Boyd Buys Land Under Barbary Coast

7 September 2005

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.


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