Q4 2022 Red Rock Resorts Inc Earnings Call
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Good afternoon, and welcome to Red Rock resorts fourth quarter, and full year 2022 conference call.
All participants will be in a listen only mode.
No that's event is being recorded I.
I would now like to turn the conference over to Stephen <unk> Executive Vice President Chief Financial Officer, and Treasurer of Red Rock resorts.
Please go ahead.
Thank you operator, and good afternoon, everyone. Thank you for joining us today for Red Rock resorts fourth quarter and full year 2022 earnings conference call joining.
Joining me on the call today are Frank and Lorenzo Fertitta, Scott Kreger, and our executive management team.
To remind everyone that our call today will include forward looking statements under the safe Harbor provisions of the United States Federal Securities laws developments and results may differ from those projected during this call. We will also discuss non-GAAP financial measures for definitions and complete reconciliation of these figures to GAAP. Please refer to the financial tables in our earnings.
Press release form 8-K, and Investor deck, which were filed this afternoon. Prior to the call also please note that this call is being recorded.
Before we get into any details we are pleased and proud to say that our fourth quarter represented another strong quarter for the company by any measure in terms of same store net revenue we had the best fourth quarter in the history of our company and in terms of adjusted EBITDA and adjusted EBITDA margin. This quarter represented our second best fourth quarter ever only surpassed by last year's strong quarter.
As we look at our results for the year in terms of same store revenue and adjusted EBITDA, We had the best year in the history of our company. While also achieving our second best adjusted EBITDA margin only surpassed by last year's record high margin.
To sum things up despite facing challenges such as COVID-19 restrictions historically high inflation in the disrupted supply chain. The company was able to generate record financial performance.
This demonstrates the resilience of our business model the sustainability of our margins and the ability of our management team to execute on our strategy even in an extremely challenging EBIT in extremely challenging macro environment.
Now, let's take a look at our fourth quarter and full year results on a consolidated basis, our fourth quarter net revenue was $425 5 million up $3 1 million from $422 4 million in the prior year's fourth quarter.
Our adjusted EBITDA was $194 4 million up two 5% from $189 7 million in the prior year's fourth quarter. Our adjusted EBITDA margin was 45, 7% for the quarter, an increase of 78 basis points from the prior year's fourth quarter.
With respect to our Las Vegas operations, excluding the impact from our closed properties. Our fourth quarter net revenue was $419 7 million up one 9% from $411 7 million in the prior year's fourth quarter.
Adjusted EBITDA was $206 9 million down one 1% from $209 3 million in the prior year's fourth quarter and our adjusted EBITA margin.
Our 49, 3% 54%.
7 billion up two 8% from $1 6 billion in the prior year. Our 2022 at full year. Adjusted EBITDA was $743 9 million up $2 9 million from $741 million in the prior year.
Full year adjusted EBITDA margin was 44, 7% a decrease of 109 basis points from the prior year.
With respect to our Las Vegas operations, excluding the impact from our foreclosed properties. Our full year 2022, net revenue was 1.64 billion up four to four 7% or $5 7 billion in the prior year.
Full year 2022, adjusted EBITDA margin was $813 4 million up 1% from $805 9 million in the prior year, our full year adjusted EBITDA margin was 49, 7% a decrease of 184 basis points from the prior year.
As always we continue to prioritize free cash flow converting 55% of our adjusted EBITDA to operating free cash flow generating $106 6 million.
Or $1 <unk> per share. This brings our 2022 cumulative free cash flow generated by the company to $448 2 million or $4 31 per share with virtually every door either being reinvested into our long term growth strategy or being returned to our stakeholders.
Throughout the year in the quarter, we remained operational discipline and stayed focused on our core local customers as well as continued to grow our regional and out of town customer base when comparing our results to last year, we continue to see benefit from strong visitation in our regional and out of town customer segments. This strength, coupled with strong spend per visit across our entire portfolio.
Allowed us to enjoy near record revenue and profits across our gaming segments.
The trends in the fourth quarter were similar to those we saw in our recent my most recent quarters and have remained consistent so far this year.
Turning to the non gaming segments, we saw continued growth in food and beverage and hotel as both segments delivered near record revenue and profitability in the fourth quarter, driven by higher occupancy and ADR across our hotel portfolio and a higher average check across our food and beverage outlets with business.
