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Howard Stutz

Station Casinos Spends Millions on Upgrades

3 October 2006

LAS VEGAS, Nevada -- Station Casinos executives found a way to fill time in between building new hotel-casinos -- upgrade their older properties.

Since 2005, the company has spent $542 million on expansion projects at its Las Vegas casinos, a process that began in 2005 and will carry over into 2007. Station Casinos Chief Financial Officer Glenn Christenson said company planners are already looking at the next round of improvements.

"Part of our strategy has always been that when we first acquire the land, we master-plan out the first 10 to 12 years of the property," Christenson said. "The problem, if you want to call it that, is that the phenomenal growth in Las Vegas has accelerated some of those improvements. The growth just doesn't seem to be slowing."

The company is able to fund the expansions two ways; through a $2 billion revolving line of credit with its banks, and its operating cash flow -- described as earned before interest, taxes, depreciation and amortization -- which was $114.5 million in the second quarter that ended June 30 and $223.6 million through the first six months of 2006.

Gaming analysts believe the construction projects offer a quick return on the company's investment because they allow for more people to use the properties' amenities.

"It's hard to find any company with the favorable position that Station Casinos has, given the pipeline for growth and the migration of new customers in the Las Vegas market," said Deutsche Bank gaming analyst Bill Lerner. "Station Casinos is doing a very judicious master-plan expansion that is geographically capturing the growth of the Las Vegas market."

The opening of the $925 million Red Rock Resort in April is expected to be followed by a ground-breaking early next year for the $600 million Aliante Station in North Las Vegas. In between, the current phase of expansions is expected to be completed.

The most recent expansion of Green Valley Ranch Resort opens today when two new restaurants, a 1,200-space parking garage, a new race and sports book, and a new poker room are unveiled. Still to come is a new entertainment lounge and additional casino space. The additions total $235 million, which included 300 hotel rooms than opened in 2005.

Additional parking seems to be a theme that runs through all the Station Casinos expansions. The Santa Fe Station is putting the finishing touches on a 2,900 space parking garage while the Fiesta Henderson opened 1,500-space parking garage in August.

"Convenient parking seems to be one of the most important amenities we've needed to add," Christenson said. "That would figure to be the case because of the growth in the market."

Even at Red Rock Resort, more parking is part of the casino's $65 million expansion, which is mainly focused on a 72-lane bowling center. The hotel's new 450 rooms, which are expected to open after the first of the year, were included in the property's $925 million price.

The expansions have also fueled job creation. In Southern Nevada, Station Casinos has added roughly 4,000 jobs in the past two years; 2,600 of the total were attributed to Red Rock Resort's opening.

Christenson wouldn't say which of Station Casinos older properties were next on the remodeling list.

With potential development sites throughout Las Vegas, the company is also looking at what project to take on after Aliante Station. The company additionally has two potential development projects in Reno.

Christenson said Durango Station, near Durango Drive and Interstate 215, and the site that formerly housed the Castaways-Showboat casino on the northern end of Boulder Highway, are being studied.

Lerner said the company is well-positioned for the future.

"You just kind of pick a location and build it to the right size relative to the customer demand," Lerner said. "This is company that is also careful not to cannibalize (their older properties)."

Station Casinos Spends Millions on Upgrades is republished from