- Red Rock Resorts will begin construction on a new casino project on South Durango Drive just South of the 215 Beltway in Las Vegas.
- The area is considered to be among the ‘most underserved’ area for casino gaming in the Las Vegas Valley.
- Red Rock Resorts is the parent company of Stations Casinos.
A ton of news coming out of Red Rock Resorts’ (NASDAQ: RRR) Q1 earnings call with the most significant obviously the sale of the Palms Las Vegas to the San Manuel Band of Mission Indians and the San Manuel Gaming and Hospitality Authority. The owners and operators of the San Manuel Casino in Highland, California should be a great fit for the property and it’ll be interesting to see what (if anything) they change. The Palms never really fit into the Stations Casino wheelhouse of locals oriented properties and looked ripe for sale ever since it didn’t reopen following the two month shutdown of the Nevada gaming industry at the height of the COVID-19 pandemic.
All things considered, RRR turned in a solid Q1 this year and with the worst of the pandemic (hopefully) in the rear view mirror the rest of the year should be even better. In a clear signal that the company is out of ‘crisis mode’ they’re planning to start construction on a long dormant chunk of property on South Durango Drive in the Las Vegas Valley. Stations Casinos purchased the 71 acre parcel at the intersection of Durango Drive and the 215 Beltway in the southwest valley in 2000. The initial plan was to open a hotel/casino in 2008 but the meltdown in the Las Vegas real estate market made that untenable. The property has been dormant ever since though a sign was installed in 2017 announcing the forthcoming construction of a new casino.
The first mention of the Durango project in the stations earnings call came from Stephen Cootey, Executive Vice President, Chief Financial Officer and Treasurer of Red Rock Resorts and was in reference to the Palms sale:
With this transaction, we can accelerate the development of our Durango project located in the fast growing and underserved Southwest Las Vegas market, while maintaining a fortress balance sheet. Finally, this transaction will further reduce our interest expense costs and eliminate approximately $9.5 million of our current annual closed property carry costs of which $2.7 million was incurred in the first quarter.
In many ways, the decade plus construction delay was fortuitous. In the interim, the Las Vegas housing market has gone insane and the Durango Drive area is likely the fastest growing in the entire valley. Frank Fertitta talks about the fast growing area later in the call:
Yes. I mean, look, at the end of the day the company has a great development pipeline here in Las Vegas, primarily we’re gaining entitled A-plus location surrounding the Las Vegas Valley in the fastest growing areas of the city. We think Durango is the most prime of all of those development sites. It’s the only non-restricted gaming location on that part of the Beltway within a 5 mile radius. It’s one of the fastest growing areas of the city. We like every time we’re saying we think it’s very, very underserved and we’re currently very focused on the scope of the project and defining that and basically working to make our project, the most efficient project that we have ever built as a company, trying to take everything that we’ve learned along the way. And so we hope to be sharing those details with you guys within the next – hopefully by the next call. We’ll be able to share with you guys the timing and the scope of that project, but we would like to be in a position to be in the ground in early 2022.
Later in the call Carlo Santarelli of Deutsche Bank asks for detail on the scope of the Durango project. Frank Fertitta gives this answer:
Look, we don’t want to get ahead of ourselves. We’re going through the process. I can tell you the project is significantly tighter than anything that we’ve done in the past. We’re going to put the dollars into the place where we make money. It’s going to be a focus on slot machines and table games, our primary business. We’ll have several restaurant options. We will not have a buffet. And I don’t want to get ahead of ourselves on it. We’re going to go through and get the real cost on the project. We were bettered out. We’re going to know exactly where we are. And we want to give you guys good solid information. But I can’t tell you – anybody, go do demographics around every local casino in Las Vegas and you’ll see the Durango is an absolute, no brainer.
Like I said, it’s most underserved adult population relative to the number of gaming positions within a 3 and 5 mile radius. And so we feel really good about it, knowing what we’re able to produce out of our other protected micro markets that we’re in. And I can tell you, we’ve seen a real inflection and I’m telling you it’s real and type of persons moving to Las Vegas, where we have these locations, like Red Rock and Green Valley that are in, the suburbs where everybody wants to live. And the quality of the customer that’s moving Las Vegas and the high-end part of our business is stronger than it’s ever been.
Stations is obviously going with the ‘if it ain’t broke don’t fix it’ strategy with the new property–they’re doing the same thing that has made them successful elsewhere in the locals market. The ‘no buffet’ isn’t a surprise in the post COVID era. More on that in a subsequent article.
Finally, there’s a good chance the property will be called ‘Durango Station’. That was the working name of the project that didn’t get built in 2007 and late last year a company called ‘NP IP Holdings LLC’ at 1505 South Pavilion Center Drive in Las Vegas applied for the ‘Durango Station’ trademark. That’s also the address of Red Rock Resorts’ corporate office. It also appears that they might be kicking around the name ‘Durango Yards’.
At the time of publication, James Murphy has a long position in RRR.