Las Vegas faces 5-7 year development dry spell

Nov 25, 2008 5:10 PM

by Mark Mayer |

If MGM MIRAGE executive vice president and CEO Daniel D’Amico is right, Las Vegas doesn’t figure to have any new development for five to seven years.

"The environment has changed," D’Amico said during a State of the Economy seminar last week at the Global Gaming Expo. "There has been suspended growth both here and in Atlantic City. That’s good news for the incumbents who are already here and can try to get stronger and better."

 D’Amico cited a worldwide financial breakdown with fewer banks out there willing to lend money.

"Everything is on the table in this day and age," D’Amico said. "Take Sheldon Adelson and Steve Wynn in their approach to gaining capital. Adelson made a deal for Las Vegas Sands that he had to do. Wynn got his funds because he wanted to."

 Bill Clifford, CFO for Penn National Gaming, said his company is fine since they are not considered "a big fish."

"We have $775 million that we need to grow with," Clifford said. "We sold our stock at a minimum of 45 and a ceiling of 67. Our goal is to take Penn National into the big leagues like MGM."

Clifford used the example of properties in Kansas where Penn National lost out in bidding with Harrah’s due to reputation.

"We had one property in Kansas and were looking to connect it to another site in the state," Clifford said. "We made our bid and Harrah’s came up with a higher offer. Harrah’s wound up getting the deal, then just recently pulled out saying that they could not come up with the money. We’re still very interested and will probably pursue that site again next year. We have the cash. Maybe this time, they will side with us."

Clifford said banks are making it difficult for the gaming industry.

"We’re going to see a lot more financing come through bonds and less in bank debt," Clifford said. "Banks want it to be like a mortgage and that doesn’t work well in companies."

Simon Dewhurst, executive vice president and CFO of Melco Crown Entertainment based in Hong Kong, said that his company raised $1.3 billion in the United States for projects here and in Asia.

"It will be a long time before another Asian company raises that kind of capital," Dewhurst said. "We are two-thirds of the way to completing funding for a $3 billion facility in the U.S. Liquidity means having enough dollars to get to the finish line."

Jeff Hartman, COO at Mohegan Sun in Connecticut, said that the Indian tribes have good relationships with banks, but acknowledged that raising money is difficult now.

"The lending pool is small," Hartman said. "We had 10 strong years at Mohegan Sun, but now we’re facing a year or two of cutbacks in spending."

Hartman was a late replacement at G2E for Harrah’s Entertainment CFO and Treasurer Jonathan S. Halkyard. Harrah’s has had recent cutbacks and it was announced at the seminar that they were reserving comments at this time.

Related Articles:
New plans for Las Vegas-styled Catskills development
Capital for development drying up quickly
MGM takes partners for Jean development