With regard to group sales with catering and catering business segments. The recovery of these business lines continue as we saw the fourth quarter to represent the sixth consecutive quarter of double digit year over year growth in this business line and we continue to see our lead pipeline grow into 2023.
On the expense side, we remain operationally disciplined and continue to look for ways to become more efficient and providing best in class wages and benefits to our team members and delivering best in class customer service to our guests, while 2022 post certain economic challenges such as inflation and higher interest rates, our constant focus on our core operations and our actions taken over the past two years.
<unk> have allowed us to generate strong adjusted EBITDA maintain adjusted EBITA margin and returned over $1 $1 billion in capital over $10 per share to our shareholders. Since we reopened in June 2020.
And while we remain vigilant to macroeconomic trends, we will continue to stay disciplined and focused on executing investing in our core strategy, including strategically expanding our footprint across the Las Vegas Valley and offer new amenities to our exist our guests at existing locations.
Last quarter, we saw the successful execution of the strategy to the openings of our high limit slot room, and Lotus as I am at our Red rock property.
These amenities at Red rock will soon be joined by the highly anticipated opening later this quarter of <unk> and a new restaurant concept focusing on coastal Greek seafood cuisine, and the Rouge room, a sophisticated European inspire cocktail hour.
Additionally, this quarter, we will be strategically expanding our company's footprints to the downtown Las Vegas area to the opening of our wildfire property on Fremont later this week.
Now, let's cover a few balance sheet and capital items, the company's cash and cash equivalents at the end of the fourth quarter was $117 3 million.
Total principal amount of debt outstanding at quarter end was 3 billion, resulting in net debt of $2 9 billion.
At the end of the fourth quarter, the company's net debt to EBITDA and interest coverage ratios were three nine times and six times times six six times respectively.
As we have discussed on previous earnings calls, our Leverages expect to Canadian trend upward as we complete the construction of our Durango project.
Upon the completion of Durango, we expect leverage to begin to trending down towards our long term leverage target of three times net debt.
On November 14, 2022, the company announced that its board of directors had declared a special cash dividend of $1 per class a share special dividend was payable to shareholders of record on November 30th and was paid on December nine.
The dividend reflects our board and management team's continued confidence in our business model is weak.
And our commitment to returning capital shareholders. In addition to executing on our long term growth strategy.
When we combine our special dividend with a regular declared fourth quarter dividend, we returned approximately $130 million to our shareholders are shareholders in the fourth quarter and over $353 million for the full year of 2022.
Also during the fourth quarter, we made distributions of approximately $22 8 million to the LLC unitholders of station Holdco, which included the distributions of approximately $13 1 million to Red rock resorts.
The company used the distribution to make its fourth quarter estimated tax payment and to pay a portion of its previously declared special dividend of $1 per class a common share.
Capital spend for the fourth quarter was $130 million, which included approximately $108 4 million of investment capital inclusive of our Durango project as well as $21 6 million in maintenance capital.
For the full year 2022, our capital spend was approximately $328 6 million, which includes $258 1 million of investment capital inclusive of our Durango project as well as $70 5 million in maintenance capital for.
For the full year 2023, we currently expect to spend between $70 million and $90 million in maintenance capital and an additional $550 million to $600 million growth capital inclusive of our Durango project.
Now lets provide an update on our development pipeline.
Starting with our Durango development as we've mentioned before we are extremely excited about this project, which is situated on a 50 acre site.
Ideally located off the $2 15 expressway in Durango drive in the southwest Las Vegas Valley.
The project is located in the fastest growing area in the Las Vegas Valley with a very favorable demographic profile and no unrestricted gaming competitors within a five mile radius of the project site.
The project is progressing nicely as we topped out in nearly October and expect to have the structure fully in close by mid April . The project continues to remain on schedule with an anticipated opening in the fourth quarter of 2023.
As mentioned on our prior earnings calls, we expect to spend approximately $750 million, which includes all design cost construction hard and soft costs.
Preopening expenses and financing costs associated with the project and are currently operating under a guaranteed maximum price contract, which represents approximately 70% of the total project cost.
As project stands now approximately 88% of the project, including the purchase of long lead <unk> items has been secured.
As stated in previous calls the company expects the return profile for this project to be consistent with past Greenfield projects within our portfolio.
As we've already mentioned we are also very excited about the opening of wildfire Fremont on February 10th.
21000 square foot Casino is the newest addition to our wildfire gaming family is conveniently located in the downtown Las Vegas area.
