"This was one of the smartest decisions Boyd ever made. They lost $500 million by stopping the project. If they had gone forward, they might have lost $5 billion and the company." — Macquarie Capital analyst Joel Simkins on Boyd Gaming's stoppage of Echelon last summer.
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After a statewide vote approved 'round-the-clock operation at Colorado's non-tribal casinos (along with a 20X increase in betting limits and a wider repertory of games), the measure wasn't home and dry. It had to be voted through in Cripple Creek, Black Hawk and Central City. I heard some skepticism voiced about whether the citizens of Central City were on board with a gambling expansion but they sure were. The proposed liberalization racked up an overwhelming victory yesterday.
Don't gas up for a drive to Colorado just now. The widened operating rules don't kick in until July 1. Although neither Ameristar Casinos nor Riviera Holdings is directly affected by the Central City vote, Wall Street finally got a clue as both stocks traded slightly upward today. Ditto Penn National but not Isle of Capri. Congratulations to all Colorado operators, who definitely could use the relief.
Poor Kerry Packer; the late Australian mogul and famous high roller must be doing all his rolling in the grave now. Reputed for being daring 
at baccarat and cautious in business, the media baron is at least spared the indignity of seeing son James Packer blow through his patrimony at a record pace.
Going is the $33 million yacht; on hold is the $40 million corporate jet. Even work on the $2.5 million backyard swimming pool has been suspended. (Don’t you hate it when that happens?) At least the pin placements on Packer’s Greg Norman-designed golf course are still “changed every day at massive expense,” reports Rupert Murdoch’s News.com.au.
More seriously, Packer is reported to be suffering from depression, though other media reports dispute this. Given the debilitating, even paralyzing nature of the disease (something for which I can vouch firsthand), it puts a potentially very different cast upon Packer’s December no-show for a Nevada Gaming Control Board hearing.
When Packer did turn up, Chairman Dennis Neilander admitted to being somewhat foxed by Packer’s acquisition of Cannery Casino Resorts (for $1.8 billion). “You and me both,” I thought. As Packer seemingly played Pin the Tail on the Donkey, buying not only Cannery but positions in Fontainebleau, Station Casinos, Harrah’s Entertainment and the flaccid Crown Las Vegas ‘failsino’-tower, I tried to convince myself that an overarching strategy was at work. In retrospect — especially after the writedown of the Station and Harrah’s investments — what we were witnessing was James Packer, Shopaholic. (How did he manage to miss out on the Cosmopolitan?) One begins to see why Steve Wynn steered clear of Packer, back when the talk of a Wynn-Packer joint venture was the buzz du jour on the Strip.
Even the Crown Macau cash spigot has been sputtering, although Melco Crown CEO Lawrence Ho keeps insisting that Chinese access to Macao will improve in time for the City of Dreams opening. (Either he’s whistling past the graveyard or he knows something for which others would pay a very great number of patacas.) Market share is down at Crown Macau and the Macanese government is predicting a serious diminution of gaming revenue for for the overall market in 2009, placing it somewhere near $10.7 billion.
Plus, the ripple effect doesn’t stop there. Aristocrat Leisure, which could really stand to have some good news, had been hoping for a fivefold increase in its installed slot base in Macao over the next two years. Not only is that unlikely, operators are trimming their existing slot inventory.
Underscoring their pessimism regarding reduced visa restrictions, Macanese tourism officials are turning their gaze at least partly away from China. Among the newly coveted markets are Singapore‘s presumed feeder markets — India, Indonesia, Malaysia, the Philippines, Thailand, and even Australia and New Zealand — to say nothing of Singapore itself. It’s long been presumed that Singapore’s got a tough row to hoe when its casino megaresorts come on line and it just keeps getting tougher.
Today we honor Dr. Martin Luther King Jr. and his ennobling vision, which finally appears to be within reach. Of course, some have a different way of celebrating this …
I think I missed the part of the "I have a dream" speech in which Dr. King foresaw 6X points in America's future. Anyway, we've heard and read about "The dream deferred." This year it seems to be "The dream downsized." Here's last year's MLK Day promo from the same casino chain:
So 1X fewer points and two fewer days in which to earn them. Don't tell me they're not sweating the comps here in Vegas. And that is something upon which men and women of all creeds, colors and nationalities can agree.
CityCenter: Cash cow or calf of gold?
It’s received wisdom that, in its worship of the Golden Calf known as CityCenter, half-owner MGM Mirage is prepared to sacrifice some of its high-value properties, including MGM Grand Detroit, even in the face of numbers like these. Perhaps a history lesson is in order.
After the 9/11 attacks and the crippling blow they dealt to the Vegas economy, one of the ways companies like MGM stayed afloat (and, in MGM’s case, profitable) was that their Vegas operations were backstopped by regional footholds in markets like Detroit and Biloxi. Now one keeps hearing that MGM is bent upon putting all its eggs in the Vegas basket, with even MGM Grand Macau possibly to be had.
