Don’t bet against me
Steve Wynn puts his cards on the table
| Steve Wynn, in his Las Vegas villa, in front of Picasso’s The Sailor and a Giacometti sculpture.
steve wynn is giving an art tour inside his villa, which is located inside his Las Vegas hotel and offers a panoramic view of the 18th hole of his lush golf course, complete with a waterfall. His two German shepherds are racing around excitedly, trying to figure out who the visitors are. We stand in the middle of a large, main room as Wynn talks about his Picasso paintings—The Sailor on one wall and Femme au chat on the other. Dressed in a bright, blue sport coat, Wynn points out the sculpture by Alberto Giacometti over near the bar, the painting by Fernand Léger, and the Matisse in the next room. He takes us out on the deck to see the statue of Mark Twain sitting on a bench, much like the statue of Red Auerbach down by Faneuil Hall. And then he smiles with delight at his latest acquisition, the Maltese Falcon statue from the 1941 movie of the same name starring Humphrey Bogart. I learn later that Wynn was the secret bidder who paid more than $4 million for the 45-pound lead statue in November.
A photographer snaps pictures as Wynn poses in front of his artwork and out on the deck with his waterfall in the background. Then it’s time to get down to business. The 71-year-old Wynn heads Wynn Resorts, a publicly traded company that reported $5.6 billion in revenues last year. Wynn is legendary in Vegas for gambling on high-end luxury casino resorts known for their amenities, service, attention to detail, and the Wynn signature on the outside. He has two towers on the Vegas Strip, another in Macau in China, and he is competing in Massachusetts for a license to build a $1.6 billion facility in Everett.
Wynn is accustomed to winning, yet he’s struggled to gain traction in his battle against Suffolk Downs for a casino license in eastern Massachusetts. From the start he’s been told that the struggling horse racing track, with its strong political connections, had the license locked up. He initially tried to interest Foxborough in a casino, but got nowhere. Then he settled on a polluted strip of land in Everett, but his odds of winning the license still seemed long. His chances improved when East Boston voters rejected a casino at Suffolk Downs and the proposed casino operator, Caesars Entertainment, was jettisoned after regulators raised concerns about its operations. But Suffolk quickly recovered, moving its proposed casino to a section of its property in Revere and bringing in Connecticut-based Mohegan Sun and its financial backer, Brigade Capital Management of New York, to run it.
Wynn doesn’t talk in bullet points; he likes to tell stories. Some of them are revealing (Wynn, one of the world’s best-known casino operators, is the son of a compulsive gambler) while others are just amusing (the same girl dated Wynn and Kraft at the same time during high school and the men never knew they were being two-timed). As he talks, Wynn, who grew up in New Haven, Connecticut, weaves in a Boston accent where appropriate, tells tales of Revere where his father grew up and where Wynn himself spent many summers, and raises his voice or lowers it to a whisper to help make his points. For the CEO of a public company, he is unusually frank. What follows is an edited version of our talk with some parts of the conversation rearranged for clarity. For a full, unedited version, click here.
commonwealth: I snuck under the fence at your Everett site a couple weeks ago and I have to say you’ve got your work cut out for you trying to build a luxury hotel there. You’ve got commuter rail tracks along one side of the property and behind the tracks a Costco and a Target. On the other side of the property is a Boston Water and Sewer pump house and across the street one of the largest power plants in Massachusetts. The land itself is a toxic stew of arsenic, lead, and sulfuric acid. What was your impression when you first visited the site?
steve wynn: Whoa, this is going to be expensive to make it pretty. The most beautiful view is the view of the skyline of Boston over the little inlet. The structure of the property is in effect a peninsula between the tracks and that water cutout, where I guess they used to bring in barges for the chemical company. That was good news and bad news. We’re going to have to completely hide the tracks, and take them out visually and experientially—New York windows like they have on Fifth Avenue. We’re going to buffer both sides of the property and we’re going to pitch the place and the views and the presentation to the river, the waterfront, and the skyline of Boston, which looks quite lovely. I look at property a little different from some people. I say, ok, what are its deficits, what are its advantages. Where’s the good news here?
