David Mckee's Stiffs & Georges - Texas

What's a Trump casino worth?

Thu, 08 Oct 2009 15:07:00 -0700

Only $14 million in cash (plus a $100 million equity infusion), according to The Donald. Bondholders say, we'll see your $115 million and raise you $100 million. The latter would recoup at least some -- but not very much -- of their $1.25 billion debt under their plan, while Das Trump would send them away virtually empty-handed. (Moral: When Donald Trump asks you for a loan, take a page from Nancy Reagan and Just Say No.)

The bondholders' assignment of a $75 million valuation to Trump Marina seems awfully optimistic for what is, in essence, a corpse that can't be sold. In essence, the real value proposition is resurgent Trump Taj Mahal, with the other two casinos scarcely better than throw-ins. The Marina is, if anything, an albatross around the company's neck. Still, given that CEO Mark Juliano is going to exceptional lengths to champion the Trumpster's bid, which is a big "screw you" to the debtholders, here's hoping Judge Judith H. Wizmur holds firm for a more responsible solution.

Ho: No! "I don't see major resorts opening for the next couple of years now," says Lawrence Ho. thereby raining pessimism on the expansion plans of Las Vegas Sands, Wynn Resorts and Galaxy Entertainment. The younger Ho also speculates upon the Chinese government's motivation for throttling, then somewhat relenting upon travel to Macao. Interesting tidbit: Marketwatch.com reports that "Venetian Sands" [sic] has cut its number of table games by 25%.

Nevada revenues in. And yeah, they suck. They're much less sucky than usual (-9%), showing an upward trend in baccarat plus two locals-oriented bright spots in the form of Aliante Station and M Resort. It's unclear, though, how much of the growth generated by the last two is new business vs. redistribution of dollars from elsewhere in the valley. The Sun's analysis is far more informative than that found in the R-J.

Wait 'til next year. That's the timeline for casinos in Massachusetts. Even though western Mass looks like slim pickings, lawmakers will probably have to put a casino there just to get the bill onto the floor.

Penn bid falls. Lenders to bankrupt Fontainebleau won a small victory or two, as the judge overseeing the case seems determined to keep lead developer Jeffrey Soffer as far from the disposition of F'bleau as possible. (Soffer is both a debtor and creditor on the project.)

F'bleau, for its part, revealed that Penn National Gaming's offer is now "substantially less" than $300 million, but would include money to replace the windows that are reportedly falling off the building. (One more reason not to build a Strip megaresort tower flush against the "pedestrian realm.")

Groundbreaking today for the long-awaited SugarHouse casino in Philadelphia, under the shadow of a stick-it-to-SugarHouse tax that's been proposed in the Lege. Table games, meanwhile, might be off the table in the face of a $200 million lawsuit. You see, non-racino casinos are allowed to have 5,000 slots (in return for a $50 million fee). Small "resort" casinos -- known as "Category 3" -- only have to $5 million and get 500 slots (accessible only to guests). That's proportional, obviously, and seems fair.

However ... lawmakers want to tilt the playing field by giving Category 3 casinos 30% as many slots as, say, Rivers Casino or SugarHouse, instead of 10% ... and open those games to the general public, not just guests. Of course, the state can't go to the one existing Category 3 casino and ask for another $10 million -- can it? Casino operators are also solidly behind the GOP position on table games: $10 million upfront plus a 12% tax. But, unless House Dems completely capitulate, the gaming bosses are unlikely to get what they want, at least where the tax rate is concerned.

Penn whiffs again. Although Penn Nat'l was supposed to be a bidder in the bankruptcy auction for the Lone Star Park racino, it evidently didn't get into the action and the track went to the Chickasaw Nation for $27 million. (A lot less than Harrah's Entertainment paid to get into Ohio.)

Which means that if/when gambling is legitimized in Texas, the Chickasaws will have a double advantage (parimutuel + tribal status), while Penn will be looking at yet another missed opportunity. Penn's corporate strategy is a baffling alternation of rashness and hyper-caution.

