Thursday, Jan. 15, 2004 | 11:02 a.m.
Station Casinos Inc. today said its newest and most expensive locals' casino will cost $450 million to $475 million -- up to $50 million more than the company's Green Valley Ranch Station casino in Henderson after that property's recently announced $110 million expansion.
During a conference call with investors today, Station Casinos executives revealed the first financial details of Red Rock Station since the hotel-casino was approved this month by the Clark County Commission for a site at Charleston Boulevard and the I-215 Beltway in northwest Las Vegas near Summerlin.
The casino will have 2,700 slot machines and 60 table games -- about 310 games more than Green Valley Ranch, one of the company's most profitable regional casinos. Red Rock Station will initially be built with 400 rooms, which will be 100 rooms less than Green Valley Ranch after it adds an expected 296 rooms by the end of this year. Green Valley Ranch, the company's most luxurious casino to date, opened in 2001.
In its first year of operation, the Summerlin hotel-casino is also expected to generate from $60 million to $65 million in cash flow and add about 6 to 11 cents in incremental earnings per share. By its third year of operation, Red Rock Station is expected to generate $80 million to $85 million in cash flow and add 25 cents to 31 cents in incremental earnings per share, the company said.
Fulcrum Global Partners casino analyst Joe Greff, who has a "buy" rating on Station Casinos stock, said the projections were higher than expected.
"To us, the story remains simple -- attractive supply-demand dynamics in the locals' market plus a robust development pipeline of new projects and developments provide for unparalleled growth in the gaming sector," Greff wrote in a research note to investors today.
Green Valley Ranch is earning a 19 percent return on investment after only two years -- returns that are generally achieved by the company's other locals' casinos over time, Chief Financial Officer Glenn Christenson said.
Red Rock's location near the affluent Summerlin community is superior to the Green Valley area, he said.
The Summerlin area has fewer neighborhood slot machines and a greater immediate population than Green Valley, he said. Average household income in Summerlin is about $75,000 per year compared to $67,000 per year in Green Valley, he added.
"Red Rock Station will be the premier property in the Las Vegas locals' market," Chairman and Chief Executive Frank Fertitta III said. "The project represents the next level in the evolution of regional entertainment complexes for locals. We expect that the quality and location of Red Rock Station will drive business from all over the valley."
The company reiterated that the casino will begin construction in mid-2004 for an expected opening in late 2005 or early 2006.
In a compromise with surrounding residents, county commissioners on Jan. 7 approved the development of a 1,000-room, 198-foot hotel tower, smaller than Station Casinos' proposed 1,500 rooms at 300 feet.
Some residents, environmentalists and other groups had fought the project on the grounds that the site had originally been planned for buildings of no more than 100 feet high and that a large resort would block views of Red Rock and mar the landscape.
During a conference call, company officials didn't discuss the compromise and instead focused on the company's expected earnings for Red Rock and other upcoming projects.
Station Casinos officials said they were optimistic about deals with proposed tribal casinos in Michigan and the San Francisco Bay Area that are awaiting state compacts as well as land in trust from the federal government. The company expects future opportunities to run casinos for Indian tribes, they said.
Economic trends are improving in Las Vegas, with continued population growth, a decline in unemployment and strong home sales, Christenson said.
The company also announced plans to issue $325 million in bonds to refinance existing bonds and reduce bank debt. The debt, along with the company's cash flow, will be used to develop Red Rock Station and other projects such as investments in locals' casinos and management contracts with Indian tribes.