Station reveals estimated value of land holdings

By Liz Benston

Friday, Sept. 9, 2005 | 11:07 a.m.

Station Casinos executives say the 489 acres of land the company has accumulated primarily in Nevada is worth up to $1.3 billion -- the first detailed disclosure of land values to investors and an indicator that could affect the company's asset value and stock price.

Station revealed the estimate Thursday in a Securities and Exchange Commission filing, in which it also said third-quarter revenue at properties open at least a year would be "at the high end" of previous estimates.

The company previously said revenue at those properties, excluding the Green Valley Ranch Station casino and hotel in Henderson, would rise from 8 percent to 11 percent this quarter from last year. The company expects to report third-quarter earnings Oct. 18.

Station's roughly 200 acres of land in the Las Vegas Valley is worth from $447 million to $601 million, while 292 acres of land in Reno and California is worth between $65 million and $110 million, the filing said. The company's land at its Wild Wild West casino on Tropicana Avenue, which the company intends to redevelop, is worth between $334 million and $534 million. Other land not in these categories is worth up to $81 million, the company said.

Station also said it has spent about $149 million to develop future tribal casinos, including the cost to acquire land -- money the company expects to recoup from financing or operating the casinos.

The company made the estimates in the interest of full disclosure to investors because "our land holdings have become such a significant part of our stock value," Station Chief Financial Officer Glenn Christenson said.

"I think (investors) knew there was substantial value in the land holdings but I'm not sure they knew it was anywhere close to the value that was assigned there," he said.

Christenson said the estimates aren't a sign that the company will simply sell its land. Some vacant land might be sold off to developers if it makes sense, while other land could be developed by Station into more profitable projects, such as high-rise condominium or condo-hotel towers.

Such towers are now in demand across Las Vegas and can be built on relatively small acreages. Station is developing its first condo-hotel complex with other real estate partners on eight acres at the site of its Red Rock Resort in Summerlin.

Several of Station's casinos, such as its Sunset Station property and its future Durango Station site, lend themselves well to high rises, though market demand will ultimately dictate whether they are built, Christenson said.

"There's a lot of value for businesses that would locate where we are," he said. "We have a symbiotic relationship with those businesses."

The escalation of land prices in Las Vegas is changing the way investors value casino companies, said Carlton Geer, director of CB Richard Ellis' Global Gaming Group in Las Vegas.

The Global Gaming Group provided estimates for Station's land in Nevada.

Companies such as the owner of the Riviera hotel and casino on the Strip are being valued based on the worth of the land the properties sit on rather than a multiple of operating profit, Geer said. Until more recently, that had been the primary way investors valued Las Vegas casino assets, he said.

"Station has been very aggressive on the real estate side and has made some strategic acquisitions," Geer said. "I think they should be rewarded by shareholders. They are adding value by making wise real estate investments in land that can be developed for gaming or other purposes."

Rising land values also will determine what casino companies like Station build on their land in the years to come, he said. Land that becomes worth more than the income generating property on it isn't maximizing value for shareholders, he added.

Station's stock has risen about 2 percent since Wednesday and was trading at $70.85 per share by midmorning today.

Bear, Stearns & Co. stock analyst Joe Greff said the information is significant because land price information in the suburbs is harder for Wall Street to come by than information about Strip values, which has been reflected in recent transactions such as the sale of the Imperial Palace casino.

"I don't think the value that the Station appraisers came up with is out of whack at all," Greff said. Still, he said, the value of their land "is not completely reflected in their stock price."

Separately, Station said it intends to hold a job fair exclusively for evacuees of Hurricane Katrina that have been relocated to Las Vegas and said that more than 500 jobs are available.

The company will run shuttles from the Fertitta Community Assistance Center from Sept. 13-15.