SLS lost $35m in first quarter

The SLS Las Vegas lost $35.3 million in the first quarter, according to a securities filing, and the Strip resort’s private equity owners contributed a total of $5.3 million in April for the property’s general operations purposes.

SLS Las Vegas opened last August as a $415 million renovation of the former Rat Pack-era Sahara, which closed in 2011.

In a quarterly filing with the Securities and Exchange Commission, Stockbridge/SBE Investment Co., owners of the 1,600-room resort, collected $37.3 million in net revenue during the three months that ended March 31.

In the filing, the ownership described the SLS as having “a working capital deficit” and “incurred net losses and negative operating cash flows” in the quarter.

San Francisco-based Stockbridge Capital Partners, which owns 90 percent of the SLS, said it would contribute as much as $40 million through the end of the year “to enable the company to pay its obligations as they become due.”

“Stockbridge remains committed to the project, believes in our business plan, and is excited about the future,” SLS President Scott Kreeger said Tuesday. “We are seeing areas of improvement.”

According to the SEC filing, Stockbridge made a “capital contribution” to the resort of $1.8 million on April 20 and a $3.5 million contribution on April 30. The funds were “to be used for operations of the property.”

The SLS Las Vegas has publicly traded debt, which requires quarterly SEC filings.

In May, Stockbridge reached an agreement with Mesa West Capital for a $185 million loan. The new debt paid off $172.5 million of existing property debt. According to SEC filings, Mesa West is charging Stockbridge a rate of 8.5 percent, far below the original rate of 13 percent.

“We’re in a very favorable financial position,” Kreeger said. “We have some of the lowest debt terms on the Strip.”

Standard & Poor’s Ratings Service said in April that SLS Las Vegas had “significantly weaker-than-expected operating performance.”

Of SLS Las Vegas’ first-quarter net revenue, $9.1 million came from the casino. Hotel revenue accounted for $13.6 million and food and beverage operations brought in more than $15.7 million.

The property had negative cash flow of $15.4 million in the quarter.

As a comparison, The Cosmopolitan of Las Vegas lost $5.39 million in the same quarter, down from a net loss of $12.7 million a year earlier. Net revenue, however, increased to $189.9 million, which included $58.4 million in casino revenue. The Cosmopolitan’s cash flow was $29.5 million.

Kreeger, a former Station Casinos executive, joined SLS Las Vegas in October. He said the property has been making adjustments and creating new ways to increase foot traffic through the north Strip resort, such as a summer concert series at the pool and different uses for the nightlife venues.

The Rock in Rio music festival in early May provided SLS Las Vegas “with a phenomenal amount of free advertising,” Kreeger said, and also brought “tens of thousands of people” through the resort. The festival grounds are across the Strip from SLS’s front entrance.

Stockbridge Executive Director Terry Fancher is the SLS Las Vegas’ CEO. Kreeger was brought in to help shore up the gaming business.

“We’ve been adjusting the business model and doing things to make the property hit on all cylinders,” he said.

Los Angeles-based nightclub operator SBE Entertainment owns the other 10 percent of the SLS.

The company’s CEO, Sam Nazarian — who was considered the visionary for the property’s development — stepped away from all day-to-day operations of the resort in December after he was questioned by the Gaming Control Board over allegations of drug use and his dealings with an extortion suspect.

The Nevada Gaming Commission gave Nazarian a one-year limited gaming license with a slew of conditions, one of which precludes involvement in casino oversight at SLS Las Vegas.

http://www.reviewjournal.com/business/casinos-gaming/sls-lost-35m-first-quarter

Mentions

• UNITED STATES SECURITIES AND EXCHANGE COMMISSION
• AMERICAN DREAM FUND - Las Vegas Regional Center
• Joseph McCarthy
• George W Ekins

Litigation Cases

• Chinese investors vs AMERICAN DREAM FUND - Las Vegas Regional Center & Henry Global Consulting Group & Stockbridge Investment Company, LLC & Evans, Carroll & Associates, Inc.

States

• Nevada