(A moment of levity: A Dutch casino executive, speaking at G2E, suggested in all seriousness that MGM buy Station Casinos or Boyd Gaming and transplant their [locals] customer base to CityCenter. Which shows almost as little understanding of the Vegas market as I have of Holland’s casino business.)
If this is an accurate reflection of the corporate thinking at MGM, shareholders should be alarmed, at the very least. A CityCenter-centric strategy concentrates risk, rather than spreading it across multiple markets. The kind of pullback that’s being mooted in the blogosphere and podcast cosmos would be so irresponsible that it would call the judgment of MGM leadership into question. However, so long as said management is answerable only to Kirk Kerkorian, that question may never be called.
Don’t look for rescue from Foxwoods or Mohegan Sun. Their slot revenues have been sucking wind this year. Also, salary cutbacks to 9,800 Mohegan Sun workers bode very poorly for further expansion by the casino, which was bullish on the Kansas market not so long ago.
Boyd fights back. The opening of nearby Four Winds Casino really did a number (as in approx. -40%) on revenues at Boyd’s Blue Chip riverboat in northeastern Indiana. Watching double-digit revenue declines, month after month, might spur those of us with lesser intenstinal fortitude to cut and run.
Not Boyd. It’s reinventing its business model for Blue Chip, in best “adapt or die” fashion. The three-pronged response of a new hotel, spa and concert venue is an aggressive pushback. It probably won’t restore Blue Chip to former levels of glory, at least where gambling revenue is concerned (Four Winds still has the “convenience factor” going for it with Michigan punters). However, it does fling a strong challenge at its adversary. Four Winds, the ball is now your court.
Even if hotelier and Westin Casuarina (above) owner Columbia Sussex succeeds in extricating itself from Tropicana Entertainment, it’s not out of the woods by a long chalk. It may have as little as nine months (or as many as 21) to pay off a $700 million loan — or forfeit over a half-billion dollars’ worth of hotel properties.
“Covenants are being triggered by those who have bought at high [long-term value] in 2006 and 2007,” says Cedar Capital Partners veep Phil Golding, and Golding’s time frame would coincide with the $3 billion-plus spending spree that netted ColSux CEO William J. Yung III not only Aztar Corp. but 14 Wyndham-flagged hotels when the seller’s market was at its peak.
Judging by the tenor of the Property Week article, MGM Mirage also found an exquisitely inauspicious time to try and semi-reinvent itself as pure hotel operator (albeit so far only for the China and Dubai markets).
Anybody who still frets about "criminal elements" in Las Vegas casinos ought to turn their gaze toward Chicago instead, where such issues continue to dog the state's 10th casino license. The citizens of Waukegan lost their shot at a casino because the would-be owners had juiced an indicted businessman into the deal, despite representations to the contrary.
And the winner is … Des Plaines.
Also, the amounts of the various bids have been revised. Favorite son Neil Bluhm's winning offer was $272 million (quite a bit more than previously reported), while Waukegan Gaming brought up the rear with $216 million. Alex Yemenidjian's bid has been revised slightly downward, to a still eye-popping $406 million. Maybe Yemenidjian, who made one previous run at Tropicana Entertainment, ought to take that $406 million check to Scott Butera's office and ask for the Tropicana Las Vegas in return. And if were Butera, I'd have that check to the bank as fast as my legs could carry me.
Wyndham's latest Las Vegas project, just up the block from LVA HQ, has ground to either a halt or an extremely slow crawl. But Wyndham is going great guns in the Bahamas, where its Wyndham Nassau Resort & Crystal Palace Casino opened yesterday. Assuming Harrah's Entertainment can ever pull the trigger on a sale of The Rio, the latter has quite a bit of acreage (36.73 acres, to be pedantically precise) out back that's being underutilized as surface parking. Any prospective owner ought to consider cannibalizing that for additional casino/restaurant offerings, piggybacked onto the rear end of the existing Rio. It could synergize quite nicely with the Wyndham's timeshares, once they're eventually up and running just across the street, and capitalize on a steady stream of Twain Avenue traffic.
(Just for perspective, El Ad Properties only has clear title to 18.4 acres for its Plaza metaresort, although it may hold options on adjacent land; there's still $615 million in that acquisition that hasn't yet changed hands, judging from property records.)
Speaking of Harrah's, whether due to its new bean-counting ownership or a surfeit of other pressures, its media site has fallen into a state of semi-neglect. For instance, Harrah's southern Indiana casino hasn't been Caesars Indiana for some time now. The newly Caesar-ized Casino Windsor doesn't even merit a Web page of its own, nor do the oft-disrespected Imperial Palace and Bill's Gamblin' Hall on the Strip. The former Barbary Coast would have been a prime spot for reintroducing the Horseshoe brand to Las Vegas, but exploiting the power of the Horseshoe name is one of many ideas that have fallen victim to Harrah's ADD-afflicted corporate style in the post-Phil Satre era.
