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The Sahara's Shifting Sands

By Chuckmonster on Tuesday, 1st March 2011 3:21pm
  » filed under Mergers & Acquisitions  comments: 11

   

When SBE Entertainment pulled out Stockbridge Real Estate Funds' checkbook and bought Sahara from the Bennett family for $350M exactly four years ago - March 2, 2007 - the world was a truly different place. Vegas visitation was on a tear and stuffed shirt impresarios armed with slick hair, shiny teeth, shiny cars, shiny renderings and a head shot had no problems finding dim witted bankers hoping to grab piece of the ground floor to ride to the statosphere of spectacular investments.

SBE CEO Sam Nazarian posited his vision that a piecemeal renovation of Sahara - installing their hyped to the hilt nightlife and dining brands from Los Angeles (don't believe it) coupled with reality TV marketing - could turn the then-55-year-old property into the center of the Las Vegas universe, commanding upwards of $250/night in their hotel.

Some of us laughed.

Ten weeks later Israeli investment firm El Ad Properties squirted $1.2B of liquidity into the headwinds of history when they purchased an eyesore on The Strip - The New Frontier - for $1.2 Billion, about half of what it cost to build Wynn Las Vegas.

The very same tainted water supply that brought us these two dreams brought us the visionary concepts behind - in order of completion status - Cosmopolitan, CityCenter, Fontainebleau, Echelon and CityCenter North.

Dream on, dream on, dream until your dream comes true." - Aerosmith

Despite some bumps, scrapes and missteps CityCenter and Cosmopolitan have managed to eke their way to completion, Fontainebleau fumbled right after crossing the 50 yard line, Echelon punted on 3rd down and Sahara... they've been running a bloody and bruising Sisyphean scrimmage every day for four straight years. It didn't help that the MGM/Kerzner 'CityCenter North' project planned for the patch of land directly across The Strip from Sahara was yanked off the drawing board almost as fast as it was put there. CityCenter North was the linchpin of SBE's perceived future valuation of Sahara, without it Sahara is just another hole in the desert.

Early enthusiasm by SBE resulted in some near term property clean up and hopefully competitive upgrades to room offerings as plans for a piecemeal renovation and re-introduction of The Sahara as "The SLS Las Vegas" was to be rolled out in a manner similar to the recent Tropicana rebirth. As the first waves of plans were filed with Clark County Planners, the economy took a nose dive and Sahara, like every other bottom tier property, was priced into oblivion. With rooms at Wynn and Bellagio available for under $100/night, the entire stack of resorts was compressed into a one dimensional bargain landscape causing many to unload inventory as a loss leader, eliminate inventory altogether or die. A week before Aria opened, Sahara quietly announced that two of their hotel towers would close while a third would slowly be renovated.

With fewer guests staying in the hotel, dining options would also be trimmed - the buffet and Caravan Cafe are closed and hours trimmed at House of Lords and Nascar Cafe. The casino adjacent Grind Cafe has been turned into an all purpose greasy spoon takeaway joint with local pizza delivery places taking up the rest of the slack. With less of a reason to stay, play or dine there... entertainment options were the next to go. The Casbar Lounge, a symbolic last vestige to the swingin' Sahara days of Louis Prima and Keely Smith, has devolved into a pathetic karaoke lounge. In the middle of February, the Sahara's two remaining shows - the tiger based magic of Rick Thomas and a titty show called Striptease, were unceremoniously put on "hiatus" for cost analysis retooling.

Limited hotel rooms. No shows. No nightlife. Limited dining.

So what exactly does the Sahara offer and how long can it continue bouncing along the rocky bottom and remain open?

Wish in one hand and crap in the other and see which hand gets filled first." - Grumpier Old Men

With today's announcement that SBE Entertainment was partnering with MGM Resorts International to build the Hyde Lounge night club at Bellagio, we can deduce that SBE's priority in Las Vegas is absolutely not the Sahara. Yeah, yeah, yeah, they coughed up some cash to clean the parking garage - a great start - but haven't invested one iota of an idea into upgrading content of the property.

Is Sahara on the verge of closing? The most obvious way to check - calling to book a reservation for fall 2011 - provides no evidence to support the argument as they were happy to take my order. The website also provides availability for July 1st and beyond if you click the "show next six months" button. The performers in Striptease have instantly scattered from Las Vegas, taking jobs at skin clubs from Norman, OK to United Kingdom and all points between and make no mention of returning or wanting to return to Striptease. Tiger-based magician Rick Thomas, currently out of the country performing in Barbados, touts "New Show To Be Announced Soon" on his website.

