Another day, another casino on its way to being bought out for cheap, another day, another casino in the sights of the Starwood Capital Group.

What's going on here?

It's interesting to watch how Starwood Capital has shown so much interest in Las Vegas casinos over the past month or so – the past few years even if you consider their initial bid for the Riveria on the strip.

Although its all rumors at this point, Bloomberg Business Week has a story about Starwood Capital's (and Colony Capital's) interest in purchasing the Rio casino from Harrahs. Harrahs has been looking to divest the property since they purchased the Planet Hollywood and is looking for interested bidders. Harrahs purcahsed the Rio in 1998 for $888 million, and according to the Business Week article – the property is only worth $500 million now. 

So why are all these private equity firms looking to get into the casino business? Its interesting to watch Carl Icahn place a bid on almost every project in Atlantic City & Las Vegas that is having financial difficulty, Starwood Capital's interest in the Riveria and now apparently the Rio, along with Colony Capital's current ownership of the Hilton Las Vegas and Atlantic City. Why?

I'd think that it would be too much trouble to go through the gambling licensing procedures for a private equity firm to even consider dabbling in this, but if you look at the history of these three firms – they have gambling in their blood.

Colony Capital has owned the Hilton in Las Vegas since 2004, the Atlantic City Hilton since 2005 and Resorts International since 2000.

Carl Icahn purchased the Sands casino in Atlantic City in the early 2000's but quickly sold it to Pinnacle Gaming, but now he owns the unfinished Fontainebleau and the Tropicana in Atlantic City

Barry Sternlicht, from the Starwood Capital Group was probably the first out of these three to get into the casino business with his purchase of ITT-Sheraton which included Caesars World in I believe 1998.

Its interesting to see what everyones intention will be – its known that casinos are great for their free cash flow – something a Private Equity firm loves, but its obvious that some people look at the purchase of a casino as just a passing investment – similar to how Carl Icahn has looked at his investment in the Sands in Atlantic City and possibly how he will look at the Fontainebleau once the economy picks up.

andrew@alconic-inc.com

Andrew Calvo is a 26 year old Commercial Real Estate Advisor in New Jersey. I live in Tinton Falls, NJ. This blog is about my passions - primarily hotels, commercial real estate, and development, etc.

Since I have been in High School I've had numerous jobs, but the field which has always interested me is Real Estate, Hotel Development and Construction. I consider myself a zealot in that area - I try to absorb as much as I possibly can, take the experiences that I learn, or read about and use them in my life. 

www.passionsofazealot.com