Cost of Aliante Station Jumps to $600 Million

LAS VEGAS -- Station Casinos has increased the budget for the company's next scheduled resort, citing the rising costs of construction and a desire to build a bigger hotel-casino.

Station Casinos Chief Financial Officer Glenn Christenson said Wednesday that Aliante Station in North Las Vegas will cost $600 million. Last December, when announcing plans to build the property on 40 acres in the Aliante master-planned community north of Interstate 215, the company said the hotel-casino would cost $450 million.

"We expanded the scope of the project," Christenson said. "When you look at the demographics of the area, such as the projections for growth in a three- to five-mile radius, we became convinced that we need to build a larger facility in the first phase."

Without giving any details, Christenson said Station Casinos has expanded the hotel, casino, restaurants, meeting space and the back-of-the-house areas of the project. Other amenities are being incorporated into the resort.

"We're not disclosing what is planned, but those areas have increased in scope," Christenson said.

During a presentation at an investment conference in San Francisco this week, Christenson said construction costs have increased, adding to the overall budget. He said Wednesday that about $30 million of the additional $150 million take into account rising costs for labor, steel, concrete and other building materials.

Gaming analysts said the cost of construction is rising nationwide so it wasn't a surprise Station Casinos' next project would be affected.

"The cost of steel, specifically, has become a consideration," CRT Capital Group gaming analyst Steve Ruggiero said Wednesday. "Obviously, the cost of the project going up will impact returns on investment. But we still believe the company will get a good return on that project."

Station Casinos has many development opportunities throughout the Las Vegas Valley and two potential projects in Reno. In recent quarterly conference calls, company executives have said they are weighing the different Las Vegas projects to develop, but determined that Aliante would be the company's next project. Construction is scheduled to begin in early 2007.

"We have looked at other markets, but the return threshold is so high. If we can stay in our own backyard and make a return on investment in the high teens to low 20s (percent), it is hard to justify the risk," Christenson said.

In a note to investors Wednesday, Bear Stearns gaming analyst Joe Greff said the cost increase should hurt the company.

"Despite the budget increase, the Las Vegas market continues to offer strong returns for Station," Greff said.

Station Casinos is completing the second phase of the $925 million Red Rock Resort in Summerlin, which opened in April. A hotel expansion is expected to open in the 2007 first quarter.

Aliante Station is a joint venture between Station Casinos and the Greenspun Corp. The two companies have a similar arrangement with the Green Valley Ranch Resort, where Station Casinos manages the property for a fee that includes 2 percent of the revenue and 5 percent of the operating cash flow.

American Nevada Co., Greenspun's real estate arm, will contribute the site. The two companies will jointly finance Aliante Station.