Park Place to sell LV Hilton

By Liz Benston

Wednesday, Dec. 24, 2003 | 11:05 a.m.

Park Place Entertainment Corp. today agreed to sell its struggling Las Vegas Hilton to an affiliate of Colony Capital LLC for about $280 million.

The transaction is expected to close by the end of June.

Colony Capital, a Los Angeles-based real estate investment firm, said it expects to enter into an agreement with Hilton Hotels Corp. -- which owns the rights to the Hilton brand -- to allow the property to continue using the Hilton name, the companies said.

Colony also said it intends to continue operating the Las Vegas Hilton as a hotel-casino but may build additional structures on vacant land at the site. The future status of the Hilton's staff was unknown.

It was unclear early today whether Colony would retain the Star Trek Experience attraction at the property.

Park Place said it intends to use the proceeds from the sale -- estimated at $256 million after taxes -- to reduce debt. The company expects to report a gain on the sale of about $85 million after taxes, or 28 cents per share, in the quarter in which the transaction closes.

Expenses have exceeded cash flow at the Las Vegas Hilton for at least the past two years, dragging down earnings at Park Place. The company's Chief Executive Wally Barr has expressed interest in selling off non-core assets nationwide.

Colony Capital was attracted to the real estate potential of the Las Vegas Hilton site, according to a source who worked on the transaction and declined to be identified.

The off-Strip resort sits on 56 acres, including undeveloped land that could be used to realign traffic flow and build hotel towers, timeshares, condominiums and even retail, industry insiders said.

"Many of the investors consider this to be a combination of a casino and real estate play," the unnamed source said. "They were looking at ways to use the assets to maximize returns by using the land around the Las Vegas Hilton as the land becomes more valuable. Colony Capital likes to invest in this kind of asset."

"The hotel-casino and the prime real estate on which it sits are truly irreplaceable assets," Colony Capital Chairman and Chief Executive Thomas J. Barrack Jr. said in a statement. "We look forward to this opportunity to further enhance and reposition the property."

Colony Capital representatives could not be reached for further comment.

Colony is one of the world's largest REITs and is known for buying distressed assets. The company bought Resorts International in Atlantic City and sold the Harveys Casino Resorts chain to Harrah's Entertainment Inc. in deals announced in 2001. It was also a suitor of the bankrupt Aladdin resort, which was eventually sold to another party.

Casino entrepreneur Nicholas Ribis, vice chairman of Resorts International, will be a partner in the Las Vegas Hilton acquisition, Park Place said.

Other bidders on the Las Vegas Hilton included Richard Alter, managing director of Financial Capital Investment Co. and another Aladdin suitor; timeshare developer Crescent Heights; and Marriott International, another interested bidder of the Aladdin.

Real estate investor Carl Icahn also was interested in buying the Las Vegas Hilton but forwarded an offer that was too low to make the next round in the bidding process, sources said.