Owners of $1.4 billion resort recommended after grilling

Thursday, July 13, 2000 | 10:29 a.m.

The state Gaming Control Board recommended licensing the owners of the soon-to-open Aladdin hotel-casino on the Las Vegas Strip, but not before grilling one of the principals over finances of the $1.4 billion project and other business deals.

Board members voted 2-0 to recommend licensing. Chairman Steve DuCharme declared a conflict of interest -- his fiance is an Aladdin executive -- and didn't participate in the hearing. The Nevada Gaming Commission will consider final approval of the licensing at its July 27 meeting.

The hearing was punctuated by board members Bobby Siller and Dennis Neilander questioning Aladdin Chairman Jack Sommer's financing of construction of the Aladdin as well as his Mountain Spa development in northwest Las Vegas. Both have endured finance-related construction delays.

"Your personal affairs are operating in the red and the Mountain Spa is operating in the red," said Siller, who said he was wavering over whether to recommend approval of the licensing. "Your only substantial income is from your mother."

Siller was referring to a series of loans Sommer disclosed from his mother, Viola Sommer, who attended the hearing but did not make a presentation before the board. Sommer has financed his projects through the Sommer Family Trust, developed by Sommer's late father, Sigmund, a New York real estate developer.

Construction was delayed at the Aladdin earlier this year because Sommer could not produce enough cash to meet his proportional share of the bills. Aladdin officials said in April that the reason was that the trust could not liquidate real estate holdings to produce the cash. At least one major real estate holding is tied up in litigation.

That forced the project's minority partner, London Clubs International plc, to make the payment and, in essence, take on a greater equity position in the project. LCI's injection of $60 million into the project in April to cover overruns resulted in the company increasing its position as a 25 percent partner to 40 percent.

The company sold one of its seven London casinos to ease the crunch. In addition to the six remaining London casinos, LCI operates properties in Lebanon, Egypt and South Africa.

The rift over finances was apparent at Wednesday's hearing, where attorneys for Sommer and LCI verbally sparred, and representatives of the trust, LCI and the Aladdin property sat in different parts of the hearing room.

"We're extremely disappointed that our partners have been unable to meet their obligations on this project," Alan Goodenough, chairman of LCI, said during a break in the hearing.

Still, he expressed optimism that the completed project would live up to expectations of his shareholders. Part of his confidence is grounded in the property's chief operating officer, William Timmins, who also is executive director of LCI.

Timmins gave board members a presentation on the property, describing the Aladdin's 2,567-room hotel, its 116,000-square-foot casino, the renovation of the 7,000-seat Aladdin Theater for the Performing Arts and the new 522,000-square-foot Desert Passage retail center.

Timmins said one architectural rarity is that the property will have two elevator cores. As a result, guests would only have to walk past a maximum of eight doors to get to their rooms.

In addition to the main casino, LCI will operate its own separate club, catering to high-rollers. Board members questioned LCI officials about the differences of managing a casino in Nevada. London casinos, for example, can't offer guests comps or credit. Goodenough assured board members his company would be prepared to accommodate guests properly.

If licensed, LCI would be the first non-North American company to be authorized to operate a casino in the state. Foreign companies have received licenses for other gaming interests.

The theater, the only portion of the original hotel-casino that wasn't imploded or demolished in 1998, is being revamped to host entertainers and shows.

Desert Passage, a much-publicized retail outlet that will house 130 shops and 14 of the resort's 21 restaurants, is being built by TrizecHahn Development Corp., a Canadian company.

Timmins said the property is still on track to open Aug. 17, but without the traditional festivities that normally accompany a big resort debut.

Sommer's ability to assemble the team building the Aladdin is what ultimately helped win Siller's confidence.

When Siller questioned Sommer's business acumen, Sommer's attorney, Frank Schreck, said the investment hasn't been given the time needed to show a return.

Acknowledging that Sommer lately has been spending above his income level, Schreck said he "could sell (the property) tomorrow for more than the $70 million he has in it."

Siller acknowledged that it could be years before the investment is profitable and agreed to go ahead with an affirmative vote.

"This is just another step in the journey," Sommer said after the favorable vote. "These projects become bigger than any one person. But I'm proud that we are building a project that will provide 4,000 jobs and will give something back to Las Vegas. My family is 100 percent behind the project and I'm 100 percent behind it."

The board also approved the suitability of executives in the project and praised LCI for maintaining a high level of integrity in its other casino operations. The board also commended Roy Ramm, LCI's compliance and security director, a former commander with Scotland Yard.