cw: What about that giant power plant across the street? That can’t be good.
wynn: We’re going to hide that. The rooms don’t look at the power plant unless you go like this [he cranes his neck] out of your room. But you’ll be up higher. Remember, the building is on a podium. The first two floors are interior environment and we’re in control of that. When you hit the first-floor rooms, you’re up five stories. When you get into a room with floor-to-ceiling glass, you’re up 50 feet. You’re looking over everything and that softens what you experienced the other day. If what you saw is what it felt like, it would be terrible. But that’s not what’s going to happen.
cw: Still, aren’t you going to see the power plant and all of the scrap yards in Everett driving in?
| A CHALLENGING SITE: Wynn needs to clean up the former site of a Monsanto chemical plant and then construct his hotel in a way that
shields patrons from commuter rail tracks and a shopping development on one side and a Boston Water and Sewer pump house and a
gas-fired power plant on the other. The Mystic River ebbs with the tide, so the inlet will need to be dredged to provide water access.
cw: Do you gamble yourself?
wynn: I played poker until I was about 50. I shoot craps about once every five years. I’m a big success, of course, like everybody else. Am I a gambler? No. My father was a problem gambler, so we lived with the results of problem gaming, the self-destructive behavior that attends such things.
cw: Do you think casinos contribute to problem gambling?
wynn: The subject came up in New Jersey years ago and they formed the Pathological Gambling Foundation, headed by Dr. Robert Custer. I was fascinated about the subject because of my dad. Dr. Custer was the first one to point out that the existence of a casino does not create more problem gamers. People who love gambling are betting with their bookmaker or engaging in gambling with their friends, betting sports. So Dr. Custer said, Steve, being against gambling is like being against drinking. You can close a bar at midnight, you won’t stop one alcoholic. You can close the bars at five o’clock, and you won’t stop the alcoholics. They will get the booze. Same with drug people, they’ll find a way to satisfy the craving. What is important is that you have a place to treat them.
cw: You seem to have a beef with the Massachusetts regulatory process?
wynn: Someone decides to do something, like legalizing an activity that heretofore was banned, and everybody says, well, you know what we’re going to do? We’re going to regulate it. The assumption in that statement is that, without proper regulation, everyone will run amok, terrible things will happen. That primary assumption—that without regulation, everything will collapse—that’s false. We’re not talking about a floating craps game in the back of a bar somewhere. You can’t run this business as a public company without self-regulation. You have to have accountability. What we see when something is first legalized is the creation of an agency and then a very self-conscious, worried approach. Are we doing this right? Are we going far enough? Because without every last measure of anticipatory regulation, the thing will explode. That assumption is totally false. There isn’t anything malicious about it. It’s just the way it is. We’ve seen it before.
cw: It’s been said you threatened to pull out of the Massachusetts competition when the state Gaming Commission began investigating your Macau operations.
wynn: I wanted to find out whether our presence in Macau, per se, was a disqualifier. So I placed a call to the chairman [Steve Crosby], one of two phone calls I made to the chairman. He was in a meeting. He returned my call with Judge [James] McHugh. I guess he wanted two people on the call when the police interviewed him. I said, Mr. Chairman, I don’t have any desire to waste your time or my own. I want to ask if our involvement in China is itself a disqualifier. If it is, I’m certainly not going to surrender my operation in Macau. He said, Mr. Wynn, what we’re interested in here is the standard you employ to run your business in Nevada or anywhere else for that matter. Our job is not to license Macau or regulate Macau. Our job is to understand how you deal with each place in which you are engaged. Does that answer your question? I said, if that’s the answer, you have answered my question. That was it.
cw: But the lawsuit against the Gaming Commission filed by Caesars Entertainment suggests Crosby begged you to stay in the Massachusetts competition.
wynn: Bullshit. That’s not what happened and Gary Loveman [the CEO of Caesars] knows that’s not what happened. I told Gary what I said just like I just told you. Next thing you know he torqued it around and got creative. Made me angry.
