Genting to Buy Las Vegas Echelon Resort From Boyd
Genting Bhd. (GENT), Southeast Asia’s largest casino operator, will buy and complete Boyd Gaming Corp. (BYD)’s unfinished Echelon resort in Las Vegas, a sign of renewed confidence in the city’s economy.
Genting will pay $350 million in cash for the 87-acre site, once home to the Stardust, Las Vegas-based Boyd said today in a statement. Boyd took an impairment charge of about $994 million in the fourth quarter, increasing its adjusted loss more than ninefold from a year earlier.
The project will be rebranded Resorts World Las Vegas, with the opening of phase one planned for 2015, Kuala Lumpur-based Genting said separately.
“This is an unparalleled opportunity to showcase what has made the Resorts World brand a globally recognized success for the past several decades,” Chairman and Chief Executive Officer Lim Kok Thay said in a statement.
Genting, which also has interests in plantations and energy, has been pushing into U.S. gambling. The company runs the Resorts World Casino at Aqueduct race track in New York City, the top-grossing U.S. slot machine parlor, and is pursuing one in Miami. The uncompleted Echelon became a symbol of U.S. real estate excesses and Las Vegas’s woes after Boyd stopped construction in August 2008.
The project sits along the northern part of the Las Vegas Strip, near Wynn Resorts Ltd. (WYNN)’s properties. It will feature more than 3,500 rooms in the first phase, 175,000 square feet of gaming space, luxury dining and retail, Genting said.
“The entrance of one of the world’s leading resort gaming developers into Nevada is another fantastic sign that Las Vegas and the Strip are poised for great things moving forward in 2013 and beyond,” Governor Brian Sandoval said in the statement.
Genting, founded in 1965, has interests in five publicly traded companies with a combined market value of $46 billion. The company purchased the downtown Miami Herald building in Florida in 2011 with the intent of building a casino. Florida’s Legislature has not passed a law permitting one there, however.
The company opened its New York casino in October 2011. It generated $638 million in revenue last year, becoming the top slot machine location in the country, according Genting. It also owns one of two casinos in Singapore, and plans to use its name recognition in Asia to attract foreign travelers to Las Vegas.
Boyd began construction on the $4.75 billion resort in 2007 before stopping a year later amid the financial crisis. The company said at the time it incurred $500 million in capitalized expenses and that it would be three to five years before it would be interested in restarting.
Boyd said today it will receive about $157 million from the sale after paying a portion of the $350 million in proceeds to fulfil the company’s obligations to LVE Energy Partners LLC, the company said.
“The sale of the Echelon site is another important step in the ongoing effort to improve our long-term financial position,” Chief Executive Officer Keith Smith said in the statement. Boyd remains “committed to the Las Vegas market” after determining that building a large project on the Strip “was not consistent with our current strategy.”
Boyd’s adjusted loss widened to $27.7 million in the fourth quarter, excluding the $994 million charge for ditching the Echelon development, from a deficit of $2.9 million a year earlier. The figure also ignores $39.4 million in impairment charges related to excess land holdings and a $17.5 million charge involving a gaming license in Shreveport, Louisiana.
The net loss was $899.9 million, or $10.24 a share, compared with a loss of about $500,000 in the same period last year.
Revenue gained 3.2 percent to $625.8 million in the fourth quarter, Boyd said, though sales at the Borgata, the company’s 50 percent-owned joint venture in Atlantic City, fell 16 percent on a five-day closure due to superstorm Sandy. Sales also declined at downtown Las Vegas properties and Boyd’s “locals” segment in the Nevada city. Revenue was helped by the Peninsula division, including the Kansas Star Casino.
Boyd gained 11 percent to $7.17 at 10:29 a.m. in New York. The shares had gained 2.7 percent this year through March 1.
Genting will face new local competition when it opens Resorts World. Los Angeles-based SBE broke ground last month on the SLS Las Vegas, a $400 million remodeling of the Sahara hotel, expected to open in late 2014 farther up the Strip.
Visitors to Las Vegas broke an all-time record of 39.7 million last year, while gambling revenue on the Strip rose 2.3 percent to $6.21 billion, according to data compiled by Bloomberg Industries. Gambling revenue remained below the 2007 high of $6.8 billion.
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