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Rod Smith

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From First Glance, Las Vegas Held Allure for Wynn

25 Apr 2005

By Rod Smith

LAS VEGAS, Nevada -- Las Vegas casino developer Steve Wynn may be best-known these days as the man standing atop his new Strip megaresort in a slick television commercial promoting the $2.7 billion Wynn Las Vegas and asking whether he "can come down now."

The real Steve Wynn, however, is a street fighter who has had to orchestrate comebacks from calamities that would have flattened lesser operators.

Associates say Wynn has been personally affected by two facts of life: his incurable eye disease, retinitis pigmentosa, and his father's business failures.

The eye ailment pushes him to emphasize design and micromanage appearances, they say. Nothing in Wynn Las Vegas has gone up without his approval.

His father, Mike, was a problem gambler who owned a chain of bingo parlors but wagered and lost the family fortune. Because of the experience, Wynn grew up to be a nongambler who has made a mint by developing megaresorts whose allure has been nongambling amenities.

"Don't trust gambling," he warns. "It's an effect, not a cause. Follow the noncasino attractions and you'll always see the winners."

Wynn's father brought him to Las Vegas for the first time in 1952. Mike Wynn set out to become king of bingo in America's gaming mecca, and the son fell in love with the place.

University of Nevada, Las Vegas professor Bill Thompson, who specializes in gaming studies, said Steve Wynn, like a real gambler, has been chasing the magic of that first whiff of Las Vegas ever since.

"Like the habitual gambler, he may never find the feeling (again), and so he may never be able to stop the chase," Thompson said. Wynn calls himself "a compulsive developer."

While Wynn was falling in love with Las Vegas, his father's bingo hall in the Silver Slipper lost out to the Frontier next door.

Then in 1953, Mike Wynn was denied a gaming license because of ties to East Coast associates, and he went back to Utica, N.Y., where he operated a string of moderately successful bingo halls.

Ten years later, Wynn's father died of heart failure at 55, and Steve Wynn inherited the bingo halls, graduated from the University of Pennsylvania and married his childhood sweetheart, Elaine, all within months of one another.

Starting on a career path that repeatedly has brought him to the edge of ruin, Wynn and his wife moved here in 1967.

Through his father's contacts, Wynn made a 3 percent investment, later raised to 5 percent, in the Frontier.

With the investment came a job as a slot manager. His new associates, however, turned out to be associated with organized crime in Detroit and were indicted for a hidden ownership and skimming scheme.

Less than a year later, state regulators got Howard Hughes to buy the Frontier to clean up its reputation. Wynn has said he made no money on the deal and lost his job.

However, he also made the most valuable contact of his career when he met Las Vegas banker Parry Thomas. MGM Mirage Chairman and Chief Executive Officer Terry Lanni said Thomas was the only banker in the country who would loan money to casinos, and the Thomas relationship has paid off for Wynn.

After the Frontier debacle, Wynn became involved briefly in promoting lounge shows before landing a liquor distributorship.

More important, he flipped a real estate parcel through a land swap for a strip in front of Caesars Palace into a $700,000-plus profit he used to buy 5 percent of the Golden Nugget.

There, Wynn confronted the company's chairman, Bucky Blaine, whom he accused of mismanagement and threatened to expose it if Blaine did not leave the company. Wynn moved into the chairmanship and upped his share in the company.

Not long afterward, Wynn met junk-bond king Michael Milken. The first deal they worked was financing for a project in Atlantic City.

Wynn used profits from the Golden Nugget in downtown Las Vegas to buy a decrepit hotel in Atlantic City. He tore it down and built the Golden Nugget Atlantic City in 1980 with financing arranged by Milken.

He lavished money on the two hotels, including $10 million for a three-year contract with Frank Sinatra that included a series of television commercials featuring Wynn with Sinatra.

All this was paying off big and, by 1984, Wynn's personal net worth was estimated at $100 million.

