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Whitehall Makes $1.3B Play for AREP Gaming Subsidiary

Stratosphere Casino Hotel & Tower Among Four Gaming Assets to Change Hands
April 25, 2007
American Real Estate Partners (AREP) (NYSE: ACP) is dealing its gaming operations subsidiary to Whitehall Street Real Estate Funds, a Goldman Sachs & Co. affiliate, for $1.3 billion, the company said Monday.

Whitehall is acquiring American Casino & Entertainment Properties LLC (ACEP), which owns four Nevada casinos including the famed Stratosphere Casino Hotel & Tower in Las Vegas, from American Entertainment Properties Corp., a wholly owned subsidiary of AREP. The deal is subject to approval from the Nevada Gaming Commission and the Nevada State Gaming Control Board and is scheduled to close in about eight months.

Bear, Stearns & Co. Inc. acted as financial advisor to AREP in the deal, while Goldman Sachs advised Whitehall. AREP said it expects to gain $1 billion on its investments in ACEP.

"We believe that this sale represents an opportunity for AREP to take advantage of the current favorable market environment for gaming assets and to realize significant gains on our multiyear investment in the industry," said Carl C. Icahn, the billionaire investor who serves as Chairman of the Board of American Property Investors Inc., the general partner of AREP. "Pro forma for this transaction AREP will have in excess of $4 billion of liquidity to continue to invest in undervalued assets."

ACEP's portfolio includes two off-Strip casinos in Las Vegas, Arizona Charlie's Decatur and Arizona Charlie's Boulder; Aquarius Casino Resort in Laughlin, located about 95 miles south of Las Vegas; and Stratosphere. The portfolio totals more than 4,912 hotel rooms and about 236,000 square feet of casino space.

The Stratosphere Casino Hotel & Tower opened in 1996 at the northern end of The Strip. Its prominent observation tower, which includes a revolving restaurant and club at the summit, is the tallest building west of the Mississippi River at 1,149 feet. The property includes 2,444 hotel rooms, 80,000 square feet of gaming space, 110,000 square feet of developed retail space and a 640-seat showroom. The deal includes 17 acres of undeveloped land adjacent to the property.

Icahn acquired a controlling stake in Stratosphere Casino Hotel in 1997 by purchasing almost 90% of Stratosphere Corp.'s mortgage bonds when the company filed for bankruptcy.

ACEP made its initial gaming investment by investing in Stratosphere in 1998. It acquired the Arizona Charlie's properties in 2004 and acquired Aquarius, formerly known as Flamingo Laughlin Hotel and Casino, last May for $114 million from Harrah's Operating Co. Inc.
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