Yesterday saw an unusual — but altogether pleasant — change in the Vegas Gang routine, as we taped “on location” from a seventh-floor room in Encore, overlooking Echelon and the increasingly ominous Fontainebleau (so disproportionately massive it looms over its neighbors like Godzilla or Gammera over mere mortals). Both David G. Schwartz and Jeff Simpson joined us by speakerphone, giving the conversation a certain Charlie’s Angels vibe.
It’s Fontainebleau … coming to stomp us all! Run for your lives!
Spoilers ahead …
I’m clearly very much in the minority on the likelihood of a Mirage or Bellagio sale. Cash cows they may well be, but there seems to be a strong consensus that their tires are being kicked and serious talks are underway, as well as that The Mirage has become a stodgy property.
Also that MGM Mirage is a Vegas-Vegas-Vegas-obsessed company and would be willing to sacrifice the Gulf Coast and Detroit markets — the latter of which it utterly dominates — to keep the CityCenter bucks a-flowin’. (And why would MGM bail on Detroit and not on the sickly Illinois market instead? Or Tunica? Or … ? If Alex Yemenidjian would pay $435 million for an Illinois license, what might he put down on actual, operational asset?)
Such a strategy would fly in the face, if not of sense, at least of recent casino industry thinking, whereby you try to maintain strong footholds in the second-tier markets and not put all your chips on Vegas (unless you’re Steve Wynn and even he tried it once). It would be like Harrah’s Entertainment evacuating Atlantic City to raise money for its stalled Octavius Tower.
And you could knock me over with a feather if MGM sells its Macao demi-concession to partner Pansy Ho or back to her father Stanley, especially after all the hoops MGM had to jump through to get into Macao. Bailing on the world’s #1 casino town would be an indicator of extreme desperation bordering on insanity.
Unfortunately, we weren’t able to get into the provenance of the urban legend that Phil Ruffin‘s Treasure Island purchase was just a big-ass/short-term loan to MGM, with “T.I.” serving as collateral — and at 55% interest, no less.
"For a casino worker, every day breathing second-hand smoke in the workplace is one too many. Everyone has the right to breathe smoke-free air — regardless of the color of their collar." — Americans for Nonsmokers Rights Executive Director Cynthia Hallett, reacting to a resolution passed by the National Council of Legislators from Gaming States. The NCLGS resolution urges constitutent states to make all gambling venues smoke-free workplaces and that smokeless gambling be a mandatory part of future tribal-state compacts. States that require smoke-free casinos are, at present, Illinois, Colorado and Delaware.
Secured creditors of Tropicana Entertainment are being asked to take haircuts of 14-27%, as details continue to emerge of the company's reorganization proposal. The bigger shave would go to debtors of the company's 10 non-Vegas properties, the value of whose stake would be written down to $915 million.
Those who are owed money by the Tropicana Las Vegas (which would be spun off into a stand-alone TropEnt subsidiary) would reduce their claims to, if my calculations are correct, $376 million and change. Which means that, if CEO Scott Butera's #1 priority is to balance the ledger, a Strip property that stock and real estate analysts were valuing in the $1 billion-$1.2 billion range back in '06 might soon be had for less than $400 million — or just over $11 million an acre.* How times change.
(* — Obviously this does not take into as-though-redeveloped valuations, ongoing operating costs, EBITDA multiples, etc. But if MGM Mirage really is having trouble getting $1.2 billion for The Mirage in the present economy, then asking a third as much for the not-sought-after, rehabilitation-needing Trop seems quite plausible.)
Subordinated debtors, though, are being asked to take it in the shorts: Settle for less than $20 million of nearly $1 billion in debt. TropEnt's former CEO, William J. Yung III, may be going down but he continues to inflict collateral damage along the way.
After a fitful start, blogorrhea is sweeping the business desk of the Las Vegas Review-Journal, resulting a veritable flood of news nuggets today …
Planet Hollywood prexy Michael Mecca has resigned to pursue the proverbial "other opportunities" at a time when revenues have been up. On the next Vegas Gang, Jeff Simpson predicts — with unassailable logic — that Mecca is going over to Crown Ltd. to head up James Packer's North American gambling operations (in which case Mecca will have his work cut out for him, but congratulations all the same).
A less-charitable alternative theory would be that Mecca has been scapegoated by Planet Ho for having been in charge when it got dragged into the Omar Siddiqui scandal. (The indicted ex-Fry's Electronics exec lost $9 million there in one gambling session alone.) Planet Ho's lawsuit against Siddiqui got tossed last month.
