California Tribe Strikes Deal for the Palms in Vegas

The San Manuel Band of Mission Indians, which operates the dominant tribal casino in the Los Angeles area, is focused on diversification, and with its purchase of the Palms from Red Rock Resorts becoming the first Native American tribe to own a Las Vegas resort.

California Tribe Strikes Deal for the Palms in Vegas

The San Manuel Band of Mission Indians, one of Southern California’s most successful gaming tribes, is expanding into Las Vegas via a $650 million deal with Red Rock Resorts to buy the off-Strip Palms Casino Resort.

The tribe and its casino arm, the San Manuel Gaming and Hospitality Authority, confirmed the purchase on May 4 and said they expect to close on it by the end of the year.

“Our board believes that the Palms is a casino resort that many of San Manuel Casino’s loyal guests would enjoy,” authority Chairwoman Latisha Casas said in a statement. “We are excited to move forward with this transaction.”

The Palms is one four Las Vegas casinos operated by Red Rock subsidiary Station Casinos that haven’t reopened since the 78-day shutdown the state of Nevada imposed last March to contain the Covid pandemic.

The closure, coupled with the battering the pandemic has wrought on travel and tourism, not to mention public gatherings as a whole, proved a particular disaster for the Palms, which was struggling to make good on $690 million worth of top-to-bottom refurbishments commissioned by Red Rock almost immediately after purchasing the resort from the Maloof family in 2016 for $312.5 million. The remodeling took almost three years and was completed just 11 months before the pandemic hit.

“We were actually starting to get some traction at the Palms,” Red Rock Vice Chairman Lorenzo Fertitta said in confirming the sale last week.

The redesigned resort, located on Flamingo Road about a mile west of the Las Vegas Strip, features a 94,000-square-foot casino, 703 hotel rooms and suits along with an adjoining condominium tower, an array of casual and upscale restaurants and entertainment lounges, a 2,500-seat theater, a pool and spa, meetings and conventions space, high-priced artwork and new outdoor signage highlighted by a 272-foot-high LED wall.

But between cost overruns and an expensive fiasco resulting from operating disputes at a 73,000-square-foot nightclub and day club that ultimately was closed at a cost of $34 million, the prospects of the resort recouping its investment were looking bleak even before the pandemic hit.

Fertitta acknowledged during Red Rock’s first quarter earnings call that the company had spent “too much money” on the property’s nightlife segment in a market that already was overcrowded and wasn’t growing.

“We needed to focus on the core parts of our business,” he said.

For the San Manuel, however, the Palms offers “a well-designed property which has been beautifully redeveloped and maintained,” as Casas put it𑁋moreover, one that provides the tribe with a powerful opportunity to market Las Vegas to the extensive customer list it has built over 35 years at its San Manuel Casino in Highland, California, about 70 miles east of Los Angeles, the closest tribal casino to the metropolitan area.

The casino, which features more than 100 table games and 4,900 machine games, is in the midst of a major remodeling of its own that includes the addition of more than 400 redesigned hotel rooms, new restaurants, expanded high-limit gaming and new space for meetings, conventions and special events, along with another 1,500 slot machines.

At the same time, the greater Los Angeles area has long been a major market for Las Vegas and one the San Manuel have been busy leveraging through sponsorship deals with the NFL’s Las Vegas Raiders and Allegiant Stadium, the NHL’s Las Vegas Golden Knights and contributions to the University of Nevada, Las Vegas and other local organizations.

“We have so many team members, friends and partners who call, or have called, Las Vegas their home,” San Manuel Chairman Ken Ramirez said at one point late last year. “It’s in this spirit of understanding and solidarity that we were moved to show our support for Las Vegas.”

He said the tribe views the Palms as an “important step” in a “long-term economic diversification strategy.”

The San Manuel will be the second Native American enterprise to enter the Las Vegas market this year following Mohegan Gaming and Entertainment’s deal to operate the casino at Virgin Hotels Las Vegas, which opened in March on Harmon Avenue just east of the Strip at the site of the former Hard Rock casino hotel. But the tribe will be the first to actually own a Las Vegas property.

Analyst Chris Grove of Eilers & Krejcik Gaming told the Las Vegas Review-Journal he expects tribal gaming to be a “material component of the next wave of Las Vegas casino ownership.”

“San Manuel,” he said, “has long been one of a short list of elite tribal casino operators thought to have the ambition, financial wherewithal and operational chops to execute on a Las Vegas opportunity.”