AC casino deal unfolds like a soap opera

It sounds almost like a soap opera.

Mirage and Boyd have kissed and made up, stranding Circus at the altar. Meanwhile, Harrah's lurks in the background, poised to crash the party.

But unlike the typical daytime drama, this story involves real companies and serious money. Billions are at stake as the saga starring some of the gaming industries biggest actors unfolds.

Mirage Resorts Inc. and Boyd Gaming Corp. announced Tuesday they've settled their dispute over developing part of a multibillion-dollar resort complex in Atlantic City.

But the fight between Mirage and Circus Circus Enterprises Inc. over participation in the H-Tract project appears certain to be played out in court.

"We've been unable to come to an agreement with Circus about how to move forward," a Mirage executive said Tuesday.

"We're still in the midst of litigation against Mirage and will have no comment on the announcement regarding Boyd," a Circus spokesman said.

Mirage and Circus have been locked in litigation since the announcement last January that Mirage was terminating its Atlantic City development deals with Circus and Boyd. All three companies are based in Las Vegas.

At that time, Mirage said it would build Le Jardin, a wholly owned, 4,000-room hotel-casino expected to cost more than $1 billion, in the center of 125 acres it controls in the Marina District of Atlantic City.

Circus had planned to build its own $600 million, 2,000-room hotel-casino on one side of Le Jardin on land it bought from Mirage. But as site preparation costs escalated, Mirage sought larger contributions from Circus and Boyd, who both balked at the costs.

Boyd also sued Mirage, but the two companies continued to negotiate over the ensuing months. Those talks resulted in Tuesday's announcement that they have dropped all litigation and revised and expanded their joint-venture plan.

One element critical to the new pact was Monday's land swap between Mirage and Memphis-based Harrah's Entertainment Inc. That even-up swap gave Mirage 4.5 acres along the east side of its casino site in return for 10 acres abutting Harrah's Atlantic City resort, which will undergo a $350 million expansion that will connect to the Mirage complex.

The land swap paved the way for the amended Mirage-Boyd agreement, which calls for the joint development of a $750 million hotel, gaming and entertainment resort on 25 acres next to Le Jardin.

The new Mirage-Boyd agreement marks a significant expansion of the plan they had two years ago, reflecting not only the increased costs but also a greater appreciation of the growth potential for the Atlantic City market.

That growth, though, will rely on redefining Atlantic City from a "day-trip" market into a full-service resort destination.

"There's no question that Atlantic City has a very powerful future if the development of new-generation attractions involves creating hotel-casinos, not casino-hotels," Mirage executive Alan Feldman said.

"Right now, they're running bus promotions paying customers $26 apiece to come in for the day because all they've got is slot machines. They've got to move past that."

"The project will be larger and more spectacular than what was originally envisioned," Boyd Chief Financial Officer Elliot Landau said. "The cost has gone to $750 million from $500 million, partly due to increased site costs and partly due to a re-assessment of the market."

The partners will contribute $150 million each in equity. Boyd will put up $150 million cash, Mirage $60 million cash and $90 million in land. The two companies will borrow another $450 million in an off-balance sheet project financing they expect to close next year.

Boyd Gaming said it plans to start construction in September 1999 and open the as-yet unthemed and unnamed new property in 2002. It will not be called Stardust Atlantic City, as originally planned.

Boyd will manage and operate the joint venture, which will feature at least 1,200 hotel rooms and other amenities aimed at attracting middle and upper-middle market customers and overnight visitors.

"This is one of the most important and significant developments in Boyd Gaming's long-term growth plan, and we intend to develop one of the premier resorts in the market," said company Chairman William Boyd.

"We are very attracted to Atlantic City for several reasons, including recent and current renovations at many of the city's resorts and the addition of a new convention center.

"We believe the ongoing commitments of the state of New Jersey and city of Atlantic City to create a world-class resort destination are contributing to the redefinition of this market, and we look forward to participating in that effort."

Landau said the Atlantic City venture won't affect Boyd's plans to upgrade its Stardust hotel-casino on the Las Vegas Strip.

"We're looking at a variety of options for that property," he said. While Boyd executives wouldn't comment, the options may include changing Stardust's marketing thrust to attract a different type of customer than it has drawn in the past.

In Atlantic City, the Mirage-Boyd venture and Le Jardin still leave room for another partner. Mirage has sued Circus, seeking a declaratory judgment that would clear up the status of their aborted deal and force Circus either to pay a higher price for the land it needs to participate in the Marina District or be ousted from the complex.

The Mirage plan has generated fierce opposition from competing casino operators, including Donald Trump and Hilton Hotels Corp. gaming chief Arthur Goldberg, who fear loss of market share to the newer resorts.

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