Nevadan at Work: It’s always been about numbers for gaming consultant

Ever since he was a child Jacob Oberman has been fascinated by numbers, whether they were in a baseball box score or dealt during a hand of blackjack.

"I used to add the sports scores when I was 3 or 4 years old, trying to figure out how much team A had beaten team B by," Oberman said.

His affinity for numbers led him to Cornell University and a place in the School of Hotel Administration, along with internships with MGM Grand Las Vegas and Deutsche Bank Securities North American Equity Research for Lodging, Gaming and Leisure.

"I knew I wanted to go into the gaming industry," he said. "Cornell gave me a very diversified business education. There are a lot of Cornell alumni in Las Vegas."

Today, he is director of gaming research and analysis with CB Richard Ellis' Global Gaming Group in Las Vegas. The division has provided analytical support for more than $1 billion in casino transactions since 2004.

But just don't compare Oberman to Wall Street analysts, whom he describes as "stock pickers."

"We are consultants," he said. "But our niche is that we are a real estate brokerage firm with a dedicated gaming brokerage and consulting group."

Question: Can the gaming industry help diversify Nevada's economy?

Answer: Obviously, gaming has been the backbone of the state's economy. What you've seen over the last few years is the nongaming elements expand within a casino. So, 30 to 40 years ago, it was just a casino and a hotel. Now you've seen an expansion into food and beverage, retail and nightclubs. That stuff in itself is where the gaming industry has helped diversify the economy. It has had to evolve as gaming has expanded to other states. So in Las Vegas the gaming industry has had to evolve into the entertainment industry.

Question: Was being a gaming industry analyst always your career goal?

Answer: Numbers always fascinated me. Then you come out here and you are kind of naturally immersed in them. I don't necessarily like to gamble, but I like the numbers that go into it. When I was in high school I was looking at schools and careers. Ultimately, I knew I wanted to go into the gaming industry. I had the opportunity to go to Cornell University to get a very diversified business education. When I graduated I said I'm going to come back here and get some industry experience and see where that takes me.

Question: What does a gaming research and analysis director do daily?

Answer: We support brokerage transactions by providing analytical data to support the transactions. For example, if our brokerage team is listing a gaming property, we will help show the operating performance of the property. Most brokers don't know the ins and outs of a casino income statement. It's not like you are selling a building where there is revenue, income and a cap rate. We are here to analyze data, provide market expertise and explain the market. What I spend 90 percent of my time on is being a consultant. We do feasibility studies for new casino projects around the world, which include revenue projections. We advise companies, individuals or funds looking to acquire existing gaming assets. We'll look at the particular market and say this market has some upside, a property has some potential or it doesn't. We also advise companies that are looking to participate in RFPs (request for proposals) in new states such as Kansas.

Question: What will the Las Vegas market look like in 2011?

Answer: The mix of customers is going to change. There are going to be more convention customers coming through the door than leisure customers. With that there are some dynamics. Some of the analysis we've done in the past shows many leisure customers gamble a bit more than the convention customer because frankly they don't have to dedicate a lot of their day going to meetings or an expo. They're here to enjoy themselves completely and not just for part of the day. Twenty percent of visitors to Las Vegas come for a convention or meeting; it was obviously higher a few years ago. It will be growing this year.

Question: What was the biggest surprise in the gaming industry in 2010?

Answer: I don't know if you would call it a surprise, but the potential passage of Internet poker. We did an analysis in July and we think the United States, forgetting about the foreign players who would play on U.S. sites, would generate $10 billion in revenues. That's a stabilized figure after the industry has a few years to ramp up. Maybe by the third year after passage. But given the viral nature of the Internet it could grow pretty fast. Given what the legislation as written said, you would need a license. Obviously, a huge concentration of gaming licenses in the U.S. are in Nevada and we felt given a company like Harrah's (now Caesars Entertainment Corp.) it would likely create a lot of jobs in Nevada. And the companies here would have another way to market their product, a new group of customers to market their product to and ultimately grow their customer bases with more people coming to Las Vegas. We felt visitation to Las Vegas would ultimately grow because of Internet poker, if that legislation had passed.

Question: What's the lingering impact of Echelon and Fontainebleau?

Answer: They've both been stopped for over a year. You would have a few thousand construction workers on the job if they were to resume. There are the permanent jobs and with those permanent jobs you have the multiplier effect in the community. It's not something we've done a lot of work on. There are analysts out there who believe that one job on the Strip equals two or two-and-a-half-jobs in the community. We don't anticipate any new construction for some time.

Question: What do you think it will take for Wall Street to invest in the Strip again?

Answer: We have to see Aria and Cosmopolitan start to generate solid cash flow. That has to happen first before anybody could pencil out a return on investment on new development.

Question: What would that cash flow number be?

Answer: Whatever Wall Street wants it to be. Because what they are going to look at is a math equation. So they are going to look at Fontainebleau or Echelon and ask, "What is the estimated cost to finish the project?" Or (they will) look at a piece of dirt and ask, "What's the cost of building a new project?" Then, based on what the financing climate is like and (what) the EBITDA (earnings before interest, taxes, depreciation and amortization) is, they'll ask, "How much do I need to have to generate a return?" Then they are going to look and say, "What projects recently opened and how are those projects doing?" They are going to look at Encore, Wynn (Las Vegas), Palazzo, Aria and (The) Cosmopolitan and see what they are generating and how much it cost to finish or build a new resort. It's going to have to match up. If you can't justify the investment it's going to be hard to get money. That's going to be the challenge for the next few years.

Question: Are other markets using Las Vegas as a business model?

Answer: Yes. Look at Singapore. One of most prominent assignments we had was we advised the Singaporean government in 2005 on the appropriate land valuations on the two integrated resorts. And when they looked at an integrated resort, they wanted to increase tourism. So they limited the size of the casino to roughly 160,000 square feet. They wanted large hotels. They wanted convention space. They wanted retail. So Singapore, I think, is kind of the model of saying we want Las Vegas. We may not want 20 casinos but we want as much of what Las Vegas brings in tourism with the smallest amount of gaming as possible.

Contact reporter Chris Sieroty at
csieroty@reviewjournal.com or 702-477-3893.