Downtown LV casino to be sold to slot-leasing outfit

David Strow

Friday, March 10, 2000 | 11:19 a.m.

The owner of the Four Queens hotel-casino said Thursday it agreed to sell the landmark property in downtown Las Vegas to a small financial company for $30 million.

Elsinore Corp. announced it signed a non-binding letter of intent to sell the 690-room property to PDS Financial Corp. of Las Vegas. The $30 million price is roughly equal to Elsinore's outstanding debt load.

For PDS, the sale moves it into an entirely new line of business. The company provides financing for equipment leases to casinos and sells reconditioned gaming devices.

"We don't think it's such a big stretch," said Peter Cleary, PDS' president. "We've been investing in the gaming industry for 10 years, so we know a great deal about casinos. It is an extension of our investment in the gaming industry."

Cleary said no major layoffs or cutbacks are expected at the property, which employs more than 1,000 people. Nor will there be any changes to the property's theme, he said.

"It's been a very good property over the years," Cleary said. "It has an excellent reputation, and should produce a reasonable return to our shareholders. The dynamics make a lot of sense to us."

Over the first nine months of 1999, Elsinore -- whose only major asset is the hotel-casino -- recorded net income of $278,000, up from a net loss of $1.92 million in the year-before period. Revenues rose 4 percent to $43.5 million, while cash flow increased 20 percent to $8.7 million.

PDS, by comparison, reported a net loss of $451,000 over the same period, down from net income of $783,000. Revenues fell 11 percent to $27.1 million.

A spokeswoman for the Four Queens would not comment on why Elsinore is selling the property, saying those details would be released later in the company's annual report.

But it is clear there are some significant conditions that must be overcome. One of the biggest -- PDS says the deal is conditioned on its ability to find "satisfactory purchase financing."

That could be a challenge, said Dave Ehlers, chairman of Las Vegas Investment Advisors. He pointed out PDS has $82 million in debt and just $10.3 million in equity.

"That's a debt-to-equity ratio of more than 8-to-1," Ehlers said. "That's a bunch (of leverage)."

Still, it appears PDS is getting a bargain, at least compared to Elsinore's most recent balance sheets. On its most recent financial reports, Elsinore listed the value of the property at $40 million -- $10 million more than PDS is going to pay.

Other conditions that must be met include due diligence, negotiation and execution of a definitive purchase agreement and approval of the sale by the Nevada Gaming Commission.

"That's quite a few conditions there ... that's about as many conditions as you see in these things," Ehlers said. "When you have that many conditions, the greater the unlikelihood of the deal."

Until recently, the Four Queens was managed by a subsidiary of Riviera Holdings Corp., the owner of the north Strip Riviera hotel-casino. This agreement was terminated without explanation Dec. 31, and Elsinore assumed management of the property.

In 1995, Elsinore filed for Chapter 11 bankruptcy. After a restructuring, the company emerged from bankruptcy protection in 1997.

Cleary said PDS in the past had financial dealings with Elsinore. But PDS currently has no lease or loan arrangements with the Four Queens or Elsinore, he said.