|By Rod Smith, Las Vegas Review-Journal|
Knight Ridder/Tribune Business News
June 15, 2004 - The Nevada Gaming Control Board, paving the way for the $280 million sale of the Las Vegas Hilton, on Monday gave its approval to granting gaming licenses for buyer Colony Capital.
Gaming Control Board Chairman Dennis Neilander said the financing for the takeover from Caesars Entertainment is very complicated, but "at the end of the day there isn't anything very complicated about it or Colony's plans (for the property)."
Thomas Barrack, founder and chairman of Colony, said the Las Vegas Hilton represents a "turnaround situation" for Colony, which plans to invest $26 million in renovations, starting Thursday when it takes possession of the property.
Nicholas Ribis, who will be the "key executive" operating the Las Vegas Hilton for Colony, said his company has signed a licensing agreement to continue using the Hilton name and reservation systems for at least two years.
He said Colony is confident that by marketing the Las Vegas Hilton as a convention hotel, it can be returned to its former glory.
The Las Vegas Hilton was originally developed in 1969 by Kirk Kerkorian, now majority shareholder in MGM Mirage, as the International. It was immediately criticized because it was too big and too far from the Strip. The 30-story tower on Paradise Road opened with 1,512 rooms, making it the largest hotel in the world at the time.
Still, it enjoyed a huge initial success and won international renown for hosting headliners such as Elvis Presley. More recently, under Caesars Entertainment, however, it has generated minimal cash flow.
Ribis said Colony will reconfigure the casino floor immediately, opening it up for access for visitors. The company also plans to replace the casino's slots with state-of-the-art machines.
"The floor as it is does not drive traffic. There's no fun at the property," he said.
Ribis said Colony will launch a program to remodel the property's bars and restaurants, focusing on its business strategy of developing a core clientele around the convention industry. He said immediate plans call for spending $30 million on room renovations, $22 million for redeveloping the casino and public areas and $7 million to replace the slots.
Barrack told the Control Board that his company, which mainly represents 150 major institutional investors, has invested more than $10 billion in real estate assets such as the Hilton since it was founded in 1991.
He also said this expansion of Colony, which is a private equity company, will be constructive for the gaming industry because private equity companies have deeper capital pockets than individual investors who participate in ownership through stock markets.
Deutsche Bank analyst Marc Falcone said the deal, which is expected to close Thursday following final license approvals by the state Gaming Commission, will be good for Colony, Las Vegas and Caesars Entertainment.
He said the $240 million in net proceeds will help Caesars pay down outstanding debt, and will enable the new owners to reposition the property, which will make it important to Colony.
Joe Greff, gaming analyst at Fulcrum Global Partners, an independent Wall Street investment research firm, predicted that the sale will put Caesars in a position to start paying dividends or repurchasing shares by the end of the year.
Falcone said Colony is a strong gaming company. It operates Resorts International in Atlantic City and briefly operated Harvey's Lake Tahoe in Stateline.
Greff said Colony is particularly good at repositioning and turning around troubled properties.
Robert Stewart, spokesman for Caesars Entertainment, declined to discuss the impending sale.
Caesars stock closed Monday at $14.20, down 23 cents, or 1.6 percent, on normal trading volume of 1.6 million shares.
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