Australian billionaire moves closer to Cannery purchase - Business

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Jan. 08, 2009
Copyright © Las Vegas Review-Journal

Australian billionaire moves closer to Cannery purchase

By ARNOLD M. KNIGHTLY
LAS VEGAS REVIEW-JOURNAL

M RESORT STEP CLOSER TO GAMING LICENSE

The Gaming Control Board on Wednesday recommended licensing of the $1.07 billion M Resort, which is scheduled to open March 1.

M Resort Chairman and Chief Executive Officer Anthony Marnell III told regulators the 390-room hotel-casino will be marketed with an emphasis on locals, but also as a destination resort to Southern California and the domestic markets.

"I believe the market is underserved for a destination resort that is not ... In the heart of the Las Vegas Strip and has great access from California," Marnell said. &Quot;Our location is one of the better locations to serve that market.&Quot;

Approximately 466,000 people living within a 10-mile radius of the new resort have a median family income of $71,000. That is 24 percent higher than the rest of the valley, Marnell said.

The hotel will offer rooms in the mid-$100 range, and it will own and operate all nine restaurants.

Marnell said he expects to grow the property's revenues 5 percent between the first and second years, a business plan that surprised regulators with its aggressiveness.

The project is funded through an equity investment by the Marnell family, loans from the bank of Scotland and a $160 million investment by MGM Mirage.

Nearly 13 percent equity stake is held by the Ray Shapiro family, which owned a portion of the 80 acres the resort now sits on at the corner of Las Vegas Boulevard and St. Rose Parkway in Henderson.

The property has received nearly 38,000 applications for 1,800 jobs, Marnell said.

Nearly 400 people have been hired, and Marnell said the resort will be fully staffed by Feb. 14.

The Henderson City Council approved the M Resort's liquor and gaming licenses, pending state approval, in December.

A partnership with Sherman Oaks, Calif.-based Galaxy Theaters plans to break ground on a movie theater complex soon after the resort opens, according to Marnell.

Construction on the 1 million-square-foot retail center, however, has been delayed at least two years.

M Resort is scheduled to go before the Nevada GamingCommission on Jan. 22 for final approval.

ARNOLD M. KNIGHTLY/LAS VEGAS REVIEW-JOURNAL

James Packer
Chairman of Crown Ltd., which owns several casinos, but none in the United States

Rowen Craigie
Crown Ltd. executive says approval in Pennsylvania should come in a few months

Australian billionaire and casino investor James Packer is one step closer to getting his long-desired foothold in the U.S. gaming market.

The Gaming Control Board on Wednesday recommended approving Australia-based Crown Ltd.'s bid to buy Cannery Casino Resorts for $1.8 billion in an all-cash transaction.

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The company is scheduled to appear Jan. 22 before the Nevada Gaming Commission for final approval.

The deal, however, will not close until Pennsylvania gaming regulators finish their investigation, which Crown Chief Executive Officer and Director Rowen Craigie said should happen in the next few months.

"We look forward to the opportunity to be part of the casino industry in Las Vegas and Nevada," the 41-year-old Packer, Crown's chairman and largest shareholder, told regulators.

Craigie said the company pursued the purchase because it expects long-term growth in the locals gaming market.

The company will focus on improving the Cannery through its experience with customer loyalty programs, customer service initiatives, slot and poker products, and employee training and development, Craigie said.

Crown owns and operates properties in Melbourne and Perth, Australia; the United Kingdom; British Columbia; Alberta; and Macau.

Cannery Casino Resorts will be held as a subsidiary of Crown Ltd., which is publicly traded on the Australian Securities Exchange. Craigie said a new Las Vegas-based senior management team and board will be formed to oversee the Cannery's operations.

The board will report directly to Craigie, who will probably have a board seat, he told regulators.

William Wortman and Bill Paulos, industry veterans who formed Cannery Casino Resorts in 1996, will remain as advisers for six months after the opening of a Pennsylvania racino, which is scheduled to be completed in April. Both will also remain as directors of the company.

"Obviously, the two Bills bring a wealth of experience in running the existing Cannery operations," Craigie said. He said many of the properties' managers and employees will remain with the company after the transaction.

The Cannery Casino Resorts owns the Cannery in North Las Vegas, the Eastside Cannery, which opened in late August, and operates the Rampart Casino at the JW Marriott at Summerlin.

Crown also has a 19 percent "passive" interest in Fontainebleau, with no operational input or board seats, Craigie told regulators. It also owns 2.5 percent of Harrah's Entertainment and 4.9 percent of Station Casinos, but wrote down the majority of its $414 million combined investment last year.

Packer, who controls 38 percent of Crown, is intensely private. He reportedly checks in hotels under assumed names, and arrived minutes before the start of the 9 a.m. meeting. He departed quickly after the hourlong hearing.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. HndtoHnd wrote on January 08, 2009 09:14 PM: Enter Nelson Peltz. A man who has been itching to get into Vegas for years. Oh yeah, look up "Jamies" dad...Kerry. His relationship will become obvious. Tread with caution though! Gilbert wrote on January 08, 2009 05:44 PM: Hey Right On, You are Right Off. Steve Wynn treats his employees better than any other casino owner in the world!! Crown casino's in Macau have layed off people and cut there pay. Has Steve Wynn done that? NO! There should be more Steve Wynn owners in the world that knows casinos and class. David wrote on January 08, 2009 04:21 PM: Why would Packer buy the locals dump known as "The Cannery". With his money, he doesn't have to settle for some way off the strip locals joint, does he?? Right On wrote on January 08, 2009 12:02 PM: I applaud him - and for one would like to see him involved in the Strip Resorts that the MGM has anounced they will sell off to shore up money. It would be nice to have someone that actually treats the employees well involved again, and get rid of the Steve Wynns of the world!! casinocon wrote on January 08, 2009 11:02 AM: Wow! He owns parts of Stations, Fountainebl-eeewww, and Harrah's -- all real winners! This guy is gonna bankrupt his company faster than his daddy used to gamble. I'd hightail it out of the meeting too! Casino Deal Madness wrote on January 08, 2009 09:41 AM: Why would anyone close a non strip casino deal right now with the locals market in a freefall?? They are grossly overpaying for these properties and if they require financing based on the EBITDA it will never fly. I am shocked that Packer is still moving forward on this. If he wants to be in LV then he should buy the Mirage from MGM. I'm sure they would give him a better deal for a superior asset. tw wrote on January 08, 2009 09:32 AM: He should have waited and bought it out of bankruptcy...the casinos are empty. norman p wrote on January 08, 2009 06:55 AM: I went to a great Crown Casino in Melbourne, AU last year. Very, very impressive operation. I'm trying to figure out why they bought the Cannerys, however. I've been told they're doing poorly in the new casino on Boulder Hwy. Can't understand why they built it in an area of RV Parks, mobile homes, cheap apartments, and hookers galore. Plus nearby competition from Sam's and that classy AZ Charlies. Maybe Moose is right-Fudge will turn things around? Rod Samson wrote on January 08, 2009 06:07 AM: Hey Moose Thanks for the laugh... MooseVegas wrote on January 08, 2009 04:57 AM: In an unrelated story, his brother Fudge is looking to purchase a controlling interest in some nightclubs around Paradise and Harmon.