LAS VEGAS SUN FILE
Monday, March 1, 2010 | 2 a.m.
In Today's Sun
- Casino MonteLago at Lake Las Vegas to close next month (2-16-2010)
- Ritz-Carlton Lake Las Vegas to close in May (2-8-2010)
- Current, past owners spar in Lake Las Vegas bankruptcy case (9-21-2009)
- Lake Las Vegas proposes bankruptcy plan (9-5-2009)
- Judge approves bankruptcy for Lake Las Vegas golf course (6-29-2009)
- Another golf course to close at struggling Lake Las Vegas (6-25-2009)
- Lenders seek control of Lake Las Vegas hotel (6-4-2009)
- Ritz-Carlton bought amid financial woes (3-24-2009)
- Residents of bankrupt Lake Las Vegas face uncertainty (3-23-2009)
- Lake Las Vegas can abandon golf course, judge says (1-15-2009)
- Resort golf course’s fate spurs debate (12-16-2008)
- Bridge over troubled water (5-24-2008)
- Casino MonteLago swaps managers (6-17-2007)
- Grand opening set for new Lake Las Vegas casino (5-7-2003)
- Ritz-Carlton Lake Las Vegas spa and golf resort opens (2-11-2003)
One of Las Vegas’ maxims is that a casino is a license to print money.
Casino MonteLago, closing next month for lack of business and liquidating its assets, is the rare exception to that rule.
The recession and the failures of Lake Las Vegas golf courses and hotels that surround MonteLago hurt the casino, of course. But it was a long shot from the beginning for a more basic reason.
The casino, located 17 miles from the Strip and seven miles from downtown Henderson, failed to meet a prerequisite for a suburban casino: It doesn’t have enough potential customers living close to it.
Given the casino’s location and the recession, “it’s no wonder that it wasn’t able to survive,” said Grant Govertsen, a principal with casino consultants Union Gaming Group in Las Vegas. “It’s like trying to run a business with its hands tied behind its back.”
Most casinos operate at a decent profit before making payments of interest and principal on the mortgages and other loans to develop them. Even overleveraged casinos have moved into the black once mortgage debts are reduced or eliminated in bankruptcy. The ones that file for bankruptcy typically stay open and transfer to new owners who can operate them profitably.
In contrast, Casino MonteLago was barely making enough money to cover operating expenses.
Many observers attribute that problem to the fact that Lake Las Vegas, a 3,600-acre master-planned community that once had three golf courses, an open-air retail district and three upscale hotels, has built only 1,700 residences, far short of original plans for more than 9,000 homes. Fewer than 500 homes surrounded the 320-acre, man-made lake by the time the casino opened in 2003.
According to real estate research firm Claritas, about 3,500 homes are within a 10-minute drive of Casino MonteLago. The casino has a smaller number of homes nearby than any other casino in the Las Vegas Valley, including the relatively remote Aliante Station in North Las Vegas, which has about 64,000 homes within a 10-mile drive and the M Resort in southwest Henderson, surrounded by about 35,000 homes. Green Valley Ranch, located in a more established neighborhood, has about 70,000 homes in that vicinity to draw from. (The three casinos, like most others, are hurting in the recession.)
Early critics of Casino MonteLago said it also lacked a sufficient number of restaurants and other attractions to draw customers from more populated areas, which offer bigger casinos with more amenities. Lake Las Vegas’ retail district, MonteLago Village, was mostly vacant when the casino opened and was eventually populated by independent boutiques and curio shops that have struggled in the recession.
Early warning signs emerged for the casino and attached Ritz-Carlton hotel. (The 348-room hotel, another victim of the recession, will close in May.)
The original landlord, Cook Inlet Region Inc., is owned by an Alaskan Indian tribe with rights to oil and gas royalties and extensive real estate holdings. Cook Inlet owned a stake in the Hyatt Regency and Ritz-Carlton hotels at Lake Las Vegas and also owned the company that operated the Casino MonteLago, CIRI Lakeside Gaming Investors LLC.
By 2006, after incurring “substantial operating losses” following the casino’s opening, the tribal company decided to sell its casino operating company, according to Cook Inlet’s latest annual report from 2008.
Cook Inlet sold Lakeside Gaming in September 2007. In 2006, the operating company lost $6.5 million and reported an additional loss of $5.2 million to write off the value of casino assets and related operations.
In 2006, the tribal company sold its stake in the Hyatt and Ritz-Carlton hotels, along with a third resort, the Westin Kierland Resort in Scottsdale, Ariz. The company reported a loss of $90,000 in 2008, income of $54,000 in 2007 and income of $76.5 million in 2006 from the three resorts, excluding the casino, according to the annual report.
In 2007 a group of investors bought Lakeside Gaming, retaining the original name. The Casino MonteLago building is owned by Deutsche Bank. One of the new Lakeside Gaming owners, Johan Finley, acknowledged it was “definitely a mistake” to have opened the casino ahead of a critical mass of homes in the region.
Yet he held out hope that the casino could thrive, claiming at a Gaming Control Board hearing in 2007 that his group had brought the money-losing casino into the black, improving operating profit by more than 80 percent within a few months of taking over through a combination of cost-cutting and aggressive marketing targeting locals.
Then came the recession.
“The number of customers continued to rise until ... the entire economy turned down,” John Tipton, legal counsel to Casino MonteLago’s owners, said last week.
Now, even though the new owners of Lakeside Gaming don’t pay rent on the 40,000-square-foot space, the casino is barely breaking even, Tipton said.
The planned closure of the Ritz-Carlton, announced in February, was the last straw, Tipton said. Although most casino customers are residents rather than hotel visitors, the Ritz-Carlton, which helped market the casino, drew decent traffic to MonteLago, he said.
Under both old and new casino ownership, managers mailed a slew of offers to Henderson residents and held events typical of suburban casinos. Built to resemble a 15th-century Tuscan winery, MonteLago developed a following among Henderson residents who appreciated gambling discounts typically offered by low-rent casinos in an upscale resort atmosphere. They had to drive for miles, past downtown Henderson, past older casinos, past dilapidated buildings, a trailer park and a wide swath of desert to get there, however.
Knowing locals are reluctant to travel more than a few miles to neighborhood casinos, bosses advertised slot machines that paid back a greater percentage of wagers than most Las Vegas casinos.
But to no avail.
In 2007, Finley said he was betting on the growth of Lake Las Vegas to fuel a turnaround.
Now, casino owners see no point in continuing to gamble on growth that may be a long time in coming.