CasinoCityTimes.com

Gurus
News
Newsletter
Author Home Author Archives Search Articles Subscribe
Stay informed with the
NEW Casino City Times newsletter!
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!
Related Links
Related News
Recent Articles
Best of Howard Stutz
Howard Stutz
 

Off The Strip: Rock Stars

18 April 2006

Touring the $925 million Red Rock Resort last week, retired casino owner Frank Fertitta Jr. was stopped by an employee. Kathy Patterson dashed out of a slot department meeting when she spotted the 67-year-old Fertitta, for whom she worked in the 1980s when he owned the Bingo Palace, the small precursor to Station Casinos.

"I didn't mean to interrupt anything, but I just had to say hello," Patterson said. "This is from the heart. He always took such good care of us."

The two hugged and exchanged pleasantries. Fertitta remembered that Patterson dealt poker at the Bingo Palace. She is entering her 25th year as an employee with Station Casinos, transferring to the new Red Rock Resort from Sunset Station.

"I was hoping I'd run into him before we opened," she said.

The moment captured the converging universes that define Station Casinos.

The company, once a small locals casino pioneer, now has a market capitalization of $5.14 billion. It operates 16 casinos and has shares on the New York Stock Exchange that hovered near $80 last week.

On Tuesday the company opens Red Rock Resort, its most elaborate, and at a cost of almost $1 billion, its most expensive property to date.

But many casino watchers, especially longtime employees, still view Station Casinos as the family-owned business started by Fertitta and built on the bedrock of a 5,000-square-foot West Sahara Avenue casino that was designed to give the local residents working in the glitzy Strip properties a casino to call their own.

Sitting in the Summerlin casino's executive conference room with his sons, Station Casinos Chairman and Chief Executive Officer Frank Fertitta III, 44, and President Lorenzo Fertitta, 37, Frank Fertitta Jr. looked and sounded every bit the doting father.

"I'm proud of the fact that I was able to give back to the community and I'm proud that all my children are successful and have done the same thing," Frank Fertitta Jr. said.

He walked around Red Rock Resort as the casino had its final preopening run-through. The man affectionately still referred to by longtime employees as "Mr. Fertitta" was amazed by the opulence of the casino's stonework, tile flooring and onyx fixtures.

"I think people will be impressed," he said.

Last month, when Nevada gaming regulators licensed the property, it was pointed out that Fertitta's original casino would fit into one of Red Rock Resort's lounges.

Looking at the lobby lounge, with its large, glimmering chandelier and lavish surroundings, Lorenzo Fertitta commented that the lobby area alone "probably cost more than the original casino."

One of the gaming industry's pioneers, Frank Fertitta Jr. came to Las Vegas in 1960 when the 70-acre site for Red Rock Resort was nothing more than a dirt road populated with cactus and jack rabbits.

The location, now the centerpiece of the 1,300-acre Summerlin Centre, was on the valley's outskirts, and a casino, or any development for that matter, was far from anyone's mind.

"No one saw or could predict this growth back then," Frank Fertitta Jr. recalled. "And now, no one can see an end to it."

Frank Fertitta Jr. expanded the Bingo Palace into the Palace Station and bought the Boulder Highway land that would eventually accommodate Boulder Station.

But he left the company in 1993 when Station Casinos had its initial public offering, turning the business over to his sons.

At the time, the company was making inroads into Missouri casinos, had purchased its own slot machine route operation and was exploring riverboat gambling opportunities in the South and Midwest.

"We reached an inflection point where we had grown from a small family business into all the different opportunities in front of us," Frank Fertitta III said. "We had this basket of opportunities and we spent six months in intense deliberations as to what would be the best strategy."

While dad expressed caution, the sons saw opportunity.

"We were young and aggressive," Lorenzo Fertitta said. "We wanted to expand and do all these things. He kept saying these new jurisdictions look good now, but they may not always last, and it looks like he was right."

Frank Fertitta Jr.'s decision to leave the business wasn't made lightly.

