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Sam Sells SBE's SLS Stake

By Chuckmonster on Tuesday, 6th October 2015 1:41pm
  » filed under Mergers & Acquisitions  comments: 10


When SBE Entertainment honcho Sam Nazarian announced his company was buying the Sahara, touting plans to transform the aging landmark hotel into a destination that would generate upwards of $250/night room rates, The Vegas Gang scratched their heads in wonder. There may even have been laughter. Disdain, even. Certainly disbelief.

Two years later, after allowing the property to devolve from aging beauty into a dirty ass grind joint, VegasTripping broke the news that SBE was unable to continue operating the hotel and would imminently close it.

Sam promised "Be Back Soon!"

We asked questions. We questioned their answers. We spoke truth to power and scratched our heads wondering how delusional SBE was thinking that this big bet on turning Sahara To SLS could possibly work?

Eventually - to the credit of Nazarian and renovation project CEO Rob Oseland - SLS Las Vegas was financed, renovated and actually opened! I stayed there, loved the creativity of the Story Tower rooms and some of the dining.

A little over four years ago, the one and only Sam Nazarian logged in to his VT account and posted this comment:

Sam and I have yet to grab that coffee. And now, I doubt we ever will.

This morning, the Wall Street Journal reported that SBE Entertainment has sold its 10% holding in SLS Las Vegas to 90% owner Stockbridge. SBE's hotel management contract is over but the SLS name will remain with the hotel for the time being as part of an ongoing licensing agreement.

Stockbridge CEO Terry Fancher - who promised to continue funding the money losing hotel through the end of 2015 (whatever that means) - says the deal is a plus for both sides. Fancher says the deal "will give the SLS Las Vegas flexibility to introduce new brands or restaurants."

This implies that the current crop of restaurants are probably on the way out. One has to wonder, with SBE gone, will Jose Andres remain. Chef Andres is the culinary creative director for SBE's global hotel footprints.

The sale of SBE's percentage in SLS Las Vegas follows a pattern of asset divestiture. Along with SLS Las Vegas, SBE has sold their Beverly Hills hotel, their Katsuya and Cleo restaurant chains, the Abbey in West Hollywood along with the closure of a number of Hollywood bars and nightclub venues. Nazarian claims that these sales are part of a new "asset light" strategy that relies on brand licensing and management fees to generate income.

Rumors are have also been floating around (I suspect a suggestive leak) that SBE is angling to merge with Morgans Hotel Group, with Nazarian taking over the CEO job. Would Morgans shareholders approve a CEO acquihire/merger involving a troubled company with a leader possessing a past so recently checkered with gangster rap shakedowns and blow fueled bro-downs?

The real question here is what is going to happen with SLS Las Vegas over the near term. Stockbridge has access to a lot of capital, but looking at recent filings for the SLS JV proves that CEO Fancher is one smart cookie. They've proactively paid most, if not all of their primary renovation bank debt using excess proceeds from the EB-5 program and other revolving financing instruments. This made the runway a little bit longer and probably made the SBE buy out an easier decision.

At this juncture, what is the point in SBE's involvement anyways? SLS brand means nothing, nor to any of the restaurant names other than Jose Andres and maybe Umami Burger. The SLS name license only possesses value in the inverse - it is cheaper for Stockbridge to pay the licensing fee than to have to spend a grip of money creating and launching a new brand. I suspect that Stockbridge has a whole docket of meetings planned with the Hiltons and the Marriotts of the world to get them a new name and a rock solid marketing database.

The long and the short of it is, SBE took Stockbridge's money and made a big, hyper confident, long shot bet on the power of their brands in Las Vegas. As we predicted, that bet lost. And now, Sam Nazarian and SBE Entertainment, like billions of people before him, takes that long, sad, lonely, dejected drive through the desert back to Los Angeles, beaten.

Sam, since you're reading this, here's a pro tip: the best way to get over a bad Vegas trip is to start planning the next one.


Comments & Discussion:

SLS is tied in with Hilton Hhonors with the curio collection. Perhaps hilton is a good partner

so, who owns the Sahara name? Super Lucky Sahara !!

With SBE selling off assets, this deal falls in line with that move (especially after they lost a major new investor earlier this year as the result of Sam retaking the reigns at SBE).

I think that we could see the property rebrand within the next 12-18 months (if not earlier). The listed owners of the Sahara name are Stockbridge/SBE Holdings, but Stockbridge has been the majority owner of the property so they have control over the Sahara name. They've been keeping the trademarks live, although likely to prevent someone from poaching the name.

Never could figure out why they didn't do something with the Sahara name. Not that it wa the greatest asset ever, but it was at least known.

Sahara. Flamingo. Tropicana. They're not just Vegas street names, but iconic Sin City properties. Then again, it's hard to turn SLS back into a desert palace, especially with the weird blob thing greeting everyone on their way in.

Wonder if they'll keep all the monkeys after the rebrand.

In other news, what does this mean for the SLS hotel being built in the Bahamas?

Roo far down the Strip; too quirky for it's own good

I always thought the location of that property and the target marketing was a mistake. Personally I always thought leveraging the monorail access and convention center group sales would be a way to boost revenue, along with targeting the value conscious vegas traveler.

I doubt whatever they attempt on the gaming side of the house would be enough to pull away the palm locals or attract players from the CET / MGM duopoly. I have been to the property and I would pass on any free room / comp offers since there is nothing in their remodel that appeals to me.

Problem is nobody rides the monorail.

And at night no one is willing to walk down that far. The monorail is just there. I think the only hope for the place is Resorts World and Lucky Dragon or a sudden interest in finishing Fontanbleu. If they can hold uot for a year then the place has an outside chance.

I just saw the SLS on an episode of America's Next Top Model, so traffic is bound to pick up

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