Riviera stock deal a Trumped up story?

July 16, 2002 7:57 AM
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Much ado about Trump? Contrary to headlines hinting that the Donald is ready to deal in Las Vegas, Strip execs and observers say there’s less to the story than meets the eye.

The East Coast real estate magnate and casino operator garnered some free press last week with the purchase of a 9.8 percent stake in the Riviera. The $2.7 million buy-in gives him 330,000 shares of Riviera Holdings Corp.

After two decades of kicking the tires along the Strip, has Trump finally landed?

The Riviera and the usually flamboyant Trump were both low-key about the prospects. And Strip competitors were generally unfazed.

"It would be a big deal if it was someone who knew the gaming business,’’ said a VP for one of the Big Four resort companies on the Strip. "He really doesn’t know what he’s doing.’’

Trump, for his part, said, "I’ve always had a good feeling for Las Vegas, but this is purely an investment.’’

Even that did not sway the naysayers. "If it’s really an investment, you have to wonder about his judgment (of properties),’’ another Strip exec told GamingToday.

"I wouldn’t make too much of it,’’ said a nearby casino owner. "It’s chump change for Trump. Besides, he doesn’t even like the Riv.’’

Still, many are bullish about the north Strip neighborhood where Steve Wynn is ramping up the $2.4 billion Le Reve.

"I think Trump is looking at this as a potential real estate play down the road,’’ said John Kempf of Goldman Sachs. According to this theory, the Donald is betting that his $2.7 million stake will appreciate in what’s rapidly becoming Las Vegas’ new high-rent district.

And, observers note, never underestimate Trump’s desire to turn an easy profit on Wynn’s coattails. The two ego-driven gaming moguls have wrangled for years over executive raids and other competitive issues.

Trump in April hooked up with another midsize property nearby, announcing plans for a 60-story condominium venture with New Frontier owner Phil Ruffin. Trump and Ruffin are 50-50 partners in the $350 million project slated for the lot behind the hotel.

Ruffin told GamingToday that he’s been "deluged with calls" from prospective buyers of the high-rise suites ticketed at around $2 million apiece.

Coincidentally, or not, the Riviera is pondering a similar project on six acres adjacent to its hotel.

While the Riviera has struggled in recent years — and the property has become a hodgepodge of dissimilar pieces — the casino is, in the words of one analyst, "getting pretty good grind action.’’

"You may not be able to get lox and bagels there anymore, but business has picked up,’’ the source said. In addition, Riviera Holdings’ casino in Black Hawk, Colo., is performing well and more selective market expansion is on the boards — all of which could make for an attractive investment.

David Atwell, who helped Trump size up Las Vegas properties during a three-year period in the late 1990s, doubted that the East Coast millionaire would be upping the ante at the Riv. "I just don’t think he’s serious about entering the gaming market here,’’ said Atwell, president of Resort Properties of America. "I think his project with Ruffin will be fabulous, however.’’

Meantime, business is bustling along the Strip’s north end. In addition to Le Reve, the Riviera’s southern neighbor, the Fashion Show mall is in the midst of a major expansion with Nordstrom’s, Sak’s Fifth Avenue, Bloomingdales, etc. And Ruffin still has plans for a lavish San Francisco-themed resort that would nearly triple the New Frontier’s current 986 rooms.

Even low-brow real estate deals are turning quick profits. California investor Luke Brugnara recently sold 3.5 acres of the old Silver City property to the developer of a Ross Dress for Less store for a tidy $31.3 million. Brugnara paid $31.5 million for the entire nine-acre site less than a year earlier, and he retains the remaining Strip frontage for future commercial or casino use.

Unlike Palm Springs, New Jersey and the Midwest, the Donald’s Vegas stake does not give him any operational control at the Riv. Both parties strenuously deny any "current plans" for changes, additional purchases or management shuffles at the property.

Then again, all those denials are couched in the present. Stay tuned.