On the same day Red Rock Resorts confirmed it was selling the Palms, executives announced the company will begin work on a new project next year.
The company hopes to break ground on its long-awaited South Durango Drive casino early next year, Station Casinos CEO Frank Fertitta III said Tuesday on an earnings call with investors. He offered little detail on “the timing and scope of that project” but said he expected to share more by its second-quarter earnings call.
Station Casinos’ parent company, Red Rock Resorts, announced Tuesday that it was selling the Palms to the San Manuel Band of Mission Indians for $650 million. Those proceeds could “accelerate the development” of the Durango project, Fertitta said.
The property at South Durango and the 215 Beltway has been in the works for two decades.
In 2000, the casino operator purchased 71 acres in the southwest valley, at the intersection of Durango Drive and the 215 Beltway. It had been set to open a casino with a 201-room hotel tower and meeting space in 2008, but the Great Recession foiled the plans.
In 2017, the Review-Journal reported that the site had signage that advertised an upcoming Station Casinos property with 1,000 rooms and a 120,000-square-foot casino.
And on Tuesday, Fertitta reiterated the company’s position that the area is ripe for a casino, with little competition within 5 square miles and a growing population.
We like everything we’re seeing (in the area),” Fertitta said. “We think it’s very, very underserved. And we are currently very focused on the scope of the project and defining that, and basically working to make that project the most efficient project that we have ever built as a company.”
The property would focus on the company’s moneymakers — slot machines and table games — and will feature restaurants but not buffets, Fertitta said.
“The project is significantly tighter than anything that we’ve done in the past,” he said, though executives are still working to determine its cost.
The announcement drew positive response from analysts.
“We think the Palms proceeds give RRR the balance sheet and flexibility to begin the Durango project, which they’ve been considering for several years,” said Chad Beynon, an analyst with Macquarie Capital. “In our view, there’s always been strong demand in that region with an absence of high-quality product.”
Brendan Bussmann of Global Market Advisors called the project “arguably a no-brainer” because of the area’s largely underserved market.
“The Durango project probably cannot get out of the ground soon enough to serve that portion of locals market,” he said in an email Tuesday. “The 2022 groundbreaking goal is not only reasonable but also shows management urgency to push forward with this project.”
Bussmann noted that the growth in the southwest part of the valley will help spur the development because locals must drive some distance to go to a gaming facility. “The acceleration to get this product to market sooner rather than later will help solidify Red Rock’s position in the locals market.”
The pandemic continues to affect the gaming company’s bottom line, company executives said. Red Rock Resorts reported first-quarter revenues of $352.6 million represent a decrease of 6.6 percent from $377.4 million during the same period last year. It’s also a 21.1 percent decline from the $447 million reported during the first quarter of 2019.
Net loss improved to $106.6 million during the first three months of this year, compared with $177.8 million for the same period last year and $20.3 million in 2019.
“During the first quarter the Company continued to execute on its phased reopening program, and operated its first-to-reopen properties of Red Rock, Green Valley Ranch, Santa Fe Station, Boulder Station, Palace Station and Sunset Station, together with its Wildfire Properties,” Red Rock Resorts said in a Tuesday Securities and Exchange Commission filing.
Shares of Red Rock Resorts, traded as $RRR on the Nasdaq, closed at $36.78 Tuesday.