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MIRACLE MILE TO BRING VEGAS STRIP A ‘MALL FOR THE MASSES’

By Steve McLinden

Some big-time bets have been placed on a pair of prime properties on the Las Vegas Strip. Specifically, there is more than $250 million in renovation money in play to create flashy new branding for the identity-challenged Shops in Desert Passage mall and its next-door neighbor, the Aladdin Resort & Casino.

In the process, the desert sun will be setting slowly on their old themes, as the Arabian names yield to marquees flashing “Miracle Mile Shops” and “Planet Hollywood Casino.”

The 475,000-square-foot Desert Passage, which was expected to compete with the well-heeled Forum Shops at Caesars and the Grand Canal Shoppes at the Venetian when it opened six years ago, has been an underperformer. Its fortunes may be about to change, though, amid the plethora of “pardon our dust” signs, mall officials say.

Timing, which can be everything in retail, as in anything else, has not favored the middle-price-point Desert Passage during its short history. Trizec Properties completed the mall in 2000 at a cost of $300 million just before opting out of retail development and into office properties. A year later the terror attacks of Sept. 11 dampened mall sales just when the Aladdin concept was lagging names with more contemporary themes: Bellagio, Caesars Palace, Paris. What is more, market researchers found that people often equated the Desert Passage name with a theme park, not a major mall.

In December 2003 investor David Edelstein and his TriStar Capital group bought the property, then suffering from occupancy rates below 70 percent, in partnership with Aby Rosen and Michael Fuchs of RFR Holdings for $240.5 million. Since then, some 40 new tenants have been brought in, and occupancy has risen to about 90 percent. Before it’s all over, Edelstein and his partners will have spent some $50 million toning up the place.

Robert K. Futterman, CEO of New York City-based Robert K. Futterman & Associates and the man charged with reshaping the mall’s tenancy, says Desert Passage “has done tremendous sales in spite of itself. It should — it is probably the best-situated [retail] location on the Strip.”

But everything is relative in Vegas, including Desert Passage’s current average of nearly $700 in sales per square foot, up $100 from when the mall was sold. Though that is nearly twice the national, ICSC-tabulated average of $392 per square foot, it dwarfs alongside the estimated $1,700 per square foot of The Forum Shops at Caesars and Fashion Show Mall’s over $1,000 per square foot. In fact, sales at Desert Passage, which draws upwards of 60,000 visitors a day, “would put it in the top 10 percent of the country, but not in Vegas,” said Futterman.

The new Miracle Mile name is a double entendre: It is meant to be reminiscent of similarly named shopping districts in Los Angeles and Florida, but it is also a roundabout description of the mall, whose circular walkway measures roughly a mile in circumference, says Russell Joyner, the mall’s general manager, who defected from Fashion Show to help resurrect Desert Passage.

Joyner says the mall’s strategy will be to cluster like kinds of stores in about a half dozen zones he calls “nodes of opportunity,” which will form natural stopping points where shoppers will linger. He also says he is confident the makeover will help bring sales up to par with other Vegas retail properties. “I don’t think the $1,000 [per square foot] airspace is an unreasonable goal,” he said. “We are poised for that with the new tenant mix, new amenities and new-and-improved brand.”

Flanking the new entrance will be a pair of two-story tenants: a 12,000-square-foot Urban Outfitters and Nevada’s first Trader Vic’s, a 15,000-square-foot, Polynesian-inspired restaurant with outdoor patio seating on both levels. A remodeled Sephora will also be visible at the entry point. Bebe Sport, Forty United Colors of Benetton and Sisley have all opened recently. Other tenants include several Gap concepts, a branch of the venerable New Orleans restaurant Commander’s Palace, Hugo Boss, Victoria’s Secret and Z Gallerie.

Coming soon are London-based clothier Ben Sherman, whose first Las Vegas store will also be its largest in the U.S., runway-inspired clothing store Marciano, outdoor sports lifestyle retailer Quicksilver, Greek restaurant Taverna Opa and several art galleries. “That’s a big commitment for us,” said Paul McAdam, president of Ben Sherman North America. “We believe in that center. We are trying to cater to the same [mid-to-upper-middle] end consumer that the mall is.” At press time the 5,700-square-foot Ben Sherman store had a late-August expected opening date.

