Rouse is betting on Las Vegas Purchase: Rouse Co. is spending $520 million to buy the holdings of Howard Hughes Corp., including a residential community, office buildings and a shopping mall in Sin City.

June 09, 1996|By Alec Matthew Klein | Alec Matthew Klein,SUN STAFF

LAS VEGAS -- The images endure: flashing neon, sweltering heat, shotgun betrothals, street hawkers selling smut and midnight romance all colliding in this outpost of Elvis impersonators and eternal hope in a slot machine.

But across the desert landscape, another image is soaring above the rest: construction cranes silhouetted against the Red Rock Mountains.

This is the future of Las Vegas.

And Rouse Co., one of the nation's premier real estate developers, has laid its claim here into the next century, buying a legacy of the past: the last remnants of the Howard Hughes estate.

The billionaire could not have foreseen the economic explosion when he arrived in Las Vegas on the eve of Thanksgiving 1966, slipping unseen into the Desert Inn Hotel.

Columbia-based Rouse, however, is betting on the boom: The $520 million acquisition of vast residential and commercial holdings is aimed at capitalizing on the Las Vegas phenomenon, among the fastest-growing cities in America.

"This," said Chief Executive Officer Anthony W. Deering, "builds on the strengths that we have with risks that we can manage."

Already, Rouse has weaved its own mystique -- pioneering regional malls, inventing the teeming community of Columbia and reviving chic urban redevelopment, from Baltimore's Harborplace to New York's South Street Seaport.

But Las Vegas is something different.

By far the company's largest investment ever, the Howard Hughes Corp. acquisition represents a bold strategic move.

Rouse is departing from its East Coast focus, acknowledging weaknesses in its core business -- retail development -- and venturing into community-building on a grand scale for the first time in nearly 20 years.

Expected to close Thursday, the deal is a monumental corporate decision driven by numbers -- shareholder value, positive cash flow and, analysts estimate, potential record earnings this year, up almost 20 percent to $130 million before taxes, interest and noncash charges.

But it is also an acquisition rooted in the fancies of a reclusive tycoon, a dashing aviator, the creator of the flying boat "Spruce Goose," a man linked romantically with screen icons Carole Lombard, Jean Harlow and Katharine Hepburn.

Everything Howard Hughes touched seemed epic -- even when he was simply looking to lie low in Las Vegas 30 years ago.

"Howard Hughes bought a hotel so that he'd have a place to sleep," recalled his former right-hand man, 78-year-old Robert A. Maheu.

Early morning arrival

The billionaire arrived by train five miles outside of this desert town in the pre-dawn hours in fall 1966.

Railroad security was arranged. A personal staff of eight stood ready. And as was his wont, Hughes had temporarily reserved the top floor of the Desert Inn -- with the elevator button replaced by a special key.

There was only one glitch.

Once he checked in, Hughes refused to leave, ignoring the hotel's pleas to make room for other guests -- the casino high rollers.

"I had to call upon a friend of mine in Washington to get the help of Jimmy Hoffa to tell the owners of the hotel -- the Teamsters had a major loan on the hotel -- to leave us alone," Maheu said.

But the power play only aggravated the hoteliers, who endured the impetuous tycoon for a few more months before it came to this: They threatened to remove him bodily.

"What do you suggest we do?" Hughes asked.

"Maybe you ought to buy the place," Maheu suggested, half in jest.

"Start negotiating," Hughes replied.

Buying the hotel was a lark, but it turned out to be a tax break for the complex Hughes empire.

Which gave him another idea: "How many of these toys are available?"

By the time he left Las Vegas four years later, in 1970, Hughes had amassed a Nevada kingdom -- the last vestiges of which will instantly make Rouse the largest developer in the Las Vegas real estate market.

All the Strip is not

Where Hughes bought desert wasteland, now rises the crown jewel of Rouse's acquisition.

Named after the billionaire's grandmother, Summerlin is the nation's best-selling planned community, a lush oasis of tile roofs, stucco walls, palm trees, village walks, golf courses and shimmering new homes on 22,500 acres.

Set against the Red Rock Mountains, Summerlin is all that the hyperbolic Strip is not.

It is both a retirement community and the archetypal home for a family with 2.5 children and a station wagon -- but only a 15-minute commute from the spectacle of downtown Las Vegas.

Even Columbia, one of the nation's largest planned communities, does not compare.

The Rouse creation in the Baltimore suburbs has drawn about 80,000 residents since the community opened in 1967, and another 20,000 will settle in before the project is completed in a decade or so.

But Summerlin, which has already built 12,000 homes for 20,000 residents since its inception about six years ago, is expected to surpass Columbia, adding another 140,000 dwellers over the next 20 years.

In the middle of the path

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