Some Thoughts About Alon
Alon management released a statement and the above rendering in response to the news that Crown Limited was withdrawing from further investment in the project.
The founders and developers of Alon Las Vegas will continue to explore all of its options to advance the project and optimize the value for its stakeholders. Crown Resorts, the principal financial and strategic partner of Alon, has elected not to move forward with the Alon Las Vegas project at this time.
The Alon site is the most compelling new development opportunity on the Strip. It is positioned directly across from Wynn Las Vegas and Encore and bordered by Fashion Show mall, Trump Tower and the new Resorts World Las Vegas development. Having invested two years in the program planning, design, development, pre-construction and entitlement process, the Alon resort project has been thoroughly vetted and is considered "shovel-ready."
The Alon Team is comprised of an accomplished and diverse group of industry experts, all of whom remain committed to the project and to realizing the best possible outcome.
Translated: James Packer zipped up his courage and ran home. We've got the last, best located, green field development opportunity on the Las Vegas Strip. We've done the math, we've assembled the team, we've done the work, and we've got plans to build one of the sexiest resorts in Las Vegas. Investors, let's get butt naked and fuck.
In August, I asked Andrew Pascal directly if Crown/Packer were still on board with Alon. With absolute certainty Andrew responded that James Packer and Crown were still committed to the project as was the existing team of executives and player partners.
When pressed about rumors of financial difficulty within the project Andrew stated that design and development of Alon was mostly completed ("shovel ready") and that their primary obstacle to breaking ground was an equity gap in pre-finance funding.
When arranging financing to purchase a car or a home or to build a $2+ billion dollar resort, banks require applicants to pony up a percentage of the total amount as down payment. Crown and their partners (Andrew Pascal and Oak Tree Capital) agreed to contribute a percentage of the down payment and sought to share the risk and cover the gap by taking on additional investors. Wynn Resorts engaged in similar tactics - a financial partnership between of Steve Wynn, Elaine Wynn and Kazuo Okada - during their nascent stage. The renovation of SLS Las Vegas by the partnership of sbe entertainment and Stockbridge Real Estate had to call on the U.S. government's EB-5 "cash for visas" program to close their equity gap before the banks would release construction funds.
Simultaneously with seeking Alon equity partners, Packer and Crown boomeranged corporate restructuring ideas out into the Australian financial community. There had been talk of rolling all of Crown Limited's non-Australian holdings (including Macau's Melco Crown Entertainment and Alon) into a new company, as well as spinning off Crown's Australian holdings into an operating company and a separate real estate investment trust.
A few days ago, Packer's boomerang abruptly skidded back to Earth in a series of stream-of-consciousness investor filings. Instead of spinning their international holdings into a new company, Crown decided to sell nearly all of their partnership stake in Melco Crown and abruptly ceased further investment in Alon. Crown's board says they will use a large portion of the proceeds from these extractions to retire debt, buy back their own stock, IPO the REIT and pay dividends to shareholders.
Instead of pursuing international growth and opportunity, Crown engaged in a full-scale global retreat followed by a retrenching of their domestic business.
Any semi-conscious dice player knows that the second you think seven out, you seven out. Fear unchecked is self-fulfilling.
So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself -- nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life, a leadership of frankness and of vigor has met with that understanding and support of the people themselves which is essential to victory."
- Franklin Delano Roosevelt, Inaugural Address March 4, 1933
Crown's blanket decoupling from their international investment projects isn't about the validity of those investments, it is about fear.
Over the last few years, Macau casino operators have had their once dazzling sure bet investments kneecapped by graft, scandal and multi-faceted interventions by the Chinese government. Facing the fear of a seven, Crown dumped their shares in Melco Crown at the precise moment Macau's ebb tide slows, inhales, and hangs in the momentary pause, waiting for the flow to begin.
Shave and a haircut...
Crown has gotten hosed in Las Vegas (at least) three times. The first was a $300m investment in Fontainebleau which promptly ceased construction and spiraled into bankruptcy. The second squirt happened months after the Fontainebleau investment, where Crown signed on to the $3.4b Crown Las Vegas, a Burj Dubai style super tower to be located between Fontainebleau and SLS. Their third - and most baffling - attempt to break into Las Vegas was a $350m purchase of 25% of Cannery Resorts in 2007. Boyd Gaming purchased 100% of Cannery Resorts for $230m in April 2016.
