Park Place eyes big new tower at Caesars overlooking resorts

Gary Thompson

Tuesday, Feb. 1, 2000 | 11:30 a.m.

Caesars Palace may build a new 1,500-room hotel tower overlooking Bellagio and Paris Las Vegas at the corner of Flamingo Avenue and the Strip, Arthur Goldberg said today.

Goldberg, chief executive of Caesars' parent Park Place Entertainment Corp., also expressed doubts that owners of the Aladdin hotel-casino just south of Paris Las Vegas have enough money to complete construction and operate the property.

And he fired another subtle shot at rival casino magnate Steve Wynn in what has become a custom during Park Place's quarterly earnings conference calls.

Park Place, the world's largest gaming company, announced fourth-quarter net income of $17 million, or 5 cents per diluted share, compared with pro forma net of $6 million, or 2 cents a share, in the 1998 fourth period. Revenue rose to $850 million from $712 million.

For all 1999, Park Place earned $136 million, or 44 cents a share, compared with $139 million, or 45 cents a share, in 1998. Revenue rose to $3.2 billion from $2.9 billion.

The latest quarter's earnings were reduced about 6 cents a share due to a charge for the pending sale of the Flamingo Hilton in Reno, while the 1998 numbers reflect results as if the Dec. 31, 1999, spinoff of Park Place from Hilton Hotels Corp. had occurred a year earlier.

The 1999 fourth quarter also includes results from Paris Las Vegas, which opened in September. The successful debut of Paris and strong results at the Las Vegas Hilton helped boost cash flow for the company's Western region 67 percent, to $107 million.

"We have in our master plan (for Caesars Palace) a tower project of some 1,500 rooms right on the corner, but we're not ready to begin it at this time," Goldberg said.

"Facing the lake at Bellagio and the Eiffel Tower, we'd clearly have the best views in town, he said. "But we want to digest what we have now and look at that later this year."

Park Place completed the acquisition of Caesars World Inc.'s gaming properties on Dec. 29, and Goldberg said he expects to make a 15 percent return this year on the $3 billion the company spent on the purchase.

Part of that will come from "streamlining the Palace," he said. "The productivity of employees got a little bit skewed there. We're cleaning up the place and changing managers around very quickly. We'll get the staff the way we want it and do some rooms and just on that will pick up $20 million to $25 million" of cash flow.

Goldberg said Caesars Magical Empire, which hasn't generated significant returns, will be replaced by a nightclub and separate buffet and that construction on higher-end suites may begin by mid-summer. Caesars needs to upgrade its suite product to compete effectively with the Mansion at the MGM Grand and Bellagio, which have captured a major share of the high-end gambling market.

Responding to a question about Park Place's estimated 35 percent stake in Aladdin Gaming's subordinated discount notes, Goldberg said:

"I heard yesterday the bonds are selling around 45 cents." (The notes were originally sold at 50 per 100 dollars of par value at maturity).

"They seem to be working to complete it," he said of the $1.3 billion resort being built by real estate developer Jack Sommer and London Clubs International.

"I don't know if they'll complete it or not. And if it gets done, I don't know where they're going to get the capital to operate it."

Goldberg estimated Aladdin Gaming "would need $50 million to $100 million" to operate the facility, and added: "London Clubs has bet their company on it.

"I don't know how they open this year," he said. Aladdin Gaming has said it expects to open in late summer or early fall. "If there's a (capital) shortfall, it will happen around June."

Aladdin Gaming President Richard Goeglein couldn't be reached for comment today.

Goldberg also made an oblique but stinging reference to Beau Rivage, the Mirage Resorts Inc. hotel-casino in Biloxi, Miss., that has experienced lower-than-expected results since opening last year.

"We paid $825 million for three Grand casinos, which generated a 20 percent return for us," he said, referring to the acquisition of three Grand Casinos Inc. properties in Mississippi last year.

"One of our competitors spent almost that much building one hotel, and I think you know what their return was."