"No more wire hangers!" Whatever the case, somebody leaked Siddiqui's player profile to the San José Mercury News and, geez, this "whale" sure is a whiny little bitch. (Sorry, I meant that to read, "a high-value, loyal customer and a good friend of our casino staff, who look forward to his every visit.")
Good news for visitors: The Nevada Department of Transportation is at least talking about widening I-15 south of Tropicana Ave. Whether NDOT can get the money from Gov. Jim "Scissorhands" Gibbons is another matter, but it can at least remind Midnight Jim that he himself identified California as Nevada's Numero Uno tourism priority in the course of disparaging Asian marketing as "a waste of taxpayer money."
And who knew that the Circus Circus RV park was the new "in" place to stay?
Randy Black, aka Mr. Thrift. Many of his employees are out of work, the former Si Redd's Oasis may be a hollow sepulchre these days and his Black Gaming has defaulted on debt. But we don't need to pass the hat for the self-aggrandizing Black Sr. quite yet.
Seeing financial havoc all around him, Black decided that austerity measures are for other people (like his employees) and awarded himself a nearly 4% raise for this year, escalating to 5% for each year afterwards. Whatever meagre EBITDA Black's Mesquite casinos achieve, 5% of that will be redirected into Black's pockets as a "management fee," on top of $21,200 in other goodies.
At a time when Nevadans from all walks are being asked, or sometimes told, to accept wage freezes and outright reductions, Black's greed is a disgrace to the state. R-J reporter Arnold Knightly is to be commended for keeping tabs on SEC filings and ferreting out not-so-niceties like this.
In other news …
Folies Bergere: 49 is the new 50.
From showgirls to no-girls: What's Ron Thacker's first official act as president of the Tropicana Las Vegas? What else but shut down Folies Bergere well shy of its 50th anniversary? The no-frills spirit of Columbia Sussex remains, protestations to the contrary, clearly alive and well [sic] at the Trop.
Thacker's press release made noises implying that the Trop had a replacement for Folies waiting in the wings but, when pressed by Norm(!) Clarke, a Trop flack could only weakly respond that it was "exploring options" and was "definitely not closing up shop." (The Trop gave the Las Vegas Sun a different, more definitive story, saying it does have a new show en route.) Unspecified property improvements are also promised. Pardon my skepticism, but we've heard that before — and are still waiting.
Geez, first Titanic and Bodies take a hike over to Luxor (where they're doing even bigger business). Now this. Since it's a just a wee bit too cold for swimming right now, is there any reason left to visit the Tropicana? Bueller … Bueller?
Harmon blame game: It looks as though the truncation of The Harmon into a 25-story stump is ultimately the fault of the same people who overlooked scofflaw remodeling jobs at sundry Harrah's Entertainment properties: Clark County's ever-(not)-vigilant building inspectors. "What? Fifteen floors of deficient rebar you say? Gosh, I guess I missed it. My bad. When's lunch?"
The Las Vegas Sun's story comes with a helpful graphic that shows how Perini Building Co. and its subcontractors ineptly installed and then further compromised the rebar that ultimately turned the (would-have-been) 49-story Harmon into what we might call The Half Harmon. In the accompanying video, Clark County's Ron Lynn threatens the culprits with a "potential disciplinary hearing." Oh, they must be quaking in their boots.
Peppermill exec in line for state job. No, not the beloved Peppermill restaurant on the Strip but rather Reno's Peppermill Resort Casino. Director of Marketing Kim Stoll is one of six finalists for the job of Nevada's tourism czar. Not making the cut was underqualified Gibbons crony Kirk Montero. Then again, Gibbons wants to eliminate the selfsame job that he tried to gift-wrap for Montero, so maybe the also-rans in this competition are its real winners.
Yesterday saw an unusual — but altogether pleasant — change in the Vegas Gang routine, as we taped "on location" from a seventh-floor room in Encore, overlooking Echelon and the increasingly ominous Fontainebleau (so disproportionately massive it looms over its neighbors like Godzilla or Gammera over mere mortals). Both David G. Schwartz and Jeff Simpson joined us by speakerphone, giving the conversation a certain Charlie's Angels vibe.
It's Fontainebleau … coming to stomp us all! Run for your lives!
Spoilers ahead …
I'm clearly very much in the minority on the likelihood of a Mirage or Bellagio sale. Cash cows they may well be, but there seems to be a strong consensus that their tires are being kicked and serious talks are underway, as well as that The Mirage has become a stodgy property.
Also that MGM Mirage is a Vegas-Vegas-Vegas-obsessed company and would be willing to sacrifice the Gulf Coast and Detroit markets — the latter of which it utterly dominates — to keep the CityCenter bucks a-flowin'. (And why would MGM bail on Detroit and not on the sickly Illinois market instead? Or Tunica? Or … ? If Alex Yemenidjian would pay $435 million for an Illinois license, what might he put down on actual, operational asset?)
