Original Studio 54 figure eyeing Maxim

Wednesday, Feb. 27, 2002 | 11:06 a.m.

SUN STAFF AND WIRE REPORTS

Ian Schrager is placing a bet on the gambling business, telling the Wall Street Journal he has put down a deposit to buy the shuttered Maxim casino-hotel in Las Vegas.

The trendy hotelier says he expects to invest about $200 million to renovate the decrepit Maxim, making it reminiscent of Las Vegas' Frank Sinatra era. The by-now well-romanticized Rat Pack period is a draw these days for tourists already flocking to Las Vegas to see the gigantic Paris-, Venice- and New York-themed casinos that have been built in the past few years.

"When I think of Las Vegas, I think of Frank Sinatra," Schrager told the Journal, noting that he intends for the 800-room hotel to appeal to "sophisticated people -- the kind who used to go see Frank Sinatra."

Schrager told the Journal he put down a $1 million deposit on the Maxim. If the sale goes through in a few months, he says he expects to pay about $38 million for the existing property, then renovate it, adding a 12,000- to 15,000-square-foot meeting or entertainment facility and enlarging the casino. The $38 million price would come close to the $42 million the Maxim's owner has been seeking since acquiring the property in June 2000.

The Maxim first opened in 1979 on Flamingo Road just east of the Strip, and has struggled financially over much of its history. Several times over the past two decades it fell into bankruptcy.

In late 1999 a dispute between the property's former owner and its casino operator led to a brief closure of the Maxim. Though the hotel reopened days later, the departure of the casino operator meant gaming could not resume. The casino never reopened.

Without gaming operations, the Maxim suffered heavy losses, and its mortgage holder foreclosed. Revanche LLC, a Houston-based company, acquired the Maxim in June 2000 in a foreclosure sale, and immediately began marketing the property for resale. But after a year of losses, Revanche shut down the Maxim last August, and it has remained closed ever since.

Going into the Las Vegas casino business is a big step away from Schrager's previous enterprises, which include avant-garde hotels in major cities, including the Paramount, Mondrian and Sanderson hotels in New York, Los Angeles and London, respectively, as well as the original Studio 54 nightclub in New York.

Moreover, Schrager's felony conviction for tax fraud stemming from his operation of New York's Studio 54 nightclub could put a snag in his getting a casino license from Nevada gambling regulators, who generally bar felons from operating or working in casinos. Schrager says he is looking into the licensing issue with the help of legal advisers in Las Vegas.

"I've made some preliminary inquiries and was encouraged to go forward," he says. Another alternative, he notes, would be to divide the hotel, food and beverage operations from the casino.

The Maxim sits off the famous Las Vegas Strip -- generally a disadvantage in that competitive market. But lately, a few off-strip casinos aimed at a more sophisticated urban audience have sparked imitations. The Hard Rock casino led that trend several years ago, followed more recently by the Palms. Several clubs within the dominant resorts also aim to attract more trendy, youthful gamblers -- such as the Studio 54 nightclub at the MGM Grand.