Station Casinos’ planned Durango property has price tag: $750M
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Executives of Station Casinos have no plans to sell the three casinos they own that remain closed, and they now have a price tag for their planned resort at Durango Drive — $750 million.
Station’s parent company, Red Rock Resorts, reported solid third-quarter earnings Tuesday afternoon. Chairman and CEO Frank Fertitta III said the company successfully migrated business from the resorts that were closed to the six Station properties that remain open.
“I think what we have to look at is those three properties represented less than 10 percent of our cash flow even though they were one-third of the casinos and we have been very successful at moving a lot of the business at those closed properties to the six open properties,” Fertitta said. “That has resulted in the higher margins that we’re seeing — 49 percent for Las Vegas operations this quarter.”
When the coronavirus outbreak shut down Nevada’s casinos for 78 days last year, casino operators didn’t immediately open them back up. But Station opted to quickly open Red Rock Resort and Green Valley Ranch, and eventually added Palace, Sunset, Boulder and Santa Fe stations. Properties that remained closed were Texas Station, Fiesta Rancho, Fiesta Henderson and the Palms.
The company had other plans in mind for Palms, announcing in May that it was selling the off-Strip resort to the San Manuel Band of Mission Indians for $650 million. It also announced plans to move forward on the development of a casino project at South Durango Drive near the 215 Beltway.
Executives confirmed on Tuesday that the Palms deal would close before the end of the year.
Fertitta and Executive Vice President and Chief Financial Officer Stephen Cootey also provided new details about the South Durango Drive project.
Cootey said he expects the project to break ground in the first quarter of 2022 and take 18 to 24 months to complete.
The hotel-casino will cover 533,000 square feet with 73,000 square feet of casino space for 2,000 slot machines and 46 table games. It will have 200 hotel rooms and suites, 21,000 square feet of convention and meeting space and four full-service food and beverage outlets. There will also be a state-of-the-art sports book and resort-style pool.
He said while executives are continuing to refine the construction budget, he expects the project to cost $750 million. That price tag includes all design costs, hard and soft costs for construction, pre-opening expenses and financing costs.
Cootey and Fertitta also disclosed that the company intends to develop on roughly 50 acres but sell off 23 acres at Durango for the development of multifamily residences, a strategy the company intends to pursue at some of its other casinos where the company holds excess land.
“We’re planning on monetizing the back 23 acres of the Durango site. So we are taking the front 50 acres to develop and we’ll monetize the back,” Fertitta said. “Multifamily residential behind the property will be good for the property. And we’ll continue to look at each of the development sites in Vegas as we roll forward, try to build out the portfolio, double the footprint here in Las Vegas. We’ll take the heart of each of the properties and sell off the remaining real estate surrounding those development sites.”
Station prioritized improving cash flow and results from the quarter that ended Sept. 30 showed some of the best net revenue, adjusted cash flow and cash-flow margins in the company’s history.
For the quarter, the company reported net income of $117.9 million, 93 cents a share, on revenue of $414.8 million. For the same quarter a year earlier, the company had net income of $72 million, 56 cents a share, on revenue of $353.2 million, all double-digit percentage improvements.
Gaming analyst Barry Jonas of Atlanta-based Truist Securities complemented the company for its same-store cash-flow performance, but noted the company still failed to meet analysts’ expectations.
“We could see a slight (stock) sell-off tomorrow,” Jonas said in a Tuesday report to investors.
He attributed the miss of 4 percent to 5 percent to indoor mask mandates and seasonality.
“Despite the miss, we make no changes to our forward estimates, price target or rating as we see RRR as a key beneficiary of continued strength in the Las Vegas locals market and having among the most robust development pipelines in our coverage.”
Red Rock Resorts stock, traded on the Nasdaq exchange, fell 99 cents, 1.8 percent to $53.70 a share on average volume Tuesday. After hours, the stock continued to fall by 75 cents, 1.4 percent, to $52.95 a share.
rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.
