Please ensure Javascript is enabled for purposes of website accessibility

Why Is Wynn Resorts Spending $336 Million on the North Vegas Strip?

By Rich Duprey - Updated Dec 27, 2017 at 3:32PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The future of the region's development could be radically altered.

Macau may be on the rebound and Japan the next big gambling oasis, but it seems Las Vegas is where casino operators will be spending most of their money in the near future. Wynn Resorts (WYNN -1.03%) has announced it's buying a huge swath of property at the north end of the Vegas Strip that has the potential to change the way tourists visit the city.

As this comes on the heels of MGM Resorts (MGM -0.69%) announcing that it was turning all of its attention to the numerous properties it owns in this desert gambling mecca, Vegas could be the biggest and best bet for investors for years to come.

Wynn Resorts Encore Hotel

Image source: Wynn Resorts.

Giant land grab

Wynn is buying 34 acres on the Strip, plus an additional four adjacent acres, for $336 million. The property is the site of the former New Frontier that had the distinction of being the second casino to have opened in Las Vegas back in 1942. It ended up being torn down 10 years ago with plans that it would be turned into a new resort, the Alon Las Vegas, but those plans were ultimately abandoned.

Now Wynn has taken possession of the property, and it makes it a unique corner of the city because it sits across the street from Wynn's existing properties -- the Encore and Wynn Las Vegas --  giving Wynn a vast 280-acre real estate complex. The sprawling acreage spans from the Las Vegas Convention Center on Paradise Road, which was just approved for a $60 million upgrade, crosses over the Strip on which it has combined frontage of 3,500 feet, and extends to Industrial Road on the western edge of the property. 

The area is slated for a massive overhaul. Earlier this year, Wynn announced it would move forward with the $1.6 billion Paradise Park, a resort the casino operator said it will build next to the Wynn Las Vegas. Construction is slated to begin in January, and Wynn intends the project to attract families and not just gamblers. Paradise Park will feature a 20-acre lagoon and a white-sand beachfront, as well as a 47-story, 1,500-room hotel, on the site of the Wynn Golf Course.

Coupled with this new piece of land, Wynn can truly change north Strip's fortunes, which have struggled to compete with the southern end. That's if Wynn decides to develop it.

Lying fallow

Although the press release announcing the purchase says the property "will further change tourist visitation patterns in Las Vegas drawing more visitors to the north end of Las Vegas Blvd.," it's also important to note, first they're talking about the Vegas Strip, not N. Las Vegas Blvd., a very off-Strip location, and it references "future development," not anything immediate, suggesting Wynn won't be doing anything with the property anytime soon. 

That means any boost from its development might come too late for existing properties in the area. The SLS Las Vegas, which opened in 2014, reportedly hasn't made a profit since opening its doors and is on the brink of bankruptcy, while the nearby Lucky Dragon is similarly struggling. It opened its doors a year ago with the seemingly novel idea of catering to Chinese nationals that it expected to flood into Las Vegas, and though it got off to a fine start, it's reportedly had a hard time getting that crowd to return.

Other development is still far off, too, including Resorts World, whose opening has been pushed out to 2020 and the Fountainbleu, which has new owners, but there's no date set on when new construction will begin.

Too good to ignore

So maybe Wynn CEO Steve Wynn is simply keeping his powder dry until the north Strip's fortunes are already changing. It was a prime piece of real estate at a price that couldn't be ignored. It had been sold to the owners of New York's Plaza Hotel in 2007 for $1.2 billion, but the recession caused plans for the property to be shelved. In 2014, it was sold to Crown Resorts for just $280 million, but it also ended up backing out of developing it.

Now having acquired the property, Wynn may sit on it until there is evidence of a renaissance. He is already investing in Paradise Park while other casino operators are renovating their existing properties, such as what MGM Resorts is doing with the Monte Carlo. It makes sense to see if there is enough demand for more amenities on the north end of the Strip before building even more resorts that no one might want.

Wynn Resorts' new parcel of land might be able to transform the region's performance, but only if it is ready to build more buildings, which doesn't seem to be the case just yet. The transformation may have to wait a little bit longer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Wynn Resorts, Limited Stock Quote
Wynn Resorts, Limited
WYNN
$57.69 (-1.03%) $0.60
MGM Resorts International Stock Quote
MGM Resorts International
MGM
$30.03 (-0.69%) $0.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.