All bets are off for Packer's Las Vegas casino, by Vanda Carson - The Sydney Morning Herald - 5th June 2008
James Packer's ambitious roll of the dice aimed at creating the world's tallest casino has failed to come up with the right numbers, with financiers failing to support the Las Vegas project.
Crown Ltd, of which Mr Packer owns 38 per cent, yesterday announced that plans to build a $5.2 billion casino with American partners had been thwarted by the global credit crunch.
The decision to pull the plug comes after the plan to transform an empty block of land into a casino and hotel development was effectively put on life support about three months ago.
The partners were forced to call it quits as their option to buy the prime building site on the Las Vegas strip was due to expire at the end of the month. They had previously extended the time given to hand over the final purchase payment several times.
Crown, which had hoped to call the casino Crown Las Vegas, has been forced to write off the $44 million it contributed to the joint venture for the deposit to buy the site from the vendor Archon Corp.
Crown had a 37.5 per cent stake in the joint venture, with partners including a Texan developer Chris Milam and US private-equity firm York Capital Management.
The 11-hectare site was in a prime position on the Las Vegas strip at the northern end, which had been slated for a revival. However, the US sharemarket downturn means this is now under a cloud, with some casinos in Las Vegas laying off staff and others seeing a slowdown in turnover.
Already the owner of the iconic Tropicana casino has filed for bankruptcy and four of the US's largest gambling companies have reported earnings slumps in the previous quarter.
While historically gambling has been unaffected by slumps in discretionary spending, it is no longer immune as it gains almost a third of earnings from hotel, restaurant and entertainment facilities within casino-resorts.
The site that was earmarked for the Crown Las Vegas was a former Wet'n'Wild water amusement park - one of the last non-gambling related entertainment projects within the centre of Las Vegas.
Prior to Crown's investment, the project had received approval for a 142-storey tower known as Las Vegas Tower. However, the US Federal Aviation Administration later forced this to be reduced for fear of causing flight problems with the local airport.
When Mr Milam bought the site two years ago the opportunities to borrow money were much greater and Las Vegas was booming. He said at the time that financing the project would not be a problem.
"There seems to be very little lack of capital in Las Vegas," he reportedly said.
He had hoped to start building by 2007 and to open the casinos doors by 2010.
The failure does not mean that Mr Packer is left without a presence in Las Vegas, as Crown still owns a $300 million stake in a partially-built casino right next door. The Fontainebleau Las Vegas development is on track to open late next year.
Crown also owns three casinos on the outskirts of Las Vegas, which are much more downmarket and cater for local, as opposed to interstate, gamblers.
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