Las Vegas- Gentlemen, Sapphire needs your business.
In a Monday auction to settle a struggle for control between owners Pete Eliades and Michael Talla, Sapphire Gentlemen's Club and the 6.2 acres it sits on sold for $80 million -- or 4 million lap dances at the going $20 rate.
Talla, a Los Angeles health-club executive, trumped Olympic Garden owner Eliades in the bid for Sapphire, billed upon its 2002 opening as the world's largest strip club.
The $80 million sale price -- more than twice the $35 million opening bid -- is reasonable for Talla because he already owns half the club, said Peter Feinstein, Talla's managing partner. Buying out Eliades means Talla will purchase the property for just 50 cents on the dollar, or $40 million. Add in Talla's half of the $26 million it cost to build Sapphire, and that means Talla will own the club for a total of $53 million, Feinstein said.
"It made very logical sense both as a real estate asset and an ongoing business to own the club," Feinstein said shortly after the auction. Feinstein noted that Talla also owns the 3-acre shopping center south of Sapphire on Industrial Road.
Feinstein said Sapphire, at 3025 Industrial Road, will stay open. Talla's representatives are in talks with a restaurant group and a nightclub operator to expand the 71,000-square-foot Sapphire's amenities, which include VIP skyboxes and three lounges.
What about real estate analysts' conjecture that Sapphire would meet the wrecking ball and make way for high-rise condominiums?
"We have no other intention right now for the property other than to operate it not only as the world's largest gentlemen's club, but as the world's most expensive gentlemen's club," Feinstein said.
But that doesn't mean a high-rise is out of the question in the distant future.
"We're interested in watching the next phase of high-rise condos going up, and we're interested in seeing how the Stardust comes together with their new $4 billion product," said Feinstein, referring to Echelon Place, the Boyd Gaming Corp. property across from Sapphire on Industrial Road. "We have cash flow we can sit on while we're watching the market."
Rodney Tucker, a land broker with CB Richard Ellis in Las Vegas, praised that cautious approach. He said the opening of Boyd Gaming Corp.'s Echelon Place would likely generate substantial spillover business for Sapphire, and Boyd would make a "built-in" buyer for the Sapphire site if the company wants to expand Echelon Place.
The two other parties who made the $4 million deposit required to participate in the auction inside a courtroom at the Regional Justice Center never got a bid in edgewise, watching silently as the going price rose in $5 million increments.
Harry Mohney, owner of the national Deja Vu chain of strip clubs, and Michael De Cotiis, chairman and chief executive officer of Canadian condominium developer Pinnacle International, sat by as Eliades and Talla propelled the price to $80 million in less than two minutes. Eliades bid first, at $35 million, and made his last bid at $75 million; Talla stopped at $80 million.
Feinstein said $80 million was as high as Talla was willing to go, based on his calculations of a return on capital.
And though Eliades and Talla spent much of the past three years fighting for control of the club, conciliatory words prevailed following the auction.
"A business partnership is like a marriage, and as with any marriage, at times you're going to have conflict," Feinstein said. "We found a way to work together that worked out through this whole situation."
Said Eliades as he left the courtroom: "They can have Sapphire. No hard feelings."
