It's time to blow some crap up!
SoV is back. Happy Sunday.
This time around, Jeff explains what's going up in smoke and when. Enjoy.
I frequently notice blog comments on this and other sites recommending properties for implosion. I've been known to recommend parking garages for implosion (cough, Imperial Palace, cough) and I've decided to handicap the likeliest implosion candidates on and near the Strip.
Right off the bat it is important to remember that implosions almost always take place to make way for some kind of resort redevelopment. Sands (Venetian), Aladdin (Aladdin II), Dunes (Bellagio), two Desert Inn towers (Wynn Las Vegas), Hacienda (Mandalay Bay), Stardust (Echelon), New Frontier (Plaza) and Boardwalk (CityCenter) are examples of that type of implosion. Other implosions eliminated long-closed properties that could potentially make way for some other casino development: Landmark (still relatively undeveloped as convention center parking, sat idle for a couple of years after closing before it was imploded) and the El Rancho casino on the current Fontainebleau site -- the former Silverbird and Thunderbird, not the El Rancho Vegas -- was closed for about eight years before it was imploded in 2000, the first implosion I covered.
So there's the rub when evaluating prospects for an implosion: Redevelopment drives the decision to implode. We all have our list of properties that we believe the city and its visitors could live without and I'll blend some of my opinions along that line into this column. But the real determining factor has always been redevelopment plans, with a distant second reason being long-closed eyesores that property owners decided to eliminate. Some properties that were much better than many other remaining Strip properties have been imploded, including the Desert Inn (which had recently undergone an expensive remodeling) and the Stardust, which had a tower that was only 16 years old.
It is important to understand that operator bankruptcy or property foreclosure doesn't mean that a casino property has to close and be imploded. Those are debt-connected problems but debt purchases, bankruptcy sales and foreclosure sales can solve them. What really matters is whether the property can generate positive cash flow. If revenues can more than offset expenses it can be a viable enterprise. Some properties that generate cash flow are burdened by heavy debt loads but that doesn't mean that they are definite implosion candidates. If it did the Cosmopolitan would be an implosion candidate, despite its strong hotel, food and beverage operations. But it doesn't and the Cosmo will be operating for many decades to come -- likely under new owners who know how to run a casino.
I should also note that I realize that every still-open property mentioned as a possible implosion candidate employs hundreds or thousands of people. The top properties on my list are not open but most of them are and I acknowledge that closure will be painful for those properties' workers, suppliers and even their frequent guests. I should mention again that this is not a list of properties I dislike and want to see erased.
So what are the likeliest implosion candidates? The first three are easy:
1. The Harmon looks like it is being juiced in for implosion and that only a court victory by its builder over MGM Resorts will save it. When the plans for CityCenter were first announced and then the models were revealed I loved the Harmon's look and location. I questioned why it wouldn't have an MGM-run casino to take advantage of its prime location but loved the blue and its architecture. Of course there has been a lot that has happened since then and it is hard to believe it will ever be completed in its stump form and it is even less likely to be built out to its original height. MGM and the county seem to be working hand-in-glove to get Harmon imploded and you have to doubt whether Perini can prevail over the city's biggest employer and political contributor in court. It is a sad case, as implosions often are, but -- as is also often the case -- it creates opportunity as an implosion might allow MGM to reinvigorate its CityCenter entrance and access.
2. It pains me to say it, but the Fontainebleau probably ranks right near the top, at No. 2. Estimates that it would take about $1.5 billion to finish seem to make its completion unlikely, a distressing reality as I originally had high hopes for the project. I don't know enough about how the property's elements would be sold as scrap, but presumably all salvageable components would be removed and then what couldn't be dismantled would be imploded. Owner Carl Icahn has time to wait as he bought the place for a pittance but I can't believe he would finish building the resort. He has time to wait to see if some prospective buyer will want to buy it and complete it but I don't see that happening either, unless Deutsche Bank decides that, as long as they are in for $3 billion with the Cosmopolitan, might as well be in for another $2 billion, buying and then completing the 'bleau.
