L.A.’s biggest nightclub owner betting big on shuttered Sahara

By Jessica Gelt, Los Angeles Times

Tuesday, July 2, 2013 | 2 a.m.

He’s the biggest nightclub owner in Los Angeles, the man whose Hyde Lounge and Shelter became prime hunting grounds for the paparazzi. He’s been photographed cozying up with Paris Hilton, Kristin Cavallari and Sofia Vergara. When HBO’s “Entourage” needed a club owner, he got the part — playing himself.

Now Sam Nazarian is moving to shed his party boy image to become a Las Vegas mogul, hoping to parlay his success in L.A.’s fiercely competitive club scene into the cutthroat world of casinos. In his tony office near the Strip, he points to a scale model of his latest venture: SLS Las Vegas, a 1,600-room hotel, casino and nightlife mecca that will emerge from the shell of the legendary Sahara.

Clad in jeans and a black dress shirt, Nazarian taps the sleek white model, with its valet circle dominated by artist Jeff Koons’ giant red stiletto heel sculpture.

“This is the birthplace of — and the gateway to — the next era of Las Vegas,” said Nazarian, a 6-foot-4 bear of a man. “How do you reinvent history?”

It’s not a rhetorical question. Nazarian is betting more than $800 million that he can create the Strip’s hottest new destination as Las Vegas rebounds from its long slump. A win would give his fledgling SLS hotel chain a flagship for future expansion. Lose, and who knows whether he will get another shot.

The hotel industry is watching closely, especially because Nazarian plans to stock SLS with restaurants and clubs in which he has an ownership stake, bucking the Las Vegas trend of outsourcing these reliable cash generators to celebrity chefs and well-known club brands. Nazarian’s Hyde Lounge, for example, is the featured nightspot at the Bellagio.

Bringing in food, beverage and nightlife partners spreads the risk but also diminishes the profit potential, especially in an era of high-end restaurants and pricey bottle service. Nazarian said he has spent years creating his food and nightclub brands, or buying into them (he grabbed a 50 percent stake in Umami Burger in 2011), with just this endgame in mind. His SLS Las Vegas will feature incarnations of Umami along with renditions of his first club Shelter, the Sayers Club, Katsuya by Starck and the Bazaar by Jose Andres.

“He’s making a play on his food, beverage and entertainment options as a way to differentiate his hotels from his competitors,” said hospitality consultant Bruce Baltin of PKF Consulting.

His timing appears good: Tourism and gambling revenue on the Strip are once again on the rise. But getting this far hasn’t been easy.

Nazarian knew the aging Sahara was a fixer-upper when he bought it with partner Stockbridge Capital Group for $345 million in 2007. The following year, the housing market crashed and the nation plunged into financial crisis.

“The forecast was rain every day, and we were trying to sell sunshine,” he said. “In Vegas, we were trying to get construction financing and banks wouldn’t even return our calls — they said Vegas was dead.”

Six years and countless headaches later, work began on the $450 million makeover in February after Nazarian managed to secure crucial financing from an alternative source — foreigners participating in the federal government’s EB-5 program that grants green cards in return for investments of $500,000 in job-creating ventures.

That Nazarian persisted despite financial hurdles is one reason he has enjoyed success, said Thomas Barrack, the billionaire founder of Colony Capital in Santa Monica, Calif.

“On a business level, he’s relentless, he’s tireless, he’s 100 percent there,” said Barrack, whose firm invested $35 million with Nazarian’s Los Angeles-based SBE Entertainment Group in 2011. “What Sam has is unique, especially as a young man.”

Indeed, Nazarian was just 31 when he bought the Sahara. Now 37, Nazarian said he’s no longer a fixture on the celebrity club and party scene, focusing his energy on business instead.

“I really don’t recognize myself anymore,” he said, between drags on an American Spirit cigarette and sips of Pellegrino. “I’ve turned into that guy who’s in bed by 8 or 9 o’clock.”

Not that Nazarian’s home is a bad place to be. His $8.5 million, 14,000-square-foot mansion in the hills above Las Vegas boasts an epic view of the Strip, a 10-car garage, a home theater and other amenities. His girlfriend, smoldering fashion model Emina Cunmulaj, is a frequent guest.

