Casino development hits jackpot in U.S. real estate DENVER - Results of the 1999 Hospitality Real Estate Counselors Inc. (HREC) Annual Casino Development Survey indicate that approximately $6.7 billion in casino development is currently underor future development in the United States. According to the survey, the bulk of this development - which represents 14 gaming projects, approximately 1.2 million sq. ft. of casino space and 13,500 hotel rooms - is taking place in Colorado, Indiana, Iowa, Louisiana, Michigan, Mississippi, Nevada, and New Jersey.
The survey does not include the impact the Venetian and Mandalay Bay casinos in Las Vegas, or the Beau Rivage casino in Biloxi City, Miss., have had on the industry. These three projects which total $3.1 billion in development costs, added to the $6.7 billion under construction, would yield approximately $10 billion in total recent casino development nationwide.
Colorado, Louisiana, Michigan, Nevada, New Jersey, and South Dakota all have legalized land-based casino laws. Illinois, Indiana, Iowa, Louisiana, Mississippi, and Missouri have what is known as dock-site casino laws which require all casinos to be built on a body of water.
According to Andy Sabatini, an associate with HREC, slow growth of casinos can be attributed to the legality of gambling. "Deadwood, S.D., was the first jurisdiction outside of Nevada to have legalized gaming," he says. "Now, many state governments are looking at [gambling and casinos] and saying, 'Well, if they get gaming in every backyard who's going to support it?'" Sabatini notes that several states (includingand Florida) are currently in legal battles in attempt to legalize gambling and casinos.
The $900 million MGM casino in Detroit, one of the largest projects currently under construction in the United States, will house 800 hotel rooms and approximately 100,000 sq. ft. of gaming space. (The city of Detroit is experiencing a sizable amount of casino building; please see our Detroit pullout section in this issue for more.) In addition, the survey also identifies an additional $2.3 billion in proposed casino development that, when completed, will account for 670,000 sq. ft. of additional dedicated gaming space and more than 6,000 hotel rooms.
The survey does not reflect potential Indian gaming projects which, depending on the outcome of current California legislation, could inflate HREC's numbers by more than $1 billion in new casinos or expansions over the next five years. In addition, several states are trying to enter into agreements between Indian tribes and state governments that would allow casino development.
Florida senators leading way to REIT rule changes WASHINGTON, D.C. - In sponsoring the Real Estate Investment Trust Modernization Act of 1999, U.S. Senators Connie Mack (R-Fla.) and Bob Graham (D-Fla.) have introduced legislation that would allow REITs to offer some of the same types of services as their competitors. Mack and Graham were joined by 17 other Senators in the measure, which has the support of more than two-thirds of the Senate Finance Committee.
In a letter to Senate colleagues, Mack and Graham explain that, under current rules, REITs may provide only "customary services" to their tenants and must adhere to what the Florida Senate delegation calls, "unworkable distinctions that defy logic and impede competitiveness." For example, REITs can have parking lots for shopping centers or offices they own, but cannot directly offer valet parking services; REITs also can own apartments, but cannot directly provide lifeguards or amenity services such as dog walking.
"Despite these restrictions, REIT competitors can and do provide all these services without limitations," the Senators write. "As a result, REITs are increasingly placed at a competitive disadvantage."
Identical legislation was introduced in the House of Representatives on April 29. The House and Senate legislation is similar to a proposal included in the fiscal 2000 federal budget, and the proposed legislation has the support of the entire REIT industry, according to Steven A. Wechsler, president and chief executive officer of the National Association of Real Estate Investment Trusts (NAREIT).
"This legislation would enable REITs to evolve while ensuring that they remain real estate oriented," he says. "It also would conform a REIT's distribution requirement to the 90% standard applicable to mutual funds. A return to this standard, which was in place from 1960 to 1980, would allow REITs to retain more after-tax capital."
The weather is not the only thing heating up this summer. In two separate developments - one in Florida and one in Washington, D.C. - the Building Owners and Managers Association International (BOMA) has spoken out on the potential for mandatory telecommunications access to commercial real estate properties.
In late April, Florida legislators denied telecommunications companies mandatory access to Sunshine State commercial properties. The bill, endorsed by more than 300 telecommunications companies, would have allowed telecommunications providers unlimited access to commercial properties. While property owners generally support having a wide range of telecommunications providers competing to serve their tenants, the mandatory access provision - which did not require compensation for the owner - seemed to be more than the industry could stomach.
