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Regulators OK key deals

Jan 29, 2008 6:25 AM

Nevada regulators were busy last week approving several key deals: Goldman Sachs purchase of Carl Icahn’s four Southern Nevada casinos; Terry Caudill’s purchase of Binion’s Gambling Hall & Hotel; and the licensing of the Hard Rock’s owners to operate their own casino.

The Goldman Sachs $1.3 billion purchase includes the Stratosphere hotel/casino, two local Arizona Charlie’s casinos and the Aquarius Casino Resort in Laughlin, as well as a 17-acre parcel attached to the Stratosphere. They were previously owned by billionaire Carl Icahn’s American Real Estate Partners LP.

Managing director Jonathan Langer of Goldman Sachs told members of the Nevada Gaming Commission that his company believed high-end developments on the north end of the Strip — such as Wynn’s new Encore, the recently opened Palazzo, and upscale developments earmarked for the former Stardust and Frontier sites — could leave some tourists out in the cold.

"We feel that the middle-class customer, which we feel is the biggest piece of the demographic pie in terms of who’s coming here, is potentially being priced out of the Las Vegas Strip," Langer said. "We feel this presents an opportunity for the Stratosphere to take advantage and cater specifically to that customer."

The gaming commission voted unanimously to approve the deal.

Langer said the fund was preparing to immediately spend $54 million to upgrade the properties, including a $25 million transformation of unfinished retail space at the Stratosphere into meeting space, $10 million to change a bingo hall at Arizona Charlie’s Decatur into meeting space and a $19 million room renovation at Aquarius.

Goldman Sachs said it was taking on $1.2 billion in debt and adding more than $200 million in equity to the deal after all was said and done.

Commission chair Peter Bernhard called the deal "highly leveraged," but approved it, saying he was comfortable with the fund’s plans.

"It’s a big investment and it’s not without risk," he said. "But it’s your money."

Binion’s sale approved

The former home of the World Series of Poker, Binion’s Gambling Hall & Hotel, will once again be owned by a Las Vegas operator after Nevada regulators approved its $32 million purchase from MTR Gaming Group Inc. of West Virginia.

TLC Casino Enterprises Inc., owned by Terry Caudill, is expected to close on the deal in February. Caudill’s company also owns the Four Queens casino-hotel across the street.

MTR had run the downtown property, founded by the late, storied casino boss Benny Binion in 1951, at a loss.

After the unanimous approval by the Commission, Caudill said he expected to turn a profit in the first year after immediately investing $10 million to renovate rooms and the casino area and completing the installation of coinless slot machines.

He noted that he raised operating profit at the Four Queens from $5 million annually to around $12 million since taking it over in 2003.

"A property like that in a very, very competitive market, you have to be there and you have to spend time there," he said. "I just don’t think you’re going to be successful to operate that kind of a property from clear across the country."

MTR also has a North Las Vegas property under contract for sale.

The company decided to sell its Nevada properties so it could concentrate on holdings in West Virginia, Pennsylvania and the Midwest.

Hard Rock owners OK’d

A joint venture led by Morgans Hotel Group Co. were granted the right to operate the casino portion of the Hard Rock Hotel & Casino.

Morgans chief executive Fred Kleisner said the unanimous approval by the Gaming Commission will help boost profits at the venture, which had contracted Golden Gaming Inc. to run the casino until the licensing process was over.

"I’m elated," Kleisner said after the meeting. "We are highly confident this will have a positive and permanent effect on the direction of our bottom line."

Kleisner said the team will begin revamping the marketing plan at the casino, particularly to better target the local Las Vegas market.

"They have the vibe of ”˜the Rock’ as well and we welcome them," he said.

Morgans is a 33.3 percent partner in the venture, with DLJ Merchant Banking Partners owning the rest.

The pair bought the property in February last year for $770 million from founder Peter Morton and are investing another $750 million in an expansion that will double the size of the property and add 950 rooms by mid-2009.

The venture is also looking at expanding the Hard Rock casino brand, to which it owns the rights in areas of the United States west of the Mississippi and in Australia, Brazil, Israel, Venezuela.

"Morgans Hotel Group is a perfect fit for Las Vegas and the Hard Rock Hotel & Casino," Kleisner said. "We are in strategy and reach and style and vibe and edge, if you will, we’re quintessentially L