KVIG Informative

Howard Hughes spent less than two years buying five Las Vegas Strip properties with cash, prompting Nevada to rewrite its licensing rules to accommodate a buyer who wanted nothing to do with the state’s old system of hidden ownership. Six decades later, the buildings under several of the Strip’s most recognizable casinos don’t belong to a casino company at all — they belong to a publicly traded real estate investment trust that separated from Caesars Entertainment’s bankruptcy in 2017.

Hughes arrived in Las Vegas on a chartered Union Pacific train on the night of Nov. 27, 1966, and moved into the top floor of the Desert Inn, according to UNLV Special Collections’ account of his Nevada years. Over the next two years he purchased the Desert Inn, the Sands, the Frontier, the Silver Slipper and the Landmark, according to the same UNLV Special Collections account and the Nevada Resort Association’s own published history of the state’s gaming industry. Existing management stayed in place at the properties he bought — Moe Dalitz continued running the Desert Inn, and Jack Entratter and Carl Cohen continued running the Sands — according to UNLV Special Collections.

A third of the Strip’s revenue in two years

By 1968, Hughes’s holdings accounted for about a third of the revenue earned by every casino on the Las Vegas Strip, according to the Nevada Resort Association’s history of the period. The U.S. Department of Justice filed a monopoly lawsuit that year when Hughes moved to add the Stardust to his holdings, according to the same source, and the purchase did not go through.

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Nevada rewrites its licensing rules

Nevada gaming regulators changed the state’s licensing procedures to accommodate Hughes, whose reclusiveness made the standard process impractical, opening the door to the publicly traded hotel corporations — including Hilton and Marriott — that followed him into Las Vegas, according to UNLV Special Collections’ account of his Nevada operations. Then-Gov. Paul Laxalt worked with banker Parry Thomas and the Nevada Legislature to go further, according to a September 2015 article in Nevada Gaming Lawyer written by then-Nevada Attorney General Adam Paul Laxalt. The result, the Corporate Gaming Act of 1969, replaced the requirement that every individual stockholder in a casino-owning company be personally investigated with a system concentrating licensing on a small group of key executives, opening casino ownership to large publicly traded corporations for the first time, according to the same article.

The change addressed a financing problem as much as a crime problem: conventional lenders had grown unwilling to extend the large loans a small group of individual owners needed, a gap that had let organized-crime-linked money finance casinos in the first place, according to Laxalt’s account. William Harrah took his own casino company public in 1971, and it reached the New York Stock Exchange by 1973, the same account states.

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Now the buildings themselves are corporate

The transition didn’t stop with who could own a casino operating company. Caesars Entertainment Operating Company filed for Chapter 11 bankruptcy protection on Jan. 15, 2015; when it emerged from that reorganization on Oct. 6, 2017, its real estate holdings were spun off into a newly formed real estate investment trust, VICI Properties Inc., owned by the former Caesars creditors, according to VICI’s own quarterly filing with the U.S. Securities and Exchange Commission. VICI, now a member of the S&P 500, describes itself on its own company website as owner of 103 properties nationwide, including 63 gaming properties — among them the physical real estate under Caesars Palace, the MGM Grand, the Venetian Resort and Harrah’s Las Vegas, four of the Strip’s best-known names.

Hughes’s money forced Nevada to let outside capital past the casino cage. Six decades later, the outside capital doesn’t just own the casino companies — on parts of the Strip, it owns the ground itself.