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Best of Howard Stutz

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Howard Stutz
 

Riviera Hotel to be demolished for Las Vegas Convention Center expansion

18 February 2015

LAS VEGAS -- The walls of the Riviera Hotel and Casino will, indeed, come tumbling down.

The Las Vegas Convention and Visitors Authority on Tuesday scheduled a special board meeting on Friday to consider acquisition of the 60-year-old Strip resort for $182.5 million, which includes up to $8.5 million in transaction-related expenses. Morgan Stanley, which was hired to oversee the transaction, would receive $3.5 million flat fee. The remainder would pay title fees, legal and professional fees, surveys and environmental studies.

If approved, the Riviera would close in mid-August and be demolished to make way for a portion of the $2.3 billion Las Vegas Global Business District, a major expansion of the Las Vegas Convention Center to include new and upgraded facilities, a trade center and a multimodal transportation hub.

The acquisition cost includes business closure expenses and the real estate price of the property, which is less than the authority’s most recent appraisal. A $275 million credit facility with JP Morgan approved last September would cover the transaction.

The 14-member board will consider a contract to acquire the Riviera and its 26.4 acres from Riviera Holdings Corporation, a subsidiary of Starwood Capital Group. The transaction would close immediately but the agreement includes a lease-back provision enabling the casino’s manager, Las Vegas-based Paragon Gaming, to continue to operate the property and handle its eventual closure. The authority would not manage the property.

Privately held Paragon, headed by Dianna Bennett — daughter of the late Las Vegas gaming pioneer William Bennett — began managing the Riviera in June 2013 following a major shake-up that included the firing of the CEO.

Nevada State Gaming Control Board Chairman A.G. Burnett said the regulatory agency had been briefed on the deal. He said the LVCVA would not have to be licensed for the Riviera.

“The audit division and tax and license division will work with Paragon since it appears to be a short-term, gradual close-down process,” Burnett said.

A spokeswoman for Paragon said the company would not comment on the matter until after Friday’s LVCVA board meeting. A spokesman for Greenwich, Conn.-based Starwood could not be reached for comment.

According to a 2013 regulatory filing, the 2,100-room hotel-casino had more than 850 employees. Culinary Local 226 Secretary-Treasurer Geoconda Arguello-Kline said the union is “doing the utmost to protect our members.”

Negotiations between Morgan Stanley and Starwood began in August. Reports of a prospective deal surfaced last week, but officials with the authority, Starwood and Paragon offered no comment on those reports.

Under terms of the deal, property managers would have six months to close and vacate the building. A 90-day extension is possible to assure that the closure, expected around Aug. 20, occurs within provisions of the state’s gaming laws.

The Riviera was was considered the Strip’s first high-rise resort when it was opened by Miami-based investors in April, 1955. Liberace headlined the resort’s opening. Two of the famous Marx Brothers comedy team — Harpo Marx and Gummo Marx — held small ownership stakes.

The resort took a star turn as the mob-run “Tangiers” in Martin Scorsese’s 1995 movie “Casino.”

Over the years, the Riviera went bankrupt three times and had several owners, including famed mobster Meyer Lansky. Israeli businessman Meshulam Riklis owned the Riviera between 1973 and 1991. Twice the property went into bankruptcy under his ownership and he eventually lost the property to creditors.

In 1997 the hotel became the home of a Las Vegas icon — a life-size bronze sculpture of seven gee-string-clad dancers from its “Crazy Girls” topless show, in a line as seen from the rear. Visited by countless tactile tourists, the metal bottoms of the dancers are always burnished to a golden glow.

Starwood became the primary owner of the resort after Riviera Holdings Corp. filed for bankruptcy in July 2010.

The authority has made several land acquisitions for the planned $2.3 billion Las Vegas Global Business District, but most of that property has been south of the existing Las Vegas Convention Center campus off Sierra Vista Drive.

The Global Business District proposal, a plan to refurbish the 3.2 million square-feet of convention halls to maintain the city’s lead as the nation’s top trade show destination, includes a transportation component that community leaders have been discussing for nearly a year.

Authority officials have said that about 20 major trade shows have expressed interest in Las Vegas, but couldn’t because the calendar was full and there wasn’t enough room to accommodate them. They believe the planned 750,000 square-feet in expansion and the renovated facilities would help them land those shows and bolster the city’s position as the nation’s leading trade-show host.

Tuesday’s announcement was hailed as good news for the Las Vegas resort market, if the end of an era for a venerable Strip hotel.

MGM Resorts International Chairman Jim Murren said he supports the transaction because it allows the LVCVA to have a presence on the Strip. The Global Business District, he said, will give Las Vegas another boost in its competition for convention business with Chicago, Orlando and other cities.

“This is really going to be bad news for other convention markets,” Murren said. “I love this deal because it will create an attractive corridor from the Strip to the Convention Center. It’s going to help bring people down to that end of the Strip.”
Riviera Hotel to be demolished for Las Vegas Convention Center expansion is republished from Online.CasinoCity.com.