Las Vegas Review-Journal: Cosmopolitan already tabbed as trendsetter

By Chris Sieroty
LAS VEGAS REVIEW-JOURNAL
Posted: Apr. 5, 2011 | 3:29 p.m.

The Cosmopolitan of Las Vegas may have lost $139.5 million over 17 days in December, but gaming industry analysts believe the hotel-casino is positioned to be the property to follow in the future for emerging trends on the Strip.

The upscale hotel-casino, which opened Dec. 15, has already defied the notion that Las Vegas casinos need to be built on sprawling parcels. It has also changed the notion that U.S. visitors would not respond positively to a vertical resort, analysts said.

Both Joel Simkins of Credit Suisse and Sterne Agee’s David Bain agreed that The Cosmopolitan had begun to establish stronger brand awareness out of the box than its neighbor CityCenter did when it opened in December 2009.

“The Cosmopolitan found an identity,” Bain said. “Aria is still trying to find their identity. In my view Aria and CityCenter are trying to be everything to everyone in the luxury market.”

The Cosmopolitan is on a parcel 13 percent the size of CityCenter’s 67 acres.

Although not all of its 2,995 rooms are open, the hotel-casino had average daily occupancy of 98.7 percent in its first two weeks of operations, benefiting from a relationship with Marriott International and a listing in the company’s Autograph Collection.

“The partnership with Marriott has given The Cosmopolitan access to Marriott Rewards members as well as leads into convention demand,” Simkins said in a research report.

Bain said the effect of The Cosmopolitan’s new-room inventory on the Strip market would not be felt until “we’re out of convention season and into consumer season.”

The Comsopolitan has just 185,000 square feet of convention space, but Simkins believes meeting planners like the hotel’s compact layout and the flexibility of having facilities located on the second through fourth floors away from the casino.

While nongaming revenues were a modest $14 million, Simkins said a more complete financial picture would not emerge until this year’s second quarter or third quarter .

He said The Cosmopolitan’s “fairly high” preopening expenses of $116.5 million resulted from “generating buzz” and having many high-profile entertainers perform during the fourth quarter of 2010 and this year’s first quarter.

Bain and Simkins both believe that gaming revenues, which were reported at $4.3 million for the hotel’s opening reporting period, will take time to build.

“Naturally, without a pre-existing gaming database, we believe slot/table volumes have been soft,” Simkins said. “However, we believe the strong buzz … will eventually spill over in terms of repeat visitation, and eventually gaming revenues as the property builds its database.”

Bain said his only concern was sustained $4-a-gallon gasoline prices, which would effect The Cosmopolitan’s numbers and especially its count of visitors from Southern California.

Nevada Property 1 LLC, the reporting entity for The Cosmopolitan, was formed in 2008 after Deutsche Bank AG purchased the 8.7-acre property out of foreclosure. The hotel, between Bellagio and CityCenter, was built for $3.9 billion.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.

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Las Vegas Review-Journal: Station Casinos affiliates file bankruptcy reorganization petitions

By Chris Sieroty
LAS VEGAS REVIEW-JOURNAL
Posted: Apr. 13, 2011 | 11:52 a.m.

Station Casinos Inc. affiliates including Fiesta Station Inc., as expected filed prepackaged bankruptcy reorganization petitions as part of the parent company’s reorganization plan.

Fiesta Station listed assets of about $500 million and debt of more than $1 billion in a Chapter 11 petition filed Tuesday in U.S. Bankruptcy Court in Reno.

Besides the bankruptcy filing, the Las Vegas-based company moved for joint administration of the cases with Station Casinos’ main case already in bankruptcy court in Reno.

Station Casinos also asked for court orders allowing their subsidiaries to continue paying vendors and employees and continue to pay gaming liabilities at their casinos.

With its filings, the company submitted a consolidated list of creditors holding the 40 largest claims against its subsidiaries. The Nevada Gaming Commission topped the list at $5.09 million.

