Las Vegas Sun

March 29, 2024

Aladdin to open Aug. 17 with Gaming Commission blessing

The $1.4 billion Aladdin hotel-casino received formal approval from Nevada gaming regulators Thursday, clearing the way for an Aug. 17 opening of the Strip's newest megaresort.

"To borrow an English phrase, I think this is a new jewel in the crown of Las Vegas," said Brian Sandoval, chairman of the Nevada Gaming Commission. The comment was aimed at London Clubs International, 40 percent owner of the hotel-casino.

With the approval, Aladdin Chief Executive Richard Goeglein said the pieces are now in place for a full opening of the property in just three weeks. The doors of the Aladdin should open to the public around 6:30 p.m. on Aug. 17, followed by a fireworks show four hours later.

"On Aug. 17, all the major elements of the Aladdin resort-casino will be complete ... and this includes all of our guest rooms," Goeglein said. "We will have an opening celebration that will let all of the major markets in the country knew that we have arrived."

Just 800 of the resort's 2,567 rooms will be available on opening night, but Goeglein said this shouldn't be construed as a "soft opening." Within a week of opening, he said, all rooms will be available -- but that Aladdin management decided to phase these rooms in gradually to keep opening night stress among staffers to a minimum.

The licensing hearing, which lasted more than two hours, never saw the level of tension seen during the Aladdin's hearing earlier this month before the Nevada Gaming Control Board. The contentious hearing pitted LCI against the Sommer Trust, which owns 57 percent of the Aladdin.

The cause of the rift came with the cost overruns experienced by the Aladdin over the past two years of construction. When the Sommer Trust failed to meet capital requests made by Aladdin management, LCI was forced to put up the additional cash. LCI put an additional $60 million into the project in April, pushing its total Aladdin investment close to $200 million.

"We were clearly disappointed the (Sommer) trust was unable to support the Aladdin to the extent London Clubs did," said Alan Goodenough, chairman of LCI. "But it is in both of our best interests to start with a clean slate, go forward and work together."

Still, Goodenough seemed to take a jab at the trust while discussing his company's history of regulatory responsibility.

"We are utterly committed to our investment in Las Vegas, and time and again, we have demonstrated our commitment with substantial financial contributions," Goodenough said. "We intend on doing things properly. We are used to doing things properly.

"We have never failed to come up to the stump so far ... and we will support (the Aladdin) to the extent which we are able."

Despite the cooler mood that prevailed Thursday, Aladdin Chairman Jack Sommer did not escape some grilling by commissioners over the failure of the trust to put up funds for the Aladdin's cost overruns. Sommer explained that was the result of the trust's limited liquidity, as well as fiduciary responsibilities to all members of the trust.

"We believe this is an excellent investment for the trust," Sommer said.

But a recent loan agreement assured that Sommer will have to invest if the Aladdin needs funding once again. The Aladdin recently received a $50 million loan from the Bank of Nova Scotia, funds that will be used to get the property to its grand opening.

"This will cover all preopening costs, marketing and working capital," Sommer said. "It's everything we need to turn the key."

As a condition of receiving this loan, Sommer said, the trust agreed that it will be jointly responsible for any capital required by the property from its owners -- and said the trust is liquidating some assets to ensure that those funds will be available if needed.

Despite difficulties with cost overruns, the Aladdin's executives and owners all insisted the property was poised to be a financial success, and that future capital calls were unlikely.

"Unless we built complete junk there, it's going to work ... and we invested $1 billion there," Goodenough said.

Before the casino will be able to post a profit, it will have to meet at least $85 million per year in expenses to meet interest costs and capital maintenance needs, said Aladdin Chief Financial Officer Tom Lettero. That's the result of the Aladdin's capital structure -- of the $1 billion invested in the Aladdin, $375 million came in the form of equity.

The remaining $625 million comes in the form of debt, at an average interest rate of 11 percent per year, though officials expressed confidence the resort would produce enough cash flow to service the debt. As evidence, Chief Operating Officer Bill Timmins said reservations are now growing at a rate of 10 percent per day, and that the resort is now ahead on budget forecasts as far out as 2001.

"We are confident the Aladdin is now on a sound financial footing," Goodenough said.

One key element in the resort's formula will be a reliance on LCI to draw from its clientele of European and Middle Eastern customers. To promote the Aladdin among these customers, LCI is holding "Aladdin parties" at its casinos in London, Egypt, South Africa and Lebanon, and is arranging trips for its high-end customers to the property.

"There's an untapped market of European Union and Eastern European customers," Timmins said. "We didn't come here to cannibalize other properties. We're here to grow the market, and we're determined to add to the market in Las Vegas."

In other actions on Thursday, the commission:

The changes in regulations, first proposed by Desert Inn owner Steve Wynn, permit institutional investors to take up to a 15 percent stake in privately held gaming companies without being licensed. Until Thursday's changes, even the smallest investment in a private company mandated a gaming license, a process most institutional investors were not willing to endure.

By raising the bar to 15 percent, owners of private gaming companies, such as Wynn, will now have an easier time in drawing capital from institutional sources, said Wynn attorney Jack Godfrey.

"These regulations are not drafted to benefit just one company," Godfrey said. "This is an important step in attracting financing for Nevada gaming companies."

Though Wynn will be the immediate beneficiary of the change, which took effect immediately, other private companies are also looking to institutional investors as a result of the new regulation, Godfrey said.

"It may very well be the start of a new trend (toward privately held casino companies)," Godfrey said.

Investments held in privately held gaming companies will be tightly restricted, however. To qualify, an institutional investor must still undergo an investigation and receive a licensing waiver. The investor is then not permitted to hold voting rights in the company, and may not sell shares without prior commission approval.

"This doesn't entitle anybody to anything," said board member Dennis Neilander. "It allows them to make an application (for a waiver). This is still a pretty extensive investigation."

After a ringing endorsement by board members, the new regulations passed on a unanimous vote, with little debate.

Under the settlement, American Wagering agreed to pay a $10,000 fine to settle the complaint. More significantly, however, the company agreed to sell off its Australian Internet sports wagering service, Megasports, within 180 days.

Last December, the control board accused Megasports of accepting wagers from an undercover control board agent in Nevada. This would violate Nevada law, which specifically prohibits Internet wagering.

Though his company admitted no wrongdoing, AWI Chief Executive Vic Salerno said he believed his company had no choice but to get out of the Internet wagering business for now.

"There isn't a way to prove to them that we could 100 percent guarantee our (bets) weren't coming from the U.S.," Salerno said. "Next time, we'll make sure the board is in agreement before we move ahead (with Internet wagering)."

Salerno agreed that the complaint and its outcome has cast a chill over Nevada gaming companies' thoughts of getting into the Internet casino business.

"I think it's really dependent on technology (to identify location of bettors)," Salerno said.

Even Sandoval, who has been the Nevada gaming regulator most open to the possibility of Nevada's involvement in the booming worldwide online betting business, said that's an issue that must be worked out before the state's casinos can move into cyberspace wagering.

"That's always been one of my biggest concerns about this, that we can't tell who's on the other end of the line," Sandoval said.

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