There is a truly fascinating anonymous posting on multiple Trippies winning community VegasMessageBoard.com which seems to out the news that Sahara is closing and makes quick and semi-convincing argument that it will happen. The most compelling part of the post is that it was made the very same week that Rick Thomas and Striptease were put on hiatus, adding critical mass to Valentines Day being the start date of Sahara's imminent dismantling. Moderators on VMB discredit that user as being a credible source because they created their account, created that thread and left to never return. In my experience, commenters who post and jump with such oddball, yet plausibly backed up theories are usually folks who have no interest in joining a community beyond blowing the whistle on a small piece of information they have.

Interviews related to the recent investment in SBE by Colony Capital (owners of the Las Vegas Hilton and parts of Station Casinos as well as a number of Atlantic City properties and global investments) reveal that Nazarian's interest with SBE is to grow his SLS and Redbury hotel brands in advance of a possible IPO of the company in 2014. Sinking approximately $250m into an aging distressed and isolated property with no content, no foot traffic and no draw in a challenging market over saturated with luxe accommodations works against that goal.

Right now, only The Naz knows if Sahara goes fishing or SBE cuts bait.



Tagged: sahara   sbe   nazarian   





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Comments & Discussion:

Looks like they are setting up for a bankruptcy filing. It is clear that nobody is going to come along with grandious rennovation plans. I'm not even sure the location would work to close everything but the casino (ala Binion's). They might just board it up and not even demolish it.

It looks like the Sahara may become the Strip's version of the Lady Luck.

Oy.
Just a small correction, Caravan Cafe is still open, it now calls its home where Paco's used to be. I doubt that this bit of info will cause anyone to make a reservation any time soon.
Yes, the place is a dump, and yes I have massively nostalgic feelings toward it, but the thought of another Vegas spot heading off to Yesterland, makes me a bit sad.

"Echelon punted on 3rd down"

more like they had the opening kickoff run back on them for a 99 yard touchdown.

Honestly, I hate the idea of another vegas classic joint being shuttered to be replaced by aimless dreams. However, there are just TOO MANY ROOMS in Vegas. With so many rooms and fewer visitors, each room has to be that more appealing along with the resort itself to attract those few customers. Right now, Sahara is attracting the "Man, the IP luvtub rooms sure look nice....maybe I can afford them when I retire" crowd. As Chuck said, its obvious the current owners have little to no interest in the property until it starts magically making a return-on-investment. The long, winding road for Sahara is about to hit a dead end with SBE. The only way I see Sahara around in say 2012 is if

A) The economy makes a record-breaking recovery, and the Nascar Cafe has enough rednecks to support a small town.
B)SBE sells off the hotel to someone with a lot of money to invest and patience to match.

If neither A or B occur, its my fear that we will see the Sahara powered down and boarded up. There's just no room for it in its current shape in this economy.

We walked through there in June from the Monorail to go to a wedding up north of the Strat, and the place was packed. Disgusting and dirty and smelling of piss and stale smoke, but packed nonetheless. Bar was full, slots and tables full.

This is just great for a city with as much unemployment as Vegas has. I feel for all these people who will lose their jobs with no hope of jobs in sight.

Can't be A) because The Stratosphere is Nascar headquarters

Without an upgrade then what would be the poirn of keeping the Sahara open? The Stratosphere recently upgraded their rooms so anyone with a brain would choose there instaed of a dated relic like the Sahara. Being located next to the carcasses of Fontanbleu and Echelon do not help them at all. If the owners sunk at least as much money into a revamp as the Trop did then the place has a chance but if not just blow the place up and get the death over with.

The rooms at the Sahara are o-k..clean and functional if you're looking for a cheap place to stay on a Saturday night back in December, but if you're not there to gamble, there really is nothing to do at the property itself..if you're looking for food after 11pm, its either $8 wrapped sandwhiches at the only remaining food outlet, or calling up the pizza places in the area--and you'll find a stack of those choices under your door when you arrive..

In a way, its rather sad..there isn't much left of "Classic Vegas", with the demise of the Stardust, and the Sahara and the Riv are pretty much what's left..and I'd rather stay at the Sahara then the Riv any day..so what does that tell you?

I was in the Sahara on a weekday afternoon a couple of years ago to get my shot glass, beer and hot dog..all for $1 each (the shot glass has a proud place on my "Vegas Table" in my bedroom), and I could stand at that portion of the property and do a quick headcount..but at night the place is jumping..

If the place does close..I want one of the table lamps that was pictured in the room review several weeks ago..those things are sweet..

"Ten weeks later Israeli investment firm El Ad Properties squirted $1.2B of liquidity into the headwinds of history..."

Nice turn of the phrase. Very nice. Some day you should rank the Top 10 biggest Vegas blunders of the last 10 years, with commentary. It would be an interesting debate for sure.

I hope it doesn't happen (closing). At worst why in the world wouldn't they at least sell it for a loss? Heck, it's still probably in better shape then the New Frontier was when Ruffin sold it, and if Icahn can turn the Strat around, the Sahara should be childs play.



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