CLOSED CASINO: Castaways likely finished
Experts agree: Beleaguered Fremont Street property unlikely
to reopen
By JEFF SIMPSON
GAMING WIRE
Tuesday, February 03, 2004
Las Vegas Review-Journal
The Castaways is unlikely to reopen, Las Vegas casino industry
executives predicted on Monday after the 49-year-old hotel-casino
was sold to Vestin Mortgage, the property's biggest creditor.
Vestin was the lone bidder in Monday morning's foreclosure
auction held in the lobby of Vestin's El Camino Avenue offices,
winning the property with a bid of $20.7 million.
The Castaways closed Thursday afternoon after Vestin exercised
its right to foreclose on the property and collect its cash
as collateral for its $22 million-plus mortgage note.
The closure put an estimated 800 people out of work.
Vestin plans to sell the Castaways quickly, company spokesman
Steve Stern said after the auction.
"Vestin owns the property and they're going to sell it
as soon as possible," Stern said, declining to be more
specific about Vestin's timetable.
He also declined to speculate on the future of the property
and whether it has seen its last days as a hotel-casino site.
Casino industry insiders doubted the property's future as
a casino, and said the big three locals operators, Station
Casinos, Coast Casinos and Boyd Gaming, almost certainly would
pass on an opportunity to buy and operate the Fremont Street
hotel-casino.
"It's hard to imagine that someone would want to operate
at that location," said one knowledgeable executive who
spoke on condition of anonymity. "It's in a dreadful location."
Another top casino executive who declined to be named said
the Castaways' contract with the Culinary union includes successorship
clauses that would force a new owner to hire the property's
union maids, cooks and porters.
"The unions are one of the big reasons the property's
closed," said the executive, who noted that the Castaways'
nearest competitors in the Boulder Strip market don't have
union contracts. "Boulder Station, Sam's Town and Arizona
Charlie's don't have Culinary contracts, and cleaned the Castaways'
clock."
That executive suggested that Station or Boyd may want to
buy the property and its grandfathered casino gaming entitlement,
and then sell the site with a stipulation that it not be used
for gaming.
Station made a similar deal with former Santa Fe owner Paul
Lowden when it acquired his Sunset Road site across from Station's
Sunset Station cash cow in 2000, and then sold the land for
development as a big-box retail site with a no-gaming stipulation.
Industry insiders said Station's ability to almost corner
the lucrative Sunset Road and Stephanie Street-area casino
market in Henderson was a much stronger incentive to do a buy-and-sell
deal than would be Castaways' difficult and already-competitive
market.
The Lowe's home improvement store across Fremont Street from
the hotel, on the former site of the Montgomery Ward department
store, is one type of development that might work on the Castaways'
site, with a Wal-Mart or warehouse store a best-case scenario,
insiders suggest.
Others predict an implosion of the Castaways hotel tower and
wonder whether any major retailer would want the troubled site.
David Atwell, a veteran Las Vegas casino broker, said the
removal of the Showboat name and its mystique hastened the
demise of the property. But he remained optimistic that a savvy
operator could make money running the hotel-casino.
"To resurrect the property would take considerable additional
capital, a new theme or brand, and a very sharp owner," Atwell
said.
But the chance of those things happening and the Castaways
reopening is slim, industry experts said.
"It's sad to say, but we've seen the last of the Showboat," predicted
one operator, unintentionally using the hotel's former name.
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