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Arnold M. Knightly

Entrepreneurs: Success on tap

18 June 2007

LAS VEGAS, Nevada -- When Blake Sartini started Golden Gaming in 2001, the company was a small slot-route operator. More than five years later, the company has grown from 44 employees to about 2,000 and widened its slot routes, added a new line of branded pubs, and operates some casinos and manages other casinos.

Sartini, Golden Gaming's president and chief executive officer, said the company has grown in directions he had not envisioned when he started it. For example, Golden Gaming just added its 44th tavern, in Henderson under its upscale Sierra Gold brand.

"When I stepped down (as Station Casinos chief operating officer) in October of 2001, initially I was focused on the routes," Sartini said. "At that time I had no definite direction of where I was going to take the company."

Sartini paid Station Casinos around $14 million for Southwest Gaming Services, Station's slot-route subsidiary. Southwest Gaming included 80 accounts and 900 machines.

He renamed the company Golden Gaming.

It is privately held by Sartini and his wife, Delise, sister of Station Casinos Chief Executive Officer Frank Fertitta III and President Lorenzo Fertitta.

Golden Gaming is Nevada's largest tavern owner with its PT's brand of pubs. The company is also the state's third-largest slot route operator. The slot operations have grown to approximately 2,500 machines in more than 200 locations.

"I'm not surprised at the success he's had," Lorenzo Fertitta said. "He's very experienced and talented in the gaming industry. The last five years have proved that out."

The company's casino interests expanded in October to four with the purchase of the Pahrump Nugget. In January, Golden Gaming began a two-year contract to manage the casino at the Hard Rock Hotel.

"They control a large share of the slot inventory in the market and appear to be continuing to expand that business both within slot-route operations as well as outside into other ventures," said Brian Gordon, a principal at Applied Analysis, a Las Vegas financial consulting firm.

Because the company is privately held it is hard to gauge how well financially the company is doing beyond its size and pace of growth, Gordon said.

Sartini looked within Station Casinos' ranks when forming Golden Gaming's first management team; Chief Financial Officer Rod Atamian was Station Casinos' vice president of financial services, Golden Route Operations President Brad Pederson is Southwest Gaming's co-founder, and Vice President of Operations Stephen Arcana was food and beverage director at Sunset Station and Texas Station.

Sartini continues to gather talent from Station Casinos and other gaming companies. For example, Golden Tavern Group operations director Todd Kinesh is the former beverage operations director at Treasure Island.

Golden Gaming Vice President of Marketing Christopher Abraham is former associate vice president of marketing at Station Casinos.

"He's got a very deep team of experienced casino guys," Lorenzo Fertitta said. "That's why they've been able to accomplish as much as they have."

Slot operations growth spurred Golden Gaming's expansion into taverns. The company agreed in 2002 to buy PT Pubs, a chain with 23 taverns, for an undisclosed amount.

"When the PT's opportunity came about we studied that quite a while," Sartini said. "We decided that was a natural extension of the slot route."

Sartini envisions opening four taverns per year, mainly in Southern Nevada where it now owns 36 taverns. The company opened two new taverns under the PT's Gold brand earlier this year and is scheduled to open a third in September.

"Our business plan has been to grow rapidly and establish ourselves in the newer parts of the valley," Sartini said. "As Las Vegas becomes more metropolitan and continues to grow as a major city, taverns are going to become a more important component to that growth."

A couple of years after entering the tavern business, Golden Gaming expanded into casino ownership. It acquired three casinos in Black Hawk, Colo. in 2004.

The gaming-only properties, 38 miles northwest of Denver, have a combined 2,100 slot machines and about 800 employees.

Golden Gaming followed with the purchase of the 70-hotel room, 63,000-square-foot casino Pahrump Nugget.

Renovations to the exterior and some restaurants have already taken place at the Nugget. The property has 18 additional undeveloped acres that the company is considering for a master-plan expansion.

Golden Gaming has land in Carson City that will be developed for a new casino. The project should break ground in the next two years.

"Our deal flow on the casino side is exceptionally strong," Sartini said. "As we position in secondary markets there are also some mainstream opportunities we may pursue."

The company is five months into a two-year agreement with Morgans Hotel Group to manage the casino at the Hard Rock Hotel while the New York-based boutique hotel operator pursues a gaming license.

"It is a situation that we didn't really anticipate being involved in initially," Sartini said.

"With such a high-profile brand, that whole dynamic has brought some additional focus to Golden Gaming."

The Nevada Gaming Commission approved the arrangement in January, allowing Golden Gaming to lease the casino for 25 percent of the gaming revenue and an estimated $3 million per year in management fees.

The company will in turn pay an estimated $9.4 million in leasing fees the first year with an estimated 3 percent increase each year after.

"Venturing off to the Hard Rock shows the ability for the company to grow and do new and better things," Lorenzo Fertitta said.

Sartini said the company has received inquiries to manage other casinos, but he is hesitant to take the company deeper into casino management.

He also said although Golden Gaming has expanded beyond its original business model, he is still committed to growing the slot routes.

"The more high-profile things you will see from Golden are obviously growing the casino side of the business," Sartini said. "That doesn't mean we're going to collapse the route side."