Case Bets: South Point, Gustav, Monte Carlo, Gold Spike, Excalibur, etc.

Posted on September 2, 2008 by David McKee

Why does a holiday weekend suck? Because it means that instead of having to dig through three days' worth of the Las Vegas Review-Journal on Monday (a depressing task under the best of circumstances), a Tuesday start means at least four days of windfall from what Hugh Jackson calls "the dead tree of record" through which one must cut brush. Solution? Chop it up into Insta-Blog fodder! Like …

Horse dies at South Point, in front of 500 undoubtedly traumatized spectators. Leaving aside the equine tragedy, if South Point can only rustle up 500 attendees for a Friday-night event, its equestrian center may be even more of a gold-plated albatross than was originally thought.

Gulf Coast casinos ordered to close. Good grief, has common sense taken a leave of absence down there? Why was Mississippi required to force the issue?

Monte Carlo not up to code, says Clark County. Whereupon neither the county nor MGM Mirage takes responsibility for remediating the situation, each putting the onus on the other.

Wall Street comes around. The Street has a manic-depressive attitude toward gaming stocks and is coming out of its latest episode of depression. Even so, some of these stocks look ridiculously undervalued, especially Las Vegas Sands, which The Street used to think was worth three times as much.

Speaking of Sands, there's confidence and then there's foolhardiness. Then again, given the company's genius at protracting litigation to superhuman lengths, its sanguine attitude may be born of experience.

Somnolent editors awake from nap, find that Nevada's economic model isn't working, call for more of the same, go back to sleep. (BTW, here's one of those "Nevada Democrats" the editorial reflexively derides.)

First Nevada Palace fell and now the Gold Spike is half-renovated. We're going to have to come up with a new shorthand for "bottom-of-the-barrel casino" now that we won't have the Spike to kick around anymore. Stephen Siegel has done more with the place than his predecessors, absentee owners Tamares Group, accomplished in three years (unless you count the offerings they took out, like table games).

Still, Siegel's being a wee bit charitable when he says "most people underestimate the Gold Spike." Stephen, it is impossible to underestimate the Spike, the only Nevada casino for which I would have used "vile" as a description, back in its Tamares days.

Comment threads in newspapers can be a very mixed blessing, but much of the back-and-forth that follows this story about electronic poker at Excalibur is well worth reading, as it provides a great deal of hard information and a player's-eye perspective on the experiment.

Posted in Animals, Current, Downtown, MGM Mirage, Michael Gaughan, Mississippi, Monte Carlo fire, Sheldon Adelson, Tamares Group, Taxes, The Strip, Wall Street | Comments Off on Case Bets: South Point, Gustav, Monte Carlo, Gold Spike, Excalibur, etc.

E-Can debuts

Posted on August 29, 2008 by David McKee

We got out of the way of the front doors of Eastside Cannery last night just in the nick of time. For all the apprehension about opening new casinos in the current economy (especially when locals' gambling budgets have taken a big hit), patrons were out in force for the opening, literally charging the casino floor when the doors swung wide. Whether by car or by foot, it was impressive turnout — not the mob scene that greeted The Palms in 2001 — but quite a heartening sight nonetheless.

E-Can is yet another nail in the coffin of the old "entrapment" theory of casino design. The entryways are airy and easily visible throughout the casino floor. Aisles are wide and, even with 2,100-plus slots, one gets that sense that Cannery Casino Resorts could have jammed in quite a few more but elected not to. Good on them.

Ceilings aren't so low as to be oppressive, but not so high as to engender the "slot barn" feeling of Palazzo or South Point. The various eateries are distributed in a "restaurant row" along the east wall. The sports book is very open and spacious, and wouldn't look out of place at a Strip casino — and is far superior to some Strip books I could name, but won't.

We gorged a little too much early in our go-around, so we didn't do justice to each restaurant's offerings. (Though, for the record, oysters on the half shell and covered with chives and melted cheese tastes a helluva lot better than it probably reads. Kudos on the sausage-stuffed mushrooms, too.) If what was on display — and in our stomachs — last night was a representative sample of the everyday fare, my biggest concern will be whether such a high standard can be maintained over the long haul.

If you grew up in the Sixties, as I did, the prevalent color and décor schemes will have a comforting familiarity. The overall aesthetic could be called 'Light Industrial,' and I don't mean that in a cute or pejorative way. Exposed pipework appears to be part of the statement, although I'm not so sure about the lack of drop ceiling. I couldn't tell whether the acoustical tiling has simply been omitted or is going to be installed later.

There's not a lot of fine detailing; strong colors, acute angles and long, undulating curves all typify a casino where the design elements are writ large. Sometimes form takes precedence over functionality: Stools in the sports book and one of the restaurants may be pleasing to the eye but they're distinctly unforgiving to the ass. On the other hand, the keno lounge is as classy and comfortable as any I've seen in Vegas.

