Carlton Geer, who ran the Showboat Mardi Gras Casino in East Chicago and the Showboat Hotel Casino in Las Vegas before the properties were sold to Harrah's Entertainment, founded the Global Gaming Group in 2001. The unit now includes a team of three partners and financial analysts who help gaming companies and entrepreneurs figure out what their properties are worth and the best way to maximize value.

Geer, a senior vice president with the Global Gaming Group, received CB Richard Ellis' Innovation Award last year for creating a new market niche for the company. The unit is one of the first at CB Richard Ellis, one of the world's biggest brokerage firms, to earn significant revenue from consulting fees.

Question: You had operated several casinos by the time you were recruited to run the Global Gaming Group in 2001. How did you make the transition into real estate?

Answer: I spent the first 18 to 20 years of my life in the gaming business. In 1998 our company, Showboat, was purchased by Harrah's and I found myself having the choice of taking the change of control clause in my contract or staying on and I chose to leave and retire. During that retirement period I started looking for small casinos. I found there was not really a marketplace that allowed buyers and sellers to get together and allow transactions. As a consequence I found that there was no liquidity in casino transactions. I remember thinking in 1999 and 2000 that if I wanted to buy apartment complexes I could go to the local commercial real estate brokerage house and probably get help with funding, get all the due diligence information and get a transaction completed in a few months. You couldn't do that with gaming. In late 2001 I got a call about this opportunity and met with the managing director who is now my partner, John Knott. I found their mission statement was exactly right, and that is, creating a forum for gaming properties and trades.

How is your team organized?

I was the only member of the group for about a year and a half. John Knott then decided to manage this particular office and become my partner. We have a junior partner, Michael Parks, and three gaming analysts who assist us. We just started a resort retail division that does only retail analysis, from analysis to leasing to sale of retail at resorts. It is a continuation of our philosophy of cradle to grave services. You bring us an idea or you have a property and you need help we can help you in every avenue of that property as long as it's gaming or resort related.

Can you talk about the consulting end of your business? How are you difficult from a typical brokerage firm?

We do everything related to gaming from pure consulting to M&A transactions. We have a knowledge base here that is not typical in either an investment bank or a real estate company. We do everything from feasibility work to bankable pro formas and financial statements to development pro formas. We will help them on the financial advisory side if possible. The consulting side gives a knowledge base that was unique and created differentiation between us and either other brokerage companies or investment banks. The way it's helped us is that we understand the markets.

One example of that is that we did a study of the Gulf Coast market right after Katrina. We analyzed and projected what the Gulf Coast market was going to do from a supply and gaming win basis up until 2011. From that we were able to identify opportunities at other places that other people couldn't identify and as a result, we were successful in representing Copa Casinos in their purchase of the Gulfport Grand site from Harrah's. We understood the opportunity probably better than anyone else at the time.

That gave us leverage in terms of being able to understand the kinds of transactions that were going to benefit buyers and sellers and the kinds of value ranges that were going to allow the deal to get done.

Can you talk about the recently-formed resort retail division and how that got started? To lead the group you recently hired Patrick Done, who used to work for Olympia Group and Howard Hughes Corp.

(Venetian owner) Sheldon Adelson had surprised the world by selling a fully leased second floor asset, the Grand Canal Shops. It's a unique transaction in the gaming world but a very typical transaction in the real estate world. What we see is a convergence of real estate and gaming happening. Gaming as a business opportunity also happens to have some of the largest real estate assets in the world. If we start applying some of the traditional practices of real estate into the gaming markets we believe we can benefit the owners of those properties and further develop relationships. (The resort retail division analyzes) how many square feet should be devoted to the retail component of the particular project as well as the leasing side and what the financial projections are going to show.

We also look at the determination of whether you want to pre sell or sell fully leased or not. We see that as being a huge benefit to our clients worldwide and another leg of the stool of the advisory services we offer.

CB Richard Ellis also has hired a top casino appraiser. What does he bring to the table?

CB Richard Ellis has the largest hospitality division in the world. As part of that they hire appraisers who are hospitality-oriented but also gaming-oriented. We have a division of our appraisal unit that has an office in New York as well as on the West Coast in Seattle that's in charge of gaming. We happen to be lucky in our Las Vegas office to have hired Larry Snyder, who is one of the leading gaming appraisers in the United States, to do a lot of our work.