In other tribal news, much-criticized National Indian Gaming Commission Chairman Phil Hogen is gone, thank God, and with him his new, more-restrictive Class II rules. Hogen was justly pilloried for attempting a rollback of hard-won gains in what games tribes could offer. His new rules reflected Bush administration paternalism toward tribes and while they're officially postponed for a year, I think it's safe to say they're dead.* No wonder Rep. Dan Boren (D-OK) is smiling. Watch out for that doorknob, Mister (Ex-)Chairman.

(* It's probable the same thing would have happened under a President McCain, as either candidate would have brought a more enlightened attitude to D.C.-tribal relationships.)

Supporters of video gambling are starting to push back in Illinois, at least in rural, conservative McHenry County. So far it's been the urban areas where this expansion of gambling hasn't been gaining traction.

A repeal of UIGEA continues to gain ground in the House of Representatives, even if it got pulled off the floor in the Senate. (Thanks for nothing, Harry Reid.) The money quote, literally, is a reference to an amendment Rep. Jim McDermott (D-WA) which would would specify that "corporate taxes owed on regulated Internet gambling activities are collected, as they currently are from the land-based casino industry." [emphasis added]

If that means what it implies, it would remove the spectre of industry-wide federal gambling taxation from the discussion and leave taxation to the states. If not, then the nose of the federal casino-tax camel is still sticking through the legislative tent. And you know where that leads.

We've seen a nationwide gaming tax get shot down during the Clinton administration but there are desperate times, obviously. Republicans like Mike Huckabee and Rep. Steve King (R-IA) have been looking to sock it to casinos at the federal level for some years now, so I fear it could have bipartisan support, should such a debate come to pass.

It's playoff time. A tired, flat-footed Minnesota Twins squad looked positively dreaful last night, flailing at outside pitches from C.C. Sabathia (if you couldn't reach that slider in the first inning, your arms aren't going to be any longer in the seventh, son). Cliff Lee made short work of the Colorado Rockies (besides, Jim Tracy can't win in the postseason), the St. Louis Cardinals look set to continue their tradition of postseason underperformance and my Anaheim Angels are forever reduced to a quivering heap of Jello in playoff games against the Boston Red Sox. Why am I having visions of brooms?

Robo-poker reprieved ...

Mon, 28 Sep 2009 18:08:00 -0700

... but maybe not long for long. A momentary uptick in the price of PokerTek stock temporarily rescued it from penny-stock status. But after decisive rejections of dealer-less poker in both Las Vegas and Atlantic City, the future of PokerTek as anything other than a marginal supplier looks bleak.

Vegas casino operators continue to learn that you can't export the Strip business model to Macao (our over-optimistic expectations to the contrary). Case in point: Wynn Macau, which is cannibalizing restaurants, kitchens and even a showroom to make room for more gambling positions. A sanguine-sounding Steve Wynn, meanwhile, yawns in the face of competition from Singapore and tries to spin his Macanese IPO as a philanthropic gesture.

Neil Bluhm's big break. Although $800 million Rivers Casino in Pittsburgh maybe up and running, the county assessor continues to tax the site as though it were empty land. As the bureaucrats let tens of millions of property-tax dollars slip through their fingers, casino owner Neil Bluhm has a chance to bank some serious coin here. That'll take a little of the sting out of Pennsylvania's 55% gross-revenues tax rate.

A Texas track that's now come into tribal hands may hold the key to the future (if any) of limited Vegas-style gambling in Texas. The Lone Star State's gubernatorial aspirants are all over the map. Sen. Kay Bailey Hutchison (R) has cozied up to the Stone Age anti-gambling crowd, making Gov. Rick Perry's (R) qualified pro-gambling position preferable ... even though Perry would still relegate Indian tribes to the back of the bus.

