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Howard Stutz

Good-bye Sahara, hello SLS Las Vegas - Strip property to be redeveloped

1 May 2012

Goodbye Sahara, hello SLS Las Vegas.

Think of this as an implosion without the dynamite.

Sahara owners SBE Entertainment Group, LLC of Los Angeles and San Francisco-based private equity group Stockbridge Real Estate said Monday they had completed the process to acquire $300 million in financing that will return Sahara, which was shuttered almost a year ago, into an operational north-Strip hotel-casino sometime in 2014.

SBE Chef Executive Officer Sam Nazarian said the three existing hotel towers would remain, but two will be "stripped down to their skeletons." A low-rise hotel structure will be torn down, but the 2,500-space parking garage will remain.

SLS Las Vegas will have roughly 1,600 rooms and operate as a "true boutique resort," although it will be the largest SLS hotel in the company. Gensler Architects and Penta Building Group have been hired to oversee the renovation. Nazarian said plans have been completed and construction work could begin by the end of summer.

He said SBE took a similar building approach when it developed SLS properties in Beverly Hills, Calif., and in Miami's South Beach, adapting and renovating existing buildings.

The two-year time line to complete the remodeling allows SBE to grow its database of customers to more than 2.5 million names. By the time SLS Las Vegas opens, SBE will have SLS-branded hotels in several U.S. cities, including New York, Los Angeles, Chicago and Miami.

"The beauty of a long runway is that it allows the [Las Vegas] market to continue to correct itself and gives us 24 months to dedicate sales and marketing of the brand," Nazarian said. "We believe this will kick off the next wave of construction in Las Vegas."

The construction funds, raised by J.P. Morgan Securities, marks the first new construction loans on the Strip in several years. In early April, Moody's Investors Service gave the loans a positive ratings assignment.

Gov. Brian Sandoval, in a statement released by SBE, said the investment by SBE and Stockbridge shows confidence in the Strip and the state.

"Today's news will make an immediate and positive impact in Las Vegas, infusing hundreds of millions of dollars into our economy and creating thousands of jobs," Sandoval said.

Nazarian said he's confident other investment will come to the Strip's north end.

"I've kind of become the unofficial ambassador for the northern end of the Strip," Nazarian said. "We see the northern end of the Strip as the future of Las Vegas, and we're pleased to be positioned at the forefront of that growth."

With "50,000 cars a day" passing the intersection of Sahara and the Strip, Nazarian said SLS Las Vegas would compete for local business in addition to going after SBE's customer base. Along with its hotels, SBE has a nightlife and restaurant business, including 14 locations under different brands in Southern California. SBE runs the Hyde Lounge at Bellagio and has hospitality businesses in such cities as Dallas and San Francisco.

The SLS Las Vegas will also feature several brands from SBE's nightlife and restaurant business, including The Bazaar by José Andrés, Katsuya by Starck, and a reinvention of the company's original nightlife concept, Shelter.

Nazarian said the recognized brands, including new developments that could be introduced over the next two years, would give SLS Las Vegas customers some familiarity. SBE plans to market SLS Las Vegas to its hotel customers that use existing SLS locations.

"We're going to be the only casino operator with hotels in major U.S. cities," Nazarian said. "That should give us a good advantage coming out the gate."

In addition to the funding, SBE named hospitality and gaming industry veteran Rob Oseland as president and chief operating officer of SLS Las Vegas. Oseland was formerly with Wynn Resorts Ltd..

"Rob brings more than two decades of development, gaming and marketing expertise to SLS Las Vegas," Nazarian said.

SBE and Stockbridge bought the Sahara in 2007. SBE closed the 59-year-old Sahara last May, saying the resort was "no longer economically viable" to operate. All the Sahara's furnishings and memorabilia were sold in an estate sale.

In November, Clark County commissioners approved a tentative plan for the Sahara remodeling that reduce the hotel's original size from 1,720 rooms to 1,600.