Battle Ignites Over Proposed Riviera Sale

Back in April Riv Acquisition struck a deal to buy the beleaguered propriety, as well as its Riviera Black Hawk Casino sister property in Colorado for a deal worth $426.5 million. The purchase priced is based on a sale price of $17 per share totaling $211.5 million as well as the assumption of another $215 million in debt.

For the deal to go through 60% of shareholders must give the thumbs up, but investment firm D.E. Shaw & Co. LLC says they will vote nay on this proposed deal. Their voting block under the name D. E. Shaw Laminar Portfolios, L.L.C. and certain of its affiliates control about 1.22 million voting shares, which is about 9.8% of outstanding shares.

The Laminar group is opposed to the deal because they feel the sale price of $17 per share is below market value, especially since Riv Acquisitions had been willing to pay as much as $23 per share for the properties.

According to a letter sent by Marc Sole, Senior Vice President of D. E. Shaw & Co., L.P., as Investment Adviser of Laminar to Riviera Holdings Corporation and obtained by www.onlinecasinocrawler.com, the sale price translates to about $10-11 million per acre, which is considerably lower than other Strip land transactions. Archon Corporation, which has a 27-acre parcel on the Strip a few hundred feet north of Riviera Las Vegas values their land at approximately $16.6 million per acre.

“We are fully cognizant of the fact that the value of real estate (particularly real estate whose value has appreciated as quickly as that on the Las Vegas Strip) which has risen can go down as well. As you well know, however, the Riviera\'s neighborhood on the Strip is changing rapidly. Looking ahead to the end of the decade, 2901 Las Vegas Boulevard South is likely to be adjacent to, or just down the street from, the newly constructed Echelon Place, Montreux Resort and the Fontainebleau Hotel as well as whatever arises from the ashes of the former Wet \'N Wild property. It would not be a stretch to say Riviera Las Vegas will be sitting on land which sits at the epicenter of the next wave of development on the Strip,” Sole wrote in the letter.

Sole posits that while the company may have to sit on the sidelines to await the opening of these projects to see the full value of the land on which the Riviera sits, the company could refinance its debts to lower interest payments by millions per year.


Additionally, he notes the Stardust and the Frontier are about to close to make way for more glittering upscale resorts. The closures will significantly shrink the supply of rooms on the Las Vegas Strip in the Riviera\'s market segment, which could help Riviera increase its revenue per available room (RevPAR). Sole wrote that if the property is able to raise its average daily rate to $80 next year from last year’s $71.84, the property will be able to generate an additional $5 to 6 million in revenue.

Occupancy is running more than 90% at the property, which puts it into a strong position to raise rates.

If the properties are sold to Riv Acquisition Holdings, its President Scott Butera said the company will not implode the Riviera and replace it with a sparkling new mega-resort. Instead they will refurbish the 55 year old property and play up its retro appeal.

"The game plan is clearly to ... commit the human capital and financial capital so that the property can be repositioned and over time become competitive with the rest of the assets on the Las Vegas Strip," Butera said. "We think there\'s some real nostalgic value to the Riviera brand."

The Riviera’s 23 story tower was the first high-rise on the Las Vegas Strip.


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