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Boyd Gaming evaluating REIT spin-off

Boyd Gaming Corp. is evaluating the formation of a real estate investment trust, which could spin-off all or a portion of the Las Vegas-based company’s casino holdings into a separate entity.

Boyd Gaming CEO Keith Smith said Thursday the company is working with advisors to understand the feasibility of the process. Boyd Gaming operates 22 casinos in eight states.

“The evaluation of whether to form a real estate investment trust takes a considerable amount of time and thoughtful consideration, so this will not be a quick process,” Smith said during a conference call with analysts to discuss the company’s third quarter earnings.

“There are various aspects of our capital structure that make potential value creation through a real estate investment trust challenging at this time,” Smith said.

Boyd Gaming has spent $3 million so far on the evaluation.

By law, real estate investment trusts, often referred to as REITs, don’t pay federal income taxes. With real estate as their primary source of income, REITs are required to distribute at least 90 percent of their taxable earnings to shareholders.

Penn National Gaming split off 21 or its 29 casinos and racetracks into a REIT last year.

In March, a New York-based hedge fund acquired 5 percent ownership in Boyd and analysts speculated the firm would try and push Boyd into forming a REIT.

Smith read from prepared remarks about Boyd’s REIT process and avoided answering questions about the topic from analysts. He said the company wouldn’t provide updates on the process unless the board votes to approve a transaction.

Boyd Gaming sliced its third quarter net loss by more than half while the company’s Las Vegas locals and downtown operating segments reported overall revenue increases.

Boyd said it lost $15.1 million, or 14 cents per share, in the quarter that ended Sept. 30. A year ago, the company lost $37.3 million, or 37 cents per share.

The overall results were hurt by a pretax impairment charge of $12.1 million to adjust the company’s 50 percent ownership stake in the Borgata. MGM Resorts International was re-licensed in September by New Jersey gaming regulators and its 50 percent ownership in the Atlantic City resort was restored.

Boyd Gaming’s overall net revenue in the quarter rose less than 1 percent to $738.8 million.

The company’s Las Vegas locals market saw overall revenue increase 1 percent, while revenue from the company’s downtown Las Vegas casinos rose 1.3 percent. Revenue declined in Boyd’s Midwest and South property segments.

“This was a solid quarter for our operations,” Smith said. “Growth resumed in our Nevada business, as our Las Vegas Locals and Downtown Las Vegas operations both achieved positive (cash flow) comparisons.”

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.

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