Family Synergy: The Maloof Family

With a hand in sports, entertainment, and casinos, the Maloof brothers’ various enterprises all come together to form one company that is taking the nation by storm.

By Seth Semilof

A trip to Vegas is always exciting, but this time it wasn’t about hitting the high-roller’s room or catching a show at The Palms. No, this trip to Vegas had a purpose-a very important one, one that excited and thrilled me at the same time. This trip to the City of Sin had me meeting with some of the Maloof family-brothers Gavin, Joe and George Jr. to be exact-the innovators who are crossing industries to create a conglomerate that is leaving its mark in a number of entertainment arenas. The fourth brother, Phil, was unfortunately tied up with Maloof Productions and unable to make it to our meeting.

Haute Living was invited into Gavin’s 14,000-square-foot home on the outskirts of Vegas’ city limits. This brand new masterpiece is Gavin’s dream property, a passion project that inspires a giddiness in the mogul, one that is echoed in his brothers. The home is empty in preparation for a housewarming bash taking place next week. The list of invitees reads like a list of “Who’s Who” of industry insiders, with a cool mix of pop stars included, of course.

I walk into the massive estate and am greeted by Gavin’s three-pound miniature pinscher, Sally. On the floor with the pup is Joe, keeping one eye on the prancing dog while talking to CNBC’s Squawk Box about the family’s business, which has a hand in…well, almost everything. From the Sacramento Kings and Palms Casino to beer distribution and Maloof Productions (the movie, television, and music arm), there is little that the brothers don’t do.

And they do it with a certain childlike wonder and enthusiasm that belies their ingenuity. The whole while I was at Gavin’s home, Joe and George Jr. ran around, checking out this room and that, the entire time praising their brother for his acquisition with genuine enthusiasm.

From a distance, the four sons of the late George Maloof Sr. are living a fantasy life. Along with their mother, Colleen, and sister, Adrienne (who resides in Beverly Hills with her husband), Phil, Gavin, Joe, and George Jr. are equal partners in Maloof Enterprises, a billion-dollar empire of fun and games.

Family Tree

The current Maloof brood is a third-generation success story. The family history dates back to 1892 when Joe Maloof Sr. opened a small general store in New Mexico. By the 1930s, the family had acquired distribution rights to Coors Beer for the entire state. In 1937, Quality Imports was established as a wholesale fine liquor distribution center. Joe Sr. parlayed the small business into lucrative investments in blue chip stocks and a liquor and beer operation that included New Mexico’s first Coors distributorship. When Joe Sr. suffered a heart attack in 1944, his son, George J. Maloof Sr., left his studies at the University of Colorado to assume responsibility of the Maloof companies. He was just 21 years old.

George Sr. successfully expanded the family business into a group of diversified companies. In 1979, he expanded the New Mexico general store into a statewide liquor distributorship based in Albuquerque, as well as purchased all the branches of the First National Bank of New Mexico. He also picked up a hotel in Anaheim, California. These progressions into the hotel and banking sectors allowed George Sr. to build the family’s fortune to $10 million by the late 1970s.

Responding to his love for sports and competition, George Sr. borrowed heavily to purchase the Houston Rockets for $9 million in 1978. Just two years later, the diabetic George Sr. died from a heart attack, leaving his wife, Colleen, and five children (Joe, Gavin, Phil, Adrienne, and George Jr.) to manage the family’s holdings. Instead of doing the expected and selling the assets in the wake of her husband’s death, Colleen went the opposite route, assuming control of the entire Maloof Corporation and enlisting the help of her five children. Joe and Gavin were in their 20s; young George Jr. was only 16.

They all rose to the challenge, though. “We didn’t even have time to grieve,” explains Joe. “Interest rates were high, and the family was leveraged. It was a tremendous responsibility.” The first thing they did was make a pact to stick together through thick and thin, a vow that is still apparent today. “After [our father’s] death, we said we would get along as a family, as brothers,” Joe continues. “We had to fight the competition instead of fighting amongst ourselves.”

