KC riverboat sale gains its first approval

Rick Alm

Tuesday, May 16, 2000 | 11:05 a.m.

KANSAS CITY, Mo. -- The Kansas City Port Authority on Monday unanimously approved the $33.5 million sale of the long-troubled Flamingo Hilton Casino to Mississippi-based Isle of Capri Casinos Inc.

If the Missouri Gaming Commission also says yes at a meeting in Kansas City May 31, downtown's lone casino would change hands June 5. Then it would undergo a $15 million makeover into Isle's trademark Caribbean village motif, complete with a massive waterfall in the middle of the gaming floor.

As for the outside, the landlocked vessel would be remodeled as a 19th century riverboat casino that Mark Twain and Huck Finn would have no trouble recognizing.

The exterior design unveiled Monday is definitely traditional, especially compared with the pinks, purples and feathered festoonery that have adorned the Flamingo Hilton Casino since it opened for business four years ago.

"Practically every light you see on that boat will be taken off," said Edward J. Ortmann, executive vice president of the Kuhlmann Design Group Inc. of St. Louis, which is remodeling the vessel.

Instead, the Isle casino will be bathed in spotlights at night.

Isle officials said Monday that the casino would remain open throughout the remodeling and that all 800 employees would be guaranteed a job, from the top down.

Dave Miller, Hilton's acting general manager, will become the day-to-day operations chief under Isle general manager-designate Dan Weindruch, now corporate director of finance properties in Biloxi, Miss.

Weindruch, a certified public accountant, joined the gaming company in 1991 after a stint as an executive with the Columbia House mail order division of CBS Records.

The deal approved Monday reinforces an unfulfilled agreement by Hilton to recruit minority individuals as investors in 10 percent of the local holding company that owns the casino. It also renews goals for hiring minorities and women and buying goods and services from minority- and women-owned firms.

The Port Authority's approval Monday also ratified Isle's takeover of Hilton's riverfront land lease with the city.

But the sale doesn't allow Hilton Hotels Corp. to walk away from the project clean.

Matthew V. Webster, of Fahnestock & Co. Inc., the Port Authority's financial consultant, said the Beverly Hills, Calif., hospitality company remained "on the hook" for about seven more years as the principal guarantor of $21 million in bonds sold by the Port Authority to finance construction of Richard L. Berkley Riverfront Park next to the casino site.

Though Isle would make those payments, Hilton would be required to step in if there would be a default, Webster said.

If approved by the Gaming Commission, the deal with Hilton would close in early June, said Isle President Jack Gallaway, followed by the remodeling and then an official "reflagging" as an Isle of Capri casino sometime in September.

Weindruch also said he expected within a year to seek city approval for a 150- to 200-room hotel on the site.

While the riverboat exterior will be old Missouri, the inside of the casino will be another story.

Its centerpiece will be a 16-foot-high waterfall into a pool in the middle of the gaming floor, with banks of slot machines jutting from the rock sides of the structure.

Other floor plans, also shown publicly for the first time Monday, left the arrangement of games on the casino floor basically unchanged -- save for giant bamboo canopies over the blackjack, craps and other table game areas.

Restaurant and bar operations also would remain about the same, but with Isle's trademark names and decor, including Calypso for the buffet and Farraddays for the steak house.

A VIP lounge will replace the stage for live musical acts on a balcony area that overlooks the casino floor.

A Tradewinds deli restaurant would move into the current gift shop space, with Isle's T-shirt and souvenir sales moving to kiosks set up outside the sports bar.

The company calls the makeover Isle Style, a standardized decor and operations system that is identical at each of its 10 operating casinos in the United States, with the redone Flamingo and two other casinos in Boonville, Mo., and Las Vegas in the works.

Fahnestock's Webster told Port Authority commissioners that Isle was also very good at making money, and is a current darling of many Wall Street gaming stock analysts, who rate the company's shares a "strong buy."

Webster said the company boosted its stock value around 300 percent last year and 400 percent over the past three years.

"The company is well positioned in its markets and has grown very, very fast," said Webster.

With acquisitions in the past year, Isle currently ranks as the eighth-largest gaming company in the United States. Isle has other casinos in Mississippi, Louisiana, Colorado and Iowa, a racetrack in Florida and a gambling cruise ship that docks in New Orleans.

Isle's purchase offer for the Flamingo was the third one considered by gaming regulators.

Last year Trump Hotels & Casino Resorts withdrew its $15 million offer when it appeared the gaming commission would not approve the sale over concerns about the longterm strength of Trump Hotels' finances.

After the Trump deal fell apart, Station Casinos Inc. offered $22.5 million for the Flamingo. But that sale was held up and the deal finally voided after disclosure of a still-pending investigation into questionable payments by Station to a St. Louis lawyer, Michael Lazaroff, after the company won its license for Station Casino Kansas City in 1997.

The payments to Lazaroff came to light during an audit of Station's books as part of its bid for the Flamingo. Station has denied any wrongdoing. Lazaroff, who was forced out of the law firm where he was a partner, has declined requests for interviews.

Hilton put the Flamingo on the block in late 1998 after years of disciplinary problems with the commission over accusations that it had funneled $250,000 in questionable payments to associates of Elbert Anderson, a former Port Authority chairman.

Anderson's role in the agency's selection of Hilton over several competitors to build on city property triggered a federal investigation and an eventual agreement by Hilton to pay $655,000 in federal fines and penalties to avoid a criminal trial for its corporate behavior.

The threat of prosecution jeopardized Hilton's gaming licenses in other states where it operates casinos.

The yearlong scandal shoved Hilton to the brink of being fined, suspended or stripped of its Missouri gaming license - where it has remained for more than a year.

Criminal charges against a former Hilton senior vice president were later dropped. Anderson meanwhile was sentenced to two years in prison after being convicted on unrelated charges of bribing public officials to steer public money to his companies.