Red Rock Resorts Bets on Palms Casino Resort in Las Vegas
Red Rock Resorts subsidiary Station Casinos LLC has reached a definitive agreement to acquire the upscale resort.
By Gail Kalinoski
Palms Casino Resort, Las Vegas
Las Vegas—Calling it a “hybrid gaming property” that attracts both tourists and locals in Las Vegas, Red Rock Resorts Inc., the parent company of Station Casinos LLC, is betting on the Palms Casino Resort with a $312.5 million cash deal.
Red Rock Resorts, which recently completed a $531.4 million IPO, said its subsidiary Station Casinos had reached a definitive agreement to acquire the Palms from private equity firms TPG Capital and Leonard Green & Partners. The investment firms each owned 49 percent stakes along with the 2 percent owned by George Maloof, who opened the casino resort in November 2001. The firms became majority owners in 2011 amid efforts by the Palms ownership to restructure millions in debt.
“With the acquisition of the Palms we gain a leading gaming asset in Las Vegas with key strategic benefits in the Las Vegas locals market and close proximity to the Las Vegas Strip,” Marc Falcone, executive vice president, CFO & treasurer of Red Rock Resorts, said in a prepared statement. “With its appeal to both Las Vegas residents and tourists alike, the Palms is a hybrid gaming property that is uniquely positioned to benefit from the strong economic trends in Southern Nevada and record visitation levels in Las Vegas.”
Red Rock Resorts manages and owns a significant indirect equity interest in Station Casinos, which is the leading provider of gaming and entertainment to Las Vegas residents. Station Casinos’ properties include Red Rock Casino Resort Spa, Green Valley Ranch Resort Spa Casino, Palace Station Hotel & Casino, Boulder Station Hotel & Casino and Sunset Station Hotel & Casino. It also is the manager of Grafton Resort & Casino in northern California and owns a 50 percent interest in MPM Enterprises LLC, which is the manager of Gun Lake Casino in Michigan.
The Palms is located just off the Las Vegas Strip and features a 95,000-square-foot casino with approximately 1,250 slots and 48 table games, a race and sportsbook. It has about 710 rooms across two towers with 85 suites, 19 penthouses and 599 condos. The resort also has 15 restaurants, including the award-winning N9NE Steakhouse and Novo Italiano, Ghostbar Nightclub, the 2,500-seat Pearl Theater, a 14-screen Brenden Theaters and IMAX movieplex and 60,000 square feet of meeting and convention space. There is also a luxury spa and the 2-acre Palms Pool and Palms Place Pool.
The transaction is expected to close in the third quarter. Milbank, Tweed, Hadley & McCloy LLP served as legal advisors to Red Rock Resorts for the transaction. Macquarie Capital was the financial advisor and Wilkie Farr & Gallagher LLP was legal advisor to FP Holdings LP, doing business as the Palms Casino Resort.
Previously known as Station Casinos, the company went public in late April, changed its name to Red Rock Resorts and began trading on the NASDAQ.
On Thursday, the company discussed the Palms acquisition during a conference call about its first quarter 2016 earnings.
The company estimated the Palms will generate $35 million in EBITDA during the first full year of ownership and the acquisition would be accretive to earnings per share and free cash flow positive in the first full year of operations.
The company reported a 4.8 percent increase in first quarter revenue over last year, the 12th consecutive quarter of year-over-year consolidated net revenue growth. Consolidated net revenues for the first quarter were $359.2 million, up $16.5 million or 4.8 percent compared to last year.
“The key Las Vegas metrics that drive our business – job creation, wage growth and increased discretionary spend – were all strong in the first quarter,” Falcone said.
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