3. The Sahara is next on my list, but I'd venture to say it is more likely to be a El Rancho-style "dormant eyesore" implosion than a "big club magnate truly believes he can build and operate a Las Vegas resort" version. I believed Sam Nazarian was making a land play when he bought the Sahara and -- for a time -- it looked like he made a golden decision. He likes to make announcements about what he has planned for the property and some in the media seem to swallow them whole. When it comes to Nazarian and his supposed plan to redevelop the property, I'll believe it when I see it. I still see the site as a mid-to-long-term real estate flip. If Nazarian truly has persuaded backers to buy up some of his debt he has undoubtedly lost a big chunk of his ownership stake. I think it is highly likely he will never reopen the property or redevelop it. If he and his backers sell it, I believe it is unlikely buyers would reopen it and that it is more likely they'd want to redevelop it. But, who knows? Maybe Nazarian will prove me wrong.
4. Now comes the hard part, figuring out which still-open properties are most likely to be imploded. It's a tough call but I'm going to say Riviera is next at No. 4. I'm not positive the property can make money and its owners might be willing to close, implode and hold as a real estate play. The owners already made a deal to sell off the company's Colorado casino and closing the Riv might be next, sad to say. There aren't many retro properties remaining on the Strip and the Riv is the best of them but its hodge-podge design and location in the middle of the challenged north Strip make its operation a tough go. Maybe the owners really do want to operate the Riviera but I have my suspicions that they don't. We'll see.
5. Bill's Gamblin' Hall & Saloon is next on my list at No. 5. A short and squat property -- it might not even take an implosion to tear it down but it probably would. Caesars (Harrah's, back then) paid through the nose for this property (then the Barbary Coast) from Boyd Gaming when it had grandiose plans for redeveloping the east side of the center Strip. Even though Caesars is heavily burdened by debt it has deep-pocketed owners and access to cash (note the half-billion-plus Linq project) and Gary Loveman may be able to persuade ownership to invest in a better use for Bill's prime site. I don't think it is likely for the next few years but you never know.
6. Hooter's occupies the next spot at No. 6. I'm not sure whether a debt-free owner could make a go of it (an argument in favor of implosion) but the property's site is small, unsuitable for redevelopment as a standalone site and its logical buyer (neighboring Tropicana) doesn't seem to be in the market for more capacity (an argument against an implosion for redevelopment purposes). The property is a boutique-sized hotel by Las Vegas standards yet would probably cost many tens of millions to adequately remodel and de-Hooterize, not to mention the cost of acquisition. (The Hooters name and theme has always been ridiculous in this market.)
7. My argument for why Bally's is next (or at least one tower at Bally's) is similar to the argument for why Bill's should rank so high: Gary Loveman had originally planned to knock down one Bally's tower and better utilize the property's underdeveloped Stripfront, and I have to believe that if times get better he'd still like to do so. Perhaps it could be the spot for the new Horseshoe Las Vegas (if that name doesn't go on the reworked Imperial Palace). By the way, I'm not counting the IP as an implosion candidate although its collection of cobbled-together buildings certainly is ripe to lose one or two of them during the Linq-connected remodeling and IP de-naming and -theming. I just don't see Caesars knocking down the main parts of the IP's structure.
8. Last on my list is a property that still makes money for MGM Resorts, Circus Circus. This is sort of a wild card entry, as a possible part of a site that, combined with the land MGM owns north of the property (the former joint-venture site with Sol Kerzner, the so-called CityCenter North site) could be the biggest Las Vegas Strip redevelopment ever. If times improve and MGM decides to play (unlikely) or partner up with some other entity (likely only if it's the partner's money and MGM's land) or some buyer with tons of money (most likely) decides they want to build, Circus Circus plus the northern parcel would be a much bigger site than CityCenter. It's a long-shot.
I didn't include Casino Royale on my list but the Elardi family that owns it might be persuaded to sell it to one of his neighbors who could better use the prime Stripfront mini-parcel, with Las Vegas Sands being a much more likely buyer than Caesars, in my opinion. I believe the property is too small to implode but I'm not a demolition expert. A quick note about one other property that is sometimes mentioned as a redevelopment site, the Las Vegas Hilton. On the plus side it has a nice location next to the Las Vegas Convention Center but on the down side its location is off the Strip. I don't see the LVH being imploded in the near- or mid-term (next five or six years) but if times either dramatically improve or deteriorate it is possible. Of course those scenarios would make many other implosions possible, as well.
-- Jeff Simpson, October 2011