cw: If I understand correctly, you also called Crosby to raise concerns about the commission’s timetable for suitability hearings and an Everett referendum. The commission thought the suitability hearings had to be concluded first and you felt the referendum was needed to prepare for the suitability hearings. The commission changed its position after your call, right?
wynn: They reversed their position, not to do me a favor but because they found out that there was a conflict.
cw: In your filing with the commission, you raised a number of problems with the state gaming law that you feel need to be changed.
wynn: Each of those things is critical or we wouldn’t have made an issue of them. I am not going to lead this company over a cliff. I am not a Judas goat. I’m the CEO of a public company. I’m dying to build a hotel for a billion and a half dollars in Boston, and I’ll bring my capital and experience full tilt to the job personally. But I want the state of Massachusetts to have the same commitment to us as we do to them.
cw: One of your concerns is a requirement that anyone receiving winnings of $600 must pay withholding on those funds at the casino. Why is that bad?
wynn: You can’t do that. You can’t treat everybody like they’re a deadbeat dad when they cash out $600. That’s like everybody is presumed to be a bum. A table-gaming person comes in three days in a row. He loses on Friday. He loses on Saturday. He loses $10,000, but wins $600 on Sunday. He’s lost $9,400 and they take taxes out. My customers won’t put up with that and I won’t be part of it. It’s an outrageous mistake.
cw: Several lawmakers have told me that your point about withholding taxes is valid and the provision should be changed. But regarding many of your suggestions—tax parity with the Wampanoags, for example—they are wary of reopening the debate about gambling.
wynn: That’s very interesting. Is the leadership of the Legislature in Massachusetts dedicated to the pursuit of excellence or is this a political ping pong game? If it’s a political ping pong game, it’s not the right place for us.
cw: Another of your concerns is the requirement to provide space for compulsive gambling services inside your hotel. What’s your problem with that?
wynn: We’re not qualified to run a compulsive gambling facility. I’m not even qualified to pick somebody to run it. The state of Massachusetts is qualified and will have the revenue—from us—to do it. To put a pathological gambling facility in a casino is to put Alco¬holics Anonymous in a bar. Anybody that wants me to do that is someone that I need to think about.
cw: In your submission to the commission, you said you’d walk away from Massachusetts if these problems aren’t fixed.
wynn: I don’t know how else to start this conversation to get the state to negotiate with us in order to do this well. So we put in there that if we don’t get these types of changes, we have the right to leave. That’s always true. If I don’t have a casino in Boston, I’m not hurt. But if I have a casino in Boston that’s no good, I’m destroyed. We do it right or we don’t do it. That’s a black and white statement. It’s sharp-edged. Those issues that we’ve highlighted, there is room to deal with them reasonably and you can give someone comfort that if you’re not going to deal with it today you can do it tomorrow. I want the discussion. Otherwise, I’m a dope.
cw: When will you pull out if the Legislature hasn’t acted?
wynn: They’ve got time to do this. There isn’t anything we’ve asked them to do that isn’t solvable one way or another. But to not mention it would be an act of gross irresponsibility to my stockholders, my company, and to the state of Massachusetts. Nothing that we’ve suggested has anything to do with anything except informing the state that certain things they’ve done are counterproductive to the goals of the legislation and will sabotage the very thing they want to build. A couple of them are so critical that they would really undermine the enterprise and, on those issues, if you aren’t going to fix it, I’m not playing.
cw: But Mohegan Downs/Suffolk Downs isn’t complaining about the law.
wynn: They just want me to go away. So they’ll run PR. [He adopts a phony-sounding voice.] Steve Wynn is trying to tell Massachusetts what to do. Steve Wynn is this or that. We love Massachusetts. We’re compliant. We’re grateful. We wouldn’t put any politician in an uncomfortable position. Aw shucks, putting politicians in uncomfortable positions, breaks my heart. Well, hello? I’m not apologizing for anything. I’m just trying to be helpful and tell the truth whether you like it or you don’t.
