Palms Owner Looking to Expand

LAS VEGAS -- Palms owner George Maloof is looking for opportunities to expand in Las Vegas or California although he said he won't act until he finds the perfect project.

"This is our business; we're not going to just sit here and do nothing," Maloof said this week. "We want to be involved in the gaming business."

For his part, Maloof is coy about his future gaming industry prospects, which include an as-yet undefined Palms expansion.

Additional hotel rooms and at least one new restaurant, probably Italian, will be part of the mix, he said.

"We need more of what we have, more of what's worked," he said. "The reaction to every restaurant has been fantastic. We don't have a loser. Almost everyone opens with a loser. We didn't."

Beyond the planned expansion, growth opportunities are numerous, but he plans to pass on any that aren't just about perfect, Maloof said.

Maloof, who owns the lion's share of the 2-year-old Palms with his family, said he has had "serious talks" with Indian tribes about running a tribal casino. Although such a deal remains a possibility, he said there aren't that many good opportunities left in California.

He's also interested in another Las Vegas casino, either on or off-Strip, but said good opportunities are limited here as well.

"Vegas is challenging now," Maloof said. "If you don't have a half-billion or a billion, how do you get in this market? How do you compete."

Deutsche Banc casino debt analyst Andrew Zarnett said Maloof would be up to the challenge of building a bigger property himself or partnering with another operator to do so.

"He'd be a great partner," Zarnett said. "Everybody loves him: customers, the investment community, everyone." Station Casinos and the Greenspun family, for example, are partners in the Palm with each owning less than 7 percent of the Flamingo Road property.

The Maloofs could also opt to buy another casino property.

"We've positioned ourselves where we could make a big acquisition," he said.

For now, though, the 39-year-old developer is able to enjoy the success of his off-Strip property.

The Palms' brand name is powerful, its image is hot, and it's making a lot of money -- a 20 percent annual return on its $268 million cost, Maloof said.

The privately held property hadn't previously released much financial data, but Maloof said its return on invested cash flow is better than almost all recently opened Las Vegas properties.

"It's a major success," Maloof said. "People all over the country know the name; they know the brand. And when I tell them I own a casino -- the Palms -- they smile."

"He's a very bright guy, and he's created a substantial brand name in a short period of time," Bear, Stearns casino debt analyst John Mulkey said of Maloof on Wednesday. "Create the buzz and the cash flow will follow, and that's what Maloof has done."

When the Palms opened Nov. 15, 2001, the city was reeling from a national recession and the post Sept. 11 tourism slowdown.

The tough times allowed Maloof to hire highly qualified workers laid off from top-end Strip properties, and the Palms opened strong, he said.

Key to the robust start was the property's initial public relations offensive, which proved remarkably effective, he said.

"When you open a place the most challenging thing is the image," Maloof explained. "You get off to a good start or a (weak) start."

His family's ownership of the National Basketball Association's Sacramento Kings helped.

"They're so visible, the NBA's so visible" Also helping, was the lack of new Strip-area casino openings since the Aladdin's August 2000 opening, Maloof said.

Maloof and his Palms staff created the initial buzz by drawing hundreds of celebrities, hosting a season of MTV's "Real World" and hosting dozens of special events.

But central to its repeat business was building a hotel with hot restaurants and nightspots and hiring a great work force, Maloof said.

Maloof pays close attention to detail at his hotel, Zarnett said.

"He's very good in the operations side of the business," Zarnett said. "He puts a lot of effort into his product and his people, and it shows. His roots are in customer service, just like Steve Wynn's are."

The Wynn-Maloof comparison is often made, and Zarnett said it's apt.

"He's passionate about what he does, about pleasing the customer," Zarnett said. "Clearly he's viewed as a young Steve Wynn in the industry, and even by Steve. That puts him in a great place."

Maloof said the property has surpassed his initial hope that room rates and room occupancy would stay above $90 per night and 90 percent, respectively.

"We're well over those marks," he said.

Maloof said initial miscalculations were few, and they were quickly fixed.

Slots were removed shortly after opening to create more space on the casino floor, a laminate covered wood floor is being replaced by a solid wood floor, and a darker shade of carpeting has been installed in most hotel rooms.