$500M Cost Overrun At Las Vegas Sphere Could Bring Stadium Development Cost To $1.7B
The Las Vegas Sphere, an 18,000-seat arena under development with a distinctive globe design, might cost as much as $500M more than an estimate by developer Madison Square Garden Co.
Madison Square Garden Co., which owns sports teams such as the New York Knicks and entertainment assets including its eponymous arena in Manhattan, estimates that the Vegas development would cost $1.2B. AECOM, the contractor on the job, puts it at $1.7B.
Madison Square Garden Co., along with Las Vegas Sands Corp., broke ground on the project about a year ago. It is expected to be completed in 2021.
During the company's most recent earnings call, Madison Square Garden Co. Chief Financial Officer Victoria Mink downplayed the higher number.
"The $1.2B cost estimate was for budgeting and forecasting purposes and it was based on schematic designs at that time," she said.
"The $1.7B is based on an estimate from the contractor for fee setting purposes and it's part of a cost-plus contract, with the contractor of course incentivized to propose a higher cost estimate as it gives them a more favorable benchmark," Mink said. "But as we stated, we think the estimate is too high, and we are in this process of reviewing and challenging those assumptions."
The company also reported that during its fiscal 2019, which ended June 30, its revenues were about $1.6B, an increase of 5% as compared with the previous year. However, Madison Square Garden Co. suffered an operating loss of $13.9M in fiscal 2019, compared to an operating income of $23.1M in fiscal 2018.
Word of the potential cost overrun, along with the disappointing results, sent Madison Square Garden stock from about $293/share on Aug. 19 to about $253/share Aug. 23.
Whatever the final cost of the Las Vegas Sphere, when completed it will be on Sands Avenue, between Manhattan Street and Koval Lane. It is on a 63-acre site adjacent to The Venetian, which Las Vegas Sands owns. The Sphere will stand more than 360 feet tall, with a width of 500 feet.
The arena will feature walls of LEDs and a flooring system that promises audience members will feel the entertainment by directing audio to specific locations in the bowl at a near-constant volume, ENR Southwest reports. The venue will be suitable for a variety of entertainment events.
The construction of a monorail station for the Sphere, plus a station for the Mandalay Bay Resort and Casino, was approved by the Clark County Board of County Commissioners late last year. The new stations will bring the monorail to 5 miles long with nine stops.
Madison Square Garden Co. is planning a similar spherical entertainment development in London. That project could break ground as early as next year.