He’s accustomed to posh surroundings, having been born to a wealthy Iranian family that fled that country when the Shah was deposed in the Islamic Revolution. In the 1980s, his father, Younes Nazarian, invested in a small startup that was acquired by San Diego technology firm Qualcomm, making him a fortune when Qualcomm went public.

Although he grew up a child of privilege in Beverly Hills, Calif., Sam Nazarian said he couldn’t get into the kinds of clubs he would later own. He attended the University of Southern California and New York University but didn’t graduate, instead embarking on an entrepreneurial career by investing $25,000 in a cellphone company. He later sold it for $1 million.

But nightlife, not tech, was his true calling. Fascinated by the club scene, Nazarian ignored his father’s wishes and bought the Coconut Teaszer on the Sunset Strip in 2002. The club had gone to seed, but Nazarian transformed it into a rock ’n’ roll boite with a post-apocalyptic “Thunderdome” vibe, including leather-clad servers with mohawks. The edgy downstairs VIP lounge, Chrome Room, attracted the likes of Jennifer Lopez and Leonardo DiCaprio.

Other nightspots followed — including Prey, Hyde and S Bar. Nazarian became known for running clubs for a few years and then closing them for a complete makeover, before they could get stale. Thus his West Hollywood, Calif., club Industry, a playful dance venue with a burger bar, was converted to Greystone Manor, a glittery riff on a classic supper club.

The constant feature in Nazarian clubs is over-the-top lavishness: leather banquettes, chandeliers, showgirls dancing on platforms and pricey bottle service. The celebrities came, but so did the legions of others in the entertainment world — agents, lawyers, publicists — and those who aspired to be like them.

Hyde Lounge, his most popular nightspot, opened the year after TMZ.com launched. The tabloid site used to keep a camera trained on the door of Hyde to catch which celebrities were let in and which were turned away.

It’s not all starlets and vodka-sodas, however. A civil suit against the SBE club the Abbey alleged that in 2011 employees served two patrons drinks with drugs and then raped them. No criminal charges have been filed and SBE executives declined to discuss the case, saying it is in the early stages of litigation.

On April 29, a shooting inside MyStudio in Hollywood left a man in critical condition and prompted Nazarian to close the club.

Nazarian wouldn’t address specific incidents but said: “When the safety of your employees and customers is compromised, it’s one of the most gut-wrenching feelings any business owner will ever experience.”

With his success, his family’s investment vehicle, Nazarian Enterprises, became the biggest minority investor in SBE, helping him expand the brand. In 2011, he acquired his chief rival in the L.A. night-life scene, buying David Judaken’s Syndicate Hospitality for an undisclosed amount and doubling his club holdings.

Nazarian also moved into restaurants, including taking a 50 percent stake in Umami Burger. Privately held SBE is on track to generate $400 million in revenue this year, up from $200 million in 2009, Nazarian said.

Hotels are the next big move. He launched his SLS chain — the acronym stands for style, luxury and service — in 2008 in Beverly Hills, expanding to Miami’s South Beach last year. He plans to expand the SLS brand into China and across the U.S. within the next five years, beginning with New York City in 2014.

The SLS Las Vegas will be his biggest venture to date. Nazarian said his aim is to take the legacy of the Sahara — the Rat Pack haunt synonymous with 1960s cool — and update it for today’s legions of glitzy clubbers and gamblers.

That means a boutique hotel experience for the masses — wireless and Bluetooth technology in every room that will allow guests to connect their devices to a large, central screen, and plenty of concierges and service personnel. Frenchman Philippe Starck, who helped create the boutique hotel look in the 1980s, is designing a gleaming white, modernist space with clean lines and plenty of artistic touches, including colorful paintings, bold lighting fixtures and digital projections that will periodically change the look and feel of the rooms.

“Since the invention of boutique hotels 30 years ago, I saw only copies of copies — sometimes good, a lot of times very bad,” Starck said. “Sam has never copied.”

Getting praise from a master of style is especially sweet for Nazarian. As a young man, he didn’t always have the right connections to get into Hollywood’s elite clubs.

He remembers one in particular: Garden of Eden in Hollywood. It’s now the Emerson Theatre, and he owns it.

“I used to not get let into most of the clubs we own today,” Nazarian said, walking through the Emerson’s front door one night. “But especially this one. They didn’t let me into this one the most.”