Issue 296
May 15 - May 21, 2006
Volume 6
page 1
 

This Issue

Gaming News

Casino City's May Sweepstakes

Mergers and Acquisitions: Hard Rock Sold for $770 Million

Casino Rumors Surround Trump Philadelphia Tower

Isle Plans Expansion in Florida Market

Meadows Plans $450 Million Expansion

Show Time Kevin James performs at Mirage's Danny Gans Theatre.

Column Satellite Poker Tournaments by John Marchel.

Check out our entertainment highlights & upcoming tournaments

See the lucky winners

 

Not yet subscribed to the Casino City Newsletter? Sign up NOW!

 

Biloxi Mayor Says Casinos Will Again Revitalize Region
By Howard Stutz - Las Vegas Gaming Wire

BILOXI, Mississippi -- Mayor A.J. Holloway watched during his first 12 years in office as a booming Gulf Coast casino industry fueled his city's economic prosperity.

Holloway told the opening session of the Global Gaming Exposition Institute on Wednesday at Red Rock Resort that casinos will once again serve as the catalyst to revitalize the small community ravaged by Hurricane Katrina last year.

"We're going to look at the things that made us successful in the past," said Holloway, who had just started his fourth four-year term as Biloxi's mayor when Hurricane Katrina hit the community Aug. 29. "We're going to build on those qualities to help make us even more successful in the future."

Before Hurricane Katrina, Biloxi's 10 casinos produced $911 million in gaming revenue in 2004, providing taxes that enhanced the city's budget. The estimated 30-foot storm surge and 130 mph winds dismantled the city's gaming industry, which had helped make Mississippi the third-most prosperous casino state in the nation behind Nevada and New Jersey.

In December, three Biloxi casinos reopened. Several gaming companies, including Harrah's Entertainment and MGM Mirage, have said they will reopen their Biloxi casinos this summer. Other casino operators have hinted at opening rebuilt casinos by the end of the year.

"There's a difference in actually reopening and saying you're going to reopen," said Isle of Capri Casinos President Tim Hinkley. His company's Biloxi property reopened in December with a temporary casino located in the hotel's convention space. An expansion expected to be completed next week will give the property 1,300 slot machines and gaming tables.

Hinkley participated in a panel discussion with Holloway on reviving the Gulf Cost gaming market.

"I think everything we've heard gives us confidence that Biloxi will come back," Hinkley said.

Mississippi gaming revenue statistics show the three reopened casinos had gaming revenue of $64.2 million in January, $58.8 million February and $63.7 million in March, about 70 percent of what 10 casinos earned in the prior year.

Revised Mississippi gaming regulations that allow casinos to be located 800 feet from the Gulf of Mexico shoreline has Holloway predicting that between 15 and 20 casinos will dot the Mississippi coastline by 2010.

He said the rebuilding of the Highway 90 bridge that connects the Biloxi peninsula with Ocean Springs, Miss., to the east, will help bring back the tourists. The new bridge could be open in 15 months after the construction contract is awarded in June.

Still, Holloway said visitors are finding their way into the casino district. He said his own personal survey of the license plates in casino parking lots show vehicles from Arkansas, Alabama, Georgia, Florida, Tennessee and other areas of Mississippi.

"Conventional wisdom was that our casino customers would be construction workers and FEMA employees," Holloway said. "But our visitors are starting to come back."

Before the hurricane, Biloxi had $6 billion in development during Holloway's first three terms. The casinos hired 15,000 employees while the number of hotel rooms on the Gulf Coast grew from 6,000 rooms to 20,000 rooms.

"We went from 1 million visitors a year to between 8 million and 10 million a year," Holloway said. "When Beau Rivage opened in 1999, we saw gaming revenue jump to $775 million, which was a 35 percent increase over the previous year. In 2004, the casinos in Biloxi grossed $911 million. That's an 18 percent increase in the five years since the Beau opened."

Hinkley said Biloxi's biggest needs are affordable housing and infrastructure. He said jobs are becoming available; Isle of Capri has hired more than 1,000 workers since reopening.

"We need to provide those employees a place to live," Hinkley said.

The hurricane wiped out 6,000 homes and businesses in Biloxi and several historical homes and landmarks along Highway 90, which runs alongside the coastline.

Holloway said land values have doubled and tripled in Biloxi, especially in the hurricane-devastated community of Point Cadet at the peninsula's eastern tip. Almost all the older residences in the area that borders the casino district were destroyed. Holloway said he expects that area to become a commercial zone that enhances the returning casino industry.


Mergers and Acquisitions: Hard Rock Sold for $770 Million

By Hubble Smith - Las Vegas Gaming Wire

LAS VEGAS -- The Hard Rock Hotel, a pop icon in Las Vegas with its signature neon guitar and concert venue, The Joint, has been sold to New York-based Morgans Hotel Group for $770 million, Hard Rock founder Peter Morton said Thursday.

The sale, pending regulatory approval and other conditions, includes the 647-room hotel and 30,000-square-foot casino on 17 acres at Paradise Road and Harmon Avenue, 24 adjacent acres that were planned for a hotel-condo expansion and related intellectual property.

Morton will receive about 95 percent of the net proceeds from the sale and said he doesn't plan to develop any other properties in Las Vegas, gaming or otherwise.