Given the unbelievable thrift with which "the dollar Bills," Messrs. Paulos and Wortman* pulled E-Can off, one does feel the compulsion to scan the place for obvious economies, trying to figure out how they did it. The exterior is pretty Spartan; big, sharp and sweeping lines (and a wraparound neon display after dark) endeavor to divert one's attention from an otherwise utilitarian look.

Inside, certain of the wall coverings and materials screamed "Cheap!", especially around the proscenium in Marilyn's, the live-entertainment lounge. Some upfront savings will probably mean frequent-replacement costs on the back end. Then again, I heard similar criticisms of The Palms when it opened (and George Maloof arguably overcrowded his slot floor in the early going — a mistake not repeated here), but keeping construction costs low was one of the cornerstones of that place's success.

Paulos and Wortman's heir, James Packer, will be in profit on E-Can a lot more quickly than will any recent or forthcoming Station casino, given the latter company's current tendency to spend lavishly and then scrimp down the road. Assuming that maintenance is proactive and frequent, I don't see any downside for E-Can.

Despite my longstanding fondness for Sam's Town, the pioneering Boyd Gaming property will seem that much more like a crowded and badly laid-out warren of gambling rooms — definitely Old School, if that's what you dig. Given the two casinos' proximity, I can see Sam's Town evolving into a "dormitory" where people stay or park their RVs, take advantage of the movie theaters, etc., but do their playing at E-Can. Plus, the cheerful, retro Cannery "brand" has struck quite a chord with Las Vegans. Aggressive counter-marketing will have to be the order of the day.

* — "The dollar Bills" was Hollywood's nickname for producer William Pine and his business partner, William Thomas, so named for their budget-conscious tendencies. It seems affectionately apt for the Paulos/Wortman duo, who balance fiscal conservatism with quality.

Posted in Boulder Strip, Boyd Gaming, Cannery Casino Resorts, George Maloof, James Packer, Station Casinos | Comments Off on E-Can debuts

Eastside Cannery update

Posted on August 28, 2008 by David McKee

Yesterday, I asked how William Paulos and William Wortman were able to bring in Eastside Cannery (which opens tonight) for 250 million clams — $425 million less than Station Casinos is splurging on Aliante Station. In today’s Sun, Liz Benston explains how. The two Bills have a history of turning sow’s ears into silk purses and, should the buyout of Cannery Casino Resorts by James Packer go through, they’ll only stay on long enough to get their Pennsylvania racino open.

Hopefully — hopefully — Packer will retain enough of the Paulos/Wortman-assembled executive team to get things humming along in their wonted fashion, and will refrain from meddling. Casino operators, especially ones from overseas, who are novices in the Vegas market tend to have a very rough go of it here.

Harrah’s makes the news and not in good way. On the other hand, who knew that the erstwhile Barbary Coast was where the hip-hop crowd likes to roll, especially after a run-in with the law? Of course, the “Suge” Knight incident is big news for us at LVA, seeing as it went down an Olympic shot put-throw’s distance from our Procyon Ave. corporate headquarters. And now Gary Loveman can brag on how “gangsta” his properties have become.

Posted in Boulder Strip, Cannery Casino Resorts, Current, Harrah's, Station Casinos | Comments Off on Eastside Cannery update

Durango Station, slightly downsized

Posted on August 27, 2008 by David McKee

Station Casinos has filed its latest set of plans for Durango Station and it looks like they’ve pulled back a bit, although you can judge for yourself. Hotel inventory has been reduced from 1,040 rooms, then 1,000, to 726; the smaller of the two towers has been scaled back an additional 10 feet in height.

Bingo players will be displeased, as a bingo room has been scrapped; ditto a bowling alley. Two fewer reasons to go there, IMO.

Rather than wait, though, Station will go ahead straightaway with the second of two parking garages. Even with 4,048 covered spaces, Station is also budgeting for over 2,100 surface-parking spaces, causing Clark County planners some minor qualms over the oceans of asphalt surrounding Durango Station and the pedestrian hazard they could represent.

Joe Hasson, Aliante Station GM

Carol Thompson, Aliante’s assistant GM

On the executive front, Station has selected the general manager and assistant GM for Aliante Station. They are, respectively, Joe Hasson and Carol Thompson. The former boss of Harrah’s New Orleans, Hasson — who Casino Executive Magazine once described as “whippet-thin” (and who, if memory serves, is a marathon runner), comes to Aliante from a lengthy tenure at Green Valley Ranch. If he looks familiar, it’s because he was a regular on the Discovery Channel’s American Casino, filmed at GVR. Thompson, who is active in local philanthropy, honed her managerial school at some of Station’s “farm team” properties, such as Barley’s.

