Potential buyers of Cal Neva Resort aren't deterred by gaming weakness

Weak gaming numbers at North Lake Tahoe haven't reduced interest from potential purchasers of the Cal Neva Resort Spa and Casino, says an executive of the real estate company's that's marketing the property.

John Knott, executive vice president of CB Richard Ellis and head of the real estate brokerage's global gaming group, says the gaming win at the lake down 16 percent on the north shore for June compared to the same time in 2008 won't affect the sale of the property, which sits on 13.6 acres. It includes 219 rooms and cottages, restaurants, a spa, 16,000 square feet of meeting space and 5,365 square feet of gaming. It was built in 1926 and was a major attraction for Hollywood and the political elite.

Knott expects a quick sale, perhaps by the end of the year, because of the building's amenities and prime location at Crystal Bay.

"Certainly if there are market pressures that are downward that could limit what someone is willing to pay, but financial performance of this asset is not the basis of why it will sell," says Knott. "The asset is irreplaceable. It is the most significant property, other than maybe the Hyatt, on the north shore. It is the highest building and has spectacular views of the lake, and it has a storied history. We will find people who have a vision for what they would like to do with the property."

Canyon Capital Realty Advisors of Beverly Hills, Calif. took control of the Cal Neva in April in foreclosure and hired CB Richard Ellis to market the property, which once was owned by Frank Sinatra. Canyon also hired NHH Hotels and Resorts to manage hotel operations.

Canyon Senior Director Richard Bosworth also says that declining gaming numbers haven't been the problem at the Cal Neva.

"Under the previous owner's direction, the Cal Neva was not managed or marketed to compete," Bosworth says. "The previous owners had a redevelopment strategy, which means the Cal Neva's performance against the market is not truly indicative of past performance. While the market over 2008 has declined, Cal Neva's market share has actually increased."

Potential buyers for the property, CBRE's Knott says, fall into three categories: hotel brands seeking entry into the Lake Tahoe market, investors seeking entry into Nevada gaming and wealthy individuals who view the property as a once-in-a-lifetime investment.

A number of hotel companies would love to be in the Lake Tahoe market, Knott says. But the number of available facilities is limited and new construction at the lake is an arduous and permit-laden process. He says he's fielded queries from a number of hotel companies that would like to see their flags on the property.

Canyon's Bosworth says the prestigious Lake Tahoe market affords a hotel brand the chance at an excellent strategic position, and that a well-known hotel flag will create the most value for the property.

The Cal Neva's unrestricted gaming license offers easy entry into Nevada gaming, and the licenses provisions allow a potential buyer to double the size of the casino space.

"When you look at the costs associated with entering gaming, this will be on the lower end of the range," Knott says. "This gives the opportunity to someone who would like to be in gaming in Nevada an entry point. One of tickets to entry in that market is to have unrestricted license, and this affords that opportunity."

And some in the investment community see purchase of the property much like buying a baseball team opportunities for ownership are rare.

"Wealthy individuals look at it as, 'If I don't buy this asset now, when will I ever have the opportunity?' There are just not properties like this that come up," Knott says.