A few details need to be worked out before Southern California’s San Manuel Band of Mission Indians takes ownership of the Palms Casino Resort in Las Vegas.
Such as who gets the shark?
The off-Strip Palms is loaded with high-priced artwork, some of which was acquired by Red Rock Resorts executives Frank Fertitta III and Lorenzo Fertitta. The company sold the Palms to the tribe last week for $650 million. San Manuel has to be approved for licensing by Nevada gaming regulators, a process that could take until the end of the year.
A 13-foot-long tiger shark – sectioned into three pieces – towers above The Palms Unknown Bar/Photo via Red Rock Resorts
That gives everyone enough time to determine the outcome of the 13-foot-long tiger shark – sliced into three parts, suspended in formaldehyde, and enclosed in a steel and bullet-proof glass tank. The art piece, created by Damian Hirst, towers above the Palm’s Unknown Bar.
Another Hirst piece, the 23-foot-tall, “Warrior and Bear,” sat at the entrance to the Kaos Nightclub.
The future of one high-priced creation from Hirst has already been determined. “Demon With Bowl,” a 60-foot-tall bronze sculpture that was the outdoor centerpiece for Kaos’s day club poolside operation, was removed last summer. The helicopter from KSNV-TV in Las Vegas flew over the Palms in July and photographed the empty space where the $14 million statue had stood.
The artwork was displayed in both the public spaces and private areas of the resort. Some of the collection is owned by the Fertittas. Other pieces belong to the property or are owned jointly by both parties.
The Palms has been closed since last March, initially for a state-ordered 78 days along with the resort of the casino industry due to the pandemic. But Red Rock kept the 703-room hotel and casino shuttered along with three other company properties in Las Vegas. Red Rock focused efforts on reopening six of its more profitable locations and the chain of small Wildfire casinos. The Palms is expected to remain closed during the tribe’s licensing process.
A spokeswoman for San Manuel said she didn’t have any specific details on what assets from the Palms, such as artwork, would be retained by the tribe through the purchase agreement. A Red Rock Resorts spokesman said that outside of Tuesday’s official announcement, the company had no additional comments on the transaction.
The investment community had plenty to say. Many analysts wrote off the value of the Palms – including the artwork – from Red Rock Resorts’ financial picture.
The company spent more than $1 billion on the Palms, acquiring the property in 2016 for $321.5 million and another $690 million on a redevelopment effort that became a financial drain. Much of the cost overruns were due to exorbitant spending on Kaos, a flashy 73,000-square-foot indoor-outdoor venue. The club closed seven months after opening in 2019 and Red Rock paid $34 million in one-time charges, which included buyouts of contracts covering high-priced celebrity performers and DJs.
“Our sense is that investors have given zero net asset value credit related to the Palms,” said J.P. Morgan gaming analyst Joe Greff.
Stifel gaming analyst Steven Wieczynski said he was never sold on Red Rock’s concept of the Palms becoming a “hybrid” Strip resort/locals casino.
The 60-foot-tall Demon With Bowl before it was removed from the Palms’ Kaos Nightclub outdoor space/Photo via Red Rock Resorts
“We are probably willing to give them a pass on the Palms investment,” Wieczynski said. “They tried operating an asset out of their comfort zone, realized they were probably in over their skis and instead of holding on to it and flushing more capital away, decided to part ways. We applaud that.”
Truist Securities gaming analyst Barry Jonas noted the deal between Red Rock and San Manuel has an “interest purchase agreement” that calls for a roughly $28.5 million increase in the sales price if the transaction doesn’t close in 18 months.
There is also a labor matter hovering over the Palms. The powerful Culinary Workers Local 226 and Bartenders Local 165 are the recognized representatives of the Palms’ non-gaming workforce. The unions were negotiating with Red Rock’s Station Casinos operating subsidiary on a contract before the pandemic.
“The Culinary Union looks forward to completing a first union contract, whether it’s before the sale of the property is completed and the new owners are licensed, or after,” said Secretary-Treasurer Geoconda Argüello-Kline.
San Manuel is expanding its San Manuel Casino in the San Bernardino County community of Highland into a full-scale resort that includes a 432-room hotel tower, a 3,000-seat events center, new restaurants, and other non-gaming attractions.
Some of the restaurants and amenities that the tribe is bringing to its flagship property might find their way to Las Vegas.
After all, a 60-foot statue of a naked demon holding an empty bowl needs to be replaced.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