That year, he is reported to have bought blocks of MCA stock in a takeover attempt but came up short. Thompson said Wynn could have been ruined, but Milken, independent of Wynn and with the help of Ivan Boesky, successfully dumped the stock.

While the MCA deals won Milken and Boesky felony convictions, federal investigators found no wrongdoing on Wynn's part.

In the meantime, Milken proceeded with Wynn's junk-bond financing for Wynn's next creation, The Mirage.

Wynn soured on Atlantic City and its hostile regulatory environment after a difficult, but successful, fight for relicensing in 1986. The experience, however, convinced him to concentrate on Nevada and led to him jumping at an offer to sell the Atlantic City Golden Nugget.

The biggest issue with The Mirage was never whether it would be popular, but whether Wynn could turn a profit, especially given his high cost of capital.

"The debt load of the property and the interest rates of the junk bonds were indeed very, very heavy. Even if they were not going to bring down the property, they would certainly restrict the Mirage Inc. from freely developing in new directions," Thompson said.

Wynn got out of his financial dilemma by offering new shares and using the cash to pay off bonds. Luckily, new investors jumped at the chance to have a "piece of the action," Thompson said.

From The Mirage, Wynn moved on the build Treasure Island next door, which was a marketing and financial success from the outset.

Soon afterward, he bought the Dunes and cleared the property for his newest megaresort, Bellagio, which opened in 1998.

Bellagio, which is seen as the most luxurious Strip hotel to date, has been a marketing sensation from the beginning.

In its first year of operation, however, its return on investment fell short of Caesars Entertainment's Paris Las Vegas, which opened at the same time across the street.

This was not surprising, analysts said, because Paris came in at half the cost and there are usually employment and service problems in the first year of any new and breakaway resort.

After Bellagio, Wynn opened a huge, European-themed hotel on the Gulf Coast in Biloxi, Miss., the problem-plagued Beau Rivage.

"Wynn tried to elevate the `entertainment-recreation-amenities' of the Gulf Coast, but the area catered to day-trippers, weekenders and low-end vacationers," Thompson said.

With a good seashore and golf courses, it was called the "redneck Riviera," but the area did not have a major airport or the reputation to draw the clientele Wynn wanted. The costs were such that he needed to produce revenue fast.

"The marketing effort had to take time, he didn't have the time, given his other costs," Thompson said. "He might have made it if he had 10 years, but then he had stockholders and they wanted results," Thompson said.

Despite the increased revenues Bellagio and Beau Rivage brought in, his company's earnings per share and stock price started dropping dramatically.

Wynn's old mentor and competitor, Kirk Kerkorian, majority owner of MGM Grand, swooped in to force the sale of Mirage Resorts for $6.7 billion.

Edged out of his own company, Wynn cashed in his stock for $500 million, took $11.3 million in severance and left the Strip to plot his resurrection.

Unknown to the public and media, he had agreed just before the sale to buy the Desert Inn, a classic property that boasted the Strip's only remaining public 18-hole hotel golf course.

Secretive from the beginning about what he'd do with it, Wynn holed up with advisers, designers and architects. He brought in Japanese pachinko prince Kazuo Okada and Baron Asset Fund and put together what was originally a $1.95 billion stake for his hotly anticipated Le Reve, now Wynn Las Vegas.

He has since run the tab up to $2.7 billion by adding 18 fairway villas, the "Avenue Q" showroom, an employee parking lot and the purchase of the golf course lots, spokeswoman Denise Randazzo said.

Still, the "compulsive developer" remains undeterred.

Shortly after going public with his new resort, Wynn told KLAS-TV, Channel 8 that Le Reve would be the first of possibly six hotel towers on the site, each with an average of 3,000 rooms.

And he already has announced a second phase for Wynn Las Vegas and a development in Macau, the former Portuguese colony off the coast of China, is well under way. Wynn also is bidding on one of two casino sites in Singapore.

For Wynn, the magic never dies and the excitement is in the chase he will never stop.

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