Four Queens owner to sell downtown LV property

David Strow

Friday, March 15, 2002 | 11:01 a.m.

For the second time in three years, the owner of the Four Queens has struck a deal to sell the downtown hotel-casino.

Las Vegas-based Elsinore Corp., the Four Queens' holding company, announced Thursday it had agreed to sell the property to SummerGate Inc. for $22 million. Las Vegas-based SummerGate will also assume $4 million in debt held by the Four Queens.

SummerGate is owned by Terry Caudill, the owner of the Magoo's chain of video poker bars. The sale is expected to close by early May.

But the sale won't result in big changes at the 690-room Four Queens, at least not right away, the property's president said this morning. The Four Queens now employs more than 900, and all will be offered employment by SummerGate, said Elsinore President and Four Queens General Manager Philip Madow.

"The rights and the (name) are assigned to the new company, so we can continue with the same name," Madow said. "Obviously that's important, because we feel we've been able to establish very good brand recognition over the years."

"At this point, I think he (Caudill) is very pleased with the physical facility. At this point, we don't anticipate any immediate changes."

Caudill owns Magoo's Gaming Group, which has 15 locations in the Las Vegas area. Caudill formerly served as corporate vice president and chief accounting officer of Circus Circus Enterprises Inc., leaving that company in 1994. Caudill has attempted to enter the downtown market before, making an unsuccessful $15 million bid for the Fitzgeralds hotel-casino last year.

"It's good that this guy has experience, and knows what the game is," said UNLV Professor Bill Thompson. "But is this owner one that can gut it out? Can he invest in marketing, in fixing up the entrances? It's an opportunity, but to spruce it up takes money."

Caudill could not be reached for comment this morning.

The SummerGate deal comes two years after a failed attempt by Elsinore to sell the Four Queens. In March 2000, PDS Financial Corp. of Las Vegas offered to buy the property for $30 million, but was unable to come to a definitive agreement with Elsinore. The deal was terminated a month later.

Several years before that, gaming investor Allen Paulson offered to acquire Elsinore for $54 million. This deal would have been simultaneous with a pact to acquire Riviera Holdings Corp. -- the owner of the Strip's Riviera, and the one-time manager of the Four Queens -- for $250 million. But this deal was called off in 1998.

Ever since the PDS deal fell through, Elsinore has been hunting for a buyer, Madow said.

"(The $22 million) reflects the fair market value dropping," Madow said. "Certainly 9/11 played a factor in that."

Over the nine-month period ended Sept. 30, Elsinore -- whose sole operating asset is the downtown casino -- posted $41.9 million in revenues, a 3 percent decline. The company posted a net loss of $700,000 over that period, compared to net income of $1.4 million in the comparable period in 2000.

Proceeds from the sale will go entirely toward paying off Elsinore's debt and preferred stock, the company said. Stockholders will not receive anything from the sale, and Elsinore will be left with no assets.

As a result, Elsinore shares plunged more than 57 percent to 15 cents on news of the sale this morning.

News of the planned sale came a day after Isle of Capri Casinos said it planned to sell downtown's Lady Luck hotel-casino. Lady Luck has been posting negative cash flow for most of the two years it's been owned by Isle.

The trend for downtown Las Vegas has been one of largely flat gaming revenues for the last decade. It posted modest growth in the last two years -- up 1.5 percent in 2001, up 1 percent in 2000 -- and posted zero growth the two years previously. The largest bump in gaming revenues in the last 10 years came in 1996, when the opening of the Fremont Street Experience led to a 5.7 percent increase in gaming revenues. That increase reversed three straight years of gaming win declines downtown.

"It's a downer that the prices (for downtown properties) are bargain basement," Thompson said. "It's just glum down there. Downtown needs another shock."