UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

(Mark One)

x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
OR
	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-50689

BH/RE, L.L.C.

(Exact Name of Registrant as Specified in its Charter)

NEVADA	84-1622334	~~84-1622334~~
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)
(State or Other Jurisdiction	(I.R.S. Employer
885 Third Avenue 34th Floor New York, New York		10022
of Incorporation or Organization)	Identification Number)
(Address of Principal Executive Offices)		(Zip Code)
3667 Las Vegas Boulevard South Las Vegas, Nevada	89109
(Address of Principal Executive Offices)	(Zip Code)

(~~212~~702) ~~371~~785-~~2211~~5555

(Registrant’s Telephone Number, Including Area Code)

~~________________________~~Indicate by check mark whether the Registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the ~~Registrant~~registrant ~~(1)~~ has ~~filed~~submitted ~~all~~electronically ~~reports~~and posted on its corporate Web site, if any, every Interactive Data File required byto be submitted and ~~Section~~posted 13pursuant orto ~~15(d)~~Rule 405 of ~~the~~Regulation ~~Securities~~S-T ~~Exchange~~(§ ~~Act~~232.405 of ~~1934~~this chapter) during the preceding 12 months (or for such shorter period that the ~~Registrant~~ registrant was required to ~~file such~~submit ~~reports)~~ and ~~(2)~~post ~~has been subject to~~ such ~~filing requirements for the past 90 days~~files). Yes ýo No o

Indicate by check mark whether the ~~Registrant~~registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (asSee ~~defined~~definition inof “accelerated ~~Rule~~filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the ~~Securities~~ Exchange Act ~~of 1934~~). ~~Yes o No ý~~

Large accelerated filer o	Accelerated filer o

Non-accelerated filer x (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Table of Contents

BH/RE, L.L.C. AND SUBSIDIARIES

Index

PART I— FINANCIAL INFORMATION
ITEM 1.	~~ITEM~~FINANCIAL 1.STATEMENTS:	~~FINANCIAL STATEMENTS:~~
	Condensed Consolidated Balance Sheets (Unaudited)	~~Condensed Consolidated Balance Sheets (Unaudited)~~
	Condensed Consolidated Statements Of Operations (Unaudited)	~~Condensed Consolidated Statements Of Operations (Unaudited)~~
	Condensed Consolidated Statements Of Cash Flows (Unaudited)	~~Condensed Consolidated Statements Of Cash Flows (Unaudited)~~
	Notes To Condensed Consolidated Financial Statements (Unaudited)	~~Notes To Condensed Consolidated Financial Statements (Unaudited)~~
ITEM 2.	~~ITEM~~MANAGEMENT’S 2.DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
ITEM 3.	~~ITEM~~QUANTITATIVE 3.AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~
	ITEM 4.	CONTROLS AND PROCEDURES
ITEM 4T.	CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION:
	ITEM 1.	LEGAL PROCEEDINGS
ITEM 6.	EXHIBITS
	ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
SIGNATURES
	ITEM 3.	DEFAULTS UPON SENIOR SECURITIES
	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5.	OTHER INFORMATION
	ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K
	SIGNATURES

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BH/RE, L.L.C. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands)

	March 31, 2005			December 31, 2004
	March 31, 2009			December 31, 2008
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4818,~~485~~554		$	3723,~~016~~881
Receivables, net	1416,~~239~~493			1218,~~626~~717
Inventories	2,~~194~~265			2,~~489~~498
Prepaid expenses	56,~~469~~895			57,~~253~~935
Deposits and other current assets	~~3,432~~164			~~3,258~~164
Total current assets	73,819			60,642
Restricted cash and cash equivalents	32,590			29,366
Property and equipment, net	491,269			494,781
Total current assets	76,961			82,561
Restricted cash and cash equivalents	94,542			96,199
Property and equipment, net	568,583			578,043
Other assets, net	11,044			11,761
Restricted cash and cash equivalents	11,981			11,284
Total assets	$	670,674		$	663,383
Land receivable	16,548			16,918
LIABILITIES AND MEMBERS’ EQUITY
Other assets, net	217			244
Total assets	$	674,290		$	689,050
LIABILITIES AND MEMBERS’ EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt	$	1862,~~304~~059		$	12,~~268~~001
Accounts payable	23,~~283~~648			23,~~095~~549
Due to affiliates	3,352			1,887
Accrued payroll and related	12,429			10,786
Accrued expenses and other current liabilities	36,059			36,199
Accrued interest payable	6,643			6,827
Total current liabilities	42,998			41,449
Accrued taxes	2,560			2,422
Long-term debt, less current portion	590,320			584,814
Accrued expenses	7,912			8,881
Other long-term liabilities	4,193			4,375
Deposits	3,343			4,587
Total liabilities	637,511			630,638
Other current liabilities	4,610			4,512
Commitments and contingencies
Due to affiliates	1,926			1,773
Minority interests	19,194			19,132
Total current liabilities	905,130			45,338
Members’ equity:
Long-term debt, less current portion	25,029			885,561
Member’s equity	21,500			21,500
Other long-term liabilities	1,537			1,537
Accumulated deficit	(7,531		)	(7,887		)
Total liabilities	931,696			932,436
Total members’ equity	13,969			13,613
Members’ equity (deficit):
Total liabilities and members’ equity	$	670,674		$	663,383
Controlling members’ equity (deficit)
Equity	34,200			34,200
Accumulated deficit	(265,917		)	(253,493		)
Controlling members’ deficit	(231,717		)	(219,293		)
Noncontrolling members’ deficit	(25,690		)	(24,093		)
Total members’ equity (deficit)	(257,407		)	(243,386		)
Total liabilities and members’ equity (deficit)	$	674,290		$	689,050

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~BH/RE, L.L.C.~~Table ~~AND~~of ~~SUBSIDIARIES~~Contents

~~CONDENSED CONSOLIDATED~~BH/RE, ~~STATEMENTS~~L.L.C. OFAND ~~OPERATIONS~~SUBSIDIARIES

~~(amounts~~CONDENSED inCONSOLIDATED ~~thousands)~~STATEMENTS OF OPERATIONS

(~~unaudited~~amounts in thousands)

							Predecessor Information
	Three Months Ended March 31, 2009			Three Months Ended March 31, 2008
	Three Months Ended March 31,
	(unaudited)			(unaudited)
	2005			2004			2004
Operating revenues:
Operating revenues:
Casino	$	25,351		$	32,347
Casino	$	32,913		$	—		$	29,389
Hotel	22,759			30,953
Hotel	29,237			—			28,512
Food and beverage	11,699			14,257
Food and beverage	19,319			—			18,903
Other	2,881			3,782
Other	4,393			—			4,124
Gross revenues	62,690			81,339
Gross revenues	85,862			—			80,928
Promotional allowances	(5,616		)	(7,345		)
Promotional allowances	(6,643		)	—			(7,572		)
Net revenues	57,074			73,994
Net revenues	79,219			—			73,356
Operating costs and expenses:
Operating costs and expenses:
Casino	17,415			20,420
Casino	17,458			—			16,877
Hotel	9,402			10,566
Hotel	9,056			—			7,512
Food and beverage	8,637			9,068
Food and beverage	12,939			—			11,439
Other	456			284
Other	2,342			—			3,434
Selling, general and administrative	15,702			18,974
Selling, general and administrative	17,500			—			15,193
Depreciation and amortization	10,184			8,801
Depreciation and amortization	5,870			—			—
	61,796			68,113
Preopening expenses	—			286			—
Operating income (loss)	(4,722		)	5,881
	65,165			286			54,455
Interest expense, net	(9,298		)	(17,891		)
Operating income (loss)	14,054			(286		)	18,901
Pre-tax loss	(14,020		)	(12,010		)
Other income (expense):
Provision for income taxes	—			—
Interest income (expense), net	(13,635		)	25			(968		)
Net loss including noncontrolling interest	(14,020		)	(12,010		)
Minority interest	(63		)	(4		)	—
Net loss attributable to noncontrolling interest	(1,597		)	(1,802		)
Reorganization costs	—			—			(1,549		)
Net loss attributable to BH/RE, L.L.C.	$	(12,423	)	$	(10,208	)
	(13,698		)	21			(2,517		)
Pre-tax income (loss)	356			(265		)	16,384
Benefit from income taxes	—			—			—
Net income (loss)	$	356		$	(265	)	$	16,384

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~BH/RE, L.L.C.~~Table ~~AND~~of ~~SUBSIDIARIES~~Contents

~~CONDENSED CONSOLIDATED~~BH/RE, ~~STATEMENTS~~L.L.C. OFAND ~~CASH FLOWS~~SUBSIDIARIES

~~(amounts~~CONDENSED CONSOLIDATED inSTATEMENTS ~~thousands)~~OF CASH FLOWS

(~~unaudited~~amounts in thousands)

							Predecessor Information
	Three Months Ended March 31, 2009			Three Months Ended March 31, 2008
	Three Months Ended March 31,
	(unaudited)			(unaudited)
	2005			2004			2004
Cash flows from operating activities:
Cash flows from operating activities:
Net loss including noncontrolling interest	$	(14,020	)	$	(10,208	)
Net income (loss)	$	356		$	(265	)	$	16,384
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	10,184			8,801
Depreciation and amortization	5,870			—			—
Amortization of debt discount and issuance costs	—			2,090
Amortization of debt discount and issuance costs	1,727			—			—
Decease in value of interest rate cap	27			—
Minority interest	63			4			—
Changes in assets and liabilities:
Changes in assets and liabilities:
Restricted cash and cash equivalents	(3,224		)	6,484
Receivables, net	(12,~~613~~224		)	—1,344			~~1,304~~
Inventories and prepaid expenses	791,273			—(1,319		)	~~841~~
Other assets	(174		)	—			490
Deposits and other current assets	—			52
Accounts payable	188			—			(1,534		)
Due to affiliates	153			835
Accrued expenses and other current liabilities	5,900			—			(515		)
Accounts payable	99			(2,063		)
Net cash provided by (used in) operating activities	12,396			(261		)	16,970
Accrued payroll and related	1,643			276
Cash flows from investing activities:
Accrued expenses	(831		)	(633		)
Capital expenditures	(2,013		)	—			(514		)
Deposits and other current liabilities	(1,146		)	(213		)
Restricted cash and cash equivalents	1,657			(25		)	(40		)
Accrued interest	(184		)	(1,273		)
Advances from affiliates	—			1,557			—
Long term deposits and other assets	370			647
Deferred acquisition costs	—			(1,271		)	—
Net cash (used in) provided by operating activities	(3,432		)	3,018
Net cash (used in) provided by investing activities	(356		)	261			(554		)
Cash flows from investing activities:
Cash flows from financing activities:
Purchases of property and equipment	(724		)	(17,752		)
Payments under bank facility	—			—			(270		)
Restricted cash and cash equivalents	(697		)	16,719
Payments on CUP financing	(403		)	—			—
Net cash used in investing activities	(1,421		)	(1,033		)
Change in value of warrants	(168		)	—			—
Cash flows from financing activities:
Adequate protection payments - secured lenders	—			—			(6,029		)
Payments under CUP financing	(474		)	(424		)
Adequate protection payments - GECC	—			—			(1,875		)
Net cash used in financing activities	(474		)	(424		)
Net cash provided by (used in) financing activities	(571		)	—			(8,174		)
Cash and cash equivalents:
Cash and cash equivalents:
(Decrease) increase in cash and cash equivalents	(5,327		)	1,561
Increase in cash and cash equivalents	11,469			—			8,242
Balance, beginning of period	23,881			21,468
Balance, beginning of period	37,016			—			38,240
Balance, end of period	$	18,554		$	23,029
Balance, end of period	$	48,485		$	—		$	46,482
Supplemental cash flow disclosures:
Supplemental cash flow disclosures:
Cash paid for interest, net of capitalized interest	$	9,538		$	17,341
Cash paid for interest	$	7,448		$	—		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~BH/RE, L.L.C.~~Table ~~AND~~of ~~SUBSIDIARIES~~Contents

~~NOTES~~BH/RE, TOL.L.C. ~~CONDENSED~~AND ~~CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~SUBSIDIARIES

1.NOTES ~~ORGANIZATION~~TO ~~AND~~CONDENSED ~~BASIS~~CONSOLIDATED OFFINANCIAL ~~PRESENTATION~~STATEMENTS (UNAUDITED)

Organization1. ORGANIZATION AND BASIS OF PRESENTATION

BH/RE, L.L.C. (“BH/RE”) is a holding company that owns 85% of EquityCo, L.L.C. (“EquityCo”). The remaining 15% of EquityCo is owned by a subsidiary of Starwood Hotels and Resorts Worldwide, Inc. (“Starwood”). MezzCo, L.L.C. (“MezzCo”) is a wholly owned subsidiary of EquityCo, and OpBiz, L.L.C. (“OpBiz”) is a wholly owned subsidiary of MezzCo. As of November 1, 2004, 50% of BH/RE’s voting membership interests were held by each of Robert Earl and Douglas P. Teitelbaum, and BH/RE’s equity membership interests were held 40.75% by BH Casino and Hospitality LLC I (“BHCH I”), 18.50% by BH Casino and Hospitality LLC II (“BHCH II”) (collectively “BHCH”) and 40.75% by OCS Consultants, Inc. (“OCS”).Organization

BH/RE ~~and~~is a holding company that owns 88.61% of EquityCo, L.L.C. (“EquityCo”). ~~its~~The ~~subsidiaries~~remaining ~~were~~11.39% ~~formed~~of toEquityCo ~~acquire~~is owned indirectly by Starwood Hotels & Resorts Worldwide, Inc. ~~operate~~(“Starwood”). ~~and~~MezzCo, ~~renovate~~L.L.C. ~~the~~(“MezzCo”) ~~Aladdin~~is a ~~Resort~~wholly owned subsidiary of EquityCo and ~~Casino~~each of OpBiz, LLC (~~the~~“OpBiz”) and PH Mezz II LLC (“~~Aladdin~~PH Mezz II”) ~~located~~is ina ~~Las~~wholly ~~Vegas,~~owned ~~Nevada.~~subsidiary ~~OpBiz,~~of MezzCo. anPH ~~indirect~~Mezz I LLC (“PH Mezz I”) is a wholly owned subsidiary of ~~BH/RE,~~PH Mezz II. ~~completed~~PH ~~the~~Fee ~~acquisition~~Owner LLC (“PH Fee Owner”) is a wholly owned subsidiary of ~~the~~PH ~~Aladdin~~Mezz I. onTSP Owner LLC (“TSP Owner”) is a wholly ~~September~~owned 1subsidiary of PH Fee Owner. PH Mezz II, ~~2004~~PH Mezz I, PH Fee Owner and ~~will~~TSP ~~begin~~Owner aare ~~renovation~~Delaware ~~project~~limited liability companies structured as bankruptcy remote special purpose entities which, ~~when~~together ~~complete~~with OpBiz, ~~will~~ ~~transform~~own ~~the~~and ~~Aladdin~~operate ~~into~~ the Planet Hollywood Resort and Casino (the “PH Resort”). InOpBiz ~~connection~~is ~~with~~ the ~~renovation~~licensed owner and operator of the ~~Aladdin,~~gaming ~~OpBiz~~assets ~~has~~and ~~entered into~~leases anthe ~~agreement~~casino space and hotel space together with ~~Planet~~all ~~Hollywood~~hotel ~~International,~~assets ~~Inc~~from PH Fee Owner. TSP Owner was formed to hold the parcel of land (the “~~Planet~~Timeshare ~~Hollywood~~Parcel”) ~~and~~ ~~certain~~that ofwas ~~its~~sold ~~subsidiaries~~ to Westgate Resorts, LLP, ~~among~~a ~~other~~Florida ~~things,~~limited ~~license~~partnership ~~Planet~~(“Westgate”) subject to the ~~Hollywood’s~~Timeshare ~~trademarks~~Purchase Agreement, ~~memorabilia~~dated December 10, 2004 and ~~other~~modified ~~intellectual~~on ~~property.~~September 10, 2007, between OpBiz ~~has also~~and ~~entered~~Westgate, ~~into~~as anmore ~~agreement~~fully ~~with~~described ~~Sheraton~~below. ~~Operating~~As ~~Corporation~~of ~~(“Sheraton”)~~March 31, a2009, ~~subsidiary~~each of ~~Starwood,~~Robert ~~pursuant~~Earl toand ~~which~~Douglas P. ~~Sheraton~~Teitelbaum ~~provides~~held ~~hotel~~50% ~~management,~~of BH/RE’s ~~marketing~~voting membership interests. BH/RE’s equity membership interests were held 43.27% by BH Casino and ~~reservation~~Hospitality LLC ~~services~~I ~~for~~(“BHCH I”), ~~the~~15.61% ~~hotel~~by ~~that~~BH ~~comprise~~Casino and aHospitality LLC II ~~portion~~(“BHCH ofII” ~~the~~and, together with BHCH I, “BHCH”) PHand ~~Resort~~41.13% by OCS Consultants, Inc. (“OCS”).

BH/RE ~~is a Nevada limited-liability company~~ and ~~was~~its ~~organized~~subsidiaries onwere ~~March~~formed 31to acquire, ~~2003.~~operate ~~BH/RE~~and ~~was~~renovate ~~formed~~the byAladdin ~~BHCH~~Resort and ~~OCS.~~Casino ~~BHCH~~(the is“Aladdin”) ~~controlled~~located byin ~~Douglas~~Las ~~P. Teitelbaum~~Vegas, ~~a managing~~Nevada. ~~principal~~OpBiz ofcompleted ~~Bay~~the ~~Harbour~~acquisition ~~Management,~~of ~~L.C.~~the ~~(“Bay~~Aladdin ~~Harbour~~on ~~Management”).~~September 1, ~~BHCH~~2004 ~~was formed by Mr.~~and ~~Teitelbaum~~completed ~~for~~a ~~the~~renovation ~~purpose~~project ofwhich ~~holding~~transformed ~~investments~~the inAladdin ~~BH/RE~~into bythe ~~funds~~PH ~~managed by~~Resort ~~Bay~~at ~~Harbour~~the ~~Management.~~end ~~Bay~~of ~~Harbour~~2007. ~~Management~~In isconnection anwith ~~investment~~the ~~management firm.~~operation ~~OCS~~of isthe ~~wholly~~PH ~~owned~~Resort, ~~and~~OpBiz has ~~controlled~~entered byinto ~~Robert~~an ~~Earl~~agreement ~~and~~with ~~holds~~Planet MrHollywood International, Inc. ~~Earl’s~~(“Planet ~~investment~~Hollywood”) inand ~~BH/RE.~~certain ~~Mr.~~of ~~Earl~~its issubsidiaries ~~the founder~~to, ~~chairman~~among ~~and~~other ~~chief~~things, ~~executive~~license ~~officer of~~ Planet Hollywood’s ~~and~~trademarks, ~~Mr.~~memorabilia ~~Teitelbaum~~and isother aintellectual ~~director of Planet Hollywood~~property. OpBiz ~~Together,~~has ~~Mr.~~also ~~Earl,~~entered ainto ~~trust~~an ~~for~~agreement ~~the~~with ~~benefit~~Sheraton ofOperating ~~Mr.~~Corporation ~~Earl’s children~~(“Sheraton”), ~~and~~a ~~affiliates~~subsidiary of ~~Bay Harbour Management~~Starwood, ~~own~~pursuant ~~substantially~~to ~~all~~which ofSheraton ~~the~~will ~~equity~~provide hotel ofmanagement, ~~Planet~~marketing ~~Hollywood.~~and ~~Mr.~~reservation ~~Earl~~services ~~disclaims~~for ~~beneficial~~the ~~ownership~~hotel ofthat ~~any~~comprises ~~equity~~a portion of ~~Planet Hollywood owned by~~ the ~~trust~~PH Resort.

~~Acquisition~~BH/RE is a Nevada limited liability company and was organized on March 31, 2003. BH/RE was formed by BHCH and OCS. BHCH is controlled by Douglas P. Teitelbaum, a managing principal of Bay Harbour Management, L.C. (“Bay Harbour Management”). BHCH was formed by Mr. Teitelbaum for the purpose of holding investments in BH/RE by funds managed by Bay Harbour ~~Aladdin~~Management. Bay Harbour Management is an investment management firm. OCS is wholly owned and controlled by Robert Earl and holds Mr. Earl’s investment in BH/RE. Mr. Earl is the founder, chairman and chief executive officer of Planet Hollywood and Mr. Teitelbaum is a director of Planet Hollywood. Collectively, Mr. Earl, a trust for the benefit of Mr. Earl’s children and certain affiliates of Bay Harbour Management, own substantially all of the equity of Planet Hollywood. Mr. Earl disclaims beneficial ownership of any equity of Planet Hollywood owned by the trust.

