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Deliberate growth amid boom reflects Eureka owner's heritage

24 August 2009

Las Vegas Sun

MESQUITE, Nevada — The fortunes of Greg Lee's Eureka Casino Hotel have closely traced the growth of this town.

When Mesquite was adding subdivisions and residents, Lee was adding a steakhouse, lounge and other amenities to his resort.

The only Asian casino operator in Nevada, Lee is a self-described "believer in the vision of Mesquite," but these are tough times for optimists. Gaming revenue in Mesquite fell 12 percent last year, and another 18 percent so far this year.

Like the rest of the industry, Lee's casinos have been hurt by the downturn. But because he has followed a business philosophy passed down from his immigrant grandfather — operating with virtually no debt — Eureka has been spared the dire decisions forced on his closest competitor, Black Gaming.

That company, staggering under the debt it took on to expand, closed its Oasis casino in December and laid off hundreds of employees. (Some were hired by Black's other two casinos in Mesquite.)

Lee said revenue at the Eureka is flat but the casino and hotel continue to operate as they have since opening 12 years ago. Plans for expansion, however, are on hold.

Of his low- or no-debt strategy, Lee, 45, said his family taught him it's easier to get accustomed to having more than having less.

• • •

Lee's business philosophy can be traced to his grandfather, Joe Shoong, one of the country's early Chinese-American success stories.

At 20, Shoong left his village in Guangdong, China, for the United States. After working for a year in a garment factory, he founded in 1901 what would become the National Dollar Store chain. Without loans, it grew to 54 stores at the time of Shoong's death in 1961.

Along the way Shoong became one of the country's first Chinese-American millionaires, highest-paid business executives and a well-regarded philanthropist. A 1938 Time magazine article referred to him as the "richest, best-known Chinese business man in the U.S." (Joe Shoong Park, near Charleston and Lamb boulevards in Las Vegas, is named in his honor.)

Lee's parents worked in real estate development. But he set his sights on a career in law.

After graduating from Harvard, as his father had, he earned a law degree from the University of Southern California and embarked on a career in corporate law at a midtown Manhattan firm. "It was what I thought that I'd want to do — live in New York City and work for a firm where you wore nice clothes and shiny shoes," Lee said.

But after only a year he began to question whether it was his calling. Though he found the law interesting, the every-man-for-his-own-glory attitude that pervaded the firm bothered him.

In 1995, he left the firm and moved to Las Vegas, where his parents had relocated to take over a small neighborhood casino.

His parents were also working on plans for a bigger resort in Mesquite. The family estimated the project, to be built on land just off Interstate 15 that they had purchased in the late 1980s, would cost more than $20 million.

The family pooled its cash to fund what would become the Eureka Casino.

• • •

The Lees were latecomers to Mesquite.

After I-15 was built, gaming pioneer Si Redd had recognized the farming community's potential as the first stop in Nevada for traffic from Utah. In 1983, he turned a sleepy truck stop into the Peppermill, now the Oasis. In 1990, Randy Black opened the Virgin River. Black Gaming now owns three Mesquite casinos.

In 1997, the Lees opened Rancho Mesquite — a boxy casino with 500 slot machines, one restaurant, two bars and a 215-room hotel next door.

It was the smallest property in town. And although it catered to the freeway traffic, Lee quickly discovered that drive-in visitors weren't interested in the casino or its restaurants.

"We built a locals casino with no locals," said Lee. "It was a rough go."

Lee and his father shared their frustrations at the time with a longtime gaming industry insider who operated a casino on the Strip.

The insider asked the Lees if they knew of any other Asians in the casino business.

"My dad and I thought to ourselves, 'Well the Yasudas owned the Aladdin but they've closed. Nangaku actually never got licensed at the Dunes.' We said, 'Well, we don't know of any besides ourselves.'?"

The insider replied: "Well, do you think there's a connection?"

For the first time, the Lees wondered if racial prejudice might be hurting business.

"I'm sure they didn't see any Chinese on the street," Lee said of Mesquite residents. "But I really can't say that I felt it's been a hindrance at all."

A few local retirees and workers at other casinos sustained the Eureka in the early years.

Lee lived at the hotel. (He now resides in Las Vegas.) And he got to know his blue-collar clientele.

They liked the property "maybe for the wrong reasons," said Lee — because it wasn't crowded and they got better service. The regulars told him they wanted a nicer restaurant for special occasions, a lounge where they could listen to music, and newer slot machines.

Lee listened. He reinvested up to 10 percent of revenue and took no cash out of the business so he could add a steakhouse, lounge and new slots. He renamed the complex Eureka.

Mesquite was attracting more retirees. The town's population doubled, from 10,000 in 2000 to 20,000 in 2008.

Lee struck a deal with Mesquite's Wolf Creek Golf Club as the lodging partner for its golfing packages, which attract 40,000 players a year.

Randy Black's Virgin River was Mesquite's most successful casino from about 1995 until 2003.

"That's when we passed them," Lee said.

From 2005 to 2007, Lee spent $30 million to expand the casino and add slot machines, a bar, back offices and the buffet. He spent another $3 million updating the hotel.

Following the family tradition, he used minimal leverage for the renovations. Lee secured a $28 million revolving line of credit but has left it largely untapped.

"The other hotels were getting worn down and dying on the vine," said Steve Sargent, Wolf Creek's director of golf. "To the Eureka's credit, they were proactive and renovated their facility."

• • •

Lee remains optimistic about Mesquite's future and the future of the Eureka.

Once growth resumes, Del Webb's Sun City retirement community and other planned developments will lure residents from "as far as you can see," Lee said.

He envisions another expansion to the Eureka — a spa, bungalows, another 100-200 hotel rooms and a bigger garden to host retreats and weddings.

When that time comes, Lee will again do it with little debt.

"The biggest discipline is determining how much investment will pay off," Lee said. "If we make a mistake and build something that does not add to — or reduces — profits, the virtuous cycle of investing for the future is destroyed."

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