$200 million bid for Desert Inn called ‘flaky’

David Strow

Tuesday, March 14, 2000 | 11:11 a.m.

A European investment group today bid $200 million for the Desert Inn hotel-casino on the Las Vegas Strip -- an offer immediately rejected by the property's owner as inadequate.

The $200 million cash offer is the latest move in a three-year effort by Boccardi Capital Systems Inc. to find property along the Strip that could be used to build a massive new hotel-casino. The company, headed by young Italian resort investor Fabrizio Boccardi, has been unable so far to secure land for the project.

"Our cash offer reflects our confidence and belief in the continued growth potential of the Las Vegas market and the strong economy," Boccardi said in a statement. "Our vision for an entirely new branded concept in gaming and entertainment can be fulfilled exceptionally with acquisition of this property."

Boccardi's offer expires Thursday.

But Starwood Hotels Resorts Worldwide Inc., owner of the Desert Inn, says Boccardi will need to bump his offer substantially. Starwood put the property back on the market after Bahamas-based Sun International Ltd. dropped its $275 million offer to buy the north Strip property.

"We would not consider that ($200 million) a serious offer," said Starwood spokesman Dan Gibson. "We'd be looking to sell it for $275 million."

James Lee, spokesman for Boccardi, declined to say whether the company planned to raise its price.

"We're not going to have a bidding war in the press," Lee said. "The offer Boccardi has put on the table is effective until March 23, and obviously, if they choose not to take it, we'll see what happens then.

"This is a good offer, a fair offer that benefits investors and shareholders. The clock is running."

As an alternative, Boccardi has also offered to pay $100 million for just the Desert Inn hotel-casino, allowing Starwood to retain the golf course for another buyer. This purchase would give Boccardi 30 acres for development, rather than the 200 acres included in the entire parcel.

Although a few analysts and observers say the Desert Inn's market value may have declined considerably since Sun International agreed to pay $275 million, Gibson said he was "optimistic" the company would still be able to fetch a similar price.

"We're just now beginning to receive multiple offers," Gibson said. "There's no reason for us to feel otherwise at this time."

Jason Ader, senior managing director with Bear Stearns, echoed Gibson's attitude.

"It's a flaky offer at best," Ader said. "The property's worth $250 to $300 (million), and probably toward the high end of that range, given how Las Vegas is doing.

"Business is only getting better in Las Vegas, so its value is going up, not down."

But Boccardi is suggesting that $200 million may be as good as Starwood can expect at this point.

"We believe our offer will meet the needs of our investors and Starwood's shareholders since it is essentially a land play proposal involving only cash that can be closed quickly," Boccardi said. "Our proposal is also best positioned for the long term since it is questionable that the existing operations can truly be successful without major changes."

Over the past several years, Boccardi has eyed a number of Strip properties for construction of its proposed hotel-casino, including the New Frontier and a land parcel near the Polo Towers.

The company has already secured Phoenix-based Perini Building Co. as its general contractor on the project. Previously, Boccardi officials have privately expressed confidence they could finance a project in the $800 million range.

To date, all Boccardi has said publicly about the project is that it would encompass 2,500 to 3,000 rooms, and feature a 100,000-square-foot casino.

"We have a very clear vision as to the type of entertainment complex we want to put up there (at the Desert Inn site)," Lee said. "We believe it's the next evolutionary step in where Las Vegas ought to be going. It will raise a lot of eyebrows."

In recent days, the Desert Inn has been the target of buyout talk of another sort, as analysts and observers speculate that Steve Wynn would try to acquire the property after leaving the helm of Mirage Resorts Inc., which will be acquired by MGM Grand Inc. for $6.4 billion.

"We haven't received an offer from (Wynn), to the best of my knowledge," Gibson said.