Paris Las Vegas exceeding expectations for Park Place

Friday, March 31, 2000 | 10:56 a.m.

Paris Las Vegas, Park Place Entertainment Corp.'s $785 million resort on the Strip, produced $46 million in cash flow in its first four months of operation, exceeding analyst expectations for the property.

The strong performance was outlined in Park Place's annual report, filed with the Securities and Exchange Commission this week. Paris' cash flow was more than half the $84 million recorded by neighboring Bally's Las Vegas for all of 1999.

"It's done better than expected," said Stuart Linde, gaming analyst with Lehman Bros. "Of all the new properties, Paris has been the best performing one."

Linde projects the resort will become Park Place's top cash flow producer in Las Vegas in 2000, with cash flow anticipated to reach $130 million. That would make it the third-best performing casino in the Park Place chain, behind Bally's-Park Place and Caesars Atlantic City.

Cash flow for the entire company in 1999 was $778 million, up 40 percent from 1998. Though Paris gave these numbers a substantial boost, the majority of the cash flow increase -- $166 million -- came from the portfolio of Grand Casinos Inc., acquired on Dec. 31, 1998.

The company posted net income of $136 million on the year, up 25 percent. Park Place attributed this gain to Paris and Grand Casinos.

Meanwhile, Park Place said Lyle Berman, chairman and chief executive of Lakes Gaming Inc., will leave the company's board in May. The company is eliminating his position on the board.

Berman was chairman of Grand Casinos prior to its merger with Park Place. While Grand Casinos was absorbed by Park Place, the Indian gaming holdings of the company was spun off into Lakes. Lakes currently has agreements to develop tribal casinos near San Diego and Sacramento, creating the potential for competition with Park Place's Nevada holdings.

In its proxy statement, the company said Berman wasn't re-nominated "due to the board's concern with his conflicting business interests."

"Although there's never been a conflict, the board of directors was concerned about the potential for or the appearance of conflict between the companies with which Lyle Berman was associated with and Park Place," a company spokesman said. "To foreclose on the possibility of future conflict, the board and nominating committee of the board decided not to have Mr. Berman stand for re-election."

Berman, who said he was informed about two weeks ago, said Park Place told him the decision was based on Lakes' California involvement. He expressed disappointment over the decision.

"I don't think it runs to the spirit of our (merger) agreement," Berman said. "It was very clear that Lakes was not only to stay in Indian gaming, but mandated. And it was highly likely that it would be in California some day.

"If there was a problem, they should have spelled it out, but they didn't. They may have followed the letter of the law, but they didn't follow the spirit of the agreements."

Separately, Park Place outlined terms of its agreement to use the Hilton name on several of its properties, including the Las Vegas Hilton and the Flamingo Hilton.

Starting next year, Park Place will pay a licensing fee to Hilton Hotels Corp. for use of the name on its properties. The Las Vegas Hilton fee will be $5 million per year, while Park Place will pay 3 percent of room revenues from the Flamingo Hilton.

The Flamingo Hilton licensing agreement expires at the end of 2003, though Park Place can pull out of the agreement as early as the middle of 2001. However, Park Place's licensing agreement at the Las Vegas Hilton, which runs through 2008, cannot be terminated early unless Park Place pays "the present discounted value of the yearly fee due for the remainder of the 10-year term."