AladdinInterim Gaming,Financial L.L.C.Statements (“Aladdin Gaming”unaudited), which was a debtor-in-possession under Chapter 11 of the United States Bankruptcy Code, commenced its bankruptcy case in the United States Bankruptcy Court for the District of Nevada, Southern Division on September 28, 2001. On April 23, 2003, OpBiz and Aladdin Gaming entered into a purchase agreement pursuant to which OpBiz agreed to acquire the Aladdin. Under the purchase agreement and pursuant to an order of the Bankruptcy Court, Aladdin Gaming conducted an auction to sell the Aladdin. On June 20, 2003, the Bankruptcy Court declared OpBiz the winner of that auction and, on August 29, 2003, the Bankruptcy Court entered an order confirming Aladdin Gaming’s plan of reorganization and authorizing Aladdin Gaming to complete the sale of the Aladdin to OpBiz under the purchase agreement. On September 1, 2004, OpBiz acquired substantially all of the real and personal property owned or used by Aladdin Gaming to operate the Aladdin, and received $15 million of working capital from Aladdin Gaming, including $25.7 million of cash. The acquisition was accounted for as a purchase and, accordingly, the purchase price and working capital adjustments have been allocated to the underlying assets acquired and liabilities assumed. The working capital adjustment was determined based on the closing balance sheet on August 31, 2004. OpBiz paid the purchase price for the Aladdin by issuing new secured notes to Aladdin Gaming’s secured creditors and assumed various contracts and leases entered into by Aladdin Gaming in connection with its operation of the Aladdin and certain of Aladdin Gaming’s liabilities, including Aladdin Gaming’s energy service obligation to the third party owner of the central utility plant

6The accompanying condensed consolidated financial statements included herein have been prepared by the management of BH/RE (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. BH/RE believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results for the interim periods have been made. The results for the three months ended March 31, 2009, are not indicative of results to be expected for the full fiscal year. These unaudited financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2008, included in BH/RE’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2009.

that supplies hot and cold water and emergency power to the Aladdin. At the time of purchase, the energy service obligation was $34.0 million. Upon the completion of the Aladdin acquisition, OpBiz issued $510 million of new secured notes to Aladdin Gaming’s secured creditors under an Amended and Restated Loan and Facilities Agreement (the “Credit Agreement”) with a group of lenders and The Bank of New York, Asset Solutions Division, as administrative and collateral agent. OpBiz also simultaneously made a $14 million cash payment to those secured creditors, which reduced the principal amount of the notes to $496 million and obtained a release of the lien on a four-acre parcel of undeveloped property that OpBiz also acquired from Aladdin Gaming (“Timeshare Land”). On December 10, 2004, OpBiz entered into a Timeshare Purchase Agreement with Westgate Resorts, LTD. (“Westgate”), whereby OpBiz has agreed to sell approximately four acres of the Timeshare Land to Westgate, who plans to develop, market, manage and sell timeshare units on the land. The Credit Agreement also requires that OpBiz provide either cash or a letter of credit in the aggregate amount of $90 million to fund the costs of the planned renovations to the Aladdin. In August 2004, MezzCo issued $87 million of senior secured notes to a group of purchasers. The net proceeds of this financing were used to make the $14 million payment described above, to pay certain costs and expenses of BH/RE and its subsidiaries and affiliates related to the acquisition of the Aladdin, and to provide OpBiz with a portion of the funds necessary to meet its obligations regarding the planned renovations to the Aladdin.6

~~The purchase agreement also provided that OpBiz assume~~Table ~~substantially all~~ of Aladdin Gaming’s pre-petition contracts and leases and any post-petition contracts or leases to which OpBiz does not object. In addition, the purchase agreement provided that OpBiz offer employment to all of Aladdin Gaming’s employees, other than executive management, on terms and conditions substantially similar to their previous employment terms and conditions.Contents

Plan2. ofSUMMARY OperationsOF SIGNIFICANT ACCOUNTING POLICIES

OpBizSignificant is currentlyAccounting conductingPolicies a renovation project which, when complete, will transform the Aladdin into the PH Resort. In connection with the proposed renovation of the Aladdin, OpBiz has entered into an agreement with Planet Hollywood and certain of its subsidiaries to, among other things, license Planet Hollywood’s trademarks, memorabilia and other intellectual property. OpBiz has also entered into an agreement with Sheraton, a subsidiary of Starwood, pursuant to which Sheraton provides hotel management, marketing and reservation services for the hotel that comprise a portion of the pre-renovation PH Resort.Estimates

~~Interim~~The ~~Financial~~condensed ~~Statements~~consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles. Certain policies, including the determination of bad debt reserves, the estimated useful lives assigned to assets, asset impairment, insurance reserves and the calculation of liabilities, require that management apply significant judgment in defining the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. Management’s judgments are based on historical experience, terms of existing contracts, observance of trends in the gaming industry and information available from other outside sources. There can be no assurance that actual results will not differ from management’s estimates.

~~The~~To ~~accompanying condensed consolidated financial~~provide ~~statements~~an ~~included~~understanding ~~herein have been prepared by the management~~ of ~~BH/RE, without audit, pursuant to~~ the ~~rules~~methodology and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. BH/RE believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, ~~all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results for the interim periods have been made. The results for the three months ended March 31~~applies, 2005 are not indicative of results to be expected for the full fiscal year. These unaudited financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2004, included in BH/RE’s ~~Annual Report on Form~~significant ~~10-K~~accounting ~~filed~~policies ~~with the Securities~~ and ~~Exchange~~basis ~~Commission on April 15, 2005. Pursuant to Rule 302~~ of ~~Regulation~~presentation ~~S-X,~~are ~~the~~discussed ~~registrant has included condensed statements of operations and cash flows of the predecessor for the three-month period ended March 31, 2004~~below.

7Cash and Cash Equivalents

2.Cash ~~SUMMARY~~and OFcash ~~SIGNIFICANT~~equivalents ~~ACCOUNTING~~include ~~POLICIES~~cash on hand, as well as short-term investments with original maturities not in excess of 90 days.

SignificantRestricted AccountingCash Policies and EstimatesCash Equivalents

The ~~condensed~~ ~~consolidated~~balance ~~financial~~in ~~statements~~current ~~are~~restricted ~~prepared~~cash inand ~~conformity~~cash ~~with~~equivalents ~~U.S.~~at ~~generally~~March 31, ~~accepted~~2009 ~~accounting~~and ~~principles.~~December 31, ~~Certain~~2008 ~~policies,~~was ~~including~~approximately ~~the~~$32.6 ~~determination~~million ofand ~~bad~~$29.4 ~~debt reserves~~million, ~~the estimated useful lives assigned to assets~~respectively, ~~asset~~which ~~impairment,~~consists ~~insurance~~of reserves ~~and~~required under the ~~calculation~~Loan ~~of liabilities,~~Agreement ~~require~~(as ~~that~~defined ~~management apply significant judgment~~ in ~~defining~~Note 5 to the ~~appropriate~~ ~~assumptions for calculating financial estimates. By their nature,~~Condensed ~~these~~Consolidated ~~judgments~~Financial ~~are~~Statements) ~~subject~~including toa anreserve ~~inherent~~for ~~degree~~payment of ~~uncertainty.~~property ~~Management’s judgments~~taxes ~~are~~and ~~based~~insurance and ona ~~historical~~reserve ~~experience,~~for ~~terms~~on-going ~~of existing contracts~~furniture, ~~observance~~ offixture ~~trends in the gaming industry~~ and ~~information~~equipment ~~available~~purchases ~~from~~or ~~other~~property ~~outside sources~~improvements. ~~There~~Long-term ~~can~~restricted becash noand ~~assurance~~cash ~~that~~equivalents ~~actual~~consist of ~~results~~approximately ~~will~~$12.0 ~~not differ~~million ~~from~~and ~~our estimates~~$11.3 Tomillion ~~provide~~at anMarch 31, ~~understanding~~2009 ofand ~~the methodology~~December 31, ~~management~~2008, ~~applies~~respectively, ~~BH/RE’s~~which ~~significant~~primarily ~~accounting~~includes ~~policies~~a ~~and~~reserve ~~basis~~for ofinterest shortfalls ~~presentation~~required ~~are~~under ~~discussed below, as well as in~~ the ~~management’s~~Loan ~~discussion and analysis~~Agreement.

CashAccounts Receivable (and CashAllowance Equivalentsfor Doubtful Accounts)

~~Cash~~Accounts receivable, including casino and hotel ~~cash~~receivables, ~~equivalents~~are ~~include~~typically ~~cash~~non-interest bearing and are initially recorded at cost. An estimated allowance for doubtful accounts is maintained to reduce the receivables to their carrying amount, which approximates fair value. Management estimates the allowance for doubtful accounts by applying standard reserve percentages, which are based on ~~hand~~historical collections, asto ~~well~~aged asaccount balances ~~short-term~~under ~~investments~~a ~~with~~specific dollar amount and specifically analyzes the ~~original~~collectability ~~maturities~~of ~~not~~each inaccount ~~excess~~with a balance over the specified dollar amount, based on the age of 90the ~~days~~account, the customer’s financial condition, collection history and any other known information.

~~Restricted Cash and Cash Equivalents~~7

~~Restricted~~Table ~~cash and cash equivalents consist~~ of approximately $94.5 million and $96.2 million as of March 31, 2005 and December 31, 2004, respectively, the majority of which will be applied toward the remaining cash commitments for the planned renovations to the Aladdin.Contents

Accounts ReceivableInventories

~~Accounts receivable,~~Inventories ~~including~~consist ~~casino~~of food and ~~hotel receivables~~beverage, ~~are~~retail merchandise ~~typically~~and ~~non-interest bearing~~operating supplies, and are ~~initially~~stated ~~recorded~~ at ~~cost. An estimated allowance for doubtful accounts is maintained to reduce~~ the ~~receivables~~lower toof ~~their~~cost ~~carrying amount,~~or ~~which approximates fair value~~market. ~~BH/RE~~Cost ~~estimates~~is ~~the~~determined ~~allowance for doubtful accounts~~ by ~~applying standard reserve percentages to aged account balances under a specific dollar amount and specifically analyzes~~ the ~~collectibility of each account with a balance over the specified dollar amount~~first-in, ~~based~~first-out ~~on the age of the account, the customer’s financial condition, collection history~~ and ~~any~~specific ~~other~~identification ~~known information~~methods.

InventoriesProperty and Equipment

~~Inventories~~Property and equipment ~~consist~~are ofstated ~~food~~at cost. Recurring repairs and ~~beverage~~maintenance costs, ~~retail~~including ~~merchandise~~items that ~~and~~are ~~operating~~replaced ~~supplies~~routinely in the casino, hotel and food and beverage ~~are~~departments ~~stated~~which atdo not meet the ~~lower~~Company’s capitalization policy, are expensed as incurred. The Company has established its capital expense policy to be reflective of ~~cost~~its orindividual ~~market~~ongoing repairs and maintenance programs. ~~Cost~~Gains isor losses ~~determined~~on bydispositions ~~the~~of ~~first-~~property and equipment are included in, the ~~first-out~~determination of income. Property and ~~specific~~equipment ~~identification~~are ~~methods.~~generally depreciated over the following estimated useful lives on a straight-line basis:

Property and Equipment

Buildings		40 years
Building improvements		15 to 40 years
Furniture, fixtures and equipment		3 to 7 years

Property and equipment and other long-lived assets are ~~stated~~evaluated atfor ~~cost~~impairment in accordance with the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 144, ~~Gains~~“Accounting for the Impairment or ~~losses~~ onDisposal ~~dispositions~~of Long-Lived Assets.” For assets to be disposed of, ~~property~~the ~~and~~asset ~~equipment~~to ~~are~~be ~~included~~sold inis recognized at the lower of carrying ~~determination~~value or fair value less costs of ~~income~~disposal. ~~Property~~Fair ~~and~~value ~~equipment~~for ~~are~~assets ~~generally~~to ~~depreciated over~~be ~~the~~disposed ~~following~~of is estimated ~~useful~~based ~~lives~~ on comparable asset sales, solicited offers or a discounted ~~straight-line~~cash ~~basis:~~flow model.

Buildings		39.5 years
Building improvements		15 to 40 years
Furniture, fixtures and equipment		3 to 7 years

Property and equipment are reviewed for impairment whenever indicators of impairment exist. If an indicator of impairment exists, the estimated future cash flows of the asset, on an undiscounted basis, are compared to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model.

8Derivative Instruments and Hedging Activities

~~Property~~Pursuant ~~and~~to ~~equipment~~the ~~and~~refinancing ~~other~~of ~~long-lived~~the ~~assets~~Securities ~~are~~Purchase Agreement and ~~evaluated~~the ~~for~~terms ~~impairment~~of inthe ~~accordance~~Restructuring ~~with~~Agreement, the ~~Financial~~Restructuring ~~Accounting~~Parties ~~Standards~~agreed to ~~Board’s~~amend ~~(“FASB”)~~the ~~Statement~~warrants issued by MezzCo to purchase 17.5% of ~~Financial~~the ~~Accounting~~fully ~~Standards~~diluted equity ~~(“SFAS”)~~in NoMezzCo. ~~144,~~The ~~“Accounting~~warrants ~~for~~contain ~~the~~a ~~Impairment~~net orcash ~~Disposal~~settlement, ofand ~~Long-Lived~~therefore ~~Assets.”~~are ~~For~~accounted ~~assets~~for toin beaccordance ~~disposed~~with ~~of,~~Emerging ~~the~~Issues ~~asset~~Task toForce be(“EITF”) ~~sold~~00-19, is“Accounting ~~recognized~~for atDerivative ~~the~~Financial ~~lower~~Instruments ofIndexed ~~carrying~~to, ~~value~~and orPotentially ~~fair~~Settled ~~value~~in, ~~less~~a ~~costs~~Company’s ofOwn ~~disposal~~Stock”. ~~Fair~~Both SFAS ~~value~~No. 133 “Accounting for ~~assets~~Derivative toInstruments beand ~~disposed~~Hedging ofActivities” isand ~~estimated~~EITF 00-19 ~~based~~require onthat the ~~comparable~~warrants ~~asset~~be ~~sales~~recognized as liabilities, ~~solicited offers~~with orchanges ain ~~discounted~~fair ~~cash~~value ~~flow~~affecting net ~~model~~income. See “Note 5. Long-Term Debt.”

~~Property~~The ~~and~~terms ~~equipment~~of ~~are~~the ~~reviewed~~Loan ~~for~~Agreement ~~impairment whenever~~required ~~indicators~~the ofCompany ~~impairment~~to ~~exist.~~enter Ifinto an interest ~~indicator~~rate ofcap ~~impairment~~agreement, ~~exists~~which expires on December 9, 2009, to manage ~~the~~interest ~~estimated~~rate ~~future~~risk. ~~cash~~The ~~flows~~Company ofdid ~~the~~not ~~asset,~~apply oncash anflow ~~undiscounted~~hedge ~~basis,~~accounting ~~are~~to ~~compared~~this toinstrument. ~~the~~Although ~~carrying~~this ~~value~~derivative ofwas not afforded cash flow hedge accounting, the ~~asset.~~Company Ifretained the ~~undiscounted~~instrument ~~cash~~as ~~flows exceed~~protection against the interest ~~carrying~~rate ~~value,~~risk noassociated ~~impairment~~with isits ~~indicated~~long-term borrowings. IfThe ~~the~~Company accounts ~~undiscounted~~for ~~cash flows~~its doderivative ~~not~~activity ~~exceed~~in ~~the~~accordance ~~carrying~~with ~~value~~SFAS No. 133 and accordingly, ~~then~~includes ~~impairment~~the israte ~~measured~~cap ~~based~~agreement in other assets on the ~~fair~~accompanying ~~value~~balance ~~compared~~sheet toat ~~carrying~~fair value, with any in change in fair value ~~typically~~being recorded ~~based~~in oninterest ~~a discounted~~income ~~cash~~or ~~flow~~expense ~~model~~in the accompanying consolidated statements of operations.

~~The~~Revenue ~~property~~Recognition and ~~equipment and other long-lived assets~~ ~~that~~Promotional BH/RE obtained in the acquisition of the Aladdin were appraised by an independent third party. Property and equipment and the related accumulated depreciation amounts, as well as certain intangible assets recorded in the Company’s condensed consolidated balance sheets as of March 31, 2005 are based on the independent third party appraisal.Allowances

~~Debt~~Casino revenues are ~~Issuance~~recognized ~~Costs~~as the net win from gaming activities, which is the difference between gaming wins and losses. Hotel revenue recognition criteria are generally met at the time of occupancy. Food and beverage revenue recognition criteria are generally met at the time of service. Deposits for future hotel occupancy or food and beverage services are recorded as deferred income until revenue recognition criteria are met. Cancellation fees for hotel and food and beverage services are recognized upon cancellation by the customer as defined by a written contract entered into with the customer. All other revenues are recognized as the service is provided. Revenues include the retail value of food, beverage, rooms, entertainment and merchandise provided on a complimentary basis to customers. Such complimentary amounts are then deducted from revenues as promotional allowances on BH/RE’s consolidated statements of operations. The estimated departmental costs of providing such promotional allowances are included in casino costs and expenses and consist of the following (amounts in thousands):

Debt issuance costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense over the expected terms of the related debt agreements using the effective interest method and are included in other assets on BH/RE’s consolidated balance sheets. Debt issuance costs, net totaled approximately $8~~.2 million and $8.5 million as of March 31, 2005 and December 31, 2004, respectively.~~

~~Intangible~~Table ~~Assets~~of Contents

In connection with the purchase of the Aladdin and as a result of an independent appraisal of the assets purchased, BH/RE recorded intangible assets, which consist of a customer list and trade name on its condensed consolidated balance sheets at March 31, 2005. The customer list was valued at approximately $2.7 million at the time of purchase and at March 31, 2005, had a net book value of approximately $2.3 million. The trade name was valued at approximately $1.0 million at the time of purchase and at March 31, 2005, had a net book value of approximately $0.6 million. The customer list and trade name will be amortized using the straight-line method over a useful life of 4 years and 1.5 years, respectively. The amortization expense related to the customer list and trade name for the three months ended March 31, 2005, was approximately $0.2 million for each of the intangible assets.

	Three Months Ended March 31,
	2009		2008
	(unaudited)		(unaudited)
Rooms	$	1,412	$	1,567
Food and beverage	2,090		2,429
Other	8		8
Total cost of promotional allowances	$	3,510	$	4,004

Derivative InstrumentsPlayers’ andClub Hedging ActivitiesProgram

~~BH/RE~~ Players’ ~~has~~club ~~issued~~members ~~warrants in~~earn anpoints ~~effort~~based toon gaming ~~provide~~activity, ~~further~~which ~~consideration~~can tobe ~~the~~redeemed ~~purchasers~~for ofcash. ~~memberships interests~~OpBiz inaccrues ~~EquityCo~~expense and ~~MezzCo.~~a liability ~~BH/RE~~related ~~accounts~~to ~~for~~this program as the ~~senior~~points ~~note~~are ~~warrants~~earned based on historical inredemption ~~EquityCo~~percentages. asRevenues ~~embedded~~are ~~derivative~~recognized ~~instruments~~net of certain sales incentives in accordance with ~~SFAS~~the ~~No.~~Emerging ~~133,~~Issues Task Force (“EITF”) consensus on Issue 01-9, “Accounting for ~~Derivative~~Consideration ~~Instruments~~Given ~~and~~by ~~Hedging~~a Vendor to a Customer (Including ~~Activities,”~~a ~~and~~Reseller ~~SFAS~~of Nothe Vendor’s Products).” ~~138,~~EITF 01-9 ~~“Accounting~~requires ~~for~~that ~~Certain~~sales ~~Derivative~~incentives ~~Instruments~~be ~~and~~recorded ~~Hedging~~as ~~Activities~~a –reduction anof ~~Amendment~~revenue; ofconsequently, ~~FASB~~casino ~~Statement~~revenues ~~No.~~are ~~133”.~~reduced ~~The~~by ~~warrants~~points ~~issued~~earned inthrough ~~conjunction~~the ~~with~~players’ ~~the~~club ~~Mezzanine~~loyalty program. The ~~Financing~~Company ~~contain~~accrues a ~~net~~liability ~~cash~~for ~~settlement,~~players’ ~~and~~club ~~therefore~~points ~~are~~that ~~accounted~~can ~~for~~be inredeemed for ~~accordance~~cash. In ~~with~~March 2009, ~~Emerging~~the ~~Issues~~Company changed ~~Task~~the ~~Force~~structure ~~(“EITF”)~~of ~~00-19,~~its ~~“Accounting~~players ~~for~~club ~~Derivative~~to ~~Financial~~allow ~~Instruments~~patrons ~~Indexed~~who ~~to,~~earn ~~and~~points to ~~Potentially~~redeem ~~Settled~~those ~~in,~~points afor ~~Company’s~~promotional ~~Own~~slot ~~Stock”.~~play ~~Both~~and ~~SFAS~~other Nonon-cash incentives. The ~~133~~total accrued liability ~~and~~related ~~EITF~~to ~~00-19~~potential ~~require~~cash ~~that~~awards ~~the~~redeemable ~~warrants~~under bethe ~~recognized~~players’ asclub ~~liabilities,~~program ~~with~~was ~~changes~~$1.3 million inat ~~fair~~March 31, ~~value~~2009 ~~affecting~~and ~~net~~$2.2 million ~~income~~at December 31, 2008.

9Self-Insurance Accruals

~~Revenue~~BH/RE ~~Recognition~~is self-insured, up to certain limits, for costs associated with employee medical coverage. The Company accrues for the estimated expense of known claims, as well as estimates for claims incurred but not yet reported which totaled approximately $3.3 million at March 31, 2009 and ~~Promotional~~$2.4 million ~~Allowances~~at December 31, 2008.

