‘Better deal’ to increase value and equity

Oct 23, 2007 1:11 AM

"There’s no such thing as having too much land along the Las Vegas Strip."

That’s a tip from one of the Harrah’s insiders who are discouraging speculation that any of the company’s major Nevada or Atlantic City properties will be sold.

"It’s a better deal," explained another well-placed source, "to increase value or equity," than it is to sell casinos merely for the purpose of paying down debt."

The sky-rocketing property values associated with land in major resort corridors may not have been such a visible factor when the early plans for a transition from public to private ownership were being devised.

The effort to downplay talk of sales is not surprising, but the hang-in-there-with-us sales pitch aimed at senior managers who are being asked to invest half of their buyout packages in the "new" Harrah’s makes sense as the company hurries toward the eventual opening of its own Macau resort.

Macau casinos have become powerful value drivers as the recent high prices of Wynn  and Las Vegas Sands stock illustrate.

Pulling political strings

Highways to success are sometimes paved with favors aimed at satisfying all the right people. Now there’s a business principle that has been around since the beginning of time.

The road traveled by Sheldon Adelson to a Macau casino license appears to have run through Washington with an important stop in Beijing.

Contrast this with the experiences of Steve Wynn and Terry Lanni who say they had never been to the capital of the People’s Republic of China when they made their earliest attempts to acquire Macau casino licenses.

Shows what they knew.

A recent Las Vegas Review-Journal story says Adelson was called to Beijing in 2001 by Chinese officials who knew he wanted a casino in Macau and who also knew he was well connected at the highest levels of the Republican Party.

Could Adelson use his connections to help kill legislation in Congress that would have prevented China from hosting the 2008 Olympics?

The story says Adelson made a call to then-House Speaker Tom DeLay who took care of the problem.

Adelson subsequently ended up with a "sub-concession" that went with the license issued to Hong Kong-based Galaxy. Three calls to the Venetian did not produce anyone willing to discuss the story, but the RJ said no one had called him to complain.

"And here we were," came the wry commentary of an executive with another company, "thinking Sheldon got his license simply because he had built a better mousetrap."

But let’s give the guy a break. What politician is not going to listen attentively when the No. 3 man on the Forbes rich guy list comes calling?

Atlantic City carrot?

People who contend MGM Mirage is dangling a gold-plated multibillion-dollar carrot in front of New Jersey regulators with its announcement of a "CityCenter East" in Atlantic City are obviously cynical.

But they are also probably correct, not that we can expect MGM officials to admit anything of the sort.

Back Terry Lanni to the wall, ask the MGM chairman if there were any ulterior motives driving the announcement and I suspect he will look thoughtfully into the distance, brow slightly furrowed, as he explains that the time is simply right to move forward on the 72 acres MGM owns at Atlantic City’s Renaissance Point next to the Borgata.

And maybe there is nothing more to it than because sometimes a cigar is just a cigar.

Unless it isn’t.

I’m guessing the plan may be quickly put back on the shelf should the state’s gaming regulators take a dim view of the company partnering with Pansy Ho in Macau. 

Some observers have suggested MGM’s multibillion-dollar presence in Las Vegas made it difficult for Nevada authorities to reject the partnership approval they gave earlier this year. Some of the same people suggested New Jersey might have far less trouble taking a "tough position" because MGM’s investment in Atlantic City is a relatively small one. 

So perhaps company’s strategists decided the time is right to nudge regulators toward real world thinking about the wisdom of keeping one of gaming’s most respected companies active in the community.