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The Biggest Bet in Vegas

Impresario Steve Wynn has broken ground on a $1.95 billion hotel, Le Reve
Michael Kaplan
From the Print Edition:
Steve Wynn, Jan/Feb 03

(continued from page 3)

Standard rooms at Le Reve (boasting high-speed computer ports and plasma-screen TVs) will outsize the Venetian's. Then, Wynn will really push the envelope with a significant upgrade for the high-roller suites. They are anything-but-standard rooms that will benefit from the exclusivity that so successfully overrides MGM's Mansion. Still in their model stages, the big, sprawling suites, with mirrored ceilings and separate massage rooms, already look as if they'll be
big-money-player magnets -- augmented by private entrances and exclusive check-in desks. Wynn describes the high-roller rooms as a 300-suite hotel within an already grand hotel, and they'll be strategically positioned to feed directly into Le Reve's baccarat pit.

But the real prize for free-spending gamblers will most likely be 18 villas lining Le Reve's new 18-hole championship golf course, which will be an additional expense on top of the $1.95 billion project. The course is situated along the Strip, directly adjacent to the hotel. While Wynn knows better than to try outdoing, or even replicating, his fabulously infamous Shadow Creek layout (with its 15,000 North Carolina pine trees in the middle of the desert), he assures that the new course, laying on 140 acres of land as compared to Shadow Creek's 250, will have plenty going for it. "We are in the middle of the city, we have surprise, we have convenience, we have tremendous elevation changes that will delight everyone," Wynn says. "It's great to be able to walk out of your room and tee up right here and now, without taking a limo for 30 minutes. Then you can finish playing and go back to your room for a drink on the patio, where you can sit and watch other guys putting out. Golfers will be able to live in the environment. You can't do that in Shadow Creek. The only one who lives in the environment of Shadow Creek is me. My house is there and nobody else lives there."

Maybe Wynn got lonely out there, all alone on the golf course, because he has immersed himself in another highly collaborative project. He is striving to be the first American to build a casino on the island of Macau, the former Portuguese colony near Hong Kong that was transferred back to the Chinese three years ago (Sheldon Adelson, the only other Westerner with a Macau license, will be building a casino there as well). Wynn plans on breaking ground in February and expects to build a Euro-themed operation that will blend in with the island's existing architecture and exude the Chinese definition of old-money class. Most importantly, it will be a synergistic dream. "Marketing will be huge," declares Wynn. "Having access to all those Chinese players will be the biggest thing that ever happened to Las Vegas. And it'll affect the other hotels as well. They'll stay with us, but find their way to the MGM and Bellagio."

That may sound like an uncharacteristically generous prediction, but it reflects the way Wynn seems to be thinking these days. He acknowledges that Wall Street's financing for his resort, even though he raised less than he had initially hoped for, is not only a positive sign for him but also a positive sign for Vegas, especially since Wynn's last parting with the Street wasn't so smooth. After the share price of his Mirage Resorts had violently dipped from $26 in the spring of 1999 to $10.88 the following February -- Wynn's casinos had failed to hit their numbers in the latest quarter -- the stage was set for Kerkorian to launch the takeover, which has generously been described as only semi-hostile. Kerkorian snatched up Mirage Resorts when it was at its most vulnerable, ultimately offering to pay $21 per share, nearly twice what the stock was trading for. He sweetened the deal for Wynn -- offering him the $11.3 million severance package -- and wound up with an unbeatable high-rolling trident: the Mirage, the Bellagio and the Mansion (at the MGM), which allows MGM/Mirage to cater to top-flight gamblers at every level.

At the time, Wynn stacked his chips and declared that he would never again head a publicly traded company. However, he now insists that the takeover was something he wanted. "When I saw a company like Palm go public, and in one day it had a bigger valuation than General Motors, I began looking for an exit," he maintains. "I wanted to opt out of the system and Kirk Kerkorian came forward with six and a half billion dollars in his jeans. [Kerkorkian took on $2 billion in debt.] I got the chance of a lifetime to jump off a train as I felt it was about to go over a cliff."

