Sam Nazarian appears to be abandoning his dream of running a thriving Las Vegas casino.
The Los Angeles nightclub mogul plans to sell off his minority stake and give up management of the SLS Las Vegas, an $800-million casino-and-hotel project he spearheaded and opened 14 months ago.
"Throughout the long history of Las Vegas there have been lots of people who thought they had the key," said David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas. "It's never as easy as it seems."
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The SLS has caused Nazarian major headaches by prompting a Nevada gaming board investigation that disclosed that Nazarian had used illegal drugs and was the target of an expensive extortion scheme.San Francisco-based Stockbridge Capital Partners, which owns a 90% stake in the 1,600-room hotel and casino, plans to buy out Nazarian's 10% share and take over operations from Nazarian's company, SBE Entertainment. The hotel will continue to pay licensing fees for Nazarian to retain the SLS brand.Nazarian and Stockbridge executives describe the transaction as a strategic move. Terms were not disclosed."Converting SBE's current management agreement into a license agreement benefits all parties involved — our valued guests and employees, SBE and Stockbridge," Terry Fancher, Stockbridge's executive managing director, said in a statement. "It is more efficient from a cost and operational standpoint, and will give the SLS Las Vegas flexibility to introduce new brands or restaurants from time to time to further improve guest experience and strengthen financial performance."Nazarian called the deal a "win-win.""The resort remains a valued member of the expanding collection of SBE branded and managed luxury hotels across the country and the globe," he said in a statement.From the beginning, the project was a long shot.Nazarian and Stockbridge paid $400 million in 2007 for the iconic Sahara Hotel & Casino, known as a hangout for Rat Packers Frank Sinatra, Dean Martin and Sammy Davis Jr. They invested another $400 million to overhaul the property in a hardscrabble neighborhood several blocks from the most popular casinos on the Las Vegas strip.Nazarian, who owns and operates dozens of Los Angeles nightclubs and hotels, opened the SLS in August 2014, saying he expected to draw in hundreds of his Southern California nightclub fans. At the time, the project was the biggest hotel Nazarian had opened and his first casino. He said he was trying to emulate his hero, hotel and casino magnate Steve Wynn.The project opened in the shadow of the defunct, half-built Fontainebleau Resort, a liquidated hotel and casino that stood as a reminder of the risks of investing in Las Vegas' gaming industry.But Nazarian was engulfed in a scandal shortly after opening the SLS when the Nevada Gaming Control Board, performing a routine background investigation, discovered that he had taken illegal drugs and had been targeted for extortion payments.Nazarian was awarded a gaming license but was required to undergo random drug tests.Although the hotel was built within walking distance of a new 33-acre open-air concert venue, the casino-hotel project has yet to become the success Nazarian envisioned."He is not the first one and won't be the last one who has come in with great hopes in the beginning," said Karl Brandmeir, a former Las Vegas gaming executive and hospitality professor at Niagara University in New York.Stockbridge and SBE reported an $84-million loss in the first six months of 2015, according to a filing with the Securities and Exchange Commission.Breaking into the gaming industry is difficult, Brandmeir said, because casino guests are fickle.He noted that Nazarian transplanted several Los Angeles-based bars and restaurants into the SLS Las Vegas, but he also hoped to make the casino a regular hangout for Las Vegas residents."It sounded good but only if people from L.A. come to the casino," he said. "It doesn't mean that locals want to go there."Schwartz said the SLS Las Vegas still has a chance to succeed with the right features, amenities and management."There is room for growth in the market," he said. "You have to be very selective about what you do."The move to sell his stake in the SLS comes as Nazarian prepares to merge SBE Entertainment with Morgan Hotel Group Co. of New York, according to people familiar with the deal.As proposed, Nazarian would head the publicly held company, with boutique hotels in New York, Miami, London, Istanbul and Los Angeles.In Los Angeles, the Morgan Hotel Group operates the stylish Mondrian Hotel on Sunset Boulevard, where a penthouse suite rents for more than $3,870 a night. This e-mail address is being protected from spambots. You need JavaScript enabled to view it Twitter: @hugomartinALSO:For $115 million, you can live in this enclave for the super-richDrones are providing film and TV viewers a new perspective on the actionWith new equal-pay act, will Jennifer Lawrence get paid like Bradley Cooper?Â
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