Icahn poker was played and Carl just raked in the pot – againBy Ken Adams, CDC Gaming ReportsSeptember 9, 2017 at 11:43 amCarl Icahn just sold the unfinished Fontainebleau Las Vegas for $600 million making a tidy profit of $450 million on the deal. The $2.6 billion, but still unfinished Fontainebleau has been standing half finished since declaring bankruptcy in 2009; Icahn bid on the property at the time and took possession in 2010. As he had done with TWA in the 1980s, the first thing he did was sell off whatever he could of the assets; in the TWA deal there was a lot to sell. With the Fontainebleau there were no airplanes or prime routes, just some furniture to sell. But whatever there was to sell, Icahn sold it, likely netting about $5 million. For the big payoff, he had to wait seven years. The final check was probably worth the wait.The Fontainebleau was not Icahn’s first bet on Las Vegas casinos. In 2008 he sold the Stratosphere, Arizona Charlie’s Boulder, Arizona Charlie’s Decatur, and Aquarius Casino Resort for nearly a billion dollars more than he paid for the properties. Icahn had begun investing in the Stratosphere in 1997 when he bought some of the property’s debt. That is Icahn’s specialty, buying the debt of distressed properties and holding it until conditions change before unloading it. He plays an extremely high-stakes game, making large wagers on underperforming properties and then as the song goes, Icahn knows when to hold’em and when to fold’em. The game takes nerve and a large bankroll and Icahn has both. Forbes terms Carl Icahn an investor and says he has $15.7 billion making him number 26 on the list of the richest people in the country. To say that Icahn is an investor is to undervalue the amount of risk he takes; in truth Carl Icahn is more of a gambler than anything else. He routinely wagers $100 million to $ 300 million on assets he may be forced to hold for many years. Patience is the key to Icahn Poker; both the Fontainebleau and Stratosphere investment took nearly ten years to come to fruition. In the case of the Stratosphere the casinos were operating under Icahn’s management company and thus did produce cash during the holding time, but the Fontainebleau was just an unfinished dream with no cash flow. It takes nerve and faith in one’s judgment to make those bets.As he has done in Las Vegas, Icahn has made a couple of “casino plays” in Atlantic City. In the 1990s he bought and sold Trump debt several times, making a tidy profit in the process. In 2010, he bought the Tropicana Atlantic City Resort, adding it to the other Tropicana Entertainment Inc. casinos he had recently purchased. Seven years later, Icahn’s operating company still runs the Tropicana in Atlantic City; although, he has sold some of the other assets of Tropicana Entertainment in other states. It may be years before he can find a way to monetize the Tropicana as Atlantic City is a difficult market- so difficult that even Icahn finds Atlantic City a hard place to make the big killings for which he is famous. In fact the city is the home of his most famous failure. The Trump Taj Mahal was one of those bets he lost and he says it cost him $350 million. In the end, he ran out of patience and folded. In October 2016, the Taj Mahal bid adieu to its last customer. Icahn did recoup a portion of his investment when Hard Rock International bought it for an undisclosed sum; analysts’ estimates put the price at $50 million.Carl Icahn has frequently been the subject of criticism for his tactics because he is always an outsider. For his gaming operations, he hires casino-people to run the casinos, but Icahn does not really understand the industry and he does not seem to care. Over the years, I have been guilty of some of that criticism of Icahn and other outsiders like him trying to stake a place in the gaming industry. In my mind and the minds of other casino people like me, the outsiders were doomed to fail; they just didn’t understand our business. In the 1980s, there were several rich Japanese and a California farmer bent on buying casinos on the Las Vegas Strip. They had lots of money, but no knowledge of the casino business. They claimed it was totally unnecessary, it was just business and any good business person could do it. So we cheered when they failed.However, there have been some outsiders who managed to do pretty well in the casino world; Kirk Kerkorian, Sheldon Adelson and Carl Icahn were all outsiders when they first came to town. They had not worked their way up from a craps table, but that did not seem to hamper them. They learned enough about gaming to build a fortune by owning, operating and selling casinos. And in the case of those three, they were more than successful. They all turned out to be among the richest and most successful investors in the history of our industry. Adelson is more than an investor; he has kept what he bought, improving and expanding it. Today Adelson is the richest casino guy in the world. Kerkorian was more like Icahn than Adelson, except he put more effort into becoming an operator than Carl. Casinos were never Kerkorian’s only interest and like Icahn, Kerkorian continued to invest in other industries until the end.And that is the point of my little tale. The most successful people in the casino industry are turning out to be savvy investors and businessmen rather than old time operators. The days when a casino operator could build an empire from a single craps table or a bingo game as Bill Harrah did are gone. There may be one major exception; Steve Wynn is a casino guy. He has lots of talents, but he worked his way up from… Oh wait, Wynn worked his way up from another business with a really good real estate investment. He bought some vacant land on the Strip and sold it to Caesars for enough money to buy into the Golden Nugget. The casino industry has matured; dealing the games may be a good foundation for managing a casino, but gaming experience by itself is not enough to operate at the highest level in the industry in the 21st century. And it certainly isn’t enough for a seat in the high-stakes game of Icahn Poker.