Las Vegas Business Press :: News : Klondike living on borrowed time

Klondike living on borrowed time

Florida-based developer eyes condo/hotel on South Strip

BY DAVID MCKEE
BUSINESS PRESS

For 45 years, the Klondike Hotel & Casino has stood at the southernmost edge of the Las Vegas Strip. But instead of embodying history it may soon be history.

Last September, the land under the Klondike was purchased by Royal Palm Las Vegas, a subsidiary of Boca Raton, Fla.-based condominium developer Royal Palm Communities. Royal Palm intends to build a condo-hotel casino resort of 1,000 to 1,600 units on the site and on land immediately to the north, adjacent to McCarran International Airport. Potential construction on those 10.6 acres is height-restricted at 20 to 25 stories and zoned for a maximum of 1,800 units, according to Royal Palm CEO Daniel Kodsi.

"Like anything else, progress takes its toll, my friend," said Klondike owner John Woodrum, who has run the grind joint for decades. "You can only stand in the way of it so long and it rolls over you."

The days of the Klondike Hotel are numbered now that the site has been bought for a condo-hotel development.

Woodrum hasn't made any announcement yet. "When I have a fixed time that I'll be leaving, then I'll let everyone know. That could be as much as two years down the road."

Kodsi said he is at least a year from breaking ground and, as far as setting a closing date for the Klondike, "that's going to be up to the Woodrums." In the meantime, the Woodrum family continues to operate the Klondike on an open-ended lease.

The Klondike, bought from Ralph Engelstad in 1975 for $1 million, fetched $23.75 million from Royal Palm last fall. The adjacent parcel was one of eight that developer Howard Bulloch purchased for an aggregate $40.17 million in August 2000. That parcel now costs $42 million by itself.

According to Restrepo Consulting Group principal John Restrepo, land values are peaking, high-rise fever in Las Vegas is cooling off and Woodrum's landlord, Wallace K. Kazama, picked the right moment to exit. "If your core business is not development, you might as well just sell," is Restrepo's advice to landowners.

Both the Klondike and Royal Palm are family businesses and Woodrum is effusive in his praise of Kodsi. The younger man returns the compliment, describing the Woodrums as typifying the business people Royal Palm hopes to team with in its first Las Vegas venture. Kodsi is already talking to locals-casino operators to provide the gambling expertise the Paramount-branded resort will require.

"When we go into a new market, we like to bring locals aboard. Locals have the right relationships," Kodsi explained. "We like having local partners and people that are watching out for us. We know Vegas is a very tight market and we don't want to be the operators. You understand (the business climate) best when you live there."

Whatever becomes of the Klondike, Woodrum says it wasn't a lack of business that sealed its fate. "It ain't like we got here yesterday. Our business has been pretty steady because we deal in a local entity," Woodrum said of his player base, adding that lately he's been able to fill his low-cost motel rooms with out-of-town construction workers.

"That's going to get a lot greater when the (MGM Mirage) CityCenter brings on those 15,000 employees," Woodrum said of the small army of skilled laborers who may have to be jobbed in for MGM's city-in-miniature project. "A construction worker in this city," the casino veteran added, "(even) if he's deaf, blind and dumb, he's got a job."

Restrepo noted that because of its Florida track record, Royal Palm is more likely to develop in Las Vegas than less-experienced builders. Of 19,000 condo units proposed for the valley, only 7 percent have "gone vertical," according to Restrepo's figures.

Kodsi replied that he's aware of "issues" surrounding the Las Vegas condo bubble. Accordingly, "we're not doing a residential project. You get a lot of amateurs in the game," Kodsi said, noting that he's delivered thousands of units in Florida in the 15 years since the 37-year-old executive took over Royal Palm. It currently has five condo and condo-hotel projects in various stages of development and/or completion in Florida, representing a total of 1,455 units.

"It's real easy to move the dirt around, grade the site, put (up) a fence and a billboard," Restrepo said of here-today-and-gone-tomorrow condo developers. "(Kodsi) didn't get a sweetheart deal," the analyst said of Royal Palm's $65.75 million land purchase, "but he didn't overpay."

Royal Palm expects to present its Paramount plan to the Clark County Commission later this month. Kodsi says he is proceeding circumspectly in his Vegas debut: "We're not going to overstep our boundary. We're going to do one project. Some of our competitors (went) in there and started to go a little crazy."

dmckee@lvpress.com | 702-871-6780 x318

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