David Mckee's Stiffs & Georges - Gary Goett

Station 1, Boyd 0

Wed, 03 Jun 2009 14:01:00 -0700

In a North Las Vegas proxy war, Station Casinos handed defeat to Boyd Gaming when its preferred candidate, Councilwoman Shari Buck, trounced a colleague, to become the city's next mayor. Both Boyd and Station contributed to both candidates but slight biases were evident.

Station and partner Greenspun Corp. gave $32,600 to Buck, $28,500 to opponent William Robinson. Boyd and its NLV partner, Olympia Group, gave $37,500 to Robinson, as opposed to $25,000 for Buck.

Hence, the outcome of the election will not be good news for Boyd, especially if Station comes back to the city council, asking for a zoning variance so it can build Losee Station ... right across the street from Boyd's as-yet-untitled joint venture with Olympia. Outgoing Mayor Michael Montandon had opposed expanding the number of casino enterprize zones in NLV until all the existing ones have been developed, a process that might have required waiting until Hell is dripping with icicles. With Montandon out of the picture, all bets -- so to speak -- are off.

'M' is for 'mobbed'

Mon, 16 Mar 2009 11:08:00 -0700

Local naysayers have been gleefully predicting the swift demise of M Resort for weeks now. And I'll admit I even entertained a few doubts as we drove out there yesterday morning. I mean, unless you live well south of Vegas proper, you have to drive all to hell and gone to reach M. Was that initial fortnight of frenzied business just a novelty phase?

Boy, were my doubts misplaced. M was crawling with players and other customers at 10 a.m. on a Sunday, with lines soon forming for just about every restaurant on the property. That's to say nothing of the number of people queuing up to join the players' club. That was about a half-hour wait, followed by what must have an even longer one for the buffet, although my bad back was flaring up so fiercely that A) it played hob with my sense of time and B) I was sure I'd be leaving M on a gurney.

That buffet is no doubt one of the main drivers of M's early success. (Savvy marketing is another.) Both in breadth and quality, it rivals the two buffets at The Rio, thereby putting it in the top three among off-Strip buffets. M manages the not-inconsiderable feat of putting Station Casinos' Feast buffets in the shade and the respectable Sam's Town one is left completely in the dust.

Leaving M, you'll pass the once (and future?) site of Gary Goett's Olympia Gaming casino-resort (above, as originally conceived), now retitled Legends at Southern Highlands. One billboard vows an April 2010 opening, which is preposterous, while another -- right next to it -- only promises 2011. As of this writing, not so much as a spadeful of earth has been turned. This project was announced before M but has slipped into the "believe it when it happens" category.

Donald Trump likes to sue but this time he's on the receiving end. Depositors in insolvent Trump Ocean Resort Baja are claiming "fraud, negligence, unjust enrichment and violating federal disclosure laws" after the project blew through $31.5 million worth of deposits with nothing to show for it but a hole in the ground. As is quickly becoming the case whenever a Trump-branded product goes belly-up, the orange-haired TV star is claiming he had nothing to do with it.

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.

Harrah's waffling on Kansas?

Fri, 14 Nov 2008 17:41:00 -0700

Kansas casino applicants have been dropping like flies and now the buzzards are starting to circle Harrah's Entertainment's $535 million Sumner County project. (Harrah's has already been warned once by the Kansas Lottery that it had better make good on its proposal, in full.) All Harrah's would tell AP is that it doesn't comment on rumors, which is less than a ringing reiteration of its commitment to the Sunflower State.

The folks in Topeka, though, weren't sounding any too confident, uttering things like, "I consider it a possibility, but I haven't heard anything definite." Or "We haven't gotten official notification of anything yet. I know there have been some conversations." Or perhaps the oh-so-reassuring, "When I've checked on the rumors, they have assured us that is not the case, at least not at this time ... but you never know about the future."

There are a couple of observations to be made here. One, which almost goes without saying, is that had Harrah's CEO Gary Loveman not gone a-courtin' to Texas Pacific Group and Apollo Management, we'd probably be talking this moment about a profitable company, not one that lost $130 million over the summer. It has until Jan. 21 to decide which it needs more: The Kansas market or its $25 million soon-to-be-nonrefundable deposit. If it opts to take the money and split, Harrah's will be doubly the loser, having opted out early from a tribal casino-management contract in Kansas in order to take a run at one of the Lottery's concessions instead.

The other thought is that Kansas' four-casino initiative is unraveling in dismaying fashion. Whatever stomach Las Vegas had for managing state-owned casinos in the heartland has been all but lost, especially given the high cost of entry. MGM Mirage, Las Vegas Sands, Pinnacle Entertainment and Olympia Gaming all bailed out late in the audition process.