Critics say one big problem with the current mall is its lack of visibility from the Strip. To resolve that, the exterior design architect firm, Las Vegas-based Friedmutter Group, is making the main north entrance and the secondary south entrance more user-friendly and inviting. The firm is removing several large planters and other elements from the north entrance for visibility and adding patios and terraces. Two 3-foot-wide people movers are being added to the existing one, and surrounding them will be an 8-foot-high, 200-foot-long water wall. Several 50-foot-tall light-emitting diode screens with ambient video spanning 250 feet in length will be the second-largest LED configuration in Vegas (after Fremont Street downtown) and will give the entry a Times Square ambience, says Suzanne Coutere, the firm’s senior designer.

“It all gives a very contemporary, very visible statement,” Coutere said. “It’s more of an in-your-face approach that will be drawn out to the street as far as the law allows. It creates more of a club environment and a good energy.” Entryway tenants will use glass exteriors and signage will be greatly enhanced.

The previous thematic constraints limiting the size, shape and materials of store facades have been eliminated. “The key is to get rid of as much of that Moroccan influence as possible and create larger visible storefronts,” said Coutere. “That allows tenants to let their own identity guide the way.”

The recasting of the mall entrance, a short walk from the famous Bellagio crosswalk, should be nearly completed by early next year. All renovation work, which has been phased to keep the center’s 170 shops and 16 restaurants operating, will be completed by late 2007, about the time the casino is fully rebranded.

Andrew Zarnett, a gambling industry analyst at Deutsche Bank, says the mall’s widened main entrance will greatly increase visibility and heighten a sense of identity, while the contemporary Miracle Mile theme is sure to appeal to visitors from Los Angeles and other California markets.

The adjacent Aladdin, which has been beset by poor fortune even as far back as 1967, the year Elvis and Priscilla Presley held their wedding there, is slowly being retailored into a Planet Hollywood Casino at a cost of over $200 million. Planet Hollywood International CEO Robert Earl and Starwood Hotels & Resorts Worldwide co-own the property. Though Planet Hollywood suffered through waves of restaurant closings in recent years owing to overly aggressive expansion plans, the concept remains workable, Zarnett says, and is apt to succeed with Robert Earl behind the branding and entertainment. Earl told local media that his group is “dismembering” the casino’s Middle East theme in favor of a Planet Hollywood motif that will place the casino in the same class as Mandalay Bay, MGM Grand and The Mirage.

A 1,000-room time-share and condominium tower being built by Orlando, Fla.-based Westgate Resorts on 4.5 acres east of the casino’s main entrance “is probably the most important part of the whole puzzle, because it drives more gaming play,” Zarnett said. The P.F. Chang’s at the casino entrance, the chain’s busiest in Las Vegas, will remain, though plans to push the seating deeper into the casino to clear a wider pathway to the mall are under discussion.

The casino and shopping center ownership groups “are in agreement that we need to create a more stylish, chic and accessible environment,” said Coutere.

But Hal Rothman, a history professor at the University of Nevada, Las Vegas, who has studied both properties, says he is not optimistic about synergy between the center and the casino. “Planet Hollywood is a declining brand, one that is a decade past its prime,” Rothman said. “If it has a constituency, it is downscale 30-somethings. It cannot compete with the Palms, the Hard Rock and all the other hip places. In the end, Miracle Mile will have to carry Planet Hollywood, not vice versa. That’s a tall order for a shopping mall.”

Miracle Mile does have a chance to become a prominent high-end retail destination, but it still lacks a premium anchor tenant to drive higher-end sales, he says. “The first thing that has to be done is get beyond the stigma,” Rothman said. Though it has some of the best restaurants in town, Desert Passage has fallen in the eyes of visitors and local residents, he says.

And there is the problem of the hotel’s image. Unquestionably, the Aladdin has been plagued from its inception in 1966 to its implosion in 1998 and reopening in 2000. Organized-crime involvement, a closure by the Nevada Gaming Commission, kickback scandals, bankruptcies and ill-fated partnerships all stigmatized the property. Planet Hollywood “is simply not strong enough to overcome all the bad associations that people have with that property,” said Rothman.

But the mall and casino “believe strongly in their brands and that those brands will work on the Strip,” Futterman said. “Miracle Mile will function as a mall for the masses. It will cater to people out on the Strip and have something for everyone. It won’t be limited to luxury items.”

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