~~Casino~~Advertising revenues are recognized as the net win from gaming activities, which is the difference between gaming wins and losses. Hotel revenue recognition criteria are generally met at the time of occupancy. Food and beverage revenue recognition criteria are generally met at the time of service. Deposits for future hotel occupancy or food and beverage services are recorded as deferred income until revenue recognition criteria are met. Cancellation fees for hotel and food and beverage services are recognized upon cancellation by the customer as defined by a written contract entered into with the customer. All other revenues are recognized as the service is provided. Revenues include the retail value of food, beverage, rooms, entertainment, and merchandise provided on a complimentary basis to customers. Such complimentary amounts are then deducted from revenues as promotional allowances on BH/RE’s consolidated statements of operations. The estimated departmental costs of providing such promotional allowances are included in casino costs and expenses and consist of the following (amounts in thousands):Costs

					Predecessor Information
	Three Months Ended March 31,
	2005		2004		2004
Rooms	$	857	$	—	$	915
Food and beverage	2,463		—		2,812
Other	186		—		256
Total cost of promotional allowances	$	3,506	$	—	$	3,983

Advertising costs are expensed as incurred and included in selling, general and administrative costs and expenses. Advertising costs totaled approximately $0.9 million and $2.4 million for the three months ended March 31, 2009 and 2008, respectively.

~~Slot Club Program~~Income Taxes

The condensed ~~Aladdin’s~~consolidated ~~slot~~financial ~~club~~statements ~~members~~include ~~earn~~the ~~points~~operations ~~based~~of onBH/RE and ~~gaming~~its ~~activity~~majority-owned subsidiaries: EquityCo, ~~which~~MezzCo, ~~can~~OpBiz, bePH ~~redeemed~~Mezz ~~for~~II, ~~cash~~PH Mezz I, PH Fee Owner and TSP Owner. ABH/RE and EquityCo are limited liability companies isand ~~recorded~~are taxed as partnerships for federal income tax purposes. ~~the~~However, ~~estimated~~MezzCo ~~cost~~has ofelected ~~the~~to ~~outstanding~~be ~~points~~taxed ~~accrued~~as ~~under~~a ~~the~~corporation ~~slot~~for ~~club~~federal income tax ~~program~~purposes. ~~The~~OpBiz ~~accrued~~and ~~slot~~PH ~~club~~Mezz ~~point~~II, ~~liability~~wholly-owned ~~was~~subsidiaries ~~approximately~~of ~~$1.5~~MezzCo, ~~million~~are treated as divisions of MezzCo for federal income tax purposes, and accordingly, $1are also subject to federal income taxes.9 ~~million~~Additionally, asPH Mezz I, a wholly-owned subsidiary of ~~March~~PH 31Mezz II, ~~2005~~PH Fee Owner, a wholly owned subsidiary of PH Mezz I, and ~~December~~TSP 31Owner, ~~2004~~a wholly owned subsidiary of PH Fee Owner, ~~respectively~~are also subject to federal income taxes.

~~Advertising~~MezzCo, ~~Costs~~OpBiz, PH Mezz II, PH Mezz I, PH Fee Owner and TSP Owner account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. SFAS 109 requires the recognition of deferred income tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.

~~Advertising~~The ~~costs~~Company ~~are~~accounts ~~expensed as incurred and~~for ~~included~~income taxes in ~~selling,~~accordance ~~general~~with ~~and~~the ~~administrative~~provisions ~~costs~~of FASB ~~and~~Interpretation ~~expenses~~No. 48 ~~Advertising costs~~(“FIN ~~totaled~~48”) ~~approximately~~“Accounting $1for Uncertainty in Income Taxes — an interpretation of FASB No.0 109”, ~~million~~which ~~and~~clarifies $0certain aspects of accounting for uncertain tax positions, including issues related to the ~~three~~recognition ~~months~~and measurement ~~ended~~of ~~March~~those tax positions. FIN 3148 also provides guidance on derecognition, ~~2005~~classification, ~~and~~interest ~~2004~~and penalties, ~~respectively~~accounting ~~for~~in ~~BH/RE~~interim ~~and~~periods, ~~approximately~~disclosures, $1and transition.7 FIN 48 ~~million~~is effective for fiscal years beginning after December 15, 2006. Further discussion regarding the ~~three~~adoption ~~months~~of ~~ended~~FIN 48 ~~March~~can ~~31,~~be ~~2004~~found ~~for~~in Note ~~Aladdin~~9 ~~Gaming~~to the Condensed Consolidated Financial Statements.

~~Income~~Timeshare ~~Taxes~~Purchase Agreement

~~The~~Pursuant ~~consolidated~~to ~~financial~~an ~~statements include the~~agreement ~~operations~~dated ofDecember 10, ~~BH/RE~~2004 and ~~its~~modified ~~controlled~~on ~~subsidiaries: EquityCo~~September 10, ~~MezzCo~~2007, ~~and~~ OpBiz. entered ~~BH/RE~~into ~~and~~a ~~EquityCo~~Timeshare ~~are~~Purchase ~~limited~~Agreement ~~liability~~with ~~companies~~Westgate ~~and~~Resorts, LTD. ~~are taxed as~~(“Westgate”), ~~partnerships~~a ~~for~~Florida ~~federal~~limited ~~income~~partnership, ~~tax~~whereby ~~purposes.~~OpBiz ~~MezzCo~~agreed ~~has elected~~ to besell ~~taxed~~approximately as4 aacres ~~corporation~~of ~~for~~land ~~federal~~adjacent ~~income~~to ~~tax~~the ~~purposes.~~PH ~~OpBiz,~~Resort ato ~~wholly-owned~~Westgate ~~subsidiary of~~(the ~~MezzCo~~“Timeshare Parcel”), who ~~will~~plans beto ~~treated~~develop, asmarket, amanage ~~division~~and ofsell ~~MezzCo~~timeshare ~~for~~units ~~federal~~on ~~income~~the ~~tax~~land. On September 19, ~~purposes~~2007, ~~and~~the ~~accordingly,~~sale ~~will~~of ~~also~~the beland ~~subject~~and deed transfer to ~~federal~~Westgate ~~income~~was ~~taxes~~completed. In

MezzCo and OpBiz account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. SFAS 109 requires the recognition of deferred income tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.9

10Table of Contents

~~Membership~~connection ~~Interests~~with the close of the transaction, OpBiz, PH Fee Owner, LLC and TSP Owner, LLC, entered into a modification agreement (the “Modification Agreement”) with Westgate. The Modification Agreement defines the development phases for the Timeshare Parcel and outlines the permitted number of timeshare, whole ownership and penthouse units. The Modification Agreement also outlines permitted amenities on the Timeshare Parcel and documents Seller’s approval of Westgate’s financing for the project.

AsPursuant ofto ~~March~~the terms of ~~31,~~the ~~2005,~~Timeshare ~~BH/RE’s~~Purchase ~~membership~~Agreement, ~~interests~~the ~~had~~purchase ~~not~~price ~~been~~of ~~unitized~~the ~~and~~land ~~BH/RE’s~~was ~~members~~$29.5 million. doThe ~~not~~Company ~~presently~~was ~~intend~~carrying tothe ~~unitize~~land ~~these~~at ~~membership~~a ~~interests.~~value of $29.5 million. Accordingly, ~~management~~no gain on the sale of ~~BH/RE~~this land has ~~excluded~~been recognized ~~earnings~~in ~~per~~the ~~share~~accompanying ~~data~~financial ~~required~~statements. Westgate pays the Company ~~pursuant~~a monthly fee equal to ~~SFAS~~9% Noof total timeshare sales. ~~128~~ ~~“Earnings~~50% ~~Per~~of ~~Share”~~the fees received ~~because~~will ~~management~~be ~~believes~~used ~~that~~to ~~such~~pay ~~disclosures~~the ~~would~~purchase ~~not~~price for the land and the remaining 50% will be ~~meaningful~~recorded toas income as received. As of March 31, 2009, the Company has a receivable balance for the ~~financial~~sale ~~statement~~of ~~presentation~~land of $19.2 million, $16.6 million of which is classified as long-term and at December 31, 2008 the Company has a receivable balance for the sale of land of $19.9 million, $16.9 million of which is classified as long-term in the accompanying financial statements.

VariableMembership Interest EntitiesInterests

InAs ~~January~~of March ~~2003~~31, ~~the FASB issued FIN 46~~2009, ~~“Consolidation~~BH/RE’s ofmembership ~~Variable~~interests ~~Interest Entities.” The objective~~had ofnot ~~FIN~~been 46unitized isand toBH/RE’s ~~improve~~members ~~financial~~do ~~reporting~~not bypresently ~~companies~~intend ~~involved~~to ~~with~~unitize ~~variable~~these ~~interest~~membership ~~entities~~interests. ~~FIN~~Accordingly, 46management ~~changes certain consolidation requirements by requiring a variable interest entity to be consolidated by a company that is subject to a majority~~ of ~~the risk of loss from the variable interest entity’s activities or receives a majority of the entity’s residual returns or both.~~ BH/RE has ~~adopted~~excluded ~~FIN 46 and has determined that all variable interest entities~~earnings ~~that~~per itshare ~~has~~data anrequired ~~interest~~pursuant into atSFAS ~~March~~No. 31128, ~~2005~~“Earnings ~~do not require consolidation~~Per ~~under the provisions of FIN 46~~Share,” asbecause ~~BH/RE~~management isbelieves ~~not~~that ~~subject~~such todisclosures awould ~~majority of~~not ~~the~~be ~~risk~~meaningful ~~of loss or entitled~~ to ~~receive a majority of~~ the ~~variable~~financial ~~interest entity’s~~statement ~~residual returns~~presentation.

~~3. RECEIVABLES~~Recently Issued Accounting Pronouncements

~~Accounts~~In December 2007, the FASB issued SFAS No. 141 (revised ~~receivable~~2007), ~~consist~~“Business ofCombinations.” SFAS No. 141 (revised) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the ~~following~~identifiable (assets acquired, the liabilities assumed, and noncontrolling interest in ~~thousands~~the acquiree and the goodwill acquired. The revision is intended to simplify existing guidance and converge rulemaking under U.S. generally accepted accounting principles with international accounting rules. This statement applies prospectively to business combinations where the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of SFAS No. 141 (revised): had no impact on the Company’s financial position, results of operations or cash flows.

	March 31, 2005			December 31, 2004
	unaudited
Casino	$	5,553		$	5,712
Hotel	10,330			7,735
Other	1,046			1,433
	16,929			14,880
Allowance for doubtful accounts	(2,690		)	(2,254		)
Receivables, net	$	14,239		$	12,626

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51.” This statement establishes accounting and reporting standards for ownership interest in subsidiaries held by parties other than the parent and for the deconsolidation of a subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 changes the way the consolidated statement of operations is presented by requiring consolidated net income to be reported at amounts that include the amount attributable to both the parent and the noncontrolling interests. The statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and those of the noncontrolling owners. This statement is effective for fiscal years beginning on or after December 15, 2008. The adoption of this provision on January 1, 2009 did not have a material impact on the Company’s financial position, results of operations or cash flows.

4In March 2008, the FASB issued SFAS No. ~~PROPERTY~~ 161, ~~AND~~“Disclosures ~~EQUIPMENT~~About Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133.” SFAS No. 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. This statement is effective for fiscal years beginning after November 15, 2008. SFAS No. 161 did not have a material impact on the Company’s financial position, results of operations or cash flows.

~~Property and equipment and the related accumulated depreciation amounts listed below are estimates made by management and consist of the following (in thousands):~~3. RECEIVABLES

	March 31, 2005				December 31, 2004
	unaudited
Land	$		97,979		$	97,979
Building and improvements	367,234				367,234
Furniture, fixtures and equipment	35,284				35,172
Construction in progress	3,688				1,787
	504,185				502,172
Accumulated depreciation	(12,916			)	(7,391			)
Property and equipment, net	$	491,269			$		494,781

Receivables consist of the following (in thousands):

Depreciation expense was approximately $5.6 million and $7.4 million for the three months ended March 31, 2005 and the year ended December 31, 2004, respectively for BH/RE. Aladdin Gaming was not recording depreciation expense in 2004, as the assets were classified as “held for sale”.

	March 31 2009			December 31, 2008
	(unaudited)
Casino	$	14,764		$	13,584
Hotel	5,249			5,999
Land sale receivable	19,188			19,918
Other	3,446			4,368
	42,647			43,869
Long-term portion of land sale receivable	(16,548		)	(16,918		)
Allowance for doubtful accounts	(9,606		)	(8,234		)
Receivables, net	$	16,493		$	18,717

1110

~~5. ACCRUED~~Table of ~~EXPENSES AND OTHER CURRENT LIABILITIES~~Contents

~~Accrued~~4. PROPERTY ~~expenses~~AND ~~and other current liabilities consist of the following (in thousands):~~EQUIPMENT

	March 31, 2005		December 31, 2004
	unaudited
Accrued payroll and related	$	10,848	$	10,652
Accrued interest payable	6,753		6,498
Advance deposits	3,881		4,040
Accrued gaming and related	3,519		4,395
Accrued taxes	3,132		2,500
Accrued and advance commissions	1,821		1,245
Accrued Central Utility Plant charges	1,140		1,287
Accrued advertising	781		354
Accrued acquisition costs	608		796
Other accrued expenses and current liabilities	3,576		4,432
Accrued expenses and other current liabilities	$	36,059	$	36,199

Property and equipment and the related accumulated depreciation consist of the following (in thousands):

6. LONG-TERM DEBT

	March 31, 2009			December 31, 2008
	(unaudited)
Land	$	68,479		$	68,479
Building and improvements	502,420			502,305
Furniture, fixtures and equipment	126,912			126,582
Construction in progress	743			464
	698,554			697,830
Accumulated depreciation	(129,971		)	(119,787		)
Property and equipment, net	$	568,583		$	578,043

~~Long-term~~Depreciation ~~debt~~expense ~~consists~~was approximately of$10.2 million and $8.8 million for the ~~following~~three ~~(in~~months ended March 31, ~~thousands):~~2009 and 2008, respectively.

	March 31, 2005			December 31, 2004
	unaudited
Term Loan A - $500 million senior notes	$	486,000		$	486,000
Term Loan B - $10 million senior notes	10,368			10,202
Mezzanine senior secured subordinated notes	96,142			91,734
Northwind Aladdin obligation under capital lease	33,167			33,570
Total long-term debt	625,677			621,506
Term A debt discount, net	(29,805		)	(31,162		)
MezzCo warrants, net	(4,172		)	(4,262		)
EquityCo warrants	(76		)	—
Current portion of long-term debt	(1,304		)	(1,268		)
Total long-term debt, net	$	590,320		$	584,814

5. LONG-TERM DEBT

~~Credit~~Long-term ~~Agreement~~debt consists of the following (in thousands):

The Aladdin acquisition and the planned renovations were funded by the issuance of $510 million of secured notes to Aladdin Gaming’s secured creditors pursuant to a Credit Agreement. OpBiz’s obligations under the Credit Agreement are secured by liens on all of its assets, including a mortgage on its real property, the Hotel, the Casino and the Theater for the Performing Arts (“TPA”), and security interests in its accounts receivable, inventory, equipment and intangible assets, excluding the Timeshare Land. The Credit Agreement will be guaranteed by MezzCo and MezzCo will secure its guarantee by pledging its membership interests in OpBiz to the lenders. The Credit Agreement matures on August 31, 2010.

	March 31, 2009			December 31, 2008
	(unaudited)
$860 million Loan Agreement	$	860,000		$	860,000
Northwind Aladdin obligation under capital lease	27,088			27,562
	887,088			887,562
Current portion of long-term debt	(862,059		)	(2,001		)
Total long-term debt, net	$	25,029		$	885,561

~~The loans under the Credit Agreement are evidenced by $500 million of Term~~ Loan ~~A notes and $10~~ million of Term Loan B notes. BH/RE simultaneously made a $14 million cash payment to the holders of the Term Loan A notes to reduce the principal amount of the Term Loan A notes to $486 million and obtained a release of the lien on the Timeshare Land.Agreement

12On November 30, 2006, OpBiz and PH Fee Owner (collectively the “Borrower”) entered into the Loan Agreement (the “Loan Agreement”) with Column Financial, Inc. (the “Lender”) for a mortgage loan in the principal amount of up to $820 million. The Loan Agreement provided for an initial disbursement in the amount of $759.7 million and a future funding facility in the amount of up to $60.3 million. On July 17, 2007, the Borrower and the Lender entered into an amendment (the “Amendment”) to the Loan Agreement. The Amendment provided for the immediate funding to Borrower of the balance of future funding that was available under the Loan Agreement and established an additional future funding facility in the amount of up to $40 million (“Future Funding Tranche B”). Future Funding Tranche B has the same terms as the Loan Agreement for maturity and extension. The Loan Agreement, as amended by the Amendment, is referred to as the Loan. The Loan is secured by a deed of trust on the PH Resort and a pledge, subject to approval by the Nevada gaming authorities, by MezzCo of its membership interest in OpBiz (as described below).

~~Scheduled~~The ~~principal~~initial maturity date of the Loan was December 9, 2008 with ~~payments~~three one year extension options available, subject to payment of a fee (applicable to the second and third extensions only) and the Borrower’s compliance with the requirements for an extension outlined in the Loan Agreement. The Borrower exercised the first available extension option thereby extending the maturity date to December 9, 2009. Interest on the ~~Term~~Loan is payable monthly and accrues at the 30 day LIBOR rate (0.56% for the March 31, 2009 interest payment) plus 3.25% with a .25% ticking fee on available but un-advanced future funding. Interest on Future Funding Tranche B is payable monthly and accrues at the 30 day LIBOR rate plus 7.50% with a 1.50% ticking fee on available but un-advanced funds. The Loan Adoes ~~notes~~not require amortization during the initial term or, provided certain EBITDA thresholds are met, asduring ~~follows:~~the extension periods. The Loan requires that the Borrower establish and maintain certain reserves including a reserve for completion of the renovation project, a reserve for projected interest shortfalls, a reserve for payment of property taxes and insurance and a reserve for on-going furniture, fixture and equipment purchases or property improvements. The Loan restricts the Borrower’s ability to spend excess cash flow until certain debt service coverage ratios are met.

~~• $~~On May 7, 2009, the Borrower, Planet Hollywood International, Inc., Planet Hollywood (Region IV), Inc., Planet Hollywood Memorabilia, Inc., Trophy Hunter Investments, Ltd., Bay Harbour 90-1, Ltd.25, ~~million~~Bay Harbour Master onLtd., ~~the~~Douglas ~~first~~Teitelbaum, ~~day~~Robert ofEarl, ~~each~~and ~~fiscal~~Wells ~~quarter~~Fargo ~~during~~Bank, ~~the~~N.A., ~~period~~as ~~beginning~~Trustee for onThe ~~August~~Credit Suisse First Boston Mortgage Securities Corp. Commercial 31Mortgage Pass-Through Certificates, Series 2007-TFL2 entered into a third modification (the “Modification”) of the existing Loan Agreement, dated November 30, 2006, between Borrower and ~~ending~~Column onFinancial, Inc. (the “Loan Agreement”). The Modification provides for up to $9 ~~August~~million ~~31,~~of ~~2007;~~the Interest Reserve Fund (as defined in the Loan Agreement) to be available to Borrower for monthly debt service.

~~• $3.75 million on the first day of each fiscal quarter during the period beginning on August 31, 2007 and ending on August 31, 2008;~~11

~~• $5.0~~Table ~~million on the first day~~ of ~~each fiscal quarter during the period beginning on August~~ ~~31, 2008 and ending on August 31, 2009;~~Contents

~~• $6.25~~The ~~million~~Loan Agreement has two remaining one year extension options onavailable (the ~~first~~second ~~day~~and ofthird extension options). As a condition to exercising each ~~fiscal~~of ~~quarter~~the second ~~during~~and third extension options, the ~~period~~Borrower ~~beginning~~must onreplenish ~~August~~the Interest 31Reserve Account (as defined in the Loan Agreement) to an amount sufficient to achieve a Debt Service Coverage Ratio (as defined in the Loan Agreement) of 1.05:1.00 and 1.10:1:0, ~~2009~~respectively, using the specified terms and ~~ending~~parameters onoutlined in the Loan Agreement. Failure to replenish the Interest Reserve ~~August~~Account 31is an Event of Default (as defined in the Loan Agreement) and a Specified Event (as defined in the Modification). A Specified Event means the occurrence of certain events, ~~2010~~including (a) failure of the Borrower to make certain payments as required by the Modification or the Loan Agreement; (b) certain Events of Default under the Loan Agreement; and (c) an Event of Default under the Modification resulting from failure to pay amounts owed to Lender, failure to pay certain taxes, the incurrence of additional indebtedness in violation of the terms of the Loan Agreement, and the imposition of any lien encumbering the collateral of the loan (for the purpose of a Specified Event, an Event of Default means a Default (as defined in the Loan Agreement) that continues after the applicable notice and cure or grace periods under the terms of the Loan Agreement and related documents).

• At December 31, 2008, the ~~then~~Loan was classified as a non current ~~unpaid~~liability ~~balance~~in ~~amount~~the ofaccompanying ~~Term~~financial statements based on the Company’s intent and ability to exercise the second extension option. Operating income for the three months ended March 31, 2009 is not sufficient to demonstrate that the Company will generate sufficient cash flow from operations to meet the conditions set forth in the Modification (described above) in order to exercise the second extension option. Accordingly, the Loan Ahas ~~notes~~been onreclassified ~~August~~to a current liability in the accompanying financial statements as of March 31, ~~2010~~2009.