As for Penn National, not only did it walk away from its Cherokee County concession, no one has stepped forward to replace it. What if they offered a casino license and nobody came? We're about to find out.

(Considering that Penn wanted a parlay of Sumner and Cherokee counties, if Harrah's falters then the Lottery could do worse than swallow its pride and have Penn CEO Peter Carlino on speed-dial.)

That leaves two concessionaires -- Butler National Service Corp. and Cordish Co. -- neither of whom is prominently associated with the casino industry. (In Butler's case, that translates as "completely inexperienced.") It's an inauspcious scenario and, faced with such a mess, Gov. Kathleen Sebelius may find the siren song of Washington, D.C., more appealing with each passing moment.

Casino Vote '08: Dan Lee's the big winner

Wed, 05 Nov 2008 16:36:00 -0700

JP Morgan has proclaimed Pinnacle Entertainment "the biggest winner this election day." By voting to both lift the cap on buy-ins and the close Missouri to additional casinos, Show-Me State voters delivered a gift to Pinnacle CEO Dan Lee, who has massively invested in the greater St. Louis market and can now reap the benefits of higher wagers and artificially limited competition. Anybody contemplating the investment risk that Pinnacle has been lately (with at least $2.85 billion in outstanding projects) can sleep a little more soundly tonight.

But, as Morgan analysts point out, the stomping of a pro-casino initiative in Ohio redounds to the benefit of Pinnacle's Belterra casino (and Penn National's Argosy Lawrenceburg riverboat). While the Ohio vote reflects a certain amount of anti-casino sentiment, this was one of those ballot measures where the devil was in the details. It polled well in the immediate region, which has been hard-hit with job losses (5,000 of which casino backers promised to replace) but it was "no sale" upstate. An otherwise leftward-trending electorate was unpersuaded.

Specifically, there was a "trap door" in the enabling language that might have let Lakes Entertainment slip its tax obligations if tribal casinos open in the Buckeye State (a long shot, but one voters weren't willing to hazard), not to mention that the casino was to be allowed to operate with scant oversight. Oh, and the license fee ($15 million) wasn't chicken feed, but it's considerably less than what casinos are ponying up elsewhere -- like Kansas -- where no monopolies are promised. The face-saving spin was that "misleading ads" were to blame -- like that's anything new in politics.

Details were the bane in Maine, too, where Olympia Gaming found itself on the losing end of a casino plebiscite. Maine voters have taken a go-slow approach to casino expansion in their state, also voting down a racino at Scarborough Downs. There also seems to have been some "payback" involved -- from Down Easters who had seen their own casino aspirations crushed five years ago. If they couldn't have a casino, those upstart resort communities were going to be SOL, too. So there!

Pat LaMarche expresses her considered opinion of Maine's electoral process.

Lowering the legal gambing age to 19 stuck in voters' craw, as did certain other special privileges which were to be extended to the Oxford County casino and to Gary Goett's Olympia. Project booster Pat LaMarche sniffed that folks in Maine were "very unfriendly" and says she's going to take her ball and LaMarche right next door to New Hampshire.

On the other hand, LaMarche is the bete noire of intolerant religious wack jobs, so that's something in her favor.

Having a win/win day, was also the good fortune of Ameristar Casinos, which will see some relief in Colorado, in addition to prevailing in Missouri. In return for helping the state's community-college system, Colorado casinos get some new goodies that -- we hope -- will ameliorate the effects of the state's smoking ban.

It's a mixed bag, albeit more positive than negative, for Penn National. It headed off the Ohio threat but finds its flagship property in West Virginia facing competitive pressure not only from Pennsylvania but soon from Maryland, even though the latter's ramp-up is roughly four years away. Penn astutely protected its flank by optioning strategically placed real estate near Baltimore, in its first move after its LBO imploded last summer.

(Amusingly, both sides in the Maryland fight used President-elect Obama as a "product placement" in their literature. They knew a good "branding opportunity" when they saw one.)

Hopefully the Maryland Lege will revisit (read: reduce) the confiscatory 67% tax rate. Otherwise, brace yourself for Ye Olde Shack O'Slots, as no sane businessman would invest heavily in a casino with such a narrow operating margin. By establishing a Maryland beachhead, Penn is probably thinking more in terms of capturing "leakage" from its other nearby properties, not having visions of $$$ dancing in its head.

