Golden Nugget owners eye expansion plans

Thursday, Nov. 11, 2004 | 11:02 a.m.

The owners of the Golden Nugget casino in downtown Las Vegas are exploring how to expand the west side of the property across First Street and have locked up some land across First Street over the past several months for potential development.

But executives say they have not finalized any expansion plans and are merely being fiscally prudent given increasing demand for downtown real estate.

Poster Financial Group Inc. purchased land occupied by the former Leroy's Race and Sports Book and some vacant land next door. The vacant land, the most recent purchase, closed in late August for $1.6 million.

Expanding the property into First Street would be complicated because the street is city-owned and is leased by the Fremont Street Experience mall and lightshow, which also operates a bandstand there.

"We don't know yet what we're going to do because we don't know whether we can (expand)," Poster Financial Chief Executive Officer Tim Poster said today. "It's a complicated legal issue as to whether it's possible to do."

A knowledgable source told the Sun that the Golden Nugget wants to move some of its nongaming operations into a new three-story structure the Golden Nugget would build west of the property. The source said the move would enable the casino to add about 12,000 to 15,000 square feet of additional gaming space.

Golden Nugget owners claim their 1,277 slot machines win more per day, on average, than those of any other casino in the state. On Wednesday, a property executive said the casino's average slot won 6 percent more in the third quarter than a year ago.

The Fremont Street Experience is considering moving the bandstand so the Golden Nugget could expand westward, though plans haven't yet been determined, Fremont Street Experience Chief Executive Joe Schillaci said.

City officials could not be reached for comment by press time today about whether the Golden Nugget would be able to get the city-owned street vacated.

During a conference call to discuss the company's third quarter earnings Wednesday, Poster said the company is transforming the Golden Nugget into a hip hangout that is luring more gamblers from the Strip.

"Demand for our Las Vegas property is greater than what our facility can supply," Poster said. "We understand that what we have to do is maximize our investment."

The company is considering acquisitions as well as "cooperative developments" with partners, he said.

Third quarter losses widened at Poster Financial as the company spent more on marketing, promotions and complementaries to lure new and repeat gamblers to the Golden Nugget.

Gamblers also were luckier than usual at the tables, though table game bets were up 79 percent from a year ago, executives said. If the casino would have won its typical percentage of bets from players, earnings would have been in line with last year's, they said.

The company reported a net loss of $8.7 million in the third quarter compared with net loss of $860,000 in the third quarter of 2003.

Revenue rose 7 percent to $60.9 million, but cash flow fell because of a lower percentage of bets collected from players at the Golden Nugget, officials said. Poster Financial reported a negative cash flow of $300,000 in the quarter compared with positive cash flow of $6.7 million the same quarter of last year.

Hotel revenue as well as food and beverage revenue were up in the quarter, the company said. The average occupancy rate was relatively flat at 96.5 percent, those hotel rates rose significantly, executives said.

Poster said the company expects marketing programs -- such as a $1 million ad campaign called "What's Cool" -- will pay off in the long haul.

The Golden Nugget held 35 special events during the third quarter, including 14 slot tournaments and six table game tournaments, Poster said. The property also is hosting singer Tony Bennett over the next two years for performances and promotional events, he said. "The Casino" reality show, which wrapped up 13 episodes on the Fox network, also has generated significant traffic at the property, he added.

"We estimate that several hundred people come to the Las Vegas property each day to catch a glimpse of what they saw on prime time television," Poster said. "We are confident that the vast majority of those people had an experience here at the Nugget that they want to repeat."

The news comes as Poster Financial Wednesday announced plans to sell its sister casino in Laughlin to Barrick Gaming Corp., owner of several downtown casinos.

Poster said his company had received several "unsolicited and attractive" offers over the past few months to purchase the Golden Nugget in Laughlin and decided to sell it for $31 million after determining that the future rate of return at the Las Vegas property would be higher.

The company expects to use some proceeds from the sale to pay down debt, he said.