Report will illuminate situation at Aladdin

David Strow

Monday, April 2, 2001 | 11:19 a.m.

Fresh light into the struggles of the $1.2 billion Aladdin hotel-casino on the Las Vegas Strip will be provided today when the resort's holding company issues its annual report.

The Aladdin had not issued its report as of late this morning, but was set to do so by this afternoon. Details will be available this afternoon on the Sun Internet website lasvegassun.com.

Several sources have indicated the Aladdin will report between $10 million and $12 million in cash flow for the quarter ending Dec. 31

That would mark an improvement over the negative cash flow of $3.2 million posted by the resort in the quarter ending Sept. 30. But it would still be below the levels the Aladdin must consistently reach to make payments on its huge debt load without continued capital infusions.

Aladdin Chief Executive Richard Goeglein said the resort was assisted during the December quarter by a $7 million interest payment received recently from the Sommer Trust, the majority owner of the Strip resort. That would have helped the Aladdin meet a $11.7 million interest payment Feb. 1.

But Goeglein denied a published report he was shopping the property.

"About 18 months, two years ago, there were some discussions, but I haven't been talking to anybody," Goeglein said. "It seems a little strange the (Sommer) trust would put $7 million into something they're trying to get rid of."

The minority owner of the Strip resort, London Clubs International, is widely thought to be negotiating with the Sommer Trust to convert LCI's preferred shares into common equity. This would boost LCI's stake from 40 percent to more than 80 percent; LCI then hopes to find a buyer for part of its enlarged stake, sources have said.

But finding a buyer for that equity could be difficult, given the Aladdin's current financial performance, analysts say.

"They need to do $60 million to $70 million (in annual cash flow) just to keep up," said Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown.

The Aladdin's annual fixed costs are about $80 million a year, primarily from interest payments on its debt.

"The Aladdin is structurally flawed," Zarnett said, referring to the fact people can visit the Aladdin mall or performing arts center without walking through the casino and being tempted to gamble.

"A smart casino destination forces people to walk through the casino, disregarding which activity they want to partake in. This property says, 'You don't have to walk through the casino to get to the activity you choose.' That has part to do with (the resort's financial troubles)."

Goeglein, however, bristles at the growing criticism of the Aladdin's design. He points out that patrons can walk into the Forum Shops without entering Caesars Palace, and into the Canal Shoppes without entering the Venetian.

"Nobody ever says anything about that," Goeglein said. "It's a little bit aggravating to me. Why is ours bad and theirs aren't? We need to be able to ramp up (the casino business). We need to move our slot business to another level, and we've said that for a long time."

Goeglein said he's undertaking measures to make it easier for patrons to get into the Aladdin. Currently, the resort is studying plans to build a "peoplemover" that would move patrons from the Strip sidewalk into the resort in place of the stairs they must now climb.

"People take the path of least resistance," Goeglein said. "Anything we can do to make it easier (for pedestrians) will be beneficial."

Goeglein said he'd also "like to get rid of that construction look" on a 3-acre vacant lot at Harmon Avenue and the Strip, the southwest corner of the Aladdin complex. But while the Aladdin does own 5 undeveloped acres in that area, it doesn't own the 3-acre vacant lot. That belongs to Clark County.

Goeglein said the Aladdin will meet the the county later this week to discuss their plans for the lot, as well as plans to widen Harmon. He said details on what the Aladdin planned to do with its 5-acre parcel would be discussed in the annual report.

"If it were up to us we'd do something (with the vacant lot)," Goeglein said.