cw: How concerned are you about a referendum question making it on to the ballot this November repealing the gaming law?
wynn: There ought to be a consensus of the people that live there that it’s a good idea because without that consensus it’s never going to be a good business. When a legislature does it unilaterally and someone says let’s have a referendum to cancel out those assholes in the capital, I’m saying to myself whoa. I hope there isn’t a serious issue about the acceptability of it in Massachusetts. That would be disappointing and confusing. When states have ballot measures, my take on this, after having had this job for 40-odd years, is that it’s inappropriate for us to work it.
cw: You’ve said your proposed casino in Everett would be Mohegan Sun’s worst nightmare.
wynn: Absolutely their worst nightmare. I’ll take all their top-end table business. Just like that [he claps his hands together loudly]. The only interest of the Indians is to smother this threat to their main business, where they have billions invested.
cw: You don’t seem to have a high opinion of Mohegan Sun.
wynn: No one who was making a major, serious effort would have ever, ever proposed a three-star hotel in the United States of America in my business today. A three-star hotel is a 50-square foot bathroom. You walk in and there’s a toilet, a single sink, and a tub-shower combination. Those are 350-square-foot rooms. It’s not done. It’s outrageous. You’d say it’s either a total amateur, someone who has not done their homework, or it’s someone who is saying our major effort is to control this process because we have something going on somewhere else. Clearly, having a hedge fund buy 60 percent of the place, having one guy do the shops, another guy doing the hotel, where’s your heart in this project? It sounds like you’re trying to finance it out like a shopping center developer.
cw: So you believe Mohegan Sun’s real goal is to limit its business in Revere to prevent the Connecticut casino from being hurt?
wynn: We’re going to pay 25 percent on table games. We’re not going to have anything to do with Connecticut. They have no tax on table games [in Connecticut], zero. Now, you’d have to be critically handicapped not to see that, from a Massachusetts point of view, it’s a disqualifier. To pick Mohegan Sun, if you represent the state of Massachusetts, is an act of gross irresponsibility.
cw: Why do you think your company is better qualified to run the casino?
wynn: The state of Massachusetts, through its elected representatives, passed a law that said they wanted to create tourism, tax revenue, and jobs. Two of those three things are effects, one of them is a cause. They’re not equal. They may be the stated objectives, but employment and tax revenue are the result of increasing tourism in Boston. Unless you have a place that brings people from outside the region in, you don’t have the growth and the stability that offsets the rising cost of business. You need to have a growth path in these businesses. When all you do is cater to Everett, Boston, and the immediate area, you have a good first year, and then you stay there. That’s what happens with the riverboats. There’s an economic downturn in the town, down it goes. I’m not in that business. We’re a destination resort kind of place. I backed out of Philadelphia but I stayed in Boston because Boston is a destination city. It has museums. It has all those international students with all those international parents. And I know a lot of them and I’m going to get them to come to our place and bring their money from China, Mexico, and Brazil and every place else.
cw: How well do you think your proposed casino will do financially?
wynn: I believe the cash flow, the EBITDA [earnings before interest, taxes, depreciation, and amortization] on the hotel will be around $300 million. This place did $480 million last year. Macau did $1.325 billion. I think Everett is a $300 million business, as we’ve drawn it, or better. If I spend $1.5 billion and I get $300 million, that’s a 20 percent return on capital. But I am going to put in as equity $500 million or $600 million and borrow $900 million. So the return on the $500 million or $600 million, that’s pretty healthy.
cw: What’s happened to your Las Vegas business as casinos open across the country?
wynn: Las Vegas business has suffered. The local business in slot machines and blackjack and craps is the same or less than it was in 2004 because of all the regional gaming and the Indians in California. Las Vegas is still the destination of choice, but instead of coming three times a year they come once and go closer to home. Las Vegas is surviving and growing only because of international business. They come from Latin America, from Europe, and from China. Fifty-two percent of my table business is Chinese, 24 percent is Latin. My American business is 25 percent. Having a casino in Boston will give us a local presence.
