Whatever you do, do not drive past the Key Largo. It would break your hearts to see it now. Its absentee ownership has done a frankly disgraceful job of maintenance and the casino-hotel has become an eyesore, due to a proliferation of graffiti and broken windows. Nothing is planned for the site but Colliers International continues to shop it.
Colliers must be feeling pretty cocky. They’ve actually marked the site up to $79 million (or $9.7 million an acre) at a time when even real estate on the Strip has plummeted in value. To put that number in context, the Key Largo sold in 2005 for a recorded value of $22.9 million ($2.8 million/acre). In April 2011, our Stiffs & Georges correspondent, David McKee, looked into the matter and found that the asking price was a "mere" $48.5 million – or almost $6 million per acre.
This sudden bullishness of Colliers is fairly baffling (and emails to Colliers were not returned). True, there’s "critical mass" in the area, since the Key Largo site is within walking distance of both locals favorite Terrible’s and the Hard Rock Hotel & Casino. Also, the Siegel Group is revamping a nearby condo tower into a hotel. However, it takes some nerve to put the asking price up nearly 40%, considering the tumbledown condition of the property. Not only would the existing structure probably have to be razed, it lies under a McCarran International Airport flight path, meaning that vertical construction must be capped at 450 feet.
Also, the site has relatively little parking space, so the first order of business would be to build a parking garage. Its 314 hotel rooms hail from an era when Vegas tourists had far lower expectations of how much space and how many amenities their room would have. And while 20,000-plus square feet of gambling floor may sound like a lot, it isn’t. At the time of its closing, the Key Largo boasted a puny 345-slot, five-table game inventory. That’s not competitive in today’s market.
A sow’s ear can be turned into a silk purse. Former Terrible’s owner Herbst Gaming did just that with the skanky old Continental. Terrible’s, however, sits on a considerably larger footprint of land than does the Key Largo, so any developer would have to "go vertical." It’s feasible, at least on paper: At the time of its closing, the Key Largo’s mystery purchasers were talking about two towers, one 196 feet high, the other 70 feet, which would hold 905 condos and 344 hotel rooms, respectively. That sounds like a tight squeeze but more power to you if you can do it.
Another baffling element of Collier’s price hike is that, after ponying up nearly $80 million for the site, you’d have to spend at least $125 million-$250 million to build a state-of-the-art casino-hotel. The Key Largo was a bargain play in its heyday and it’s extremely difficult to envision anyone ponying up $200 million-$350 million in order to have a very small casino with $20/night hotel rooms. This isn’t a $35 million Plaza Las Vegas fixer-upper.
Locals gaming specialists Boyd Gaming and Station Casinos haven’t the skin for this game, and would-be Vegas operators Penn National Gaming (which owns M Resort) and Isle of Capri Casinos, are looking to manage turnkey properties, not build them. Of any potential buyer, Station makes the most sense because it owns a free-floating license that exempts it from having to build the statutory, 200-room hotel (a license that was intended for the old Castaways site). However, after having bought Green Valley Ranch out of hock for a half-billion dollars and essentially deeded Aliante Station to a private-equity firm in lieu of foreclosure, Station’s not exactly flush -- and Boyd’s credit line is tapped out.
Perhaps the sudden jump in the Key Largo’s asking price bodes improvement in commercial real estate in Sin City, a sub-market that’s been dead in the water. But with other, even better sites unable to find buyers, you’ll pardon us if we think Colliers has drunk its own bathwater.
Incidentally, the Key Largo deserves a special footnote in Vegas history. From 1986-89 it was the La Mirage, a moniker that Steve Wynn purchased so he could name his first Strip casino The Mirage. It was the second of several name changes, having been the Ambassador Casino (1978-85), Anthony’s Casino (1989-93), the Quality Inn Casino (1993-95), and finally the Key Largo from 1997-2005. If a new owner could retain the retro look of the Largo’s Flamingo Road façade and signage, but bring the rest of the structure into the 21st century, it’d be an an outcome fervently to be desired.