The only question remaining is this: If Aliante Station cost $675 million, why was Cannery Casino Resorts able to build Eastside Cannery for $425 million less? Yes, Aliante has a concert hall and a 16-screen cineplex. But ECan has 105 more hotel rooms, more meeting space and an equal number of restaurants. (It also boasts a spa and a bingo room, items not listed among Aliante’s amenities.)

ECan also makes a bolder, striking architectural statement, the jagged parapet of its hotel tower serrating the sky. Aliante’s outward style might be described as Office Park Chic.

Station just doesn’t seem to be getting nearly as much bang for its buck. How come?

Posted in Boulder Strip, Cannery Casino Resorts, Station Casinos | 1 Comment

Quote of the Day

Posted on August 27, 2008 by David McKee

“The real story here is the workers, who put up with the worst working conditions, having the fortitude and tenacity to say we’re not going to be run out of here by someone who has come in from Kentucky to destroy our standard of living,” — Culinary Union Secretary D. Taylor, on Tropicana workers’ long-in-the-making victory over Columbia Sussex CEO William J. Yung III. New Trop management capitulated to the Culinary’s demands last week.

Posted in Columbia Sussex, Kentucky, The Strip | Comments Off on Quote of the Day

Just as I suspected …

Posted on August 27, 2008 by David McKee

… and tried to imply the other day, we have two conflicting agendas in the ixnayed Casino Aztar sale. One is that of the creditors, who think the boat can fetch a higher price than the $220 million for which Columbia Sussex CEO William J. Yung III had to settle. (You will recall that prospective buyers were distinctly thin on the ground at the time.)

They're walking a tightrope, as they don't want to alienate putative buyer Eldorado Resorts and, should Eldorado walk (having already been told its money's not good enough) they don't want to be stampeded into a fire sale before Sept. 28. That's when disposition of the vessel passes into the hands of the State of Indiana.

The other endgame, as I tried to hint earlier, is that of Tropicana Entertainment CEO Scott Butera. He, creditors fear, may be trying to hang onto Casino Aztar by putting it back on the market and then saying — as was already bruited in the Wall Street Journal — that no offer is good enough, so TropEnt is keeping it. Which means creditors, instead of getting hundreds of millions of dollars now, would be asked to settle for a dribble of cash over the long haul. Butera seems able to charm the birds off the trees, but that might be a tough sell, even for him.

(The Evansville Courier Press story comes with a helpful timeline. Note the succession of three general managers in 14 months — a period in which Casino Aztar's revenues sank lower and lower and lower, only beginning to rise again in May.)

Then again, the would-be casino titan whose company managed to lose $1 billion-plus in a year still has his fans. Raves Courier Press reader lmajors_koch, "[Bill] Yung is the smartest man alive!!!! He's going to end up keeping Casino Aztar before this is all over with. You guys just watch."

Yeah, we will.

Posted in Columbia Sussex, Indiana | Comments Off on Just as I suspected …

On the other hand …

Posted on August 25, 2008 by David McKee

… if Illinois casinos are sucking wind (which they are), why hasn't this redounded more to the benefit of neighboring states? For instance, it looks like Indiana had a good July, but once you back out two new racinos, a 2% gain turns into an -11% retreat from last year's numbers.

And the northern Indiana boats ought to be doing better, even if Horseshoe Hammond's revenues (-18%) were depressed by a temporary closure and Boyd Gaming's beleagured Blue Chip (-40%) is a drag anchor on the regional average. Still, a -15.5% year/year comparison — even with those two factors taken into consideration — doesn't suggest floods of nicotene-deprived gamblers storming the gangways.

Only Majestic Star, of all unlikely vessels, had a revenue-positive July. Year to date, Ameristar Casinos is doing the best of any single company, which makes its recent decision to run up the white flag and sack 244 employees, fretful over a newly expanded Horseshoe Hammond, look doubly defeatist. Current Ameristar management just doesn't look like they're in it for the long haul (read "not cut out for it" or "lack the stomach for it").

A change of brand, to Horseshoe, isn't doing the trick — yet — for Harrah's Entertainment's Glory of Rome. The glamorously named Horseshoe Southern Indiana (formerly Caesars Indiana) is the only casino in the Hoosier State's southern reaches to post negative revenue comparisons for every month of 2008. The others either swing like weathervanes or, in the case of Casino Aztar, improved dramatically with a change in management.

If French Lick isn't licked, it appears to have crested. The turnaround at Casino Aztar (currently under state trusteeship) blunted its revenue growth, as did the debut of the Indiana Live and Hoosier Park racinos. Until the economy improves, it looks like it's maxed-out at $8.5 million-$9 million per month.

Missouri is another puzzle, down 3% once the effects of Pinnacle Entertainment's nascent Lumiere Place are subtracted. The St. Louis market, closest to Illinois, was -8%, while Kansas City — the market with the least to gain from Illinois' troubles — was up 2%. Go figure.