For the first and probably only time, Crown had found the perfect Las Vegas partner in Andrew Pascal. Together, they snagged the perfect parcel, smack dab in the middle of Las Vegas' high rent neighborhood and put together an exquisite set of resort plans. Crown would be partnered in an exclusive, intimate, luxurious, modern, nuanced and thoughtful resort experience envisioned by a certifiable dream team of Las Vegas executives. Alon would compliment and extend Crown's existing brand and burnish their reputation as the first six-star casino resort in Las Vegas. Crown had the opportunity to enter the market where it deserved to - at the to - not the Eastside Cannery.
The table was set with the finest linens, the sharpest of knives and a stunning view of Steve Wynn's lunch.
Anyone who knows Steve Wynn could smell the fear behind his snickering 2015 earnings call boast that having a new property across the street would add tens of millions of dollars to Wynn's bottom line. The mere thought of having Packer/Pascal as neighbors caused Steve Wynn to close two restaurants, move a poker room, sell, close and demolish a car dealership, design and commence construction on a shopping mall, sell 49% of shopping mall operations, and - in a real coup de grace - summon investors to preview his own unapproved plans for a 1000 room lake-facing hotel. Wynn also used Elaine Wynn's blood relationship with Andrew Pascal (therefore, Alon) as one of the reasons why she should be removed from the board of directors of a company she is a major shareholder of part.
Wynn did all of this before one single solitary shovel of construction dirt was moved on the New Frontier site. Steve Wynn, when faced with the possibility that a portion of his lunch may actually be in jeopardy, chose action over retreat.
Packer, digs in to the batters box.
Pascal sets, kicks and delivers a Bugs Bunny floater heading right over the middle of the plate.
Packer's brows raise and pupils dilate as the seams swirl slowly in his the pools of eyes.
He shifts his weight, tightens his grip and cocks his bat.
Then, with deep inhalation and muscular twist of the torso, Packer runs off the field and straight into the showers.
Strike four! Yer out!
And with that, Crown Limited pulled out of Alon. Blame the tabloids. Blame Mimi. Blame Brexit. Blame Donald Trump and his ugly ass hotel tower. Blame James Packer and Crown Resorts' penchant for making bad decisions at the worst time. Blame fear.
Why Alon Matters
I've watched Andrew Pascal present the Alon concept, property and design in person on three separate occasions. During these and other in-person meetings and phone calls, Andrew has walked me through the genesis of the Alon project - how he put the partnership together, how the parcel was purchased, and how the team was assembled - and shared details he hasn't discussed with any other member of the media.
Between hopping hoops & garters of resort design and the lingua logos of luxury, Andrew and his team have shown me the hotel rooms, resort interiors, dining line up, the casino layout and game mix, plus a whole bunch of surprises in store for the resort - epic, intimate and jaw dropping - lastly through a hogshead of real fire! I've brought some of the smartest folks I know (John, Mike, Hunter and my wife) to two of these meetings, purposefully standing aside, taking note of their reactions, questions and responses as Andrew talked through the resort concept. Each and every one of them walked away with the same reaction that I had.
Having this degree of access to a project as it navigates the savage sea of gestation has been an eye-opening experience. For the first (and probably only) time, I've been staring at the secret plans from inside the fortress walls. Now, when I hear the froth, fury and faux-facts echoing around the news, blogs and social media circles, I have a pretty good understanding what information is on the money and what is crap. It has been a supremely enlightening experience in many ways.
I could easily write 20,000 words about why Alon interests me. I could talk generally about the property, the architecture, the technology, the spaces, the philosophy of comfort or go deep on the gorgeous room designs, one specifically insane restaurant concept or the attractions. Maybe, someday, I will. But right now, none of that matters.
What matters most to me, and is the single solitary thing I hope you take away from this article, is that Alon has the potential to save Las Vegas from itself.
Many have deduced that Alon aims to provide boutique luxury resort experience at the top of the market. This may or may not fit with your personal player profile. Even so, this very concept is something that all Las Vegas visitors should thoroughly embrace and encourage.
I am most definitely not a member of the 1%, and barring an investment miracle and an invitation to Alon's opening week media junket, I probably won't be staying here much at all. But the mere possibility that the 1% who can stay here will vacate the penthouses, mansions, skylofts, tower suites and villas all across Vegas and instead stay, play and go cray at an independently owned property at the top of the market should give every disgruntled, disillusioned, under-appreciated, profit-growth-planned and pissed off Vegas visitor a big fat meaty boner.
Photo by JohnH
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