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Best of Howard Stutz

Gaming Guru

Howard Stutz

Casino Acquisition: Golden Nugget Sale OK'd

28 September 2005

As chairman of the Nevada Gaming Commission and a longtime Las Vegas attorney, Pete Bernhard has heard many a promise from a prospective casino operator possessing large-scale plans to revive downtown Las Vegas.

Most never came to fruition.

Houston-based Landry's Restaurants, which closed its $325 million purchase of the two Golden Nugget casinos in Las Vegas and Laughlin on Tuesday, expressed similar promises about rekindling interest in the downtown property. The commission unanimously approved the transaction during a 40-minute hearing, which ended the two-year ownership of the Golden Nugget properties by Poster Financial Group.

Bernhard spent several minutes questioning Landry's Chairman Tilman Fertitta about how a company with more than 300 restaurants, operating under 28 varying brands in 36 states, will fare in its first gaming venture.

Fertitta, a cousin of the Station Casinos' Fertitta family, said the Golden Nugget would change direction, marketing to a mass audience of gamblers, rather than the volatile high-end crowd favored by the previous ownership. Fertitta said the profits from one successful casino would equal the company's take from 40 restaurants.

During his presentation, the personable Landry's chairman, who punctuated many of his statements with "y'all," described plans for expanding the venerable downtown property, including adding a hotel tower to the 1,900-room resort while increasing the size of the casino, entertainment offerings, restaurant choices and other amenities.

Bernhard came away from the hearing convinced the company's ambitious plans were possible.

"The financial structure and the financial strength of the Landry's entity is something that gives them the economic wherewithal to do what they're saying," Bernhard said. "Assuming they get the returns on the market as they were saying, then it makes sense for them to put their resources in to Las Vegas, and that would be a positive for the entire community and the state."

Fertitta said it was unfair to compare Landry's with previous downtown casino operators because of the size of the publicly traded business, which had $1.3 billion in assets at the end of 2004. It had revenue of $1.2 billion in 2004.

In an interview in the Golden Nugget's 18th floor conference room after the commission hearing, Fertitta said Landry's track record of participating in city redevelopment is a reason to believe in the Golden Nugget's future.

Through its hospitality division, Landry's built hotels in downtown Houston, a convention center and resort in Galveston, Texas, and aquariums in Houston and Denver. Landry's is also the developer and operator of the Kemah Boardwalk, a 40-acre dining and entertainment complex overlooking Galveston Bay.

Landry's is redeveloping the Tower of the Americas, a 750-foot revolving restaurant and tourist attraction in San Antonio.

"This is what we do," Fertitta said. "We've done this before and I don't think you can compare our company with previous people. We're a big company. (Poster Financial Group) did a good job keeping the historical flair of the Golden Nugget alive. But I think our strengths are in the development part of it."

Fertitta said Landry's originally had an agreement to buy the Riviera on the Strip before making the deal to buy the Golden Nugget in January. The company let the agreement for the Riviera lapse because Fertitta thought the Golden Nugget would be a better brand to take into other gaming markets, such as riverboat casino jurisdictions.

"We've grown every business we've purchased," Fertitta told the gaming commission. "That's been our track record."

While Poster Financial Group is out of the picture, the current operating team will remain to run the two Golden Nugget casinos. Fertitta said substantial changes to the existing downtown casino could be completed by the end of 2006. Landry's plans to add a new hotel tower and restaurants to the Golden Nugget Laughlin.

Fertitta said Landry's spends $40 million a year on marketing. He said the company's database of 50 million restaurant visitors are potential Golden Nugget visitors.

"It seems that this particular company has a well- thought-out marketing plan," Bernhard said.