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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Downtown Las Vegas: Barrick Sells Casino Stakes

28 June 2005

Fifteen months after announcing plans to restore and re-create the ambience of downtown Las Vegas, Barrick Gaming said Monday it would sell its minority holdings in four casinos -- once the centerpiece of casino pioneer Jackie Gaughan's real estate portfolio -- to a privately owned international investment company.

No sale price was disclosed. Nevada gaming regulators must approve the transaction in which the Tamares Group will acquire 100 percent of Barrick Gaming's subsidiaries that lease the Plaza, Las Vegas Club, Gold Spike and Western Hotel.

Tamares already own a majority stake in the casinos and was considered a silent partner and the casino's landlord. Barrick, with its minority shares, is the managing partner, overseeing day-to-day operations of the gambling halls and serving as the property's public face.

The deal gives Tamares 100 percent ownership in the casinos.

The transaction is the second major casino sale this year that affects downtown Las Vegas. In February, Poster Financial Group agreed to sell the Golden Nugget to Landry's Restaurants for $295 million in cash and debt assumption. That deal is expected to close by December.

Barrick closed its minority purchase of the four Gaughan casinos in March 2004 for $82 million and outlined plans for a massive redevelopment of the Plaza and its seven additional acres. In addition, Barrick said it would retheme the Western Hotel as a destination resort for Hispanics. The company said it would add 1,200 hotel rooms and 1,200 time share units to the Plaza while renovating the Las Vegas Club.

The company also discussed building a themed street behind the Plaza that would re-create old Las Vegas.

No details, costs or plans were ever announced.

Tamares, which has offices in London, New York and Tel Aviv, Israel, owns properties in New York City and London.

As part of the transaction, Tamares will pick up two smaller properties, Queen of Hearts and the Nevada Club, as well as more than 40 commercial and residential sites in Las Vegas.

The company was already planning on investing money in Barrick's casino operations.

Nevada gaming regulators will meet in a special session Wednesday to consider allowing Tamares to loan the casino group an undisclosed amount of money to help with operational costs.

In a statement, Poju Zabludowicz, the London-based chairman and chief executive officer of Tamares, said, "The proposed loan for Barrick is important to ensure that the company can continue to operate efficiently until such times as Tamares can complete our acquisition. We are comfortable in making this cash injection now, a mark of our confidence in the future potential of the business."

Zabludowicz said there were two reasons to acquire Barrick's interest in the casinos.

"The primary one is that we remain, as we have since looking first at Las Vegas in 2002, very optimistic about the fantastic growth potential of our property portfolio here," Zabludowicz said. "The second is that Barrick's executives wanted to realize the increased value of their stake in the four properties. While it was not planned to make these acquisitions at this time, we feel this is a very good deal for all parties concerned. We will take some time to consider the business opportunities afforded to us as a result of these transactions."

The current Barrick Gaming management team, headed by President Stephen Crystal, will continue to run day-to-day operations until the sale closes. Crystal will continue to work with Tamares to determine the redevelopment potential of the company's noncasino interests.

Crystal said Monday he thought Tamares would bring in a new management team to run the casinos once the deal gains its necessary approvals.

He added that Barrick Gaming will continue as a company with a few downtown Las Vegas real estate holdings and projects in Oklahoma and Montana. The company also plans to proceed with a planned casino in Wendover.

Barrick Gaming Chief Executive Officer David Barrick will no longer have an operational role in the casinos.

Barrick Gaming had tried to buy the Golden Nugget Laughlin from Poster Financial Group last November for $31 million but the deal collapsed May 31. Barrick claimed certain provisions in the purchase agreement were breached by Poster Financial while the Golden Nugget owners said Barrick didn't meet its obligations as the casino's purchaser.

Both companies filed competing complaints in Clark County District Court over the failed transaction while Landry's, through language in its purchase agreement for the Golden Nugget Las Vegas, will obtain the Laughlin casino as well without having to put up any additional money.