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Columnist Targets Wynn's Le Reve Resort Plans

LAS VEGAS -- A commentary in BusinessWeek magazine's Sept. 2 issue is critical of Steve Wynn's plan to go to public markets for funds to finance his $2.5 billion Le Reve resort on the Las Vegas Strip.

Christopher Palmeri, in a commentary headlined "For investors, Wynn's latest may be a sucker bet," said the board of directors for Wynn Resorts Ltd., the company building Le Reve, is stacked with Wynn associates who may not be able to control what Palmeri called Wynn's penchant for extravagance.

But a University of Nevada, Las Vegas gaming industry educator said Wynn received the same criticism when he built The Mirage and Bellagio and both turned out to be extremely profitable for Wynn and shareholders.

In June, Wynn Resorts announced an initial public stock offering that company officials hope raises $355 million.

Market sources have said they expect the IPO to be marketed by Wynn Resorts after the Labor Day holiday.

In a Securities and Exchange Commission filing, the company disclosed the 2,701-room resort at the site of the Desert Inn hotel-casino also would include a full-service Ferrari and Maserati car dealership and a gallery to display the works of the private art collection of Wynn and his wife, Elaine.

The property also would be home to an 18-hole golf course to be designed by Wynn and Tom Fazio, who designed the Shadow Creek golf course in North Las Vegas. A "casually elegant" casino would have 2,000 slot machines and 120 table games, the filing says.

A tree-lined man-made mountain eight stories tall along Las Vegas Boulevard will enclose an area along the front of the hotel and a three-acre man-made lake will be designed to be seen from all rooms in the 48-story building.

It's that type of extravagance and fears Wynn's board of directors won't be able to control costs that Palmeri's commentary addressed.

"When MGM bought Mirage for $6.4 billion, Mirage's stock was sliding because of construction-cost overruns for new casinos and Wynn's lavish perks," Palmeri said.

"He rented his art collection to the company's Bellagio Hotel for $330,000 a month. Mirage also put an $8 million New York condo and a fleet of jets at Wynn's disposal. After selling Mirage, Wynn vowed he would never again run a public company. So much for that promise."

Palmeri quotes the prospectus saying Wynn has sold two personal jets to the company for $48 million, that he has contributed a license to build a casino in Macau for $56 million in equity and he is again leasing his art collection to the company. The author considers the lack of outside voices on the board of directors to be "a red flag."

Board members include Wynn, his wife, Vice Chairman Kazuo Okada, founder of the Aruze Corp. in Japan, a manufacturer of electronic gambling machines, and Wynn Resorts President Ronald Kramer. Also serving as directors on the board are former Nevada Gov. Bob Miller, who received campaign contributions from Wynn; Zenith Insurance Co. Chairman Stanley Zax, a longtime Wynn friend; and retired executive John Moran.

Company officials have not commented on the Le Reve project since the IPO was announced, citing SEC "quiet period" regulations.

Other observers, however, say Wynn is following a success formula that has served him well throughout his career.

"People say that when Steve Wynn went back to Wall Street to promote the Golden Nugget when he was first getting started that they criticized him for having his wife and some other relatives on the board and they asked him why he needed a corporate jet," said Shannon Bybee, executive director of the UNLV International Gaming Institute.

"By the time he was done with his presentation, the analysts were asking him if there were any more relatives he could put on the board and if the plane was big enough. That, of course, is kind of tongue-in-cheek, but that's the way he has operated."

Bybee pointed out the formula has been successful, with The Mirage being the first hotel-casino to have more than $1 million a day in revenues in the 1980s and cash flow at Bellagio exceeding all records and expectations in the '90s and this decade.

"I think analysts are becoming increasingly more concerned about the roles of members of boards of directors in the past year," Bybee said in reference to numerous corporate scandals that have been reported.

"A lot of people didn't think Steve could pay for The Mirage because it needed to make more than a million dollars a day and they said he spent too much on Bellagio," he said. "But there are people who follow Steve because he has been successful. Some people who play it safe wait for the Steve Wynns to break new ground."

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