All companies except Harrah's had a revenue-positive July, even Isle of Capri Casinos. Harrah's lost market share in St. Louis and Kansas City, and Ameristar gained in both markets. (See previous comments about unwarrantedly panicky Ameristar execs.)

And see them again once we note that Ameristar had the best July of any publicly traded company in Iowa, +3%. (Harrah's and Penn were flat, Isle down almost 6%.) Ameristar had the third-highest performing casino in the market, trailing Harrah's Horseshoe-branded racino and the Prairie Meadows track. A good month at the tracks offset a flat one on the riverboat, making Iowa revenue-positive for the month.

This was the first full month of year-over-year comparisons for Isle's newest casino, in Waterloo, which was down over 13%. Wow. The bloom went off that rose fast. The previous Isle regime's business model of growing revenues by opening more and more casinos is well and truly out of gas.

Isle's Bettendorf casino, however, was the only one of the company's quartet of Hawkeye State riverboats to increase revenue in July.  Could it be … the Illinois smoking ban coming into play? I'm going to opt for Occam's Razor and say,  "Yes."

Posted in Ameristar, Boyd Gaming, Columbia Sussex, Don Barden, Harrah's, Horseracing, Illinois, Indiana, Isle of Capri, Missouri, Penn National, Pinnacle Entertainment | Comments Off on On the other hand …

Trop to Eldorado: "Never mind"

Posted on August 25, 2008 by David McKee

In the strongest sign to date that company owner William J. Yung III has been banished to the doghouse, Tropicana Entertainment formally reneged on its sale of Casino Aztar to Reno-based Eldorado Resorts. The latter could walk away with as much as $7.1 million for its troubles, but appears determined to enforce the sale. Tropicana, meanwhile, already has its bankers out beating the bushes for prospective buyers.

“We are committed to obtaining maximum value for our assets and doing what is right for all of our constituents,” declared Trop CEO Scott Butera, sounding for all the world like Continue reading →

Posted in Columbia Sussex, Harrah's, Indiana, Kansas, Regulation | Comments Off on Trop to Eldorado: "Never mind"

Kansas, Round 1: It's Harrah's, Penn

Posted on August 22, 2008 by David McKee

Score one victory each for Harrah’s Entertainment and Penn National Gaming in the first round of casino concessions awarded in Kansas today (with Round 2 to follow in a month). But there’s really only one winner …

…. and it’s Harrah’s, which got the Sumner County contract and, with it, the Wichita market. Penn National must settle for the concession prize of Cherokee County.

Big deal. Penn had no competitors for that market and — keeping that in mind — two of the seven state arbiters voted against Penn. Perhaps that’s because Penn had previously sulked that it might pull out of Cherokee County if it didn’t get the Sumner concession as well. Announcing that it was going to scale back its Cherokee County investment and dribble it onto the market in piecemeal fashion (fearful of a nearby tribal casino) probably didn’t endear Penn to the Lottery Gaming Facility Review Board, either.

Even today, Penn’s spokesman was still threatening that the company might not go through with the casino Kansas just handed it. That’s unbecoming conduct from one of the few cash-rich casino companies at the moment.

Small wonder Penn’s Sumner proposal garnered only one vote of support. Which isn’t to imply Harrah’s gets the Wichita market out of spite or default. (There was, after all, a third contender.) Board members were impressed by the proposed amenities in Harrah’s $535 million-560 million proposal and by the site’s proximity to Wichita.

Probably the most attractive criterion was that the state’s first-year revenue projections for Harrah’s, while lower than the company’s own, were the highest for any of the three proposals — 48% more than those for Penn and 44% higher than for Marvel Gaming.

Marvel, which has local ties, particularly to the Binion family, says it’s keeping its powder dry. No wonder: If Penn decides to take its ball and go home, Marvel (which got two votes to Harrah’s four) appears to have made a good enough impression on the review board that it could make a strong run at Cherokee County, if the opportunity arose — and the cost of entry would be a great deal lower there.

View the complete set of proposals here.

Recommendation for the weekend: The new suspense drama from Claude Lelouch, Roman de Gare.

Karaoke fans, rejoice! As reported here, earlier (and now official), a singalong version of Mamma Mia! opens on Aug. 29. Presumably smarting from hearing Dark Knight this and Dark Knight that, Universal Studios‘ press release gets in some passive-aggressive jabs on behalf of its $330 million-grossing musical, noting “is now the highest grossing film of 2008 in the U.K., Austria, Greece, Hungary, Norway and Sweden.” And, just to get one more dig in: “The film still has more than 35 territories in which to open.” Meow!!!

