Red Rock Resorts executives on Tuesday defended the permanent closure of three casinos, while touting new development that will double its portfolio in Las Vegas by 2030.
During a second-quarter earnings call, Red Rock Resorts CFO Steve Cootey said they’re fielding a lot of calls from parties interested in the three closed properties-Texas Station and Fiesta Rancho in North Las Vegas and Fiesta Henderson.
“While these properties have been an important part of our business for many years, our capability to recapture the majority of the gaming play from these properties has made the reopening of these properties uneconomic,” Cootey said. “While the decision was difficult, it was the correct one and will enable the company to move more quickly to develop the next generation of Station Casinos’ resorts for the residents of visitors to North Las Vegas, Henderson and the rest of Las Vegas valley.”
Cootey noted that Station Casinos recently paid $172.4 million for 127.7 acres of additional land south of their existing parcel at the Las Vegas Boulevard and Cactus Avenue, which is south of the South Point Casino.
“We are excited about the potential of this site as a local and regional destination casino resort and look forward to setting our plans for this parcel in the future,” Cootey said.
Red Rock Resorts has also signed a purchase and sales agreement and is “conducting due diligence” on a 67-acre site master planned for a casino resort in North Las Vegas at Losee Avenue and the 215 Beltway, Cootey told Wall Street analysts.
“These two acquisitions are a continuation of our 46-year history of growth through the purchase of gaming sites located in high-growth areas with superior ingress and egress among major beltways in the Las Vegas valley,” Cootey said. “We are currently working through the planning, entitlement, and zoning process for these properties, which would be strong additions to the robust development pipeline which will fuel the next chapter of growth for Station Casinos.”
Earlier in the day, the company issued a memo to employees explaining future growth potential with the land acquisitions and its $750 million Durango Station casino under construction in the southwest valley, expected to be completed by the end of 2023.
Executives told employees the acquisitions and developments show the company’s commitment to Las Vegas and are part of their long-term strategy to expand as the city grows. The memo said that the company acquires sites years and sometimes decades in advance of actual development to take advantage of the growth.
In addition to the sites on Las Vegas Boulevard South and in North Las Vegas, the memo mentioned sites in the Inspirada subdivision in Henderson, Skye Canyon in northwest Las Vegas, and a site near Town Center Drive and Flamingo Road in Summerlin.
CEO Frank Fertitta III said they want Durango Station to open and to see the operating results before proceeding to other projects. “We want to get Durango open and we’ll be ready to start on the next project after that,” he said. “We expect to double the size of the portfolio by 2030 and continue to roll out new properties one after the other.”
Cootey said they’ll go forward with entitlement and zoning of its properties, so when they open Durango Station ,they have options to go to any one of their seven future sites.
“It’s consistent with the strategy we’ve had for a long time,” said Lorenzo Fertitta, vice chairman of the board of directors. “We’ve actually owned the Durango property for more than 20 years. On the piece of property on Losee, we think that longer term, that’s going to be a tremendous location, because of the growth that way. This ensures the company has this growth pipeline for years to come. Our strategy is consistent with what we’ve done in the past.”
Lorenzo Fertitta said the decision on a pecking order of the future projects would depend on demographics and where they see the demand versus supply. The company is working on plans for the Inspirada and Skye Canyon locations, he said.
“It’s just a matter of our team working on entitlements and making sure we’re completely up to date on what’s going on in the real estate market in Las Vegas and where the growth is going,” Lorenzo Fertitta said. “We’re looking at the long-term view of where this company is going and our ability to multiply the size of the company. The way we’re going to do it is the way we built the company – the development of greenfield projects. In order to be successful there, you have to control the real estate and have a pipeline for development.”
Frank Fertitta said some of the projects would be on par with Durango Station, while some would be smaller and site-dependent.
“All of the projects are planned to be able to expand over time, so even though some of these projects may start out to be smaller than Durango, they’ll be able to grow to Durango-plus as the market demands,” Frank Fertitta said.
Lorenzo Fertitta said they’ll design properties with an expectation of hitting their historical return of 20% on investment capital.
Red Rock reported net revenues of $422.2 million for the second quarter, a decrease of 1%, or $5.9 million, from $428.2 million in the same period of 2021.
Net income was $32.4 million for the second quarter, a decrease of $110.9 million, from $143.4 million year over year.
Adjusted EBITDA was $188.9 million for the second quarter, a decrease of 10% or $21.3 million from $210.2 million in 2Q/21.