New UNITE HERE Gaming report asks: "Who's on the hook for the Palms?"

New UNITE HERE Gaming report asks: "Who's on the hook for the Palms?"

PR Newswire

LAS VEGAS, April 23, 2019

LAS VEGAS, April 23, 2019 /PRNewswire/ -- UNITE HERE Gaming released a new report providing investors in Red Rock Resorts, Inc. (NASDAQ: RRR) with an assessment of the company's ability to achieve a sufficient return on investment with its nearly finished $1 billion-plus Palms Casino Resort project. Investors should ask management to set clear markers: who will be held accountable if the post-renovation Palms doesn't generate the kind of return of investment (ROI) management has projected? The new report is available here: "Who's on the Hook for the Palms?"

The Culinary Union is Nevada’s largest immigrant organization with over 60,000 members - a diverse membership that is approximately 55% women and 54% Latinx. Members - who work as guest room attendants, bartenders, cocktail and food servers, porters, bellmen, cooks, and kitchen workers - come from 178 countries and speak over 40 different languages. The Culinary Union has been fighting for fair wages, job security, and good health benefits for workers in Nevada for 84 years. (PRNewsfoto/Culinary Workers Union Local #2)

"A conservative interpretation of guidance from Red Rock's management puts the midpoint for expected ROI at 13% or $130 million annual EBITDA from the new Palms," said Jason Kordosky of UNITE HERE Gaming Research. "Investors in Red Rock Resorts should hold the company to such projections by insisting on property-level financial breakout for Palms going forward. There should be some accountability if Red Rock Resorts management cannot make good on its word after spending a billion dollars on Palms."

Red Rock Resorts paid $312.5 million to purchase the Palms in 2016 and is wrapping up a $690 million renovation of the 17-year-old property more than a mile west of the Las Vegas Strip. In quarterly earnings calls on November 7, 2017, February 28, 2018, and November 7, 2018, Red Rock Resorts management told investors they expected a "mid-teens" to "low-double digit" return on the investment at the Palms. UNITE HERE Gaming Research analysis of Palms finds that it will be a challenge for the post-renovation property to generate that level of EBITDA. UNITE HERE Gaming Research believes Palms is likely to earn $100 million in annual EBITDA should it achieve margins of 30% or $117 million at 35% margins.

UNITE HERE represents 270,000 hospitality workers in gaming, hotel, and food service industries in North America and provides analysis from the perspective of those who work in these industries.

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