False alarm: If you got an e-mail alert about a Philadelphia-related S&G posting, but couldn’t find it, it’s temporarily on hold, pending some new wrinkles in the story. Then there are latest Illinois/Iowa/Missouri/Indiana revenue comparisons and … and … and …

Posted in Ameristar, Harrah's, Kansas, Movies, Penn National | Comments Off on Kansas, Round 1: It's Harrah's, Penn

Quote of the Day

Posted on August 21, 2008 by David McKee

"You can't save your way to success." — Tropicana Entertainment CEO Scott Butera, commenting on the new collective-bargaining agreement at the  Las Vegas Tropicana. Funny, but that's almost a word-for-word reprise of Dennis Gomes' analysis of parent company Columbia Sussex's downfall in Atlantic City ("you can't save your way to prosperity [in the casino industry].")

Posted in Columbia Sussex, The Strip | Comments Off on Quote of the Day

Stupid Ameristar tricks

Posted on August 20, 2008 by David McKee

So your lucrative, big-ass casino company is costing headaches — and money — for a Chicago tax preparer because of a single-digit difference between your toll-free number and his. Which means he has to waste time fielding calls from thick-fingered (and, in some cases, thick-headed) patrons.

So, if it’s true that Mr. Refund “sometimes pretended to be an Ameristar employee, answering the phone as ‘Mr. Ameristar,’ pretending to take hotel reservations, asking customers for personal information and credit card numbers or telling callers that Ameristar hotels had burned down,” one can’t entirely blame him. (I’ve had the same phone number for over nine years and still get wrong-number calls, over and over.)

Anyway, what does Ameristar Casinos do but sue the poor S.O.B. to wrest his 1-866 number away from him? Ridiculous! Besides, had Ameristar accepted the solution that Mr. Refund says he offered the company, it would have cost Ameristar far less than the contentious route it’s taken.

This is easily Ameristar’s dumbest move since it opened the short-lived Reserve (now Fiesta Henderson) 10 years ago.

Posted in Ameristar | Comments Off on Stupid Ameristar tricks

From bad to worse

Posted on August 19, 2008 by David McKee

British Reuters lays out a dire scenario for casino bonds, the second-most-distressed sector of the junk-bond market (only media firms are doing worse).

"We believe it probably hasn't hit its bottom," is the grave verdict of Moody's Investors Service analyst Keith Foley. His formula for highest risk: lone-property operators with heavy debt burdens. Stateside, this would seem to spell "Las Vegas Sands," where debt is approaching $10 billion and Palazzo has been a dud, at least by the benchmarks expected of a new Strip megaresort. (Morgans Hotel Group, which staked its future on the Hard Rock Hotel & Casino, probably ought to be worrying, too.)

So far, one could argue that recent wave of casino bankruptcies has had a Darwinian effect, singling out the bottom-feeders (Columbia Sussex) and market laggards (Greektown). The deeply distressed bond status of Trump Entertainment Resorts may portend yet another visit to Chapter 11, but Station Casinos' bonds are doing little better.

Other danger signs identified in the article include …

• Debt-to-cash flow ratios of 9- or 10-to-1 (five times in excess the ratio deemed "investment grade"); Harrah's Entertainment, with its $29.7 billion buyout tab, is singled out, a poster child for …

• LBOs conducted "at the worst possible time."

• "Financing for casinos is also in dire straights [sic], a concern for companies that depend on expansion to drive growth," like Isle of Capri, at least under its previous regime.

Well worth repeating: "With this heinous act of sheer unadulterated corporate greed and disregard for customers, Harrah's has proven that they don't care at all about our 'fun' regardless of how they have sold the concept of gambling being 'paying for entertainment.' This is all about Harrah's making Harrah's a profit even if Harrah's spokesmouth Gary Thompson tells Liz Benston in the LV Sun that the games were removed because they weren't popular with players. Wheel of Fortune? Not popular with players? How truly out of touch are these numbskulls?" — Chuck Monster of VegasTripping.com, inveighing against Harrah's decision to start removing IGT's Wheel of Fortune from its casino floors.

Posted in Columbia Sussex, Donald Trump, Harrah's, Isle of Capri, Morgans Hotel Group, Sheldon Adelson, Station Casinos, The Strip, Wall Street | Comments Off on From bad to worse

Quote of the Day

Posted on August 19, 2008 by David McKee

“The foundation of every successful company is its employees. We certainly recognize the value and hard work that each employee at the Tropicana has provided throughout the years and continues to provide every day. I look forward to getting to know and working with all of the Tropicana employees. Currently, we are in the process of evaluating the appreciation programs that have been in place to find ways to improve upon them, but we will also develop new programs where there were none before.” — Atlantic City Tropicana Casino & Resort President Fred Buro, in an interview published in February 2007, shortly after Columbia Sussex took control of the property. By year’s end, there would be 900 fewer employees left to “appreciate” … including Buro.

Posted in Atlantic City, Columbia Sussex | Comments Off on Quote of the Day

Trop sale stumbles forward … sorta

Posted on August 18, 2008 by David McKee

If Justice Gary Stein, the state-appointed trustee for the Atlantic City Tropicana Casino & Resort, isn’t the most inept public servant in America, it’s not for lack of effort. Add nepotism to his string of failings, as his ever-less-credible pronouncements now emerge from the mouth of his son, Martin Stein, a lawyer who has apparently joined Dear Old Dad at the public trough.