~~OpBiz~~As ~~pays~~further ~~interest~~outlined on in the ~~outstanding~~Modification ~~Term~~dated ~~Loan~~May 7, A2009 ~~notes~~within ten ~~quarterly,~~days inafter ~~cash,~~Lender’s atwritten demand after the ~~London~~occurrence ~~Inter-Bank Offered~~of ~~Rate,~~a orSpecified Event ~~LIBOR,~~as ~~plus~~determined anby ~~applicable~~Lender ~~margin~~in ~~that~~its ~~increases~~sole ~~over~~but ~~time. Until~~good ~~August~~faith 31discretion, ~~2007~~Borrower, MezzCo ~~OpBiz’s~~and ~~interest~~TSP ~~payment~~Owner ~~will~~LLC ~~not~~shall ~~exceed~~deliver ~~its~~to ~~quarterly~~Lender (i) one or more deeds ~~EBITDA,~~conveying ~~reduced~~fee bysimple ~~certain~~title ~~permitted~~to ~~reductions~~all portions of the Property (as defined in the ~~Credit~~ Loan Agreement); ,(ii) one ~~divided~~or bymore aassignments ~~factor~~conveying membership interests of ~~1.20.~~MezzCo ~~After~~in ~~August~~OpBiz; ~~31,~~and ~~2007,~~(iii) all ~~OpBiz’s~~other documents and ~~interest~~instruments ~~payment~~to ~~will~~Lender ~~not~~that ~~exceed~~may ~~its~~be ~~quarterly~~required ~~EBITDA,~~to ~~reduced~~enable byLender ~~certain~~to obtain title ~~permitted~~insurance ~~reductions~~coverage ~~(as~~with ~~defined~~respect into ~~the~~fee ~~Credit~~simple ~~Agreement)~~property. ~~Interest~~In order to permit the Lender to foreclose on the ~~Term Loan~~Hotel Band ~~notes~~Casino ~~will~~separately ~~accrue~~and atto aallow ~~rate~~OpBiz ofto continue ~~LIBOR~~to ~~plus~~operate 4%the ~~and~~casino ~~will~~after besuch ~~added~~a ~~quarterly~~foreclosure (should the Lender choose to do so), title to the ~~outstanding~~real ~~principal~~property ~~amount~~comprising ofthe Hotel and Casino (the ~~Term~~“Property”) ~~Loan~~was Btransferred ~~notes~~from ~~and~~OpBiz ~~will~~to bePH ~~paid~~Fee Owner. OpBiz and PH Fee ~~when~~Owner then entered into a lease pursuant to which OpBiz ~~pays~~agreed ~~off~~to continue to operate the ~~Term~~Hotel ~~Loan~~in Bthe ~~notes.~~manner ~~OpBiz~~it ishad ~~also~~been ~~required~~and to pay anmonthly rent of ~~annual~~approximately ~~administrative~~$916,000. ~~fee~~OpBiz and ~~certain~~PH ~~other~~Fee ~~fees~~Owner ~~and~~also ~~expenses~~entered ofinto ~~the~~a ~~lender~~lease ~~under~~pursuant to which OpBiz agreed to continue to operate the ~~Credit~~Casino ~~Agreement~~in the manner it had been and to pay monthly rent of approximately $1,160,000.

~~OpBiz~~In isconnection with the Loan, the Lender required that Trophy Hunter Investments, Ltd., Bay Harbour 90-1, Ltd. and Bay Harbour Master Ltd., which are affiliates of Bay Harbour Management, execute and deliver a certain Guaranty (as described below). In exchange for Trophy Hunter Investments, Ltd., Bay Harbour 90-1, Ltd. and Bay Harbour Master Ltd. (the “Guarantors”) executing the Guaranty, OpBiz and PH Fee Owner agreed to pay to Trophy Hunter Investments, Ltd. and Bay Harbour ~~prepay~~Master Ltd. ~~amounts~~a ~~outstanding~~fee ~~under~~equal to $1,500,000 per year. The fee is accrued as of March 31, 2009 and only payable once OpBiz hits certain debt service coverage ratios defined in the ~~Credit~~Loan Agreement:.

• In connection with ~~excess~~the Loan, the Guarantors entered into a Guaranty, ~~cash~~dated ~~flow~~November 30, 2006 (asthe ~~defined~~“Guaranty”), pursuant to which the Guarantors agreed to indemnify the Lender against losses related to certain prohibited actions of the Borrower and guarantied full repayment of the Loan in the ~~Credit~~case of a voluntary or collusive bankruptcy of the Borrower, a transfer of the Property or interests in the Borrower in violation of the Loan Agreement and if the Borrower fails to maintain its status as a bankruptcy remote entity and as a result sees its assets consolidated with those of an affiliate in a bankruptcy. The liability of the Guarantors is capped at $15,000,000 per entity and $30,000,000 in the aggregate, however this cap does not apply to (i) liability arising ~~after~~from ~~certain~~events, ~~permitted~~acts ~~cash~~or circumstances actually committed or brought about ~~reserves~~by ~~are~~the ~~accumulated;~~willful acts of any of the Guarantors and (ii) the extent of any benefit received by any of the Guarantors as a result of the acts giving rise to the liability under the Guaranty. Each of Douglas Teitelbaum and Robert Earl executed and delivered guaranties substantially the same as that delivered by the Guarantors, however the liability of each of them was limited to (i) liability arising from events, acts or circumstances actually committed or brought about by willful acts by him and (ii) the extent of any benefit received by him as a result of the acts giving rise to the liability under the Guaranty.

~~• in~~In ~~scheduled~~connection with the Loan, the Guarantors and Robert Earl executed ~~quarterly~~and ~~amounts~~delivered ~~beginning~~a ~~after~~Completion ~~August~~Guaranty, 31dated November 30, 2006;, pursuant to which they jointly and severally guarantied the completion of the renovation of the Property and payment of all costs associated therewith. The liability under the Completion Guaranty is capped at the greater of (a) $35,000,000 and (b) only in the case that cost overruns for the renovation exceed $15,000,000, 24% of the then unpaid costs of the completion of the renovation.

~~• with~~In ~~certain amounts~~addition, ~~received~~ in connection with the ~~development~~Loan Agreement, MezzCo effected a refinancing of the ~~Timeshare~~Securities ~~Land~~Purchase Agreement, dated August 9, 2004, ~~adjacent~~among toMezzCo and the ~~Desert~~Investors, ~~Passage~~pursuant to which MezzCo issued to the Investors (asi) 16% ~~defined~~senior subordinated secured Notes in the ~~underlying~~original aggregate ~~agreement~~principal amount of $87 million, and (ii); Warrants for the purchase (subject to certain adjustments as provided for therein) of membership interests of MezzCo, representing 17.5% of its fully diluted equity. Loan proceeds were used to redeem in full the Notes.

• with an amount equal to the difference between what should have been spent on renovation capital expenditures and what was actually spent thereon if (i) an aggregate amount of $72.0 million is not spent on renovation capital expenditures by August 31, 2006, or (ii) an aggregate amount of $81.0 million is not spent on renovation capital expenditures by February 28, 2007 or (iii) an aggregate amount of $90.0 million is not spent on renovation capital expenditures by August 31, 2007; and12

~~• with~~Table ~~the proceeds~~ of ~~certain asset sales.~~ Contents

In ~~particular,~~connection ~~after OpBiz~~with ~~accumulates~~the ~~certain~~refinancing ~~permitted~~of ~~cash~~the ~~reserves~~Securities Purchase Agreement and redemption of the Notes, ~~OpBiz~~the isRestructuring ~~required~~Parties toentered ~~pay~~into the ~~100%~~Restructuring ofAgreement, ~~its~~dated ~~excess~~November 30, ~~cash~~2006, ~~flow~~pursuant ~~(as~~to ~~defined~~which the Restructuring Parties terminated in full the ~~Credit~~Securities Purchase Agreement), ~~from~~the ~~operations~~Subordination toAgreement, ~~the~~dated ~~lenders~~as ~~under~~of August 31, 2004, among MezzCo, OpBiz, the ~~Credit~~Senior ~~Agreement.~~Agent ~~That~~and ~~percentage~~the ~~decreases to~~Investors, ~~75%~~the Pledge Agreement, ~~then~~dated ~~50%~~August 9, 2006, ifamong ~~OpBiz~~MezzCo ~~meets~~and ~~certain~~the ~~targeted~~Collateral ~~ratios~~Agent, ofand ~~total~~the ~~debt~~Guaranty, todated August 9, ~~EBITDA~~2004, ormade ~~leverage~~by ~~ratios~~OpBiz to the Investors, ~~for~~and ~~any~~amended ~~two~~certain ~~consecutive~~other ~~fiscal~~existing agreements, ~~quarters~~as described below.

~~The~~In ~~Credit~~accordance with the terms of the Restructuring Agreement, the ~~includes~~Investors ~~covenants~~and ~~that~~EquityCo, ~~among~~MezzCo ~~other~~and ~~things~~OpBiz entered into a Release, ~~restrict~~Consent ~~OpBiz’s~~and Waiver ~~ability~~Agreement, pursuant to ~~sell~~which the Investors (i) released OpBiz from ~~assets~~its guaranteed obligations, ~~make~~under ~~distributions~~that tocertain Guaranty Agreement, dated as of August 9, 2004 and executed by OpBiz in favor of the Investors and the collateral agent; (ii) released MezzCo from its ~~owners~~pledge of the collateral, ~~other~~under ~~than~~that ~~distributions~~certain ~~for~~Pledge ~~taxes~~Agreement, ~~incur~~dated oras ~~prepay~~of ~~additional~~August 9, ~~indebtedness~~2004, ~~enter~~and ~~into~~executed ~~transactions~~by ~~with~~MezzCo in favor of the ~~affiliates~~collateral agent, ~~incur~~the ~~liens,~~Investors ~~make~~released ~~investments~~their security interest, ~~make~~as ~~capital~~defined ~~expenditures~~in that certain Security Agreement, ~~develop~~as ~~the~~amended ~~Timeshare~~by ~~Land~~that ~~adjacent~~certain toAmendment ~~the~~to ~~Desert~~Security ~~Passage~~Agreement, ~~and~~in ~~enter~~each ~~into~~case ~~material~~dated ~~contracts.~~as Inof ~~addition~~August 9, ~~OpBiz~~2004 isand executed ~~required~~by tothe ~~maintain~~Company ~~certain~~in ~~levels~~favor of ~~EBITDA~~the ~~that~~collateral ~~increase~~agent; ~~over~~(iii) released ~~time~~ and, ~~beginning~~terminated ~~August~~the 31Deed of Trust, ~~2007~~dated as of August 9, ~~maintain~~2004 ~~certain~~and ~~ratios~~executed by MezzCo in favor of ~~EBITDA~~the toTrustee ~~interest expense~~(as ~~that~~defined ~~increase~~therein) ~~over~~for ~~time~~the benefit of the collateral agent; (iv) released and ~~maintain~~terminated ~~certain~~the ~~leverage~~Investors’ ~~ratios~~security interest in the securities account, provided for that certain Securities ~~decrease~~Account ~~over~~Control ~~time~~Agreement, dated as of August 9, 2004 and executed by the Company, the collateral agent and Wells Fargo Bank, N.A.

~~The~~Additionally, ~~Credit Agreement contains customary events of default~~MezzCo, ~~including a change of control of OpBiz~~EquityCo, ~~the~~ ~~occurrence~~and ~~of a default under~~ the ~~terms~~Investors ofentered ~~any~~into ~~indebtedness of MezzCo, a~~an ~~default~~Amended byand usRestated ~~under~~Investor ~~the~~Rights ~~hotel~~Agreement, ~~management~~dated ~~contract~~November 30, ~~or termination of Sheraton as~~2006 (the ~~manager~~“A&R ofInvestor ~~the~~Rights ~~Hotel (unless we replace Sheraton with another approved manager within 30 days of such termination~~Agreement”), ato ~~default~~amend orand ~~termination~~restate of the original ~~Planet~~Investor ~~Hollywood~~Rights ~~license~~Agreements ~~agreement~~among ~~and certain defaults under~~ the ~~agreements with~~parties ~~Boulevard~~thereto, ~~Invest~~dated orAugust 9, ~~Northwind Aladdin~~2004.

13Pursuant to the Restructuring Agreement, the Restructuring Parties agreed to amend the Warrants by issuing Amended and Restated Warrants to Purchase Membership Interests of MezzCo (the “A&R Warrants”) to the Investors upon approval by the Nevada gaming authorities. The A&R Warrants will be exercisable at any time, subject to the approval of the Nevada gaming authorities, at a purchase price of $0.01 per unit. Subject to the approval of the Nevada gaming authorities, the warrants may be exercised to purchase either voting or non-voting membership interests of MezzCo or a combination thereof through the expiration date of December 9, 2012. In addition to customary anti-dilution protections, the number of units representing MezzCo membership interests issuable upon exercise of the A&R Warrants may be increased from time to time upon the occurrence of certain events as described in the A&R Warrants. Holders of the A&R Warrants and any securities issued upon exercise thereof may require MezzCo to redeem such securities commencing on December 9, 2011 at a redemption price based upon a formula set forth in the A&R Warrants. These rights expire upon completion of a public offering by MezzCo or OpBiz.

~~The Credit~~In ~~Agreement~~connection ~~includes~~with ~~warrants entitling~~ the ~~lenders~~Restructuring toAgreement, ~~2.5%~~EquityCo ofentered ~~the~~into ~~fully~~a ~~diluted~~Guaranty ~~membership~~Agreement, ~~interests~~dated inNovember 30, ~~EquityCo~~2006 at(the a“Guaranty ~~price~~Agreement”), ~~equal~~in favor toof the ~~price~~Investors ~~paid~~and by the ~~principals~~Collateral ofAgent, ~~EquityCo.~~pursuant ~~BH/RE has issued warrants~~ to ~~purchase~~which ~~2.94% of its ownership interest in~~ EquityCo ~~to the lenders under the Credit Agreement. The~~has ~~warrants~~guaranteed ~~can only be exercised upon~~ the ~~occurrence~~obligation of ~~(i)~~MezzCo ato ~~liquidity~~pay ~~event or distribution (such as through~~ the ~~sale~~redemption ofprice ~~the~~under ~~hotel/casino); (ii) a public sale~~the ofA&R ~~equity~~Warrants ~~securities~~prior ofto ~~EquityCo,~~expiration ~~MezzCo,~~and orany ~~(iii)~~indebtedness ~~OpBiz;~~arising ~~or payment in full of the obligations~~ under the ~~Credit Agreement. The warrants can either be settled~~Put inNote ~~cash~~(as ordefined in ~~other~~the ~~membership~~A&R ~~interests upon exercise~~Warrants).

~~As of~~EquityCo ~~March~~and 31the Collateral Agent also entered into a Pledge Agreement, dated ~~2005~~November 30, ~~management~~2006 ~~estimated~~ (the ~~fair~~“Pledge ~~value~~Agreement”), pursuant to which EquityCo has, subject to approval of the ~~warrants~~Nevada togaming beauthorities, pledged and ~~approximately~~granted ~~$0.1~~a ~~million. However,~~first priority security interest to the Collateral Agent for the ~~management~~ratable isbenefit ~~currently~~of the Investors in the ~~process~~membership interests of ~~obtaining~~EquityCo ain MezzCo. ~~third-party~~The ~~valuation~~Pledge Agreement, once approved, will secure the full payment of the ~~warrants~~Put Right (as defined in the A&R Warrants), including any obligations under the Put Note.

~~Mezzanine~~On ~~Financing~~November 30, 2006, MezzCo entered into an Indemnification Agreement with the Investors, pursuant to which we agreed to indemnify the Investors for any losses caused by (i) lack of gaming approvals for the issuance of the A&R Warrants, (ii) lack of gaming approval for the granting of a lien by EquityCo in the equity interests in MezzCo, as described in the Pledge Agreement, and (iii) the inability of the Investors to exercise the Warrants until July 1, 2007.

InEnergy ~~August 2004, MezzCo~~Services entered into a mezzanine financing transaction (“Mezzanine Financing”) with a group of purchasers. Pursuant to the Mezzanine Financing, MezzCo issued $87 million of 16% Senior Secured Subordinated Notes and warrants to purchase 17,500 of its units representing membership interests equal to 17.5% of the fully diluted equity of MezzCo. The gross offering proceeds of the Mezzanine Financing were deposited into an escrow account and, in conjunction with the closing of the Aladdin acquisition, were used to (i) pay approximately $16.1 million of fees and expenses related to the acquisition of the Aladdin, (ii) fund the $14 million lien release payment required under the Credit Agreement, and (iii) fund a portion of the planned renovations to the Aladdin. The notes mature in August 2011 and accrue interest at 16% per annum. Interest on the notes is payable in kind or, at the option of MezzCo, in cash. The warrants are exercisable at any time, subject to the approval of the Nevada gaming authorities, at a purchase price of $0.01 per unit. Subject to the approval of the Nevada gaming authorities, the warrants may be exercised to purchase either voting or non-voting membership interests of MezzCo or a combination thereof. Currently all of MezzCo’s voting membership interests are represented by units owned by EquityCo. In addition to customary anti-dilution protections, the number of units representing MezzCo membership interests issuable upon exercise of the warrants may be increased from time to time upon the occurrence of certain events as described in the warrants. The maximum aggregate increase is 28%, following which the warrants would represent rights to purchase 45.5% of the units representing membership interests of MezzCo, on a fully-diluted basis. Holders of the warrants and any securities issued upon exercise of the warrants may require MezzCo to redeem such securities commencing in August 2011 at a redemption price based upon a formula set forth in the warrants. The holders of warrants, and securities issued upon exercise thereof, have the right, starting in August 2008, to assume control of MezzCo and OpBiz and conduct a sale of the equity of, or all or substantially all of the assets of, either MezzCo or OpBiz. These rights are subject to (i) repayment in full of all indebtedness that is senior to the notes (including all indebtedness of OpBiz under the Credit Agreement), (ii) certain covenants related to OpBiz’s ability to achieve targeted levels of EBITDA and (iii) the prior approval of the Nevada gaming authorities. These rights expire upon completion of a public offering by MezzCo or OpBiz. In connection with the Mezzanine Financing, OpBiz’s obligation to make expenditures on renovations to the Aladdin was increased from $90 million, as required under the Credit Agreement, to $100 million.

AsOn ofJanuary 30, 2009, ~~March~~OpBiz ~~31,~~entered ~~2005~~into the Fifth Amendment to Energy Services Agreement (the “Fifth Amendment”) with Northwind Aladdin (“Northwind”), the third party that owns and ~~MezzCo~~operates ~~financing~~a ~~was~~central ~~recorded~~utility ~~net~~plant ofon land leased from OpBiz. The plant supplies hot and cold water and emergency power to the ~~unamortized~~property ~~balance~~under a contract which expires in 2020. The Fifth Amendment assigns a portion of the ~~put~~capacity to heat and chill water provided to OpBiz to ~~warrants~~Westgate for operation of ~~approximately~~the $4timeshare tower. Operation of the timeshare tower is fully described in Note 2—Summary ~~million~~of Significant Accounting Policies, Timeshare Purchase Agreement. The ~~estimated~~Fifth ~~fair~~Amendment ~~value~~provides for Westgate to assume a pro-rata portion of the ~~warrants~~ ~~was~~debt ~~approximately~~and ~~$4.1~~equity ~~million~~obligations atpayable ~~both~~by ~~March~~OpBiz to ~~31,~~Northwind. ~~2005~~OpBiz’s ~~and~~obligations ~~December~~to 31Northwind, recorded as a capital lease in ~~2004~~the accompanying financial statements, ~~respectively.~~will be reduced

~~Energy Services Agreement~~13

~~Northwind Aladdin (“Northwind”), a third party, owns~~Table ~~and~~of operates a central utility plant on land leased from OpBiz. The plant supplies hot and cold water and emergency power to the Aladdin under a contract between Aladdin Gaming and Northwind. OpBiz has assumed the energy service agreement, which expires in 2018. Under the agreement, OpBiz is required to pay Northwind a monthly consumption charge, a monthly operational charge, a monthly debt service payment and a monthly return on equity payment. Payments under the Northwind agreement total approximately $500,000 per month.Contents

14by the pro-rata assignment to Westgate as payments are made. Payments under the Northwind agreement made by OpBiz total approximately $292,000 per month.

76. MEMBERSHIP INTERESTS

The non-voting interests in BH/RE are owned 4043.7527% by BHCH I, 1815.5061% by BHCH II and 4041.7513% by OCS and the voting interests are owned 50% by Douglas P. Teitelbaum and 50% by Robert Earl. BHCH is controlled by Mr. Teitelbaum, managing principal of Bay Harbour Management, an investment management firm. BHCH was formed by Mr. Teitelbaum for the purpose of holding ~~investments~~ investments in BH/RE by funds managed by Bay Harbour Management. OCS is wholly-owned and controlled by Mr. Earl and holds Mr. Earl’s investment in BH/RE. Mr. Earl is the founder, chairman and chief executive officer of Planet Hollywood and Mr. Teitelbaum is a director of Planet Hollywood. ~~Together~~Collectively, Mr. Earl, a trust for the benefit of Mr. Earl’s children and affiliates of Bay Harbour Management, own substantially all of the equity of Planet Hollywood.

BH/RE owns 8588.61% of the membership interests in EquityCo and Starwood owns 1511.39%. OpBiz is a wholly owned subsidiary of EquityCo. BH/RE and Starwood made total equity contributions of $20 million each in EquityCo to ~~fund~~ fund the costs of the planned renovations to the Aladdin. Starwood’s equity ~~interest~~ interest in EquityCo is reflected as minority interest in the accompanying ~~consolidated~~ consolidated financial statements. ~~BH/RE recorded minority interest income related to the Starwood interests of approximately $0.9 million for the year ended December 31, 2004.~~

BH/RE has the option to purchase all of Starwood’s membership interests in EquityCo if OpBiz is entitled to terminate the hotel management contract between OpBiz and Sheraton (see Note 8 7) as a result of a breach by Sheraton. Starwood can require EquityCo to purchase all of its membership interests in EquityCo if the hotel management contract is terminated for any reason other than in accordance with its terms or as the result of a breach by Sheraton. In addition, BH/RE and Starwood entered into a registration rights agreement with respect to their membership interests in EquityCo.

