Landry’s has big plans for Nugget

Monday, Feb. 7, 2005 | 10:50 a.m.

The prospective owner of the Golden Nugget in downtown Las Vegas expects to open from six to eight Golden Nugget-brand casinos nationwide over the next three to five years.

Landry's Restaurants Inc., one of the nation's largest restaurant chains, announced plans Friday to purchase the Golden Nugget for $295 million and gain its first foothold in the lucrative casino business.

The company has been eyeing properties in Las Vegas for the past year and was "waiting for the right opportunity," Landry's Chief Executive Tilman Fertitta said.

Fertitta acknowledged that his company is still exploring a purchase of the Riviera hotel and casino on the Strip but that redevelopment costs would be significant.

The Golden Nugget was ultimately chosen in part because it is a well-maintained property with a well-known, quality brand, he said.

"It's in good shape," Fertitta said. "It's not going to require a lot of renovation ... and has a good management team that was trained by Steve Wynn."

Fertitta is a cousin of Station Casinos Inc. Chairman and Chief Executive Frank Fertitta III and Station President Lorenzo Fertitta.

Fertitta said Station won't be involved in managing the Golden Nugget but said he may call upon his cousins for informal advice.

"It's very comforting knowing that they are there if we have a question," he said.

Landry's is entering the business at a turbulent time for the Golden Nugget casino. In an attempt to lure high-rollers from the Strip, the landmark casino raised betting limits and put its money at greater risk. A single player won about $9 million from the casino, contributing to the company's third quarter loss of $8.7 million.

Fertitta said he is aware of those concerns and said the company will run things differently. "We're not going to let a player come in and beat us for $9 million," he said.

Landry's aims to cross-market Golden Nugget properties in its restaurants.

Once the company receives a gaming license, it also may consider adding slot machines in restaurant locations such as those in Las Vegas, he said.

Landry's, which owns the Joe's Crab Shack, Landry's Seafood House and Rainforest Cafe chains, among other brands, is one of the nation's fastest-growing restaurant chains. The company recently refinanced its debt with $400 million in bank loans and $450 million in bonds.

"They are prepared with cash to get into the casino business in a big way," said Carlton Geer, director of C.B. Richard Ellis' Global Gaming Group in Las Vegas.

Geer, a broker who has watched Landry's interest in Las Vegas develop over the past several months, said the Golden Nugget was probably the best strategic purchase for the company.

Of the aging properties in Las Vegas available for purchase, some Strip properties not only are more expensive, but they may not have the Golden Nugget's mainstream brand awareness and reputation for quality, he said.

Many companies are interested in getting into the casino business, which tends to have a better cash return than any other industry when managed properly, Geer said. Landry's is one of few companies in a position to make such an investment, he said.

"The restaurant industry is the toughest industry in the world, bar none," Geer said. They've done very well in the hospitality industry and a lot of that knowledge will transfer to the gaming industry. There's still a learning curve but they have the financial capacity to survive that learning curve."

Landry's isn't the first restaurant brand to step into the casino business.

A partnership including the co-founder of the Planet Hollywood restaurant chain bought the beleaguered Aladdin resort out of bankruptcy in 2003 and is redeveloping the property into a movie-themed Planet Hollywood resort. And the developers behind the Hooters restaurant chain last year obtained an ownership stake in the Hotel San Remo with the aim of remaking the property into a Hooters Casino Hotel.

Fertitta said observers shouldn't be so surprised by the acquisition.

"Landry's is not just a restaurant company," he said. "We have lots of different brands, we're the second-largest operator of aquariums and we've got a resort in Galveston."

The company owns the 40-acre Kemah Boardwalk development of shops, restaurants and amusement rides as well as a 52-room hotel near Houston. Its Downtown Aquarium in Houston features themed water attractions, rides and a white tiger exhibit.

"We want to be a part of downtown revitalization in Las Vegas," Fertitta said.

In addition to the casino and hotel, Landry's also will be acquiring the property's namesake attraction, an elongated lump of gold known as the "Hand of Faith." The golden nugget, on display in the hotel lobby, is considered one of the world's largest.

Las Vegas Mayor Oscar Goodman spoke positively about the Golden Nugget's existing and prospective owners and said he's hopeful Landry's will invest in the area around the Golden Nugget.

"If you can make yourself $50 million in a year and a half you'd do it too," Goodman said Friday about Golden Nugget owners Timothy Poster and Tom Breitling. "Sometimes you're made an offer you can't refuse."

Goodman said the city was "very lucky" the property was bought by Landry's, which he said has a tradition of investing in the areas around their businesses in Texas.

"I'm delighted that they're coming here," he said, adding that Fertitta is expected to visit Las Vegas and meet with the mayor sometime this week.

"He said he's a downtown guy," Goodman said.

Sun reporter Dan Kulin contributed to this report.