Aladdin sales proposal clears another obstacle

Wednesday, Oct. 30, 2002 | 11:15 a.m.

A settlement has been reached between the owners of the Aladdin hotel-casino and a company that had been contracted to stage a production show starring actress Carmen Electra.

The settlement was an important hurdle for Aladdin Gaming LLC to clear in its bid to sell the bankrupt Las Vegas Strip property.

The settlement says Showclubs of America Inc. will receive $400,000 and the Aladdin agreed to release a $100,000 letter of credit from the company.

"This settlement will allow my client to recover its hard costs," said Showclubs attorney Matthew Callister. "And, it gives the Aladdin back the use of the showroom."

Callister said Showclubs was able to recover what it had invested in the project, but lost at least $2 million in potential show revenues.

The settlement, approved Tuesday by Bankruptcy Court Judge Robert C. Jones, enables the owners of the 2,567-room hotel to move forward in their bid to sell the property because it removes any commitment the owners have had with contractors running the showroom.

Showclubs of America had agreed last year to invest $12 million to $14 million to build a combination nightclub and 1,200-seat showroom to house "Lumiere," a show that was to showcase Electra.

Under a lease Showclubs signed with the Aladdin, show producers were to have secured financing in early September 2001 and begun construction a month later. Showclubs said it was delayed by matters relating to the Sept. 11 terrorist attacks and that those drastic events gave the company the right to begin construction at a later date. The Aladdin maintained that the financing deadline was days before Sept. 11.

When preparations for the venue were delayed, Electra moved on to other projects, company officials said.

As prospects of a settlement progressed, Aladdin spokesman Fred Lewis said the company undertook a different entertainment strategy. Last summer, the company opened Curve, a different nightclub venue.

The showroom where "Lumiere" was to be performed, now called The Center Stage, has been scaled back to seat 408 people and is the venue for a variety show by Society of Seven, which signed a one-year contract with the Aladdin.

Lewis said the showroom in November would also be home to a new adult show called "X," featuring rotating stars that have appeared as centerfold models from adult magazines.

Lewis said Society of Seven would perform early in the venue and "X" would be staged as a late show.

By reaching the settlement with Showclubs, the Aladdin took another step toward being able to sell the $1.2 billion property, which filed for bankruptcy 13 months ago.

By December, hotel attorneys are expected to file documents outlining the sale procedure and a "stalking horse" lead bidder.

Sources familiar with the deal on Tuesday said Colony Capital LLC, a Los Angeles real estate investment company, Pinnacle Entertainment Inc., Glendale, Calif., which owns seven casinos, and hotel giant Marriott International Inc., Bethesda, Md., are still interested in partnering on a bid for the property.

No sales price has been disclosed and officials with the companies and the Aladdin say they are restricted from discussing the proposal by confidentiality agreements.