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Howard Stutz

Golden Gaming gets ready to Rock

11 January 2007

LAS VEGAS -- Golden Gaming took its initial steps Wednesday to increase its presence in the Las Vegas casino market, winning preliminary approval from Nevada gaming regulators to operate the Hard Rock Hotel's casino once the property is sold to the Morgans Hotel Group.

Las Vegas-based Golden Gaming, best recognized as the operator of the PT's taverns and restaurants in Las Vegas, will manage the casino for Morgans while the company seeks its own gaming license, which could take more than a year to obtain.

Morgans, which is purchasing the Hard Rock for $770 million, will operate the property's 647 hotel rooms, restaurants, The Joint nightclub and other public areas once the transaction closes. Golden Gaming will be responsible solely for the Hard Rock's 30,000-square-foot casino.

The Nevada Gaming Commission will rule on the Gaming Control Board's recommendation Jan. 25. Golden Gaming President Blake Sartini said Morgan's could close the Hard Rock purchase by Feb. 1.

The deal is somewhat uncommon, according to gaming regulators. Golden Gaming will receive a management fee to operate the casino and the company could share in a portion of the gaming revenue after expenses. The balance of any gaming revenue will be placed in an escrow account that will go to Morgans once the hotel company receives a gaming license.

Meanwhile, about 520 of the Hard Rock's 1,800 employees will be loaned to Golden Gaming to operate the casino.

"It's an unusual arrangement, but it's not something we haven't seen before," control board Chairman Dennis Neilander said during the hearing.

Sartini said Golden Gaming had originally planned to make an equity investment of up to $100 million in the Hard Rock, but changed its direction. Instead, the initial agreement calls for the company to manage the casino for two years.

"Golden Gaming has a pretty substantial business," Sartini said. "In the end, it gives us some visibility and I think it progresses our company forward in the right direction."

Golden Gaming will have complete authority in the operation of the Hard Rock casino. Any capital expenditures, such as new gaming equipment or management systems, would be funded by Morgans, Sartini said. Sartini told gaming regulators

Golden Gaming is already planning to make some changes in the Hard Rock's casino layout.

Gaming regulators were informed that Bart Pestrichello, a former Station Casinos employee who oversees table games at the Hard Rock, will become the general manager of the casino once Morgans buys the property.

"(Bart) worked for me for seven years," Sartini said. "As the licensee, we have the ability to go in and do what we need in regards to the gaming. Obviously, we want to work in concert with the Morgans people to create a synergy. Nongaming has to work with gaming, and our anticipation is we'll work together with them to market the property."

Sartini served as chief operating officer of Station Casinos for more than four years. He left the company in 2001 to take over Golden Gaming, which then was known as Southwest Gaming.

Golden Gaming owns three casinos in Black Hawk, Colo., near Denver, with a combined 1,200 slot machines. The company recently completed the purchase of the Pahrump Nugget. Its Nevada tavern operation has 38 locations under seven different names, the most recognizable being the PT's bars and restaurants in Las Vegas. Golden Gaming also has a statewide slot machine route operation on which it manages more than 3,000 machines in convenience stores, bars, restaurants and taverns.

Morgans agreed in May to buy the Hard Rock Hotel, an adjacent 23-acre parcel and other assets from Hard Rock Hotel developer Peter Morton for $770 million. The company filed an application with the control board for a state gaming license in December, but an attorney representing the company said the application may have to be amended to reflect additional financing partners once the sale closes.

The Hard Rock sits on almost 17 acres at the intersection of Harmon Avenue and Paradise Road.

Morgans will add the 11-story Hard Rock Hotel into its operating group that includes hotels in Miami, Los Angeles, Scottsdale and London.