Imperial Palace falls to Harrahs; Biloxi property spurned
Confirming rumors that swirled up and down the Strip last week, Harrahs Entertainment announced Monday that it had acquired the Imperial Palace Las Vegas, in a deal valued at $370 million. The Imperial Palace in Biloxi, Mississippi was not included in the transaction and remains in the hands of the Ralph & Betty Engelstad Trust.
The purchase gives Harrahs an additional 2,640 hotel rooms along the Strip, plus 1,600 slots, 56 table games and a drive-up race-and-sports book. Most importantly, perhaps, Harrahs obtains 18.5 acres of central-Strip real estate. "That was the attraction," said Harrahs spokesman David Strow. "It was a tremendously strategic location."
"So thats strategic for them in that they now control that whole area," said Los Angeles-based analyst Saul F. Leonard, referring to the Flamingo and Harrahs Las Vegas hotel-casinos that flank the Imperial Palace.
"Harrahs is putting together some very, very strategic real estate," confirmed Eugene Christiansen, president of New Yorks Christiansen Capital Advisers. "You look at that, you look at Caesars Palace and the implication is that Harrahs is: a) Making a no-brainer investment; b) Is making provision for a major expansion in its Strip presence. I look at the map; I couldnt read it any other way. Thats something the company needs Š a greater presence on the Strip."
However, given the amount of capital recently plowed into Caesars Palace (including the brand-new Augustus Tower) and the Forum Shops, Christiansen doesnt think that if Harrahs is going to make a major statement on the Strip that theyre going to do it on the west side. He added, "There was a defensive element here, in that would not have been in Harrahs interest for anyone else to get control of the dirt that Imperial Palace sits on. I have no private indication from the company that this is true, but thats the way I read it."
Because of the narrowness of the parcel on which the Imperial Palace resides, Leonard believes its likelier that Harrahs will expand its eponymous Strip property and/or the Flamingo rather than try to build a stand-alone facility in place of the Imperial Palace.
"Theyve also put, in the last 10 years, 400-odd million into their own Strip property," Christiansen noted of recent improvements to Harrahs Las Vegas. "So itll take a while to amortize those investments, if thats what the company wants to do. On the other hand, when Steve (Wynn) bought the Desert Inn, in the few years preceding it had a $375 million makeover, and Steve just decided to dynamite it and start over."
The Imperial Palace is undergoing its own, $130 million makeover, which came as news to Strow, who added, "I think that will not be proceeding." Imperial Palace spokesman Jeremy Handel said, however, "My understanding is its going to be business as usual (until the deal closes)."
After that, both the Las Vegas and Biloxi Imperial Palaces will operate under the IP brand in the near term.
"We will not be pursuing that brand in the long term," Strow remarked. Although Harrahs has acquired rights to the brand, it is unclear whether the Biloxi casino-hotel will continue to use the name or not.
2005-08-12
