The increased revenue, to $48.9 million from $45.8 in the same year-earlier period, is attributable to the addition of its Paradise hotel tower and an expanded concert venue. The revenue increase was not universal, with 24.7% increase in food and beverage revenue and a 4% increase in lodging revenue offsetting a 31.5% drop in casino revenue and an 18.5% decline in retail revenue.
Casino revenue fell to $9.8 million from $14.3 million on a nearly 50% drop in table games revenue, which the company said was due to a combination of less being bet and a much lower hold percentage (8.9% versus 15.8%). Food and beverage revenue increased to $25.4 million from $20.3 million due to the additional hotel rooms and the expansion of The Joint, its concert venue. Lodging revenue increased to $10.4 million from $10 million due to the additional hotel rooms despite a decrease in the average daily rate to $136 from $193 and a decrease in hotel occupancy to 89.0% from 92.4%.
"Automobile traffic into Las Vegas and air travel into McCarran International airport continues to be adversely impacted, resulting in relatively low casino volumes and demand for hotel rooms," the company states in its SEC filing. "Based on these adverse circumstances, we believe that we will continue to experience relatively low hotel occupancy rates and casino volumes as compared to that of prior periods."
The additional hotel tower and the expanded concert venue are part of a larger expansion and overall renovation of the existing facilities. The total expansion is slated to include 875 guest rooms, 60,000 square feet of meeting and convention space and approximately 30,000 square feet of casino space. The project also includes an expansion of the hotel's pool, several new food and beverage outlets, the renovated and expanded concert venue, a new spa and exercise facility, and additional retail space.
The renovated and expanded concert venue and the convention space were completed in the second quarter and the 490-room Paradise Tower opened in the third quarter. The company says it remains on pace to complete the remainder of the expansion project by the end of 2009 and within the parameters of the original budget. The total cost of the expansion is now estimated at $760 million, up $10 million from a previous estimate.
The company had one asset held for sale as of the third quarter, a 10-acre parcel adjacent to the Hard Rock resort. The net carrying value of the asset is $95.2 million—which represents a fair value of $100 million minus $4.8 million of expected closing costs. An appraisal during the third quarter showed no lost value from the second quarter. It will be appraised again during the fourth quarter.
Last year, the company completed an intercompany transfer of the property for $110 million, with the proceeds used to satisfy a $110 million amortization payment under a CMBS facility due in August 2008. The buying entity obtained a $50-million acquisition loan for the purchase from Column Financial Inc. that carried an interest rate of LIBOR plus a blended spread of 15.9% that could be increased to 20.7%. The loan was payable no later than Aug. 9, 2009. The due was subsequently extended to Oct. 22, 2009 and on Oct. 23 the company received a notice of default from the lenders. The Company has entered into a term sheet with the lenders under the land acquisition financing to amend the loan agreement governing the land acquisition financing to, among other things, extend the maturity date to August 9, 2011 and thereby cure the event of default.
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