cw: The Gaming Commission, on a 3-2 vote, awarded a slots-only license to a Plainville facility, largely because it promised to keep a harness-racing track there going. Do you fear the commission will side with Suffolk Downs to keep the horse track open?
wynn: Am I worried? No. That is so preposterous. The race track business is dead. Hello? What do you need, a building to fall on your head? Thoroughbred racing is dying. Every slot machine joint put in every track hasn’t made one speck of difference. Do we assume that everyone is ignorant of the facts, that no one does any research on gaming, that no one in government is capable of knowing what’s going on outside the room? I have no patience for that kind of foolishness.
cw: What is your strategy for Everett?
wynn: I like being there. I’m putting up with a lot of stuff to get through the process because I like the opportunity. I think we’d be a big hit there if we’re allowed to run the business properly. I think everybody would like us once we’re there because it will be tasteful, it will be elegant, it’ll be fun to go there. And the casino—you won’t ever have to see it when you’re in my hotel and my restaurants. It’s a place where children don’t go, with separate access from the garage. You have to walk down the hall, go through a separate foyer into an isolated casino. I want a hotel first in Boston that everybody who doesn’t give a damn about a casino wants to stay at because you can charge in Boston. Boston’s got a good average room rate. There’s rich people there, and a casino is not for poor people. I’m not interested in poor people in a casino at a resort hotel. I’m interested in people who can afford this and have the intelligence and the wherewithal and the sophistication to know the difference between good and bad, clean and dirty, pretty and ugly. I’m the pretty building guy. It’s not for everybody. So all that populist crap is not for me. I build places that are destinations. You want me and my company, that’s it. If you don’t, my feelings won’t be hurt. We’ll retire gracefully and thank everybody for their time. But if we’re going to do this, this company doesn’t do half-ass jobs. The other guys have a completely different agenda.
cw: What’s Mohegan Sun’s agenda?
wynn: They will spend the least amount of money. The guys who are supposedly being picked will have bupkus invested when this is over. They will not have a horse in the race. They’ll be up the street where they come from. They will have laid off the hotel to some operator. They will have laid off the retail. And they’ll have laid the capital off to a hedge fund that will own 60 percent of the operation. What the hell a hedge fund is doing there I don’t know. You couldn’t have picked someone who was more comparatively disqualifiable unless you picked the other Indian tribe. You can’t vilify me enough to overcome the obvious disqualifier of Mohegan Sun.
cw: The conventional wisdom all along in Massachusetts was that Suffolk Downs was going to get the license. Did you hear that?
wynn: Joe O’Donnell let everyone know from day one that Boston was his. [He puts on a Boston accent.] I’m the guy from Harvard. Suffolk Downs? Don’t worry about it. When I was in Foxborough, I bumped into Joe one day. He said, I wish it had been you with me, Steve. Total confidence. Very successful man. A man of respect. He let everybody know—perhaps it was a strategy to discourage competition—that Boston was his. And there isn’t anyone in America in my industry who wasn’t told that one way or another by him and [fellow Suffolk investor] Richard Fields. They laughed at me. And one of their partners was Steve Roth from Vornado. He came on my boat and he said to me, we’re going to kick your ass. He actually said that to me.cw: Have you had any more dealings with O’Donnell?
wynn: When we came to Everett, I saw O’Donnell and he gave me the same speech. Steve, you’re going to lose, you’ve got the wrong site. I wish you had been with me, but you’ve got no chance. When Caesar’s took a hike, or got tossed, I called him. He said, what took you so long? I said, what do you mean? He said, I thought you’d have been here already. This is your chance. Look, I said, I’m calling because I wanted to figure out what your deal is. He said have your guy talk to my guy, we’ll tell you everything. He said it’s a good thing you’re calling me because you have no chance where you are. The next day I called him back and he asked me, when are you going to withdraw? I said, based on our conversation yesterday, I am calling to withdraw my inquiry to you. I am not withdrawing from Everett. Sorry. Oh well, he said, you’ve got a problem. Maybe so, maybe so, but Suffolk Downs is not the problem.