Wynn, partner have yet to detail plans for Desert Inn

David Strow

Tuesday, Nov. 7, 2000 | 11:16 a.m.

One day after the announcement that Japan's largest pachinko machine maker would become a co-investor in Steve Wynn's plans for the Desert Inn, both sides were saying little about what's next for the property.

Both Wynn and his new partner, Aruze Corp., declined to reveal details about what is now being called "the Wynn Park Project." Details should be revealed over the next several months, Aruze said in a press release.

"They're in the design phase," said Billy Vassiliadis, spokesman for Wynn. "If anyone knows Steve, they know how much he likes to create, and he's creating. In the not-too-distant future, they'll be able to make an announcement as to what they're doing."

In a statement issued Monday, Wynn said he was aiming to "create an entirely new breed of hospitality and business venues on the Las Vegas Strip."

"Las Vegas' success has often come from the audacity to try new things, to be bold and innovative," Wynn's statement read. "Coupled with the wisdom we have gained from serving the millions of people who have come here, that spirit of innovation will serve us well as we create something entirely new with the Wynn Park Project."

Kazuo Okada, chairman of Aruze, said he was "fascinated" by Wynn's plans.

"This investment is an exciting financial opportunity, but more importantly it's a chance to be in on the ground floor of what promises to be the next generation of Las Vegas' growth," Okada said in a statement. "Under Mr. Wynn's direction, this project will reinvent not just a hospitality offering but an entire section of the Strip and Las Vegas itself."

To build a project of any scope, more cash will almost certainly be needed, analysts say. In its press release, Aruze said Valvino Lamore, the company that owns the Desert Inn property, has a total of $370 million in equity.

Jason Ader, gaming analyst with Bear Stearns, believes more equity investment may be needed before the project moves forward. And he believes the fact that Wynn went to Aruze was an indication that raising capital from Wall Street sources proved tough.

"It's hard to say (what the project will cost), but it's hard to imagine the property would be competitive with a capital budget of anything less than $1.2 billion," Ader said. "It's going to be tight to do pure debt (fund-raising) at that (equity) level.

"It seems like (Aruze) is paying a nice price."

Vassiliadis said he didn't know details about further financing plans, "but from what Steve has told me, he feels they're in pretty good shape to get this project financed."

The announcement also drew interest because of Aruze's main business, the pachinko (Japanese gaming) industry. Like Las Vegas of the past, Japan's pachinko parlors have had an image problem because of connections to Yakuza, the Japanese mob.

Shannon Bybee, executive director of UNLV's International Gaming Institute, said there is even speculation that North Korea built hard cash reserves from money funneled from some pachinko parlors. But these organized crime concerns have largely centered on the operators of the parlors, rather than manufacturers of pachinko machines like Aruze, Bybee said.

"(Japan) has done a lot to clean it up," Bybee said. "They've had the reputation of being the No. 1 tax avoider. But they've passed organized crime legislation, and the situation is much improved.

"It's the kind of thing (the Nevada Gaming Control Board) will look at much closer, because of the history, and because of concerns about the organized crime issues."

Bybee is a former member of the control board.

But Wynn took the opposite tack, calling the investment by Aruze and its chairman, Kazuo Okada, a key step in the evolution of Las Vegas.

"His stature on the world markets brings a new dimension to Las Vegas, and his investment clearly sets a tone for the kind of partnerships that will ultimately create an entirely new breed of hospitality and business venues on the Las Vegas Strip," Wynn said.

Vassiliadis also pointed out that Okada already holds a Nevada gaming license through this ownership of Universal Distributing of Nevada, once one of the state's dominant slot machine makers. Okada is trying to sell UDN to Aruze; that sale is awaiting approval by Nevada regulators.

"The fact is that Mr. Okada has a gaming license ... and we believe that we've got a credible, legitimate investor in this business," Vassiliadis said. "We have faith in the gaming control board.

"The fact is that Steve made this deal with great respect and personal knowledge of Mr. Okada, and that's what he's depending on. This is more of an agreement between two businessmen than it was between two companies."