Issue 279
January 16, 2006 - January 22, 2006
Volume 6
page 1

This Issue

Gaming News

Riverboats ride higher after 2005

No money, no labor, no way

Las Vegas Sands Corp. Offering Workshops for the Community

Grand Emperor Hotel Commences Business

Scots bingo chain taken over by main rival in �64m deal

Show Time Keith Anderson will be at Boulder Station Hotel & Casino's Railhead Showroom.

Column Gambling Do's and Don'ts By John Grochowski

Check out our entertainment highlights & upcoming tournaments

See the lucky winners


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Riverboats ride higher after 2005

As Reported by The Kansas City Star

MISSOURI - Revenues up again in the area, while new mark is set statewide. Gamblers left $688.5 million at Kansas City’s four riverboats in 2005. The 1.7 percent increase from 2004 lifted the local casino industry to its 11th consecutive year of growth.

Statewide, Missouri’s 11 casinos also set records, surpassing $1.5 billion for the first time. Combined revenues of $1,526,806,799 represented a modest bump of 3.6 percent from 2004.

“The numbers are staggering,” said Troy Stremming, a vice president with Ameristar Casinos and president of the Missouri Riverboat Gaming Association trade group.

“Over a 10- to 11-year period, people just continue to further enjoy gaming as a form of entertainment. That’s something we’re extremely proud of.”

The Missouri and Kansas lotteries also were up in 2005, 5 percent and 3.8 percent, respectively. The Woodlands pari-mutuel race track in Wyandotte County was down — sharply — 6.3 percent.

Casino taxes and Missouri’s share of lottery profits are earmarked mostly for public education. That combined 2005 figure statewide for the first time is expected to exceed half a billion dollars — $504 million.

The steady expansion of casino gambling in Missouri recently brought a cry from the state’s lone anti-gambling citizens lobby. Directors of St. Louis-based Casino Watch last month urged that the number of slot machines in the state be capped at their present level, which it contends would blunt their impact on compulsive gamblers.

Testifying in recent weeks before two state panels that deal with state gambling policy, Casino Watch chairman Mark Andrews noted that Missouri’s 17,875 slots account for around 87 percent of casino revenues.

“Problem gambling is alive and well in Missouri,” he said. “It is time for Missouri to institute sound restrictions on casinos, which will lessen the likelihood of addiction.”

A similar idea to cap the number of slots was floated last year in Jefferson City but failed to gain traction.

Much of the casinos’ business growth is being bought with expensive brick-and-mortar expansion of nongambling attractions such as restaurants and nightclubs.

“That’s something else we’re very proud of,” added Stremming, “that 60 percent of profits have been invested back into the properties. When you continue to reinvest in your investment, you will continue to grow the market.”

Later this month Harrah’s North Kansas City Casino and Hotel will close out a nearly two-year, $126 million makeover that featured the VooDoo Lounge — an emerging Harrah’s franchise. It also opened a 192-room hotel addition, five new restaurants and the Twist lounge, a mini-nightclub on the casino floor.

The Isle of Capri refurbished its buffet area last year and opened its Pulse bar on the casino floor last month to complement a stage added earlier that has injected live music into the gambling atmosphere.

The Argosy Riverside Casino is in the midst of a $86.5 million upgrade that includes a recently opened parking garage and a more convenient casino entrance. Work continues on a 250-room hotel that will give the casino’s existing meeting and ballroom facilities a lodging component to attract more out-of-town business.

Ameristar Kansas City Casino and Hotel in 2005 poured around $36 million into its property in a facelift of several indoor streetscape attractions and the casino’s 184 hotel rooms. The company also is considering a hotel expansion.

Market leader Ameristar and Argosy were the year’s winners, with both posting property record revenues.

Ameristar becomes the first casino in Kansas City to surpass the quarter-billion dollar annual revenue mark, hitting $252.8 million for the year and a market record 36.7 percent annual market share.

Argosy closed out the year with a property record $149.2 million won from gamblers along with record turnstile admissions of 4.8 million.

Harrah’s’ $191.7 million and 27.8 percent market share for 2005 marked its second consecutive year failing to surpass its all-time high of $208.9 million in 2003. Harrah’s, however is rebounding thanks to its lineup of new attractions.

The casino’s December market share of 30 percent was its best showing since December 2003. That month Argosy opened its $105 million casino showplace that has taken a bite out of competitors’ bottom lines ever since.

The Isle of Capri faded noticeably in 2005, posting revenues of $94.8 million and a 13.7 percent market share. That was its weakest market share showing ever, save 2000, when large sections of the casino floor were closed the better part of four months during a remodeling.

