Harrah’s, Park Place seen as likely buyers of Imperial Palace

David Strow

Tuesday, Nov. 28, 2000 | 11:08 a.m.

The Imperial Palace isn't the newest property on the Strip, nor is it the flashiest.

But the 2,600-room hotel-casino is situated at a prime location on the Strip, directly across from Caesars Palace. For that reason, gaming industry observers believe a number of possible bidders could emerge if owner Ralph Engelstad places the property on the sales block.

Two potential buyers are mentioned more than others -- Harrah's Entertainment Inc. and Park Place Entertainment Corp., the Imperial Palace's neighbors.

"It's right next to (Park Place's) Flamingo, right next to Harrah's," said Dennis Forst, gaming analyst with McDonald Investments. "There might be other outsiders interested, but I think the route of least resistance would lead me to one of those two (as a potential buyer)."

Speculation that the Imperial Palace could be sold was sparked by Engelstad's comments that he was looking for a buyer for the Imperial Palace in Biloxi, Miss. Engelstad told the Sun Herald newspaper of Biloxi that he was liquidating assets in preparation for retirement.

That leads some to believe that the Imperial Palace on the Strip is also for sale. Engelstad, Imperial Palace officials and attorneys could not be reached for comment.

The Imperial Palace is situated on 8.6 acres of land, sandwiched directly between Harrah's Las Vegas and the Flamingo Las Vegas. If Engelstad is willing to sell, both are seen as possible buyers -- but particularly Harrah's, since its one Strip property has little frontage on Las Vegas Boulevard.

"It would make sense for Harrah's to want (the property), simply because they want the adjacent real estate," said David Anders, gaming analyst with Merrill Lynch. "You could create a very large complex with Harrah's and Imperial Palace."

A deal with Harrah's isn't pending, though a company spokesman would not rule out the possibility of such a deal in the future.

"We look at every potential deal that's out there, but we have no plans to do anything at this point," said Gary Thompson.

Another possible buyer, Anders said, is Colony Capital LLC, a Los Angeles-based real estate investment concern. Colony's recent gaming acquisitions include the $420 million purchase of Harveys Casinos Resorts of Lake Tahoe, the $1.4 billion buyout of Pinnacle Entertainments Inc. of Glendale, Calif., and the acquisition of Trump Hotel & Casino Resorts' Resorts Atlantic City for $140 million. Both the Pinnacle and Resorts purchases are still pending.

"For Colony, given the assets they have, the Imperial Palace at the right price could work for them," Anders said. "They are one of the few companies that wouldn't feel a real need to rework the property. They have a tendency to buy and run properties very well.

"Otherwise, most large companies will take a look at it, but there really isn't a natural buyer for the Imperial Palace in my mind, as a going concern at least. It doesn't fit anyone's strategy or theming. But the real estate, everyone would like."

But Shannon Bybee, executive director of UNLV's International Gaming Institute, believes just about every major gaming company will at least consider the possibility of buying the property.

"Public (gaming) companies should recognize that they're certainly in the position where they need to keep growing," Bybee said. "If they don't keep growing, they have to make some pretty big payouts (dividends) to keep the stock price up."

A sale price is difficult to determine, as the Imperial Palace has no publicly held equity or debt. As a result, its cash flow isn't known -- and cash flow is the measurement used to derive a casino's sales price. The appraised value of the property, assigned by Clark County for tax purposes, is $142 million.

The Imperial Palace would probably need an extensive facelift if purchased by another gaming operator, said Anthony Curtis, publisher of the Las Vegas Advisor newsletter. But for Harrah's or the Flamingo, Curtis believes the property could be kept and used for expansion.

"It would need quite an upgrade, and it would be an expensive proposition," Curtis said. "But with the money and the wherewithal, I think they'd jump at it. That's just a huge value, the space itself.

"You could have one long, continuous Harrah's on the Strip. But who knows, after being bit by the Rio deal, that they'd have the stomach for it (a second Las Vegas acquisition)."

Harrah's has struggled with its acquisition of the Rio as the Rio's casino numbers haven't met expectations in recent quarters.

But ultimately, Anders believes it's possible Engelstad could decide to retain the property and still retire.

"My suspicion is that the Imperial Palace Las Vegas runs itself," Anders said.