It took more than three-and-a-half hours Wednesday for Nevada gaming regulators to gain a level of comfort with the ownership structure, management and financing for the $415 million SLS Las Vegas.
In the end, operators of the north Strip hotel-casino were recommended for licensing approval by the Gaming Control Board. The 1,600-room resort, a redevelopment of the Rat Pack-era Sahara, is scheduled to open Aug. 23.
However, regulators placed several conditions on the gaming license, including a request that SLS Las Vegas developer Sam Nazarian, CEO of SBE Entertainment, not have any management influence over the casino operations or share in the property’s gaming revenue until he is licensed by Nevada.
At the outset of the hearing in Carson City, SLS attorney Tony Cabot said the investigation by state gaming agents into Nazarian’s business dealings and personal background had not been completed.
“Mr. Nazarian’s businesses are very complex,” Cabot said. “We hope he will be on an agenda soon.”
Control Board Chairman A.G. Burnett said it was priority for state gaming agents to complete the investigation.
“I do look forward to seeing Mr. Nazarian,” Burnett said.
The Control Board agreed to a request by Cabot that SBE’s share of SLS’s gaming revenue be placed into an escrow account until Nazarian and the company are licensed.
Gaming regulators approved the license application for Stockbridge Real Estate of San Francisco and SB Gaming, a subsidiary that will manage the SLS Las Vegas. The Nevada Gaming Commission will make a final ruling on the application on Aug. 21.
“I’m happy to see SLS Las Vegas move forward,” Control Board member Terry Johnson said. “This is a good project for that end of the Strip.”
Stockbridge owns 90 percent of the SLS Las Vegas while SBE Entertainment owns the remaining 10 percent but does not have any voting rights.
Stockbridge CEO Terry Fancher has authority over all operations of the property. SLS Las Vegas President Rob Oseland will oversee the casino’s day-to-day operation and report to Fancher.
“We have ultimate control of SLS Las Vegas, but that is not to diminish the control of our operating partner, Sam Nazarian,” Fancher told the Control Board. “Mr. Nazarian is a visionary. We wouldn’t be here without him.”
Oseland told the Control Board that SBE serves as the “ambassador of their brands.”
SBE Entertainment, which operates restaurants and nightclubs throughout the U.S., as well as SLS hotel brand, placed some of its popular restaurants and nightclubs inside SLS Las Vegas.
Nazarian did not attend the hearing. However, he narrated a video presentation that was shown to the Control Board about SBE’s history and the company’s numerous brands.
Fancher described Nazarian as someone who “puts everything and everyone together and then steps back and lets everyone run it.”
Stockbridge manages nearly $8 billion in real estate holdings and handles investments for five of the the six largest pension funds in the country. The company once owned the Hollywood Park Racetrack near Los Angeles and the Bay Meadows Racetrack new San Francisco, but sold both businesses.
Fancher told regulators the Sahara was first presented to Stockbridge by Nazarian in 2006 and the company agreed to finance the purchase, which was completed in 2007. Terms were not disclosed.
SBE operated the nongaming aspects of the Sahara and hired a management company to run the casino. The Sahara closed in 2011 and the redevelopment began in February 2013.
Fancher said original redevelopment plans called for construction of a new 40-story hotel tower, but the idea was scrapped when the economy tanked. Stockbridge held off on financing any renovation until economy bounced back.
At one point, Stockbridge wrote down its equity in the Sahara to zero dollars and Fancher had to tell the pension funds they had lost their investment. He told the Control Board the pension fund managers supported keeping the Sahara.
“It’s a miracle we’re here today,’ Fancher said. “We could have lost this project so many times.”
The SLS redevelopment was financed through $300 million raised by investment firm J.P. Morgan and $115 million raised through EB-5 financing, which provides foreign nationals a method of obtaining a green card in exchange for an investment in the U.S.
Fancher said 800 individuals from China invested in the development. He said EB-5 financing was the only way the SLS Las Vegas could have been completed.
Burnett said he and the other board members appreciated the presentation on EB-5 funding, which took more than an hour to review. He asked Cabot to keep the Control Board apprised of any changes in the SLS financing.
Nazarian and SBE Entertainment will manage the nongaming aspects of the SLS Las Vegas, including the hotel, restaurants, nightclubs, and retail. However, any financial decisions must be made by Fancher.
Contact reporter Howard Stutz at email@example.com or 702-477-3871. Follow @howardstutz on Twitter.