LV gaming company investing in real estate to help cut tax bill

Tuesday, May 22, 2001 | 10:52 a.m.

Archon Corp. of Las Vegas announced it acquired two East Coast office complexes in March for $148.2 million.

Archon, previously known as Santa Fe Gaming Corp., paid $82.9 million for the first office complex, a 425,000-square-foot office complex in Dorchester, Mass. Archon said it paid $5.6 million cash; the remainder was financed by debt.

The second purchase was a 342,000-square-foot office building in Gaithersburg, Md., acquired for $9.9 million in cash and $55.4 million in mortgage debt.

The buildings were classified by Archon as "properties held for investment." By acquiring the buildings, the company said, it will be able to reduce income taxes due from the $205 million sale of the Santa Fe hotel-casino to Station last year.

The purchases were disclosed in Archon's quarterly report, filed with the Securities and Exchange Commission earlier last week. The company reported net income applicable to common shares of $2.23 million, or 36 cents per share, up from net income of $1.6 million, or 25 cents per share, in the year-ago quarter.

Revenues, however, declined 63 percent to $13 million, while cash flow was off 64 percent to $3.8 million. A big reason for the decline was the absence of revenues from the Santa Fe, though the company's sole remaining casino asset -- the Pioneer hotel-casino in Laughlin -- saw cash flow decline 21 percent to $2.6 million. The company blamed softness in the Laughlin market, which is also being experienced by other casinos in the area.

Archon also released further details on the settlement of its lawsuit against New York investor David Lesser, a former director of the company and holder of 40 percent of its preferred shares. Archon said it acquired 3.46 million preferred shares from Lesser, as well as 53,600 shares of common stock.

Lesser had attempted to force Santa Fe Gaming into bankruptcy in 1998 after its subsidiary, Pioneer Finance Corp., missed bond payments. Pioneer did go into bankruptcy, but a judge ruled Santa Fe Gaming did not have to also enter bankruptcy. Santa Fe Gaming later sued Lesser, accusing him of attempting to take over the company.

Archon dropped these claims against Lesser, and Lesser dropped his petition for reimbursement of $1.1 million in attorney's fees connected to the Pioneer bankruptcy, the Archon filing said.

Archon said it paid Lesser $5.75 million in connection with the settlement. The filing did not make it clear whether this payment was for the preferred shares, or whether it came on top of an amount paid for the shares. Archon officials couldn't be reached for comment on this issue.