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Gaming Guru

Arnold M. Knightly
 

Hard Rock project unveiled

13 March 2007

By Arnold M. Knightly

LAS VEGAS, Nevada -- Celebrities and hipsters will soon have more room to party and be seen at one of the area's premier niche gaming properties.

"The new owners of the Hard Rock Hotel unveiled plans Monday for $750 million in renovations and expansions that will double the size of the property by adding new hotel rooms and convention space to the property as well as a new, larger concert venue.

""We would view this expansion as a positive ... given its current capacity constraints," gaming analyst Bill Lerner of Deutsche Bank said in a note to investors.

"Monday's announcement came five weeks after the joint-venture partnership between boutique hotel operator Morgans Hotel Group and private-equity investor DLJ Merchant Bank closed on the $770 million purchase of the 16.7-acre property and adjacent 23-acre Paradise Bay Club apartment complex.

""With the acquisition of the Hard Rock now officially closed, we are pleased to move forward with our transformation of this legendary Las Vegas property," Morgans Chief Executive Officer and President Ed Scheetz said in a statement.

"The announcement culminates months of speculation among Wall Street analysts about how Morgans, which announced the purchase in May, will upgrade the property and use the property's excess acreage.

""The latest expansion plans demonstrate the long-run interest in the Las Vegas hotel and gaming market," said Brian Gordon, a principal at Applied Analysis, a Las Vegas-based financial consulting company. "Given the level of investment in the acquisition of the Hard Rock and related real estate, Morgans is required to move on development plans to leverage the underlying real estate."

"The expansion will feature the addition of a new 15-story, 550-room hotel tower with a separate 400-suite VIP tower.

"While construction on the expansion is scheduled to begin in October and finish by mid-2009, renovations to the existing 640 rooms and many restaurants will begin immediately.

"Hard Rock Hotel President and Chief Operating Officer Randy Kwasniewski said the adjacent apartment complex is slated to close in July to make room for new employee and guest parking as well as a staging area for the new construction.

"The front of the property along Paradise Road, which is now occupied by parking, will be converted to 60,000-square-feet of convention and meeting space as well as a new, larger The Joint concert venue.

"Kwasniewski added that the new concert venue will be "considerably larger" to accommodate more than the 2,000 people The Joint can now hold for concerts and other events.

"The current venue will be opened up to make room for 35,000-square-feet of additional casino space.

"The expansion also calls for 30,000 square feet of new retail space, expanding the pool, new bars and restaurants, and a new spa and health club.

"Previous owner Peter Morton had announced plans for a $1.2 billion expansion in 2005 but scrapped them before announcing he was selling the property and trademark to Morgans.

"While the 1,200 condominium-hotel unit Bungalows, Flat and Residence was slated for the entire 23 acres neighboring the Hard Rock, the expansion and renovation project announced Monday only utilizes 8 acres.

"The new owners are still evaluating options for the remaining 15 acres, the statement said.

""We may expect to see them further joint venture the balance of the property as well," Gordon said.

"The expansion joins several multibillion-dollar developments in Las Vegas including the $4.4 billion Echelon Place.

"Morgans is a 50 percent joint-venture partner with Boyd Gaming Corp. to develop two boutique hotels, Delano and Mondrian, as part of that development.

"Shares of Morgans Hotel Group rose 29 cents, or 1.56 percent, Monday to close at $18.93, its highest closing in 12 months.