MGM Grand and AEG broke ground May 1 on a $375 million Vegas arena, hoping to attract an NHL or NBA team. The arena, designed by widely known sport architecture firm Populous, will seat 20,000 and plans to open in Spring 2016. Going in without a commitment from a professional sports team doesn’t worry MGM or AEG because they have devised a business plan that will allow them to showcase mixed martial arts, boxing, concerts, awards shows and eventually basketball, hockey or other sports. Owners anticipate between 100 to 150 events per year with the UFC looking to hold five or six annual fights.
Financing for the arena was divided between AEG and MGM, each contributing $75 million each, totaling to $150 million in equity. Bank of America will be serving as lead in debt financing. The project cost increased from $350 to $375 million with the addition of a nightclub and upscale seating areas. Despite the costly project, AEG and MGM avoided acquiring public dollars from the local government for the project.
Why is this arena project different from others? First of all, it has not been established to host a professional sports franchise. Despite this, the arena will still be built to NBA and NHL specifications with the hopes of a team relocating to the desert. But, having the option for a variety of events will make it more desirable.
Secondly, Las Vegas is the ultimate entertainment destination for adults. Las Vegas is home to two million residents as well as the millions who come as tourists. Last year, nearly 40 million tourists visited Sin City, making it one of the top destinations for visitors from around the globe. This venue will have top of the line amenities, seating options and affluence, making it the more attractive option when compared to other sports venues in the area such as 38,000 seat Sam Boyd Stadium, 18,500 seat Thomas & Mack Center and 9,300 seat Cashman Field.
Las Vegas is already home to the NHL Awards as well as the NBA Summer League. AEG Chief Executive Dan Beckerman believes that nearly every major touring concert and act is expected to make a stop at the new arena. UFC events are also expected to be planned, with UFC President Dana White excited for the new opportunity. When asked about the arena, White said:
“This arena fits Las Vegas. It’s going to be one of those over the top, unbelievable, you’ve never seen anything like it. What you expect to see when you come to see a show in Vegas.”
The project will be creating 3,500 construction jobs as well as 2,000 permanent jobs. It will also be generating revenue for the state through the “live entertainment tax.” Just this past December, the Las Vegas Review Journal published an article stating that because of the growth in live entertainment shows on the Las Vegas Strip, the state economy has generated approximately $47 million more in taxes than were predicted by the Economic Forum in 2013. Having the new arena could contribute even more in tax revenue for the state.
Once completed, the arena will be the highlight of the eight-acre entertainment district, also known as “The Park,” located near the New York-New York and Monte Carlo casinos, between Las Vegas Blvd and Interstate 15. In addition to the arena, there will be a plaza and outdoor retail center linking it to the Strip, making the entire site 16 acres. This will be the first major arena breaking ground in 30 years. After many failed attempts, this one is the real deal. Everyone is excited, with MGM CEO Jim Murren stating:
“It’s a big day for Las Vegas. It’s a big day for Nevada. It’s a big day for entertainment. We need to create the experience tourists are so yearning for. They want to be wowed.”