Two Way Hard Three | Las Vegas Casino & Design Blog

October 16, 2011

SIMPSON ON VEGAS #032: Implosion City

Posted by Hunter

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


Read archived comments (11 so far)
October 16, 2011 8:58 AM Posted by Paolo

It would be interesting to see implosions of open properties by MGM or Caesars strictly as a way to shrink capacity in the city. I think we can all agree that adding new capacity is a long way off. This is only something that MGM or Caesars could do, but I'm wondering if getting rid of some of the underperforming properties in an effort to lower supply would help boost demand at some of their better performing properties.

October 16, 2011 10:02 AM Posted by detroit1051

MGM must already have detailed plans in the drawer to reinvent CityCenter's entrance once Harmon is gone. It will be a golden opportunity to make Aria and CC more welcoming to all tourists.

Jeff, why does Fontainebleau pain you to put it on the list? Imo, it's just a huge monolith, reminiscent of what would be built in Moscow were the Soviet Union still here in 2011. It looks wrong on that site and not as inviting as Cosmopolitan is on an equally small site. As many speculate, Icahn is just waiting for the price of steel to reach his minimum, and down it comes. Besides, it would give a well deserved break to the residents in Turnberry Place.

Bally's confuses me. Would the smaller, South Tower come down to be replaced by Horseshoe? Then, you'd have Bally's Paris and Horseshoe all crammed in on the Strip.

Fun column. You should write here every day!

October 16, 2011 4:47 PM Posted by Mitesh Damania

The front half of City Center would be a more suitable candidate for implosion than Circus Circus. It would be even more suitable if the brainchildren of City Center were inside during the implosion(s).

October 16, 2011 7:36 PM Posted by Ted Newkirk

One has to think MGM is chomping at the bit to get rid of Harmon and make CityCenter more inviting to people off the street. Put in some Strip-front gaming.

I have mixed emotions about F-Bleau. It is too big for the location (way out of line with everything else up that way) and an eyesore. I don't think it will look much better if/when completed. On the flip-side, having it up and running would create some serious and needed life on the North Strip.

If room occupancy hits and stays above 90% in 2012 (highly likely), we'll set a new record for visitors. Which could make it worth the cash to finish the blue monster. If they don't dismantle it first.

When it comes to The Sahara, I don't think that even Nazarian has a clue what he's going to do. No way the boutique hotel gimmick will work. He'll eventually have to sell to someone who knows what they are doing in the gaming/hotel business. From there, we'll see if it becomes a "Tropicana" or "El Rancho".

Good stuff.

October 16, 2011 7:42 PM Posted by bigdaddyj

I've always thought the Hilton has good bones (after all, its innovative tri-tower design was the basis for many contemporary strip resorts) and could still be viable, if it were bought by an owner who was willing to put some money into it (as opposed to the present owners who seem more determined to run it into the ground).

Considering how frequently you hear people complain about how the clubs and craziness of the strip can be off-putting to older visitors (and I don't mean "senior citizen", in many cases just people 40 and up), and given the Hilton's proximity to the convention center and its place in Las Vegas history, that if a savvy operator took the time & money to update both the rooms and the other offerings (redecorate the casino, add better retail & restaurants) to contemporary standards, and along with those renovations made an effort to bring it up to four or five diamond service standards as well, that it could be successfully marketed to a more mature crown more interested in just in gambling, conventions and an upscale resort atmosphere as a place for those customers to escape from the madness of the strip but still have a first class Vegas experience. It would just take some capital investment and savvy marketing, but I think it could be positioned as "classic" or "mature" Vegas. I know if the Hilton were renovated & service was brought up to 4 or 5 diamond standards, I'd stay there again...given its location, and his reputation for running high-end resorts with good service, it could be a good purchase for Wynn, but I doubt he would ever do it though, since he's more of an implode and build his own type of guy than a renovator.

October 17, 2011 1:26 AM Posted by motoman

Fun column, indeed. Detroit, I'm glad you mentioned the residents at Turnberry Place. When Fontainbleau hit the wall, my first thought was of those residents who had their Strip views replaced with the side of a parking structure. (Of course they were also concerned for the loss of property value along with the views, but they aren't going to get that back anytime soon.)

