A city hammered by Hurricane Katrina is feeling the effects of a casino-led real estate boom. In the wake of the devastating storm that roared through Biloxi with 100 mph wind gusts and flooding rains, legislation has been passed that allows Mississippi-licensed gaming operators to build casinos within 800 feet of the shore. Previously, casinos were required to operate on piers or dockside locations.
Las Vegas-based MGM Mirage, the Trump Organization as well as Harrah's Entertainment plan to develop casino projects collectively valued at more than $1 billion along Biloxi's shoreline.
Fueled by the prospects of a casino boom, commercial real estate developers also are eagerly gobbling up acres of adjacent land, betting that the expected influx of visitors and jobs will spawn new retail, hotel, housing and restaurants.
“Most of the land on the shore has [already] been bought by casino developers or investors affiliated with casinos,” says David Staehling, finance director for the City of Biloxi. “Price isn't a problem for casinos, so many of them have paid two or three times what the land was worth before the storm.”
Land prices in east Biloxi have jumped from roughly $15 per sq. ft. — about $650,000 an acre pre-Katrina — to roughly $80 a sq. ft. this fall, or almost $3.4 million an acre.
By late October, the shoreline boasted seven land-based casinos and no riverboat operations. Staehling says that his city grossed $95.7 million in casino revenues in September, the highest monthly total in 14 years.
Developer Jerry Wallace, president and owner of Destin, Fla.-based development firm Jerry Wallace Cos., has developed mixed-use projects on the Gulf Coast since 1994.
Wallace is now marketing the Shores of Paradise, a 476-unit, $270 million complex that features retail, restaurant and hotel space located next to a casino. Katrina decimated parts of the project, but Wallace has spent $23 million redeveloping the site.
“The land values are escalating rapidly, and we need much more housing in the area to support the people who are working at these casinos,” says Wallace.
According to a July economic report commissioned by Biloxi's Chamber of Commerce, local casinos could generate as much as $1.6 billion in annual revenues within the next two years. The previous fiscal year before Hurricane Katrina (Sept. '04 to Sept. '05) local casinos generated $908 million in revenues. These businesses could also employ as many as 25,000 local workers by 2008.
After falling by 72% during the first three months following Hurricane Katrina, the number of building permits rose from 46 in November 2005 to 488 in June 2006. Roughly three-quarters of those June permits were for commercial developments involving retail, residential and hotel uses.
Casino re-openings also accelerated in August, allowing seven of the nine formerly water-borne casinos to open up by September. Casino employment has followed. Employment growth ticked up from 360 jobs per month through June to 1,050 jobs per month in July and August.
Theodore Gamble, managing director at real estate investment firm Prescott Group, believes Biloxi will see increasing demand. The Manhattan-based investment firm owns a portfolio of nine apartment properties in the Biloxi region valued at $130 million. “It's hard to deny that gambling will be a major demand driver in that market in coming years.”