Inside Gaming: CityCenter Tower Implosion, Cosmopolitan Losses, and More
We know you missed Inside Gaming during our brief summer vacation, but don't worry! We're back to cheer you up with the depressing stories of a possible implosion on the Las Vegas Strip, a sobering six months for the Cosmopolitan, and impending financial disaster for both the Las Vegas Hilton and the Atlantic City Hilton. See, don't you feel better already?
MGM Plans to Implode Unfinished CityCenter Tower
MGM Resorts International, a 50 percent stakeholder in Las Vegas' CityCenter, told Clark County officials on Monday that, pending county approval, MGM will implode the structurally flawed Harmon Tower, an unfinished building at the north end of CityCenter. Last month, the structural engineering firm hired by MGM at the county's request reported that the 27-story Harmon Tower would collapse in an earthquake and that missing an incorrectly placed rebar may make the building beyond repair. The firm said it would take 12 to 14 months to determine the feasibility of repairing the Harmon.
MGM said it decided to implode the Harmon after consulting unnamed experts who believed demolition was the "fastest and safest" solution. CityCenter Senior Vice President William Ham wrote in a letter to Clark County Building Official Ron Lynn that the developers decided to demolish the building in order to, "abate the potential for structural collapse in case of a code level earthquake."
CityCenter's general contractor, on the other hand, still believes that it can repair the Harmon. Perini Building Co., which is currently involved in a lawsuit against MGM, says MGM wants to demolish the building to hide evidence of what Perini calls "MGM's design errors." CityCenter continues to maintain that the building's failures rest on Perini's shoulders.
The Clark County District Court has prohibited any construction or destruction of the Harmon until the suit is settled. CityCenter says if the county approves the demolition, it will seek approval from the District Court to move forward. LVI Environmental Services, hired by CityCenter to conduct the demolition, says that it will take six months to prepare the tower for implosion and four months to remove debris. Screens and scaffolding would be used to protect nearby business and adjacent pedestrian bridges. The local Fire Department, Police Department, Highway Patrol, and Air Quality Control Boards would all have to sign off on the plan before the Harmon could be turned to dust.
To learn more about the implosion and the legal wrangling behind it, check out the Las Vegas Review-Journal.
Cosmopolitan Has Second (of Two) Quarters More than $50 Million in the Red
The property next to the Harmon Tower isn't having an easy first year either. While The Cosmopolitan Resort and Casino isn't slated for demolition, it's putting quite a wrecking ball in its owner's portfolio. Nevada Property 1 LLC, owned by Deutsche Bank, said the property lost $54.3 million during the second quarter of 2011, slightly less than the $56.8 million it lost during the first quarter. The casino opened on Dec. 15, 2010, so no previous second quarter numbers exist for comparison. During the first six months of this year, The Cosmopolitan, which cost $3.9 billion to build, lost $111.1 million on net revenues of $231.08 million.
The Cosmopolitan, primarily recognized for its trendy nightclub and restaurant offerings, has been intensifying its focus on gaming revenue since it opened in December. Despite those efforts, second quarter gaming revenue fell to $28.2 million from $31 million in the first quarter. Nevada 1 Property pointed out in its quarterly financial report, published on Monday, that the casino's second quarter hold on table games was 11.6 percent, below the company's expected range of 12 to 15 percent.
"The volume of table games play increased steadily over the three months as our focus on hosted table games customers continues to yield solid results," the company said. "We continue to focus on supplementing the level of table games play at the property."
Hotel revenue rose in the second quarter as the property continued to ready new hotel rooms for use. Food and beverage revenue climbed significantly and continued to be the Cosmopolitan's largest source of revenue.
The casino's second quarter earnings included a $2 million write-down of the value of a lounge being demolished to add 9,600 square feet of high-limit gaming space. The new area is expected to hold 15 table games and be on line by November. The casino still will not include a poker room.
"Given the growing demand from our guest for high-limit gaming facilities, now is the ideal time…to debut out high-end gaming experience," said Amy Rossetti, Cosmopolitan's public relations director. "We have established ourselves as a significant player in the luxury tier of the market."
Still, it's going to take a lot of high rollers to net the Cosmopolitan a positive quarter in the near future.
LV Hilton in Default Status; AC Hilton in Desperate Need of Buyer
The Las Vegas Hilton is having a rough year, too. The slightly-off-the-strip hotel casino lost $8.47 million in the second quarter, an improvement from the $9.85 million it lost in 2010's second quarter. But things are looking grim as the property, which will lose the right to call itself the Hilton at year's end, disclosed that it is in default status.
Colony Resorts LVH Acquisitions LLC which owns and operates the Las Vegas Hilton, said in its quarterly report that it chose not to make monthly interest payments in June, July, and August on a $252 million term loan. The company says it skipped the $3.5 million in payments "to conserve liquidity for operating and other needs." The loan represents most of the company's $296 million in debt and liabilities. Colony Resorts LVH says it is currently in restructuring negotiations with the lender, Goldman Sachs Commercial Mortgage Capital L.P. The term loan was most recently negotiated following a default in July 2010.
Hilton Hotels Corp. notified Colony Resorts LVH during the second quarter that the Hilton was not planning to renew the property's lease on the use of the Hilton name, customer database, and room reservation system. The Las Vegas property's owner said in its quarterly statement that it is in "discussions with other major hotel brands" and may also reach a new license agreement with the Hilton.
The Las Vegas Hilton, on the north end of Paradise Road, has been hit hard by the decline of the north end of the Las Vegas Strip. The Sahara, across the street from the Hilton facing the Strip, closed in May, joining the stalled Echelon project and a dusty lot as places not attracting tourists. The Hilton, struggling with its status as both off-Strip and north of the Wynn, reported a quarter-on-quarter drop in casino revenue of 9.1 percent. Food and beverage revenue fell 8.6 percent, while hotel revenue held steady.
The Atlantic City Hilton has already lost the right to use the Hilton name. Its owner, Colony Capital LLC, has been trying to sell the city's smallest casino for months but can't seem to give it away. Lenders put foreclosure proceedings on hold in January to allow Colony Capital to sell the property, but its current nameless status and downwardly-trending earnings reports aren't making it easy. The hotel and casino lost $18.9 million last year and $7.3 million in the first quarter of 2011, making it Atlantic City's worst-performing casino.
The Hilton name was removed from the slot machines but still adorns the hotel tower. The hotel is now referring to itself simply by the acronym "ACH" on its website, show tickets, and when answering hotel phones, but the casino spokeswoman says the name is still the Atlantic City Hilton Casino Resort until further notice.
The Atlantic City Hilton was valued at $513 million when Colony Capital bought it in 2005, but now even $30 million hasn't attracted any offers. Buyers would have to be willing to pick up the property's financial liabilities in addition to the cost of rebranding. If no one takes an interest in the Hilton's 809 hotel rooms and 75,000 square feet of gaming space soon, there could quickly be one less casino on the boardwalk.
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*Photo courtesy of LasVegasSun.com