8The Company has entered into various employment agreements, as amended, with several executives. ~~RELATED~~ ~~PARTY~~The ~~TRANSACTIONS~~employment agreements have initial terms of two to three years. The employment agreements provide that the executives will receive a base salary with either mandatory increases or annual adjustments and annual bonus payments. In addition, depending on the terms of the employment agreements, these executives are entitled to options to purchase between 0.2% and 3% of the equity of MezzCo.

~~Due~~Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), “Share-Based Payments” requiring that compensation cost relating to ~~Affiliates~~share-based payment transactions be recognized in the operating expenses. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s estimated requisite service period (generally the vesting period of the equity award) on a straight-line basis. Estimates are revised if subsequent information indicates that forfeitures will differ from previous estimates, and the cumulative effect on compensation cost of a change in the estimated forfeitures is recognized in the period of the change. Prior to January 1, 2006, the Company accounted for share-based compensation to employees in accordance with APB No. 25, and related interpretations. The Company also followed the disclosure requirements of SFAS No. 123 as amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure.”

~~Since~~There ~~its formation,~~is ~~certain~~no ~~members~~compensation orcost ~~affiliates of BH/RE have paid expenses totaling approximately $20.0 million~~ related to ~~the Aladdin acquisition and funded~~ ~~deposits~~non-qualified ~~under~~stock ~~the~~options ~~purchase~~recognized ~~agreement~~in onoperating ~~behalf~~results offor ~~BH/RE~~the ~~and its subsidiaries.~~three Onmonths ~~September~~ended 1March 31, ~~2004,~~2009 ~~$4.25~~and ~~million~~there ofis ~~advances~~$3,000 ~~from each~~ of ~~BHCH~~compensation ~~and OCS~~cost, which ~~were~~approximated ~~used~~fair tovalue, ~~fund~~related ~~the~~to ~~deposit~~non-qualified ~~required~~stock ~~under the purchase agreement, were~~options ~~contributed~~recognized toin ~~BH/RE~~operating asresults ~~capital.~~(included ~~Additionally,~~in ~~on September 1~~selling, ~~2004,~~general ~~the~~and ~~advances~~administrative ~~made~~expenses) byfor ~~BHCH~~the ~~and~~three ~~Planet~~months ~~Hollywood~~ended toMarch 31, ~~pay transaction fees and deposits were repaid~~2008.

~~Planet~~7. RELATED ~~Hollywood Licensing~~PARTY ~~Agreement~~TRANSACTIONS

~~OpBiz,~~ Planet Hollywood ~~and certain of Planet~~Licensing Hollywood’s subsidiaries have entered into a licensing agreement pursuant to which OpBiz received a non-exclusive, irrevocable license to use various “Planet Hollywood” trademarks and service marks. Under the licensing agreement, OpBiz also has the right, but not the obligation, to open a Planet Hollywood restaurant and one or more Planet Hollywood retail shops under a separate restaurant agreement with Planet Hollywood. OpBiz will pay Planet Hollywood a quarterly licensing fee of 1.75% of OpBiz’s non-casino revenues. If OpBiz opens an attraction with paid admission using the Planet Hollywood marks or memorabilia prior to beginning operations as the PH Resort, it will pay Planet Hollywood a quarterly licensing fee of 1.75% of the revenues of the attraction until OpBiz begins operating as the PH Resort. The initial term of the licensing agreement will expire in 2028. OpBiz can renew the licensing agreement for three successive 10-year terms.Agreement

InOpBiz, ~~addition~~Planet toHollywood and ~~being~~certain aof ~~manager~~Planet ofHollywood’s ~~BH/RE,~~subsidiaries ~~Mr.~~have ~~Earl~~entered isinto a licensing ~~the~~agreement ~~chief~~pursuant ~~executive~~to ~~officer~~which ~~and~~OpBiz ~~chairman~~received ofa ~~the~~non-exclusive, ~~board~~irrevocable oflicense to ~~directors~~use ofvarious “Planet Hollywood” trademarks and service marks. ~~Similarly~~Under the licensing agreement, ~~Mr.~~OpBiz ~~Teitelbaum~~also ishas the right, but not the obligation, to open a ~~manager~~Planet ofHollywood ~~BH/RE~~restaurant and aone ~~director~~or ofmore Planet Hollywood retail shops under a separate restaurant agreement with Planet Hollywood. ~~Together,~~OpBiz ~~Mr.~~pays ~~Earl,~~Planet Hollywood a ~~trust~~quarterly ~~for~~licensing ~~the~~fee ~~benefit~~ of Mr1.75% ~~Earl~~of OpBiz’s ~~children~~ ~~and~~non-casino ~~affiliates~~revenues. The initial term of ~~Bay~~the ~~Harbour~~licensing ~~Management~~agreement ~~own~~will ~~substantially~~expire ~~all~~in of2028. OpBiz can renew the ~~equity~~licensing agreement for three successive 10-year terms. The property officially began operation as the PH Resort on April 17, 2007 and began paying fees pursuant to the licensing agreement as of that date. Licensing fees paid to Planet Hollywood totaled approximately $0.6 Mrmillion and $0.8 ~~Earl~~million ~~disclaims~~for ~~beneficial~~the three ~~ownership~~months ofended March 31, 2009 and 2008, respectively.

15In addition to being a manager of BH/RE, Mr. Earl is the chief executive officer and chairman of the board of directors of Planet Hollywood. Similarly, Mr. Teitelbaum is a manager of BH/RE and a director of Planet Hollywood. Together, Mr. Earl, a trust for the

~~any equity of Planet Hollywood owned by the trust.~~14

~~Sheraton~~Table ~~Hotel Management~~of ~~Contract~~Contents

~~OpBiz~~benefit ~~and~~of ~~Sheraton~~Mr. Earl’s ~~have~~children ~~entered into a management contract pursuant to which Sheraton provides hotel management services to OpBiz, assists OpBiz in the management, operation~~ and ~~promotion~~affiliates of ~~the Hotel and~~ ~~permits~~Bay ~~OpBiz~~Harbour toManagement, ~~use~~own ~~the~~substantially ~~Sheraton~~all ~~brand and trademarks in the promotion~~ of the ~~Hotel.~~ ~~OpBiz~~equity ~~pays Sheraton a monthly fee~~ of ~~4% of gross hotel revenue and~~Planet ~~certain food and beverage outlet revenues and 2% of rental income from third-party leases in the hotel~~Hollywood. ~~The management contract has a 20-year term commencing on the completion of the Aladdin acquisition and is subject to certain termination provisions by either OpBiz or Sheraton~~Mr. Earl ~~Sheraton~~disclaims isbeneficial ~~a wholly~~ownership ~~owned subsidiary~~ of ~~Starwood,~~any ~~which has a 15%~~ equity ~~interest~~of inPlanet ~~EquityCo~~Hollywood ~~and~~owned ~~has~~by the ~~right to appoint two members to the EquityCo board of managers~~trust. ~~Starwood Management fees totaled approximately $3.1 million for the three months ended March 31, 2005.~~

~~9. INCOME~~Sheraton ~~TAXES~~Hotel Management Contract

~~The~~OpBiz ~~condensed~~and Sheraton have ~~consolidated~~entered ~~financial~~into ~~statements~~a ~~include~~management ~~the~~contract ~~operations~~pursuant ofto ~~BH/RE~~which ~~and~~Sheraton ~~its~~provides hotel ~~controlled~~management ~~subsidiaries:~~services ~~EquityCo~~to OpBiz, ~~MezzCo~~assists OpBiz in the management, operation and promotion of the Hotel and permits OpBiz. ~~BH/RE~~to use the Sheraton brand and trademarks ~~EquityCo~~in ~~are~~the promotion of the Hotel. OpBiz pays Sheraton a monthly fee of ~~limited~~4% ~~liability~~of ~~companies~~gross hotel revenue and ~~are~~certain ~~taxed~~food asand ~~partnerships~~beverage ~~for~~outlet ~~federal~~revenues ~~income~~and 2% ~~tax~~of ~~purposes~~rental income from third-party leases in the hotel. ~~MezzCo~~The management contract has ~~elected~~a to20-year beterm ~~taxed~~commencing ason athe ~~corporation~~completion ~~for~~of ~~federal~~the Aladdin acquisition and ~~income~~is ~~tax~~subject ~~purposes.~~to certain termination provisions by either OpBiz, or Sheraton. Sheraton is a wholly- owned subsidiary of ~~MezzCo~~Starwood, ~~will~~which behas an 11.39% equity ~~treated~~interest asin aEquityCo ~~division~~and ofhas ~~MezzCo~~the ~~for~~right ~~federal~~to ~~income~~appoint ~~tax~~two ~~purposes,~~members ~~and~~to the EquityCo ~~accordingly,~~board ~~will~~of ~~also~~managers. beManagement ~~subject~~fees paid to ~~federal~~Starwood ~~income~~totaled ~~taxes~~approximately $2.1 million and $2.6 million for the three months ended March 31, 2009 and 2008, respectively.

~~MezzCo~~Planet ~~and OpBiz account~~Hollywood ~~for~~(LV) ~~income~~LLC ~~taxes~~Lease in accordance with SFAS No. 109, “Accounting for Income Taxes”. SFAS 109 requires the recognition of deferred income tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.Agreement

AtOpBiz ~~March 31~~and Planet Hollywood (LV) LLC (“Planet Hollywood LV”) have entered into a lease agreement pursuant to which Planet Hollywood LV, ~~2005~~as tenant, ~~OpBiz~~ ~~has~~operates a ~~general~~new ~~business~~concept ~~credit~~it ~~carryforward~~has developed offor an upscale 24-hour diner named “Planet Dailies” within approximately 11,500 square feet of space located on the premises owned by OpBiz. Planet Hollywood LV pays OpBiz base rent in the amount of $0500,000 per year (subject to annual increase adjustments), in addition to percentage rent of up to 12% based on annual gross sales (to the extent such percentage rent exceeds base rent).3 The ~~million~~initial term of ~~that~~the ~~expires~~lease agreement will expire in ~~2024~~2017. ~~MezzCo~~Planet ~~and~~Hollywood ~~OpBiz~~LV ~~recorded~~can arenew ~~valuation~~the lease ~~allowance~~agreement atfor two successive 5-year terms. Planet Dailies began operation ~~March~~on April 311, ~~2005~~2007 ~~relating~~and began paying rent pursuant to ~~recorded~~the ~~tax~~lease ~~benefits~~agreement ~~because~~as of ~~all~~that ~~benefits~~date. ~~are~~Rent received from Planet Dailies totaled approximately $0.1 ~~more~~million ~~likely~~and ~~than~~$0.1 ~~not~~million tofor bethe ~~unrealized~~three months ended March 31, 2009 and 2008, respectively.

10Planet Hollywood LV is wholly owned by, and a subsidiary of, Planet Hollywood International, Inc. ~~COMMITMENTS~~ Together, ~~AND~~Mr. Earl, ~~CONTINGENCIES~~a trust for the benefit of Mr. Earl’s children and affiliates of Bay Harbour Management, own substantially all of the equity of Planet Hollywood International, Inc. Mr. Earl disclaims beneficial ownership of any equity of Planet Hollywood International Inc. owned by the trust.

~~Litigation~~Earl of Sandwich (Las Vegas), LLC Lease Agreement

~~BH/RE~~OpBiz isand ~~not~~Earl ~~currently~~of Sandwich (Las Vegas), LLC (“Earl of Sandwich”) have entered into a ~~party~~lease agreement pursuant to which Earl of Sandwich, as tenant, operates a restaurant ~~any~~named ~~material~~“Earl ~~legal~~of ~~proceedings~~Sandwich” within approximately 3,030 square feet of space located on the premises owned by OpBiz. Earl of Sandwich pays OpBiz base rent in the amount of $161,600 per year (subject to annual increase adjustments), in addition to percentage rent of up to 12% based on annual gross sales (to the extent such percentage rent exceeds base rent). The initial term of the lease agreement will expire in 2017. Earl of Sandwich can renew the lease agreement for two successive 5-year terms. Earl of Sandwich began operation in September 2007 and began paying rent pursuant to the lease agreement as of that date. Rent received from Earl of Sandwich totaled approximately $0.1 million and $0.1 million for the three months ended March 31, 2009 and 2008, respectively.

16Earl of Sandwich is wholly and indirectly owned by a trust for the benefit of Mr. Earl’s children. Mr. Earl disclaims beneficial ownership of any equity of Earl of Sandwich owned by the trust.

Guaranty Agreement

In connection with the Loan, the Lender required that Trophy Hunter Investments, Ltd., Bay Harbour 90-1, Ltd. and Bay Harbour Master Ltd., which are affiliates of Bay Harbour Management, execute and deliver a certain Guaranty (see Note 5.—Long-Term Debt). In exchange for executing the Guaranty, OpBiz and PH Fee Owner agreed to pay Trophy Hunter Investments, Ltd. and Bay Harbour Master Ltd. a fee equal to $1,500,000 per year. The fee is accrued and only payable once OpBiz achieves certain debt service coverage ratios defined in the Loan Agreement.

Aircraft Charter Arrangements

In the ordinary course from time to time the Company utilizes the services of private aircrafts for charter. The Company currently utilizes several different third party aircraft management/charter vendors for the provision of charter flights depending upon aircraft size, availability and location. One or more affiliates of BH/RE have placed an owned aircraft in service with one such vendor. From time to time, the Company may utilize the services of this vendor which may involve the affiliates owned aircraft provided that the rate charged for that aircraft shall be at arms length and fair market for similar aircraft.

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8. FAIR VALUE MEASUREMENTS

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS 157 does not establish requirements for any new fair value measurements, but it does apply to existing accounting pronouncements in which fair value measurements are already required. SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. The Company has adopted the provisions of SFAS 157 as of January 1, 2008, for financial assets and liabilities and January 1, 2009, for non-financial assets and liabilities. Although the adoption of SFAS 157 has not materially impacted its financial condition, results of operations, or cash flow, the Company is now required to provide additional disclosures as part of its financial statements.

SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of March 31, 2009, the Company held certain items that are required to be measured at fair value on a recurring basis. These included an interest rate cap contract and certain put warrants to purchase 17.5% of fully diluted equity interest in the Company. The fair value of interest rate cap contract is determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Therefore, the Company has categorized the cap contract as Level 2. The Company determines the value of the put warrants using a discounted cash flow model and weekly asset volatilities of comparable companies over the past three years. Therefore, the Company has categorized these put warrants as Level 2.

In accordance with the fair value hierarchy described in SFAS No. 157 “Fair Value Measurements,” the following table shows the fair value of our financial assets and financial liabilities as of March 31, 2009:

	December 31, 2008		March 31, 2009		Level 1		Level 2		Level 3

Assets:
Interest rate cap	$	26,000	$	239	$	—	$	239	$	—

Liabilities:
Put warrants	$	1,537,000	$	1,537,000	$	—	$	1,537,000	$	—

The following section describes the valuation methodologies used to measure fair value, key inputs, and significant assumptions:

Interest rate cap — The estimated fair value of our interest rate cap is based upon quoted prices available in active markets and represent the amounts we would expect to receive if we sold these marketable securities.

Put warrants — The estimated fair value of our put warrants is based on a discounted cash flow model and asset volatilities of comparable companies over the past three years.

9. INCOME TAXES

The condensed consolidated financial statements include the operations of BH/RE and its majority-owned subsidiaries: EquityCo, MezzCo, OpBiz, PH Mezz II, PH Mezz I, PH Fee Owner and TSP Owner. BH/RE and EquityCo are limited liability companies and are taxed as partnerships for federal income tax purposes. However, MezzCo has elected to be taxed as a corporation for federal income tax purposes. OpBiz and PH Mezz II, wholly-owned subsidiaries of MezzCo, will be treated as divisions of MezzCo for federal income tax purposes, and accordingly, will also be subject to federal income taxes. Additionally, PH Mezz I, a wholly-owned subsidiary of PH Mezz II, PH Fee Owner, a wholly owned subsidiary of PH Mezz I and TSP Owner, a wholly owned subsidiary of PH Fee Owner will also be subject to federal income taxes.

MezzCo, OpBiz, PH Mezz II, PH Mezz I, PH Fee Owner and TSP Owner account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. SFAS 109 requires the recognition of deferred income tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is recorded.

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Management believes it is more likely than not that its net deferred tax asset will not be realized and has therefore recorded a valuation allowance against this net deferred tax asset.

As of December 31, 2008, MezzCo has federal net operating losses of $297.6 million which begin to expire after 2024. MezzCo has general business credit carryforwards at December 31, 2008 of $2.0 million which begin to expire after 2024 and a minimum tax credit carryforward of $7,000.

As discussed in Note 2 to the condensed consolidated financial statements, the Company accounts for income taxes in accordance with the provisions of FIN 48. Upon the adoption of FIN 48, the Company reclassified the uncertain tax benefits as required and reclassified a portion of the existing allowance. Accordingly, there has been no adjustment to retained earnings recorded as a result of the FIN 48 reclassifications. The Company had uncertain tax benefits of $2.1million as of March 31, 2009 and December 31, 2008. The Company recognizes penalties and interest as a component of income tax expense. Management does not expect any penalty assessment associated with the adoption of FIN 48. The Company is no longer subject to U.S. federal tax examinations by tax authorities for tax years before 2004.

10. COMMITMENTS AND CONTINGENCIES

Litigation

In the normal course of business, the Company is subject to various litigation claims and assessments. The Company is not currently a party to any material legal proceedings.

Employment Agreements

The Company has entered into various employment agreements, as amended, with several executives. The employment agreements have initial terms of two to three years. The employment agreements provide that the executives will receive a base salary with either mandatory increases or annual adjustments and annual bonus payments. In addition, depending on the terms of the employment agreements, these executives are entitled to options to purchase between 0.2% and 3% of the equity of MezzCo.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview of Management’s Discussion and Analysis of Financial Condition and Results of Operations

Set forth below is a discussion of the financial condition and results of operations of BH/RE and its ~~our~~ subsidiaries for the periods covered in ~~the~~this report. The discussion of operations herein focuses on events and the revenues and expenses during the three months ended March 31, ~~2005~~ 2009, as compared to the three months ended March 31, ~~2004, as if there was no~~ ~~change in ownership of the Aladdin~~2008.

The following management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes to the consolidated financial statements of BH/RE ~~and Aladdin Gaming, respectively, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”~~ included in BH/RE’s ~~Form~~Annual 10Report ~~Registration~~on ~~Statement (File No. 000~~Form 10-~~50689)~~K filed with the Securities and Exchange Commission on ~~April~~March 1531, ~~2004~~ 2009, and the unaudited condensed consolidated financial statements and notes hereto included in Part I, Item 1 of this report.

Critical Accounting Policies and Estimates

Significant Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements are prepared in conformity with U.S . generally accepted accounting principles. Certain policies, including the determination of bad debt reserves, the estimated useful lives assigned to assets, asset impairment, insurance reserves and the calculation of liabilities, require that we apply significant judgment in defining the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. Our judgments are based on historical experience, terms of existing contracts, observance of trends in the gaming industry and information available from other outside sources. There can be no assurance that actual results will not differ from our estimates. To provide an understanding of the methodology we apply, our significant accounting policies and basis of presentation are discussed below, as well as, where appropriate, in the notes to the condensed ~~consolidated~~ consolidated financial statements.

Property and Equipment

Property and equipment are stated at cost. Recurring repairs and maintenance costs, including items that are replaced routinely in the casino, hotel and food and beverage departments which do not meet the Company’s capitalization policy, are expensed as incurred. The Company has established its capital expense policy to be reflective of its individual ongoing repairs and maintenance programs. Gains or losses on dispositions of property and equipment are included in the determination of income. Property and equipment are generally depreciated over the following estimated useful lives on a straight-line basis:

Buildings		~~39.5~~40 years
Building improvements		15 to 40 years
Furniture, fixtures and equipment		3 to 7 years

Property and equipment and other long-lived assets are evaluated for impairment in accordance with the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” For assets to be disposed of, the asset to be sold is recognized at the lower of carrying value or fair value less costs of disposal. Fair value for assets to be disposed of is estimated based on comparable asset sales, solicited offers or a discounted cash flow model.

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Derivative Instruments and Hedging Activities

~~BH/RE~~Pursuant ~~has issued warrants in an effort~~ to ~~provide further consideration to~~ the ~~purchasers~~refinancing of ~~memberships interests~~the inSecurities ~~EquityCo~~Purchase Agreement and the ~~MezzCo.~~terms ~~BH/RE~~of ~~accounts for~~ the ~~senior~~Restructuring ~~note~~Agreement, ~~warrants in~~the ~~EquityCo~~Restructuring asParties ~~embedded~~agreed ~~derivative instruments in accordance with SFAS No. 133,~~to ~~“Accounting~~amend ~~for~~the ~~Derivative~~warrants ~~Instruments~~issued ~~and~~by ~~Hedging Activities,”~~MezzCo ~~and~~to ~~SFAS~~purchase No17.5% ~~138,~~of ~~“Accounting~~the ~~for~~fully ~~Certain~~diluted ~~Derivative~~equity ~~Instruments~~in ~~and Hedging Activities – an Amendment of FASB Statement No~~MezzCo. ~~133”.~~ The warrants ~~issued in conjunction with the Mezzanine Financing~~ contain a net cash settlement, and therefore are accounted for in accordance with Emerging Issues Task Force (“EITF”) 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”. Both SFAS No. 133 “Accounting for Derivative Instruments and ~~EITF~~Hedging Activities” and EITF 00-19 require that the warrants be recognized as liabilities, with changes in fair value affecting net income. See “Note 5. Long-Term Debt.”