S&G likes candidate Kinky Friedman best on this issue (the Kinkster is pro-casino, period), while Tom Schieffer (D) is back in the Dark Ages somewhere with Hutchison. Hank Gilbert occupies a wussy, "let's take a poll" middle ground somewhere between Perry and his GOP rival.

Fun with math, "Jubilee!" style

Thu, 27 Aug 2009 12:55:00 -0700

Does anybody know the maximum number of bared female bosoms that can be seen at any one point in Donn Arden's Jubilee!? I'm reviewing the show for a new Web site and have most of the mind-boggling statistics at hand. The mammary-count, however, is not among them. I lost track at 50, myself, though I know it's more. Anybody care to take a shot at this?

Bueller? ... Bueller?

Jackson for kids. No jokes, please. A concert tribute to the music of sometime Vegas resident Michael Jackson will raise money for the cash-strapped music programs of the Clark County School District. Besides, who can resist the prospect of what Terry Fator will do with "Ben"? It could be twisted, in a very good way.

Soulless impotence. A belated afterbirth of When We Were Kings arrives in the form of Soul Power, a title as yesterday as polyester jackets with wide lapels. The move is as underwhelming as its moniker. Or, to quote Cleveland from Family Guy, "The noise was good but I thought they phoned in a lot of the funk."

A reader responds: "David, re your blog on the R/J economics and Mr. [Sherman] Frederick's not-so-full flight from Austin [Tex.]: I live in Austin and continue to fly to Vegas three or four times a year. Although I usually fly on Thursday, Friday, or Saturday, I've never seen any flight that had more than a handful or middle seats not occupied. Further, the only airline I know of that flies directly (i.e. not stop or one stop w/o change of planes) is Southwest. They have about 8 flights a day that connect to Vegas from Austin. So, yes, I can see how one flight on a Tuesday might not be full. But Austin is a great market for Vegas. Every year Harrah's gives me a handful of coupons for two free nights that I can hand out to friends and people at work. These coupons disappear by 7:00 a.m. when I send out my email to the folks at 6:30. And this is only one office."

Texas afterthoughts

Fri, 10 Apr 2009 14:52:00 -0700

My apologies for leaving regular readers high and dry on Thursday. I was KO'd by a viral infection of some sort. Between that and a couple of doses of Zicam, I spent most of the day drifting in and out of sleep. Amazingly, I managed to stay awake through the early part of a Dodgers/Padres game in which neither starting pitcher could find the strike zone with two hands and a flashlight (the first two innings took an hour to play), only to doze off as things became -- moderately -- interesting and each team overcame its aversion to scoring runs.

Wednesday's report on Sheldon Adelson's surprise appearance in Austin, prompted this reader reaction, posted here because it was devoured by LVA's Comment-Eating Server: Regarding Texas and Casino Gaming: IMO the reason North Texas and Oklahoma are so closely linked is because Texas has strong beer and strong porn, and Oklahoma has Casino Gaming, and both sides are more OK with it than they want to admit.

Having taken note of Adelson's Texas peregrination, the Las Vegas Review-Journal said to Las Vegas Sands, in effect, "Show me the money!" (Adelson is promising to spend $2 billion-plus on a Dallas-area casino.) The company's response was that its current troubles "wouldn't impair its ability to invest in Texas, in large part because even if gambling is legalized there licenses wouldn't be up for grabs until at least March 2011."

So is Sands promising to have its financial house in order 23 months from now? We'll take that as a "Yes." (Don't forget that Adelson is also courting Massachusetts legislators in hopes of landing a casino deal in his native state.)

The Dallas Morning News, to its credit, did a little number crunching and -- at the end of its story -- poked a big hole in the revenue projections being made by Texas casino proponents. In essence, they're promising 3X-4.5X the amount of casino-tax lucre that Nevada pulls in, with only double the tax rate and a tiny fraction as many casinos. Uh-huh.

Then again, the poster boy for a Lone Star casino industry is the man who once crowed, "We could build 10 Las Vegas Strips over here [in Asia], there’s so much demand!" How's that working out?

