Yesterday I posted a pretty lengthy entry about how casinos are the “next big thing” in real estate investment, and in that post I made some pretty bold predictions about how I thought that Starwood Capital would probably get involved in investing in casino developments…

Well – today I came across a number of news articles (some of which date back to August 13th) stating how Riviera Holdings (Owner of Riviera Hotel in Las Vegas, and the Black Hawk Casino in Denver, CO) is 11% owned by a consortium named Riv Acquisition Holdings (RAH) of which Barry Sternlicht is a part of (surprisingly though, it seems as though it is a personal investment of his, and not one which is made by Starwood Capital). The news articles said that RAH is now able to purchase an additional 9% of Riviera Holding’s stock, with an option for a complete acquisition in the near future after that.

If RAH is able to successfully take over Riviera Holdings – I think we will see another major development on the Las Vegas Strip in the next five years – the Riviera Casino is over 50 years old, and while it does hold up its end of the bargain as an inexpensive strip casino, it is showing its age, and now that almost every other older casino on the strip is being torn down (Stardust, Sahara) and being replaced by multi-billion dollar developments – its only natural that the Riviera property would follow.

It’s worth noting that Barry Sternlicht previously had a Nevada Casino License when he was part of Starwood Hotels, and Starwood Hotels owned the Desert Inn, and Caesars World for a number of years after purchasing ITT-Sheraton.

The question I have is why is this investment seem to be a personal investment by Mr Sternlicht instead of an investment by Starwood Capital. The only possible answer that I can come up with is getting through the licensing process with the Nevada Gaming Commission. Perhaps it would be much more difficult for Starwood Capital to get the license, rather than just Barry Sternlicht, so the ownership of the casino property would be on Barry Sternlicht’s shoulders, and when the property is redeveloped, perhaps only Starwood Capital’s hotel brands will be allowed to open on the property (Baccarat, Le Crillon, 1 Hotel). I’m not going to speculate anymore beyond that because it would really be useless, but it’s always interesting to see what Barry Sternlicht is doing next.

We’ll have to see how this progresses.

andrew@alconic-inc.com