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Arnold M. Knightly

Hard Rock Hotel owners go forward

10 January 2008

LAS VEGAS, Nevada -- The owners of the Hard Rock Hotel seem poised to start collecting revenues from the largest cash flow amenity on the property: the casino.

The state Gaming Control Board on Wednesday recommended giving joint partners DLJ Merchant Banking Partners and New York-based hotel operator Morgans Hotel Group a nonrestricted gaming license to operate the 30,000-square-foot casino.

If the license application is approved by the state Gaming Commission at its Jan. 24 hearing, the owners will be able to profit from the property's gaming revenue a year after taking over ownership of the niche property.

"I think this provides a welcomed entrance to the market," said Dennis Neilander, Gaming Control Board chairman. "This combination is favorable for the property and the market."

Morgans and DLJ bought the property for $770 million and are investing an additional $750 million in an expansion that will double the size of the property while adding 950 more rooms.

The casino has been leased and operated by locally based Golden Gaming since founder Peter Morton sold the property in February.

Hard Rock President and Chief Operating Officer Randy Kwasniewski told regulators all but one of the casino's current employees -- a manager that works for Golden Gaming will remain.

"We will operate the casino with the same employees," he said. "The casino will continue to be run the same way it always has."

DLJ managing director Steven Rattner told regulators the private equity firm will manage the business from the boardroom, not the floor, leaving day-to-day operations in the hands of Morgans and Kwasniewski's management team.

The property recently installed a $1.5 million customer tracking system from International Game Technology to help market to players.

Morgans Chief Executive Officer Fred Kleisner said during the hearing that the owners want to continue trying to increase its share of high-end customers.

He added that the property has benefited from access to a million-customer database built through Morgans' network of high-end hotels in Los Angeles, San Francisco, New York, London and Scottsdale, Ariz.