Reno Gazette-Journal from Reno, Nevada • Page 10

i mm ft 1 0A Reno Gazette-Journat Sunday, January 24, 1988 Several Reno-area hotel, resort projects remain in limbo would include 1,400 hotel and multifamily units, 70 single-family homes and 150 employee units. Convention Properties Kent Witt of Convention Properties is still searching for an operator to run the proposed hotel-casino across from the Reno-Sparks Convention Center. Until an operator is chosen, details of the project design, scaled down from the original Centennial Plaza proposal, remain sketchy. The first phase would cost $150 million to $200 million and include 1,000 to 2,000 rooms on the 50-acre site, he said. Witt said he can keep the project alive indefinitely by spacing out major project review approvals for other parts of the project.

To keep his zoning, a major review must be approved every two years. In a joint venture with Nell J. Redfield Trust and Convention Properties, the developers already have built on much of the 200-acre site. Three hundred condominiums and 50 homes were built on 30 acres. This winter, construction will begin on 100 apartments, 230 senior citizen housing units and a day-care center on 35 acres, Witt said.

In addition, another 14 acres were sold for single-family homes. The developer of these projects will be Bacs Development of Santa Ana, Calif. Of the rest of the land, 7 acres will be used for a park, Vk acres for freeway ramps and an 7-acre parcel and a 9-acre parcel will be used for commercial By Susan VoyleaGazette-Journal No one has yet to take a ski lift at the Galena resort, sip cocktails on the decks of the gigantic redwood River Inn casino overlooking the Truckee River or attend a convention at Sierra Reflections. Delays created by environmental stu dies, government extensions and new plans have kept these projects on the shelf. Galena Ski Resort Bob Weise, Galena Ski Resort developer, hopes to start building roads and sewer lines at the resort on top of Mount Rose early this fall, assuming plans to build new wetland areas to replace wetlands bulldozed for the project satisfy the U.S.

Army Corps of Engineers. The resort, valued at several hundred million dollars at full buildout, is now the subject of a full environmental review, which is expected to be completed by late this summer. To fund $3 million in construction this year, the Galena Resort Co. intends to sell limited partnerships for $250,000 each. Investors would buy a 1 percent interest in the company, but would share no liability.

If plans don't have to be redrawn, construction next year would begin on a ski lodge, a hotel-casino, five ski lifts and a parking garage. Sales of lots for homes also would begin. With the permit from the corps in hand by this summer, "we'd be in pretty good shape for opening by the 1989-90 winter," Weise said. The development eventually Sierra Reflections Land that was to be developed into a hotel-casino and golf course south of Reno once called the Sierra Reflections was taken over by the Al Pagni family after foreclosure on the ranch in Pleasant Valley last March. Washoe County originally approved plans in 1981 for a $200 million resort a getaway for jetsetters when it was proposed by Saudi Arabian developers in 1980.

But M. Mehdi Mostaedi, the ownerdeveloper, quit making mortgage payments in the spring of 1986, prompting the foreclosure, said Pagni, of Carson City. The family is now searching for a new investor to develop the land. The River Inn T.M. Chang of San Francisco has plans to breathe new life into the River Inn, which has been closed for almost 10 years.

Steve Walther, Chang's attorney in Reno, said Chang has plans to finish the hotel-casino. Walther only would say Chang's plans are not quite the same as those envisioned by George Benny, but work should begin this year. George Benny, the San Francisco developer who is serving a 30-year prison term for fraud, sold the property to Chang in 1979 but retained a leasehold interest. The resort now includes the nearly completed casino, the foundation for a spa, a sewer plant, and plans for a 150-unit recreational vehicle park and a 500-room hotel. Richard, Wayne, Daryl, John and Ralph and San Diego investor John Jentz.

Richard Capurro, a U.S Department of Agriculture official in Nevada, said the partnership still holds hopes of building. Virginia Peckham Hotel-Casino Developers have nothing more to say about their plans for developing the Virginia Peckham Hotel-Casino than what was said in November. At that time, Ben Farahi said he and brothers John and Bob were considering either expanding their existing Travel-odge motel into a hotel-casino on South Virginia Street or pursuing their plans to build a new hotel-casino across the street. Called the Virginia Peckham Hotel-Casino, the new hotel-casino would include 300 rooms on 14.6 acres. In May, the City Council gave the project an additional 18 months to submit final plans.

Milltowne Centre Milltowne Centre, a proposed $175 million hotel-casino to be built on East Second Street, is alive by a thread. Messages can be left with an answering machine that takes phone calls for Milltowne Associates, the developers. But over the last week and a half, no phone messages have been returned. The project, approved in 1986 by the Reno City Council, includes 1,374 hotel rooms on 3.6 acres of the old Riverside Mill Co. site by the Truckee River.

A public stock offering and or a limited partnership were being considered to fund the project. Travelers Hotel The Travelers Hotel hopes to announce within four months an operator for the hotel-casino project near Reno Cannon International Airport. "We're moving forward, we're close to fruition," said Stephen Mollath, attorney for Michael Neeser, the developer of the project. Fifty million dollars needed to finance the project would include raising equity through issuing limited partnerships. With that money in hand, the developers would seek additional capital from outside banks to build the project, Mollath said.

The Reno City Council turned down the project in June 1983 but the next year the Nevada Supreme Court overturned that denial, ruling the city acted arbitrarily. The 15-story, 325-room hotel-casino would be built at the corner of Villanova Drive and Airmotive Way. Reno Airport Convention Hotel Two blocks from the Travelers, plans are still in the works for the proposed 700-room Reno Airport Convention Hotel, previously known as the Red Lion. To be built on 11 acres at the southwest corner of Plumb Lane and Terminal Way, the $150 million hotel-casino would include 950 hotel rooms, said Richard Capurro, one of the partners. The Reno City Council approved the project in 1984, but litigation over title to the property stalled development.

