Boyd Buys Land Under Barbary Coast
7 September 2005
by Rod Smith
Las Vegas Gaming Wire
Moving to consolidate its control of one of the
smallest but most valuable parcels of land on the Strip, Boyd
Gaming Corp. on Monday bought the land under the Barbary Coast
for $15.7 million.
With the 1.8-acre acquisition, Boyd Gaming now owns
4.3 acres on the northeast corner of the Las Vegas Boulevard and
Flamingo Road, commonly referred to as the Four Corners area of
the Strip.
Boyd Gaming Corp. Chairman Bill Boyd said the company
has no specific plans for redeveloping the site but will be in
a position to evaluate possibilities.
Boyd Gaming paid Enpey Enterprises, a family interest
that owned a motel on the site before the Barbary Coast was built,
about $8 million an acre for the parcel, which industry experts
called an incredible bargain for Boyd Gaming.
By comparison, Harrah's Entertainment is paying
$20 million an acre for the Imperial Palace and the land on which
it sits.
Boyd Gaming acquired the Barbary Coast and the back
half of the parcel under the parking structure in July 2004 as
part of its $1.3 billion buyout of Coast Casinos, which has made
it the third-largest gaming company in the world.
The deal gives Boyd Gaming more flexibility to redevelop
or sell the site on its own terms with fewer legal complications,
said Brian Gordon, a principal in Applied Analysis, a Las Vegas-based
financial consulting company.
Deutsche Bank analyst Andrew Zarnett said the company
will first have to decide how it will redevelop its Stardust site,
valued at up to $1.3 billion, farther north on the Strip and decide
what kind of a niche product would make the most sense on the
Barbary Coast site.
"At this point, they are in a position to develop
a niche product that would maximize the tremendous value from
the traffic flows through the intersection," he said. "Boyd
is one of the largest gaming companies in the world, and with
its success with The Borgata (in Atlantic City), it has the proven
capability to do things with markets which people did not think
could be done."
University of Nevada, Las Vegas history professor
Hal Rothman said the transaction is reminiscent of local developer
Steve Wynn's deal years ago to flip a small parcel of land in
front of Caesars Palace into a $700,000-plus profit he used to
buy a 5 percent stake in the Golden Nugget.
"But in this case, with the way the city is
going vertical, there are a lot of high-rise development options
Boyd could decide to pursue," he said. "What they are
going to have to do is think in terms of developing up rather
than out. The land is worth an incredible amount per square foot,
and they are going to want to maximize the value they get for
their shareholders.
"It's another sign Boyd Gaming is stepping
up because it's one of the big boys on the Strip now. They likely
are going to use the land and their resources toward building
a Strip-centric company along the lines of MGM (Mirage), rather
than remaining just a locals player on their old Sam's Town model."
Zarnett said if instead of redeveloping the site,
Boyd wants to realize value by selling the property, the acquisition
gives it a bigger piece of land to sell to Harrah's Entertainment
or a third party that is shopping for a prime Strip location.
The surrounding properties, the Flamingo, Batista's
Hole in the Wall and Bourbon Street, are all owned by Harrah's
Entertainment, which has announced it is considering redeveloping
the area.
Industry experts have speculated since Harrah's
acquired the Flamingo as part of its $9.4 million merger with
Caesars Entertainment that it was interested in buying Boyd's
holdings at the Four Corners.
Harrah's spokesman David Strow said he could not
comment on his company's possible interest in a further acquisition
because it is focusing all its efforts on relief for Gulf Coast
workers following Hurricane Katrina.
However, Boyd Gaming spokesman Rob Stillwell said
his company has had no discussions with Harrah's involving the
possible sale of the Barbary Coast.
"There was always a desire by Caesars (Entertainment)
to expand its holdings, but there haven't been any discussions
since the merger," he said.