The Steins’ latest bit of boobery involves not re-starting the bidding process for the Trop until sometime (as yet unspecified) after Labor Day and then having it wrapped up on Oct. 16, six weeks later. Their excuse for this foreshortened timetable is that advisers Moelis & Co. are “just beginning their work,” even though they’ve been on the payroll for over a month and a half. I’m not necessarily saying the Stein-supervised process is slow, but I’ve seen glaciers that moved faster.

The Steins also continue to evince boundless optimism that they’re going to get better offers the second time through the process. Considering that Atlantic City’s revenue numbers have continued to weaken and the economy has not improved, I’d sure like a sniff of whatever “happy dust” they’ve been inhaling. Of course, the blame ultimately redounds to the New Jersey Casino Control Commission for appointing Justice Stein to perform a task for which he has proven, by all outward appearances, manifestly ill-equipped.

On other Trop-related fronts, the prospect that Tropicana Entertainment may renege on Continue reading →

Posted in Atlantic City, Columbia Sussex, Harrah's, Indiana, MGM Mirage, Penn National, Pinnacle Entertainment, The Strip | Comments Off on Trop sale stumbles forward … sorta

This is news?; plus Station/Harrah's/Echelon notes

Posted on August 12, 2008 by David McKee

Way back when Vestin Group made a loan to the Castaways that exceeded the doomed casino's appraised value (as revealed by a Vestin-commissioned appraisal that miraculously emerged when the Castaways filed for bankruptcy*), I did some digging into Vestin's financials. As of late 2003/early 2004, roughly one in four of Vestin's high-interest/high-risk loans was non-performing. There was some other odd stuff going on, too, but Greenspun Media — my main freelance outlet at the time — ultimately didn't want to hear about it.

Flash forward four-plus years and Greenspun's crosstown rival is belatedly discovering that it's the same old same-old at Vestin. Which, had a few daily-paper business reporters done their jobs sooner, might have saved a Vestin investor or two from taking it in the shorts. I wonder if they're still on the hook for Vernon Downs, that long-suffering racino in upstate New York into which Vestin threw tens of millions of dollars?

* — the loan was initially made on the basis of a Castaways-supplied appraisal whose valuation was contingent upon a series of contingencies all falling into place.

Station Casinos isn't staggering under its newly acquired debt burden the way that Harrahs' Entertainment has been (see sidebar). While Station picked a bad time to lever up and one layoff is usually one too many — at least if you've ever been in those shoes — it's commendable that Station is concentrating its economies at the corporate level, rather than taking it out on customer service. The same cannot be said of some rival firms.

Speaking of Harrah's, it's actually getting some reporters to buy into its spin that a doubling of its debt-servicing costs (to $468 million) wasn't the reason it lost almost $98 million last quarter.

Let's see … You go from being $237.5 million in the black, this time last year, to $97.6 million in the red — a $335 million-plus swing, roughly $235 million of which is gobbled up by increased interest payments on your $29.7 billion debt load — and that's not your main problem? (coughbaloneycough)

After beating up on the Dogpatch Daily, I'd like to make partial amends by pointing out an excellent piece of enterprise reporting that raises additional questions about Boyd Gaming's due diligence when assembling its Echelon team. The problem? An excessively leveraged General Growth Properties. (Too much debt? Where have I heard that before?)

"A closer look at General Growth then could have shown potential for trouble down the road," writes Benjamin Spillman of Boyd's May 2007 recruitment of GGP. One of his sources, BoomBustBlog.com continues to keep tabs on insider transactions at GGP which, says blogger Reggie Middleton "smack of desperation on the part of the CEO and CFO."

The gracefulness with which Boyd extracted itself from a deteriorating situation at Echelon might not have been necessary had the company been a little choosier on the way in. Maybe Morgans Hotel Group and GGP were the best dance partners Boyd could find; or perhaps it noted Morgans' limited borrowing capacity and GGP's heavily encumbered balance sheet, then hoped for the best.

In the end, it was that choice of partners that would let Echelon down. Morgans squandered money on the Hard Rock Hotel & Casino (the phrase "mid-life crisis" suggests itself) it should have been putting toward less-sexy Echelon, and GGP's business model clearly wasn't built for adversity. KVBC-TV recently described the company's Shoppes at Palazzo as "struggling," so we may see some additional fallout ripple down the Strip. Let's hope not.

Posted in Boyd Gaming, Harrah's, Morgans Hotel Group, Station Casinos, The Strip, Wall Street | Comments Off on This is news?; plus Station/Harrah's/Echelon notes

Trop turnaround?

