The Navegante Group. Casino Resort Development & Management

Gambling regulators gave initial approval Wednesday for the $151 million sale of the Reno Hilton to Grand Sierra Resort Corp., which plans to spend another $140 million overhauling the property.

Among the plans are a Dolce restaurant backed by celebrity investors, including Ashton Kutcher of "That 70s Show," a nightclub featuring raunchy Las Vegas comedian Jeff Beacher, and the largest indoor water park in the U.S.

After buying the largest Washoe County hotel-casino from Harrah's Entertainment Inc., Grand Sierra Resort also is converting the top 11 floors of the 25-story building to 825 hotel-condominiums. The company has about 280 signed contracts for units, and is working another 80, GSR Chief Executive Thomas J. Schrade said.

"Now we are focused on the acquisition, but following that we will move aggressively on the next phases of development," Schrade said of further plans to develop condominiums and retail on the Hilton's 145 acres along the Truckee River.

The Gaming Control Board approved the sale after delaying a vote in January because of questions about financing.

"The financing was not ripe in the sense we could act on it," Gaming Control Board Chairman Dennis Neilander said Wednesday before unanimous approval of the gaming license. "It appears the funding is adequate."

The three board members had several questions regarding when the money in the escrow account would be available and asked for a guarantee that $3 million would be accessible by Larry Woolf, chief executive of The Navegante Group, who is leasing the casino from GSR for three years.

Among the issues the board must consider is whether the casino has the financing to operate following the sale. In addition to the $3 million, Woolf also will take control of all the money on the casino floor and in the cage when the sale closes.

"This is a pretty ambitious project," Neilander said. "We wish you success. But as long as he gets his $3 million, there is not a risk to the state."

The Gaming Commission will have final say on the issue at its June 22 meeting in Carson City, and liquor and gaming licenses are needed from Reno City Council, officials said.

Work on the condominium conversions will begin in September if the sale closes, Schrade said. The property wants to keep its nearly 2,000 hotel rooms full during the busy summer tourism season, he said. The company will seek bids to build the water park in early 2007, and construction of the park could take 24 months, he said.

"All the first phase projects, the Dolce restaurant, will move fairly quickly," Schrade said.

Once hotel-room conversions begin, Schrade expects to finish one floor a week, he said.

Prices range from about $235,000 for a 427-square-foot unit to more than $1 million for a suite, according to a GSR price sheet, and have risen since Grand Sierra began taking contracts, Schrade said.

The condo-hotel units will be rented out while the owners are away, but GSR officials have refused to discuss what kind of revenue the owners could see from the arrangement, citing Securities and Exchange Commission rules.

Condo-hotel units can't be occupied for more than 28 days at a time.

At least one of the nearly 300 people who have put down deposits is backing out of the project. Sparks resident Terry Zheng put down $12,000 for a unit, but filed a complaint with the Nevada Department of Business and Industry claiming the kitchen had been cut from the floor plan after he signed a contract. He said GSR denied his request for a refund.

After the Control Board meeting, Schrade said he knew of Zheng's complaint, and planned on refunding his deposit. "We're working to address this with him," Schrade said. "We think it's without merit."

Later Wednesday afternoon, Zheng said GSR had contacted his attorney, and agreed to refund the money if he withdrew his complaint with the state.

Grand Sierra Resort is getting a $203 million loan from Connecticut investment firm Amaranth LLC, a $20 million line of credit provided by CIBC World Markets and First National Bank of Nevada, and is using about $35 million of its own equity, Schrade said. Money from the closing of condo sales also will be used to redevelop the project, he said. But condo sales can't close until Grand Sierra takes possession of the building.