RSS 2.0 FeedVol. 3, No. 5, May 2007, Nevada Q&A
Richard Brown
Chief Operating Officer, American Casino Entertainment Properties
Brown spent the formative years of his career with Harrah’s, including a stint in charge of the company’s Laughlin property. Brought on with ACEP in 2001, Brown managed to stabilize and actually improve operations at the four Nevada properties and the Sands in Atlantic City, which ACEP sold late last year.
Given ACEP’s heavy and ongoing capital investment in the Laughlin property, renovations at the Arizona Charlies casinos and the rising popularity of the north end of the Strip, the announcement last month that Icahn was selling these properties to a Goldman Sachs investment group for $1.3 billion came as something of a shock, even though Icahn is known as an investor who improves operations of a company and then sells it at a huge profit. Casino Connection Editor Roger Gros and Managing Editor Greg Jones spoke with Brown the day after the sale was announced, and he explained that given Icahn’s business style of acquiring undervalued property and later selling them for a profit, the announcement shouldn’t have been much of a surprise to anyone.
Casino Connection: What actually brought this decision on to sell? Have negotiations been ongoing or is this something that came out of the blue?
Brown: Well, I guess the best way to describe it is that Carl (Icahn) is an extremely astute buyer of undervalued assets and I think when he bought these properties they were all undervalued and we were fortunate enough to be able to turn these properties around. And I can’t commend the management team here in Nevada, and the staff and line employees at each property enough because they were the ones who really turned them around. They just did a tremendous job with what we asked them to do.
But that has been Carl’s MO throughout his career, and you know the multiples have been very, very decent so I think Carl felt that it was time to sell. To be honest with you, I can’t speak to Carl’s plans strategically but I’m sure he’ll continue to put the money into different investments.
On the other side of it, I think the Goldman guys have a great opportunity. There’s a lot of valuable land at the Stratosphere to be developed and with all of the excitement about the north Strip development opportunities, I think the timing is very good as well.
Let’s talk about some of the operating issues you’ve had with all of these properties—and I’m including the Sands in Atlantic City in this—there were challenges at each and every one of them. Was it tiring for Mr. Icahn to go through this or did he just determine that now was the best time to sell?
This has nothing to do with Carl’s frustration. Carl has been extremely complimentary to myself and the management team over the years in terms of what’s been accomplished. There was no frustration on Carl’s standpoint about the business at all.
I think anytime you buy undervalued assets there are lots of challenges, and I am extremely proud of the management team and the team members were able to accomplish over the years. It’s been a great, great run for the team.
Carl Icahn was very curious about how the industry worked, but obviously he brought in people like you and the heads of the properties to really bring their expertise to work. Did he leave that kind of minutiae of day to day operations to you and your team?
I’ve got to really compliment Carl in this arena. When I first met Carl, we had talked quite often before I joined the company, I remember saying to him one night at dinner, “This is a great opportunity for me to come to work for a guy like you that I can spend a lot of time with and learn so much from.” He looked at me and said, “Rich, if you do your job you won’t hear from me that often.”
He was true to his word. He has been a great guy to work for. He has given us—and me personally—a tremendous amount of autonomy in running the properties, yet, at the same time, when I need him, he’s always there. I can’t say enough good things about the way he worked with me and other people on the management team.
The Stratosphere has been a remarkable story. The first two owners, Bob Stupak and Grand Casinos, struggled with construction, marketing and operations. You seem to have done a better job, but what potential still exists with the property?
I think there is a lot of potential here with the Stratosphere. I think our operations have run extremely smooth over the years and we’ve always had a very strong focus on customer service. The two things that we’ve done in this company very well is providing the customer value and providing service that exceeds customer expectation.
On the marketing end of things, I think there is still a lot of room for improvement at the Stratosphere. Frankly, when you look at the asset itself, and the fact that we’ve got 17 undeveloped acres here, I think there is tremendous potential.
Explain how the tower itself has been a draw. The towers in other major cities like Seattle have been very successful. Is that the same kind of draw you’re getting in Las Vegas?
Yes, I think it’s the same concept. As you know, Las Vegas is extremely competitive when it comes to attractions in town. There is an awful lot to see and do here. The tower remains a key attraction as evidenced by the number of people who go up there.
What’s interesting about the tower is that you see its strength in the ability to attract various demographics. For instance, the people who are dining on a Saturday night in the tower probably look a lot different from the people who are on the rides a couple of floors above them.
Another hallmark of not only the Stratosphere but also the Arizona Charlies properties has been a good gamble, a good value for your dollar. Do you think that is something that has made these properties more popular?
We’ve really stayed focused on trying to give the player a fair shot to win. We’re one of the few properties on the Strip to offer games such as single-zero roulette; we’ve got 10x odds on craps; we deal single-deck blackjack.
That’s something that Carl and I talked about quite often, even before I joined the company. Carl was very committed to giving the player a fair shake and I think if you take a look at the rest of the strategies related to value, be it the food or the attractions, we’ve tried to package rides and the tower or going up in the tower with rides. We’ve developed a lot of packages with our shows and rides to try to give people value. When we talk about value, it’s important to note that value doesn’t always mean what is cheapest, it means you’re getting more bang for your buck.
Improvements at the Aquarius Resort Casino in Laughlin—formerly the Flamingo Laughlin—were pretty extensive. What was some of the work done at that property and how did that improve the value of the company?
I feel very comfortable saying this because I think Harrah’s would have said this: I don’t believe that the Flamingo was ever a real strategic asset for Harrah’s. That was one of the reasons that we were able to purchase it. It is a key asset for us. There had not been a lot of investment in the property. The slot product was not up to speed, and our first thought was to upgrade the slot floor and have the most state-of-the-art slot floor in Laughlin. I think we’ve achieved that.
This is really the only property in our system where we compete at the high end of the market. We also wanted to have a real sense of presence when you enter the property. We put in a lobby with marble floors and water features. When you walk through the front door, there’s really a sense of arrival.
Our next focus, as we move forward, is going to be getting out rooms refurbished, and we’re working on that right now.
You’ve given a lot of credit to the management team and the line employees. Do you think they played a large role in the success of the company?
There is no doubt. I am a firm believer that in this business, and probably all businesses, people are the most important resource. We’ve really been blessed with some great people who have worked hard. They’ve really dedicated themselves to the turnaround that has taken place. It’s a little tougher to turn around properties rather than taking over properties that are running well, and I think these people have really shown the fortitude and the commitment to make great things happen here.
Any idea what their fate will be with the new company?
I’ve had some discussions during the sales process with the new owners and while I can’t commit where they’re going to go on this thing, they have been very pleased with what the management team has accomplished and they’ve been very complimentary.
How about you? What does the future hold for Richard Brown?
It’s hard to tell. I’ve had some general discussions with the new owners and it’s just too early to say what is going to happen. I will say this: I like them a lot. We’ve got a great rapport, and I would hope that some positive things are going to come out of this.
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