Reno's Grand Sierra Resort in Today's Economic Climate
by Nevagante Group

Reno's Grand Sierra Resort in Today's Economic Climate

As Senior Vice-President of Gaming and a veteran employee at this Reno hotel/casino, I can't help but reflect on the property's history thinking it might crystallize a perspective of things to come in this new economic climate.

Having worked in the northern Nevada gaming market for the past 31 years, I have seen the current Grand Sierra Resort through numerous ownership and management changes. The property opened as the MGM Grand Reno in 1978 with 1,000 guest rooms and the world's largest casino floor at 120,000 square feet. Hello Hollywood was the production show which ran for eight-plus years on the world's largest stage. An additional 100,000 square feet doubled the convention space, as did the additional 1,000 hotel rooms. Now operating as a 2,000 room facility with 200,000 of convention space for the nation's companies, the MGM Grand was a crown jewel of northern Nevada in the early 1980s.

Bally's acquired the property in 1986 at the same time it was being green mailed by another gaming company in Atlantic City, New Jersey. Bally's increased its debt structure so as not to appear such an attractive acquisition. Kirk Kerkorian was more than happy to accommodate.

Short of a decade, the property was again under new ownership and in need of capital to keep the 'crown jewel' polished and competitive in the gaming market. Hilton Gaming bought the property in 1992 and provided the facelift for the newly titled the Reno Hilton. As was commensurate with the gaming industry practices at the time, Hilton Gaming acquired Bally's Gaming and renamed itself Park Place Entertainment. Park Place grew significantly through M&A and subsequently became Caesar's Entertainment. Caesar's Entertainment was acquired by Harrah's Entertainment in 2005 and the property was sold in 2006 to Grand Sierra Resort.

Today the property operates as the Grand Sierra Resort and Casino and is bank-owned because the previous owners stepped away finding themselves in default on the debt. Reviewing the history of the Grand Sierra Resort tells a partial story of Nevada gaming - opening a 'grand dame' serving as a community's cornerstone, followed by the era of multiple acquisitions by the mighty few, and, today, the divesting of casino properties by those "too big to fail" operators coupled with those properties like the Grand Sierra Resort that are owned by bankers and investors who want them open but are without a gaming license or the expertise of running a casino.

Navegante Group currently operates the casino at the Grand Sierra Resort. Navegante Group is my employer and brings to the table a gaming license and the know-how to run a casino successfully. These credentials and skills are something bankers, bondholders, and investors need to make money in gaming. I would suggest the Grand Sierra Resort's current situation might be an emerging trend as more bondholders and banking institutions ponder their options for gaming assets on the books due to default. More gaming companies might deleverage by selling off non-essential properties similar to Harrah's Entertainment selling the Reno Hilton to Grand Sierra Resorts in 2006. Banks, bondholders, and non-licensed prospective buyers will seek a licensed operator like Navegante Group to manage a property.

Larry J. Woolf and his son, Larry D. Woolf are the face of Navegante Group and the "board." Given this, Navegante Group is easily licensable in multiple jurisdictions, flexible, conscientious and can act quickly to evaluate a client's needs - and provide exacting advice on what a property's strengths and weaknesses are. In sum, Navegante Group assesses the client's objective, formulates a plan, and put the plan in motion expeditiously to completion. The leanness of the operation forgoes the bureaucratic red tape of a large, top-heavy management company.

Navegante Group's clients come from investment banker referrals. Bankers who have worked with Navegante Group recognize the value of their ability to obtain a gaming license, and provide a skill set that translates into increased casino earnings. Industry regulators respect Navegante Group's reputation because of their longstanding history of being regulatory compliant in multiple jurisdictions. As is oftentimes the case, the complexity of the solutions for the prospective buyer or reluctant owner seem insurmountable. Yet, Navegante Group and the gaming attorneys they employ know how to structure these deals such that Navegante Group can be collaborative, fair, and decisive without having to convene a cumbersome board for consensus.

In closing let me comment on the collaborative success of Navegante Group and the Grand Sierra Resort and Casino. Having come through a difficult 2009, the glow is back and the energy can be perceived. The casino floor and in excess of 800 room have been remodeled. A warm and sophisticated design has replaced the typical bright lights and loud noise of many casinos. Our business model focuses on increased casino revenue with a special emphasis on serving the local market. Celebrity chefs provide fine dining options for the tourists, conventioneers, and northern Nevada residents. Additionally, the buffet and coffee shop are providing enhanced value for gamers and those on the run. All of our designs have been working as planned and enhancing our 'glow.'

Best of all, the Grand Sierra is showing a year over year increase in casino revenue, head counts, and EBITDA. Navegante Group, the casino management team, and the bank's restructuring agent have all had to employ a quick learning curve. Being flexible, patient, and implementing new 'outside the box' ideas have resulted in extraordinary progress - and during the worst economic climate anyone can remember.

Northern Nevada has reported double digit revenue declines in recent years. Regrettably, there are probably more bankruptcies, more restructuring, and closures on the horizon. It is complicated and unpleasant. As gaming industry professionals, it hoped the tide will turn soon so increased revenues can be enjoyed by everyone. Most predict this will take 3-5 years to happen. The future is looking up, we just have continue working hard to serve our clientele, and be collaborate to ensure bankers, bondholders, investors, operators, and employees alike can all enjoy financial success.

Date Posted: 07-Feb-2010

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