Station Casinos, also known as Red Rock Resorts, is contemplating constructing a new casino in Las Vegas. This decision would come as a surprise as the company still has four casinos that have been closed since earlier this year.
Since being compelled to shut down in March to curb the spread of the coronavirus, Texas Station, Fiesta Henderson, Fiesta Rancho, and Palms have not yet reopened.
Station Casinos, despite existing circumstances, is already considering a fresh avenue for progress: constructing a new casino in Nevada.
New Nevada casino, new opportunity for revenue
It isn’t exactly groundbreaking news that Station Casinos is building a branded property.
The casino operator has held ownership of several land parcels for over a decade, including an area near Durango Drive and Roy Horn Way just off the 215 Beltway. Station has been in possession of this particular plot for two decades.
In 2019, Station Casinos revealed its intentions to sell its land during earnings calls. However, the company had a change of heart earlier this year, deciding to withdraw the land from the market as the coronavirus began to sweep across the US. The decision was driven by fears that a potential recession, triggered by the global pandemic, could cause the land’s value to plummet.
Analysts in the gaming industry believe it is the opportune time for Station Casinos to develop some of their currently unused land. Chad Beynon, a Macquarie gaming analyst, stated that the plot at Durango is one of the last appealing return opportunities in the Las Vegas Valley, due to its prime location, proximity to a population base, and absence of competition.
The Las Vegas Review-Journal has reported that Station Casinos is in the process of developing a concept and design for a new property, to be located on Durango near the 215 Beltway.
Station Casinos owns lots of land in Las Vegas
JP Morgan suggests that constructing on the Durango land would profit a casino operator focusing on locals, as reported by the Las Vegas Review-Journal. The journal obtained an analyst note from JP Morgan stating that this is the “most underserved” area of the Las Vegas local casino market.
Station Casinos owns a total of 380 acres of undeveloped land in various parts of Las Vegas.
- Tropicana Avenue near Las Vegas Boulevard: 105 acres
- Durango Drive and the 215 Beltway: 71 acres
- Flamingo Road and Town Center Drive: 58 acres.
- 57 acres located at the intersection of Las Vegas Boulevard and Cactus Avenue.
At this time, there are no indications that Station Casinos will utilize or sell any of the other land plots.
Station Casino re-introducing Durango Station
Station Casinos announced in 2008 that they planned to construct Durango Station, with the intention of breaking ground in 2009 and completing the project by 2011.
Durango Station planned to construct two hotel towers. The initial phase of construction was set to feature a hotel tower comprising 201 rooms, supplemented with amenities found at other Station Casinos properties in Las Vegas. The second phase included the addition of another hotel tower with 500 rooms.
The plans for Durango Station included:
- Casino spanning 87,000 square feet
- Cinema hall
- Arcade
- Different restaurants and retail stores
- Complex of pools
The original plan most notably featured a 190,000-square-foot retail development. This was intended to be a larger version of “The District” at Green Valley Ranch, a Station Casino property.
However, the Durango Station project never materialized. The country fell into a recession and in 2009, Station Casinos filed for bankruptcy protection. By 2011, Station Casinos had successfully emerged from bankruptcy.
Four Station Casinos properties remain closed
Four casinos under Station Casinos have yet to reopen since March.
Station Casinos officials have not yet set a reopening date for these properties. In their most recent earnings call, they stated their intention to reassess the performance of their initial reopenings post-crisis, as well as the recovery state of the Las Vegas market and overall economy, before considering the reopening of the remaining properties.
The spread of coronavirus throughout Nevada has not brought about any changes. Despite 2018 rumors about Station Casinos selling properties, there are currently no plans to divest from these properties. Frank Fertitta, the Chairman and CEO of Red Rock Resorts, clarified in May that there was no basis to the speculative sale rumors.
Palms could be attractive to buyers
Should there be a sale, it’s likely that Palms will be the first to go. It’s a fully renovated casino-resort, with Station Casinos having invested $690 million over two years in refurbishing the property. This makes it a ready-to-operate solution for a casino operator who’s new to Las Vegas.
Secondly, the proximity of Palms to the Las Vegas Strip is a significant advantage. This strategic location could attract not only locals but also tourists. This is another positive aspect for a new operator aiming to enter the market.
Finally, here’s a piece of information from the JP Morgan note:
The Fertittas made it clear that they don’t view Palms as a personal investment, nor do they consider it as a fundamental part of their portfolio.
Owners will find it easier to sell the property if they do not have a personal connection to it.
A national casino operator looking to expand their portfolio might find the location of Palms more appealing. Texas Station, Fiesta Rancho, and Fiesta Henderson are not as conveniently located near the primary tourist corridor of the Vegas Strip.
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