Nazarian to Sell Stake in SLS Las Vegas Hotel

Sam Nazarian, founder and CEO of the SBE Entertainment Group, said of the deal: “The resort remains a valued member of the expanding collection of SBE branded and managed luxury hotels across the country and the globe.” 

Hotelier’s company also giving up management of the money-losing property

Hotelier Sam Nazarian has agreed to sell his minority stake in the SLS Las Vegas hotel and for his company to give up management of the money-losing property on the Las Vegas Strip.

Stockbridge Capital Partners, the San Francisco-based real-estate investor that owns 90% of the hotel, has agreed to buy the remaining 10% owned by Mr. Nazarian and his family, according to people familiar with the matter.

As part of the agreement, the hotel’s 2,354 employees will continue to work at the property, but will now report to Stockbridge instead of SBE Entertainment Group, the company founded by Mr. Nazarian.

That means SBE no longer will collect management fees from the hotel, though it will continue to receive licensing fees for the brand. The 1,620-room hotel will remain an SLS hotel through a franchise agreement with SBE.

“Converting SBE’s current management agreement into a license agreement benefits all parties involved—our valued guests and employees, SBE and Stockbridge,” said Terry Fancher, Stockbridge’s executive managing director, in a statement to The Wall Street Journal. He added that it “will give the SLS Las Vegas flexibility to introduce new brands or restaurants.”

Mr. Nazarian, SBE’s chief executive officer, said in a statement: “The resort remains a valued member of the expanding collection of SBE branded and managed luxury hotels across the country and the globe.”

Since opening in August 2014, the SLS Las Vegas has struggled with its isolated location on the Las Vegas Strip and with limited casino business. The owners reported a net loss of nearly $84 million during the first six months of 2015, according to a regulatory filing.

The changes come as Mr. Nazarian remains in discussions with New York-based Morgans Hotel Group Co. to combine the two companies, according to people familiar with the matter.

A tie-up would create a company with hotel management contracts in major cities such as Los Angeles, New York and Miami and would include hotel brands like SLS, Delano and Mondrian. SBE also has restaurant brands and nightclub brands, like Hyde.

A deal with Morgans, which has shares trading on the Nasdaq Stock Market, would also provide a way for SBE to become a publicly traded company. Mr. Nazarian is expected to become CEO of the merged company if a deal is completed, these people said.

The hotelier looked to make big waves in Las Vegas when he and Stockbridge embarked on a $415 million renovation of the Sahara, a former hangout of movie stars that the partners modernized with money that came in part from an immigrant investment program known as EB-5.

In recent years, Mr. Nazarian has turned much of his attention to Las Vegas, where the hotel opened with more rooms than all his other hotels combined. He moved to Las Vegas in 2013 to a mansion in the hills outside the city that overlooked his new hotel.

SLS Las Vegas downsized many of the more than 3,000 workers on staff not long after the hotel and casino began operating last year. Las Vegas casino veteran Scott Kreeger was brought in as the new president of the property, succeeding the outgoing president just two months after its grand opening.

Mr. Nazarian agreed late last year to no longer be personally involved with the SLS Las Vegas after Nevada gambling regulators granted him a limited and temporary casino license. During his testimony before regulators, he spoke of previous drug use.

A few months ago, Mr. Nazarian sold his Las Vegas home and made Los Angeles his base again. He retains a condo in town and SBE has two nightclubs in Las Vegas.

http://www.wsj.com/articles/nazarian-to-sell-stake-in-sls-las-vegas-hotel-1444146891

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