Tuesday, June 28, 2005 | 10:53 a.m.
An international investment company has signed a deal to buy out business partner Barrick Gaming Corp. for an undisclosed price.
Under the deal, Barrick will sell its minority stake in the Plaza, Vegas Club, Western and Gold Spike casinos to Tamares Group, a private company with offices in New York, London and Tel Aviv. Tamares also will acquire the Nevada Club casino, Queen of Hearts motel and 40 other commercial and residential sites in downtown Las Vegas from Barrick.
Barrick Gaming will remain the tenant and casino operator of the gaming properties and Tamares will own 100 percent of the real estate assets.
As part of the deal, Chief Executive D.W. Barrick will step down from his position. Barrick President Stephen Crystal and Chief Operating Officer Phil Flaherty will continue to oversee day-to-day operations. Crystal also will work with Tamares to determine "the redevelopment potential of the company's substantial noncasino interests" downtown, Tamares said in a statement Monday.
In the statement, Tamares Chief Executive Poju Zabludowicz said the company remains "very optimistic about the fantastic growth potential of our property portfolio here."
Zabludowicz didn't say whether the company would eventually install a new casino operator but said "we will look seriously at all the possibilities on the table."
D.W. Barrick could not be reached for comment and Crystal declined to comment further on the deal.
Tamares said it has approached Nevada regulators to loan money to Barrick "to meet operating needs" in advance of the purchase.
Sources familiar with Barrick say the company had defaulted on its loan payments to Tamares even though the individual properties were generating a profit. Debt payments were eating into performance and preventing Barrick -- which was seeking financial partners to buy out Tamares -- from embarking on the kinds of major capital improvements the company envisioned, they said.
Barrick had discussed building several high-rise condominiums as well as commercial walking districts near its casinos.
Crystal and Flaherty will likely run the properties until Tamares installs another casino operator, sources say.
Joe Schillaci, chief executive of the Fremont Street Experience pedestrian mall that manages the lightshow attraction and outdoor casino mall downtown, said he hasn't had time to digest the news and doesn't know yet how downtown will be affected.
"For me it's business as usual and we'll see how it goes," he said.
Other downtown operators said they were still optimistic about further development in the neighborhood.
"The market's tough -- there's no two ways about it," said Jon Bennett, chief financial officer of Fitzgeralds casino affiliate Majestic Star Casino. "The new must-see properties on the Strip are going to pull people away."
Bennett said the city's redevelopment efforts and more recent interest from real estate investors is a good sign.
"The fact that there's new people in the market will new ideas could also help stimulate downtown," he said.
Boyd Gaming Corp. spokesman Rob Stillwell said the company's three downtown casinos -- California, Main Street Station and Fremont -- have been steady performers over the past few years.
"We're still very excited about all the new energy downtown," Stillwell said. "With the transitions downtown, there's always going to be some bumps along the way. How much of a bump this is only time will tell," he said.
One casino operator, who declined to be named, called Tamares' purchase a potential boon for the neighborhood.
"As long as you wind up with someone operating the properties that has the capital to make improvements and do the developments, that would be a good thing," the operator said.
Another source familiar with Barrick, who declined to be named, said the buyout amicably resolves a potentially difficult situation between two partners that didn't always get along.
"Barrick ends up making a lot of money and Tamares ends up making a lot of money," the source said. "This is one of those rare times that a win-win situation comes out of a bad divorce."
The four casinos Barrick purchased for $82 million from downtown casino owner Jackie Gaughan are now worth more than $200 million, the source said.
Tamares will end up with a considerable amount of land downtown that will go up in value, in part because land for bigger redevelopment projects has grown scarce, the source said.
D.W. Barrick and Crystal "had the foresight to see value in those properties and a boom in values downtown" but probably should have stuck to real estate development instead of gaming, a business they were less familiar with, the source said.
Barrick was involved in the startup of Casino Magic in Mississippi and was a joint venture partner with Station Casinos Inc. in a Missouri casino. He helped to push a gaming referendum in South Dakota, one of the first states in the Midwest to offer casinos. His family has had a number of financial interests including banking, mining, ranching, oil and gas drilling and real estate.
Crystal is an attorney and former New Hampshire legislator who has been involved in commercial redevelopment projects in Washington, D.C. and the Midwest. He brokered Barrick's partnership with Station Casinos and has represented other gaming companies.