~~Revenue~~The ~~Recognition~~terms of the Loan Agreement required the Company to enter into an interest rate cap agreement, which expires on December 9, 2009, to manage interest rate risk. The Company did not apply cash flow hedge accounting to this instrument. Although this derivative was not afforded cash flow hedge accounting, the Company retained the instrument as protection against the interest rate risk associated with its long-term borrowings. The Company accounts for its derivative activity in accordance with SFAS No. 133 and accordingly, ~~Promotional~~recognizes ~~Allowances~~all derivatives on the balance sheet at fair value with any in change in fair value being recorded in interest income or expense in the accompanying consolidated statements of operations.

~~Casino~~Revenue ~~revenues~~Recognition ~~are recognized as the net win from gaming activities, which is the difference between gaming wins~~ and ~~losses. All~~ ~~other~~Promotional revenues are recognized as the service is provided. Revenues include the retail value of food, beverage, rooms, entertainment, and merchandise provided on a complimentary basis to customers. Such complimentary amounts are then deducted from revenues as promotional allowances on our condensed consolidated statements of operations. The estimated departmental costs of providing such promotional allowances are included in casino costs and expenses.Allowances

Casino revenues are recognized as the net win from gaming activities, which is the difference between gaming wins and losses. Hotel revenue recognition criteria are generally met at the time of occupancy. Food and beverage revenue recognition criteria are generally met at the time of service. Deposits for future hotel occupancy or food and beverage services are recorded as deferred income until ~~revenue~~ revenue recognition criteria are met. Cancellation fees for hotel and food and ~~beverage~~ beverage services are recognized upon cancellation by the customer as defined by a written contract entered into with the customer. All other revenues are recognized as the service is provided. Revenues include the retail value of food, beverage, rooms, entertainment and merchandise provided on a complimentary basis to customers. Such complimentary amounts are then deducted from revenues as promotional allowances on BH/RE’s consolidated statements of operations.

SlotPlayers’ Club Program

~~Slot~~ Players’ club members earn points based on ~~gaming~~ gaming activity, which can be redeemed for cash. AOpBiz accrues expense and a liability isrelated ~~recorded~~to this program as the points are earned based on historical redemption percentages. Revenues are recognized net of certain sales incentives in accordance with the Emerging Issues Task Force (“EITF”) consensus on Issue 01-9, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).” EITF 01-9 requires that sales ~~estimated~~incentives ~~cost~~be recorded as a reduction of revenue; consequently, casino revenues are reduced by points earned through the ~~outstanding~~players’ club loyalty program. The Company accrues a liability for players’ club points that can be redeemed for cash. In March 2009, the Company changed the structure of its players club to allow patrons who earn points to redeem those points for promotional slot play and other non-cash incentives. The total accrued liability related to potential cash awards redeemable under the ~~slot~~players’ club program was $1.3 million at March 31, 2009 and $2.2 million at December 31, 2008.

~~Income Taxes~~Self-Insurance Accruals

~~The consolidated financial statements include the operations of~~ BH/RE ~~and~~is ~~its controlled subsidiaries: EquityCo~~self-insured, ~~MezzCo, and~~up ~~OpBiz.~~to ~~BH/RE~~certain ~~and~~limits, ~~EquityCo~~for ~~are~~costs ~~limited~~associated ~~liability~~with ~~companies~~employee ~~and~~medical ~~are taxed as partnerships for federal income tax purposes~~coverage. ~~MezzCo has elected to be taxed as~~The aCompany ~~corporation~~accrues for ~~federal~~the ~~income~~estimated ~~tax~~expense ~~purposes. OpBiz, a wholly-owned subsidiary~~ of ~~MezzCo~~known claims, ~~will~~as bewell ~~treated~~ as aestimates for ~~division~~claims ofincurred ~~MezzCo~~but ~~for~~not ~~federal~~yet ~~income~~reported ~~tax~~which totaled approximately ~~purposes,~~$3.3 million ~~and~~at ~~accordingly~~March 31, ~~will~~2009 ~~also~~and be$2.4 million ~~subject~~at ~~to federal income taxes~~December 31, 2008.

~~MezzCo and OpBiz account for income taxes in accordance with SFAS No. 109, “Accounting for~~ Income Taxes”. SFAS 109 requires the recognition of deferred income tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.

18The condensed consolidated financial statements include the operations of BH/RE and its majority-owned subsidiaries: EquityCo, MezzCo, OpBiz, PH Mezz II, PH Mezz I, PH Fee Owner and TSP Owner. BH/RE and EquityCo are limited liability companies and are taxed as partnerships for federal income tax purposes. However, MezzCo has elected to be taxed as a corporation for federal income tax purposes. OpBiz and PH Mezz II, wholly-owned subsidiaries of MezzCo, are treated as divisions of MezzCo for federal income tax purposes, and accordingly, are also subject to federal income taxes. Additionally, PH Mezz I, a wholly-owned subsidiary of PH Mezz II, PH Fee Owner, a wholly owned subsidiary of PH Mezz I, and TSP Owner, a wholly owned subsidiary of PH Fee Owner, are also subject to federal income taxes.

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related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is recorded.

The Company accounts for income taxes in accordance with the provisions of FASB Interpretation No. 48 (“FIN 48”) “Accounting for Uncertainty in Income Taxes — an interpretation of FASB No. 109”, which clarifies certain aspects of accounting for uncertain tax positions, including issues related to the recognition and measurement of those tax positions. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. Further discussion regarding the adoption of FIN 48 can be found in Note 9 to the Condensed Consolidated Financial Statements.

Timeshare Purchase Agreement

Pursuant to an agreement dated December 10, 2004 and modified on September 10, 2007, OpBiz entered into a Timeshare Purchase Agreement with Westgate Resorts, LTD. (“Westgate”), a Florida limited partnership, whereby OpBiz agreed to sell approximately 4 acres of land adjacent to the PH Resort to Westgate (the “Timeshare Parcel”), who plans to develop, market, manage and sell timeshare units on the land. On September 19, 2007, the sale of the land and deed transfer to Westgate was completed. In connection with the close of the transaction, OpBiz, PH Fee Owner, LLC and TSP Owner, LLC, entered into a modification agreement (the “Modification Agreement”) with Westgate. The Modification Agreement defines the development phases for the Timeshare Parcel and outlines the permitted number of timeshare, whole ownership and penthouse units. The Modification Agreement also outlines permitted amenities on the Timeshare Parcel and documents Seller’s approval of Westgate’s financing for the project.

Pursuant to the terms of the Timeshare Purchase Agreement, the purchase price of the land was $29.5 million. The Company was carrying the land at a value of $29.5 million. Accordingly, no gain on the sale of this land has been recognized in the accompanying financial statements. Westgate pays the Company a monthly fee equal to 9% of total timeshare sales. 50% of the fees received will be used to pay the purchase price for the land and the remaining 50% will be recorded as income as received. As of March 31, 2009, the Company has a receivable balance for the sale of land of $19.2 million, $16.6 million of which is classified as long-term and at December 31, 2008 the Company has a receivable balance for the sale of land of $19.9 million, $16.9 million of which is classified as long-term in the accompanying financial statements.

Membership Interests

As of March 31, 20052009, ourBH/RE’s membership interests had not been unitized and ourBH/RE’s members do not presently intend to unitize these membership interests. Accordingly, wemanagement have of BH/RE has excluded earnings per share data required pursuant to SFAS No. 128, “Earnings Per Share,” because wemanagement believebelieves that such disclosures would not be meaningful to the financial statement presentation.

Recently Issued Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations.” SFAS No. 141 (revised) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and noncontrolling interest in the acquiree and the goodwill acquired. The revision is intended to simplify existing guidance and converge rulemaking under U.S. generally accepted accounting principles with international accounting rules. This statement applies prospectively to business combinations where the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of SFAS No. 141 (revised) had no impact on the Company’s financial position, results of operations or cash flows.

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In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133.” SFAS No. 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. This statement is effective for fiscal years beginning after November 15, 2008. SFAS No. 161 did not have a material impact on the Company’s financial position, results of operations or cash flows.

Results of Operations

~~The~~Current ~~following~~Economic ~~table~~Conditions ~~highlights~~and ~~the~~Comparability ~~results~~ of ~~operations~~ of the Aladdin for the three months ended March 31, 2005 and 2004, respectively (dollars in thousands, unaudited). The amounts included in the balances for the three months ended March 31, 2004 include the results from both BH/RE and Aladdin Gaming.Results

	Three months ended March 31,				Percent
	2005		2004		Change
Net revenues	$	79,219	$	73,356	8.0	%
Operating expenses:
Casino	17,458		16,877		3.4	%
Hotel	9,056		7,512		20.6	%
Food and beverage	12,939		11,439		13.1	%
Other	2,342		3,434		(31.8	)%
Selling, general and administrative	17,500		15,193		15.2	%
Depreciation and amortization	5,870		—		100.0	%
Preopening expenses	—		286		(100	)%
Operating income	$	14,054	$	18,615	(24.5	)%

The outlook for the leisure and gaming industries remains highly uncertain due to a number of factors affecting consumers, including a slowdown in global economies, reduced consumer spending, and restricted credit markets. Reduced casino volumes, a reduced demand for hotel rooms and a highly competitive market driving hotel rates down have all contributed to declines in the overall Las Vegas market. This slow down was particularly significant in the fourth quarter of 2008 and has continued into the first quarter of 2009. 2008 was the PH Resort’s first full year of operation as a rebranded property. We believe that first quarter 2009 operating results were negatively impacted by the current market conditions and that we will continue to experience lower than historical hotel occupancy, room rates and casino volumes in 2009. As a result, we have increasingly focused on efficiency initiatives to control expenses and improve performance. We are continually reviewing the costs and marketing opportunities to ensure maximum operating performance in the face of the current economic conditions.

~~Net~~The ~~revenues~~following ~~and~~table highlights ~~overall~~the ~~operating~~ results ~~for~~of ~~the~~operations ~~three months~~for ~~ended March 31, 2005 improved over that of~~ the three months ended March 31, ~~2004 due to more effective operating efficiencies as a result of the~~ ~~purchase~~2009 ofand ~~the Aladdin by OpBiz~~2008, asrespectively ~~well~~(dollars ~~as an improvement~~ in ~~general economic conditions during the first quarter of 2005. The decrease in operating income was primarily due to depreciation not being recorded during the first eight months of 2004~~thousands, ~~while Aladdin Gaming was undergoing bankruptcy proceedings~~unaudited).

	Three months ended March 31,					Percent
	2009			2008		Change

Net revenues	$	57,074		$	73,994	(22.9	)%
Operating expenses:
Casino	17,415			20,420		(14.7	)%
Hotel	9,402			10,566		(11.0	)%
Food and beverage	8,637			9,068		(4.8	)%
Other	456			284		60.6	%
Selling, general and administrative	15,702			18,974		(17.2	)%
Depreciation and amortization	10,184			8,801		15.7	%
Operating (loss) income	$	(4,722	)	$	5,881	(180.3	)%

~~The~~Net ~~following~~revenues ~~table~~for the ~~highlights~~three months ended March 31, 2009 decreased when compared to the ~~various~~three months ~~sources~~ended ofMarch 31, ~~our~~2008. ~~revenues~~We ~~and~~believe ~~expenses~~that our revenues for the three months ended March 31, ~~2005~~2009 ~~and~~have ~~2004~~been ~~(dollars~~negatively inimpacted ~~thousands,~~by ~~unaudited).~~the ~~The~~weakened ~~amounts~~United ~~included~~States economy. Disruptions in the ~~balances~~housing ~~for~~and stock markets, high travel costs, along with declines in the ~~three~~Las ~~months~~Vegas ~~ended~~market ~~March~~due ~~31,~~to ~~2004~~decreased ~~include~~visitor ~~the~~volume ~~results~~and ~~from~~lower ~~both~~customer ~~BH/RE~~spending per trip have and ~~Aladdin~~may ~~Gaming~~continue to adversely impact our revenues. We have and will continue to aggressively monitor and reduce expenses to improve operating margins during 2009.

	Three months ended March 31,						Percent
	2005			2004			Change
Casino revenues	$	32,913		$	29,389		12.0	%
Casino expenses	17,458			16,877			3.4	%
Margin	47.0		%	42.6		%	4.4	%
Hotel revenues	$	29,237		$	28,512		2.5	%
Hotel expenses	9,056			7,512			20.6	%
Margin	69.0		%	73.7		%	(4.7	)%
Food and beverage revenues	$	19,319		$	18,903		2.2	%
Food and beverage expenses	12,939			11,439			13.1	%
Margin	33.0		%	39.5		%	(6.5	)%
Other revenues	$	4,393		$	4,124		6.5	%
Other expenses	2,342			3,434			(31.8	)%
Selling, general and administrative expenses	$	17,500		$	15,193		15.2	%
Percent of net revenues	22.1		%	20.7		%	1.4	%

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The following table highlights the various sources of our revenues and expenses for the three months ended March 31, 2009 and 2008, respectively (dollars in thousands, unaudited).

	Three months ended March 31,						Percent
	2009			2008			Change

Casino revenues	$	25,351		$	32,347		(21.6	)%
Casino expenses	17,415			20,420			(14.7	)%
Margin	31.3		%	36.9		%

Hotel revenues	$	22,759		$	30,953		(26.5	)%
Hotel expenses	9,402			10,566			(11.0	)%
Margin	58.7		%	65.9		%

Food and beverage revenues	$	11,699		$	14,257		(17.9	)%
Food and beverage expenses	8,637			9,068			(4.8	)%
Margin	26.2		%	36.4		%

Other revenues	$	2,881		$	3,782		(23.8	)%
Other expenses	456			284			60.6	%
Margin	84.2		%	92.5		%

Selling, general and administrative expenses	$	15,702		$	18,974		(17.2	)%
Percent of net revenues	27.5		%	25.6		%

Casino

Casino revenue is derived primarily from patrons wagering on slot machines, table games and other gaming activities. Table games generally include ~~Blackjack~~blackjack or ~~Twenty~~twenty ~~One~~one, ~~Craps~~craps, baccarat ~~Baccarat~~ and ~~Roulette~~roulette. Other gaming activities include the ~~Race~~race and ~~Sports~~sports books, ~~Books~~poker and keno. Casino revenue is defined as the win from gaming activities, computed as the difference between gaming wins and losses.

Casino revenues vary from time -to -time due to general economic conditions, competition, popularity of entertainment offerings, table game hold, slot machine hold and occupancy percentages in the ~~hotel~~Hotel. Casino revenues also vary depending upon the amount of gaming activity, as well as variations in the odds for different games of chance. Casino revenue is recognized at the end of each gaming day.

Casino revenues ~~increased 12~~decreased 21.06% to $3225.94 million for the three months ended March 31, ~~2005~~2009, as compared to $2932.43 million for the three months ended March 31, 2008. Table games revenue for the three months ended March 31, ~~2004~~2009, decreased by approximately $3.7 ~~The~~million ~~increase~~or 27.4% inwhen ~~casino~~compared to the three months ended March 31, 2008. The decline ~~revenues~~in istable ~~primarily~~revenue was due to ~~the~~a ~~addition~~combination of ~~new~~a ~~and~~decline ~~more~~in ~~popular~~drop ~~gaming~~which was $6.7 ~~devices~~million ~~and~~or 8.4% less than the ~~conversion~~same ofthree month period in 2008 and a ~~significant~~lower ~~amount~~than anticipated hold. Overall table hold for the first quarter of ~~our~~2009 ~~gaming~~was ~~devices~~13.4% compared to ~~“ticket-~~16.9% in~~, ticket-out”~~ ~~technology.~~the ~~Table~~first ~~games~~quarter of 2008. Slot revenue for the three months ended March 31, ~~2005~~2009 ~~increased~~decreased by approximately $23.04 million when compared to the same three ~~months ended~~month ~~March~~period ~~31,~~in ~~2004~~prior year. ~~The~~Overall ~~increase~~slot inwin ~~table~~percent ~~games~~was ~~revenue~~8.5% ~~was~~in the ~~due~~first quarter 2009 compared to ~~an increase~~7.6% in ~~win~~the ~~percentage~~first toquarter 18of 2008 but slot handle for the three months ended March 31, 2009 decreased $66.8%7 ~~from~~million or 1624.4% when compared to the same three month period in prior year. Combined revenues from the race and sports book and poker for the three months ended March 31, ~~2005~~2009 ~~and~~increased ~~2004~~by 2.5% when compared to the three month period ended March 31, ~~respectively~~2008 mainly due to a better hold on sporting events.

Casino expenses ~~increased 3~~decreased 14.47% to $17.54 million for the three months ended March 31, ~~2005~~2009, as compared to $1620.94 million for the three months ended March 31, ~~2004~~2008. The casino ~~margin~~operating ~~increased~~margin 4decreased 5.46% ~~percentage~~when ~~points in~~ comparing the same three- month periods. The ~~increase in~~operating ~~casino~~margin ~~expenses~~decline ~~was~~is ~~mainly~~commensurate with ~~the result of~~ an increase in ~~gaming~~marketing ~~taxes~~costs ~~and employee~~necessary ~~benefit~~to ~~expenses~~attract ~~for~~casino ~~the~~customers ~~three months ended March 31, 2005 as compared~~in to the ~~three~~current ~~months~~economic ~~ended~~operating ~~March 31, 2004~~environment.

Hotel

Hotel revenue is derived from rooms and suites rented to guests. “~~Average~~average daily rate” is an industry specific term used to define the average amount of revenue per rented room per day. “Occupancy percentage” defines the total percentage of rooms occupied and ~~is computed by dividing the number of rooms occupied by the total number of rooms available. Hotel revenue is recognized at the time the room is provided to the guest.~~

Hotel revenues increased 2.5% to $29.2 million for the three months ended March 31, 2005 as compared to $28.5 million for the three months ended March 31, 2004. Hotel occupancy percentages decreased 3.5 percentage points to 94.1% for the three months ended March 31, 2005 as compared to 97.6% for the three months ended March 31, 2004. Average daily room rates increased to $134 for the three months ended March 31, 2005, as compared to $126 for the three months ended March 31, 2004, resulting in increased hotel revenues. The increase in hotel revenues and average daily room rates are primarily due to an improvement in general economic conditions during the first quarter of 2005 and a higher demand for rooms in Las Vegas in general.22

~~Hotel expenses increased~~Table 20.6% to $9.1 million for the three months ended March 31, 2005 as compared to $7.5 million for the three months ended March 31, 2004. Hotel margins decreased 4.7 percentage points over the same three-month periods. The decrease in hotel margins was primarily due to the commencement of ~~management fees paid to Starwood under the management contract.~~Contents

is computed by dividing the number of rooms occupied by the total number of rooms available. Hotel revenue is recognized at the time the room is provided to the guest.

Hotel revenues of $22.8 million for the three months ended March 31, 2009 were 26.5% lower than the three months ended March 31, 2008 driven by a decline in both occupancy and average daily room rate. Hotel occupancy decreased 9.5 percentage points to 85.1% for the three months ended March 31, 2009 compared to 94.5% for the three months ended March 31, 2008. Approximately 1,008 rooms were out of service for renovation in the first quarter of 2008 resulting in more rooms available for sale for the three months ended March 31, 2009 when compared to the three months ended March 31, 2008. Average daily room rates decreased to $115 for the three months ended March 31, 2009 compared to $144 for the three months ended March 31, 2008. Las Vegas visitor volume, room occupancy and average daily rate are all down in the first quarter of 2009 when compared to the first quarter of 2008 and as a result, many of the Strip properties are reducing room rate to maintain occupancy. The decline in average daily room rate at the PH Resort is indicative of the rate reductions necessary to remain competitive in the current economic operating environment. Additionally, we have experienced cancellations and attrition in the higher rated convention segment as the economic slowdown continues to reduce the demand for business travel.

Hotel expenses decreased 11.0% to $9.4 million for the three months ended March 31, 2009, as compared to $10.6 million for the three months ended March 31, 2008. Operating margin decreased 7.2% for the three month period ended March 31, 2009 when compared to the same three month period in the previous year. We continue to focus on expense savings initiatives to maximize profitability in reaction to the reductions in average daily rate and occupancy.

Food and Beverage

Food and beverage revenues are derived from food and beverage sales in the restaurants, bars, room service, banquets and entertainment outlets. Food and beverage revenue is recognized at the time the food and/or beverage is provided to the guest.

Food and beverage revenues ~~increased~~decreased 217.29% to $1911.3 7 million for the three months ended March 31, ~~2005~~ 2009, as compared to $1814.9 3 million for the three months ended March 31, ~~2004~~2008. ~~The average~~Food ~~guest~~revenue ~~check~~decreased 25.9% ~~increased~~when compared to ~~$22.60 for~~ the same three ~~months~~month ~~ended~~period ~~March~~in ~~31, 2005~~the asprevious ~~compared~~year towhile beverage ~~$20~~revenue declined 15.751%. The ~~for~~PH Resort operates Starbucks, the ~~three~~Spice ~~months~~Market ~~ended~~Buffet, ~~March~~room 31service, ~~2004~~the pool café, ~~which~~banquets and the casino bars. The ~~resulted~~remaining infood ~~increased~~outlets are leased to third party operators. The food and beverage ~~revenues.~~revenue ~~The~~declines ~~increase~~are mainly attributable to a reduction in buffet covers and banquet revenue. Banquet revenue declines are the ~~average~~direct ~~guest~~result ~~check~~of ~~was~~the ~~primarily~~decline ~~due~~in toconvention ~~selected~~business ~~price~~in ~~increases,~~the ~~particularly~~hotel inand ~~banquets~~continued ~~and~~reductions ~~the~~in ~~buffet~~consumer spending.