Such a strategy would fly in the face, if not of sense, at least of recent casino industry thinking, whereby you try to maintain strong footholds in the second-tier markets and not put all your chips on Vegas (unless you're Steve Wynn and even he tried it once). It would be like Harrah's Entertainment evacuating Atlantic City to raise money for its stalled Octavius Tower.
And you could knock me over with a feather if MGM sells its Macao demi-concession to partner Pansy Ho or back to her father Stanley, especially after all the hoops MGM had to jump through to get into Macao. Bailing on the world's #1 casino town would be an indicator of extreme desperation bordering on insanity.
Unfortunately, we weren't able to get into the provenance of the urban legend that Phil Ruffin's Treasure Island purchase was just a big-ass/short-term loan to MGM, with "T.I." serving as collateral — and at 55% interest, no less.
"For a casino worker, every day breathing second-hand smoke in the workplace is one too many. Everyone has the right to breathe smoke-free air — regardless of the color of their collar." — Americans for Nonsmokers Rights Executive Director Cynthia Hallett, reacting to a resolution passed by the National Council of Legislators from Gaming States. The NCLGS resolution urges constitutent states to make all gambling venues smoke-free workplaces and that smokeless gambling be a mandatory part of future tribal-state compacts. States that require smoke-free casinos are, at present, Illinois, Colorado and Delaware.
As reader Bill Jones pointed out, Isle of Capri is making a first-come, first-served offer to retire 28% of senior debt at 55 cents on the dollar. (Official version here.) Wall Street wasn't impressed, with Isle stock -16% as of this moment. But then what's with the market today? Voters in Black Hawk, Colo., OK'd expanded games, hours and betting limits, and yet both Ameristar Casinos and Riviera Holdings (which operate in Black Hawk) are down roughly 12% in today's trading. The Black Hawk bulletin is a not-inconsiderable positive — but you wouldn't know it from Wall Street's glum reaction.
Despite story upon story, Penn National Gaming refuses to oblige the Las Vegas Review-Journal and purchase The Mirage. (This was the paper that pooh-poohed the Phil Ruffin/El Ad deal when it began to break.)
While — for all we know — intense negotiations may be going back and forth right now between Penn and MGM over the titular property and a deal could be thisclose, the story has never amounted to much more than feverish speculation that The Mirage simply must be for sale. It would also run a cart and horses through the equally prevalent conventional wisdom that MGM is simply 'renting' Ruffin Treasure Island and will buy it back for $1.2 billion somewhere down the road. After all, if the pirate place doesn't make sense without The Mirage, the reverse equation makes even less.
About the only thing we know for certain is that Ruffin ran the Mirage numbers and found it too rich for his blood, opting for Treasure Island as a Christmas present to himself. And that Steve Wynn didn't make an offer for it. Or so he keeps saying (and I don't for a moment believe that he did or would). Is there a story here or are we all on a fishing expedition?
My best guess — and it's nothing better than that — is that MGM is trying to interest Penn in one or more of at least four other properties but Penn wants something mid-Strip, for obvious reasons, and doesn't want to pay the going rate. (Naturally, given God's rich sense of irony, a Mirage sale will be announced today or tomorrow and I will be proven spectacularly wrong. If so, much crow will be eaten.)
What's new and interesting is the revelation in today's paper that, unlike your average sleeping-dog corporate board, Penn's board of directors actually paid more than lip service to its fiduciary duty by restraining CEO Peter Carlino from making a bid on a Las Vegas Strip property until prices fall further. "Penn National's management is committed to acquiring a Strip resort, potentially in 2009," reads the article, in which case Carlino has put himself on the hook and probably shouldn't hope for any discounts. In other words, he's become the equivalent of the pig in the old ham-and-egg-breakfast analogy, with MGM Mirage, Harrah's Entertainment, etc., enjoying the role of the chicken.
Update: Hunter Hillegas has a slightly different take on l'affaire Mirage and his readership appears to be growing skeptical of the rumored sale, for myriad reasons. There's also a valuable link to MGM Mirage property-by-property financials (a nicety the company has discontinued) toward the bottom of the thread.
Update 2: Read this next Mirage dispatch only if you have a strong stomach. I guess bloggers aren't being comped at Encore after all.
Hot flash: Menopause closes April 5.
Is Colony Capital's malaise reaching its sclerotic, baneful arm out for the Las Vegas Hilton? Parts are starting to fall off the LVH vehicle at an increasing rate. First, Star Trek: The Experience was shuttered and still no replacement has been found. Now Norm! ("The Scene and Heard") informs us that the end is drawing nigh for Laugh Out Loud, featuring The Scintas, and the LVH's cabaret mainstay, Menopause: The Musical.