Isle general manager Mike Tamburelli knows his casino must play catch-up.

“We want to do something in Kansas City,” he said in a telephone interview.

Isle officials have long discussed adding a hotel to the property, and other new amenity notions have been floated in recent months.

For December, Kansas City’s four casinos tallied revenues of $59.1 million, up 2.8 percent from 2004 and the market’s fourth best month on record.

According to the Missouri Gaming Commission’s latest monthly financial report, the average gambler in Kansas City lost $60.33 during a typical three-hour casino visit.

Lotteries Up

The Missouri and Kansas state lotteries had a growth year in 2005, with ticket sales up locally and statewide.

Missouri Lottery revenues were up 5 percent. That was well off the pace of the last three years, which saw annual growth of 15 percent, 21 percent and 12 percent.

Since 2002, state lottery officials have issued warnings that lawmakers’ deep cuts in the agency’s advertising budget would erode sales. Four years ago the agency’s ad budget was $8.1 million. This year lottery officials scrimped elsewhere to assemble a $2.1 million ad budget.

“There’s a trend line and it is flattening out,” said lottery executive director Larry Jansen. Unless lawmakers restore some of the lost funding to reinvigorate the marketing effort, “we may be leaving money on the table,” he said.

The Kansas Lottery managed modest growth last year — 3.8 percent to $228.8 million in statewide sales following a rare down year in 2004.

In coming months the annual debate in Kansas over expanded gambling will take on an even higher profile as lawmakers consider a court-ordered demand for an estimated $400 million in new education funding.

Annual proposals again expected to be on the table include new state-taxed tribal-owned casinos, casinos owned by the state outright, and permitting the state’s privately owned racetracks to add slot parlors.

“It’s all on the table,” said Matt All, counsel to Gov. Kathleen Sebelius.

All said no decision had been made to advance a compact with two Kansas tribes that had proposed a casino resort complex in Wyandotte County near Kansas Speedway.

The only commitment Sebelius is making at this point, he said, is “any plan the governor would support would have to include slots at tracks. That always been a baseline part of her proposal. We’ve got to support the pari-mutuel industry.”

The Woodlands Down

A dark cloud hung over The Woodlands in 2005. The 16-year old pari-mutuel dog- and horse-racing track in western Wyandotte County posted its second consecutive down year in 2005 as total wagers, or “handle,” slipped 6.3 percent, to $66.5 million.

That pushed down the track’s pretax gross revenues by almost $1 million, to $13.9 million. That slippage came despite a modest 1.5 percent increase in estimated attendance, to 321,213 for the year.

General manager Jim Gartland blamed part of the shortfall on the track’s forced two-week closing last spring during an outbreak of a canine flu bug that sidelined many of the track’s kenneled racing animals.

Gartland also noted that the track too often in 2005 ran less than a full card of 15 daily dog races. The track has facilities for 17 kennels to provide greyhounds, but only 13 are occupied — on purpose.

“We don’t want to cut the up the pie too much,” he said of the track’s prize purses. “We want to get these guys some money, so we choose not to bring another kennel in.

“It’s kind of a fine balance. Everybody is struggling to make money.”

Gambling Report

Kansas City gambling report for year-end 2005

2005 $688,586,922
2004 $677,054,243
2003 $614,273,640
2005 $45,102,749
2004 $43,498,088
2003 $42,523,650
2005 $18,515,062
2004 $17,788,095
2003 $18,950,089
2005 $13,967,578
2004 $14,914,990
2003 $15,710,758

Here is the metropolitan area gambling summary for the 2005 calendar year. All revenue figures represent estimated amounts lost by gamblers. Casino revenues reflect pretax operating income from all wagers after all winners have been paid. Missouri Lottery revenues are based on actual sales in Jackson, Clay and Platte counties, minus average 59 percent monthly payouts to players as winnings. Kansas Lottery revenue reflects sales in Johnson, Wyandotte, Leavenworth and Miami counties, and are based on a 53 percent average payout rate to players. The Woodlands revenue is an estimate based on the pretax “handle,” or total bets made, minus the average 79 percent returned to bettors as winnings.
For more information, visit the Missouri Gaming Commission Web site at .us.

No money, no labor, no way

As Reported by Las Vegas Review-Journal

LAS VEGAS, Nevada - Lack of financing and qualified help seen to scuttle high-rises. The difficulty of securing construction financing and signing qualified general contractors who can build high-rise condos at a feasible price has killed several projects in Las Vegas and threatens others, industry insiders say.