Former governor, sometime racino proponent and "Casino Jack" Abramoff beneficiary Robert Leroy "Bob" Ehrlich Jr. (R) hoped to "see us kill this turkey," but that sounds like sour grapes from the one-term blunder, er, wonder. Gov. Martin O'Malley (D) moved the ball across the goal line with 59% support, whereas Ehrlich couldn't get it upfield in four tries -- even in the post-9/11 economy. It may nearly be Thanksgiving but the only turkey in sight is Ehrlich (or is that a thinly disguised Steve Carell?)

Speaking of "Casino Jack", add him to the "losers" column of our S&G "Winners & Losers" with a capital "L." From the jailhouse, convicted felon Abramoff tried to 'Swift Boat' his archnemesis, John McCain, but the effort sank without leaving the pier. What a schlemil.

Loose change: Voters also gave their assent to a lottery in Arkansas and expanded table games at Greenbrier Resort in West Virginia. So I'd score that as two lost battles (Ohio, Maine), one decisive victory (Maryland) and incremental wins in four other skirmishes.

On balance, a good day.

Winners & Losers

Wed, 05 Nov 2008 13:52:00 -0700

And now the obligatory post-Election, What's-it-all-about-Alfie roundup ...

Culinary Union 1, Casino CEOs O: True, the Culinary tripped all over its own feet in the early going, leading to Democratic caucuses that weren't so much "Barackular" as "debacular." But D. Taylor & Co. backed the winning horse and did it early, which earns some chits down the road, plus they have a new Capitol Hill friend in Rep.-elect Dina Titus. Messrs. Lanni, Loveman, Wynn, Adelson and Trump made a variety of presidential wagers, losing every one.

Ameristar Casinos/Pinnacle Entertainment: They wanted a protected oligarchy in Missouri and now they've got it -- and at relatively little additional tax burden to them.

Slot manufacturers: OK, so Ohio and Maine didn't come through and the Missouri market is frozen. But 15K new slots in Maryland ain't chicken feed. Plus a West Virginia casino expansion that flew under the radar got voted in. Inexplicably, slot stocks traded downward. Stupid Wall Street.

Colorado casinos: They didn't so much "win" as get a hefty lifeline thrown to them by Rocky Mountain State voters who approved 20X higher betting limits, 'round the clock operations, and roulette and craps. (No Sen. John McCain sightings in Cripple Creek yet, though.)

Freedom's Watch: So far F-Double-U is 6-9-1 (with Sen. Gordon Smith [R] of Oregon momentarily in the "tie" column) in its top-priority races. I'm feeling generous and crediting the Adelson front group with "wins" in the case of self-destructing Rep. Tim Mahoney (D-FL), who continued the scummy tradition of predecessor Mark Foley, and in that of Sen. Saxby Chambliss (R-GA), who faces a December do-over, thanks to Georgia law. And veering off at the last minute to spend money attacking not-up-for-reelection Sen. Chuck Schumer (D-N.Y.)? Adelsonian political acumen at its finest. Winner? Loser? Let's call it a draw.

Poker: Just when it looked like the poker phenomenon was about to jump the shark, we've got a poker-playing president-elect. I dunno if Ms. Pelosi and Messrs. Reid, McConnell and Boehner cotton to hashing out legislation over cigars, booze and a deck of cards, but they'd better get ready for a whole new kind of "smoke-filled room."

Online Poker: Chances for a repeal of the UIGEA suddenly look a lot better.

Karma: Bearing false witness and serial adultery remain very uncool. But multiple felony counts and assorted other financial malfeasances remain A-OK with voters of both parties. (Hint: If Ted Stevens has to be forcibly removed from office, start practicing the phrase "Senator Palin." Kinda trips off the tongue, don't it?)

Gays & Lesbians: Voters in California stuck it to one of Vegas' most loyal constituencies big-time, passing the hateful Proposition 8. Were Nevada not so socially conservative (although compassionate enough to have legalized medical marijuana a ways back), I'd say we should vote for gay nuptials here, then sit back and gloat as the bucks roll in.

Tom Tancredo and ilk: Even if you abhor George W. Bush, you've got to give it up for his ability to rally Hispanic voters to the GOP standard. (I can't speak for Biloxi-Gulfport or Atlantic City, but Las Vegas can't function without its Latino labor base and casino CEOs know this; that's why immigration is their "third rail" of politics.) I always thought the immigration issue would be a non-starter in this election -- and it was. But the Tancredos of the GOP, by ginning it up in both '06 and early '08, antagonized Latinos, scored an own-goal and eradicated the gains Bush made with this voting bloc. So, in lieu of a prolonged post-mortem, maybe Republicans should just burn Tancredo in effigy and then turn the page.