According to man-about-town Clarke, "a sexy show is under consideration" in their place. Whew! I'm so glad to see the LVH doing something original. 'Cause if there's one thing you can't find in Vegas, it's a "sexy show." Nope, nothing like that in these here parts. Way to go, Colony Capital, the company that brought you a celebration-less New Year's Eve at the Atlantic City Hilton. And excuse me but when did Chrissy Scinta cease to be sexy?
If Tropicana Entertainment management's bankruptcy plan is accepted by the courts (one bond analyst thinks otherwise), former CEO/sole owner William J. Yung III will be left with — what's the technical term? — diddly squat. (So will his unsecured creditors, alas.)
Actually, he'll have less than nothing because he'll not only be forfeiting the remnants of his Aztar Corp. acquisition but also six TropEnt properties whose purchase predated the ill-starred Aztar buy. A portfolio cobbled together in bits and pieces over several years will be gone with the thwack of a gavel.
In which case, it will essentially close the book on The Worst Casino Acquisition of All Time, Bar None. Since Yung swung the Aztar deal by cross-collateralizing his motley fleet of casinos and riverboats, losing the Tropicana Atlantic City meant putting the whole kit 'n kaboodle up for grabs. Yung's dismissive attitude toward New Jersey casino regulations came with a $2.8 billion price tag.
Lighthouse Point: Last voyage departs soon.
I was going to write that no one in the casino industry will miss Yung, but he still owns the odd non-Trop casino, like the Westin Casuarina. So he's not going anywhere anytime soon.
The plan being for the secured creditors to roll their debt into TropEnt equity, one can see why CEO Scott Butera was at pains to complicate, stymie and/or outright thwart various asset sales initiated either by Yung or the New Jersey Casino Control Commission. As a Jan. 2, 2008 Morgan Joseph report pointed out, casino companies sell for higher cash flow multiples when peddled en masse, not piecemeal. For instance, Yung paid a whopping 11.3X EBITDA for Aztar, as compared to the 8.4X he plunked down for a Penn National castoff, the Belle of Baton Rouge.
So maybe Butera really thought he could land a higher price for Casino Aztar than Eldorado Resorts was offering or perhaps he just wanted to queer the deal that was on the table. Either way, the endgame was the same: more money. Since his plan hinges partly on regaining control of cash cow A.C. Trop and Casino Aztar, neither of which is a given (and one of which is exceptionally unlikely), TropEnt is still a long ways from being out of the woods.
Tropicana Las Vegas: Same this year, same next year, same in 2013.
Thinking positively, if Butera can't — as seems inevitable — get the Boardwalk property back, he can redirect money planned for Atlantic City upgrades into that eternally deferred Tropicana Las Vegas facelift. There's a case to be made, if not much of a case, for New Jersey to brush aside the $550 million offered by Cordish Co. for the A.C. Trop — particularly if Butera were bound to the same conditions the Division of Gaming Enforcement recommended imposing on Yung 14 months ago: a one-year probationary license and a 26-point set of benchmarks.
But the Garden State is so revenue-parched that it's unimaginable it will tell Cordish to keep its money. And whatever tenuous faith the NJCCC might have in Butera won't necessarily be bolstered by his turnaround plan. The document makes some concrete promises (including $153 million in A.C. Trop upgrades), and its property- and market-growth projections are mostly conservative. For instance, Butera clearly harbors no illusions about the difficulties ahead in Baton Rouge, where Pinnacle Entertainment has a new riverboat coming over the horizon. God bless him, he's an optimist, though: Who else would postulate five straight years of single-digit revenue growth in Atlantic City?
But Butera's strategy posits revenue growth within the context of relatively flat operating and maintenance budgets. Some outright reductions, at least, can be attributed to the cessation of operations at Lighthouse Point in 2009 and Horizon Tahoe two years later. Were it not for that, Butera's numbers would look like something out of the Bill Yung playbook. In fact, certain of the promised reforms, like "Optimize [read: "tighten"] … slot hold," centralized corporate purchasing and "utilizing third parties for certain services" are purest Yung. Others, such as a Nevada-wide loyalty-card program, appear to be new. (But why stop at Nevada?)
As for a reinvention of the Vegas Trop, don't expect anything before 2014, at the earliest. Likewise, the overdue replacement of Casino Aztar just isn't in the budget. It's a lean regimen for grim times, but give Butera this: He's not spending money he doesn't have and now the creditors to whom he is answerable will be literally invested in improving TropEnt's performance … if they hope to see their money again.
