Experts praise sale of famous resort

Wednesday, July 12, 2000 | 11:09 a.m.

The owner and operator of the Silverton hotel-casino just south of Las Vegas is buying the off-Strip Las Vegas Hilton hotel-casino.

Ed Roski Jr., who also is co-owner of two Los Angeles sports franchises, announced Monday that he is buying the Paradise Road property with a colorful history for $365 million from Park Place Entertainment.

Roski plans to keep the Hilton name under a license with Hilton Hotels Corp. However, he is expected to change the focus to a midmarket property from the high end.

Hilton split its hotel and gaming operations in 1998, making Park Place the parent company to the company's hotel-casino properties. Park Place Chief Executive Officer Arthur Goldberg viewed the Las Vegas Hilton as a duplication of the product offered by Caesars Palace, which the company acquired from Starwood Hotels & Resorts Worldwide Inc. in 1999.

Once Park Place took on Caesars Palace, the Hilton property became expendable and buyers were sought. Among those thought to be interested were the Hyatt and Marriott chains. But it was Roski, 61, who eventually emerged as the buyer.

The transaction is expected to be completed by the end of the year and is subject to regulatory approval.

Paying off debt

Park Place indicated it would use the proceeds of the sale to pay off debt and repurchase the company's common stock. The company also said it would focus its efforts on its four Strip properties -- Caesars Palace, Paris, the Flamingo Las Vegas and Bally's.

Analysts applauded the acquisition.

"It's a win-win situation for both parties," said Andrew Zarnett, who follows the gaming industry for Deutsche Bank, New York.

"Goldberg beat the naysayers who said he couldn't sell the Las Vegas Hilton and that it was only worth 5 1/2 times cash flow. Instead, he was able to negotiate with Roski for 7.3 times (cash flow). Now he has his assets concentrated at the old four corners of the Strip, just where you want to be.

"For Roski, it's an opportunity to really leverage the Las Vegas Hilton as a convention property, which is what it really is," Zarnett said. "It gives him a huge chunk of land to develop right across from Turnberry (Place condominiums) and the Las Vegas Convention Center.

"And, really, a third winner is Las Vegas. They have a new guy in the mix who's going to build a timeshare and a condo. That whole area along Paradise is turning into a high-density area, and that should be good for Las Vegas. People will sit back and say, wow, 'Goldberg did it again,' but there's actually three winners here."

Stuart Linde, who follows Park Place for Lehman Bros., New York, called the deal "an excellent sale" that should illustrate the value of Park Place's underlying assets.

'Strategic move'

"The sale of the Las Vegas Hilton is another smart strategic move by PPE's management," Linde said. "Not only is the deal accretive, but it will increase the company's property concentration on the high-traffic Las Vegas Strip."

Park Place broke down the value of the deal as $300 million for the property, plant and equipment, $31 million for the Hilton licensing agreement, which will allow Roski to keep the Hilton name, $6 million for net working capital and $28 million in high-end gaming customer receivables that Park Place will retain.

The company also said that as of March 31, the latest 12-month cash flow -- earnings before interest, taxes, depreciation and amortization and other noncash charges -- for the property was $50 million, resulting in a 7.3 EBITDA multiple based on the total price. Park Place officials said they anticipate a noncash net book loss of about $32 million on the transaction.

Roski entered the gaming industry after several other successful business ventures.

In addition to having ownership positions with the National Hockey League's Los Angeles Kings and the National Basketball Association champion Los Angeles Lakers, Roski conceptualized and developed the arena in which they play, the Staples Center in downtown Los Angeles.

He is president and chief executive officer of the Los Angeles-based Majestic Realty Co., one of the largest privately held real estate companies in the country, which currently owns, manages and leases more than 40 million square feet of property nationwide.

Roski built the Silverton hotel-casino as Boomtown in 1994 and has operated the property since 1997. Roski's companies have built more than 3 million square feet of property in Southern Nevada.

The Las Vegas Hilton will continue to operate during the ownership transition and Roski and Park Place officials said there are no closures or layoffs planned in the interim.

"We really believe our purchase of the Las Vegas Hilton is a win-win for all involved," Roski said in a statement announcing the acquisition. "This acquisition moves our company into the midlevel gaming and hospitality arena, which is a broader market segment and one in which we feel very comfortable and believe we can be competitive.

"We've been active in Southern Nevada for years, including gaming and hospitality, real estate development and construction," Roski said, "and we're excited to increase our presence and activity in this market."

Appealing location

Roski said acquiring the Hilton property appealed to him because of its proximity to the Las Vegas Convention Center, the nation's largest meeting facility, the potential of future pedestrian access to the Strip with the development of a monorail system that would stop at the hotel, and increasing development surrounding the property, including the Turnberry Place luxury condominium project.

Roski said that while it's too early to disclose specific plans for the facility, he said he has a team in place that is investigating increasing dining, entertainment and retail locations at the property, renovating casino and public space to add more slot machines, remodeling more than 1,000 hotel rooms, adding a timeshare development and building 1,500 new hotel rooms on the property's 30 undeveloped acres.

The three high-roller Villa Suites totaling 45,000 square feet atop the property are expected to be converted to a restaurant and nightclub.

Roski said he also hopes to capitalize on the local market and create attractions and amenities appealing to the foot traffic generated by the Convention Center, which is building a 1.3 million-square-foot expansion.

There are some unanswered questions about the deal.

One involves the status of the property's agreement with the Paramount Parks division of Viacom International. The Hilton and Paramount opened "Star Trek: The Experience" in 1998, a themed attraction based on the popular series. The attraction received positive reviews when it opened, but has been a box-office flop, attracting around 2,000 people a day instead of the 10,000 expected.

Another involves the status of an announced $600 million expansion project at the Silverton. The property announced it was adding 300 rooms to the hotel-casino at Blue Diamond Road and Interstate 15.

How Roski's ownership position with the Lakers and Kings will affect operations at the Hilton sports book also raises questions. Other properties with affiliations with professional sports teams haven't accepted bets on their respective leagues.

When Caesars Palace was owned by ITT, which had ownership roles in Madison Square Garden, the New York Knicks and the New York Rangers, the sports book did not take NBA and NHL bets. The Maloof family, owner of the Fiesta hotel-casino as well as the NBA Sacramento Kings, does not take NBA bets.

A Silverton spokesman said today Roski does not intend to divest himself from the sports teams. The Silverton property does not have a sports book, but the Hilton book has been one of the city's most popular for years.

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