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US – Crown’s Alon on hold due to ‘weakened American debt markets’
By Phil - 7 March 2016
James packer’s third attempt to enter the Las Vegas casino market has run into trouble with plans for his Crown Resorts’ Alon project on The Strip on hold because of ‘weakened American debt markets.’
Crown’s plan to secure $1bn in US debt to finance the project has been delayed although Crown is insistent that it is not working to any deadlines.
The Australian operator bought a 35-acre site where the former New Frontier had been located, across from Wynn Las Vegas and next to the Fashion Show Mall, in 2014 for $260m but development was been at a minimum. Crown is believed to have taken a 73 per cent share in Alon Leisure Management but is believed tom have spoken to institutional investors about a selling off some of that shareholding taking its ownership down to 45 per cent.
Andrew Pascal, CEO of Alon, and former Wynn executive, defended the project though. He said: “The report related to ALON’s financing has more to do with the macro financial markets than with Alon Las Vegas specifically. There is no question that the environment is difficult for everyone at the moment, but deals are still getting done. With that said, the Las Vegas market has never been stronger – record visitation, record revenue. We have the right team, the right idea, the right timing and the right location. We will continue to advance the development and ultimately secure the capital we need.”
Crown’s Chief Financial Officer Ken Barton added: “Obviously there’s been some volatility around capital markets particularly in the leveraged space, so that hasn’t been all that conducive, but we’re obviously working on other things that are supportive of building out the business case. We haven’t been prescriptive about what the right mix of debt or equity is or what the source of that equity is.”
Deutsche Bank analyst Mark Wilson isn’t confident though. He commented: “Crown and its partners are continuing design work on the project as well as developing a number of funding options and necessary permits have been applied for and a construction contract is being negotiated. We believe this project may be difficult to progress given the recent increase in credit spreads.”
Alon Leisure Management wants to build a 1,100-room hotel with two towers, roughly half the size of the nearby Trump tower. The plan was to open in 2018.
Mr. Pascal added: “Central to our vision for Alon is the careful consideration, creative exploration and uncompromising execution of the resort experience. We are building a team of seasoned industry operators, entrepreneurs and global designers who bring a fresh, new approach to what we think the future of Las Vegas should be.”
In April last year, Alon snapped up the services of Steve Wynn’s former nightclub guru Jesse Waits who was given an executive position where he will lead in developing entertainment experiences and social areas throughout Alon Las Vegas.
He said at the time: “We will create a compelling and exciting destination and bring something fresh and unique to the Strip.”
Having secured the land Mr. Packer said: “You can’t be in the gaming industry and not have a special reverence for Las Vegas – that’s where it all began.”
Crown already has two expensive attempts to enter the Las Vegas market. In 2007 it bought Cannery Casino Resorts for $1.75bn, investing $250m for a 19.6 per cent stake in the failed Fontainebleau Resort. The casino remains unopened and unfinished. In 2008 it cancelled a proposal to build Crown Las Vegas, which would have been the tallest building on the Strip at a cost of $5bn, saying it was not ‘commercially viable.’ It lost $44m on the project.
Crown was also reported to be interested in buying the Cosmopolitan which was eventually bought by a subsidiary of the Blackstone Group, a private equity investment firm, for $1.73bn.