Where's Sheldon?

Wed, 08 Apr 2009 12:10:00 -0700

Down in the Lone Star State, where else? The Las Vegas Sands CEO was making some Texas-sized boasts to the Lege, trying to impress them with a show-and-tell presentation of "large glossy photos of his company's properties -- the Venetian and the Palazzo in Las Vegas, and a casino development in Macao that cost billions of dollars to build."

Never mind that Sands has an abortive condo project on the Strip (where its latest marquee retailer is ... Walgreens), has had to scale back Sands Bethelehem and the Cotai Strip™ has ground to an ignominious halt -- at least until equity partners materialize. No, Adelson says he's prepared to expand into Texas and the money will be there. Indeed, he says he'll spend "Whatever it takes."

The money certainly isn't there in Macao, where "there's nothing imminent," despite hopeful talk of two Chinese construction moguls vying for a piece of Sands' Macanese action. It wouldn't be the first time Adelson's crystal ball came equipped with a rose-colored filter.

The proposal before the Texas Lege appears doomed not only because of the fierceness of its opposition but due to its over-ambitious scale. Fifteen casinos (including three tribal ones), an unspecified number of racinos, a related push for legalized and regulated poker ... it's too much for such a profoundly conservative state to swallow in one great gulp.

Besides, there's a huge disparity in the proposed tax rate for casinos (15%) and that paid by tracks (35%), meaning the Lege would have to bite one or more bullets: Raise the casino tax, lower the parimutuel one, or do some combination of both that isn't revenue-negative. If the gaming industry wants to get its boot in the door, the competing racino-only bill looks like a more viable and incremental means of establishing a Texas footprint.

The current debate has also provided another excuse for Phyllis Schlafly's Eagle Forum to make a nuisance of itself. One of its harpies squawked, "Why in the world would we want our children to grow up to be card dealers and waitresses?" I presume she would prefer that they grew up to be unemployed.

Quote of the Day

Thu, 12 Mar 2009 11:30:00 -0700

“It’s up to the Legislature. First of all, I did not support that tax increase when it was voted on. But it’s part of the public support for raising it ... Frankly, I’m kind of glad that there are some over there [in the Senate] who are reconsidering [that] the idea of raising taxes in an economic downturn is a bad idea.” -- Gov. Jim Gibbons, explaining why, although he included $290 million in added room-tax money in his 2009 budget, he's really against it. Blaming it on "the will of the people" (and the Legislature), Gibbons will allow the tax hike to become law without his signature. Midnight Jim's equivocations on this issue have been blasted not only by the usual suspects at the Las Vegas Sun but even by his core constituency, the editorial board of the Las Vegas Review-Journal, in its harshest-ever criticism of the governor.

Update: Gibbons' shilly-shallying about where he stands on the room tax has now cost him the support of Chuck Muth. I hear the thermometer in Hell just hit 31 degress Fahrenheit.

Case Bets: Taiwan, Texas, Tea & stockholder sympathy

Mon, 02 Mar 2009 17:50:00 -0700

Aside from being saddled with out-of-the-way locations, potential Taiwanese casinos will be verboten to visitors from China. Peking has made its feelings known in no uncertain terms. It's difficult to see the point of bothering with casino investment in Taiwan unless it's a meager consolation prize for missing out on Macao.

Besides, for Americans of a certain age, the notion of a casino on Matsu doesn't connote carefree resort living: Believe it or not, the U.S. and China seriously contemplated a shooting war over Matsu and sister island Quemoy. Those two little pieces of offshore real estate were a central issue in the 1960 presidential campaign, as John F. Kennedy and Richard Nixon tried to oudo each other in hawkishness.

Put down the crack pipe: Although Texas is a big state, the notion that casino revenues there could match at least five other states combined (including Nevada) is a tall tale indeed. But if one had to choose between developing in Las Vegas and trying to crack a new regional market, it's quantifiable that the latter is a far greater value proposition nowadays.

