Developers have upped the stakes in Las Vegas' quest for a professional sports franchise with a proposed 20,000-seat arena. Already the project has boosted land values in the blighted area east of the Strip and sent developers scurrying to capitalize on spin-off opportunities.

Landing a pro team would add a new dimension to the city's image and help attract corporate relocations. “It kind of gives credibility to the entire market, much like the Olympics did for Salt Lake City,” says Mike Hillis, managing partner with Commerce CRG. “All of a sudden, people recognize you. We are known for gaming, but it adds validation of Las Vegas as a real place.”

Plans announced in late August call for the $500 million project to be built on 10 acres owned by Harrah's Entertainment behind Bally's and Paris. Debt and equity financing is in place, but no tax subsidies will be allocated for the construction in unincorporated Clark County.

The arena, which could open by the third or fourth quarter of 2010, is being developed through a partnership between Harrah's and Anschutz Entertainment Group. AEG owns the Staples Center in Los Angeles, home to the Lakers and Clippers of the NBA and the NHL's Kings, an AEG franchise. Its involvement boosts Sin City's chances to land a long-coveted sports franchise.

Since Aug. 22 when the arena was proposed, land values in the area have jumped by 10% to 20%, says John Knott, executive vice president of the global gaming group of CB Richard Ellis. Properties that were worth $12 million to $15 million an acre have bumped up to $15 million to $18 million an acre, Knott says. Once the project breaks ground in 2008, nearby land values are expected to go higher, says Joseph Kupiec Sr., managing director of Grubb & Ellis.

The arena will serve as a much-needed catalyst for development of a one-mile stretch between the Strip and the Hard Rock Hotel, which opened in 1995. That crime-ridden area east of the Strip includes a mix of vacant land, convenience stores and apartment complexes that offer short-term stays. Several proposed redevelopment projects between the Strip and Hard Rock, including one by actor George Clooney, have been cancelled in recent years.

“All the plays have been on the Strip, and this now puts the spotlight on the corridor to the east,” Kupiec says. “It's going to accelerate the process and anchor the development of the entire area. It was almost like who was going to go first. This came unexpectedly to many who have been positioning themselves for a long period of time for other projects.”

One benefactor of an arena is Africa Israel Investments, an Israeli company controlled by diamond billionaire Lev Leviev, and a partnership that includes New York real estate investor Steve Witkoff, the Cipriani family and Credit Suisse Group. Days before the arena was announced, the partnership closed on a $625 million deal for 60 acres west of the Hard Rock Hotel. It plans boutique hotels, a casino and retail stores.