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Rod Smith

Local Group Pursues Castaways, Offering More Than $20 Million

25 February 2004

The odds of the Castaways reopening as a hotel-casino improved markedly Tuesday after three local casino operators signed a letter of agreement giving them an option to buy the property.

Randy Miller, Rich Gonzales and Rich Iannone, owners of the Longhorn casino on Boulder Highway and the Bighorn casino in North Las Vegas, have an exclusive option through March 15 to buy the 49-year-old landmark property at 2800 Fremont St. near Boulder Highway.

The Castaways was closed Jan. 29 after creditor Vestin Mortgage, acting under authority of a U.S. Bankruptcy Court order, notified Castaways owner VSS Enterprises it would enter the casino and collect its collateral backing a mortgage loan.

Vestin then bought the bankrupt 25.9-acre property, formerly known as the Showboat, for $20.7 million on Feb. 1 at a foreclosure sale after its bankrupt former owners were unable to satisfy terms of a $22 million-plus mortgage note. Vestin has since been marketing the property for sale.

Vestin spokesman Steve Stern declined to discuss specific details in the pending offer, but said investors in the mortgage company "would be made whole." Miller said the proposed purchase price of the Castaways is more than $20 million.

Stern said Vestin has received many serious inquiries from gaming and nongaming companies and is encouraged by the interest in the property, particularly the Miller offer.

"Vestin has known Randy Miller for more than 20 years and considers him a very smart, capable businessman. It has a lot of respect for him," he said.

However, Stern stressed the deal was not done and said Vestin is continuing to market the property, with two showings scheduled for this week to a gaming industry prospect and a nongaming company prospect despite the agreement with the Miller partnership.

Miller said his partnership is working diligently to close the sale, and said he is excited about its plan for operating the property.

"I have a lot of passion for the concept we're exploring right now. I grew up at 28th and Stewart, and I know there's a lot of market in this town," he said.

Miller stressed his belief that the Castaways "still has a chance to be successful, but it needs operators who know the community and have experience here."

While declining to discuss his plans, Miller said the Castaways would be operated as a combination locals casino and destination hotel. He said the partnership expects to reopen the hotel-casino with at least as many employees as it had under VSS Enterprises' management.

When it was closed, the Castaways had about 800 employees, roughly half who were Culinary union members. Union officials could not be reached for comment.

Miller also said there are several hurdles to overcome, including completing the due diligence, reaching final agreement with Vestin on a sales agreement and getting regulatory approvals.

"From what we've seen and the reception (the) Gaming (Control Board) is giving to putting Binion's (Horseshoe) workers back to work, they might be receptive," Miller said. University of Nevada, Las Vegas professor and casino industry expert Bill Thompson was cautious about prospects for any new owners of the Castaways, including the Miller partnership.

"They've got the experience. They know the market. It's just going to be a whole lot bigger -- five times -- than what they have now. They know what they're up against," he said.

The Castaways operated 1,300 slots and 20 table games, while the Longhorn has 250 slots and four tables and the Bighorn has 200 slots and three tables.

Thompson said any new owners will need cash to spruce up the Castaways and a national marketing partner to bring in customers and help it weather a break-even period that usually lasts about 24 months.

"If I was a former Castaways employee and I had a chance to go to work for Steve Wynn, I wouldn't turn it down. This will take time," Thompson cautioned, saying the property is in disrepair and that the previous owners failed to match the demands for marketing a hotel-casino in the competitive Las Vegas market.

Separately, Vestin on Monday asked the U.S. Bankruptcy Court in Las Vegas for an emergency order demanding the VSS Enterprises surrender all cash on hand and receivables.

Vestin attorneys argued VSS Enterprises has failed to do so despite court orders and claimed the money is being misappropriated to pay down its bank overdraft.