At one of the trade shows we go to there was a magician every year. He did a very similar version of that and other tricks all show long. He was impressive to watch and I got to chat with him a bunch. I watched some tricks countless times through out the shows and years and still can't figure out how he does it. Others were easy to figure out, however he retired two years ago.
The trick he does right there is all slight of hand. He never really shuffles the deck if you look close. Its more complex than that, but that is as far as I figured out.