Vegas Convention Authority Plans to Buy and Demolish the Riviera
By: Richard N. Velotta and Howard Stutz (Las Vegas Review Journal) February 2015
The walls of the Riviera will, indeed, come tumbling down.
The Las Vegas Convention and Visitors Authority on Tuesday scheduled a special board meeting on Friday to consider acquisition of the 60-year-old Strip resort for $182.5 million.
If approved, the Riviera would close in mid-August and be demolished to make way for a portion of the $2.3 billion Las Vegas Global Business District, a major expansion of the Las Vegas Convention Center to include new and upgraded facilities, a trade center and a multimodal transportation hub.
The 14-member board will consider a contract to acquire the Riviera and its 26.4 acres from Riviera Holdings, a subsidiary of Starwood Capital Group. The transaction would close immediately but the agreement includes a lease-back provision enabling the casino’s manager, Las Vegas-based Paragon Gaming, to continue to operate the property and initiate its eventual closure. The authority would not manage the property.
The acquisition cost includes business closure expenses and the real estate price of the property, which is less than the authority’s most recent appraisal.
Privately held Paragon, headed by Dianna Bennett — daughter of the late Las Vegas gaming pioneer William Bennett — began managing the Riviera in June 2013 following a major shake-up that included the firing of the CEO.
Gaming Control Board Chairman A.G. Burnett said the regulatory agency had been briefed on the deal. He said the LVCVA would not have to be licensed for the Riviera.
“The audit division and tax and license division will work with Paragon since it appears to be a short-term, gradual close-down process,” Burnett said.
Authority board members will be asked to approve the $182.5 million purchase of the property and up to $8.5 million in transaction-related expenses. Morgan Stanley, which was hired to oversee the transaction, would receive $3.5 million flat fee for managing the deal and the remaining $5 million would be available to pay title fees, legal and professional fees, surveys and environmental studies.
A $275 million credit facility with JP Morgan approved by the board last September would cover the transaction.
Negotiations between Morgan Stanley and Starwood began in August. Reports of a prospective deal surfaced last week, but officials with the authority, Starwood and Paragon offered no comment on those reports.
Under terms of the deal, property managers would have six months to close and vacate the building. A 90-day extension is possible to assure that the closure, expected around Aug. 20, occurs within provisions of the state’s gaming laws.
The Riviera, which opened in April 1955, has been in and out bankruptcy three times over 50 years.
Greenwich, Conn.-based Starwood took over primary ownership of the resort after it filed for bankruptcy in July 2010.
The authority board has approved several land acquisitions for the planned $2.3 billion Las Vegas Global Business District, but most of that property has been south of the existing Las Vegas Convention Center campus off Sierra Vista Drive.
The Global Business District proposal, a plan to refurbish the 3.2 million square-feet of convention halls to maintain the city’s lead as the nation’s top trade show destination, includes a transportation component that community leaders have been discussing for nearly a year.
Authority officials have said that about 20 major trade shows have expressed interest in staging their events in Las Vegas, but couldn’t because the calendar was full and there wasn’t enough room to accommodate them. They believe the planned 750,000 square-feet in expansion and the renovated facilities would help them land those shows and bolster the city’s position as the nation’s leading trade-show host.
Tuesday’s announcement was hailed as good news for the Las Vegas resort market, if the end of an era for a venerable Strip hotel.
MGM Resorts International Chairman Jim Murren said he supports the transaction because it allows the LVCVA to have a presence on the Strip.
“This is really going to be bad news for other convention markets,” Murren said. “I love this deal because it will create an attractive corridor from the Strip to the Convention Center. It’s going to help bring people down to that end of the Strip.”
