American Casino & Entertainment Properties
|Founded||December 29, 2003|
|Headquarters||Las Vegas, Nevada, USA|
|Number of locations||4|
|Key people||Frank V. Riolo, CEO|
American Casino & Entertainment Properties (ACEP) is a casino holding company headquartered at the Stratosphere Las Vegas. ACEP was a wholly owned subsidiary of American Real Estate Partners before it was sold to Whitehall Street Real Estate Funds in February 2008.
Shortly after opening the Stratosphere Las Vegas on April 30, 1996, the Stratosphere Corporation was forced to file for bankruptcy. After acquiring a majority of the bonds, ACEP gained control of the casino.
On November 29, 2005 Harrah's Entertainment announced plans to sell the Flamingo Laughlin casino to ACEP. The $170 million sale closed on May 19, 2006 and included the sale of the 7.7-acre (31,000 m2) Traymore Hotel site in Atlantic City, New Jersey to AREP Boardwalk Properties. Plans called for the property to be renamed the Aquarius within 6 months of the sale. The Flamingo Laughlin became the Aquarius in October 2006. In November 2006, The Traymore Hotel site was sold independently by AREP to Pinnacle Entertainment.
On April 23, 2007 it was announced that ACEP was being sold to Whitehall Street Real Estate Funds, an investment fund managed by Goldman Sachs for $1.3 billion. Carl Icahn acquired the four properties for $300 million. Final sale was completed on 21 February 2008. Although revenue for 2008 has only slipped by 4.47% from 2007, the interest costs of acquisition has turned ACEP a money losing operation.
ACEP and the Recession
In 2007, Whitehall Street Real Estate Funds, who owned 40% of the Las Vegas Hilton and was a passive investor in other casino properties, made an offer of $1.3 billion for the four properties. The appraisal assigned a value of $718.443 million to the land under the four properties. The buildings were worth $365.59 million. The impressive land valuation seemed to be almost entirely based on the undeveloped 17 acres (69,000 m2) of land near the Stratosphere.
On February 21, 2008, the ownership of ACEP changed hands from the previous owner, Carl Icahn, to Whitehall Street Real Estate Funds. As of February 11, 2008, Carl Icahn's personal fortune was calculated at $14.0 billion by Forbes, making him the 46th richest person in the world. The new owners retired the $255m senior notes held by the former owner and replaced them with $1.1 billion in new notes held by Goldman Sachs Term Loans, that are due to be refinanced on March 11, 2010. The interest on these loans far exceeded the net income of the company in 2007. The income of the company had to grow to cover this new financing.
Revenue peaked for the first quarter of 2008, when the company was purchased, and by the 4th quarter began plummeting precipitously. The cost of the acquisition was so considerable that the company began operating at a net loss. On March 4, 2009, the company announced that it would begin layoffs.
According to an article on May 13, 2009 in the Wall Street Journal, Whitehall Street Real Estate Funds has been in discussions to restructure the debt with its lender, Goldman Sachs, due to concerns that the company may default if gaming and visitor numbers continue to decline. Whitehall, which is an affiliate of Goldman, is finalizing terms of an agreement that would see Goldman forgive $593 million of the $1.1 billion debt load. Whitehall would also be released from an additional $200 million in additional debt. In exchange for the debt relief, a mortgage unit of Goldman would gain a 22 percent interest in the company.
In 2009 net revenue fell to $356 million, the company's worst revenue since 2005. The company restructured its debt in the last quarter and laid off 600 employees.
- "American Casino & Entertainment Properties LLC". Business Week. 2008-05-13. Retrieved 2008-05-13.
- Knightly, Arnold M. (2007-04-24). "Icahn Sells Southern Nevada casinos". Las Vegas Review-Journal. p. 1A. Archived from the original on 26 April 2007. Retrieved 2007-04-24.
- Knightly, Arnold (10 January 2001). "Stratosphere step closer to changing ownership". Las Vegas Review Journal. Retrieved 18 September 2011.
- Knightly, Arnold (14 May 2009). "Stratosphere parent company posts $1.6 million net loss". Las Vegas Review Journal. Retrieved 18 September 2011.
- "Pinnacle Entertainment Closes Purchase of Sands/Traymore Site in Atlantic City, N.J.".
- "A Goldman Sachs unit is buying 4 casinos from Carl Icahn". New York Times. 23 April 2007. Retrieved 21 July 2011.
- "Icahn Boosts Federal-Mogul Stake to 75%". New York Times. 3 March 2008. Retrieved 21 July 2011.
- Finnegan, Amanda (4 March 2009). "Stratosphere to lay off workers, halt pay increases". Las Vegas Sun. Retrieved 17 September 2011.
- Knightly, Arnold (22 March 2010). "Stratosphere owner cuts losses by 30 percent". Las Vegas Review Journal. Retrieved 18 September 2011.