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Barry Sternlicht's Investment Firm Bidding to Acquire the Riviera Las Vegas
 Hotel and Casino by Forcing the Property's Holding Company
 into Bankruptcy

By Howard Stutz, Las Vegas Review-JournalMcClatchy-Tribune Regional News

March 27, 2010 - An investment firm controlled by former Starwood Hotel founder Barry Sternlicht may be bidding to acquire the Riviera and its related casino in Colorado by forcing the property's holding company into bankruptcy.

Starwood Capital Group LLC has reportedly bought control of Riviera's first mortgage for about 50 cents on the dollar and is leading the creditors negotiating a prepackaged bankruptcy, Bloomberg News reported Thursday.

Riviera Holdings Corp., which owns the aging Riviera and the Riviera Black Hawk, defaulted on almost $250 million a year ago and hasn't made interest payments on its loans since December 2008.

According to Bloomberg, Sternlicht told potential investors his plans during a conference call in February.

Sternlicht could not be reached for comment at his offices in Greenwich, Conn. Riviera Chief Financial Officer Phillip Simons declined comment.

Derek Stevens, whose family owns the Las Vegas 51's minor league baseball team and the majority owner of the Golden Gate, said his investment company, Desert Rock Enterprises, had acquired some of Riviera's mortgage. Stevens is a longtime investor in the Riviera.

Sternlicht headed a group that tried to buy Riviera Holdings for $17 a share in 2006, but shareholders rejected the offer. The company's stock was delisted last year by the American Stock Exchange and is now traded on the Pink Sheets. It closed Thursday at 37 cents a share, up 1 cent, or 2.63 percent.

On the conference call, Sternlicht said Starwood could own the Riviera and its 26-acre Strip land parcel "for about $5,000 a room, which is less than the cost of the furniture. I'm thinking of it as a long-term parking lot. We're just going to hold it and have very little invested in the deal."

The Riviera, which opened in 1955, has 2,075 rooms, a 100,000-square-foot casino and 160,000 square feet of convention space. The company has owned the Riviera Black Hawk outside Denver since 2000.

Union Gaming Group Principal Bill Lerner told investors Sternlicht could be buying the Riviera for a "bargain-basement price."

"Assuming very little attribution for Black Hawk, we estimate the credit bid values Riviera's 26 acres in Las Vegas at about $400,000 per acre," Lerner told clients.

Starwood Capital, which Sternlicht formed in 1991, is raising $1.5 billion for a fund targeting real estate opportunities, according to an investment document.


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