They immediately got down to business, working with their vendors to allow them to expand their beer and liquor distribution company. Just two weeks after George Sr.’s passing, siblings Joe and Gavin headed to Colorado with their mother to try to convince Joseph Coors that the beer distribution was still in good hands. Their earnestness impressed the beer magnate, who told them to go back to New Mexico and run their business. Armed with Coors sanction, they convinced other suppliers of their abilities as well.

With alcohol as their core business and a large enough load to shoulder, the Maloofs hit a point where they had to decide which enterprises were moneymakers, and which were expendable. Considering the Rockets had just lost the 1981 NBA finals to the Celtics in a series that wasn’t even telecast nationally during primetime, the team was the first to go, but the brothers always kept it at the back of their minds that they would eventually get back into the game.

Nevada Roots

Four years after selling the Rockets, the youngest Maloof (George Jr.) headed to Sin City to play football for University of Nevada Las Vegas. He admits the experience wasn’t entirely academic. “I’d go to class, play football, eat, and then go gamble until two in the morning.” He became enthralled with the Vegas lifestyle, and with the blood of a budding entrepreneur coursing through his veins, knew he could make a go at it in this fickle town. Just three months after graduating, he approached his family with a plan for a Las Vegas casino that catered to the locals as opposed to tourists and convention-goers.

[highlight_text] “We’d like to stay on top of our game, which entails continuing to execute the properties we have now, and making sure we continue to service our customers and take care of our employees.” [/highlight_text]

The family listened to the plan and fully supported the vision, with the exception of George Sr.’s sisters, part-owners of the Maloof Corporation. “They were scared,” Joe recalls. “But we know how to treat customers.” Instead of allowing the women to present a roadblock, Colleen and her sons bought them out and moved forth with the plans for a locals casino that would compete with the more established brands.

Looking back, it is clear that this was a turning point, but as the saying goes, hindsight is always 20-20. At the time, the move into the casino realm just extended the family even further. The Maloofs bought land in North Las Vegas, and then went about the daunting task of convincing lenders that their business plan made sense. Over a period of four years, they made pitch after pitch, even going so far as opening a small casino in Colorado to prove they had the wherewithal to run a successful gaming business. The banks weren’t convinced, standing firm in the belief that Vegas was a tourist’s market, and locals didn’t gamble. Besides, what did four young boys and their platinum-haired mother know about running a Vegas casino?

Evidenced by the Palms, obviously they know a lot. To get started, the Maloofs agreed to guarantee the $30 million loan for Fiesta Casino themselves. If the casino went bust, they would be left with nothing. By the late 1990s, George Maloof had turned Fiesta Casino into a local’s favorite. The key? Programming the slot machines to give better odds of winning.

After expanding the casino twice (once in 1996 and again in 1999 for a total cost of about $70 million), the Maloofs sold to Station Casino for $185 million. An image of the Palms was unexpectedly forming in George’s mind throughout this process. He took what worked from the Fiesta and applied it to a property just off the Strip, one that captures the glamour of Las Vegas while attracting visitors and locals alike.

Prior to its lavish gala opening, the Palms was already the talk of the town, even garnering steady attention from the ADD-afflicted MTV crowd thanks to the Real World Las Vegas taking place in one of its renowned suites. After the season ended, George opted to not change a thing in the extravagant room, instead renting it out for $10,000 per night.

“With the Palms, we wanted to create something that could really have a theme, and could not only cater to the local market, but also to the young market that comes into Las Vegas and is more interested in nightlife than gaming.” To fill this niche, the Palms is infiltrated with top destinations, including the world’s only Playboy Club, complete with high-stakes gaming where the dealers are dressed as tantalizing Playboy Bunnies.

“The property is dynamic; it looks great on television,” George explains. This was apparent during this year’s much buzzed about MTV Music Awards (where Britney notoriously bombed.) The show took place in the Palms, and instead of the performances taking place on the stage, they were spread out throughout the Fantasy Tower’s lavish suites, giving viewers an inside look at the luxuries contained within.

Kings of the Game

Getting back into the realm of the NBA was a goal that only took sixteen years to realize. With the Rockets opening the brothers’ eyes to basketball, the Maloofs decided to negotiate for the Sacramento Kings in 1997 after deciding to forgo purchasing the NHL’s Tampa Bay Lightening. They bought the team (which came with the arena) for a whopping total of $247 million, a price that exceeded what even the most loyal fan thought the flailing team was worth.

