Wednesday, Jan. 2, 2002 | 11:03 a.m.
Lakes Gaming Inc. of Minneapolis said Monday its development opportunities at Harmon Avenue and the Las Vegas Strip were bought out by developers when they acquired two Lakes properties on the Strip for a combined total of $31.8 million.
Lakes on Monday also disclosed it's in talks to develop a timeshare property nearby at the site of the old Shark Club nightclub.
In the Las Vegas Strip deal, Lakes said it sold its 2.4-acre Polo Plaza shopping center -- recently renamed Metro Plaza -- to a company called Metroflag Polo LLC.
Lakes sold rights to the adjacent 5.5 acre Travelodge property, consisting of a long-term land lease and motel operation, to a related Metroflag entity called Metroflag BP LLC.
Metroflag Polo is a joint venture between Las Vegas developer Brett Torino's Metroplex LLC and Flag Luxury Property of New York.
Metroflag officials could not be reached for comment on whether they intend to carry out a plan announced in 2000 by Lakes to develop what observers called a $700 million non-gaming retail, hotel and residential complex on 16 acres at the southeast corner of Harmon Avenue and the Strip.
The land for the $700 million development was to have been developed by a joint venture owned by Lakes and Torino under the plan announced in 2000.
As a result of these transactions, Lakes Gaming will take a one-time charge of $26.5 million pretax in the fourth quarter and, due to this item, will realize a tax benefit of $10 million in the same period.
In the year-ago fourth quarter, the company lost 1 cent a share on revenue of $6.7 million.
The terms of the deal include a $1 million down payment, a note to Lakes in the amount of $23.3 million payable Sept. 30, 2002, and a second note payable to Lakes in the amount of $7.5 million due on June 30, 2004.
The deal closed subject to certain administrative post-closing conditions that must be satisfied within six months. If the conditions aren't met, Metroflag can require Lakes to repurchase the properties.
"We've held the properties for either development or for sale. We're not in the (commercial) development business necessarily. This deal with Metroflag represents the best opportunity for us. We needed the cash for other projects to develop Indian casinos around the country," said Lakes Chief Financial Officer Timothy Cope.
He said Lakes is in development and management agreements with four Indian tribes for casino operations, one in Michigan, two in California, and one with the Nipmuc Nation on the East Coast. He said Lakes has agreements to develop an additional casino on Indian-owned land in California through a joint venture.
Lakes still owns the Shark Club property on Harmon Avenue, named for a nightclub that closed in 1996 and burned in 1998. This is now a 3.4-acre undeveloped site adjacent to the Polo Plaza shopping center and the Travelodge sites. The area is near heavy traffic generators including the Aladdin and MGM Grand megaresorts.
Lakes, which said it's in talks with a joint venture partner to develop the Shark Club site as a timeshare project, said it will contribute the property, valued at $16 million, and won't be required to make other contributions of cash or property to the project.
Cope said its partner for the Harmon Avenue timeshare project is a Las Vegas development company, but he declined to identify it.
Lakes was formed in December 1998 as a spin-off of the tribal gaming business of Grand Casinos, which was then acquired by Park Place Entertainment Corp. of Las Vegas.