Food and beverage expenses ~~increased~~decreased 134.18% to $128.9 6 million for the three months ended March 31, ~~2005~~ 2009, as compared to $119.4 1 million for the three months ended March 31, ~~2004~~2008. ~~Food~~ ~~and~~Operating ~~beverage margins~~ margin decreased 610.52% ~~percentage~~when ~~points~~compared into ~~comparing~~ the same three- month ~~periods.~~period ~~The increase~~ in ~~food~~previous ~~and beverage expenses was due to increased employee benefit expenses, as well as the commencement of management fees paid to Starwood under the management contract~~year.

Other

Other revenue includes tenant ~~entertainment sales~~income, ~~retail sales,~~ telephone and other miscellaneous income and is recognized at the time the goods or services are provided to the guest. Tenant income also includes a portion of the marketing fees received from Westgate based on sales of timeshare units.

Other revenues ~~increased~~decreased 623.58% to $42.49 million for the three months ended March 31, ~~2005~~2009, as compared to $43.1 8 million for the three months ended March 31, ~~2004~~2008. The ~~increase~~decrease in other ~~revenues~~ isrevenue is primarily due to ~~increases~~the decrease in ~~telephone~~the ~~and~~amount ~~leased~~received ~~outlets~~from ~~revenue,~~Westgate based on ~~which~~sales ~~were~~of ~~offset~~timeshare ~~somewhat~~units. byWestgate pays OpBiz 9% of total timeshare sales on a monthly ~~decrease~~basis inwith ~~entertainment~~50% ~~revenue~~of the proceeds recorded as tenant income and the remaining 50% recorded against the land receivable.

Other expenses ~~decreased~~increased 3160.86% to $20.35 million for the three months ended March 31, ~~2005~~2009, as compared to $30.4 3 million for the three months ended March 31, ~~2004~~2008. ~~The decrease in other expenses is related to a decrease in contract entertainment costs as a result of fewer performances in the TPA during the first quarter of 2005.~~

Selling, General and Administrative (“SG&A”)

SG&A expenses ~~increased~~ 15decreased 17.2% to $1715.57 million for the three months ended March 31, ~~2005~~2009, as compared to $1519.20 million for the three months ended March 31, ~~2004~~2008. ~~SG&A~~ ~~expenses~~As as a percentage of net ~~revenues~~revenue, ~~increased 1.4 percentage points in comparing the same three-month periods. The increase in~~ SG&A expenses ~~was primarily~~increased ~~due~~ to an27.5% ~~increase~~for the inthree ~~payroll~~months ~~and~~ended ~~related expenses~~March 31, as2009 ~~well~~ as ~~management and~~compared ~~centralized~~to ~~services~~25.6% ~~fees~~for ~~incurred under~~ the ~~Starwood~~three months ~~Management~~ended ~~Agreement~~March 31, ~~which~~ ~~took~~2008. We ~~effect~~continued to ~~beginning~~focus inon ~~September~~operating ~~2004.~~expense Areductions ~~large~~in ~~portion~~the ofSG&A ~~these~~divisions ~~costs are~~as ~~fixed~~well ~~and,~~ as the aoperating ~~result,~~departments asin ~~revenues~~an ~~increased~~effort ~~the~~to ~~percentage~~maximize ofprofitability ~~SG&A~~during these ~~expenses~~challenging toeconomic ~~net revenues decreased~~times.

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Depreciation and Amortization

~~Aladdin~~Depreciation ~~Gaming~~and ~~did~~amortization ~~not record depreciation~~ expense ~~during~~of ~~2004,~~$10.2 million asfor the ~~assets~~three ~~were~~months ~~classified~~ended asMarch 31, ~~“held for~~2009 ~~sale”.~~increased Aswhen acompared to ~~result,~~$8.8 ~~the~~million ~~depreciation~~in expense for the three months ended March 31, ~~2005~~2008. ~~are~~The increase ~~significantly~~in ~~greater~~depreciation ~~than~~expense ~~the~~is ~~same~~a ~~period~~direct inresult of the ~~prior~~additional ~~year. Depreciation~~assets ~~and~~placed ~~amortization~~in ~~expense~~service ~~was~~once ~~approximately $5.9 million for~~ the ~~three~~renovation ~~months ended~~was ~~March 31, 2005~~complete.

Net Interest ~~Expense,~~ ~~Net~~Expense

~~Interest~~Net interest expense, ~~net increased~~decreased to $139.63 million for the three months ended March 31, ~~2005~~2009, as compared to $017.9 million for the three months ended March 31, ~~2004~~2008. The ~~increase~~ decrease in interest expense, ~~net~~ is directly related to the ~~addition~~reduction ofin the ~~Credit~~ ~~Agreement~~interest ~~we entered into upon the completion of the acquisition of the Aladdin on September 1, 2004~~rates.

Liquidity and Capital Resources

~~The~~During ~~following~~the ~~liquidity~~three months ~~and~~ended ~~capital~~March 31, ~~resources~~2009, ~~discussion~~we ~~contains~~utilized ~~certain~~cash ~~forward-looking~~flows ~~statements with~~from ~~respect~~operating toactivities ~~our~~of approximately ~~business,~~$3.4 ~~financial~~million ~~condition,~~and ~~results~~had a balance of ~~operations, dispositions,~~$18.6 ~~acquisitions,~~million ~~expansion~~in ~~projects~~cash and ~~our~~cash equivalents ~~subsidiaries~~as of March 31, ~~which involve~~2009. ~~risks~~We ~~and~~also ~~uncertainties~~had ~~that~~current ~~cannot~~restricted becash ~~predicted~~and cash orequivalents ~~quantified,~~of approximately $32.6 million and long-term restricted ~~consequently,~~cash ~~actual~~and ~~results~~cash ~~may~~equivalents ~~differ~~of ~~materially~~approximately ~~from~~$12.0 ~~those~~million ~~expressed~~at orMarch 31, ~~implied herein~~2009. ~~Such~~The ~~risks~~current ~~and~~restricted ~~uncertainties~~cash ~~include,~~and ~~but~~cash equivalents are ~~not~~primarily ~~limited to,~~reserve ~~financial~~accounts ~~market~~that ~~risks,~~have been established under the ~~ability~~Loan Agreement to ~~maintain~~guarantee payment ~~existing~~of ~~management~~property taxes, ~~integration~~ ofinsurance ~~acquisitions~~and furniture, ~~competition~~fixtures ~~within~~and equipment replacement. Current restricted cash also includes the ~~gaming~~balance ~~industry,~~in the cash ~~cyclical~~management ~~nature~~account. ofUnder the ~~hotel~~terms ~~business~~of ~~and~~the ~~gaming~~Loan ~~business~~Agreement, ~~economic~~all ~~conditions,~~cash receipts ~~regulatory~~are ~~matters~~deposited ~~and~~into ~~litigation~~a ~~and~~cash ~~other~~management ~~risks~~account ~~described~~under inLender ~~our~~control ~~filings~~which ~~with~~is used ~~the~~to ~~Securities~~fund reserves and ~~Exchange~~operating ~~Commission~~expenses. ~~All~~The ~~forward~~long-~~looking~~term ~~statements~~cash ~~are~~and cash ~~based~~equivalents oninclude ~~our~~funds ~~current~~held ~~expectations~~in ~~and~~an ~~projections~~interest ~~about~~reserve ~~future~~which ~~events~~will be released once certain debt service coverage ratios are achieved. See “Description of Certain Indebtedness” below.

~~During~~Our ~~the~~primary ~~three months~~remaining ~~ended~~cash ~~March~~requirements ~~31,~~for ~~2005,~~2009 weare ~~generated~~expected ~~cash~~to ~~flows~~include ~~from operating activities of~~ (i) approximately $126.4 2 million. Wefor ~~also~~maintenance ~~had~~capital ~~restricted~~expenditures ~~cash~~or ~~and~~replacement ~~cash~~furniture, ~~equivalents~~fixtures ofand equipment (ii) up to approximately $9430.59 million, ~~which~~in isinterest ~~designated~~payments on toour bedebt ~~used~~(iii) approximately ~~for~~$2.6 ~~costs associated~~million ~~with~~in payments to Northwind under the ~~renovation~~Energy Services Agreement and ~~retheming~~(iv) a of$2.1 ~~the~~million ~~Aladdin~~fee ~~into~~required to exercise the PHsecond ~~Resort~~extension of the Loan.

~~Our~~We ~~primary~~believe that cash ~~requirements~~generated ~~for~~from operations, cash held in reserve by the ~~remainder~~lenders ofunder ~~2005~~the ~~are~~Loan Agreement ~~expected~~and tocash ~~include~~made ~~(i)~~available upunder the Modification to ~~approximately~~the Loan Agreement ~~$100~~will ~~million~~be inadequate to meet the anticipated working capital ~~expenditures~~and ~~related~~capital expenditure obligations of OpBiz through at least December 2009. To the extent that cash is drawn under the Modification to the ~~renovation~~Loan ~~project~~Agreement that cannot be replenished from subsequent monthly operations, that cash and a contribution sufficient to bring the Interest Reserve Account to a level sufficient to cover the interest reserve test (iias fully defined in the Loan Agreement) will be required to exercise the ~~approximately~~next $7extension.0 The ~~million~~required debt service coverage ratio for ~~maintenance~~the ~~capital~~next ~~expenditures~~extension ~~and~~period ~~(iii)~~is up1.05:1.00. As detailed in the Description of Certain Indebtedness below, operating income for the three months ended March 31, 2009 is not sufficient to demonstrate that the Company ~~approximately~~will ~~$32~~generate sufficient cash flow from operations to meet the conditions set forth in the Modification in order to exercise the second extension option.4 Failure ~~million~~to replenish the Interest Reserve Account is an Event of Default (as defined in ~~interest~~the ~~payments~~Loan Agreement) onand ~~our~~a ~~debt~~Specified Event (as defined in the Modification).

WeThere ~~believe~~can ~~that~~be ~~cash~~no ~~generated from operations, the~~assurance ~~capital~~that ~~invested~~we inhave ~~OpBiz~~accurately atestimated ~~closing~~our ~~and~~liquidity ~~the working capital~~needs, ~~including~~or ~~the cash~~ that we ~~acquired from Aladdin Gaming under the purchase agreement~~ will benot ~~adequate~~experience tounforeseen ~~meet~~events ~~the~~that ~~anticipated~~may ~~working~~materially ~~capital,~~increase ~~capital~~our ~~expenditure, renovation~~need ~~and debt service obligations of OpBiz~~ for ~~the first 12 months~~ ~~after~~liquidity ~~the~~to ~~Aladdin~~fund ~~acquisition.~~our Weoperations ~~may~~or ~~have~~capital ~~other~~expenditure ~~liquidity~~programs ~~needs,~~or ~~such as tax~~decrease ~~distributions to~~ the ~~members~~amount of ~~EquityCo~~cash ~~and~~generated ~~BH/RE.~~from ~~The~~our ~~Credit Agreement allows OpBiz to make tax distributions~~operations.

There can be no assurance that we have accurately estimated our liquidity needs, or that we will not experience unforeseen events that may materially increase our need for liquidity to fund our operations or capital expenditure programs or decrease the amount of cash generated from our operations. We expect to experience a reduction in cash generated by our operations during our planned renovations to the Aladdin and have negotiated the terms of the Credit Agreement to address those anticipated reductions. For example, the covenant in the Credit Agreement requiring OpBiz to achieve specified levels of earnings before interest, taxes, depreciation and amortization (“EBITDA”), during the first two years of the Credit Agreement is significantly below the Aladdin’s current EBITDA levels. Also, the interest rate during the first three years of the Credit Agreement is lower than the interest rate in the last three years.

Description of Certain Indebtedness

~~Credit~~Loan Agreement

~~The~~On ~~Aladdin~~November 30, ~~acquisition~~2006, OpBiz and PH Fee Owner (collectively the ~~planned~~“Borrower”) entered ~~renovations~~into the Loan Agreement (the “Loan Agreement”) with Column Financial, Inc. ~~were~~(the ~~funded~~“Lender”) byfor a mortgage loan in the ~~issuance~~principal amount of ~~$510~~up to $820 million. The Loan Agreement provided for an initial disbursement in the amount of ~~secured~~$759.7 million ~~notes~~and a future funding facility in the amount of up to ~~Aladdin~~$60.3 million. ~~Gaming’s~~On July 17, 2007, the Borrower and the Lender ~~secured~~entered ~~creditors~~into ~~pursuant~~an amendment (the “Amendment”) to athe ~~Credit~~Loan Agreement. ~~Our~~The Amendment ~~obligations~~provided ~~under~~for the immediate funding to Borrower of the balance of ~~Credit~~future funding that was available under the Loan Agreement ~~are~~and ~~secured~~established byan additional ~~liens~~future onfunding ~~all~~facility in the amount of ~~our~~up ~~assets,~~to ~~including~~$40 million a(“Future ~~mortgage~~Funding onTranche B”). ~~our~~Future ~~real~~Funding ~~property,~~Tranche B has the ~~Hotel,~~same terms as the ~~Casino~~Loan ~~and~~Agreement ~~the~~for ~~TPA,~~maturity and ~~security interests~~extension. inThe ~~our~~Loan ~~accounts receivable~~Agreement, ~~inventory,~~as ~~equipment~~amended by ~~and~~the ~~intangible assets~~Amendment, ~~excluding~~is ~~the~~referred ~~Timeshare~~to ~~Land~~as the Loan. The ~~Credit~~Loan ~~Agreement~~ is ~~guaranteed~~secured by ~~MezzCo~~ ~~and~~a ~~MezzCo~~deed ~~secured~~of trust ~~its~~on ~~guarantee~~the byPH ~~pledging~~Resort ~~its~~and ~~membership~~a ~~interests~~pledge, ~~in OpBiz~~subject to approval by the ~~lenders.~~Nevada ~~The~~gaming authorities, ~~Credit~~by ~~Agreement~~MezzCo ~~matures~~of onits ~~August~~membership ~~31,~~interest ~~2010~~in OpBiz (as described below).

The ~~loans~~initial ~~under~~maturity ~~the Credit~~date ~~Agreement are evidenced by $500 million~~ of ~~Term~~the Loan Awas ~~notes~~December 9, ~~and~~2008 ~~$10~~with ~~million~~three ofone ~~Term~~year ~~Loan~~extension Boptions ~~notes.~~available, Wesubject ~~simultaneously~~to ~~made a $14 million cash~~ payment to ~~the holders~~ of ~~the~~a ~~Term~~fee (applicable ~~Loan A notes~~ to ~~reduce~~ the ~~principal~~second ~~amount~~and ofthird ~~the Term~~extensions ~~Loan~~only) ~~A notes to $486 million~~ and ~~obtained~~the aBorrower’s compliance ~~release~~with ofthe ~~their~~requirements ~~lien~~for ~~on the Timeshare Land.~~an

Scheduled principal payments on the Term Loan A notes are as follows:

• $1.25 million on the first day of each fiscal quarter during the period beginning on August 31, 2006 and ending on August 31, 2007;

• $3.75 million on the first day of each fiscal quarter during the period beginning on August 31, 2007 and ending on August 31, 2008;

• $5.0 million on the first day of each fiscal quarter during the period beginning on August 31, 2008 and ending on August 31, 2009;

• $6.25 million on the first day of each fiscal quarter during the period beginning on August 31, 2009 and ending on August 31, 2010;

• the then unpaid balance amount of Term Loan A notes on August 31, 2010.

We pay interest on the outstanding Term Loan A notes quarterly, in cash, at the London Inter-Bank Offered Rate, or LIBOR, plus an applicable margin that increases over time. Until August 31, 2007, our interest payment will not exceed our quarterly EBITDA, reduced by certain permitted deductions (as defined in the Credit Agreement), divided by a factor of 1.20. After August 31, 2007, our interest payment will not exceed our quarterly EBITDA, reduced by certain permitted reductions (as defined in the Credit Agreement). Interest on the Term Loan B notes will accrue at a rate of LIBOR plus 4% and will be added quarterly to the outstanding principal amount of the Term Loan B notes and will be paid when we pay off the Term Loan B notes. We are will also required to pay an annual administrative fee and certain other fees and expenses of the lender under the Credit Agreement.

We are required to prepay amounts outstanding under the Credit Agreement:

• with excess cash flow (as defined in the Credit Agreement) after certain permitted cash reserves are accumulated;

• in scheduled quarterly amounts beginning after August, 31, 2006;

• with certain amounts received in connection with the development of the Timeshare Land adjacent to the Desert Passage (as defined in the underlying agreement);

• with the proceeds of certain asset sales.

In particular, after we accumulate certain permitted cash reserves, we are required to pay 100% of our excess cash flow (as defined in the Credit Agreement) from operations to the lenders under the Credit Agreement. That percentage decreases to 75%, then 50%, if we meet certain targeted ratios of total debt to EBITDA, or leverage ratios, for any two consecutive fiscal quarters.

The Credit Agreement includes covenants that, among other things, restrict our ability to sell assets, make distributions to our owners, other than distributions for taxes, incur or prepay additional indebtedness, enter into transactions with affiliates, incur liens, make investments, make capital expenditures, develop the Timeshare Land adjacent to the Desert Passage and enter into material contracts. In addition, we are required to maintain certain levels of EBITDA that increase over time and, beginning August 31, 2007, maintain certain ratios of EBITDA to interest expense that increase over time and maintain certain leverage ratios that decrease over time.

The Credit Agreement contains customary events of default, including a change of control of OpBiz, the occurrence of a default under the terms of any indebtedness of MezzCo, a default by us under the hotel management contract or termination of Sheraton as the manager of the Hotel (unless we replace Sheraton with another approved manager within 30 days of such termination), a default or termination of the Planet Hollywood license agreement and certain defaults under the agreements with Boulevard Invest or Northwind Aladdin.

The Credit Agreement includes warrants entitling the lenders to 2.5% of the fully diluted membership interests in EquityCo at a price equal to the price paid by the principals of EquityCo. BH/RE has issued warrants to purchase 2.94% of its ownership interest in EquityCo to the lenders under the Credit Agreement. The warrants can only be exercised upon the occurrence of a (i) liquidity event or distribution (such as through the sale of the hotel/casino); (ii) a public sale of equity securities of EquityCo, MezzCo, or (iii) OpBiz; or payment in full of the obligations under the Credit Agreement. The warrants can either be settled in cash or in other membership interests upon exercise.

As of March 31, 2005, management estimated the fair value of the warrants to be approximately $0.1 million. However, management is currently in the process of obtaining a third-party valuation of the warrants.

Mezzanine Financing

In August 2004, MezzCo entered into a mezzanine financing transaction (“Mezzanine Financing”) with a group of purchasers. Pursuant to the Mezzanine Financing, MezzCo issued $87 million of 16% Senior Secured Subordinated Notes and warrants to purchase 17,500 of its units representing membership interests equal to 17.5% of the fully diluted equity of MezzCo. The gross offering proceeds of the Mezzanine Financing were deposited into an escrow account and, in conjunction with the closing of the Aladdin acquisition, were used to (i) pay approximately $16.1 million of fees and expenses related to the acquisition of the Aladdin, (ii) fund the $14 million lien release payment required under the Credit Agreement, and (iii) fund a portion of the planned renovations to the Aladdin. The notes mature in August 2011 and accrue interest at 16% per annum. Interest on the notes is payable in

~~kind~~Table ~~or, at the option~~ of MezzCo, in cash. The warrants are exercisable at any time, subject to the approval of the Nevada gaming authorities, at a purchase price of $0.01 per unit. Subject to the approval of the Nevada gaming authorities, the warrants may be exercised to purchase either voting or non-voting membership interests of MezzCo or a combination thereof. Currently all of MezzCo’s voting membership interests are represented by units owned by EquityCo. In addition to customary anti-dilution protections, the number of units representing MezzCo membership interests issuable upon exercise of the warrants may be increased from time to time upon the occurrence of certain events as described in the warrants. The maximum aggregate increase is 28%, following which the warrants would represent rights to purchase 45.5% of the units representing membership interests of MezzCo, on a fully-diluted basis. Holders of the warrants and any securities issued upon exercise of the warrants may require MezzCo to redeem such securities commencing in August 2011 at a redemption price based upon a formula set forth in the warrants. The holders of warrants, and securities issued upon exercise thereof, have the right, starting in August 2008, to assume control of MezzCo and OpBiz and conduct a sale of the equity of, or all or substantially all of the assets of, either MezzCo or OpBiz. These rights are subject to (i) repayment in full of all indebtedness that is senior to the notes (including all indebtedness of OpBiz under the Credit Agreement), (ii) certain covenants related to OpBiz’s ability to achieve targeted levels of EBITDA and (iii) the prior approval of the Nevada gaming authorities. These rights expire upon completion of a public offering by MezzCo or OpBiz. In connection with the Mezzanine Financing, our obligation to make expenditures on renovations to the Aladdin was increased from $90 million, as required under the Credit Agreement, to $100 million.Contents

Asextension outlined ofin ~~March~~the ~~31,~~Loan ~~2005,~~Agreement. The Borrower exercised the first available ~~MezzCo~~extension ~~financing~~option ~~was~~thereby ~~recorded~~extending ~~net~~the ofmaturity date to December 9, 2009. Interest on the ~~unamortized~~Loan ~~balance~~is ofpayable monthly and accrues at the ~~put~~30 day LIBOR ~~warrants~~rate of(0.56% ~~approximately~~for $4the March 31, 2009 interest payment) plus 3.225% ~~million~~with a .25% ~~The~~ticking ~~estimated~~fee ~~fair~~on ~~value~~available ofbut un-advanced future funding. Interest on Future Funding Tranche B is payable monthly and accrues at the 30 day ~~warrants~~LIBOR ofrate ~~approximately~~plus $47.50% with a 1.50% ~~million~~ticking atfee ~~March~~on 31available but un-advanced funds. The Loan does not require amortization during the initial term or, provided ~~2005~~certain EBITDA thresholds are met, during the extension periods. The Loan requires that the Borrower establish and ~~December~~maintain 31certain reserves including a reserve for completion of the renovation project, ~~2004~~a reserve for projected interest shortfalls, a reserve for payment of property taxes and insurance and ~~respectively~~a reserve for on-going furniture, fixture and equipment purchases or property improvements. The Loan restricts the Borrower’s ability to spend excess cash flow until certain debt service coverage ratios are met.

