LAS VEGAS-Las Vegas Sands Corp in just a few weeks will quietly open the 50-story hotel-casino portion of the Palazzo, its $2.1-billion, 3,066-suite encore to its adjoining Venetian and Sands Expo Center developments. The $580-million, 450,000-sf retail piece of the Palazzo addition will open in mid-January concurrent with a grand opening celebration.

When taken together, the Palazzo, the 4,027-suite Venetian and the contiguous 1.2-million-sf Sands Expo Center represent the largest hotel and convention complex in the world.

The Shoppes at the Palazzo, which opens on Jan. 18, is no longer owned by Las Vegas Sands Corp. General Growth Properties, which acquired the Venetian’s 407,000-sf Grand Canal Shoppes from Las Vegas Sands upon its completion in May 2004 for $776 million, at that time also agreed to acquire the Palazzo retail upon its completion.

The ultimate sale price for the Palazzo retail is expected to be similar to that of the Venetian, according to SEC filings. GGP will take possession of the Palazzo retail on Jan. 17.

The Palazzo retail is anchored by an 85,000-sf Barneys New York and will feature more than 60 high-end boutiques, including 20 stores that will be making their Las Vegas debuts. The newcomers include Chloe, Tory Burch, Christian Louboutin, Diane Von Furstenberg, Van Cleef & Arpels, Anya Hindmarch, Poleci, Lambertson Truex, Phillipe Charriol, Edidi, Piaget and Michael Kors. Rounding out the offering will be high-end staples including Ralph Lauren, Jimmy Choo, Piaget, Burberry, Salvatore Ferragamo, Fendi, Bottega Veneta and Montblanc.

The dining option also will be plentiful and high-end. The new restaurants include CarneVino, by Mario Batali; CUT, by Wolfgang Puck; Table 10, by Emeril Lagasse; and Restaurant Charlie, by Charlie Trotter. Additional dining options will include Dos Caminos, Grand Lux Cafe, Jade, Mainland, Morels French Steakhouse & Bistro, Prime Blue Grill, SushiSamba and Woo.

Not part of GGP’s acquisition is the entertainment piece of the development, including the 65,000-sf Canyon Ranch SpaClub; the Las Vegas version of New York’s 40/40 Club sports bar and lounge; a Lamborghini showroom, gift store and café; and the Broadway show Jersey Boys, which will take up residence in a new 1,650-seat theater in spring 2008.

Per the purchase and sale agreement, GGP’s price for the Palazzo retail will be equal to the property’s net operating income for months 19 through 30 of its operations divided by a capitalization rate. The capitalization rate is 6% on the first $38 million of net operating income and 8% on the net operating income above $38 million.

Given the lease agreements in place to date, Las Vegas Sands says it expects the opening of the Palazzo retail to trigger an initial payment of more than $500 million from GGP, and expects at least another $250 million–or at least $750 million in total–by the end of the 30-month period, according to SEC filings.

In addition to the Palazzo hotel tower and the Shoppes at the Palazzo, the development also includes a high-rise luxury condo tower fronting the Strip. The tower will rise nearly as high as the Palazzo and the base of it will be part of the Palazzo’s retail offering.

Slated for completion in fall 2009, the tower is rising on land owned by Steven Johnson, a low-key investor-developer from Scottsdale, AZ, and James Peterson of Albuquerque. The duo acquired the 0.64-acre former restaurant site in April 2003 for $32.5 million, which equates to more than $50 million per acre, by far the highest ever paid for land on the Las Vegas Strip.

Johnson told in October that he and Peterson will continue to own the land and the first two levels of the tower, which will house a Walgreens drug store and the aforementioned Barneys store. Johnson says Las Vegas Sands has leased six stories of air rights above that for office space and, above that, has purchased the air rights for the condo floors. He declined to provide a dollar value for the deal.

Las Vegas Sands says it will cost $600 million to develop the condominium tower, $135 million more than it thought back in April. At that time, the company said it expected to spend $465 million developing the units but stood to make as much as $1.94 billion selling them off.

Given the one million sf of saleable area in the tower, the estimated gross sell-out would represent an average sales price for the condos of more than $1,900 per sf, making it the priciest residential offering ever on the Las Vegas Strip. Las Vegas Sands’ expectations were revealed in a filing with the SEC regarding a $5-billion credit facility that is funding its US development projects. The financing was finalized in late May.

In addition to the Palazzo and the Venetian, General Growth has a 50-50 partnership with Boyd Gaming Corp. for the $500-million, 300,000-sf retail project that will be part of the gaming firm’s $4-billion, 87-acre Echelon development at the site of the former Stardust casino. As well, General Growth owns the 1.9-million-sf Fashion Show mall on the Strip and is developing Summerlin Centre, a mixed-use development scheduled for completion in 2009 that includes 1.2 million sf of retail in the master-planned community of Summerlin on the west rim of the Las Vegas Valley.

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