The Palms Resort & Casino has wowed Las Vegas since it opened for business in 2001. It has all the glitz and glamor a Vegas hot spot could want: heart-thumping nightclubs, even a Playboy Club. However, it takes money—lots of money—to sustain a resort of the Palms magnitude, and now it's all come to a head.
It's been reported that the Maloofs are restructuring $400 million in debt by turning over majority ownership of the hotel to investment firms TPG Capital and Leonard Green and Partners. In exchange for taking on the debt, it's reported that each firm will own 49 percent of the Palms, leaving the Maloofs with a paltry 2 percent (word is that 2 percent can be taken up to 20 percent depending on the future profitability of the resort).
So how is George Maloof, the person responsible for running the Palms up until now, taking it? Not as bad as you might think according to an interview he conducted with Vegas Inc. He told Vegas Inc. that the restructuring move was a positive step. "We're in a strong partnership, and there’s no debt on the property, so it’s good for the hotel and the family. We still have ownership, and as time progresses, we’ll have more. The deal frees us up to do a few ideas, four or five things, that we haven’t done while we were working on this."
TPG, one of the new owners, is also a major investor in Caesars Entertainment, which created some speculation that Caesars would ultimately take over ownership of the Palms, a theory that Maloof quickly dismisses. "It's not at all true. It's never been true," he bluntly told Vegas Inc.
No doubt the economy has played a role in the Palms forced restructuring. "I think everybody felt that," Maloof said to Vegas Inc. "The whole city got that same feeling, that there would be some bad times coming. I can't remember anything specific in the context of just the Palms, but of the city as a whole. Probably three and a half years ago, we were starting to feel it. The rise in unemployment, the housing crisis, the halting of construction—those were all signs that we were in for tough times."
According to Maloof, he still maintains authority to run the Palms. Perhaps in a move that highlights this, just this past Monday, Maloof hired a new president of the Palms, Joseph Magliarditi, the former president and chief executive officer of the Hard Rock Hotel & Casino in Las Vegas.
Back in Time
In 2008, sister publication Luxury Travel Advisor interviewed Maloof during headier times for the resort. Maloof grew up in Albuquerque, NM, with his three brothers (Joe and Gavin own the Sacramento Kings, a franchise that is also facing economic trouble) and sister. His father, George, Sr., was one of the largest distributors of Coors beer in the Southwest. He got his start in resorts back in 1994 when he opened The Fiesta Casino Hotel in North Las Vegas.
|The Real World Suite at the Palms|
Of the Palms, he told Luxury Travel Advisor, "We wanted to create something that was unique to Las Vegas. We wanted it to have its own identity by creating a separate space that was its own haven, away from the other things that Vegas has to offer."
To understand The Palms is to first appreciate its location. Like so many other noted Las Vegas hotels, its place is not on The Strip, which was a
strategic decision from the get-go, Maloof said. "Initially, when I had The Fiesta I wanted to create a brand and do multiple Fiestas," he said. "To do that, you can’t be on The Strip; it’s not a brand you put there from an economic standpoint. So, I was looking around town right after I opened the Fiesta for another opportunity. I knew this land existed, but someone already had it under contract, but I had heard they weren’t going to be able to close, so I put a backup contract in, and then I bought three different parcels and put them all together."
At the time Luxury Travel Advisor spoke to Maloof, he was focused on expanding the Palms brand. "I want to take it outside of Las Vegas, absolutely," he said. That may be on hold, for now. But, then again, it's tough to hold down a Maloof.