|By Arnold M. Knightly, Las Vegas
Review-JournalMcClatchy-Tribune Regional News
March 4, 2008 - Say goodbye to those orange short-shorts.
Hooters Hotel will be rebranded into a yet-to-be named boutique hotel following a $130 million redevelopment of the property that could begin later this year, the investment group purchasing the hotel said Monday.
Santa Monica, Calif.-based Hedwigs Las Vegas Top Tier is completing its financing for the $225 million transaction and hopes to close the sale by late spring, Hedwigs principal Richard Bosworth said.
"This will be a complete redevelopment of the asset that includes a lifestyle, entertainment-driven boutique hotel and casino complex," Bosworth said.
Los Angeles-based designer Dodd Mitchell is heading the redesign team and will use the current structure in the new plans.
Hedwigs made its third $500,000 nonrefundable, nonapplicable fee payment Friday to retain exclusive purchase rights for the property.
Bosworth said the group wanted to close the deal late last year, but decided to activate a one-month extension clause because of the downturn in the capital markets.
The investment group plans to announce a partnership with a boutique hotel operator to manage the rebranded property.
Hedwigs also is negotiating with high-end restaurant developers and nightclub owners to open at the property, Bosworth said.
The redesign will also include expanding the casino area and changing some of the hotel's 727 rooms into suites.
However, Bosworth declined to say if the property would remain open during the changeover, which could take as long as 18 months.
Mitchell has worked on the redesign of the Roosevelt Hotel in Hollywood, Calif., Hotel Valencias in San Jose, Calif., and San Antonio, and Thompson boutique hotels in Beverly Hills, Calif., and Manhattan.
Mitchell, which has been working on design plans since April, was in Mexico on Monday and was unavailable for comment.
This would be the property's second makeover in as many years. A $130 million redevelopment of the of the former Hotel San Remo turned the off-Strip property into Hooters in February 2006.
Bosworth said he wants to rebrand the property because he believes it could be more profitable with a brand targeting higher-end customers than those that visit Hooters.
"I just believe this location has a higher and better use that can attract higher and more profitable revenues at a major discount to construction costs," Bosworth said.
Bosworth said remodeling the resort makes more sense than building a new property on the site. The $355 million price, the purchase cost plus redevelopment costs, is approximately 40 percent below what it would cost to build new on the site, he estimated.
Bond analysts during the past few months have questioned the feasibility of the deal if the property kept its Hooters brand.
Under the Hooters Hotel brand, cash flow has been falling at the property.
Cash flow, defined as earnings before interest, taxes, depreciation and amortization, dropped 32 percent to $1.1 million for the third quarter ended Sept. 30. It was $1.7 million in the same period a year earlier.
The property has yet to report its fourth-quarter earnings.
"I know the gaming analysts have criticized the acquisition at the $225 million level based on the performance level as a Hooters," said Bosworth, adding the shift to a luxury market will raise revenues in room rates, casino play and food and beverage with limited additional investment.
Bosworth, a real estate and financial adviser, helped Florida-based Hooters, which has a two-thirds ownership stake in the hotel, purchase the San Remo in August 2004.
Bosworth, through his firm Nth Advisory Group, is developing a Hooters casino in West Wendover 400 miles northeast of Las Vegas along Interstate 80 with a third-party developer.
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