For those of you waiting for Boyd Gaming to do something with all its undrawn credit, the moment has arrived. Having surveyed the chips on the board, Boyd has pounced upon … IP Casino Resort Spa (née Imperial Palace Biloxi) in a $288 million deal. Ten million of those clams will take the form of a donation to the Engelstad Family Foundation. Boyd has also committed $44 million to property upgrades as well, above and beyond the purchase price. Analyst Joseph Greff professed himself “surprised” by Boyd’s commitment of so much moolah to what he characterized as a no-growth market. Since IP Casino is privately held, EBITDA numbers weren’t immediately available.
Now, if you’ve been having a chuckle at Boyd’s expense, consider this. Although Ralph Engelstad launched the property in contentious and catastrophic fashion back in 1997, its fortunes have greatly improved since Englestad’s decease. (The late Rex Buntain gave an excellent chronicle of Engelstad’s Attila the Hun act in a 1998 issue of Casino Executive Magazine.) Hurricane Katrina proved to be a blessing in disguise, since the IP was the casino further from shore, ergo the least damaged and the first one back in business, enabling it to solidify and enlarge its market share.
So this is a canny move on Boyd’s part, getting into a market where it presently isn’t and obtaining a casino that’s gone from laggard to leader. IP’s also the first gambling house that southbound drivers pass, so Boyd’s sitting pretty on this deal … pending revelation of the EBITDA multiple at which it purchased the IP. (It definitely makes more sense than continuing to putz around with Dania Jai-Alai in Florida.) With Caesars Entertainment still in a post-Katrina daze and Pinnacle Entertainment having fled the market entirely, Boyd has seized the initiative. It remains in possession of $1.1 billion in undrawn credit and if Ameristar Casinos goes back on the sale block, expect those billion-plus chips to be pushed to the middle of the table.
Retail therapy. Boyd isn’t the only company pulling out the checkbook this week. Melco Crown Entertainment has swooped in to rescue long-in-abeyance Studio City, buying a 60% share in the comatose project for $360 million, going from casino manager to owner in the process. A pair of hedge funds control the balance of Studio City. Wall Street is bullish on the project, foreseeing as much as a 20% ROI on what’s expected to be a $1.7 billion casino resort when all’s said and done. That kind of return has been impossible in Las Vegas since casino costs routinely began breaking the $1 billion barrier. So when moguls like Sheldon Adelson and Steve Wynn say they’ve turned their gaze to the East, you can’t blame them.
Studio City still faces such not-inconsiderable hurdles as a government-imposed 2013 completion date that Melco says it can’t meet. W Hotels and Ritz-Carlton remain on board but other franchisors have long since fled. Also bailing out is Singapore-owned CapitaLand. Whether the loss of Studio City’s entertainment and retail partners portends a scaled-down project remains to be seen. The looming completion date would argue for a smaller-is-beautiful construction plan.
Speaking of Adelson, the tycoon’s Sands China subsidiary has obtained a line of credit that maxes out at $4.5 billion and reduces Las Vegas Sands‘ cost of capital by $100 million year. Since the primary goal of the new debt is to retire $4.45 billion in current debt, it’s unclear how many patacas will be left in the kitty to service the credit line’s secondary purpose: Finishing Sites 5 & 6, which will hopefully open in our lifetime.
Actually, the timetable for Venetian Oriental started looking better last month, when Macao Secretary for Economy & Commerce Francis Tam Pak Yuen began opening the guest-worker pipeline, starting with an additional 1,000-2,oooo laborers per month. The eventual goal is to add 20,000 Gastarbeiten by year’s end, by which time Venetian Oriental (still 1,500 workers short of its goal) should be in the final throes of construction.
Paradoxically, Tam said he doesn’t expect the influx of Mainland labor to affect the one-to-one ratio of imported/local wokers on new projects. That sounds like a nudge for established operators (*cough*Stanley Ho*cough*) to reinvest in their existing facilities. And would the currently derelict Studio City qualify as “new”? Lawrence Ho and James Packer have to be hoping it won’t.
Any victory lap Adelson might have taken was sharply curtailed when the government of Singapore yanked on his leash. Contrary to anything Sands might have told investors, the $4 billion shopping mall sale Adelson was hoping to achieve by 2014 (retiring most of Marina Bay Sands’ cost in the process) can’t happen until 2017. Even then, the government will have to sign off on the deal. This illustrates a recurrent flaw in Sands’ basic strategy: opting to build costly retail malls first and then looking for buyers or joint-venture partners later. Adelson’s been caught out by this in Bethlehem, in Macao and now in Singapore.
Adelson also might do well to consider the fiscal effects of working under micromanaging, authoritarian governments before he pops off again about how terrible business conditions are in the United States. Then again, he’s lying low and well-advised to do so now that his alleged misdeeds in China could become a political hot potato back home. However, wife Miriam Adelson‘s frosty treatment of once-favored Newt Gingrich suggests that Sheldon is wondering where his $7 million went and why it hasn’t bought so much as a voter list.
Dr. Adelson’s TMI description of her husband’s physical condition leads Steve Friess to speculate on the order of succession — or lack of one — at Las Vegas Sands. Although company President Michael Leven (right) is no spring chicken, he’s in far better shape than the CEO and, in a worst-case scenario, would probably assume both portfolios, with Miriam Adelson ascending to chairman of the board. Given the number of shares controlled by the Adelsons, this seems virtually a fait accompli. Since Dr. Adelson has evidently been exercising a leadership role behind the scenes (much to the consternation of some ex-Sands execs), it’s no stretch of the imagination to see her taking the helm in one capacity or another — although I suspect Wall Street would be more comfortable with Leven in the CEO’s chair.
Fear and loathing on Bonanza Road. The incomprehension of and hostility toward all things Internet during the Sherman “Gramps” Frederick regime at the Las Vegas Review-Journal has finally come back to bite it. After some chin-scratching, Frederick & Co. had the brilliant idea of making revenue off the ‘Net via a jihad of lawsuits. The holy war was conducted through sock-puppet entity Righthaven, a ruse that was executed with typical Frederickian ineptitude and now the chickens are coming home to roost.
Rev. Frederick (whose mad HTML skillz can be seen at left) having been exiled last year, Righthaven has become Publisher Bob Brown‘s cross to bear. I don’t wish Bob any ill will but Sherm’s goon squad went after LasVegasAdvisor.com for citation of its own intellectual property. Anthony Curtis should now counter-sue the Vicar of Bonanza and gun-for-hire Steve Gibson for anything they’re worth — especially that oh-so-Eighties headset Gibson likes to model.