"I'm taking my chips off the table," Morton said from his Los Angeles office. "Vegas is a great town. I've got great people working at my hotel, and the community has been phenomenal. We tried in our own small way to make a contribution. We brought some rock 'n' roll to town."

The Joint turned Las Vegas into a popular music scene destination with performances by such acts as the Rolling Stones, Bob Dylan, Neil Young, Coldplay, Norah Jones, David Bowie, Elvis Costello and Nine Inch Nails.

Morton built the Hard Rock in 1995 for $80 million and expanded the property in 1999 with a beach club and swimming pool that became one of the hottest party spots in town. It was chosen as one of the top 10 pools in the world by the Travel Channel. Other Hard Rock attractions include Body English nightclub, Nobu restaurant and an 8,000-square-foot spa and fitness center.

"The Hard Rock is already an extraordinary landmark and we are pleased to be able to acquire a property that has so much expansion potential," Edward Scheetz, president and chief executive officer of Morgans, said in a statement. "Since Las Vegas is the largest hotel market in the U.S., it is key for our growth strategy. This transaction provides us with an immediate and highly visible entry into this market."

He said the Hard Rock will complement Morgans' existing collection of hotel brands, which include Morgans, Royalton and Hudson in New York; Delano and The Shore Club in Miami; Mondrian in Los Angeles and Scottsdale, Ariz.; Clift in San Francisco; and Sanderson and St. Martin's Lane in London.

"What I assume is they're buying the Hard Rock brand because they went public recently and they need recognition," said Jim Stuart, principal of Las Vegas-based Centra Properties, a joint venture partner with Related Cos. in the Las Ramblas project on Harmon. "Strategically, it's a logical move for Morgans because their growth mechanism is they buy a brand."

Morgans, which closed down 7 cents at $17.95 a share Thursday on the Nasdaq National Market, is known as a boutique hotel operator targeting a younger demographic.

"This hotel, along with our established and renowned Delano and Mondrian brands, will allow us to dominate the Las Vegas market at multiple price points by offering the style, innovation and service with which our brands are synonymous," Scheetz said.

Morgans, which was founded by Studio 54's Ian Schrager, also has an agreement with Boyd Gaming to build a 600-room Delano and 1,000-room Mondrian hotel at Echelon Place, planned for the current site of the Stardust on the Strip.

"We have high regard for their company and we're very excited about their involvement in the Echelon development," Boyd spokesman Rob Stillwell said. "They're coming into Las Vegas in a big way."

Two Wall Street analysts who wouldn't comment on the record because of conflicts said Morgans has wanted to enter the Las Vegas market for some time and that the Hard Rock fits with its mode of operation. It was only a question of reaching terms, especially on price, since Morton wanted at least $750 million.

Hard Rock Hotel reported earnings of $45 million before interest, depreciation, taxes and amortization last year, but because it's privately held, nobody knows to what degree there may be excess expenses, said Jane Pedreira, a gaming analyst for Lehman Bros.

She said the hotel was selling somewhere between nine times and 12 times its EBIDTA multiple, depending on how you value the 24 acres. She ran numbers from $10 million to $15 million an acre.

"We don't know if they're linked to just the hotel or can they use the Hard Rock name on other hotels," she said. "In the grand scheme of things, it's not a lot of money, rather than buying a Strip property and imploding it. You're not talking multiple billions of dollars. And it still fits with their trendy market niche."

The part that intrigues Pedreira the most about the Hard Rock sale is the gaming license. Morgans would have to go through the licensing process or contract with a casino operator, possibly Boyd.

"It would be unusual to give away the upside of a gaming license," she said.

Morton cofounded the Hard Rock brand in 1971 and sold his chain of Hard Rock cafes to the Rank Group for $410 million in 1996.

"I've been involved with the Hard Rock for 35 years," Morton said. "I just think it's a great time to sell. There's a lot of liquidity out there. As you know, the market is at a peak right now and I got a great offer. I just sort of felt there came a point in my life where I wanted to do more with my life and re-evaluate things. I want to do some different things."

Adam Frank, principal of Edge Resorts, which is developing the W Las Vegas hotel at Harmon and Koval Lane, said he'd heard Morgans' name tossed around as a possible suitor of the Hard Rock, but it wasn't one of the names he heard most often.

The Rank Group also was one of the unsuccessful bidders for the hotel-casino.

"This is great news for the Harmon corridor," Frank said. "We're happy to hear it. We've got a strong partner at that end of the block. We're trying to create a boutique environment and Morgans brings that."

Frank has stayed at Morgans, Delano and Mondrian and said they combine the hotel and nightlife that will contribute to the overall young, hip vibe that's coming to the Harmon corridor. Like the W and other hotel brands around the world, Morgans realized they had to be in Las Vegas, Frank said.

The acquisition will be financed with cash on hand and Morgans' corporate line of credit, as well as a $700 million loan from an affiliate of Credit Suisse.

The Associated Press and Bloomberg News contributed to this report.

Tell us what you think about our newsletter. Copyright � 2000-2005 Casino City. All rights reserved Casino City is a trademark of CasinoPromote.com. Please read our Disclaimer of Warranty