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Red Rock Resorts hopes to ‘basically double’ portfolio by end of decade

Updated August 10, 2022 - 8:25 pm

Recent real estate activity and plans to demolish and sell three shuttered properties are part of Red Rock Resorts’ long-term goal to “basically double” its portfolio by 2030, company executives said Tuesday.

In a second-quarter earnings call, executives said land acquisition on Las Vegas Boulevard South and a purchase agreement for land at Losee Road and the 215 Expressway in North Las Vegas — made public days after the decision to permanently close, demolish and sell Texas Station, Fiesta Henderson and Fiesta Rancho — are part of the company’s goal to strategically build Station Casinos properties in various growing corners of the Las Vegas Valley.

“We have an unparalleled growth story that will allow us to double the size of our portfolio and position us to capitalize on the very favorable long-term demographic trends and high barriers to entry that characterize the Las Vegas locals market,” said Stephen Cootey, executive vice president, chief financial officer and treasurer of the company.

Company leadership also said that it is still early in the sale process for Fiesta Henderson, Fiesta Rancho and Texas Station, which it plans to sell on the condition that a casino cannot take their place. But potential buyers have signaled interest, Cootey said.

“We’re seeing an extraordinary amount of inbound calls in demand for those three properties,” he said.

Red Rock’s land purchase and holding strategy is not a new one, but it shows the company’s bullish attitude toward the locals market. It owns other development sites in Inspirada, Skye Canyon and at Town Center Drive and Flamingo Road in Summerlin and is developing a Wildfire casino along Fremont Street near Charleston Boulevard.

Station Casinos President Scott Kreeger noted the strategy to employees, too. In a Tuesday memo to all team members obtained by the Las Vegas Review-Journal, Kreeger encouraged employees to consider the growth for career opportunities.

“These acquisitions and developments represent the Company’s commitment to Las Vegas the continuation of our long-term strategy to expand and invest as the Las Vegas valley grows,” Kreeger wrote. “We acquire sites years — and sometimes decades — in advance of actual development to take advantage of the growth in the Las Vegas valley.”

Development is not expected to begin at any of the sites until after Durango Casino &Resort, the $750 million project located at the 215 Beltway and Durango Drive, is completed by the end of 2023. The projects’ sizes are expected to depend on the market and demand and will likely be a mix of small and large projects with the ability to expand further, Vice Chairman Lorenzo Fertitta said on the call.

Red Rock leaders have not decided which land will be developed next, Chairman and CEO Frank Fertitta III said. He told investors that they intend to watch Durango’s opening and operating results before choosing the next development site.

“We expect to basically double the size of the portfolio by 2030, is kind of what the plans are and continue to roll out new properties one after the other,” Frank Feritta said.

Q2 results

Red Rock’s second quarter performance was satisfying even in the face of economic uncertainty, executives said. Spending trends among higher- and lower-tier consumers were consistent with the first quarter, and high gas prices were not affecting local visitation or drive-in traffic from Southern California, they said.

For the quarter that ended June 30, the company reported net income of $32.4 million, 0.26 cents per share, on revenue of $422.2 million. A year earlier, Red Rock reported net income of $143.4 million, $1.12 per share, on revenue of $428.2 million in the same quarter.

The company’s net income decreased $110.9 million, but that was primarily attributed to a one-time budget line related to the company’s decision to permanently close the three properties.

Cootey said the quarter was one of the best in the company’s history when looking at same store net revenue and other cash flow measurements. The best was 2021’s second quarter, when the easing of pandemic-related restrictions and government stimulus money produced more demand for many companies.

From the first quarter to the second, net revenue was up 5.1 percent, the company said. It had record profits in its gaming segments and profitable quarters in food and beverage and hotels, the company said.

Analysts were positive on the earnings news. A report to investors issued by Joseph Greff of New York-based J.P. Morgan gave the stock an “overweight” rating and said the report outperformed the firm’s expectations.

“All in all, the fundamentals remain sound in the LV Locals market, and we think a lot has to do with its favorable supply-demand dynamic (reduced capacity since the pandemic and population migration from CA to low tax/low cost of living areas like Clark County, NV),” according to the report.

Red Rock Resorts shares, traded on the Nasdaq exchange, closed Tuesday down 61 cents, or 1.49 percent, to $40.25 per share.

McKenna Ross is a corps member with Report for America, a national service program that places journalists into local newsrooms. Contact her at mross@reviewjournal.com. Follow @mckenna_ross_ on Twitter.

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