Part of your job is evaluating what casinos are worth. That's a complicated process, especially with land prices skyrocketing on the Strip. What are some of the factors that you consider?

Whether you're representing the buyer or representing the seller, it's important to frame the values appropriately. Transactions only occur if the buyer and the seller see those values as being fair. We typically look at a value in as many as 20 different ways. If there's vacant land we do a comp analysis. We also do a residual land value analysis, in other words, what is the value of the land (after you develop the site). What is the profit a developer will get from developing based upon a density on a particular site? Residual land value is looking after those profits, the amount of money the developer would be willing to pay for that land to get a return on investment. We do a replacement cost analysis, according to the square footage of the facility. We do five-year financial pro formas, looking at the way they are operating in their competitive set. We do what we call an enterprise value to EBIDTA multiple. In other words, what would a public company be able to pay without diluting (value to shareholders). The reason this is important is that the perspective of public companies is driven a lot of times by its shareholder value. There's all of these different methods that we then line up and take a range of values and we can frame the values depending upon the asset, within $50 million or in the case of large transactions, it could be $100 million. That way a buyer understands what to expect and a seller definitely understands what to expect.

Aren't there still a lot of intangibles out there because we're talking about the Strip? There's only one in the world. How do you put a value on that?

The Strip is like beachfront property. They're not going to create anymore. The properties are going to become more scarce every day. Consequently, we see the valuations and prices have gone up and are continuing a trend. We may see a time in 20 years when Strip property is worth $80 million (per acre). The point is that the trend on the Las Vegas Strip is that because of land values you have to have higher density. Operators are better yielding the square footage of their buildings and their land by putting in additional retail, food and beverage, nightclubs, hotels, as well as casinos and gaming. What we've seen as a trend is that gaming as an impact on overall revenues has gone from 65 percent to 45 percent and lower. What we're seeing is the integrated resort approach.

We're getting bigger developments, higher density on the land, and as a consequence the land value really becomes less critical, which then makes it more valuable. As the profits rise and the densities get higher the land value as a component of the overall project cost gets lower. As long as it's in a certain range developers will be willing to pay those ranges. As land becomes more scarce and as developments become higher density that land value is surely going to rise over time.

You've been following the bidding war for Aztar Corp. and its 34-acre Tropicana site on the Strip. What do you make of bids in the $24 million per-acre range?

I think the companies that are bidding have a strategic plan. Pinnacle and Ameristar were looking at it from a strategic fit standpoint. They were able to get the Atlantic City operation as well as the Las Vegas operation as a development opportunity and a method of driving regional business to lower tax rate environments. It's kind of a continuation of Harrah's philosophy of distribution. Columbia Sussex has the same philosophy. Colony Capital already has great distribution throughout the United States and has operations in Atlantic City — maybe it's not as much a strategic fit for them. No matter who wins it's going to be an interesting acquisition.

The Tropicana site is one of the best sites in the world and I'm sure they have plans to develop a project that's going to make that acquisition worthwhile and be accretive to shareholders, which is the whole driving force behind an acquisition like that.

Some analysts have been critical about the price given what the bidders can afford. You've said there's many ways to put a price on a casino. But given rising land prices on the Strip and the theory that prices are only going to go up, could these going rates for the Tropicana end up being a bargain 10 years from now?

It's hard for me to comment negatively on what Dan Lee's plans are with Pinnacle or what Craig Nielsen's plans are with Ameristar until I know what those plans are. I think if the companies buy the properties and let them sit as they are, then yes, they're paying too much. I don't think either of those individuals have that in mind and I don't think Columbia Sussex has that in mind. I believe that they know they're not buying Aztar — they're buying a development site in Las Vegas and plan on spending billions of dollars necessary to do development with a density that's going to be a home run for them. My belief is that they will create a home run project that will be a home run project for their company, for their shareholders and for Las Vegas.

What do you think the Strip is going to look like five to ten years from now?

If you look out this window and you look north you see scarcity of development. If you look south you see dense development. What you're going to see is a uniform density of development. Each succeeding property is probably going to be higher density and offer more entertainment alternatives on their property than each of their predecessors. The Mirage was the first megaresort in its design. What we've seen is that successive generations have taken that to a different level.

You've said in the past that in a few years, Bellagio might not have a lake in front of it. Are you really saying that land prices are going to force operators to build on underused land in the next few years?

