An exterior view of the Palms Tuesday, Feb. 4, 2020. The resort, sold to the San Manuel Band of Mission Indians in 2021, will reopen on April 27, officials said.
Published Tuesday, May 4, 2021 | 7:05 a.m.
Updated Tuesday, May 4, 2021 | 3:11 p.m.
The Palms, shuttered since the onset of the the COVID-19 pandemic, is getting a new owner.
Red Rock Resorts, parent company of Station Casinos LLC and owner of the Palms, announced the sale agreement this morning to the San Manuel Band of Mission Indians, according to a news release. The purchase price was listed at $650 million.
Lorenzo Fertitta, vice chairman of the Red Rock Resorts board of directors, said during a quarterly earnings call today that a sale of the Palms likely would not have happened without the COVID-19 pandemic.
"It wasn’t something we were contemplating pre-COVID," Fertitta said. "We weren’t talking about selling the Palms. When COVID hit, we reassessed our entire business, top to bottom. The San Manuel tribe came forward and presented what we thought was a great opportunity for our company to refocus our strategy."
A spokeswoman for San Manuel did not immediately return a message seeking comment.
In a memo issued today, Barry Jonas, a gaming industry analyst with Truist Securities, said Red Rock stock, which closed at $36.78 per share at the end of trading Monday, remained on his “buy” list following the announcement.
“We are positive on the sale,” Jonas said in the memo. “The purchase price comes in below (Red Rock’s) nearly $1 billion total investment (in the Palms), but we believe (Wall Street) had largely written the property off given recent underperformance and its COVID-related closure.”
Included in the sales agreement is a provision that would add $28.5 million to the purchase price if the deal is not completed in 18 months. The transaction is subject to regulatory approval by the Nevada Gaming Commission.
The Palms, which was opened by the Maloof family in 2001, gained pop culture fame as the home to the 2002 season of MTV's "Real World."
Station Casinos purchased the Palms, which is just west of the Strip, in 2016 for $312.5 million. It put more than $620 million into renovations at the 1,200-room property, including an ill-fated opening of megaclub KAOS that was closed just a few months after its debut.
Fertitta said pouring too much money into nightclub operations was a mistake.
"If we are being self-critical about what maybe didn’t go exactly as planned at the Palms, I think there was too much focus on the nightlife and daylife part of the business," he said. “We entered the market at a time when it was hyper-competitive and there were probably too many players in the market at the time. The cost of entertainment and the market not growing, we missed that.”
Fertitta said the company decided to “fail fast and move on” once it realized KAOS wasn’t generating the returns that had been expected. “We were actually starting to get some traction on the casino side and other parts of the business, but then COVID hit,” Fertitta said.
The San Manuel Band of Casinos operates its flagship San Manuel Casino in Highland, Calif., about 70 miles west of downtown Los Angeles. The tribe also owns several hotels throughout California and an office building in Washington, D.C.
The band in 2020 made a $9 million donation to the UNLV for tribal gaming operations and law education.
The Palms is one of four casinos in the valley Station did not reopen after a state closure order because of the pandemic was lifted. The others are the Fiesta Henderson and the Fiesta Rancho and Texas Station, both in North Las Vegas. The company has not announced plans for those properties.
