Now that the Downtown Grand is in receivership, what is the future for this property? Also, who do you see buying it?
What's the future of the Downtown Grand? Not much, in all likelihood. The former Lady Luck is an aged casino with serious location issues. What’s more, it’s in a market (downtown Las Vegas) that appears to be saturated.
Yes, some owners — especially Derek Stevens — have invested aggressively in downtown, but they’re on the main drag: Fremont Street. The Downtown Grand is a block and a half off Fremont and in some respects, it might as well be on the dark side of the moon. It requires enough of a detour to discourage visits and foot traffic has been its unsurprising Achilles heel.
Our own David McKee visited the plight of the Grand last August and the handwriting was already all over the wall. Our only surprise it that the Grand eked out a few more months. As of last summer, it was dogged by allegations of unpaid vendors and unpayable loans coming due. The latter eventually proved the Grand’s downfall.
For those who missed it, the Banc of California seized the Grand in January for nonpayment of a $90 million loan. The bank may be seriously underwater on that loan, as we’ll explain. In the meantime, one Paul Huygens of Henderson is trying to shop the Grand to a new owner. We wish him luck. He’s going to need it.
That $90 million loan might be the tip of the iceberg. According to the Las Vegas Review-Journal’s David Danzis, other unspecified debts have gone unpaid as they came due. And that’s not including the money Banc of California has extended Huygens to keep the Grand’s doors open until now and beyond.
As for a potentially unlicensed operator (Huygens) running the Grand, the Nevada Gaming Control Board is “monitoring it closely,” which might mean waiting for the storm to blow over.
Huygens is energetically blasting cyberspace with documents and solicitations. These have resulted in 25 signed nondisclosure agreements and 17 meetings, but no sale. Then again, various courtroom hoops must be jumped through before even a stalking-horse bidder can be named.
Inasmuch as the Grand is looking at hundreds of millions in modernization and deferred maintenance, the buyer will have to be very deep-pocketed. They will also, consequently, probably be seeking to save money on the front end of the deal.
This is where things get dicey for Banc of California. Even $90 million is an extremely optimistic target for a failing hotel-casino in a traffic-challenged area. What’s more, a possible sale to John Unwin for $30 million already fell through. Well-heeled Penske Media (publisher of Rolling Stone) also kicked the tires on the Grand and passed.
What will probably happen is that, in order to consummate a sale, any sale, Banc of California will agree to take a monumental bath on the property. There’s Vegas precedent for this: the Cosmopolitan. There, Deutsche Bank wrote off hundreds of millions of dollars in order to be rid of the place. The Grand, if it can find an angel, seems destined for a similar fate.
For the reasons we’ve outlined, the Grand will be no bargain, even at a dirt-cheap price. We doubt that any of the usual suspects, namely Boyd Gaming, Station Casinos, or Golden Entertainment, will want it. Caesars Entertainment and MGM Resorts International avoid downtown like the plague. Penn Entertainment tried its hand at the Tropicana and got burned. Even Vegas-lacking Full House Resorts would be too astute to take a flyer on the Grand, in our opinion.
We asked David McKee if any casino company might be interested in DTG. Here's what he told us.
"There is, actually, one company that's perhaps foolhardy enough to buy the place. It desperately needs to build a Vegas player base, as it has a Strip project with neither financing nor constituency. It’s been losing money quarter after quarter after quarter and is so desperate for cash flow it's going to open a Chicago casino before it’s fully ready. Although it’s groaning under $7 billion in debt, it has hared off in pursuit of casinos in Australia and Japan."
In case you're still unsure what company that might, it's Bally’s.