Posted on August 12, 2008 by David McKee

While the New Jersey Casino Control Commission continues to bobble the sale of the Atlantic City Tropicana, at least its stewardship has arrested and perhaps finally the property's decline. While a 5.5% decline in business is nothing to crow over, only Caesars Atlantic City lost less ground, down 4%.

Of course, nobody did remotely as well in dollar volume as the newly augmented Borgata. Whatever struggles Boyd Gaming has experienced in cracking the top, er, echelon on the Las Vegas Strip, it's had the rest of the Atlantic City market playing catch-up, mostly without success, for five years now.

As for the Trop, its gambling revenues are still just keeping pace with Showboat Atlantic City, a property with 7% fewer slots and half the poker/table game capacity. So, while the NJCCC has largely stanched the bleeding, the problem of an attenuated market share remains. Thanks, Columbia Sussex. Don't let that doorknob hit you on the way out.

But the Trop's doing way better than Trump Marina, whose owners — coming off a wretched quarter and not yet having booked the $316 million they're getting for Trump Marina — are merely considering using the money to pay down debt. After all they could "look elsewhere for growth opportunities" — like Panama. (I kid you not.) That's quintessential Donald Trump: Don't address your problems; just run away.

(Presumably the new "Chairman" tower at Trump Taj Mahal is supposed to evoke the glowering, orange-haired Trump himself. But, if you grew up in the Sixties, "the Chairman" was Mao Tse-tung or maybe — if you were just a few years older — the Chairman of the Board himself, one Francis Albert Sinatra. I guarantee that no one will ever call Trump "the Chairman." Ever.)

Golden Heartland: Coming soon-ish to a Kansas near you?

Golden Gaming's PR peeps contacted me to very politely dispute my characterization of Golden as a probable also-ran in the Kansas casino sweepstakes (see "Don't tax me, bro!"). They pointed to CEO Blake Sartini's 15 years in the upper ranks of Station Casinos, his 40-tavern operation in Nevada, the Pahrump Nugget and a trio of Black Hawk, Colo., casinos (with an aggregate of 778 slots and no table games).

I would respond that Golden's most imposing rival in Kansas, Mohegan Sun, probably has a larger installed slot base in its Connecticut casino alone (a mind-boggling 6,199 one-armed bandits) than Golden probably has in all its 40-plus properties rolled together. That Colorado is the minor leagues, casino-wise. That all those taverns, nice as they are (and they're some of the very poshest in Nevada), amount to one big-ass slot route — no disrespect intended. And that we're talking about a $600 million casino-resort contract — far, far bigger than anything Golden has attempted.

Bottom line: I still think Golden is very much the underdog in Kansas. In fact, I'm even more convinced of it. Which isn't to say it won't pull off a stunning upset. But, given the scale of operation that the State of Kansas wants to see, Mohegan Sun's resumé makes the most logical fit.

Posted in Atlantic City, Boyd Gaming, Colorado, Columbia Sussex, Donald Trump, Harrah's, Kansas, Station Casinos, Tribal | Comments Off on Trop turnaround?

More bankruptcies predicted

Posted on August 12, 2008 by David McKee

Financial Week weighs in the casino industry's current doldrums, amplifying the newly recurrent refrain that the revenue diversification which we thought would shield Las Vegas and other destination markets from the bad times is instead increasing its exposure to same. A gentleman over at RateVegas.com/blog was asking why Boyd Gaming said Echelon didn't "make sense" without its retail-mall and boutique-hotel components.

I was a bit stumped for an answer. Aesthetically, Echelon might have looked lopsided if it had opened without those amenities. But, with a bit more foresight, Boyd might have advisedly split the project into phases and mothballed the more troubled southern half before any significant work was done. (Sort of the way Sheldon Adelson once planned to launch successive "Venetian" and "Lido" resorts — a plan that came a-cropper betwixt the Venetian's craptacular opening, the '01 recession and the post-9/11 blight.)

Such a bifurcation of Echelon would have left the core of the project, including the casino and the Anschutz Entertainment Group-steered concert hall, intact. Hugh Jackson's previously-cited analysis that Boyd got caught up in emulating CityCenter and consequently bit off more than it could chew seems especially pertinent to this aspect of Echelon's freeze. Or, as my Mom used to tell me at the buffet line, "Your eyes are bigger than your stomach."

Of course, we don't have access to whatever financial models Boyd used to determine that the mall, and the Mondrian and Delano hotels planned by attention-deficient Morgans Hotel Group were essential to project's fiscal health. Morgans' contribution can't have been that integral, seeing as Boyd stated publicly that it wasn't necessary that Mondrian and Delano open alongside the rest of Echelon. (Of course, that was back when there was still a slim hope that Morgans could raise the money, so positive thinking was the order of the day.)

Boyd ultimately made the right call and is, again, to be congratulated for going through with what could have been a humiliating decision. I just can't help wondering if coming to that realization sooner might have meant keep at least part of Echelon moving forward for the time being.