"[Telecommunications companies] want to force the owners of office buildings and retail and industrial facilities to provide access whenever and wherever any telecommunications companies demand it, without compensation or other consideration," says John L. Brewerton III, an Orlando attorney who represented BOMA in Florida. "That is clearly and simply unconstitutional, no matter how big their lobbying budgets are. What we object to - and what we will continue to oppose - is any law that requires property owners to accommodate any industry without just compensation and without retaining some means of control over our properties.
"Property owners deserve to be compensated for the use of their property," he continues. "To demand that 300 different telephone companies be allowed unlimited and uncompensated access to office buildings, under the guise of a promise for cheaper phone rates in the future, is ludicrous."
BOMA leads fight against mandated telecom access Florida joins Colorado, Virginia, and Indiana as states where mandatory access bills recently failed to pass, while Louisiana and California legislators are expected to consider similar proposals this year. Ohio, Connecticut, and Texas have enacted mandatory access laws.
Last month, the Building Owners and Managers Association (BOMA) International, allied with a group of peer commercial real estate organizations, took the fight against mandatory access to Capitol Hill. BOMA contends that forced access - telecommunications companies taking space within a building for the installation of equipment and wiring for free or at low, government-established prices - prevents property owners and managers from maintaining control of the building's security and code compliance.
Brent Bitz, executive vice president of Arlington, Va.-based Charles E. Smith Commercial Realty LP, testified on BOMA's behalf before the House Commerce Committee's Subcommittee on Telecommunications, Trade and Consumer Protection. Bitz stressed property owners' Fifth Amendment rights that prohibit the taking of private property through forced building access and pointed to a market that already works without government intervention.
"In short, the marketplace does not need government-mandated access; telecommunications competition is alive and thriving in office buildings," Bitz testified. "Because the commercial real estate business is fiercely competitive, we must provide our tenants with access to the latest telecommunications services or they will go elsewhere, and our building operations will cease. Hundreds of license agreements are being signed by office building owners and telecommunications service providers every day; any government action or mandate would disrupt that environment."
Penn Station on track for major facelift New York's famous Pennsylvania Station, the world's busiest passenger transportation hub with more than 157 million annual visitors, could soon become the world's classiest after a $484 million redevelopment and expansion effort. Executed by the Pennsylvania Station Redevelopment Corp. (PSRC), the project is expected to begin in early 2000 and take nearly four years to complete. The Penn Station job also is expected to impact the city's economy by creating 7,600 jobs, $65 million in tax revenue during construction, and more than $15 million in annual income and sales-tax revenues.
The Postal Service, which occupies 1.4 million sq. ft. in the James A. Farley building located directly above the existing Penn Station platforms, has agreed to vacate about one-third of the complex in order to make room for a high-speed rail concourse. Amtrak's High-Speed Acela trains will run through the station, making it the center for Amtrak's high-speed rail operations in the Northeast Corridor. The rest of the redeveloped station will serve commuter, subway, airport access, bus and taxi passengers, and will be used for all of New York's mail-to-rail transfers.
The new station will feature three levels: commuter concourse, high-speed rail concourse, and an intermodal ticketing hall with covered taxi drop-offs. The existing station and new station will be connected by common passenger platforms and an upgraded east-west connection at 8th Avenue and 33rd Street. The connector also joins the A, C, E subway stop, which is currently under renovation.
>From a design perspective, the Penn Station project will be helmed by the >architectural firms Skidmore, Owings & Merrill (architects of the new >Terminal 4 at JFK International Airport) along with Ove Arup & Partners >(engineers of the Sydney Opera House), Parsons Brinkerhoff Quade & >Douglas, and Hardy Holzman Pfeiffer. The design, called by New York >magazine writer Michael Tomasky as a "a graceful marriage of neo-classical >tradition and the contemporary hankering for space, light, comfort and >amenities," will add an expressive glass canopy to the classically >inspired Farley building. All levels, including train platforms, will be >designed with universal accessibility and natural light.
The plans were unveiled last month at the James A. Farley Post Office in New York, with President Bill Clinton, New York Governor George Pataki and U.S. Sen. Daniel Patrick Moynihan present. Pataki compared the Penn Station project to the recent Grand Central Terminal preservation project, and said the new Penn Station will attract people from around the world who will "gaze in wonder at this marvelous new station."