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Pulling Up Stakes in Downtown Vegas

MGM Mirage is selling Golden Nugget hotel and casino and another in Laughlin.

June 27, 2003|Jerry Hirsch | Times Staff Writer

MGM Mirage is leaving Las Vegas -- at least downtown.

In another sign of the fading fortunes of the gambling capital's urban core, the casino-resort operator said Thursday that it would sell the famed Golden Nugget Las Vegas hotel and casino along with another Nevada property to a pair of former Internet entrepreneurs for $215 million in cash.

Once the sale to Las Vegas-based investment firm Poster Financial Group Inc. is completed this year, there will be no major casino company operating a hotel in Vegas' downtown, a down-at-the-heels district several miles from the famed Vegas Strip. Poster is owned by the founders of, a Las Vegas reservations Web site acquired by in 2000 for $105 million in stock.

Once thriving, downtown has been squeezed in recent years by the rise of Indian gaming in California and the dominance of the Strip, where richly detailed themed casinos with new-age circuses, celebrity shows and huge convention halls capture most of the billions spent by the city's 37 million annual visitors.

For The Record
Los Angeles Times Tuesday July 08, 2003 Home Edition Main News Part A Page 2 1 inches; 48 words Type of Material: Correction
Golden Nugget -- A photograph that appeared with a June 27 Business article about the sale of the Golden Nugget hotel and casino in Las Vegas misidentified the two buyers, Timothy Poster and Thomas Breitling. In the photo, Poster was the individual standing and Breitling the one seated.

Las Vegas tourism officials have tried to dress up downtown: A few years ago, they installed the Fremont Street Experience, a $70-million, five- block-long overhead light show. But the area is mostly known for its dark, smoky casinos, $1 roulette and topless bars. And it attracts a fraction of the gaming dollars plunked down at the mega-casinos along Las Vegas Boulevard. Last year, gamblers spent $4.7 billion on bets at Strip casinos, dwarfing the $657 million they wagered downtown.

The 1,907-room Golden Nugget, which opened in 1946 as a humble gambling hall, has long been considered among the nicest properties in the district, having received the AAA Four Diamond Award perennially since 1977. And Timothy Poster, Poster Financial's chief executive, doesn't care that it's far from the Strip. In fact, he said, that's a draw. "Everything in Las Vegas has gotten so big," he said.

For MGM Mirage, the Nugget sale is "a strategic move" that will help the company strengthen its balance sheet and allow it to focus on investing in emerging gaming markets, Chief Executive Terry Lanni said. The deal with Poster Financial also includes the Golden Nugget in Laughlin, Nev.

Next week, for example, MGM Mirage and Vegas-based Boyd Gaming Corp. will open Borgata, the first new casino in Atlantic City, N.J., in 13 years. MGM Mirage also is negotiating to operate slot machines at the Aqueduct Race Track in New York and has purchased a 25% stake in Metro Casinos, a British gaming company.

Analysts said that selling the Golden Nuggets would be an opportunity for MGM Mirage to exit two declining tourist areas with a small profit. MGM Mirage said that it would report "a modest gain" on the deal.

"A few years back those two properties accounted for about $50 million in cash flow for MGM Mirage. Now it is only $30 million," said William Schmitt, an industry analyst with CIBC World Markets in New York.

That's small change for MGM Mirage, which posted net income of $292 million on revenue of $4.5 billion last year. Between them, the two Nugget properties collected about $220 million in revenue last year.

Schmitt said the two casinos might do better "in hands that are more focused on them."

"MGM Mirage is off to better and bigger things," he added. "Downtown, especially, is a difficult market but others have been able to make a profit there," notably Boyd Gaming, which has three downtown properties.

MGM Mirage shares rose 38 cents to $34.38 Thursday on the New York Stock Exchange.

When they take over, the new owners of the Golden Nugget Las Vegas hope to exploit anti-Strip sentiment by luring visitors smitten by the city's glory days, when casinos were more intimate.

"We think our approach as owner-operators who will be on the property will work well," Poster said. "We believe we can attract the type of customers that were previously directed to Las Vegas Strip properties."

Poster, 34, is familiar with the gaming business, having sat on the board of Station Casinos for the last two years. He resigned that post Thursday.

At some point, he and partner Thomas Breitling, also 34, might try to acquire additional casinos, but for now "we will have our hands full with these two right out of the gate," Poster said.

The pair said their expertise in booking rooms and in hotel inventory distribution would help them attract business to both Nugget properties.

Although acknowledging the rapid growth of Indian casinos, Breitling downplayed the threat to the Golden Nugget properties, claiming that Indian casinos train new gamblers who will eventually want to come to Las Vegas and Laughlin, where the 300-room Golden Nugget sits on the Colorado River.

In selling the Golden Nugget Las Vegas, MGM Mirage is shedding a piece of regional history. Casino mogul Steve Wynn purchased 12% of the Golden Nugget for $766,000 in the early 1970s. He gained control of the hotel, adding a tower and using the property as the foundation of a gaming empire that spawned his famous themed Strip casinos, including the Bellagio, the Mirage and Treasure Island, said Hal Rothman, chairman of the history department of the University of Nevada Las Vegas.

Wynn sold the company to MGM Grand for $6.4 billion, including $2 billion in assumed debt, three years ago.

"To anybody with a tug in their heart for the old Las Vegas," Rothman said, "the Golden Nugget is a meaningful brand."

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