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HOME > NEWS > Featured Articles > Steve Wynn Agrees to Buy the Desert Inn for $270 Million

Steve Wynn Agrees to Buy the Desert Inn for $270 Million

28 April 2000

When Steve Wynn lost control of Mirage Resorts early last month, there was immediate speculation that he would buy the Desert Inn. Now that's about to happen, as Starwood Hotels & Resorts Worldwide this morning announced a definitive agreement.

Starwood said Steve Wynn and his wife Elaine will pay $270 million cash for the Desert Inn, a 50-year-old landmark on the Las Vegas Strip. The transaction is not subject to the usual due diligence or financing conditions, and is expected to close by June 30.

The Wynns paid a $30 million nonrefundable deposit. Wynn, already very wealthy, is due to receive about $500 million when the purchase of Mirage Resorts by MGM Grand is completed later this year.

"I'm very pleased to see Steve Wynn stay in the gaming industry," Joe Coccimiglio, gaming analyst at Prudential Securities, told RGTonline.com. "This is good for everybody. His projects create more demand than they absorb."

The Desert Inn is small by Las Vegas standards, with 700 hotel rooms. But it has an attached golf course, and most important, 32 acres of vacant land fronting on the Strip, between the hotel-casino and The Venetian.

"I expect him to develop something new," Coccimiglio said. "He said at the recent Mirage stockholders meeting that his biggest joy is designing new properties, and he has the cash to do it."

This time around, Wynn is not likely to tap public sources of financing, and again risk losing control of his company. Coccimiglio said Wynn would have no trouble raising any needed funds from wealthy individuals and institutions.

Just before the board of directors of Mirage Resorts agreed to the MGM Grand buyout, the Desert Inn came back on the market. Sun International Hotels Limited canceled its agreement to pay $275 million for the property.

Sun agreed to pay Starwood half the difference if Starwood received less money from a new buyer. So Sun will pay $2.5 million to Starwood when the Wynn deal closes.

Starwood won a battle for control of ITT Corp. in 1998, giving it the Desert Inn and Caesars World. Starwood later decided to exit the gaming business, and sold Caesars World at the end of last year.

The company said today that proceeds of the Desert Inn sale will be used to reduce debt and repurchase stock. Its debt will be reduced from $9 billion in the third quarter of 1999, Starwood said, to $5.2 billion as of June 30. Most of that amount came from the sale of Caesars.

Starwood operates more than 700 hotels in 80 countries, including the Westin and Sheraton brands. Its agreement with Wynn includes a first right of refusal for Starwood if timeshare units are developed on the Desert Inn grounds.

Just two days ago, Mark Advent - a casino designer whose work includes New York-New York - said that he had made an offer for the Desert Inn. Earlier, Starwood rejected an offer of $200 million from Boccardi Capital Systems.

Although ITT spent $200 million to renovate the Desert Inn into an upscale resort, the property has not done well competing against larger, flashier developments like Bellagio and The Venetian.

It was opened by Wilbur Clark in 1950 at a cost of $4.5 million. Succeeding owners have included mobster Moe Dalitz, Howard Hughes and Kirk Kerkorian.

 
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