Circus Circus entering convention business

John Wilen

Thursday, Jan. 14, 1999 | 10:25 a.m.

Circus Circus Enterprises Inc. is entering the increasingly crowded arena of competing to host conventions in Las Vegas.

Circus executives talked about their plans Wednesday as Nevada gaming regulators gave preliminary approval to the company's new Mandalay Bay hotel-casino. Approved separately was Colony Capital Inc.'s acquisition of Harvey's Casino Resorts.

The Gaming Control Board approvals are the first part of a two-step approval process. The Nevada Gaming Commission will have the final say over both items at its Jan. 28 meeting.

Circus Circus President Glenn Schaeffer touted Mandalay Bay to the Board Wednesday as "the biggest gold-plated juke-joint in the world."

Located at the south end of the Strip, the $950 million Mandalay Bay will open March 2 with 3,700 rooms, a 400-room Four Seasons hotel, a 12,000-seat performing arts theater and various nightclubs and restaurants.

Most distinctive, said Schaeffer, will be the resort's "11-acre aquatic playground," including a wave-making pool where Circus officials hope to hold a world surfing championship, an amusement park-style log ride and swimming, wading and sunning areas.

A year after opening, said Schaeffer, Mandalay Bay will add a "Sea of Predators" shark exhibit. The sharks will be viewable from a tank, from a swim-up area, from a cage dropped in the tank, or through the living-room windows of two high-roller suites, said Schaeffer.

"The walls of the living-room will be the shark tank," Schaeffer said.

New for Circus at Mandalay Bay will be an attempt to break into the convention business, said Schaeffer. The resort will include 100,000 square feet of meeting space.

"That puts Circus in a business we have not traditionally been in," said Schaeffer, who also acknowledged that this will present new challenges. "Our first year will not be our best year in the convention market at Mandalay Bay. But over two to three years, we feel we'll get our fair share of that business."

Circus expects to command an average daily room rate of $110, said Schaeffer.

Besides a planned expansion of the Las Vegas Convention Center, hotel-casinos that have added or are building expanded convention space include the MGM Grand, Rio, Riviera and the Venetian.

After Schaeffer's upbeat presentation, board members were quick to ask about Mandalay Bay's high-profile problems with foundation settling during construction. Circus Circus paid a contractor $10 million to install metal supports to stop further settling.

"We're hoping your all settled in," quipped Board Chairman Steve DuCharme.

"If Hurricane Mitch hits Las Vegas, our building will stand," said Schaeffer. "This is not a building on stilts, it's a building with roots."

Schaeffer also responded to a board question about the company's Detroit hotel-casino, saying Circus and partner the Atwater Group could have a temporary casino open there by the end of 1999.

The board also approved Colony Capital's $420 million acquisition of Harvey's, but not before taking an in-depth look at the deal's capital structure.

Los Angeles-based Colony is an investment fund capitalized with money from some of the nation's largest pension and retirement funds. After acquiring Harvey's, Colony will own 97 percent of both Harvey's class A voting and class B nonvoting stock.

Board members wondered whether the managers of the various pension and retirement funds that invest in Colony should themselves be considered owners of Harvey's stock, and thus be investigated and licensed as owners of a gaming company.

"We don't want to look down the list and see the John Gotti Roth IRA (as an investor)," said DuCharme.

Thomas Barrack Jr., Colony's chairman and chief executive, explained that while the money Colony invests rightfully belongs to the pension and retirement funds, those funds essentially give up any control over the money when they give it to Colony to invest. The funds do not receive dividends or other payments from the money while it is invested, Barrack said. They realize profits from the investments only when they are sold.

"They have created a box (isolating themselves from direct involvement)," said Barrack.

That explanation satisfied board members, who said their main concerns were with who controlled the money -- in this case Barrack and partner Kelvin Davis, both of whom will be licensed -- and with where it came from -- in this case legitimate pension and retirement funds.

Chuck Scharer, Harvey's chairman, president and chief executive, said existing management will continue running Harvey's after the Colony acquisition. Management will own 3 percent of each class of stock. Barrack and Davis will join Harvey's board of directors, but regular board meetings will be their only direct involvement in the day-to-day business, said Scharer.

"In short, Harvey's, the company, the people, will continue," said Scharer.

Lake Tahoe-based Harvey's owns casinos in Lake Tahoe; Council Bluffs, Iowa; and Central City, Colo. After selling its stake in the Las Vegas Hard Rock hotel-casino, the company is now contemplating building another Las Vegas resort at the intersection of Harmon and Koval avenues just east of the Strip.

In other action Wednesday, the board: