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The Newsroom - 2003 |
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Park
Place confirms deal for sale of Las Vegas Hilton
December 25, 2003
- Park Place Entertainment Wednesday confirmed reaching a definitive agreement
to sell the Las Vegas Hilton for $280 million to Colony Capital, a Los
Angeles-based international private investment firm.
Park Place President Wally Barr said in a statement released Wednesday that his
company's strategy is to focus on core assets, which in Las Vegas are Caesers
Palace, Bally's, Paris and the Flamingo.
"Divesting the Las Vegas Hilton allows us to concentrate on and reinvest in
those assets while continuing to reduce our overall level of indebtedness," Barr
said.
Park Place said it will use the proceeds to reduce debt. It also claimed that
had it sold the Hilton a year earlier, earnings per share would have been
approximately 10 percent higher in 2003.
"The sale of the Las Vegas Hilton will have a meaningful impact on our financial
position and should add to our earnings going forward," said Park Place Chief
Financial Officer Harry Hagerty.
Cash flow, or earnings before interest, taxes, depreciation and amortization,
was $12 million over the 12 months ending Sept. 30, 2003. Without the Las Vegas
Hilton, those earnings would have amounted to 39 cents a share rather than 36
cents a share, he said.
Depending on the final use of the proceeds, however, the sale could add even
more to the Park Place bottom line, Hagerty said.
Colony Chairman Thomas Barrack said the Las Vegas Hilton and "the prime real
estate on which it sits are truly irreplaceable assets," and that his company
intends to enhance and reposition the property.
Colony intends to continue the operation of the property as a hotel-casino, and
may construct additional facilities on land that is currently unused, he said.
Analysts generally applauded the agreement as a coup for Park Place and the Las
Vegas Hilton, adding they expect Colony to add another tower at the site and
consider converting a portion of the property to time share.
They said the sale at a multiple of 23-times cash flow is far above the industry
transaction average of 7.5-times or 8-times cash flow. |
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"In addition to cutting overall debt, they won't have the drain for continual
improvements to maintain the building. Plus, on the management side, they'll be
able to concentrate on their performing core properties," said Brian Gordon,
spokesman for Applied Analysis, a Las Vegas-based financial consulting company.
University of Nevada, Las Vegas professor and casino industry expert Bill
Thompson said the transaction "is a big deal for Las Vegas. The Hilton is a core
property because of its massive size (with 3,174 rooms) and its proximity to the
Las Vegas Convention Center, and it's important that someone tries to elevate to
where it was before."
He added that it is important that the Las Vegas Hilton was sold to a company
with deep pockets "because the place needs investment and I hope they're not
just holding it to sell it."
Deutsche Bank Marc Falcone said this was a strength of Colony and its intent for
the property.
"It's a great deal for Park Place, but there's a lot of unused land included in
the price and that's the opportunity Colony sees in addition to improve the
operations of the Las Vegas Hilton," he said.
"(Colony) did a great job with Harvey's (Resorts which they owned from 1998 to
2001) and the Atlantic City Property (Resorts Atlantic City)," Falcone said.
Shares of Park Place Entertainment were down 9 cents or 0.83 percent Wednesday
to close at $10.77.
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Article Copyright ©: R. Smith, Las Vegas Review-Journal |
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