Nevada Panel Approves Red Rock License - Friday 10th of March 2006
by Howard Stutz
Las Vegas Gaming Wire
LAS VEGAS Nevada Gaming Control Board Chairman Dennis Neilander offered a prediction Wednesday at the conclusion of the regulatory panel's 90-minute licensing hearing into Station Casino's $925 million Red Rock Resort.
After the board unanimously recommended the company be granted approval to operate the planned 850-room hotel-casino in Summerlin, showering praise upon the Station Casinos management team for the company's Southern Nevada growth and finances, Neilander peered into the future.
"By 2008 (Red Rock Resort) will be the flagship property for this company," the state's chief gaming regulator said.
The resort is set to open April 18 with 3,000 slot machines and 62 gaming tables on 87,000 square feet of casino space. There will also be 11 restaurants. Red Rock will initially have 415 hotel rooms, with 435 more expected to open by December.
During the hearing, Station Casinos executives spelled out the company's 30-year growth history, starting out as The Casino, a 5,000-square-foot building with 100 slot machines, six gaming tables and 90 employees. The Casino eventually grew into the Palace Station.
"That original casino would fit into one of the lounges at Red Rock," gaming attorney Frank Schreck told the control board in his opening presentation.
Station Casinos Chairman Frank Fertitta III and his brother, company President Lorenzo Fertitta, said Red Rock Resort was the company's most ambitious development project.
The Nevada Gaming Commission will act on the Gaming Control Board's recommendation on March 23.
With its opening, Station Casinos will operate 15 Southern Nevada properties and employ 14,380 workers. The company had $1.1 billion in net revenue during 2005 and $480 million in cash flow, recognized as earnings before interest, taxes, depreciation and amortization.
"For our company, continued investment in Nevada makes sense," Frank Fertitta III said.
Station Casinos controls seven vacant potential casino sites around the Las Vegas Valley and has two expected casino locations in Reno.
Frank Fertitta III said the company is completing more than $1.25 billion in capital improvements in Las Vegas, which includes the cost of Red Rock Resort. He said the next planned development for Station Casinos will be the Aliante Station in North Las Vegas, a $450 million hotel-casino that is expected to break ground in 2007.
The company, which operates an American Indian casino outside Sacramento, Calif., has agreements with three additional tribes in California and one in Michigan.
Station Casinos Chief Financial Officer Glenn Christenson said the company had more than $1.9 billion in debt at the end of 2005 that would be used to finance development. He said 96 percent of the debt has a weighted average fixed-interest rate of about 6.5 percent.
He said the company's guidance for cash flow in 2006 was between $545 million and $565 million, which after expenses would leave about $300 million that could be used to pay down debt, buy back stock, put toward development costs, or pay out to shareholders in the form of dividends.
"We're looking for a return (on investment) somewhere between the high teens to 20 percent," Christenson said of Red Rock.
Neilander and control board members Bobby Siller and Mark Clayton said they were satisfied the company would be successful in opening Red Rock Resort.
"We appreciate the financial structure of the company, and it looks to be in excellent shape," Neilander said. "Our only caution is that you seem to have a lot on the (development) burner and you need to be aware of those things."
Siller said he was pleased the company was making plans to build casinos in the Reno market, which would help reinvigorate the Northern Nevada community.
Red Rock Resort President Scott Kreeger said he expected the average daily hotel room rate to be around $150 a night, with the property operating at 80 percent occupancy in its first year.
Lorenzo Fertitta said the property would compete directly with Boyd Gaming's Suncoast and the Rampart Casino, and may also draw business from casinos on West Flamingo Road, such as the Gold Coast, Rio and Palms, and The Orleans on West Tropicana Avenue. The growth in Summerlin, however, would boost Red Rock, he said.
"We don't see us taking too much from our own casinos," Lorenzo Fertitta said when asked how long it took the Sunset Station to gain back market share after the opening of the Green Valley Ranch Resort four years ago.
Red Rock Resort will open with 2,600 employees, 2,000 of which have already been hired. The company has shifted about 500 workers from other company casinos to Red Rock. Station Casinos executives said 37 percent of the Red Rock work force would be minorities.
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