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Banked Station real estate on market to reduce Red Rock debt

Updated February 4, 2020 - 4:38 pm

Red Rock Resorts may part with some of the real estate it has banked for decades to leverage some of the $3.076 billion in debt the company is carrying, company executives said Tuesday.

The parent company of Station Casinos reported a decline in earnings despite a rise in income in the company’s fourth quarter.

The company, which operates several neighborhood casinos throughout Southern Nevada, reported net income of $6.8 million, 5 cents a share, on revenue of $460.8 million for the quarter that ended Dec. 31. That compared with net income of $13.2 million, 11 cents a share, on revenue of $431.5 million for the same quarter a year earlier.

In a conference call with investors, company executives said they expect to move some of the real estate the company has — eight properties totaling more than 500 acres scattered around the valley — by late 2020 or early 2021.

“I’m not saying we’re going to liquidate our entire land portfolio,” Executive Vice President Steve Cootey said during the call. “I think the point is that the effort is underway to monetize some of these assets and we’re evaluating each parcel to determine the highest and best use of each of those parcels and how we extract value out of these non-income-producing assets. Which assets do we want to continue to hold? Which do we want to sell to help pay down debt?”

Real estate value higher

He said the good news for Station is that the land’s value has increased since it was purchased. The company currently has two parcels on the market — 56 acres just south of South Point Casino at Cactus Avenue and Interstate 15, and an 88-acre parcel in south Reno.

The company has other land, including: 71 acres at Durango Drive and the 215 Beltway in the southwest valley; 58 acres at Flamingo Road and Town Center Drive in Summerlin; 45 acres at Via Inspirada and Bicentennial Parkway in Henderson’s Inspirada community; and about 30 acres on Fremont Street just south of Charleston Boulevard, former home of the Castaways.

“While we have an unbelievable pipeline of eight locations and nearly 500 acres, we’re going to keep the core holdings and look at monetizing properties we wouldn’t get to for a very long time,” CEO Frank Fertitta III said.

Land sales would be used to extinguish debt, some of which was accumulated during the company’s $192 million renovation of its flagship Palace Station and $690 million renovation at the Palms completed last year. Executives said except for the completion of some hotel rooms at Red Rock Resort, most of the company’s assets are in excellent shape and won’t have to be addressed for awhile.

Less ‘Kaos chaos’

Officials say operations at the Palms are stabilizing after the company decided to close the Kaos nightclub in November. They say revenue streams are gradually improving in hotel, slot machines and table games with the nightclub dark.

Fertitta said it’s taken longer than expected for the Palms to gain traction with customers, but Cootey added that operations are stabilizing with the “Kaos chaos” behind them.

Fertitta said closing Kaos “was absolutely the right thing to do,” as the company got out from under an unprecedented two-year, $60 million residency with DJ Marshmello.

The company also has seen positive growth in its core restaurants, the Palms cafe and buffet, and that the new fine dining additions should improve as the company better utilizes the Pearl theater and other assets.

The Palms, which considers Strip tourists as well as locals as its prime market, has seen no operational impact as a result of the coronavirus, executives said.

Strat competition

Asked by an analyst if the Strat’s $100 million in renovations completed recently has had an impact on Palace Station’s operations, Fertitta said it’s insignificant.

“I’m sure we overlap with a lot of properties, but I would think it is very insignificant,” he said.

Added Cootey: “There’s a competitor on every corner so we’re very sensitive to what our competitors are doing. We do think the locals customer moves from place to place. Fortunately, we’re situated so that we have the best assets and the best locations and 90 percent of the population is located within five miles of one of our places and location is everything.”

Red Rock Resorts stock climbed $1.90, 7.7 percent in trading three times the average volume on Tuesday. After hours, it dipped 71 cents, 2.7 percent, to finish at $26 a share.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.

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