It wasn’t until an investment bank approached Peter Morton with a huge offer to buy his Hard Rock Hotel in Las Vegas that Morton, the co-founder of the Hard Rock Cafe brand, seriously considered unloading the property he opened in 1995.
With assistance from New York-based private equity firm Leeds Equity Partners, Morton signed a deal last week to sell the Hard Rock Hotel to boutique hotelier Morgans Hotel Group for USD 770 million in cash.
Many were wondering why Morton would sell a hot property at the cusp of a new development opportunity during a time of unprecedented investor interest in Las Vegas.
Simply put, it was a good time to cash in his chips.
Morton, who won’t disclose the amount of the initial offer, was impressed enough with it to launch an official bidding process for the property, resulting in the superior Morgans bid.
Morton launched the Hard Rock Cafe restaurant chain in 1971 and in 1996 sold it for USD 410 million to London-based Rank Group Plc, which has in recent years dramatically expanded the brand through franchise agreements with hotels worldwide.
The Las Vegas property makes a stupendous amount of money in its nightclub and restaurants but its casino is only marginally profitable compared with much bigger Strip competitors. The hotel is valuable for its brand and future development opportunities.
Morton announced a USD 1 billion expansion in 2004 on 24 acres purchased behind the property that would include as many as five condominium towers, poolside bungalows, restaurants, nightclubs, retail shops and a spa.
After locking up the parcel, Morton can benefit from the value of that opportunity without spending the years and billion-plus dollars it will take to see the project to fruition. The Hard Rock halted condo sales in February and refunded buyers‘ deposits in anticipation of a sale.
There’s also room for improvement at the Hard Rock, which hasn’t been able to exploit more-profitable slot machines like its competitors because younger folks prefer table games, which are more labor-intensive and don’t make as much money in the long term.
Some say the casino, with its central bar ringed by table games, is more suited to window shopping — in this case, checking out attractive guys and gals — than actually gambling.
Morton gets much-deserved credit for luring the kind of younger, more affluent customer that the rest of the Strip is now chasing with expensive nightclubs and lounges. The property boasts the first permanent, standalone nightclub along the resort corridor and was the first to attract major and minor rock ’n‘ roll acts that previously bypassed Las Vegas for other major cities.
Morton gives up all rights to the Hard Rock brand with the sale. He isn’t sure whether he will remain in the casino business, though he has no intention of retiring altogether.
„I’ve been at this a long time,“ said Morton, who lives in Los Angeles. „I’m at a point in my life where I want to do other things,“ he said. „I want to focus on my kids.“
Morton leaves the property with an equally large reputation in Hollywood, where he owns the famed Morton’s restaurant (and celebrity hangout).
The Hard Rock restaurants also cultivated connections with rock stars and other celebrities. Unlike the stars he hob-nobs with, Morton is press shy, laid-back and informal. He’s also deferential to the managers who run the day-to-day business in Las Vegas.
„This town has been very good to me,“ he said. „The people I work with at the hotel and the whole city has such a wonderful attitude toward the growth of business here.“