On May 7, 2009, the Borrower, Planet Hollywood International, Inc., Planet Hollywood (Region IV), Inc., Planet Hollywood Memorabilia, Inc., Trophy Hunter Investments, Ltd., Bay Harbour 90-1, Ltd., Bay Harbour Master Ltd., Douglas Teitelbaum, Robert Earl, and Wells Fargo Bank, N.A., as Trustee for The Credit Suisse First Boston Mortgage Securities Corp. Commercial Mortgage Pass-Through Certificates, Series 2007-TFL2 entered into a third modification (the “Modification”) of the existing Loan Agreement, dated November 30, 2006, between Borrower and Column Financial, Inc. (the “Loan Agreement”). The Modification provides for up to $9 million of the Interest Reserve Fund (as defined in the Loan Agreement) to be available to Borrower for monthly debt service. The Loan Agreement has two remaining one year extension options available (the second and third extension options). As a condition to exercising each of the second and third extension options, the Borrower must replenish the Interest Reserve Account (as defined in the Loan Agreement) to an amount sufficient to achieve a Debt Service Coverage Ratio (as defined in the Loan Agreement) of 1.05:1.00 and 1.10:1:0, respectively, using the specified terms and parameters outlined in the Loan Agreement. Failure to replenish the Interest Reserve Account is an Event of Default (as defined in the Loan Agreement) and a Specified Event (as defined in the Modification). A Specified Event means the occurrence of certain events, including (a) failure of the Borrower to make certain payments as required by the Modification or the Loan Agreement; (b) certain Events of Default under the Loan Agreement; and (c) an Event of Default under the Modification resulting from failure to pay amounts owed to Lender, failure to pay certain taxes, the incurrence of additional indebtedness in violation of the terms of the Loan Agreement, and the imposition of any lien encumbering the collateral of the loan (for the purpose of a Specified Event, an Event of Default means a Default (as defined in the Loan Agreement) that continues after the applicable notice and cure or grace periods under the terms of the Loan Agreement and related documents).

At December 31, 2008, the Loan was classified as a non current liability in the accompanying financial statements based on the Company’s intent and ability to exercise the second extension option. Operating income for the three months ended March 31, 2009 is not sufficient to demonstrate that the Company will generate sufficient cash flow from operations to meet the conditions set forth in the Modification (described above) in order to exercise the second extension option. Accordingly, the Loan has been reclassified to a current liability in the accompanying financial statements as of March 31, 2009.

As further outlined in the Modification dated May 7, 2009 within ten days after Lender’s written demand after the occurrence of a Specified Event as determined by Lender in its sole but good faith discretion, Borrower, MezzCo and TSP Owner LLC shall deliver to Lender (i) one or more deeds conveying fee simple title to all portions of the Property (as defined in the Loan Agreement); (ii) one or more assignments conveying membership interests of MezzCo in OpBiz; and (iii) all other documents and instruments to Lender that may be required to enable Lender to obtain title insurance coverage with respect to fee simple property. In order to permit the Lender to foreclose on the Hotel and Casino separately and to allow OpBiz to continue to operate the casino after such a foreclosure (should the Lender choose to do so), title to the real property comprising the Hotel and Casino (the “Property”) was transferred from OpBiz to PH Fee Owner. OpBiz and PH Fee Owner then entered into a lease pursuant to which OpBiz agreed to continue to operate the Hotel in the manner it had been and to pay monthly rent of approximately $916,000. OpBiz and PH Fee Owner also entered into a lease pursuant to which OpBiz agreed to continue to operate the Casino in the manner it had been and to pay monthly rent of approximately $1,160,000.

In connection with the Loan, the Lender required that Trophy Hunter Investments, Ltd., Bay Harbour 90-1, Ltd. and Bay Harbour Master Ltd., which are affiliates of Bay Harbour Management, execute and deliver a certain Guaranty (as described below). In exchange for Trophy Hunter Investments, Ltd., Bay Harbour 90-1, Ltd. and Bay Harbour Master Ltd. (the “Guarantors”) executing the Guaranty, OpBiz and PH Fee Owner agreed to pay to Trophy Hunter Investments, Ltd. and Bay Harbour Master Ltd. a fee equal to $1,500,000 per year. The fee is accrued as of March 31, 2009 and only payable once OpBiz hits certain debt service coverage ratios defined in the Loan Agreement.

In connection with the Loan, the Guarantors entered into a Guaranty, dated November 30, 2006 (the “Guaranty”), pursuant to which the Guarantors agreed to indemnify the Lender against losses related to certain prohibited actions of the Borrower and guarantied full repayment of the Loan in the case of a voluntary or collusive bankruptcy of the Borrower, a transfer of the Property or interests in the Borrower in violation of the Loan Agreement and if the Borrower fails to maintain its status as a bankruptcy remote entity and as a result sees its assets consolidated with those of an affiliate in a bankruptcy. The liability of the Guarantors is capped at $15,000,000 per entity and $30,000,000 in the aggregate, however this cap does not apply to (i) liability arising from events, acts or circumstances actually committed or brought about by the willful acts of any of the Guarantors and (ii) the extent of any benefit received by any of the Guarantors as a result of the acts giving rise to the liability under the Guaranty. Each of Douglas Teitelbaum

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and Robert Earl executed and delivered guaranties substantially the same as that delivered by the Guarantors, however the liability of each of them was limited to (i) liability arising from events, acts or circumstances actually committed or brought about by willful acts by him and (ii) the extent of any benefit received by him as a result of the acts giving rise to the liability under the Guaranty.

In connection with the Loan, the Guarantors and Robert Earl executed and delivered a Completion Guaranty, dated November 30, 2006, pursuant to which they jointly and severally guarantied the completion of the renovation of the Property and payment of all costs associated therewith. The liability under the Completion Guaranty is capped at the greater of (a) $35,000,000 and (b) only in the case that cost overruns for the renovation exceed $15,000,000, 24% of the then unpaid costs of the completion of the renovation.

In addition, in connection with the Loan Agreement, we effected a refinancing of the Securities Purchase Agreement, dated August 9, 2004, among MezzCo and the Investors, pursuant to which MezzCo issued to the Investors (i) 16% senior subordinated secured Notes in the original aggregate principal amount of $87 million, and (ii) Warrants for the purchase (subject to certain adjustments as provided for therein) of membership interests of MezzCo, representing 17.5% of its fully diluted equity. Loan proceeds were used to redeem in full the Notes.

In connection with the refinancing of the Securities Purchase Agreement and redemption of the Notes, the Restructuring Parties entered into the Restructuring Agreement, pursuant to which the Restructuring Parties terminated in full the Securities Purchase Agreement, the Subordination Agreement, dated as of August 31, 2004, among MezzCo, OpBiz, the Senior Agent and the Investors, the Pledge Agreement, dated August 9, 2006, among MezzCo and the Collateral Agent, and the Guaranty, dated August 9, 2004, made by OpBiz to the Investors, and amended certain other existing agreements, as described below.

In accordance with the terms of the Restructuring Agreement, the Investors and EquityCo, MezzCo and OpBiz entered into a Release, Consent and Waiver Agreement, pursuant to which the Investors (i) released OpBiz from its guaranteed obligations, under that certain Guaranty Agreement, dated as of August 9, 2004 and executed by OpBiz in favor of the Investors and the collateral agent; (ii) released MezzCo from its pledge of the collateral, under that certain Pledge Agreement, dated as of August 9, 2004, and executed by MezzCo in favor of the collateral Agent, the Investors released their security interest, as defined in that certain Security Agreement, as amended by that certain Amendment to Security Agreement, in each case dated as of August 9, 2004 and executed by the Company in favor of the collateral agent; (iii) released and terminated the Deed of Trust, dated as of August 9, 2004 and executed by MezzCo in favor of the Trustee (as defined therein) for the benefit of the collateral agent; (iv) released and terminated the Investors’ security interest in the securities account, provided for that certain Securities Account Control Agreement, dated as of August 9, 2004 and executed by the Company, the collateral agent and Wells Fargo Bank, N.A.

Additionally, MezzCo, EquityCo, and the Investors entered into an Amended and Restated Investor Rights Agreement, dated November 30, 2006 (the “A&R Investor Rights Agreement”), to amend and restate the original Investor Rights Agreements among the parties thereto, dated August 9, 2004.

Pursuant to the Restructuring Agreement, the Restructuring Parties agreed to amend the Warrants by issuing Amended and Restated Warrants to Purchase Membership Interests of MezzCo (the “A&R Warrants”) to the Investors upon approval by the Nevada gaming authorities. The A&R Warrants will be exercisable at any time, subject to the approval of the Nevada gaming authorities, at a purchase price of $0.01 per unit. Subject to the approval of the Nevada gaming authorities, the warrants may be exercised to purchase either voting or non-voting membership interests of MezzCo or a combination thereof through the expiration date of December 9, 2012. In addition to customary anti-dilution protections, the number of units representing MezzCo membership interests issuable upon exercise of the A&R Warrants may be increased from time to time upon the occurrence of certain events as described in the A&R Warrants. Holders of the A&R Warrants and any securities issued upon exercise thereof may require MezzCo to redeem such securities commencing on December 9, 2011 at a redemption price based upon a formula set forth in the A&R Warrants. These rights expire upon completion of a public offering by MezzCo or OpBiz.

In connection with the Restructuring Agreement, EquityCo entered into a Guaranty Agreement, dated November 30, 2006 (the “Guaranty Agreement”), in favor of the Investors and the Collateral Agent, pursuant to which EquityCo has guaranteed the obligation of MezzCo to pay the redemption price under the A&R Warrants prior to expiration and any indebtedness arising under the Put Note (as defined in the A&R Warrants).

EquityCo and the Collateral Agent also entered into a Pledge Agreement, dated November 30, 2006 (the “Pledge Agreement”), pursuant to which EquityCo has, subject to approval of the Nevada gaming authorities, pledged and granted a first priority security interest to the Collateral Agent for the ratable benefit of the Investors in the membership interests of EquityCo in MezzCo. The Pledge Agreement, once approved, will secure the full payment of the Put Right (as defined in the A&R Warrants), including any obligations under the Put Note.

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On November 30, 2006, we entered into an Indemnification Agreement with the Investors, pursuant to which we agreed to indemnify the Investors for any losses caused by (i) lack of gaming approvals for the issuance of the A&R Warrants, (ii) lack of gaming approval for the granting of a lien by EquityCo in the equity interests in MezzCo, as described in the Pledge Agreement, and (iii) the inability of the Investors to exercise the Warrants until July 1, 2007.

The foregoing descriptions of the various agreements described above do not purport to be complete and are qualified in their entirety by reference to the agreements, which are filed herewith as exhibits, and incorporated herein by reference.

Energy Services Agreement

On January 30, 2009, OpBiz entered into the Fifth Amendment to Energy Services Agreement (the “Fifth Amendment”) with Northwind Aladdin (“Northwind”), athe third party, that owns ~~and~~ and operates a central utility plant on land leased from usOpBiz. The plant supplies hot and cold water and emergency power to the ~~Aladdin~~property under a contract ~~between~~which ~~Aladdin~~expires ~~Gaming~~in ~~and Northwind~~2020. The WeFifth ~~have~~Amendment assigns ~~assumed~~a portion of the ~~energy~~capacity ~~service~~to ~~agreement,~~heat and chill water provided to OpBiz to ~~which~~Westgate ~~expires~~for inoperation ~~2018~~of the timeshare tower. ~~Under~~Operation of the ~~agreement~~timeshare tower is fully described in Note 2—Summary of Significant Accounting Policies, Timeshare wePurchase ~~are~~Agreement. ~~required~~The toFifth ~~pay~~Amendment ~~Northwind~~provides for Westgate to assume a pro-rata portion of the debt and equity obligations payable by OpBiz ~~monthly~~to ~~consumption~~Northwind. ~~charge~~OpBiz’s obligations to Northwind, recorded as a ~~monthly~~capital ~~operational~~lease ~~charge~~in the accompanying financial statements, awill ~~monthly~~be ~~debt service~~reduced ~~payment~~by ~~and~~the apro-rata assignment ~~monthly~~to ~~return~~Westgate onas ~~equity~~payments ~~payment.~~are made. Payments under the Northwind agreement made by OpBiz total approximately $~~500~~292,000 per month.

Forward Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this report and elsewhere by management from time to time, the words “~~believes~~believe”, “~~anticipates~~anticipate”, “expect”, “intend”, ~~and~~“estimate”, “~~expects~~plan”, “may”, “seek”, “will”, and similar expressions are intended to identify forward-looking statements with respect to our financial condition, results of operations and our business including our planned and possible expansion plans, legal proceedings and employee matters. Certain important factors, including but not limited to, competition from other ~~gaming~~ gaming operations, factors affecting our ability to complete acquisitions and dispositions of gaming properties, leverage, construction risks, the inherent uncertainty and costs associated with litigation and governmental and regulatory investigations, and licensing and other regulatory risks, could cause our actual results to differ materially from those expressed in ~~our~~or implied by our forward-looking statements. Further information on potential factors which could affect our financial condition, results of operations and ~~business~~ business including, without limitation, the expansion, development and ~~acquisition~~ acquisition projects, legal proceedings and employee matters are included in ~~our filings~~“Item 1A—Risk Factors” of BH/RE’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2009. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof.

Our acquisition of the Aladdin and planned operations are subject to a number of risks. Please refer to the discussion of “Risk Factors” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Result of Operations – Risk Factors” in the Annual Report on Form 10-K, filed by BH/RE with the Securities and Exchange Commission on April 15, 2005.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~When~~Market ~~used~~risk inis ~~this~~the ~~report~~risk ~~and~~of ~~elsewhere~~loss byarising ~~management~~ from ~~time~~adverse tochanges ~~time,~~in ~~the~~market ~~words~~rates ~~“believes”, “anticipates”~~ and ~~“expects”~~prices, ~~and~~such ~~similar expressions are intended to identify forward-looking~~as ~~statements~~interest ~~with respect to our financial condition~~rates, ~~results~~foreign ofcurrency ~~operations~~exchange ~~and our~~rates ~~business including our expansion, legal proceedings~~ and ~~employee~~commodity ~~matters~~prices. ~~Certain~~ ~~important factors, including but not limited to, competition from other~~Our ~~gaming~~primary ~~operations,~~exposure ~~factors affecting our ability~~ to ~~complete~~market ~~acquisitions~~risk ~~and dispositions~~is ofinterest ~~gaming~~rate ~~properties,~~risk ~~leverage, construction risks, the inherent uncertainty and costs~~ associated with ~~litigation and governmental and regulatory investigations, and licensing and other regulatory risks, could cause~~ our ~~actual results to differ materially from those expressed in our~~ ~~forward~~long-~~looking~~term ~~statements~~debt. ~~Further~~We ~~information~~pay interest on ~~potential~~the ~~factors~~amount ~~which could~~outstanding ~~affect~~under ~~our~~the ~~financial~~Loan Agreement ~~condition~~monthly, ~~results~~in ~~of operations and business including~~cash, ~~without~~at ~~limitation,~~ the ~~expansion,~~London ~~development~~Inter-Bank ~~and~~Offered ~~acquisition~~Rate, ~~projects~~or LIBOR, ~~legal~~plus ~~proceedings~~3.25% ~~and~~with ~~employee~~a ~~matters~~.25% ~~are~~ticking ~~included~~fee inon ~~our~~available ~~filings~~but ~~with~~un-advanced ~~the Securities~~Future ~~and Exchange Commission~~Funding. An ~~Readers~~increase ~~are~~of ~~cautioned~~one ~~not~~percentage topoint ~~place~~in ~~undue reliance~~the onaverage ~~any~~interest ~~forward-looking~~rate ~~statements.~~applicable ~~We undertake no obligation~~ to ~~publicly~~the ~~release~~variable ~~any~~rate ~~revisions~~debt tooutstanding ~~such~~at ~~forward-looking~~March 31, ~~statements~~2009 towould ~~reflect~~increase the ~~events~~annual orinterest ~~circumstances~~cost ~~after~~by ~~the~~approximately ~~date~~$8.6 ~~hereof~~million.

MarketITEM risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices4T. Our primaryCONTROLS exposureAND to market risk is interest rate risk associated with our long-term debt. We pay interest on the outstanding Term Loan A notes quarterly, in cash, at the London Inter-Bank Offered Rate, or LIBOR, plus an applicable margin that increases over time. Interest on the Term Loan B notes will accrue at a rate of LIBOR plus 4% and will be added quarterly to the outstanding principal amount of the Term Loan B notes and will be paid when we pay off the Term Loan B notes. An increase of one percentage point in the average interest rate applicable to the variable rate debt outstanding at March 31, 2005 would increase the annual interest cost by approximately $3.8 million.PROCEDURES

~~ITEM~~Our 4management, with the participation of our principal executive and principal financial officers, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of March 31, 2009. ~~CONTROLS~~Based ~~AND~~on ~~PROCEDURES~~their evaluation, our principal executive and principal financial officers concluded that our disclosure controls and procedures were effective as of March 31, 2009.

~~Evaluation~~There has been no change in our internal control ofover ~~Disclosure~~financial ~~Controls~~reporting (as defined in Rules 13a-15(f) and 15-d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended March 31, 2009, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Prior to September 1, 2004, we were a development stage company and as such, our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, were developing a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) and performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures implemented at such time. Since the closing of the acquisition of the Aladdin, a system of disclosure controls and procedures has been put in place that our management, including our Chief Executive Officer and Chief Financial Officer, believe include disclosure controls and procedures that are effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Securities Exchange Act of 1934 is accumulated and communicated to our managers, as appropriate to allow timely decisions regarding required disclosure.27

26Table of Contents

Limitations on the Effectiveness of Controls

Our managers do not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of a control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within us have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of a control. The design of a control system is also based upon certain assumptions about the likelihood of future events, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Conclusions

Based on this evaluation, we concluded that, subject to the limitations noted above, our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 are recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Controls

There were no changes in our internal controls over financial reporting that occurred during our last fiscal quarter, i.e., the quarter ended March 31, 2005, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II — OTHER INFORMATION

ITEM 16. LEGAL PROCEEDINGS – NoneEXHIBITS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS – None


31.1		Certification pursuant to §302 of the Sarbanes-Oxley Act of 2002, Thomas J. McCartney.

31.2		Certification pursuant to §302 of the Sarbanes-Oxley Act of 2002, Donna Lehmann.

32.1		Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, Thomas J. McCartney.

32.2		Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, Donna Lehmann.

~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES – None~~28

~~ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY~~Table ~~HOLDERS~~of ~~- None~~Contents

~~ITEM 5. OTHER INFORMATION – None~~SIGNATURES

~~ITEM~~Pursuant 6.to ~~EXHIBITS~~the ~~AND~~requirements of ~~REPORTS~~the ONSecurities ~~FORM~~Exchange ~~8-K~~Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

(a) Exhibits:

	BH/RE, L.L.C.


May 15, 2009	By:	/S/ Donna Lehmann
	Donna Lehmann
	Treasurer and Chief Financial Officer

~~31.1 Certification pursuant to §302 of the Sarbanes-Oxley Act of 2002, Donna Lehmann.~~29

~~31.2 Certification~~Table ~~pursuant to §302~~ of ~~the Sarbanes-Oxley Act of 2002, Robert Earl.~~Contents

~~31.3 Certification pursuant~~EXHIBIT ~~to §302 of the Sarbanes-Oxley Act of 2002, Douglas P. Teitelbaum.~~INDEX

32.1 Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, Donna Lehmann.

Exhibit No.		Description
31.1		Certification pursuant to §302 of the Sarbanes-Oxley Act of 2002, Thomas J. McCartney.

31.2		Certification pursuant to §302 of the Sarbanes-Oxley Act of 2002, Donna Lehmann.

32.1		Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, Thomas J. McCartney.

32.2		Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, Donna Lehmann.

~~32.2 Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, Robert Earl.~~30

32.3 Certification pursuant to §906 of the Sarbanes-Oxley Act of 2002, Douglas P. Teitelbaum.

(b) Reports on Form 8-K None

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BH/RE, L.L.C.
May 16, 2005	By:	/S/ Donna Lehmann
	Donna Lehmann
	Chief Financial Officer

Filing Compare · BH RE LLC