Station scouting Indian casino deals

By Liz Benston (contact)

Monday, Oct. 6, 2003 | 11:21 a.m.

Station Casinos Inc. has become more aggressive in pursuing management contracts with Indian tribes since opening its Thunder Valley Casino for the United Auburn Indian Community near Sacramento, a top executive said last week.

Locals' casino operator Station Casinos is still interested in California but also is looking at states nationwide for potential contracts with tribes, company Chief Financial Officer Glenn Christenson said.

Christenson declined to identify what other states or tribes the company is interested in. He also declined to say when the company expects to sign another contract.

"You prospect and you work on things but it's not something you can really plan," he said. "I think there will be other deals, we just don't know when."

The success of the Thunder Valley Casino, as well as securing a second management and development contract with the Federated Indians of Graton Rancheria near the San Francisco Bay Area, has led the company to devote more time and energy to developing future deals, he said.

Thunder Valley, located along a main highway linking the Bay Area to Reno and Lake Tahoe, opened in June to miles of backed-up traffic and standing-room only crowds. It has already been blamed for nicking revenue from Northern Nevada casinos. The casino's financials aren't public, though Station said it will receive an annual fee of about $65 million to $75 million.

Based on Station's 24 percent management fee, Goldman Sachs analyst Steven Kent estimates that Thunder Valley may be generating about $290 million in pretax income. After adding back $20 million of depreciation and interest expense, the property could be generating about $310 million in annual cash flow, Kent said in a research report generated last month.

That's close to MGM MIRAGE's Bellagio resort on the Strip ($336.3 million in cash flow in 2002) and more than the Mohegan Sun, one of the country's largest casinos, he said.

Dozens of California tribes are seeking federal recognition, presumably to be granted the right under state and federal law to build casinos.

Christenson said the company isn't focusing on California at the expense of other states.

"We see opportunities for Native American gaming around the country," he said.

The company has received "a number of calls from various tribes" to discuss casino projects, he said.

Christenson said the company is still on track to develop a casino for the Graton tribe in Rohnert Park, in Sonoma County wine country.

Recent public protests by local residents against the casino, as well as an effort to recall city officials who approved negotiations with the tribe, aren't stalling development plans for a casino in two to four years, Christenson said.

"There are people who will always be anti-gaming," he said.

Station is helping the tribe strike an agreement with the city and county to mitigate the casino's effects on traffic, police and other public services. Before the casino could be built, the federal government would still need to place land into trust for the tribe, which would also need to establish a compact with the state.

The tribe intended to build the casino closer to San Francisco Bay but moved the location after intense opposition from local, county and Congressional officials. The tribe has offered $320 million to Rohnert Park and Sonoma County, which includes funds for local charities, and says it is trying to set a precedent in California by working more closely with local officials. Critics call the plan a sellout that will hurt residents in the long run. The Graton tribe is entitled to the land because of an act of Congress that says the federal government "shall" place land into trust for the tribe, Christenson said.

Station and the Auburn tribe prevailed in lawsuits filed by local officials opposed to the Thunder Valley Casino.

The Sonoma casino is an opportunity for the county to raise money during a budget crunch, he said.

Companies large and small -- from Strip operators such as Harrah's Entertainment Inc. to small partnerships in other states -- are trying to obtain tribal contracts in California and elsewhere.

Christenson said Station has a leg up on the competition because it has developed a niche catering to local gamblers.

"We believe we can take advantage of the fact that we are the locals' gaming experts," he said. "These (tribal gaming) markets by and large are locals' markets."