My favorite exchange in one of my favorite current TV series, Mad Men, takes place when weasel-like junior exec Pete Campbell (Vincent Kartheiser) goes to rat out his boss, Donald Draper (Jon Hamm), to company owner Bertram Cooper (the cunningly cast Robert Morse). “Draper” is, Campbell has discovered, a Korean War deserter who has risen to the upper reaches of Madison Ave. circa 1960 under an assumed identity.
Cooper takes all this in imperturably, bestows upon the youngster a pitying gaze and says, “Mr. Campell … who cares? This country was built and run by men with worse stories than whatever you’ve imagined here. The Japanese have a saying: ‘A man is whatever room he is in’ — and right now, Donald Draper is in this room.”
Which was pretty much my reaction to the J. Terrence Lanni resumé-inflation flap (it came and went too quickly to qualify as a scandal). The casino industry was built by men who did far worse things than list a nonexistent MBA on their curriculum vitae. Heck, Harrah’s Entertainment is operated by a Ph.D late of the Harvard University faculty and it’s not exactly an advertisement for fiscal well-being these days ($415 million lost in 2008, and counting). For that matter, we’ve entrusted our country for the last eight years to men with MBAs who said they’d run it like a corporation. How’d that work out?
And even if Lanni deliberately padded his resumé to get ahead … who cares, Mr. Campbell? At worst, the reins of MGM Mirage might have gone to somebody more obviously “qualified” … like a Gary Loveman or a Frank Fertitta III. MBA or no, Lanni was good enough for owner Kirk Kerkorian, a man with a Ph.D from the School of Hard Knocks.
Simply put, at a time when Mob-tainted Clifford Perlman is in the American Gaming Association‘s Hall of Fame (presumably soon to be joined by the late Lefty Rosenthal) and when Columbia Sussex CEO William J. Yung III got run out of New Jersey for running a rogue outfit in Atlantic City, but retains casino licenses in Nevada, Louisiana and Mississippi, outrage is difficult to muster.
Which is not to excuse the whitewash (Steve Friess has an even harsher term for it) that ran in Sunday’s Las Vegas Review-Journal. Basically, the story amounts to a regurgitation of MGM’s company line, which boils down to, “We (sort of) planned it this way.” Less charitably, the R-J lends its credibility to an attempt to sweep Lanni’s speedy and inglorious exit under the nearest available rug.
“(T)here is never a perfect time” for MGM’s CEO to step down, we are told. No, but ringing up Kerkorian on the evening of Nov. 12 and giving him two weeks’ notice is something less than the “smooth transition” MGM and the R-J are trying to depict. CEO-in-waiting Jim Murren stepped gracefully into Lanni’s shoes but the timing and alacrity of Lanni’s departure leave many questions hanging.
Given the extreme proximity between the Wall Street Journal‘s exposé on Lanni’s credentials and his resignation, the official stance that it was all just a big coinky-dink, while possible, is difficult to swallow. (After all, a plan for Lanni to remain on the MGM board was quietly withdrawn when casino-oversight three states, including Nevada, began to probe the academic-credential issue.)
But let’s give everybody the benefit of the doubt on that one and consider what else might have propelled the CEO toward the exit:
Perhaps Lanni, a man well-served in Asian sensibilities, was falling on his sword for the good of the company. After all, Nov, 12 marked the first time in at least five years that MGM stock closed at $10/share. Maybe, as Jeff Simpson has suggested, Lanni placed a “sell” order on himself once the stock price hit that inauspicious threshold.
The massive Harmon screw-up was already known to him. Or perhaps the sale of Treasure Island and writedown of $1.2 billion related to the Lanni-supervised takeover of Mandalay Resort Group were already done deals, and Lanni foresaw himself presiding over the partial dismantling of an empire he’d helped build.
Or maybe he just woke up that morning and, channeling Danny Glover in the first Lethal Weapon movie, growled, “I’m getting too old for this shit.” That, at any rate, is The Official Story (minus the scatology).
It appears we will never know what ultimately prompted Lanni’s leap … or at least not for a long time. I’m with those who say, “he will be judged on his leadership.” He certainly did much more than any executive I can think of when it comes to making diversity a priority in a boy’s-club industry. He extended the company’s reach into new overseas markets. And if MGM’s reach exceeded its grasp toward the end of the Lanni Era, it did not do so to the extent that has Harrah’s, Station Casinos and several other companies presently skirting the edge of bankruptcy.
Heck, we only demand honesty from CEOs on a selective basis. On Oct. 29, Lanni said no asset sales were on the table at MGM. Two weeks after Lanni left, Phil Ruffn plunked down $775 million for Treasure Island. Perhaps that deal really did come together in a fortnight, although it’s not been MGM’s style to move so fast. If, for purposes of argument, Lanni had been in talks with Ruffin in late October and told the press that asset sales were being discussed, what would have happened? MGM stock might easily have dropped like a brick. So if Lanni did fib about the Ruffin talks, do we further discount his credibility or do we say that it was his fiduciary duty to fudge the truth every so often?