Even if CityCenter North (or whatever it would be called) is eventually greenlit, a moneymaker like CircusCircus is unlikely to go at first. Seems we agreed MGM did the right thing leaving MonteCarlo open and generating revenue, on standby for a possible Phase 2 development while CC1 was under construction, as opposed to Boyd who decided to go for broke with Echelon, and the poor misguided folks who blew up Frontier before Plaza was probably even designed, much less shovel-ready.

(Unless maybe the owners simply wanted to remove the blight that was Frontier and hold the land, as Mr. Simpson suggests for some of his other choices. Strange choice, but who knows.)

October 17, 2011 7:50 AM Posted by socalduck

Great topic, and interesting list. I would probably move Bill's up to the list to #4 ahead of the Riv. Maybe they will take Dr. Dave's advice, shuffle the casino floor a bit, and reposition themselves as the "anti-Encore."

Give all that negative things I've heard about its construction defects, I half-expected to see the Luxor pyramid included on this list.

October 17, 2011 11:10 AM Posted by DuLac55

It was my understanding that when Victor Drai left Wynn (or sold out his management position in Xs and Tryst) he had a "big project" planned. The rumor was that he was going to buy Bill's (home of Drai's nightclub) and re-do that whole place. Is that off the table now?

October 17, 2011 5:56 PM Posted by Jeff in OKC

bigdaddyj is not my secret identity. Although even I think it is, judging by his comments about the Hilton. My love for that property and ideas for its future are very close to what he posted and have been made several times.

DuLac55: What I took from the Drai gossip of earlier this year was that he would have some partnership in the Bill's property. I have always gotten the vibe that Gary Loveman will NEVER sell any of the center Strip land CET has put together. But he will let someone try a different concept. Under his oversight, of course.

I cringe at most of the content of this column, since I am a preservationist at heart. However, I think the removal of the Fountainebleau is a great idea, since I think it is an oversized monolith on the Strip that blocks out much of the views and all hope for tomorrow. I think the Harmon is screwed, so I don't have much of an opinion. But, the Riviera. The Riviera?!?!? . No, please no! I might have to chain myself to the brass butts out front in order to save it! Although it is a mismash of a half century of designs, I feel it is the purest link to the Classic Strip, and I hope that it can eke out enough profit to make the 3 billion dollar and 2 year commitment to replace it not viable (or attractive).

Cipherin' on my fingers and toes, it seems like it would take over 30 billion dollars to complete the proposed projects. That should take the next 15-20 years, easy.

Lastly, I think "Simpson On" is one of the great uses of the written word and much better than "Wild On" on E! Except for he physical appearance of the host, of course. :-)

October 18, 2011 11:05 AM Posted by Jeff Simpson

I appreciate all of the comments and thought I'd respond to several of them.
Paulo brought up an interesting point, that operators would benefit from a reduction in capacity. I've talked to operators about that conundrum, that reducing capacity pays off for owners by tilting the supply-demand curve in favor of owners (room suppliers) but only some OTHER operator doing so makes economic sense for an individual operator. Perhaps Murren and Loveman, representing the two biggest Strip operators, could agree to each close a whole property or some combination of rooms that would net 3,000 closed rooms each. But such a deal would be very unlikely -- even though their companies (Caesars and MGM) would benefit as their remaining properties get some more room-pricing power, I doubt they'd gain enough to offset the lost cash flow from a closed property. All of the non-MGM and non-Caesars properties would benefit even more, of course, as they'd gain higher room rates as supply tightens and give up nothing.
detroit1051, Ted and Jeff wrote of their disdain for the look of the Fontainebleau. I liked the Fontainebleau and I really thought the designs and mockups of the property were great looking. The three of you -- and many other folks I've talked to -- disagree, and that's what makes our discussion interesting.
DuLac55 asked about Victor Drai and whether his supposed Bill's operation (under Caesars ownership) was still planned. I don't know but the delay seems to suggest the deal is off.

October 20, 2011 1:49 AM Posted by Haj Carr

Keen observations, Jeff. The Plaza/New Frontier site would be a natural for Wynn's Ovation when the time is right, maybe a decade from now. I'd also like to see Boyd scale back Echelon to a resurrected Stardust with the entire project designed around the iconic logo and sign - basically an over-the-top neon wonderland. A new Stardust could be the ultimate retro property, a step away from the sleek, sterile monstrosities of late and something to get excited about on the Strip.