Levity is usually an alien concept to the Las Vegas Review-Journal (where the attempts at humor are usually of the "Yer mamma wears army boots" variety). However, Howard Stutz has an amusing take on what your casino stock will or won't buy you. Personally, I consider the box of peanut butter Girl Scout cookies I bought last Saturday a better investment of $3.50 than a share of MGM Mirage, even if the cookies won't appreciate over time. (They do taste much better than a stock certificate, though, and they make your girlfriend happier, too.)

One far-too-typical R-J reader, though takes great umbrage at the notion anyone would make light of the anemic value of the gaming sector. Oh, the effrontery! So bunched up are this guy's tighty whities, he actually threatens Stutz with physical violence. Yeah, everybody's Rambo ... so long they're safely behind a keyboard.

Speaking of MGM Mirage, members of its players club needn't worry about a scam that saw Southwesterners spammed with phony "sweepstakes" winnings from the casino giant. When S&G asked whether there was any correlation between its player database and the recipients of the letter, the reply was the essence of brevity: "No."

Looking for good news in Vegas

Thu, 12 Feb 2009 17:08:00 -0700

If I wanted to drive myself to strong drink, I could write about depressing, atrocious numbers coming out of Nevada casinos in December. But as that great philosopher, Linus in Peanuts, would remind me, it's better to light a single candle than to curse the darkness. (Next panel: Lucy hollering, "You stupid darkness!") Let's just say that December revenues hew to my saw that when Wendover sneezes, Nevada catches pneumonia and move on.

Two Sundays ago, the Review-Journal ran a pair of stories that warranted mention here at the time but got lost in the shuffle. Time to give credit where it's due, especially as these articles highlight some of silver linings inside the present-day storm front.

Boyd Gaming's is the least-sexy brand among the major casino operators ... but sexiness can be overrated. (See: Station Casinos) Unlike a certain crosstown rival which put all its eggs in the Vegas basket, Boyd has always rejoiced in a diversified portfolio. With Wall Street falling in love with the regional casino market, Boyd is likely to experience newfound appreciation on the Street.

Echelon: Stopped in the nick of time.

No wonder CFO Josh Hirsberg strikes such a sanguine tone. He also fesses up to a number of uncertainties, which is a refreshing change of pace. True, the company has halved its 401(k) matches but it hasn't deep-sixed them altogether, unlike several competitors. Also, it stopped Echelon while it still had the ability to alter the scale of the project, whereas Caesar Palace's Octavius Tower had crossed that Rubicon. It certainly doesn't rank anywhere near as high on the Mortification Meter as MGM Mirage's forced truncation of The Harmon (now to be an ungainly stump) or Las Vegas Sands' abrupt cessation of its St. Regis tower. Boyd's ongoing infatuation with fickle Morgans Hotel Group remains a major puzzlement but let's not belabor that now.

Boyd's chances of coming out the economic tsunami intact look good. Besides, the company has surprised people before. Who would have picked it to be the one that would shake up the Atlantic City market and force everyone else to keep pace?

A project that has the makings of a comparable success story in Las Vegas is M Resort, brainchild of the Marnell family. (You know, the folks who gave The Rio its cachet -- before Harrah's Entertainment took over and "geriatrified" the place.) Admittedly, $1 billion for a 390-room hotel/casino doesn't sound anything like optimal bang for the buck, but M Resort has three things going for it that Station's Red Rock Resort and Aliante Station don't: location, location, location.

Strategically, M's site is killer. It sits just north of the pass through which I-15 flows into the Vegas Valley, as you head in from California. In fact, you see the M tower even before you reach the pass, stunningly framed between the canyon walls. The vista from the north side of M ought to give it must-visit cachet when it opens in two weeks (March 1). The relative paucity of hotel rooms may bespeak caution over whether the stay-off-Strip/commute-to-Strip business model has worked yet. As they say on Wall Street, "visibility is limited" because like-minded Green Valley Ranch and South Point have gone private.