After opting against moving the Kings to Vegas (a town absent of any professional sporting teams), the Maloofs went to work on building the trust of fans that had become disenchanted with the poorly performing Kings. They did so by putting forth the idea that had been running strong in the family since their father had instilled it during childhood: excellent customer service goes a long way.

Prior to his untimely passing, George Sr. was constantly teaching his sons the value of customer care. On one memorable business trip from New Mexico to Milwaukee, Joe recalls his father asking the sons to rate every single person who had the opportunity to provide services. “We came into contact with fifty-seven people that had an opportunity to service us, to take care of us as customers. Out of all of those people, there was only one lady in a downtown café that went out of her way and took the extra step to take care of us. That’s not to say the others weren’t nice, but she just took it the Maloof way. And that taught me at an early age what customer service was all about.”

Gavin continues, “We’d like to stay on top of our game, which entails continuing to execute the properties we have now, and making sure we continue to service our customers and take care of our employees. They may be simple philosophies, but they have worked for the Maloof family for more than one hundred years, passed down from my grandfather to my father to me and my brothers.”

Today, they take customer service to a whole new level, going so far as to provide their cell phone numbers to fans at the arena. “We like to be hospitable to people,” Gavin explains, “to take care of people-that’s why we were put here, to make sure that when people come to Maloof venues, they enjoy themselves.”

The idea has been embraced by the fans, who have declared the Kings as number one in overall fan experience by a survey conducted for the NBA by J.D. Power and Associates. It’s the brother’s “cool” attitude that has allowed them to climb to the top of that industry. Example? When Chris Webber’s-the star of the Kings-contract expired, there was talk of him jumping ship. The Maloofs put a stop to that with an innovative marketing strategy. A billboard went up by the local freeway featuring an image of Joe riding a lawn mower, with a message that said, “Chris, Joe will mow your lawn if you stay. Signed, Gavin.” It was a move that delighted fans, and moved Webber enough to have him extend his contract. Since the Maloofs have taken ownership of the team, they have gone on to win two Pacific Division championships.

The Maloofs also recently procured the Sacramento Monarchs, the local WNBA team, who have since brought glory to the town with their 2005 championship. And while the Kings have yet to bring home a title, that is the ultimate goal.

Maloof Productions

While Joe and Gavin are busy with the Sacramento Kings, and George Jr. has his hands full with the Palms, their brother Phil, a former New Mexico senator, is busy expanding the Maloof empire into the entertainment sector. Maloof Productions, founded in 2004, has a hand in movies, television, and music. While still a small company, their expansion plans will soon have them on the same playing field as some of the larger conglomerates. This is thanks in part to the innovative marketing strategies that are created by the synergies between all of the brothers’ various companies.

Think of it this way: Maloof Productions makes a movie. Maloof music provides the soundtrack, which was recorded in the Palms recording studio. The red-carpet premiere of the movie? Oh, that takes place at the Palms, of course. And throughout all of this, the lucky Sacramento fans are bombarded with information and promotions that highlight the film. The question begs to be asked, what else could they possibly do? “I don’t know what other markets are left,” laughs Andrew Jameson, president of Maloof Productions. “They’ve got beer distribution, they’ve got the professional sports franchise, film, television, music. Who knows where they are headed! The sky is the limit with these guys.”

Family Ties

Throughout the process of growing their family’s sizable holdings into an empire that includes being the largest shareholders in Wells Fargo, the brothers have retained their enthusiasm as well as their love for each other. Need proof? Sitting courtside at nearly every King game is Phil and George, wholeheartedly cheering them on. Gavin explains how it all works: “Joe and I run the Kings division and our big distributorship; George runs the Palms, and Phil handles the entertainment division. It’s nice because we’re all in our own areas, and we respect each other’s area.”

George seconds that notion, saying, “We’ve always supported each other and we have the greatest respect for one another.” Their ability to work together as a family has brought them each to the top of their industry, while the synergies they create further propel them into the category of greatness.