You'll never see another Steve Wynn purchase of 210 acres like (the Wynn Las Vegas/Encore site) — with room to build multiple properties. Bellagio was built at a time when land prices weren't as critical. I think they have around 110 acres. As a consequence they have the ability to take a lot of space and devote that to so-called emotional attractions. Some can argue that those emotional attractions are going to draw visitors, that it's part of the allure of Las Vegas and that (visitors) eventually end up in the Bellagio spending money. The fact is that at some point Bellagio is going to look at the lake and say, we have so many acres devoted to a water show that at some point it is going to be passe to people. At that point they have a decision to make as to what's going to be the new attraction. My bet is that it's going to be something that includes nightclubs and hotel rooms and restaurants and casino facilities and all the components that are helping people have fun. Having fun also equates to spending money and yielding money on a square foot basis. Our belief is that within 10 years Bellagio will do away with at least some of its fountain.

What about some of the older hotels on the Strip? Do you see the single-property hotels yielding to high-rise resorts in the next five to 10 years?

I get people, very successful entrepreneurs and some of the wealthiest people in the world, who ask me, 'How can I compete with MGM, how can I compete with Harrah's.' I say, 'How does Steve Wynn compete?' The point is you have the issue of the corporate versus the entrepreneur and the individual. Steve Wynn has proven over and over again that if you have the concept, the abilities, the ability to get money if it's not even cheap and you create something unique and enticing and exciting to people that you're going to be very successful. I don't believe it's a matter of these single entities going away because they're single entities. I think that some of the older properties are developing some functional obsolescence. Today is not the same as it was 30 years ago. As a consequence, properties that aren't offering this mix of entertainment and retail and nightclubs and food and beverage and hotels and other factors that draw people to Vegas probably aren't making the kinds of money they really can on the land they have. You have to look at what is it doing versus what's the opportunity.

Once the opportunity becomes more valuable than the current operation, then people start imploding. We're going to see that with the New Frontier and the Stardust — it's a perfectly fine building but it's not achieving the financial impact it could based upon the opportunity of its location.

You're going to see that with other properties. It's not that they are single properties or that they're not part of a corporation. It's because of their location and land values and the opportunity.

CB Richard Ellis is now working with the Sahara to explore a sale of that property. What do you see happening with the Sahara years from now?

The big gaming companies are always looking for the next opportunity. A lot of people have looked at the Sahara. It's a great location. They've done some really great work in redeveloping the property over the last four years. They have a great site for future development projects. You have vacant land at the corner of Sahara and Las Vegas Boulevard and 11 acres between Paradise and Joe W. Brown Drive. Those sites will be purchased and development done within the next 10 years. The Sahara is an operating entity that is cash flowing and has some opportunity in the near term. It will probably be viewed as a demolition project at some point in the future, depending upon what the owner's objectives are as far as return on invested cash.

Does that mean the property's return today is less than its future potential?

You have to look at everything in the context of what the opportunity is. Owners have certain objectives. They want to have a higher return on invested capital. They want to have more customers. They want to create new markets. It's about what's going to be functional and viable in 10 years or in 20 years. Harrah's is looking at that in each of its operations. MGM Mirage is looking at that. Wynn is doing that and so are Boyd Gaming and all the other Strip property owners.

There was an executive who said recently that the new barrier to casino development on the Strip is land prices whereas the primary barrier used to be licensing — the unwillingness by individuals to open their financial records and personal history to get a casino license. Do you agree?

The traditional barriers to entry were licensing and capital sources. In the past gaming has been a disfavored asset class for most capital sources. They were afraid of it. There was not that much liquidity. They didn't know exactly what to do if they got (a casino) back (from the operator) and it didn't perform. Today, capital sources are going after gaming properties, particularly those companies that have multiple properties, mitigated risk and have demonstrated in the past that they have minimized risk associated with a loan. Land is a part of the development process. The challenge to operators is that they have to have a good enough business plan, a good enough strategic orientation that they can create profits on that land.

Land is never going to be more than 20 percent of a property's development cycle. I don't think land prices will ever reach a point where they're a barrier to development. Land prices are a consequence of the opportunities developers see in the land, not the other way around. The land prices don't dictate the opportunity; the opportunity dictates that land price. The fact that there is so much interest in Las Vegas, the fact that there's an economic scarcity of land, drives the price. Until that interest goes away, land prices will remain the same or continue to go up.