Licensing recommended, opening set for casino

David Strow

Thursday, Nov. 8, 2001 | 10:50 a.m.

The Nevada Gaming Control Board gave its endorsement for licensing Wednesday of Green Valley Ranch Station Casino, a $300 million resort casino set to open in Henderson next month.

The hotel-casino must still receive the approval of the Nevada Gaming Commission, which will consider the application Nov. 19. Assuming the commission gives its blessing, the property is scheduled to open Dec. 18.

The property, located on Green Valley Parkway at the Beltway, is jointly owned by Station Casinos Inc. and the Greenspun family of Las Vegas, owner of the Las Vegas Sun. Each side made a $50 million equity investment in the property; an additional $195 million came in the form of debt and lease financing.

Green Valley Ranch will be Station's eighth Las Vegas-area casino, and the first opened by the Las Vegas locals casino operator since Sunset Station opened in 1997.

"This is one of the most exciting projects we've ever been a part of," said Scott Nielson, executive vice president and general counsel of Station. "This will set a new standard for off-Strip projects. This is a finely-tuned version of everything we've learned with our other properties."

Green Valley Ranch is easily the most upscale property in Station's portfolio, and is aimed to reach a different kind of audience than a typical Station property. Its 201 hotel rooms were described by Nielson as "close to Four Seasons quality"; its 80,000-square-foot casino has a high-limit area, complete with several baccarat tables; its 5,300-square-foot bar and lounge, "Whiskey Sky," rivals many of the Strip's hot nightspots in appearance; and there's a 10,000-square-foot European spa.

"This property looks very impressive," said board Chairman Dennis Neilander. "It has components in a neighborhood (casino) concept we haven't seen in other properties before."

Station officials told board members they believe elements like these will be able to attract patrons away from the Strip. For that reason, Station's doing something it's not done before -- launching a regional advertising campaign for Green Valley Ranch in the key drive-in markets of Los Angeles, San Diego and Phoenix.

"There's a different kind of customer that will be attracted to the higher level of (amenities) at Green Valley Ranch," said Glenn Christenson, chief financial officer of Station.

But Station doesn't intend to leave locals behind, said Mike Mecca, the property's general manager.

"This property, first and foremost, is a Station Casino, and we will convey that clearly to our customers," Mecca said. "We will still provide the value-oriented services locals have come to expect from us."

What concerned board members the most was that Green Valley Ranch would be too successful in drawing Henderson locals to the detriment of its nearby sister property, Sunset Station.

"If this property is successful, it looks like it will cannibalize Sunset Station," Neilander said. "One of the things that's surprising is that you have to compete with yourself, and if you're not successful, your property (Green Valley Ranch) will not be successful."

Christenson acknowledged some cannibalization will be unavoidable. In the first year of operations, he estimated any new profits generated by Green Valley Ranch will be offset by lost business at Sunset Station. It may take several years for that business to build back up, he said.

But in the long term, "we believe there's plenty of room in that area for both properties," Christenson said. "We believe, in the long term, both will present an attractive return on investment."

Neilander also expressed concern over the existence of a "make-well" agreement between Station and the Greenspuns. Under terms of this agreement, if the property's debt-to-cash flow ratio rises above 4.25, the two will have to invest up to $22 million each into Green Valley Ranch. If one owner fails to make the payment, the other will be responsible for the difference.

The Aladdin's owners, the Sommer Trust and London Clubs International, had a similar agreement. Sommer failed to make the payments, and LCI was forced to make up the differences. The heavier-than-expected investments have put LCI in a precarious financial position, and the Aladdin fell into bankruptcy.

Recalling this experience, Neilander said such agreements gave him "heartburn." But he said he felt confident that wouldn't be a problem in the case of Green Valley Ranch, noting the close business relationship between the two owners and the financial strength of the Greenspun family, developer of the Green Valley and Green Valley Ranch master-planned communities. Station and the Greenspuns are already partners in Henderson's Barley's Casino.

Another potential problem for the control board was the question of whether Green Valley Ranch would give Station too much market share -- a question the board considers when one company receives multiple gaming licenses in a single market. This question received considerable debate when Station bought out the Santa Fe, Fiesta and Reserve last year.

Station now accounts for about 7 percent of Nevada's gross gaming revenues, and less than 9 percent of Clark County's. If Station received 100 percent of Green Valley Ranch's revenues, it would increase Station's share of Clark County's gaming revenue by about 2 percent, and less than 1 percent statewide.

But board member Scott Scherer noted this deal wasn't the same as a buyout of a competitor, and would create jobs and new gaming taxes.

"The analysis for a new project ought to be different than for acquiring an existing property," Scherer said.

Green Valley Ranch will be the second major Las Vegas-area hotel-casino to open in late 2001. The $265 million Palms hotel-casino, majority owned by the Maloof family, is set to open near the Strip next week; Station and the Greenspuns are also minority owners in that project.