Maxim deal falls through

Jul 30, 2002 8:09 AM

Plans for a $200 million revival of the shuttered Maxim have fallen through, with hotelier Ian Schrager walking away from the deal.

Schrager, owner of a worldwide string of five-star resorts, was ready to pay $38 million for the Flamingo Road casino earlier this year. But the deal collapsed and he left his $1 million non-refundable deposit on the negotiating table.

An offer from an unidentified back-up buyer is pending, sources tell GamingToday. The bankrupt Maxim closed its doors in 1999. It’s been on the market ever since.

Co-founder of Studio 54, New York’s disco era hotspot, Schrager and partner Steve Rubell were the toast of Gotham in the late 1970s. Grossing $7 million in its first year, Studio 54 was a nightly hangout for stars like Cher, Diana Ross, Liza Minnelli, Halston, Calvin Klein, Elton John, Andy Warhol, Christopher Reeves, Michael Jackson, Brooke Shields, newlyweds Donald and Ivana Trump, Truman Capote and Margaux Hemingway.

It also became a notorious haven for drugs, alcohol and sex — and Schrager was subsequently arrested on charges of cocaine possession. In 1979, he and Rubell ran into problems with the IRS and were convicted of tax evasion. They were sentenced to 3 ½ years in prison.

Since his release, and Rubell’s death from AIDS, Schrager formed the Ian Schrager Hotels group. Among his holdings: the Clift in San Francisco, the Paramount in New York, the Miramar in Santa Barbara, the Sanderson in London, the Mondrian in Los Angeles and the Stoneleigh in Dallas.

The hotels attract locals as well as tourists, and rooms are designed with a cool, sophisticated ambience. Billed as "cheap chic urban resorts,’’ Schrager envisioned the same treatment for the 23-year-old Maxim.

"When I think of Las Vegas, I think of Frank Sinatra,’’ Schrager said. Before his Maxim bid went south, he vowed to re-make the 800-room hotel into a resort that would appeal to "sophisticated people ”” the kind who used to go see Frank Sinatra.’’

Had the sale gone through, the hotelier planned to add a 15,000-square-foot meeting or entertainment facility and expand the casino. All told, he pledged to pump as much as $200 million into the aging facility.

But, perhaps sensing licensing problems, Schrager quietly backed out of the deal.

"The property was very profitable, but it needs a major renovation to bring it up to average standards. Good management will be the key,’’ a source told GamingToday.

With the new Strip monorail running nearby ”” and more resort construction possible where older apartments now stand west of Koval Lane ”” the property appears to be in a good location for future growth, the source said.

For Schrager, however, the Maxim was merely a $1 million dream that evaporated in the desert sun.