Ormsby House: Do we have a bidder?
The Ormsby House will go on the auction block at the end of May after Bob Cashell spent the past year and a half rebuilding the troubled hotel/casino’s reputation, the Nevada Appeal has learned.
This auction has been the ultimate goal of New York investment fund Cerberus Partners since it formally acquired the Ormsby House in a foreclosure sale in January 1998, Cashell said.
“This is nothing more than what Cerberus has been trying to do all along,” said Cashell, the hotel’s general manager since September 1997, when Cerberus took control of the Ormsby House.
Cerberus took over the Ormsby House by default as the first mortgage holder of a $5.5 million loan issued in June 1996. Nobody bid at the foreclosure sale, leaving the property for Cerberus, which to date has some $8 million in the Ormsby House.
There will be no minimum opening bid and Cerberus has not established how low a bid it will accept, Cashell said.
Any bidder will have to present $200,000 in cash or cashier’s check to place a bid, said Aleda Nelson, president of Eric Nelson Auctioneering.
Nelson is the same Las Vegas auction house that sold the Debbie Reynolds Hotel and Casino and the Granada last year and Liberace’s house after his death in 1987. Nelson specializes in bank and bankruptcy sales, estate sales and developers sales.
Cerberus retained Nelson on Friday based on the firm’s success with hotel sales. Aleda Nelson, who conferred with Cashell Monday at his Ormsby House office, believes the auction will produce a seller, unlike the foreclosure sale.
“It’s an issue of the seller appearing to be quite motivated to sell,” Nelson said. “We believe we can sell it.”
The auction, conducted by her brother Eric, will be in the last week of May at the Ormsby House. Specific date and time was not set as of Monday.
The auction will involve the 10-story, 200-room hotel, the 14,000-square-foot casino and 361 gaming machines, the 2.3-acre site, the seven-story parking garage and all the furnishings and fixtures.
Nelson will prepare the auction package in March and start a major advertising campaigning in publications such as the Wall Street Journal, the Los Angeles Times and Casino Journal.
The Ormsby House opened in 1972 but has had troubles throughout the 1990s with two bankruptcy proceedings as well as the hotel-casino closing down from January 1993 to February 1995. That reopening under new owner Barry Silverton launched another period of troubled times for the Ormsby House that still continue even with Silverton out of the picture for nearly two years.
Throughout Silverton’s ownership, the Ormsby House was dogged by state fines, layoffs and lawsuits for nonpayment of bills.
Silverton borrowed $5.5 million from Cerberus Partners in June 1996 and defaulted on his monthly $63,719 payment in January 1997. He filed for Chapter 11 bankruptcy protection Feb. 12, 1997 with debts exceeding $11 million.
The Ormsby House went through the bankruptcy process with no buyer emerging and the property awarded in receivership to Cerberus in September 1997, when casino veteran Cashell was brought on board.
Cashell said he has spent some $250,000 in Cerberus funds to install new carpeting and wallpaper in the casino and convention area along with rebuilding the kitchen, replacing burned-out bulbs outside and restriping the parking lot.
Cashell has also invested heavily in rebuilding public confidence by putting on $30,000 fireworks shows for all the warm-weather holidays and building an elaborate haunted house in the convention area that was never built.
He said Ormsby House revenue has increased 70 percent under his management but he would not specify dollar amounts. Cashell added that restaurant revenue has gone up 30 percent and average hotel occupancy has gone up to 60 percent from 40 percent a year ago.
Even though Cerberus has had auction on its mind since day one, Cashell said the firm waited until after it established a track record.
“We’ve got 12 months of history showing its going in a positive direction,” Cashell said.
A buyer, however, will find a hotel-casino still needing huge investment. Cashell acknowledges the casino should be twice as large – an additional 15,000 square feet – to support a 200-room hotel and 14,000 square feet of convention space has remained bare concrete for nearly 30 years.
“Personally, I think there’s a niche in Carson City for the Ormsby House,” Cashell said. “It has a lot of pizzazz.”
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