500-Suite Hotel Fetches $62M, Additional $210M Investment Planned

LAS VEGAS-A Los Angeles-based Financial Capital Investment Co. has acquired the 500-suite Alexis Park Hotel & Spa here and an adjacent 206-unit apartment community with plans to spend an additional $210 million renovating the hotel, razing the apartments and adding three towers and a casino. The properties are located on East Harmon Boulevard, across the street from the Hard Rock Hotel & Casino.Financial Capital Investment announced the purchase in late May and the news was picked up by the local papers and hotel industry publications, but the sale price was never reported. GlobeSt.com has since learned that Financial Capital Investment paid $70 million for the properties, $61.9 million for the 18.5-acre hotel property at 375 E. Harmon Blvd. and $8.1 million for the 4.5-acre, 100% occupied Americana Inn Apartments immediately west of the hotel at 335 E. Harmon.Financial Capital Investment managing director Richard Alter tells GlobeSt.com that the purchase was highly leveraged and that the seller, LLCs headed by longtime Las Vegas businessman Louis Habash, “carried back some paper.” The price paid represents a 10% capitalization rate based on existing revenues, says Alter, with 90% of the cash flow coming out of the hotel. “I can also tell you that we’ve already received offers to flip it at a substantial premium (to the price we paid,” says Alter. “People are coming out of the blue, saying they didn’t know it was available and they’d love to buy it.”Don Safranek, an analyst with Appraisers of Las Vegas.com and a former hospitality asset manager with Lehman Brothers, says Alter got a good deal on the property at $123,800 per room. “For an all-suites property in a good location on Harmon, I would say the purchase price may actually be a little below market,” says Safranek. The Crowne Plaza, another non-gaming property on Flamingo, was on the market recently for $200,000 per unit, says Safranek. The property, which he describes as “a little tired,” has not sold.Built in 1984, the Alexis Park has 57,000 sf of meeting space, three pools, a restaurant & bar, retail shops, a spa and lush landscaping. The non-gaming oasis has an average daily occupancy of about 80%. Alter says he is retaining its 300 employees and has hired American Property Management Company of San Diego, CA to manage the property. Matt Construction of Las Vegas will be handling all the construction work. A renovation that began this week will result in a new front entry and a general upgrade of the common areas. When that is complete four months from now, the ensuing six months will be spent renovating the 500 low-rise hotel suites into what Alter describes as luxury villas. Demolition of the adjacent apartment property is tentatively slated for late 2005, at which point the first of three new towers is scheduled to commence. On the apartment property are planned two new 220-foot towers, a hotel-casino and a condo-hotel, with low-rise facilities in between that will include an additional 65,000-sf of meeting space. The third tower, a 120-foot timeshare development, will be located on what is now a parking lot in the northwest corner of the property, closest to the Hard Rock, which also is where a “huge” new sign will be erected, says Alter. “Whatever you want, we’ll have,” he says.Alter and his partner, Eddy Chao, were the runners-up for the Aladdin Hotel-Casino, sold in a bankruptcy auction in June 2003, and were one of the four finalists to purchase the Las Vegas Hilton in December 2003. The Aladdin is being sold for $635 million to a partnership headed by Planet Hollywood International Inc. Chief Executive Robert Earl. Earl and his partners are now in the process of being licensed by gaming regulators. The transaction is expected to be completed by late summer or early fall. The Las Vegas Hilton is being acquired by Colony Capital LLC for $280 million in a deal that is expected to close this month. Alter will need to request a zoning change from Clark County to form a gaming district for his casino development. He also will need to obtain an unrestricted gaming license. Alter already has filed for a restricted gaming license to enable him to install up to 15 slot machines in the existing hotel. “We meet all the requirements,” says Alter. “We need to go through the process and go through the hearings, but there are no legal reasons why it should not be done.”