Aladdin deal approved

Friday, Aug. 27, 2004 | 10:32 a.m.

CARSON CITY -- There's going to be a lot of changes when a new group takes over the Aladdin hotel-casino on the Las Vegas Strip next Wednesday.

The new owners, buying the resort out of bankruptcy, intend to invest $90 million for such improvements as a new facade, up-to-date ticket-in and ticket-out slot machines and changes in the layout of the casino floor.

The state Gaming Commission on Thursday gave final approval for a group led by Douglas P. Teitelbaum, Robert I. Earl and Theodore W. Darnall to buy the hotel-casino out of bankruptcy in a $637 million deal.

Earl, one of the founders of Planet Hollywood, said the hotel would eventually be renamed Planet Hollywood, but he said that would be at least 15 months from now.

Commission Chairman Peter Bernhard expressed some reservation that the group was investing only $40 million of its own. He noted that Planet Hollywood has been in bankruptcy twice. And he said he was concerned that the new owners would walk away from the Aladdin if they encountered major financial troubles in the future.

Teitelbaum, managing principal of Bay Harbour Management LLC of New York, said "That's not my style. I'm not one to throw in the towel." His company, he said, is in the business of turning around distressed firms.

Donna Lehmann, chief financial officer of the property, told the commission the Aladdin in its first year under new ownership expects $276.1 million in net revenue and $43.1 million cash flow. That's lower than the present year, but during this time there would be construction going on at the Strip hotel. In five years, Lehmann said, there should be $434 million with a cash flow of $121.4 million.

The 2,567-room resort reported a profit of $3 million in July, according to records in the U.S. Bankruptcy Court in Las Vegas.

Plans call for a developer to build 1,000 two-bedroom time-shares on the 4.6 acres of the hotel property on Harmon Avenue. The 7,000-seat showroom will be redesigned to accommodate 3,200 customers for more frequent shows; a 1,300-seat showroom will be built in unused space; and more restaurants will be developed on the ground floor of the casino.

Movie and television stars will be invited to the hotel to promote their pictures or books. And the public will have access to them, Earl said.

Earl said plans call for this to be converted into a must-see attraction. At a meeting earlier this month of the state Gaming Control Board, Earl said the Aladdin has been a "dormitory" for other hotels on the Strip.

It has good room occupancy, he said, but the guests spend less there on gaming and food. For instance, he said, the average Aladdin guest plays $70 in the slot machines but at the MGM Grand it's $120 for guests who stay there. The Aladdin guest spends $69 on food compared to $105 a day at the MGM.

Earl was asked by Bernhard why Planet Hollywood had not paid its sales and use tax to the Nevada Tax Commission for more than one year. Earl said the delinquency was on a subsidiary of Planet Hollywood and he did not learn about it until Monday. And he said the back taxes were paid. Planet Hollywood may owe taxes in other states and Earl said they would be paid.

Bernhard said this was evidence that Earl did "not run a tight ship" and brings into question his business probity. Earl said Planet Hollywood has come out of its second bankruptcy with a depleted workforce and it is now being strengthened. He said he acted as soon as he heard about the deficiency.

Earl also made a lengthy apology to gaming regulators for not completely filling out his application. He said he was guilty of "grave missteps" for failing to provide accurate and complete information. But he said he later submitted a revised application with all the information.

"It is not representative of the manner I devote myself to business matters," he said.

Starwood Hotels & Resorts Worldwide of White Plains, N.Y., would run the hotel under the name of Sheraton. Theodore William Darnall said the company was glad to be back in Las Vegas after selling Caesars Palace in 1999. Darnall and Barry Sternlicht are officers in Starwood and were licensed by the commission since Starwood will hold an interest in the resort.

Desert Passage, the shopping center at the hotel, has new owners, and Earl said it intends to make improvements that will jive with the work at the hotel-casino.