Question of the Day - 25 March 2023

[Editor's Note: This answer is penned by David McKee.]

First off, to scotch an urban myth, Siegel Suites has nothing whatsoever to do with Busgy Siegel.

It was founded 22 years ago by present CEO Steve Siegel, age 52, and encompasses numerous hotel and residential properties. Its revenue went from a modest $8.5 million in 2004 to $111 million three years later, warranting its inclusion among Inc. magazine’s 500 fastest-growing companies. 

2004 was the same year that the Siegel Group, nominally headquartered in Sherman Oaks, California, deemphasized the rapidly escalating California real-estate market and turned its focus to Las Vegas. Ensuing economic events made this a smooth move.

The Siegel Suites brand was hatched in 2006. Said Steve Siegel, “They’re convenient for people who need a place to stay before they decide where they want to live. I wanted to create a brand for the apartments I was running in Vegas and market them, so that’s how Siegel Suites came to be. I love building brands that I believe in.”

The company’s growth has been achieved by snapping up distressed apartment and motel properties and repositioning them under the Siegel umbrella. The acquisitions, as you correctly observe, are too many to relate here, so we'll point to two "flips" to reflect Siegel’s acumen. The company took over the Gold Spike, one of the sketchiest hotel-casinos in downtown Las Vegas, from absentee landlord Tamares Group in 2008. They cleaned the place out (literally) and rebranded it as a respectable casino-hotel. Siegel held the property for five years before selling to Tony Hsieh in 2013. The latter arguably overpaid for the asset, considering that his first move was to get rid of the casino.

Siegel’s corporate eye also alit on a 150-room motel, the St. Tropez, which was strategically right across from the then-Hard Rock Hotel (now Virgin Las Vegas). Siegel reinvented it as the boutique hotel Rumor, which became a fashionable spot for Las Vegans until 2017, when it was bought by Hong Kong speculators, whereby it became Serene.

However, just up the street from Serene is a monument to Siegel’s biggest misstep, the site of the Atrium Hotel. Plans by its previous owners to renovate it and capitalize on Hard Rock’s proximity ran afoul of the Great Recession. Siegel grabbed it in 2011, thinking to rebrand it and reopen the six-story hotel in 2013. However, Siegel had too many other irons in the fire and couldn’t make up its mind what to do with the hulk. They tried selling it. No dice. Extended-stay motel? Nope. Apartments? Forget it. After holding the property for eight years, Steve Siegel decided to demolish Atrium and replace it with a brand-new Siegel Suites, only the company’s second ground-up project in 18 years.

There is a dark side to Siegel Suites. In the wake of the pandemic, the company was exposed as a predatory landlord, one that had exploited tenants hard-hit by the economic consequences of COVID. The House of Representatives Select Subcommittee on the Coronavirus Crisis deemed Siegel Group’s actions “uniquely egregious.” These included Senior Vice President Mike Tisdale telling underlings to confront tenants and threaten to take their cars, their pets, even their children. If that didn’t work, they were to “arrange night-and-day door knocking, to use scheduled maintenance checks to remove air-conditioning units [in hot weather], and to interfere with household electronics using universal remotes.” (The House report has been subsequently suppressed.)

During the pandemic, Siegel Group evicted 89 tenants who had rental-assistance applications pending, even one who had just paid the rent. That was just the tip of the iceberg. Siegel turned 773 people out into the street overall. 

Much of this was done by astutely exploiting a loophole in federal law that permitted hundreds of 'no-cause" evictions, according to the House panel, “to try to avoid allowing tenants from receiving CDC moratorium protection from eviction for nonpayment of rent.” As Rep. James Clyburn stated, “While the abusive eviction practices documented in this report would be condemnable under any circumstances, they are unconscionable during a once-in-a-century economic and public-health crisis.”

Still, we’ve hardly heard the last of Siegel Group. It’s sitting on a 10-acre Las Vegas Strip parcel that used to be the site of the La Concha Motel, land that Steve Siegel obtained for a bargain-basement $7.5 million an acre. He swung this deal by paying cash on the barrelhead, unlike his rivals, who couldn’t plunk down the whole asking price at once.

According to Las Vegas Review-Journal entertainment reporter John Katsilometes, “Siegel’s plans cover the gamut of a hotel-casino, multifamily apartments, a condo tower, and retail outlets.” Apartments on the Strip? Given Siegel’s (low) purchase price, the company wouldn’t have to spend billions to justify the real-estate outlay. Besides, high-end development isn’t in Siegel’s DNA. 

And if none of that works out, Siegel could always flip the land for a huge markup. It’s been done before. Motel baron Gary Tharaldson conned Caesars Entertainment CEO Gary Loveman into paying a then-record sum for the Westward Ho site simply by feigning that he was going to build a megaresort on the land. Could Steve Siegel be doing the same? Whatever his play, we’ve no doubt it will be ultimately profitable.