Yes. Don’t build luxury condos in Vegas. Seriously, Palms Place was the beginning of the end for the go-go years at Palms Casino Resort. The $350 million tower was a bust, one of a cascade of business problems to hit the Maloof family. The latter were heavily invested in Wells Fargo (to the tune of $248 million in 2002), whose stock took a nosedive in 2009 and is still below its peak value. The Maloofs’ cash cow, a beer distributorship in New Mexico described as "dominant," was sold, eradicating an annual revenue stream pegged at $100 million.
Right now, they are trying to close a deal to sell two-thirds ownership of the Sacramento Kings to a Seattle consortium for $525 million and have already collected a nonrefundable $30 million to that end from hedge fund magnate Chris Hansen. The Maloofs are in hock to the NBA for $100 million, plus another $70 million owed to the City of Sacramento. But it’s a heckuva coup for the Maloofs when you consider that Forbes values the Kings at $300 million.
It was during the boom years of the last decade that George Maloof added the $600 million Fantasy Tower and the 600-unit Palms Place (estimated cost, $350 million). The condo tower would "be home to an affluent clientele that includes Hollywood stars, professional athletes and recording artists," Maloof told the Las Vegas Review-Journal. But by May 2009, condo sales had petered out and he had to offer to underwrite financing of the sale of 150 units. Occupancy in the condo-hotel was reported as low as 33%. Condos that had sold for as much as $3.2 million hit the resale market at deep discounts. Unable to meet debt covenants, Maloof was inexorably dragged down by Palms Place’s failure.
In mid-June 2011, he announced a deal whereby investment firms Texas Pacific Group (co-owner of Caesars Entertainment) and Leonard Green & Partners would erase $400 million-plus in debt. In return, they received 98% ownership. George Maloof was allowed to keep 2% and to stay on as the face of the Palms. TPG and Green promised to invest $30 million, which the new owners said "would be used to freshen the property’s nightlife offerings and upgrade more than 200 of the casino’s slot machines," according to a Nov. 2, 2011 Las Vegas Sun reoirt.
Reduced to figurehead status, Maloof had to stand by while his casino president, Paul Pusateri, was sacked in favor of Joseph Magliarditi, late of the deeply troubled Hard Rock Hotel & Casino. Signature Maloof amenities like Garduño’s and the Playboy Club were stripped from the Palms. (The casino was paying an annual premium to Playboy ownership for use of its name and logo.) Restaurant and nightlife operations were outsourced to N9NE Group – although N9NE had to be bought out by Texas Pacific and Green after the Nevada Gaming Control Board and Las Vegas Metro recently caught N9NE staffers red-handed in a drugs-and-hookers sting.
This let to the low ebb of George Maloof’s Vegas career last Thursday: apologizing to the Nevada Gaming Commission for the sexcapades and assenting to a $1 million fine (the third-largest in Commission history) upon the Palms. The majority owners – under whose nose the scandal occurred – let Maloof take the heat. Although a recently heard rumor said the Maloof family was on the prowl to buy the Las Vegas Hotel & Casino (currently up for sale), it appears likelier that they will exercise a contractual clause that allows George Maloof to raise his Palms ownership stake to 20%. If so, it would explain why he’s willing to take the rap for misdeeds committed under TPG/Green’s watch.