Four years earlier, Nevada gaming regulators ended a nearly five-year investigation into allegations he was part of a skimming operation at the Fremont in the 1970s. While Frank Fertitta Jr. consistently maintained his innocence, the investigation hampered his efforts to expand Palace Station.

He was finally able to complete a $55 million expansion in 1991, giving the property more than 1,000 hotel rooms and creating the company's flagship.

"My sons had the ideas on how to grow the company beyond what we ever thought possible," Frank Fertitta Jr. said.

The move to go public was a course change for Station Casinos; it brought access to financing the father never had. The company now has a $2 billion revolving credit line for expansion and other growth opportunities.

Palace Station went through 13 different expansions because the banking environment was much different in the 1980s. Frank Fertitta Jr. said he lost count of the revisions, but the sons went back and added them up.

"Even though he was making money, it was tough to get loans and expand," Frank Fertitta III said. "All the expansions were done out of cash flow. We would knock out a wall and add a coffee shop or a fish house or put in more slot machines. Dad's vision was much grander and well ahead of the times."

Boulder Station was well under construction when Frank Fertitta Jr. cashed in his chips in 1993.

"The Palace Station was like my baby," Frank Fertitta Jr. said. "It wasn't easy to give it up. What made up my mind was that I could cash out for $265 million, which 13 years ago was a lot of money. I was really able to set up the family for life."

Station Casinos began an aggressive growth focus on Southern Nevada after giving up its quest for casinos in Missouri and selling two sites to Ameristar Casinos.

Boulder Station opened in 1994 and Sunset Station was built in 1997. The company acquired the Santa Fe in 2000, and the Fiesta and The Reserve (which became Fiesta Henderson) in 2001. Green Valley Ranch Resort opened in 2001.

Meanwhile, Frank Fertitta Jr. privately financed the building of the Texas on Rancho Road in 1994, but sold the property at cost to Station Casinos before its opening in 1995. Company shareholders had questioned a perceived conflict of interest.

"It was a misunderstanding," Frank Fertitta III said. "My dad didn't have any stock in the company, he wasn't on the board of directors and he wasn't an officer. He was free to do whatever he wanted."

Said Frank Fertitta Jr., "I didn't have a noncompete, but it just wasn't worth the aggravation so it was better to put it back into the company."

He retired, sat back, and watched his sons grow Station Casinos. Some investment houses rank Station, which had revenue of $1.1 billion in 2005, as the world's sixth-largest casino company.

Station Casinos also became one of the first Nevada casino operators to explore American Indian casino management opportunities, opening the Thunder Valley near Sacramento, Calif., for the United Auburn Indian Tribe in 2003.

The company has also banked land for future development with seven potential casino sites in Las Vegas, two in Reno and four potential American Indian management contracts.

"We learned the family business from dad," Frank Fertitta III said. "If you have a good thing, get as much of it as you can. We believe in our business model and strategy. Basically, we wanted a pipeline for future growth."

Frank Fertitta Jr. started the company with 90 employees. When Red Rock Resort opens Tuesday, Station Casinos will employ more than 14,600 workers.

"The best thing about him was the culture he started," Frank Fertitta III said. "As the Bingo Palace grew into the Palace Station, people always wanted to come work for him. They liked the work environment, and that's the thing we've tried not to screw up."

The affection between father and sons is evident.

Frank Fertitta III and Lorenzo Fertitta both worked their way up through the casino ranks with jobs on the gaming floor and the back of the house.

Dad, who visits Palace Station often for lunch, still offers advice. Lorenzo Fertitta said the sons listen closely.

"Hopefully, we're going to have a lot more opportunities to continue to evolve and develop new stuff," Lorenzo Fertitta said.

On Tuesday night, Frank Fertitta Jr. plans to quietly enjoy the opening of Station Casinos' newest resort from a secluded spot in the property.

"I'll have a few drinks and celebrate," he said.

Off The Strip: Rock Stars is republished from Online.CasinoCity.com.