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Gaming Guru

Rod Smith
 

Going Good At 25

8 March 2004

LAS VEGAS -- A quarter-century after it opened, the Barbary Coast is sitting on a prized piece of real estate with perhaps the most potential for Strip redevelopment, analysts agreed Friday.

The Victorian-themed property next to the Flamingo was the first property developed and managed by Michael Gaughan, now owner of Coast Casinos.

"That's one of the most valuable corners on the Las Vegas Strip. It'll be hard to develop, but it's absolutely a premier opportunity at the ideal intersection," Applied Analysis spokesman Brian Gordon said.

Michael Gaughan, son of gaming industry legend Jackie Gaughan, opened the $11.3 million, 150-room Barbary Coast in March 1979. The property is celebrating its 25th anniversary through March.

Deutsche Bank analyst Andrew Zarnett said that even though the casino was developed 25 years ago and does not measure up to the quality of neighboring megaresorts, "the location is still the best in Las Vegas. Because of that, the property retains a significant amount of value (compared with other vintage casinos in Las Vegas)."

But it may fall to Boyd Gaming Corp., after its merger with Coast Casinos is approved, to realize the full potential of the property.

Zarnett said Boyd Gaming will have the option of redeveloping the property as a niche Las Vegas casino, much like the Palms or the Hard Rock, or selling it to the highest bidder.

"Caesars Entertainment would make the most sense because they could meld it into their neighboring (Flamingo) property," he said.

Bill Boyd, chairman of Boyd Gaming, declined to comment on the opportunities his company has with the Barbary Coast because it is in a U.S. Securities and Exchange Commission quiet period as it arranges financing for the $1.3 billion merger.

However, he said that along with the Stardust, which Boyd Gaming already owns, "it gives us a location on the Strip in another (key) location on the Strip (that will prove pivotal once the merger is completed), subject to regulatory approvals," he said.

The Gaughan family named their first property outside downtown Las Vegas for the infamous North African coast that was home to legions of buccaneers and pirates who took on naval armadas one ship at a time.

Gaughan said that by its third year of operation, the Barbary Coast was generating $15 million a year in cash flow and that it has continued to pump out profits for more than 20 years.

The Gaughan family turned the profits from the Barbary Coast into an impressive locals casino group, one of the three biggest in Las Vegas. Today, the Coast properties includes The Orleans, the Gold Coast and Suncoast. An April groundbreaking is planned for the $350 million Southcoast.

"The Barbary Coast represented Michael Gaughan's first big venture on his own, away from the rest of the family. The Barbary was part of the Strip that catered to locals, something the place had in common with Castaways (at first) and Silver Slipper. But over time it's become almost the only locals place on Strip," said University of Nevada, Las Vegas professor and casino industry expert Bill Thompson.

Thompson said the Barbary Coast has been "golden" for Gaughan and gave him the cash flow he needed to create his own gaming chain. But his success came from his personality and his management style.

"He has followed in father's footsteps by being an on-site hands-on manager who knows players and is respected by all staff. I still remember a conversation with him about 12 years ago as he relayed information to me about how every slot machine had been performing," Thompson said.

Michael Gaughan Jr. will soon be reassigned to oversee development of the Southcoast and open the property.

Under the terms of the merger agreement, Coast will become a wholly owned subsidiary of Boyd Gaming, but with Michael Gaughan in charge.

Together, the emerging company will retain the Boyd Gaming name, have revenues of about $2 billion and will operate 17 properties with 9,050 rooms nationwide. In Las Vegas, it will operate 11 hotel-casinos with a total of 5,300 rooms.

Gaughan said for the past five years, the Barbary Coast has not been as important to the overall operation of Coast Casinos as it once was, but it has continued to generate cash flow.

"It's about a generation behind, and its limited in terms of its restaurants and entertainment. For the initial investment, though, it's still OK," Michael Gaughan said.

The Barbary Coast features 200 guest rooms and suites, a 30,000 square-foot casino and two award-winning restaurants.