The property was taken over last July by five Capurro brothers of Reno Investments 2800 Gross gaming $2,567,823,711 revenue Year ended 630 2100 Clark County (Las Vegas) 1400 (Millions) $679,995,215 700 Washoe County (Reno) 0' 'I''' 1 1 1 I i 75 76 77 78 79 80 81 82 83 84 85 86 87 including a 25-story, 400-room tower and 22,100 square feet of additional gaming space. The Pepper-mill plans a $110 million expansion calling for two 15-story towers, increasing the total number of hotel rooms to 1,302. The Nugget plans call for a three-story, convention center that will serve as the base for another 600-room tower to be built in the next few years. With strong track records of success, these privately owned hotel-casinos can shop around for bank financing. The Sands Regent, which will consider whether to build a third hotel tower late this summer, could even finance most of its expansion out-of-pocket, says Jon Bengston, hotel-casino vice president.

But it will be a tough sell to get investors for new Reno hotel-casino projects, Roffman says. Promoters of Convention Properties, the Travelers, the Reno Airport Convention Hotel (formerly the Red Lion) and the Galena Ski Resort are looking at selling limited partnerships to raise money to get their projects off the ground. But without a history of success, these projects are considered too risky for banks to consider financing and too risky for anyone to bother underwriting them on the stock market. Junk bond market drying up Meanwhile, junk bonds the predominant method in financing hotel-casino growth in the 1980s have been greatly reduced in influence, Vogel and others say. Junk bonds, which carry more risk than higher-grade issues, came on strong after investors sought high yields to replace the high interest and security they enjoyed on money market investments in the early 1980s.

"With the high yields, the junk bond market is virtually falling apart," said Al Glasgow, a gaming consultant in Atlantic City. "Raising new issues is very difficult. Everything is being held up. Everything you see being built that funding was in place before the crash." Monday: Northern Nevada will no longer be able to depend on gaming. machine a year, $220,590 per table game and $27,964 in total gaming revenues per room.

In Las Vegas, the average slot machine produced $22,072 a year, the average table game won $407,708 and total gaming revenues averaged $43,267 per room almost twice the payoff in Reno. "If you're an investor with many millions to invest in a new gaming project, where do you invest?" Witt said. "Reno is going to be on the bottom of the list." Moreover, for the latest three-month period, gaming revenues in Las Vegas were up 18 percent. Laughlin, the state's new Mecca of gambling growth, was up 39 percent. Washoe County revenues climbed an average of 9 percent in August, September and October over the same three months the year before.

Revenues had been virtually flat for four years. Analysts see that as a positive sign, but one quarter's revenue figures won't be enough to encourage investment here, they say, particularly when Vegas revenues rose twice that amount. Corporations look to the south The megacorporations that control much of the Nevada gaming industry have been quick to realize where the action is. Holiday Corp. and Bally Manufacturing Corp.

two leading companies in the gaming business have shelved plans to expand operations in Reno. Instead, they're funneling their cash into southern Nevada. Holiday, which owns Harrah's, plans to pump $150 million into its Holiday Casino on the Strip. The plan is to build 2,300 rooms, with the first 737 rooms opening this year. Holiday also plans to open a new Harrah's hotel-casino in Laughlin this year.

Meanwhile, it has postponed indefinitely plans for a new hotel tower in Reno. Bally plans a face lift for its Las Vegas club before even considering whether to go ahead with a new tower at its Reno hotel. Witt and others hope the recent surge in gaming revenues in Washoe County will encourage investors From page 1A cost, new hotel-casino projects the lifeblood of Nevada's growing economy will be stalled. The likely result: Fewer new jobs, both in gaming and related businesses. A slump in revenues for state and local government budgets.

A slowdown in gaming-dependent sectors of the economy. Meanwhile, the gaming industry in southern Nevada has hardly missed a step in its march toward economic prosperity. As 1987 ended, an army of tycoons took to the Las Vegas Strip, buying up older gaming properties that had languished on the market for years. Former MGM owner Kirk Kerkorian bought the Las Vegas Sands and Desert Inn for $177 million. Las Vegas casino owner Margaret Elardi bought Summa's Frontier and Silver Slipper casinos for $65 million.

Japanese businessman Masao Nangaku bought the Dunes for $155 million. Yet at the same time, closed properties in Reno such as the Mapes, the Pearl, Kings Inn and the Pon-derosa have gone begging for as long as five years. In desperation, First Interstate Bank plans to auction the Mapes in April. Even Reno's most profitable casinos, such as Circus Circus, must advertise $16 room rates, Witt noted. "Those are the kind of things a lot of lenders who've never been to Reno look at." Investors wary of low casino revenues Perhaps the most important concern of investors: Reno just doesn't generate the revenues of Las Vegas casinos.

A key measure investors look at is revenues per table and per slot machine, said Don McGhie, a Reno gaming consultant. In 1987, Reno-Sparks averaged $16,707 per slot to reconsider the Reno-Sparks market. Pre-tax profits for Reno and Sparks climbed 50 percent from $41.8 million to $62.8 million for the fiscal year ending June 30. Almost half $9 million of the gain was attributed to higher room rates, McGhie said. McGhie said he believes the figures should help create new investor confidence in Reno.

"It wasn't very long ago when everyone was down on Vegas during the 1981-82 recession. No one would look at a Strip property. Now they're the hottest thing going." But Vogel says investors will need to see up to five years of sustained growth in the Reno market before they will be willing to invest. Investors also will be watching the success of the Eldorado, John Ascuaga's Nugget and the Pepper-mill, all of which plan major expansions this year. The Eldorado is planning a $35 million expansion.

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