Interesting article about building a House of Cards --
... I come across something rarely seen in Vegas: frozen construction projects. I pass cranes abandoned at the site of the Echelon, a huge, multibillion-dollar project of four hotels that is now just three buildings of nine floors of concrete and steel beams sitting idly on some of the most expensive real estate in the country. I pass three more abandoned sites — 63 empty steel floors of the Fontainebleau, a sad unfinished shell that was supposed to be Caesars Palace's Octavius Tower and two cranes halted on a structure that was supposed to be a St. Regis condo building. I then drive up to where the New Frontier was razed to build a resort modeled on New York City's Plaza Hotel. It's just a dirt wasteland, so ugly that Wynn planted a row of trees so his hotel guests wouldn't stare at it from their windows. I never realized an economic defeat could look so much like a military one.
Just as Americans did with their houses, casino owners borrowed way too much money to build hotels that were way too big. Economists like Yale's Robert Shiller have warned that the next big wave of failures in the U.S. recession will be in commercial real estate — and once again, Las Vegas is headlining. Even worse, the bottom fell out as casino owners were building, so a number of them couldn't replace construction loans with the financing that was once readily available to complete and open hotel-condo-casino projects. Deutsche Bank foreclosed on the $3.9 billion Cosmopolitan Hotel; only it couldn't find a buyer, so the bank is in the odd position of owning a casino — though given the way banks have operated in this decade, that seems like a logical business extension. Meanwhile, Station Casinos, Tropicana and Herbst Gaming have disproved the adage that you can't lose money owning a casino. They borrowed big and went bankrupt.
The recession has hit everything from philanthropy to stripping to the solvency of Nevada. Because Nevada has no income tax and relies almost entirely on taxing casino owners, the state is nearly bust. Governor Jim Gibbons, a Republican, whom only 11% of voters say they would re-elect, tried to turn down federal stimulus money, was accused of cheating on his wife and lost control of the legislature, having his vetoes overridden more times than any other Nevada governor. Budget cuts have closed the only hospital cancer wing for uninsured patients. "We're on the bottom of every bad list," says Steven Horsford, majority leader of the Nevada senate and de facto head of Nevada's government, who tried and failed to enact a corporate income tax. The state is so desperate, the legislature even considered a state lottery.
There are lifeless shopping malls everywhere; Neonopolis, the $100 million, 250,000-sq.-ft. downtown mall, has almost no open stores left.
The article even includes Sheldon Adelson, a proponent of expanding gambling in Massachusetts --
That is true even of Sheldon Adelson, who has lost more during this recession than anyone else on the planet. The 76-year-old chairman of the Las Vegas Sands Corp., which owns the Venetian hotel, the Sands Expo and Convention Center and the Venetian Macao, was in 2007 and '08 the third richest person in the world, with — by his estimate — a net worth of $40 billion. By February of this year, he said he had lost $36.5 billion — more than the GDP of half of the countries in the world. In the years before that slide, banks were begging him to take their money, given his massive success in building the first Vegas-style hotel and casino in Macao, China, in 2004. Adelson didn't hesitate, taking all he could get and building an entire mini-Vegas in Macao called the Cotai Strip, along with huge casinos in Singapore; he also doubled his Vegas space by adding the Palazzo to his Venetian hotel. In a short time, he has accumulated a debt-to-earnings ratio of 6.8 to 1 in the U.S. Then the loans stopped coming, and his stock price sank from $144 to $1.42 in March. (It now hovers at about $12.) That's his crane parked between the Venetian and the Palazzo resort, atop the St. Regis condominium, on which work has been halted for the foreseeable future.
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