Fertitta Enterprises was second at $2.95 million followed by International Game Technology at $1.45 million.

The subsidiaries owe the Nevada Department of Taxation $1.21 million and the Internal Revenue Service $1.05 million.

Green Valley Ranch Gaming LLC and 25 other related subsidiaries and ventures also sought bankruptcy protection. The bankruptcy filings were a procedural step needed to complete the company’s overall restructuring as it prepares to exit bankruptcy protection this year.

Green Valley Ranch Resort was acquired for $500 million by a joint venture led by the Fertitta family, the Las Vegas-based company announced last month. At the time of the restructuring, Green Valley Ranch’s debt was about $600 million.

On Wednesday, Moody’s Investors Service withdrew all of its credit ratings of Green Valley Ranch Gaming, affecting some $773 million of debt securities due in 2014.

Aliante Station in North Las Vegas is being taken over by creditors — TPG Capital and Apollo Global Management LLC — and will be managed by a Fertitta company.

The restructuring of Aliante Station is separate from Station Casinos’ bankruptcy. Both properties are co-owned by Station Casinos and the Greenspun Corp.

Station Casinos sought bankruptcy protection in July 2009 after earnings were hurt by the recession and the company was unable to meet its debt obligations after an $8.7 billion leveraged buyout by the Fertittas, who founded the company in 1976, and Colony Capital LLC and several other lenders in November 2007.

The court confirmed Station Casinos reorganization plan in August. Chairman Frank Fertitta and his brother, Vice Chairman Lorenzo Fertitta, are leading a restructured Station Casinos.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.

Las Vegas Review-Journal: Pinnacle offers stock rewards program

By Chris Sieroty
LAS VEGAS REVIEW-JOURNAL
Posted: Apr. 13, 2011 | 2:01 a.m.

In Las Vegas, some hotel loyalty card programs reward their members for the total amount spent at their property, while others offer discounts to the buffet, $50 in free slot play, or even a free two-day stay based on the amount wagered.

Pinnacle Entertainment Inc. is offering something a little different — an ownership stake in the company. The unique reward is only being offered to its best customers.

Pinnacle Entertainment created the owner’s club stock program within its “mychoice” loyalty program, rewarding customers with shares of common stock for their spending.

Customers who have earned or obtained 175,000 points are eligible to apply for membership in the stock rewards program. In a regulatory filing, the company said new members would be awarded 100 shares of common stock or a number of shares valued at $1,500.

“We believe that this sort of awards program presents a unique opportunity for our customers to realize value for their loyalty and to develop a greater proprietary interest in our casinos,” the company said.

In its filing with the Securities and Exchange Commission, Pinnacle Entertainment registered 200,000 shares of common stock. The proposed maximum asking price was $12.47 a share.

Shares of Pinnacle Entertainment lost 43 cents, or 3.19 percent, to close Tuesday at $13.04 on moderate trading of 507,116 shares on the New York Stock Exchange.

The stock program was just one new benefit offered by the casino company, which relaunched its “mychoice” loyalty program on Tuesday.

“We’re excited to relaunch ‘mychoice’ and unveil its many new and innovative benefits,” Pinnacle Entertainment President and CEO Anthony Sanfilippo said.

Sanfilippo described the loyalty program as unique for giving members “greater control over both how and where they enjoy their rewards.”

The program also offers a chance to earn annual lease payments on Mercedes-Benz vehicles and cruises on Royal Caribbean International. Pinnacle Entertainment will give its high rollers access to Wynn Las Vegas and Encore. Pinnacle doesn’t own a hotel in Las Vegas.

The trips will be offered at the program’s highest three tiers. Pinnacle has about 1 million customers in its database, 20,000 of which would qualify for the Wynn Resorts’ reward program.

Las Vegas-based Pinnacle Entertainment operates seven casinos in Louisiana, Missouri, Indiana and Reno. The company also operates a racetrack in Ohio and is developing a $357 million casino in Baton Rouge, La., scheduled to open next year.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893.