LAS VEGAS-MGM Mirage, Kerzner International Holdings and Istithmar Hotels FZE have agreed on terms for their joint venture development of a multibillion-dollar integrated resort adjacent to MGM’s Circus Circus hotel-casino property at the north end of the Las Vegas Strip. Construction is slated to commence in the first half of 2009 and open three years later.

Kerzner owns the Atlantis properties in the Bahamas and the One & Only-branded luxury hotel chain. Istithmar Hotels FZE, an investor in Kerzner, is a wholly owned subsidiary of Istithmar PJSC, the investment company of Dubai World, a Dubai government entity that recently bought a 50% stake in MGM Mirage’s CityCenter development at the heart of the Las Vegas Strip for $2.7 billion and is acquiring as much as $2.4 billion of MGM Mirage common stock.

Per the development agreement for the North Strip site, MGM Mirage will provide the land for the multibillion-dollar integrated resort and retain a 50% stake while Kerzner and Istithmar provide cash equity in exchange for 25% stakes. The land being contributed by MGM Mirage–40 acres, most of which it acquired earlier this year–is being valued at $20 million per acre.

Kerzner will lead the planning and conceptualization of this project. The new resort will front the corner of Las Vegas Boulevard and Sahara Avenue, across Las Vegas Boulevard from the Sahara Hotel & Casino, which was recently sold for between $300 million and $400 million to a new ownership group that plans to renovate and revitalize the 55-year-old, 1,700-room property.

MGM Mirage and Kerzner signed an LOI to form the joint venture in June , one month after MGM paid two different owners $576 million, about $17 million per acre, for 33.5 contiguous acres that abut MGM’s existing assets there as well as Las Vegas Boulevard. MGM chairman Terry Lanni said at the time that the partnership is a way for the company to leverage its land and development experience and accelerate growth while conserving capital for additional opportunities. “We see this type of relationship as a major part of our company’s future,” he said.

All told, MGM now controls along Las Vegas Boulevard 865 acres with three miles of Strip frontage, cementing its position as the area’s largest landholder. Its largest current project is the $7.4-billion CityCenter project, which got under way this time last year. Located between the Bellagio and Monte Carlo resorts, the first phase of the development will include a 4,000-room luxury hotel and casino, two 400-room non-gaming hotels, 2,900 condominium units and 500,000 sf of commercial space.

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