Financial History Issue 126 (Summer 2018) | Page 25
Kirk Kerkorian poses in front of his plane.
It wasn’t until Kerkorian was approach-
ing his 50s that success nudged him out
onto the national stage. And it was his
aviation business that attracted all that
attention.
In the early 1960s, Kerkorian had taken
a major gamble with his still modest but
growing charter service, borrowing $5
million on his signature to buy a new
DC-8. Trans International Airlines (TIA),
as it was called then, became the first char-
ter airline to operate a jetliner. Kerkorian
was hoping to pick up long-term Penta-
gon contracts to move military families
and supplies around the world. It worked.
It also drew unsolicited investor interest.
The Studebaker Corporation offered to
buy the company, assumed Kerkorian’s $5
million jetliner debt and topped it all off
with a $1 million bonus for Kirk himself. He
would stay on to run the charter service as
a division of the automaker. And that’s how
Kerkorian became an overnight millionaire.
The gambler took that windfall and
invested in something akin to a bag of
magic beans—a 40-acre parcel of sand in
Las Vegas that no one else wanted. The
property was near other valuable resort
properties, but it was blocked from direct
and essential access to the Strip by a row of
small, residential-sized lots that lined the
boulevard. It looked to many that Kerkorian
had a million-dollar white elephant—until
the dealmaker started dealing. He offered to
trade much larger and more desirable plots
on his 40-acre site for those small pieces of
sand. Several owners jumped at the trade.
The swaps were well timed.
When an Atlanta hotel developer came
to town shopping for the best place to
build Caesars Palace, he came first to
Kerkorian. And Kirk became the Caesars
landlord. The deal was a tribute to Ker-
korian’s business instincts. Mostly, it was
the result of another masterful series of
negotiations by the man a New York Times
business columnist would describe years
later as “the god of all dealmakers.”
To this day, the Caesars Palace land deal
ranks among the most successful real estate
ventures in Las Vegas history. Kerkorian’s
profits over a five-year span exceeded 900%
from an interim landlord lease arrange-
ment, shares of casino revenue and, finally,
sale of the land to hotel operators.
Meanwhile, back in California, TIA
was proving to be a poor fit as a division
of Studebaker. The struggling automaker
was accustomed to dealing with $400 car
engines, but not $400,000 aircraft motors.
Kerkorian and the bean counters didn’t
get along.
Less than two years after selling TIA,
Kerkorian bought it back. He added
another jetliner and more defense con-
tracts. In the summer of 1965, he launched
a public stock offering. After a slow sales
start, TIA stocks caught fire with investors
concentrated in the Armenian immigrant
communities surrounding Fresno, Kirk’s
birthplace. His personal holdings soared
in value. Later that year, Kerkorian woke
up one morning worth $60 million.
For any other businessman, that might
have been the pinnacle, the deal to end all
deals, a chance to take his winnings and
live luxuriously ever after. But Kerkorian
was still a gambler searching for the thrill
of a big bet.
All the life-changing deal making that
had come before would pale by com-
parison to what Kerkorian did next as
he finished up the 1960s with a flurry of
wheeling and dealing that would secure
his place among the great dealmakers of
capitalist history.
Kerkorian’s first play with his new wealth
was to gamble on gambling. He paid $5 mil-
lion for an 82-acre former auto speedway
site adjacent to the city’s new convention
center. He announced plans to build the
International Hotel and Casino, the world’s
biggest hotel with the world’s biggest gam-
ing floor. Locals were aghast. It was on
Paradise Road, a half-mile off the Strip. Pre-
dictions of financial disaster spread through
town. Then Howard Hughes did his best to
scare Kerkorian away.
Hughes, the world’s richest man, had
arrived in Las Vegas a few months earlier
and started buying up existing resorts to
shelter taxes from his half-billion-dollar sale
of TWA. Hughes hated competition and
wanted no rivals, least of all someone build-
ing the world’s biggest anything in his town.
Las Vegas wasn’t big enough “for two
tigers,” Hughes told his top aide, Robert
Maheu. The billionaire industrialist did
more than disparage Kerkorian. Privately
he warned his bankers to have nothing to
do with his rival. Hughes also announced
plans to invest $150 million expanding
his newly-acquired Sands Hotel. It was a
ruse to make Kerkorian reconsider break-
ing ground on the International. When
Kerkorian went ahead and started the
bulldozers, Hughes tried to buy him out,
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