Station Casinos Opens $750m North Fork Casino Early as a Court Ruling Waits

Red Rock Resorts' Station Casinos opened the North Fork Mono Casino in Madera, California, nine hours ahead of its advertised start, while a rival tribe's motion to halt gaming there still sits undecided in federal court. It arrives as Las Vegas operators report a weak quarter.

• The North Fork Mono Casino opened at 3pm on 27 October, according to Red Rock Resorts, which manages it through Station Casinos for the North Fork Rancheria of Mono Indians
• Red Rock puts the all-in project cost at about $750 million and says the 264,000 sq ft property has more than 2,400 slots, 40 table games and more than 1,500 jobs
• US District Judge Kirk E. Sherriff had still not ruled on the Picayune Rancheria of the Chukchansi Indians' motion for a preliminary injunction when the doors opened, the court docket shows, nearly three weeks after hearing it
• Opening day triggers Station's 4% development fee and starts a seven-year management contract paying it 30% of the casino's net income, according to Red Rock's latest 10-Q
• Red Rock reports its third-quarter results on 3 November, after MGM Resorts' Strip earnings fell 12% and Caesars' Las Vegas earnings fell 9.5%

North Fork Opens Hours Ahead of Its Advertised Start

The North Fork Mono Casino on Highway 99 north of Madera opened to the public at 3pm on Tuesday, 27 October, according to a Red Rock Resorts (NASDAQ: RRR) release, which describes it as an "unexpected early opening". The casino's website had advertised an opening at 12:01am on 28 October, according to a copy the Picayune Rancheria of the Chukchansi Indians filed with the federal court on 19 October. The release gives no reason for the change and carries no executive quotes.

The release puts the all-in project cost at approximately $750 million, though its boilerplate describes a $725 million development; Red Rock's 10-Q for the quarter to 30 June says the $750 million includes design, construction, preopening, financing and development fees. The release lists more than 2,400 slots, 40 table games, a high-limit room with 138 slots and 10 tables, eight dining venues and four bars, and credits the project with more than 1,500 local jobs.

ABC30 Fresno reported that hundreds of people attended a ribbon-cutting, with tribe members among the first inside. Tribal leader Elaine Bethel Fink thanked supporters for their patience and described the casino as a step towards economic growth and self-sufficiency, according to the station, which said a hotel and a gas station are planned.

The Court Challenge Is Still Open

Picayune, owner of the Chukchansi Gold Resort and Casino in Coarsegold, sued the National Indian Gaming Commission (NIGC), its chair, North Fork, Station Casinos and Red Rock in June. It asks the court to set aside the NIGC chair's approval of the management contract and to enjoin "all unlawful gaming" on the site, on the basis that California's courts have held the governor's 2012 concurrence void.

Judge Sherriff heard the injunction motion and the defendants' motions to dismiss on 9 October and took them under submission. The docket records no ruling as of 28 October. On 23 October the NIGC asked for 21 more days to file the administrative record; Picayune opposed that on 28 October, citing "ongoing prejudice".

The Opening Changes What a Judge Is Being Asked to Do

Before 27 October Picayune was asking the court to stop a casino from opening. It is now asking the court to close one that employs more than 1,500 people, by Red Rock's count. The legal question is unchanged, whether a concurrence California treats as void from the start can still support federal approval, but the balance of harms a judge weighs for a preliminary injunction is not. The release does not say why the opening moved forward, and reading tactics into a nine-hour change would be speculation. The NIGC's request for more time on the record suggests the merits will not be settled quickly.

Station Gets Paid on Opening Day, Then Carries the Risk

Red Rock's 10-Q says the 4% development fee on construction costs falls due on the day the casino opens to the public, and the management fee runs for seven years from opening. It also records $83.4 million of unrecognised amounts due from the tribe at 30 June, which Red Rock expects to recover from the casino's cash flows or financing. What remains is an operating business whose management contract is the very approval Picayune wants set aside.

A Small Segment Opens While Las Vegas Weakens

The Native American segment contributed $3.8 million of Red Rock's $510.3 million second-quarter revenue, against $503.2 million from Las Vegas operations, where adjusted EBITDA fell 5.0% to $227.5 million. Third-quarter peers point the same way: Caesars' Las Vegas adjusted EBITDA fell 9.5% and Boyd Gaming's Las Vegas Locals EBITDAR fell 5.1%. Red Rock also carries $469.4 million of land held for development on its balance sheet. North Fork's fees will not offset a softer Las Vegas, but it is Red Rock's only reported business outside the city, at a company that the Supreme Court left facing an order to bargain with the Culinary Union in September.

The casino is open and Station's fees have started. Whether the contract behind them survives is now up to Judge Sherriff.