One could go further about Lanni’s accomplishment (which also include the complete domination of the Detroit market and the development of a strong executive team), but let it suffice to say that J. Terrence Lanni was “in the room.”
Nor did he deserve the non-person status he fell into upon his resignation. His name was scarcely even mentioned at the most recent G2E and, when it was, it was sort of muttered in the corners of the press room. Honestly, there was neither a death in the family nor anything about which to be embarrassed — and casino regulatory bodies have matters more material with which to deal than with the occasional fudged resumé. The probity and financial solvency of the mergers and alliances they are asked to bless might be a good place to start.
Wait 'til the sun shines, Caesar.
Every so often there's a news story to which the only appropriate response is, "Holy shit!" Then again, it wasn't so long ago on the Vegas Gang that Jeff Simpson was reporting finding whole floors of Caesars Palace's prime real estate, its Augustus Tower, locked down. Harrah's Entertainment's decision to summarily pull the plug on the Octavius Tower is disturbing in one sense, as this will be the third stuck-in-the-mud project on the Strip (joining Echelon and the St. Regis). At least MGM Mirage is finishing the exterior of The Harmon before putting it onto the back burner.
(Update: Harrah's Jacqueline Peterson says, "The exterior will be finished.")
Then again, if the best rooms at Caesars are going unsold, Harrah's is hardly to be chided for choosing not to throw more money into a hotel tower that could easily be more of a liability than an asset, had it opened on schedule.
(Well, only with their shareholders' money, perhaps.)
Huffington Post, with the considerable assistance of VegasTripping.com, has sifted through the contributions of casino industry moguls during the last election cycle and all I can say is I'm sure glad these folks' business acumen (usually) exceeds their political prescience. Overwhelmingly, the captains of our industry backed loser after loser, with a preponderance of contributions to going to newly unemployed Jon Porter (R-NV) and to the vaporware presidential candidacy of Rudy Giuliani.
Las Vegas Sands President William Weidner has a truly dreadful political batting average. Boss Sheldon Adelson can gloat that he connected with more pitches than Weidner did. (Since the RNC and RSCC failed their main tasks in '08, I'm counting those as "strikes.")
William Weidner exaggerates the extent of his political acumen.
Former MGM Mirage CEO J. Terrence Lanni more or less "broke even," while Wynn Resorts Director Elaine Wynn's early and frequent support of President-elect Barack Obama gives her the Prescience Award. (Husband Steve didn't do too badly when it came to picking winners, either … especially if one counts his primary-season support of Sen. Joseph Biden toward the latter's eventual vice president-elect status.)
Harrah's Entertainment CEO Gary Loveman is the closest thing to a liberal — with donations to Sens. John Kerry and Christopher Dodd in '04 and '06, respectively — and the only consistently Democratic donor in the bunch. Columbia Sussex CEO William J. Yung III (three Dem donations to one GOP one) went 0-2 at the federal level and 2-0 at the state one … though it still hasn't gotten him a Kentucky casino.
Still, given the number of times this roster of CEOs and presidents (including multiple Fertittas [Fertittae?] and a Maloof) rolled snake eyes, you wouldn't want them placing bets on your behalf.
Roughly two months hence, the El Cortez will open its extension, the Cabana Suites at the El Cortez (yes, that's the full name). It's to be a 64-unit mix of rooms, mini-suites and suites.
According to the PR folks …
"The Cabana Suites will bring the spirit of 1950s South Beach to Las Vegas with modern and stylish rooms and an outside design that has a contemporary Art Deco feel, reflecting the energy of downtown Las Vegas … The new hotel will bring an artistic style that has not been seen in downtown Las Vegas, and its sleek design and style fits in perfectly within Las Vegas’ arts district.* Also, the Cabana Suites will offer cost friendly luxury that anyone can afford … iPod docks and flat screen HD televisions, an expanded entrance lobby, an enhanced fitness center and a landscaped walkway providing convenient access from the Cabana Suites to the El Cortez."
(* — OK, so it's on the far side of downtown from the Arts District, but who's keeping score?)
Anything that helps stimulate traffic reintegrate the El Cortez into the downtown casino core is to be lauded, as the property is about as far out on the east side of the city as one wants to go. From the accompanying pictures, it's impossible to tell if the rooms will be capacious or claustrophobic, but …
… they'll be modishly tricked out …
… with just a hint of Austin Powers.
It may be small-scale (even the term "boutique" seems too grand) compared to some of the monoliths in the 2009 pipeline. But a downtown Las Vegas that's seen vast expansion of the Golden Nugget, not to mention new, revitalizing ownership of the Four Queens and Binions, is a reality that seemed literally incredible a bare five years ago.