Also, by limiting their exposure on the hotel side -- where so much of the rest of the market is overexposed -- the Marnells should have supply/demand dynamics in their favor. A place like Morgans' Hard Rock Hotel, which only drew a third of its cash flow from gambling before Morgans went on a frenzied expansion binge, is super-exposed in the area that's most sensitive to price fluctuations -- hotel rooms -- and soon to become even more so. (The HRH puts a brave spin on it but it's no secret why the project is fully funded: It's 85% owned by the bank which, like the pig in the ham-and-egg-breakfast analogy, is committed while Morgans [i.e., the chicken] has but an interest.)

One also has to laud CEO Anthony Marnell III's incremental preparation for the Vegas market: a stint managing a tribal casino (giving him experience in the drive-in market), followed by acquisition of the Saddle West in Pahrump (ditto the locals market), then Laughlin. So his $1 billion dice-throw was approached via a circumspect route. George Maloof has already shown that a steady locals/hipsters mix can work as a business model. M Resort is the first project since The Palms to wholeheartedly go that route.

With nearby Olympia Gaming and Station (Inspirada) casino developments on indefinite hiatus, Marnell should be firmly entrenched before anyone else in the area gets a shovel in the ground. It's a serendipitous combination of preparation and circumstance. Of course, M could be either a succes d'estime or an outright bust, but the buzz I've been hearing is strong.

Tamares Group giveth (booking a new magic show into the Las Vegas Club) and Tamares taketh away, pulling back on a planned art museum (above). So if this is no time to invest $12 million in an art museum, maybe Tamares might want to invest it in its casinos. Comic relief is supplied by Mayor Oscar Goodman, who's been exceptionally obtuse this week. (See: President Obama, Silly Feud with)

Casinos in Texas are one of the longest of long shots but Galveston's name keeps coming up. The whole thing screams "Tilman Fertitta!", especially since we know he's wanted a casino there and was even rather colorfully accused of surreptitiously installing casino infrastructure in his Galveston convention center. He got a good chuckle out of that one, as I recall.

Fertitta vs. Fertitta

Wed, 28 Jan 2009 14:06:00 -0700

After years of seeing players flee in droves to Lake Charles, Shreveport and Oklahoma, businessmen in Texas have finally had enough and are stumping for a vote to authorize casinos in the Lone Star State. It's a long shot but in these desperate times, I'd no longer bet heavily against it. Prudently, the proposal would redress a longstanding wrong (and sidestep a lawsuit or three) by restoring gambling rights to Texas' Native American tribes, some of the many victims of l'affaire Abramoff.

The Las Vegas Review-Journal's Howard Stutz adds that the Frank Fertitta Jr. clan (including presumably Frank III and brother Lorenzo) is in on the action. True, Station Casinos itself is tapped out but the Fertittas are sitting upon bushels of money made either through the UFC or the Station buyout.

If the Las Vegas Fertittas really do have their eyes on Texas, it'd not only present a business opportunity but a chance to stick it one more time to cousin -- and rival -- Tilman Fertitta. The latter, a scion of the Galveston Fertittas, has coveted a Texas casino for some time. One can only imagine how the irascible Tilman might take to seeing young Frank III and Lorenzo setting up shop in his backyard, especially after they covertly helped Tim Poster and Tom Breitling run up the price of the Golden Nugget purchase.

Regulation? Who needs it? If, as Nevada Gaming Control Board Chairman Dennis Neilander maintains, his agency is operating at 1991 staffing levels, then Gov. Jim Gibbons proposes to take the NGCB back into the 1980s. Perhaps Midnight Jim is feeling nostalgic for the heyday of Lefty Rosenthal. Who knows?

Whatever the case, Gibbons' proposed cuts would make it more difficult for the Control Board to account for the tax revenue that Midnight Jim claims he is at such great pains to conserve and maximize. Then again, trying to reconcile what Gibbons says with what he actually does has been an impossibility from the get-go.