Does this look like a $5 billion project to you?

Further down in the Financial Week piece, it forecasts bankruptices for Indiana's usual market laggard, French Lick Resort & Casino, and for Herbst Gaming, which has missed two interest payments. (News that got little, if any, play around here.) Meanwhile, Elad Properties and IDB Group must know something we don't, because they've got their Plaza project budgeted at $4.75 billion-$6.75 billion, once land costs are backed out.

Whatever crystal ball they're using, some folks in Las Vegas would like to borrow it, probably starting with Jim Murren. After all, Moody's is predicting we're going to have endure another year of this slump before the good times return.

Knee-jerk Journalism 101. Our local papers don't usually make it a practice to deride the very conventioneers upon whose patronage we're so reliant. However, exceptions are annually made for the people attending the porn-industry show and the ones who turn out for the Star Trek Convention at the Las Vegas Hilton.

Hence the Las Vegas Sun is treating us to the obligatory "Let's make fun of these strange Trekkies" story. What really puzzles me is that a story about a concert that took place on Saturday didn't run until Tuesday morning. Evidently the rapid-response capabilities of a Web-based business model are as nothing when pitted against human indolence.

Update: The Las Vegas Review-Journal's Doug Elfman shows how this kind of story can and should be done. Bravo, Mr. Elfman.

Posted in Boyd Gaming, Herbst Gaming, Indiana, Morgans Hotel Group, Sheldon Adelson, The Strip, TV, Wall Street | Comments Off on More bankruptcies predicted

Quote of the Day

Posted on August 11, 2008 by David McKee

"Something which is fairly unique to a city the size of Las Vegas, is that the decisions of one or two individuals have the power to destabilize the entire city. We’re a one trick town … with only a few magicians." — Blogger 'Vegas Rex' on the Echelon shutdown (with video).

Posted in Boyd Gaming, The Strip | Comments Off on Quote of the Day

Case Bets: Luxor, Excalibur, Cannery East

Posted on August 8, 2008 by David McKee

MGM Mirage has provided a little more insight into just how much it’s doing in terms of spending on renovations to Luxor and Excalibur. “We are spending around $100M in improvements on each of these properties this year, and we have invested millions more since the 2005 merger,” writes a company representative (emphasis added).

You could argue that Excalibur needs a lot more than that — or maybe just some well-placed dynamite — but it’s good to see something being done. It’s an open secret that Mandalay Resort Group let things slide at its Strip properties while MGM’s buyout was in progress, leaving the new owners with a lot of remedial work to do.

Out-of-towners who haven’t seen Eastside Cannery arising along the Boulder Strip may enjoy this funky montage of its nightly light show. The building is an extremely striking addition to the eastside, dominating the landscape for miles around much as Sam’s Town used to do. Poor Sam’s Town: It used to look so monumental and now it’s dwarfed by the upstart down the street. (For the record, Cannery Casino Resorts only manages Rampart Casino and it’s [CCR] being bought out by Crown Ltd., not Melco PBL.)

Posted in Boulder Strip, Boyd Gaming, Cannery Casino Resorts, James Packer, MGM Mirage, The Strip | Comments Off on Case Bets: Luxor, Excalibur, Cannery East

Don't tax me, bro!

Posted on August 6, 2008 by David McKee

Guess who's kvetching about his property tax bill? Why it's our old buddy, Columbia Sussex CEO William J. Yung III — or at least his surrogates at Horizon Vicksburg. It's been the better part of a year since Yung announced the sale of this riverboat to Nevada Gold, yet the deal still hasn't closed. (Too bad, because the promise of that $35 million was being used to palliate angry debtholders last winter.)

Even though Olympia Gaming and Las Vegas Sands have bailed out of their respective pursuits of casino ownership in Kansas' Wyandotte County, two Vegas-based companies are still in the running. Pinnacle Entertainment has a lot of irons in the fire already and its wait-and-see attitude toward Atlantic City development may not be what the Kansas Lottery Gaming Facilities Review Board (now there's a mouthful!) wants to hear. Golden Gaming's experience, a brief stint at the Vegas Hard Rock Hotel & Casino aside, is of the small-scale variety, which may also provoke skepticism.

While tribal powerhouse Mohegan Sun is hurting on the Uncasville homefront lately, it's coming off a solid performance in Pennsylvania. I like its chances. Cordish Cos., whose pursuit of the Atlantic City Tropicana was recently rebuffed (for no good reason), is obviously itching to get into the casino industry in a big way. Perhaps its proven track record as a developer will outweigh its inexperience in the casinosphere.

Posted in Atlantic City, Columbia Sussex, Kansas, Mississippi, Morgans Hotel Group, Pennsylvania, Pinnacle Entertainment, Sheldon Adelson, Taxes, Tribal | Comments Off on Don't tax me, bro!