Wynn maintains that the recent downturn on Wall Street has brought the market back to being a more fundamentally sensible and alluring place; that, he says, accounts for his interest in reentering the public arena. Incontestable is that a little bit of irrational exuberance would have made life easier for Wynn when he was on the road, trying to raise money for his project. He made 44 presentations and found only 12 financial institutions willing to buy into an undertaking that will not earn a dime before 2005. "The IPO period was very nerve-racking," admits Wynn, usually the picture of confidence. "When you are out there, face-to-face with all the institutions and mutual funds, you see guys who are frightened. They want to wait [on investing]. But [he told them], 'I need the money now.' You get that 20 times from people and there is a cold breeze in the room." For Wynn, the stakes were incomprehensibly massive: "You've got all this money you invested, people who depend on you, a partner who believes in you. If that's not enough to make you think twice, then you shouldn't have the money in the first place. If that doesn't bother you, you are the wrong person to be trusted."

The miracle in all of this is that Wynn managed to put together his $1.95 billion in 30 months as mutual fund redemptions were through the roof. "Gathering this kind of capital, on the strength of an idea, requires unbelievable good timing, energy and the transfer of energy; it's like the creation of the universe," Wynn says, adding that it represents the largest casino project financing in the history of the United States. "Creating a company of this size overnight is harrowing. It's not the kind of thing you take lightly. If you do, if you are that confused going in, before you are done you are either dead or you got a lesson. You live through this by hooking up your aorta right to the project, and so do a bunch of other people. That is the heaviest thing of all: you let them down and you cause a train wreck."

But Wynn got his money, he's getting his mountain, and Le Reve seems poised to bring his dream to fruition. In Vegas, a notoriously cutthroat place where hoteliers routinely steal business and entertainers and ideas from one another, Wynn's success at raising the billions is viewed with optimism by his competitors. "It stirs the pot for Las Vegas tourism, and we all benefit from that," says Rob Goldstein, who plans on leading one of the first foursomes to play Le Reve's golf course as soon as it opens. "Additionally, Le Reve boosts the town's image and puts us on front pages for the next three years. It creates awareness, excitement and energy. Hopefully, we at the Venetian will be right behind Steve, developing phase two of our hotel."

Regardless of the optimism in Vegas, plenty of analysts on Wall Street are still hedging their bets. "I think Le Reve will be a success, but it's a question of how big a success," says Dennis Forst, an analyst with McDonald Investments. "They're investing close to 2 billion and I doubt they'll get a 20 percent return on it. When the IPO came up, the buzz was that Steve Wynn is an impressive guy who can build tremendous operations. The issue was his propensity for building the biggest and best properties without regard to cost."

Not expressing any of those doubts is Phil Ruffin, who owns the old Frontier Hotel, directly across the Strip from Le Reve. Ruffin has acknowledged that his green light to build a San Francisco-themed property hinged on Wynn raising his capital. The Mandalay Bay is expanding in the shadow of Wynn's construction and the Bellagio will be building a new restaurant for haute cuisine star Alain Ducasse and a new $375 million tower, with 300 state-of-the-art rooms (including a batch of high-rolling penthouses) that will sit atop an expanded spa. And as much as Lanni likes to discount the influence of Wynn upon his decision making, even he has to admit that the timing is more than coincidence (after all, when MGM built its ultra-lush mansion, it was in direct response to Wynn's Bellagio). "You need competition to be good at what you're doing," Lanni says, poised to illustrate precisely how Wynn's renewed activity will kick off a building boom on the Strip. "Le Reve provides an impetus for us to reinvent what we do. It also makes it easier when we go to the board and request money to expand. The competition is an impetus for us to move ahead faster than we ordinarily might have." After stating that the new Bellagio tower will open six or seven months ahead of Le Reve, Lanni adds, "Le Reve will be a good competitor, but we will be up for it."

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