Those two basic reasons are offered for the failure of projects such as Ivana Las Vegas, Icon, Aqua Blue and Krystal Sands.

"It's not good for consumer confidence when a developer cancels a project, but developers are not pulling out of Las Vegas because they are unable to sell units," said Steve Fifield, president of Chicago-based Fifield Co. "They are pulling out of Las Vegas because they are unable to build their buildings."

Fifield is developing the 41-story Allure towers on Sahara Avenue, west of the Strip, with a $120 million construction loan from Union Labor Life Insurance Co. and $70 million in equity or mezzanine financing from CB Strategic Partners. Mezzanine financing is the difference between what the banks will loan for construction and the total cost of the project. M.J. Dean of Las Vegas is doing the concrete work and Bovis Lend Lease is general contractor.

With an abundance of luxury condo projects announced not only in Las Vegas but in other markets such as Miami and San Diego, financial institutions are tightening their lending requirements and approaching projects cautiously.

"Especially in areas like Vegas, first of all, they're very concerned about the experience and track record of the developer," said Aaron Yashouafar, president of Milbank Real Estate Services in Los Angeles and developer of the $325 million Sky Las Vegas on the north Strip near Circus Circus.

"And they also require a very high percentage of presales of units. By presales, lenders don't care about reservations. They care about actual contracts and nonrefundable deposits in escrow."

Andrew Woodtli, commercial real estate vice president of New York-based HSBC Bank, said he was looking for a "unique project with a strong and dedicated development team" when he closed on $250 million in construction financing for One Queensridge Place, two 18-story luxury condo towers being developed by Executive Home Builders near Rampart Boulevard and Alta Drive.

"The initial challenge was educating lenders on the demand for high-rise projects not located on the Strip," said David Stepanchak of George Smith Partners, who structured the financing with HSBC on behalf of Executive Home Builders. "Once banks evaluated the strength of the local market, they responded enthusiastically and broadly."

HSBC, which has nearly 400 branches, mostly in New York and Florida, joined several other financial institutions, including PB Capital and Bank Leumi, both of New York, in providing the loan.

"It is very difficult when a loan gets to this magnitude," said Yashouafar, whose Sky Las Vegas project is financed by a $260 million loan from Hypo International. "They like to break it up."

David Norris, an independent mortgage broker in Los Angeles who arranged the financing for Sky Las Vegas, said the banks view Las Vegas much the way they view Florida.

"People are worried that the vast majority of Las Vegas has become a speculative market," he said. "Lenders are cautious of that. There (are) caveats in some of the sales contracts that you can't sell for the first two years."

Banks like to see 60 percent or more in "hard sales" and they want the developer to have a contractor lined up with a signed contract. Yashouafar did a good job in converting a high percentage of reservations to hard contracts, which require nonrefundable deposits of 25 percent of the purchase price to be placed in escrow, and snagging M.J. Dean as general contractor, Norris said.

Construction of the 45-story Sky Las Vegas has reached the 19th floor, with a floor being added about every four days, project manager Matt Joens said. About 85 percent of the 409 units are sold.

"There's no magic. What we do is not brain surgery. It's numbers. They just have to add up," Norris said. "Even other lenders I talked to knew some of those (high-rise condos) weren't going to get built. Vegas is a small town in a lot of ways and there's really only three major builders. There's a dearth of contractors that could do these jobs and people knew it."

Some $3.625 billion in projects have been announced and are under construction. Fifield said high-rise condo developers in Las Vegas are moving inventory at a record pace, which is pushing demand for limited contractor and construction resources. This, in turn, is driving up construction pricing and squeezing developers.

"Developer fallout is a symptom of a very strong and very aggressive market," he said. "We did our homework and paid a good value for the land, which played a very important role in Allure's success. In Las Vegas, there are developers who paid two to three times what land had been selling for a couple years before, which, when combined with construction cost escalation, drove the development costs up, making their projects infeasible."

Even a land price doesn't guarantee success.

In January 2004, The Related Cos. paid $15 million for 4.5 acres on Convention Center Drive that was part of the Silver City property purchased by San Francisco real estate investor Luke Brugnara.

Related announced the $350 million, twin-tower Icon project for the site and said zoning and financing were already in place.

"Bottom line, look at whose projects are on the books here and who has the experience in getting it done," Related Las Vegas President Marty Burger told the Review-Journal in November 2004. "We've never given back a project to the bank."

The project was canceled last week. Related cited high costs of construction and delays from litigation as reasons for Icon's demise.

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