Palms gains approval of Gaming Control Board

David Strow

Thursday, Sept. 13, 2001 | 9:46 a.m.

The Nevada Gaming Control Board gave its approval Wednesday to the Palms, a $265 million hotel-casino set to open near the Las Vegas Strip in November.

The board took a little less than one hour before giving its blessing -- and a recommendation for a gaming license -- to the Maloof family of Albuquerque, N.M., the developers and original owners of the Fiesta hotel-casino in North Las Vegas.

Board member Bobby Siller praised the project's "tremendous potential, beautiful location."

"These are outstanding people, this is an outstanding project, and I wish you well," Siller said.

The resort must still be given final approval by the Nevada Gaming Commission at its Sept. 26 meeting. Assuming that approval is given, the Palms is set to open Nov. 15, one month ahead of initial expectations.

"I hope I didn't shoot myself in the foot (by moving the opening date forward), but I think we'll make it," Palms President George Maloof said, setting off chuckles in the audience.

Also receiving licenses were Station Casinos Inc. and the Greenspun family of Las Vegas, who each hold a position of nearly 7 percent in the Palms. The Greenspun family owns the Las Vegas Sun.

Maloof began his presentation by showing board members a video showcasing the biggest casino to open in Las Vegas in more than a year: a 42-story tower rising over Flamingo Road; 455 hotel rooms; a 14-screen movie theater; 10,000 square feet of meeting space; a 95,000-square-foot casino ; seven restaurants; and two nightspots, the Ghostbar, located atop the tower, and "Rain," a three-story nightclub.

"The Palms will be a very special and spectacular place, the new icon of Las Vegas," Maloof said.

It will also be quite different from the Fiesta in one respect -- the Palms will take high-end action, and has a baccarat pit for high-rollers.

"We'll take a fair amount of action, but we won't go crazy," Maloof said.

Though not located on the Strip, Maloof expressed confidence the casino could draw both tourists and locals with its location on Flamingo and Interstate 15. The nearby Rio and Gold Coast hotel-casinos, he said, had turned the location into "a locals' destination," and the Palms would be positioned to capture growth on the southwest side of the Las Vegas Valley.

"If we had a location 10 miles from the Strip, I couldn't get tourists," Maloof said. "If I was on the Strip, I couldn't get locals."

Though designed to draw from both groups, the resort's offerings will be tailored to draw a local audience, Maloof said.

"We know what local people want, and we know how to cater to them," Maloof said. "If they're comfortable, everyone else will be comfortable."

And he said he's not concerned about a possible slowdown in the Las Vegas gaming industry, saying the family was in it for the long haul.

"People will want to come see us," Maloof said. "I'm confident we'll do well."

Siller expressed some concern about the nightclub, noting that previous problems had been experienced at other Las Vegas nightclubs -- particularly those catering to a younger audience.

"We'll be very sensitive in that area," Maloof said. "It is an area we need to watch, absolutely. But if we do it right, it will be a great benefit to the property."

Board member Scott Scherer then said he'd been concerned by violations of internal financial control standards at the Fiesta, though he went into no detail. Palms officials responded that they'd hired accounting firm Andersen to put together a compliance plan for the property that would prevent future occurrences at the Palms.

"You're on notice that those violations need to be corrected," Scherer replied. "We might not be as willing to give you as many chances if we see these violations recurring."

One aspect about the Palms impressed Chairman Dennis Neilander -- the fact that, out of the $265 million pricetag for the Palms, $225 million came in the form of equity. The only debt the property holds is a $50 million credit line.

"The capital structure is very impressive," Neilander said. "This debt-to-equity ratio is unheard of in the gaming industry."

Since it doesn't carry a high debt load -- as most new Strip resorts do -- it should be far easier for the Palms to post profits, since it won't have to make heavy debt payments.

"You don't have to sweat about making interest payments every quarter," Maloof said.

But it also exposes the Maloofs and their partners to higher levels of risk, a gaming analyst said.

"It means the Maloofs have a lot of their personal wealth invested in that property," said Andrew Zarnett of Deutsche Banc Alex. Brown. "They have a lot of confidence in its success, and they've put their money up front."

Like board members, Zarnett also believes the property will find success with a focus on the "hip young market."

"The market out there for those type of customers is a lot larger than the Hard Rock (hotel-casino)," Zarnett said. "The demand for that product is significantly greater than the Hard Rock is able to serve, and with demand being significantly greater than supply ... it should do very well there. The product should be very appealing to that customer base."