HOUSTON CHRONICLE - February 2005
Fish and Chips
By: David Kaplan
Landry’s Restaurants is placing a $140 million bet on the casino industry after reaching a deal on the Golden Nugget in Las Vegas.
In addition to its cash payment to Poster Financial Group, Landry’s is assuming $155 million in debt for the Golden Nugget, the biggest of 14 hotel-casinos in downtown Las Vegas.
Tilman Fertitta, chairman and CEO of the Houston-based company, said he intends to spread the Golden Nugget brand across the country and sees synergy between his other properties and the casino.
But are restaurants, aquariums and casinos a good mix for Landry’s?
A casino will be a completely different undertaking for Landry’s, but Fertitta made it sound as easy as buying a doughnut shop.
Nevada’s gaming industry is highly regulated and controlled, he said: “It’s a system,” and will be “the simplest part of the business.” His company is already experienced in the more challenging side of the Nugget operation, hospitality and restaurants, he said.
For months, rumors swirled around what Landry’s would do with $400 million it raised through a debt offering. In late December, the Houston Chronicle reported that Fertitta was eyeing Las Vegas gaming projects.
At the time, Riviera Holdings, owners of Riviera Hotel & Casino in Las Vegas and the Black Hawk Casino in Colorado, saw its stock climb over speculation that Landry’s was planning to take it over.
Fertitta said he is still considering the Riviera, but unlike the Golden Nugget, it would require a major renovation.
Over the next few years, Fertitta plans to launch several more Golden Nuggets in other U.S. cities, he said. Landry’s acquisition of the Nugget should close in a year.
Mason Leith, senior equity analyst at Zacks Investment Research, believes it will take time to assess the integration of the Nugget into the Landry’s empire.
To appeal to the masses
Non-casino companies that venture into the gaming industry don’t always fare well, but Harvey Perkins, an analyst at Spectrum Gaming Group told MarketWatch that Landry’s has a good chance of succeeding because of its background in the service industry and “grasp of customer satisfaction.” However, some analysts maintain that Landry’s paid too much for the Nugget. Others believe that the Nugget’s past owners had focused too much on high rollers, making the casino vulnerable to huge losses. Fertitta said he plans to bring more middle-class and upper-middle-class customers to the Nugget, mirroring Landry’s strategy of appealing to the masses.
Fertitta plans to put some if his high-end restaurant brands inside the Golden Nugget, perhaps a Pesce, Grotto or Vic & Anthony’s. The hotel-casino already has several restaurants. The Golden Nugget is represented by entertainers Tony Bennett and Regis Philbin. Fertitta said he plans to keep them. Las Vegas has two entertainment districts, the Strip and downtown.
Oscar Goodman, mayor of Las Vegas, described the Strip as having more “grandeur.” Downtown , where the Nugget stands has more “color and soul,” he said, and is undergoing a major revitalization. When completed it will have a huge furniture market, condos, medical center and perhaps a Major League Stadium. Goodman speculates that Landry’s will take better advantage of the Nugget’s adjoining streetscape which already includes a canopied street, mall, casinos and a $16 million light show. The Nugget isn’t Landry’s or Fertitta’s tie to gaming.
Fertitta’s great-uncle Anthony Fertitta and great-great uncles, Salvatore and Rosario Maceo, operated restaurants and gambling parlors in Galveston during Prohibition. One parlor, the Balinese Room, was a Vegas-like scene that predated Las Vegas.
Asked how he felt about getting into an industry his ancestors had been in, Fertitta said, “That doesn’t even dawn on me.”
His cousins, Lorenzo and Frank Fertitta, run Station Casinos, which owns and operates 11 casinos.
And Landry’s board member Kenneth Brimmer and his wife previously worked for the casino company that became Lakes Entertainment. Lakes has a 64 percent stake in the televised World Poker Tournament and contracts to run four Indian tribe casinos, including one in Eagle Pass.
Casinos in Texas?
Does he plan to bring a casino back to the Gulf Coast shores?
It is largely out of his control. Casino gambling is illegal in Texas, except on Indian reservations.
Many Believe Gov. Rick Perry effectively shot down efforts to legalize gambling as a way to raise school funding revenue, but the issue isn’t dead.
The House Ways and Means Committee is expected to discuss video slot machines this session, while Rep. Kino Flores, D-Mission, may file a bill to authorize casinos.
If gambling in Texas happens, “great, but I’m not pushing for it, “ Fertitta said.
Landry’s shares rose to 31.95 Friday, up $3.54 a share.