To Focus Strategically, Harrah's May Sell Rio in Vegas
Unnamed sources say that Harrah's Entertainment is looking to unload the ill-fated Rio All-Suite Hotel & Casino, a resort off the Las Vegas Strip, and instead focus their attentions on the Planet Hollywood resort that it bought last November. Harrah's, which is still about $19 billion in debt, took over Planet Hollywood when it was in default for $870 million. Harrah's bought $140 million of its debt and intended to manage and own the property, which was prized for its proximity to other Harrah's casinos and its location on the Strip.
Harrah's CEO Gary Loveman also expressed Harrah's desire to open a casino in Macao, but given the company's precarious financial position, that may not be possible. However, if selling off a less desirable property would mean less debt and freeing up some necessary cash, why not do it? With that in mind, perhaps the Rio looks a little redundant to the Las Vegas casino operator? In fact, as reported in the Las Vegas Review-Journal:
Harrah's Chairman and Chief Executive Officer Gary Loveman, however, told the Review-Journal in June that the company would entertain any buyer who wants to purchase an "asset we don't consider essential to our strategy."The Rio, whose main claim to fame is that it hosts the World Series of Poker, also has a little bit of infamy. In July of last year, the Rio's topless Sapphire Pool was shut down after a series of arrests for drugs and prostitution. The Sapphire Pool, which featured strippers from a local strip club sunbathing topless, also soon disappeared. Ah, Vegas.
With the pool and a cultivated wild nightlife, the Rio was an attempt to gain an audience similar to the Palms Casino Resort, although it never seemed to equal the Palms' marketing juggernaut which created its own reality show and became a backdrop for other unscripted shows.
As for price, the report continued:
Although Harrah's doesn't publish an individual property's revenue and cash flow numbers, one analyst said he believes a $500 million bid would be a low valuation for the property, valuing it at between 5.5 times to six times cash flow.Colony Capital and Starwood Capital are said to be mulling bids for property, but both companies as well as Harrah's, declined to comment on the rumored bids. However, many are saying that investors are now shopping for casino bargains and the Rio make have any number of potential suitors - that's if it's actually for sale."It is difficult to say what the Rio will sell for since the company has not broken out individual property results in years," Barbara Cappaert, a bond analyst with KDP Investment Advisorssaid Friday in a note to investors. "But extrapolating the numbers (the Rio's room and gaming floor count compared to other properties) we would guess the Rio is generating between $80 million to $92 million in cash flow."
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