A casino that once was the pride of downtown Las Vegas now needs rent relief to survive.
That's how dire the financial situation is for Binion's, according to a senior company official.
Brian Arlin described the property's fiscal straits in letters to landlords who own the ground under the historic Fremont Street casino.
"The situation with respect to both your holdings and mine is perilous," wrote Arlin, senior executive director of finance for Binion's parent TLC Casino Enterprises Inc.
The letters were included with documents in a lawsuit against TLC, which also owns the Four Queens. Landowners filed the lawsuit Clark County District Court on April 30, alleging the company violated its lease terms.
TLC owner Terry Caudill declined repeated requests to comment on the situation. John Peter Lee, lawyer for the landowners, was unavailable for comment by deadline.
But Arlin's letters depict a company seeking deep discounts on its rental costs to survive. In the first letter dated Feb. 13, Arlin discloses the problem, but doesn't say how much money the company needs to save.
"We are now faced with the difficult decision of having to ensure that the business which is essential to all of our livelihoods continues in operation," Arlin wrote.
In the second letter dated March 13, Arlin gets more specific.
"Although we have substantially reduced expenses at the property, we are still not able to generate a positive cash flow," Arlin wrote.
He said a market study valued land underneath Binion's at $609,800. He then says "in a normal market" landlords typically fetch 6 percent to 7 percent annual return, which would put fair market rent at $36,588. He goes on to offer $48,784 annually, which would represent an 8 percent return.
But according to a copy of the lease submitted with the lawsuit, rent for the land is set at $252,000 annually.
"We understand this is a significant adjustment to the current rent, but we also believe that without an adjustment of rents to a fair market value, our hotel/casino operation faces an uncertain future."
In a third letter, dated March 31, Arlin offers the landowners a 5 percent cut of future profits from a sale of the property.
He says the alternative is to make critical cuts that would undermine the property's business plan.
"We have been dealing with this decline by reducing staff and expenses significantly, but any further reduction in staff or expenses will adversely affect customer service and thus result in a loss of even more business," Arlin wrote.
The ownership situation at Binion's is complex. TLC agreed to a $32 million purchase of Binion's in June 2007 and took over in January 2008.
The purchase, however, covered only the buildings and some of the land. At least four of nine parcels of land under the main casino and hotel property are owned by outsiders who charge TLC rent, an arrangement previous owners of Binion's and other downtown casino owners have managed for decades.
Caudill's purchase was viewed as a lifeline for a property that had suffered from hard times and mismanagement under multiple owners since 1998, when Jack Binion stepped down from a 34-year reign as owner-operator.
In 2004 the property closed for several weeks after regulators seized the cash cage to ensure then-owner Becky Binion Behnen had enough cash to operate the property.
"Binion's had always been the absolute lifeblood of downtown," said Anthony Curtis, publisher of the Las Vegas Advisor. "When it actually shuttered, it was one of the strangest feelings you could have experienced."
Curtis said a shutdown now could damage all of downtown.
"You don't want another Lady Luck situation," he said of another downtown casino that closed in 2006 with plans to reopen that still haven't come to fruition.
Gaming Control Board Chairman Dennis Neilander says officials recently verified Binion's bankroll, the money it has to pay bets, and said the property is fine in that regard.
"We did a bankroll out there a little while ago just to make sure their cash position is adequate," Neilander said. "They have adequate bankroll."
Frank Martin, an analyst who specializes in downtown Las Vegas, said the market is not well-prepared to weather the recession because owners trimmed much of the fat from their properties during the recession that followed the September 2001 terrorist attacks and have little room to cut.
"To recover from this downturn (and) loss of revenue, they would have to far exceed those cost cutting measures introduced in 2001," Martin said.
Contact reporter Benjamin Spillman at firstname.lastname@example.org or 702-477-3861.