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Tuesday, Nov. 16, 2010 | 5:52 p.m.
Sun Coverage
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Penn National Gaming Chief Financial Officer Bill Clifford said Tuesday his company over-anticipated CityCenter’s effect on the Las Vegas market when it backed out of bidding for the stalled Fontainebleau project on the Strip.
“I think we feared CityCenter more than we should have. We really thought it would be a much more appealing product to the tour and travel customer,” Clifford said during a panel at the annual Global Gaming Expo in Las Vegas.
Clifford said while the $8.5 billion resort metropolis has done a “remarkable job” in catering to high-end guests and convention travelers, it struggles with the tour and travel segment.
“We really did expect that it was going to have a much more devastating impact on the tour and travel segment and that it was going to bring prices down,” Clifford said. “Now, having seen the way it’s sorted itself out, I would say I’m actually more encouraged about how we would have done if we would have done the deal.”
Still, the main reason Penn National backed out of the bidding was the price, Clifford said. Investor Carl Ichan outbid Penn National’s offer of $145 million with a bid of $156 million last November.
“We hit a price in terms of what we were willing to pay and then we stopped,” Clifford said.
He said even if the company would have won the bidding for Fontainebleau, it would have been a stretch for the company to spend $1.5 billion to get it up and running.
Most recently, Penn National acquired $860 million in outstanding debt on the M Resort for $230.5 million last month.
Penn National is a smart company. I worked near Harrisburg in the late 90's, and couldn't understand why they kept operating a dead race track for years. Now I see that it's called Hollywood Casino and Racetrack, and I'm sure they are making a pretty penny off all the little old ladies, and still nearly nothing from the track.
I think they can do well in Vegas-They bought the beautiful "M"
debt for a pittance, and I'm sure they will guide it to success. WTG, Penn National.
I thought CityCenter was supposed to bring renewed life back to Vegas?
The wise fact that Penn National Gaming decided not to outbid Carl Icahn shows that it is a well run company with sensible owners.
It is a shame, however, that the Fontainebleu was eventually purchased by just an investor. It continues to sit as an eyesore dragging down the foot traffic to the nearby casinos.
The foreign bank owner of the Cosmopolitan has demonstrated, by completing and getting ready to open that hotel/casino, that foreigners can actually care more about the image of Las Vegas than home-grown American capitalists like Mr. Icahn.
If Mr. Icahn had no intention of completing and opening the Fontainbleu, he should have kept his greedy hands off the bidding button for the good of the City.
Your right, Carl Icahn is now a squatter in regards to the non-activity at the Fontainbleu construction site. Deutsch Bank has deep pockets and can to things an investor cannot.
It sounds like the Penn National management team is not ready to compete in the Las Vegas casino arena. Plus, Fontainbleu is not the project to make your Las Vegas entry.
Ouch!! Finally someone from the gaming sector willing to tell it like it is ... MGM's City Center would be like Fountain Blue had it not been for a well placed campaign contribution for a Senator.
City Center was an ill conceived idea made from people who are paid to attend meetings about things they have have no clue on.
I'm sure Carl would sell it to them for the right price,since he's not gonna open it.
Penn is smart not to have bought this. It would have ruined their company. But Carl is also smart to have bought it at the rock bottom price. Now he can almost recoup his cost by tearing it down and recycling the material. And then he'll have a prime piece of LV real estate when the economy comes back in 10 years or so for virtually nothing.