Wynn unveils tower details

By Liz Benston

Tuesday, Nov. 9, 2004 | 11:12 a.m.

A second planned hotel tower at Wynn Las Vegas is expected to include 1,500 suites at a cost of about $900 million, Wynn Resorts Ltd. announced Monday.

Plans for a second hotel tower of at least 1,300 units at Steve Wynn's new megaresort were first reported in February in In Business Las Vegas, but details of the project weren't available until now.

The tower, tentatively called "Encore at Wynn Las Vegas," will include additional casino space, new restaurants, a spa, swimming pools, retail stores and convention space, the company said. The project is expected to open in 2007.

Wynn Resorts has agreed to sell 7.5 million shares of its common stock to Deutsche Bank Securities with an option to purchase up to an additional 1,125,000 shares. Net proceeds of about $453 million will be used to reduce debt, pay for the development of the second tower and Wynn Macau resort in China or for general corporate purposes.

Company representatives declined further comment regarding the project's financing or design.

Wynn is still on track to open Wynn Las Vegas by April 28, which is his wife's birthday. The property's first phase will have 2,700 rooms and is expected to cost $2.4 billion, more than any other Strip resort.

The final buildings of the former Desert Inn resort are set for implosion Nov. 16 at 2.30 a.m. to make way for the tower, which will be built adjacent to Wynn Las Vegas.

Company shares hit another high of $64.19 Monday but were down more than 5 percent to $60.85 in early trading today.

Today, Banc of America Securities analyst J. Cogan lowered his rating on Wynn shares to "neutral" from "buy" on concerns that the resorts under development in Macau could top out demand. The surge in Wynn shares over the past several months has also taken into account "most of the good news in Las Vegas and Macau over the next five years," Cogan said. Wynn shares have risen 80 percent since mid-August compared with a 9 percent increase in the Standard & Poor's 500 Index, he said.

But Fulcrum Global Partners analyst Joe Greff, who has a "buy" rating on the shares, raised his stock price estimates on news of the expansion.

In a research note today, Greff said he expects the new tower to post at least a 15 percent return in its first year of operation, or about $558 million in cash flow.

Wynn has a track record of generating high cash flows in the first couple years of his projects in Las Vegas, while the Macau project is valuable because of the market's unique proximity to gamblers in China and Hong Kong, Greff said.

Wynn shares have reached several new highs in recent weeks, soaring last week as the company reported its quarterly financial results and gave a status report on Wynn Las Vegas.