17 years and counting: Red Rock casino project with North Fork moving forward in California

September 2, 2020 11:42 AM
  • Howard Stutz, CDC Gaming Reports
September 2, 2020 11:42 AM
  • Howard Stutz, CDC Gaming Reports

Red Rock Resorts’ long-stalled tribal casino project near Fresno, California could finally be back in the development stage some 17 years after the Las Vegas-based gaming company first became involved in the project.

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One analyst said Tuesday the proposed $350 million casino-resort with North Fork Rancheria of Mono Indians could replace Red Rock’s current management deal for the Graton Resort near Santa Rosa, some 50 miles north of San Francisco.

“The project has been tied up in litigation,” Truist Securities gaming analyst Barry Jonas told investors Tuesday. “While new litigation is always possible, we think this win gives both Red Rock Resorts and the tribe the go-ahead to proceed.”

The California Supreme Court issued a 73-page decision Monday that would allow Gov. Gavin Newsom to concur with a decision by the Secretary of the Interior to take off-reservation land in trust and build tribal gaming without legislative approval.

Red Rock – through its now operating subsidiary Station Casinos – first signed an agreement with the North Fork tribe in 2003 to build and manage the gaming complex. The tribe has 61-acres near North Fork but long maintained the site was too small and remote for a casino.

The 305-acre site designated for the casino complex is in the town of Madera off Highway 99, roughly 42 miles from the tribe’s reservation and just 30 miles north of Fresno.

Red Rock Resorts Chief Operating Officer Bob Finch said in a statement Tuesday the ruling “finally cleared a major hurdle” in the tribe’s “decades-long quest” to develop the casino.

“Today’s ruling has been a long time coming for the North Fork Tribe and we are thrilled to be able to move forward with them on this very attractive project,” Finch said. “We expect that the tribe will be announcing more details regarding the casino in the near future.”

Red Rock Resorts’ seven-year management deal with the Graton tribe is scheduled to expire in November. During Red Rock’s quarterly earnings conference call in July, CFO Steve Cootey said the company expected “to reach an agreement with the tribe on an appropriate extension” of the contract.

As for North Fork, Cootey said he was hoping the California Supreme Court “will clear the way to finally develop this very attractive project on behalf of the North Fork Tribe in Central California.”

The casino is expected to include 2,000 slot machines, 40 table games, and a 200-room hotel.

A referendum on off-reservation casinos was rejected by California voters in 2014, but it doesn’t have any binding power.

“We are thrilled that the Court has finally decided this case in our favor,” North Fork Rancheria Tribal Chairwoman Elaine Bethel-Fink said in a statement. “Our tribal citizens and local community have been denied the advantages of tribal gaming — billions of dollars in economic benefits and thousands of jobs — for far too long.”

The project received federal approval in 2011 followed by then-Gov. Jerry Brown’s concurrence in 2012. After a series of legal challenges, the state Supreme Court agreed to take the case in 2017.

Bethel-Fink said, “we are nonetheless delighted to have this long drawn out drama finally behind us — and eager to get going and bring jobs and economic opportunity to our people and community.”

Jonas, in a note to investors, said the Supreme Court ruling was a “welcome win” for Red Rock and the company’s tribal gaming management business, especially with the Graton contract ending.

“We believe the project could be worth roughly $1 per share of value to Red Rock’s stock,” Jonas said.

According to Jonas, Red Rock would receive 4% of the project cost development fee and be reimbursed costs to date, which is roughly $34 million as the end of June.

“Like most tribal management agreements, the term is seven years, after which the tribe would most likely take over management and Red Rock would exit the project,” Jonas said.

Construction could begin sometime in the next 18-to-30 months.

Shares of Red Rock, traded on the Nasdaq, closed at $18.41 Tuesday, up $1.33, or 7.82%.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.