May 10, 2016 - 7:52 pm
Station Casinos parent company Red Rock Resorts Inc. has escalated the battle for Las Vegas locals casino dominance by acquiring the Palms for $312.5 million.
Company officials didn’t take questions after the announcement, but will discuss the deal in detail during its earnings conference call today. Reports of a sale swirled through the industry Monday, but the deal wasn’t completed until Tuesday.
“With the acquisition of the Palms, we gain a leading gaming asset in Las Vegas with key strategic benefits in the Las Vegas locals market and close proximity to the Las Vegas Strip,” Marc Falcone, executive vice president, chief financial officer and treasurer of Red Rock Resorts, said in a statement issued late Tuesday.
“With its appeal to both Las Vegas residents and tourists alike, the Palms is a hybrid gaming property that is uniquely positioned to benefit from the strong economic trends in Southern Nevada and record visitation levels in Las Vegas,” Falcone said.
The transaction is scheduled to close during the third quarter and is dependent on state and federal regulatory approvals.
The off-Strip property, which has some of the most expensive — and unusual — suites in the world, was opened by the Maloof family in 2001, but ran into financial trouble during the Great Recession.
Located about a mile west of Interstate 15 on Flamingo Road, Palms has a 95,000-square-foot casino with about 1,250 slots and 48 table games, a race and sports book, approximately 710 hotel rooms across two towers with 85 suites and 19 penthouses, and 599 condominiums in a third tower.
The $600 million Fantasy Tower has themed suites, including the $10,000-a-night Hardwood Suite, which has a basketball court, locker rooms and a scoreboard, and the Kingpin Suite, which has two regulation bowling lanes.
The two-story Sky Villa has a glass-enclosed cantilevered pool that juts out hundreds of feet above the ground. The 9,000-square-foot suite has a personal glass elevator and butler service.
The MTV reality television series “The Real World: Las Vegas” was filmed in one of the Palms suites. Some of the property’s suites have dancing poles in the showers.
With an array of hip nightclubs and award-winning restaurants, the Palms burst into the market as a playground for celebrities that has competed with the Strip’s Planet Hollywood and the off-Strip Hard Rock Hotel.
The property has 15 fine dining and casual restaurants, including the award-winning N9NE Steakhouse and Nova Italiano; 60,000 square feet of meeting and convention space; the Ghostbar and Moon nightclubs; the 2,500-seat Pearl Theater; a luxury spa; the 2-acre Palms Pool; and the year-round Palms Place Pool.
Palms was a pioneer of the summer dayclub concept, introducing “Ditch Fridays” with high-priced VIP cabanas, padded lounge chairs, live entertainment and bottle service.
It also has a 14-screen Brenden Theatres and IMAX movieplex.
The Palms was sold by investment bankers TPG Capital and Leonard Green & Partners LP, the majority owners, each with 49 percent stakes.
Bloomberg reported in March that the property’s owners had hired Macquarie Group Ltd. to explore a sale.
The sale is the latest in a run of locals property acquisitions that began in April when Boyd Gaming purchased the Aliante Hotel in North Las Vegas for $280 million and then the Cannery in North Las Vegas and the Eastside Cannery on Boulder Highway for $230 million.
Factoring in anticipated synergies, Red Rock Resorts estimates the Palms will generate $35 million in cash flow during the company’s first full year of ownership, resulting in an implied multiple of 8.8 times earnings before interest, taxes, depreciation and amortization for the transaction. Company officials say they expect the acquisition to be accretive to earnings per share and free cash flow positive in first full year of operations.
Red Rock Resorts stock closed up 9 cents, 0.48 percent, to $18.99 a share Tuesday afternoon in light trading.
There was no indication whether Palms employees would have to reapply for jobs when the transaction closes.
“We are very proud of our team members for their hard work, dedication and commitment to guest service and the community,” Palms President and CEO Todd Greenberg said in a statement. “We are extremely excited for all the great opportunities our team members will have with Red Rock Resorts and Station Casinos.”
Contact Richard N. Velotta at email@example.com or 702-477-3893. Find him on Twitter: @RickVelotta.