Gaming's GOP influence: The annihilation of GOP moderates at the national level is largely complete, leaving an electoral map that looks a lot like the Confederacy, plus a horseshoe-shaped chunk of the West. Subtract Mississippi, Louisiana and tribal casinos and you've got slim pickings there. Gambling-friendly Republicans like Govs. Haley Barbour (MS) and Charlie Crist (FL) have made progress, but not easily and not without much expenditure of political capital. It's difficult to see where American Gaming Association boss Frank Fahrenkopf goes within his own party when he needs its support. The casino industry's investment in the GOP has yielded scant ROI.

Gov. Jim Gibbons: With state Sens. Joe Heck and Bob Beers, and Rep. Jon Porter all packed off to early retirement by their constituents, Gibbons suddenly has much less to fear from within his own party two years hence. (Ditto Porter's designs on Sen. Harry Reid's [D-NV] seat.)

Rep. Dean Heller (R-NV): If he opts to challenge Reid -- or Gibbons -- he's now the presumptive frontrunner. (I still think "Gov. Oscar Goodman" has a nice ring to it.)

North Las Vegas Mayor Michael Montandon (R): He's laying the groundwork for an intra-party challenge to Gibbons. Montandon's ably managed growth in NLV and would easily trump Gibbons on the "competence" front. The sudden political demise of Beers, Heck and Porter gives him a clear field of fire.

Tourists: Ever hospitable, Clark County voters gave them the finger, by endorsing a 2%-3% hike in the hotel tax. Thankfully, it's just an advisory vote.

Joe the Player: Winner. Clinton-era tax rates are coming back, which may hurt the "whales" but should be good for the rest of us. The Clinton administration coincided with halcyon years of casino growth, especially in Vegas and on the Gulf Coast. The succeeding eight years were dominated by M&A binges, condomania and a narrowing of the Strip's economic appeal toward the monied elite -- the latter being a very sore point among casino consumers. Vegas-wise, which eight years would you choose?

Jon Ozark: This cardboard dummy was wheeled into Nevada Assembly District 21 by local monied interests, to knock off Asm. Bob Beers -- not be confused with the less-hirsute state Sen. Bob Beers -- for having the audacity to stand up against Steve Wynn, he whose name dare not be pejoratively uttered in Carson City. That much having been accomplished, in the general election Ozark discovered once again that it takes more than a pretty face to win. Good luck in your next district, Mr. Ozark. They say the third one's the charm.

Happy anniversary, you're fired

Mon, 06 Oct 2008 15:48:00 -0700

That was essentially the message conveyed to several dozen workers at MGM Grand Detroit as the hotel-casino passed its first anniversary. Such cutbacks are usually routine in the industry and this one affected but a fraction of a percentage of the casino's workforce. But it's a heckuva way to say, "Happy anniversary!"

It's also an indicator of how much our economy has soured that MGM Grand Detroit is having to curb staffing even though it's by far the dominant player in the Motown market. Still, its workforce reduction is microscopic compared to the cuts coming up at Harrah's Entertainment (whistleblower Fred Frazzetta, who knows a thing or two that Harrah's management wishes he didn't, says 20% of Harrah's Vegas-based workforce will be decimated). Then there's Mill Casino, in Oregon, which opened a new hotel tower in the teeth of a recession. The result? A 7% workforce diminution, the first in the casino's 13-year history. Small wonder that Atlantic City is preparing to backpedal on its Oct. 15 smoking ban.

Wall Street has been no help. Liz Benston explains why several gaming companies' market-cap value is a fraction of that of their asset base. The casino industry's debt loads and ambitious construction plans are giving investors jitters, Benston reports. Ironically, the same Wall Street that has loudly pined for a never-ending stream of megaresort openings would now be happier if those same companies were doing nothing. Worse still, the gaming group is one of the few sectors that can be shorted with impunity. So if gaming stocks continue to plummet, it's partly because it's in some investors' interest that they do so.

Boyd's Michigan nemesis, Four Winds Casino is profiled by the Columbus Dispatch. It's a close-up view of the tribal casino that's taken a whopping big bite out of revenues from Boyd Gaming's Indiana riverboat, Blue Chip, basically by pre-empting the latter's Michigan-customer base.

Second wind in Maine. While developer Gary Goett's Olympia Gaming may have found the Las Vegas and Kansas markets too rich for its blood, at least for now, Maine is a whole 'nother story. Since Olympia threw in its lot with a pro-casino initiative, momentum has shifted in the project's favor.