Thursday, Feb. 22, 1996 | 11:59 a.m.
Some gaming analysts are pessimistic about the announced plans for the El Rancho property, but the head of the company that bought the closed hotel-casino thinks the $1 billion project will be a good bet.
During a meeting Wednesday of its shareholders in Cherry Hill, N.J., Orion Casino Corp., a newly formed Nevada subsidiary of International Thoroughbred Breeders, unveiled grandiose plans for the Strip property closed since 1992.
Plans call for demolition of the existing structures and construction of a $1 billion hotel, casino, retail and entertainment complex, including a 65-story hotel tower, on the 21-acre site.
ITB is a New Jersey company that owns and operates racetracks in Freehold and Cherry Hill, N.J. It recently purchased the El Rancho from Las Vegas Entertainment Network for $43.5 million.
Orion officials said the project, to be called Starship Orion, will cover 5.4 million square feet. They envision seven separately owned casinos, each about 30,000 square feet, and 300,000 square feet of retail space, 2,400 hotel rooms, an alien circus, a galactic theater and interactive simulators and motion-based theaters.
"We've had broad talks over the past year with prospective tenants. We plan to be highly selective," said Francis Murray, chairman and president of Orion, from company headquarters in Cherry Hill.
Murray characterized the project as an entertainment superstore. "We are highly confident and intend to do everything right and by the numbers."
A major question in the minds of analysts within the gaming industry, however, is how ITB, which has no experience in casino gaming, will raise the capital to undertake such a project.
"I don't think they have the expertise or the financial wherewithal," said Joe Milanowski, director of research for USA Capital, a Las Vegas brokerage firm. "Who are they? They haven't run anything. They have a couple of race tracks back in New Jersey."
Other analysts echoed the same sentiments, with many having little information on ITB.
"I've never even heard of them," said Harry Curtis, gaming analyst with Smith-Barney in New York. "And where are they going to get the money? If you're (Mirage Resorts Chairman) Steve Wynn, Wall Street will fund you until you're blue in the face. But that's the question I'd have."
Murray, however, is no novice when it comes to big business. In addition to heading ITB, he was co-owner of the National Football League's New England Patriots from 1987 to 1992. And from December 1988 to November 1993, he was co-founder of the St. Louis NFL Partnership, which convinced the Los Angeles Rams to move to St. Louis last year.
Spreading the costs
Murray said the project will be financed, to a large extent, by the seven independent casino operators, who will be expected to provide a combination of equity and debt to fund the construction to the tune of about $100 million each. He said ITB would provide the remainder of the financing through traditional long-term mortgage securities.
"We have investment bankers who have guided us on this and think we're on the conservative side," Murray said.
Still, others will require more convincing. Russ Roth, editor of the Las Vegas Investment Report, which is produced by a local brokerage firm, said the little he knows about ITB and its plans does not reassure him.
He said companies in the past have been unsuccessful at the El Rancho's north Strip location or have blown a lot of smoke about plans that never materialized.
"Why would seven casinos take a chance at that location?" he asked. "It's not easy being a small casino company and raising money and these guys are not even in the casino business."
But ITB's stock, which trades on the American Stock Exchange, gained seven-eighths following announcement of the plans Wednesday to close at 4 7/8. Its high during the past 52 weeks was 7 1/4 and the low 2 3/4. Ross said the company has total assets of about $97 million and equity of about $72 million.
"There's nothing here that gives me the least bit of belief that this, in fact, will take place," Ross said.
Jason Ader, a gaming analyst for the New York brokerage firm Bear-Stearns, said recently that he believes it will be a real challenge for anyone to make the El Rancho site successful.
Murray, however, reiterated that the company and its board of directors are confident they can revitalize the El Rancho property. He said the issue of asbestos removal from the existing structures has been addressed, adding the company would like to clear the property, settle the financing and obtain local planning approval this year and begin construction of the project before 1997. It is scheduled to open in April 1998.
Nora Cooper, manager of public information for McCarran International Airport, said Orion will have to apply with the Federal Aviation Administration and the Airport Hazard Board for permits, but that the construction of the 1,500-foot Stratosphere Tower probably sets a precedent as to construction of the company's proposed 65-story tower.
Murray said Orion will own and operate one of the casinos. A major hotel operator and national property management firm are being sought to lease the retail portion of the project.
Murray said Starship Orion, with its outer space theme, will be designed by Hellmuth, Obata and Kassabaum, an architectural firm noted for designing such projects as the Smithsonian Institution's National Air and Space Museum in Washington and baseball stadiums such as Camden Yards in Baltimore and Jacobs Field in Cleveland.
"We're looking for gaming, entertainment, theater, all the elements that will make people want to see the place and stay when they get there," Murray said.