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Commission Clears Owner to Run Hard Rock Casino

LAS VEGAS-Morgans Hotel Group Co. gains approval from the Nevada Gaming Commission to operate the off-Strip resort it acquired earlier this year for $770 million and is now expanding.

By Brian K. Miller | Updated on January 29, 2008

LAS VEGAS-Publicly traded Morgans Hotel Group Co. and its equity partner gained approval this week from the Nevada Gaming Commission to operate the casino portion of the Hard Rock Hotel & Casino they are in the process of expanding. New York City-based Morgans and DLJ Merchant Banking Partners acquired the gaming resort here early last year for $770 million. It immediately took over hotel operations but had to farm out the casino operation until it gained an operator’s license from the Commission. Morgans expects to begin operating the casino in February.

Meantime, an affiliate of locally based Golden Gaming Inc. will continue to operate the casino per the lease agreement that commenced upon the closing of the acquisition in February 2007. Under the lease, which has a term of up to two years, the base rent is $20.7 million per year payable monthly, plus reimbursements for certain expenses, according to SEC filings.

Golden Gaming is entitled to a management fee of $3.3 million, also payable monthly. In addition, Golden Gaming will receive 25% of casino EBITDA in excess of the rent and management fee amounts. The other 75% will go to Hard Rock for payment of principal and interest on the gaming asset note and any other loans to the lessee. As part of the deal, the casino’s gaming assets were sold to Golden Gaming for a note with a principal amount equal to the net book value of the gaming assets.

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