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Pricier Than The Menu

News: Analysis & Commentary: LANDMARKS


Unquestionably, there is an aura to the `21' Club. In 75 years, the former Prohibition-era speakeasy has been the haunt of Humphrey Bogart and F. Scott Fitzgerald, the host to every U.S. President since Franklin D. Roosevelt. In the private-stock area of its musty wine cellar, Elizabeth Taylor's bottle of 1964 Chateau Lafite-Rothschild rests just above Ivan Boesky's favorite red. And its famous hamburger is priced at $21.50--though fries are included.

Little wonder, then, that word on May 24 of the `21' Club's impending sale drew hushed, shocked murmurs in New York's corridors of power. Or less hushed: "Vegas Bigs Eyeing N.Y. Eateries," the New York Post headline screamed. Yes, New York industrialist, leveraged-buyout specialist, and `21' owner Marshall S. Cogan was looking to deal his restaurant. "I'm fundamentally interested in what's best for `21,"' Cogan says. Several casino operators, including erstwhile Chrysler Corp.-hunter Kirk Kerkorian, were said to be in the hunt.

THE PITCH. Cogan has retained his longtime buddy, New York investment banker Roy L. Furman of Furman Selz Inc., to locate a buyer. Furman's sales pitch, say those he rang up, is direct: The `21' Club posted a profit of close to $2.5 million last year and should do "better" this year. For $40 million, Cogan would sell the property immediately, Furman confided to at least one casino executive in late May.

In truth, `21' is worth far less. It almost certainly is losing money. Associates say Cogan has tried for years to unload the restaurant. And the casinos aren't interested.

Cogan's numbers fail to reflect any debt service on both the $21 million Cogan paid for the restaurant in 1985 and $10 million in subsequent capital improvements. Since Cogan's private investment vehicle, `21' International Holdings Inc., is closely held, he is able to account for the debt elsewhere. Add in the financing costs on both the original purchase and the improvements, and the `21' Club has never turned a profit, say numerous sources inside and outside his operation. A Cogan associate acknowledges that the profit numbers shown potential investors do not include interest but says they fairly reflect the club's operating value.

Cogan, say casino and restaurant operators, bought near the top of the market and badly overpaid. The millions he has spent since to add two state-of-the-art kitchens and to refurbish the historic barroom, they say, likely will never be recouped. "The `21' Club might be worth half what they're asking," says one casino executive who says he was contacted by Furman. "Marshall bought himself a very expensive toy, and now he's stuck with it."

Since the for-sale sign was hung, Cogan's public-relations executives have eagerly passed on rumors that several Las Vegas companies supposedly were eager to buy the club. Cogan's theory: For the right operator--say, a gaming or hotel business--the `21' Club's name would have immense franchise value.

But none of the casino companies floated as potential bidders--among them MGM Grand, Mirage, and Bally's--have any interest in buying the restaurant. Franchise value? Says Robert N. Stanton, a Manhattan-based business broker specializing in private deals: "It's hard to imagine a buyer getting much value from licensing the name. It's one matter to own the `21' Club, but it's another matter to recreate one."

TRADEMARK TUNA. So why is Cogan so hot to sell? He says the timing was prompted by unsolicited buyer interest; his spokesman denies that he has tried to sell before. But it could be he's just tired of losing money. Further, the inner delight that stems from munching on his trademark grilled tuna lunch at a little table just inside the main dining room may be wearing off. "It's clear that since Cogan bought the place, he has improved it a lot," says Tim Zagat, co-publisher of the Zagat Restaurant and Hotel Survey. "But I suspect that he's getting tired of the problems there, and he's ready to move on."

Cogan just might get lucky and find another wealthy status seeker willing to pay for the prestige of owning the `21' Club. Maybe Donald Trump? "No interest!" barks a Trump spokesman. So unless Cogan has an ace up his sleeve, it looks like he's holding a losing hand.By Willy Stern in New York

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