The casino will offer over 200 slot machines, SDN sports as well as two restaurant options to our guests.
We're excited to be bringing our best in class service and amenities to the downtown area of Las Vegas, and look forward to welcoming our first customer in the coming days.
Turning now to North Fork as we noted last quarter after favorable resolving all of its other litigation that drive is only one pending case in the California courts.
As we have also noted last quarter, we do not believe that any decision by a California State Court could deprive north fork of its ability to game on Federal Trust land, we continue to work with the tribe to progress our efforts with respect to this very attractive project, including working toward approval on our management agreement continuing our work on development and design and having preliminary talks with <unk>.
Specter of lending partners, we will continue to provide updates on this on our next quarterly earnings call.
Lastly, this quarter you have seen our long term development plan in action as we have been very busy upgrading our real estate portfolio.
We purchased a 67 acre gaming site at low <unk> in the $2 15 Expressway in North Las Vegas were 55 million and.
And funded the purchase using a tax efficient 10, 31 exchange as a result of successfully.
Successfully closing on our sale of $56 six acre site, north north of Cactus and Las Vegas Boulevard for $60 8 million.
Additionally, we sold 21 acres of excess land on our Durango project site with $23 8 million to a group of multifamily developers, which will bring additional visitation to our project at Durango.
Lastly, we successfully completed the sale of our $35 three acre site of our former Fiesta Henderson property for almost $33 million in.
In total we sold approximately 113 acres for $118 million in proceeds in 2022 and with the purchase of our <unk> site in our earlier purchased south of Cactus and Las Vegas Boulevard, we substantially upgraded our pipeline of land held for development.
With the completion of these transactions, our strategic landholdings amount to over 522 acres, the bulk of which will serve as the foundation for the future growth of the company.
We are actively looking to divest or under contract on almost 120 acres of land as we continue to reposition and upgrade our real estate portfolios for the next chapter of growth of station casinos.
Lastly on February seven 2022, the company now to this board of directors had declared a cash dividend for 25 cents.
Per common class a common share payable for the first quarter of 2023, the dividend will be payable on March 31 to all shareholders of record as of the close of business on March 15th.
The current best in class assets and locations coupled with our development pipeline of seven owned development sites located in the most desirable locations in the Las Vegas Valley.
We have an unparalleled growth story that will allow us to double the size of our portfolio and position us to capitalize on the very favorable long term demographic trends and high barriers to entry that characterize the Las Vegas locals market.
While the macroeconomic environment through the year was challenging our disciplined approach to running our business resulted in record high EBITDA and near record high EBITDA margin for 2022 as we begin 2023, we will remain vigilant to macro economic trends. We are confident in the resilience of our business model and our management team's ability to execute our long term growth.
<unk> and take a balanced approach to returning capital to our shareholders.
And as we do every quarter, we'd like to recognize and extend our thanks to all of our team members for their hard work 2022 was a very challenging year and our team members rose to the occasion as they always do.
Our success starts with them and because of them our guests come back time after time.
We've again like to thank them for voting us top casino employer in the Las Vegas Valley for the second year in a row and making us the employer of choice in the Las Vegas Valley and finally special Thanks goes out to all of our guests for their loyal support over the past 46 years.
Operator. This concludes our prepared remarks today and we are ready to take questions from participants on the costs.
We will now begin the question and answer session.
Good question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing mckeith.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question today comes from Joe Greff with Jpmorgan. Please go ahead.
Hi, everybody.
Looking back at the <unk> Casino revenues were down a little bit year over year, and then the non casino revenues.
We were up mid single digit year over year.
Similar to the <unk> can.
Can you talk about how your Las Vegas locals consumer spending whats driving that and then what are you seeing in the <unk> to date.
Well thanks, Joe.
Kind of take it from the top and look at.
Casino revenues first.
We continue to look at casino revenues as stable and healthy when you look at the database we.
See good signs of stability across the database that's everything from the low end to the higher end customer. We also see growth in the out of town market as well.
So we continue to.
Offer good products and the slot.
She'd realm, and then also work on our table games, and we think that.
What youre seeing in casino revenues is stability and the opportunity to growth.
When we switch gears and look at the non gaming.
Food and beverage and hotel revenues, we're seeing outsized growth.
From regional and out of town. So when you look at all metrics, whether thats food and beverage hotel.
Ancillary.
Our entertainment options like Boeing.
Salon and Spa all of them are up double digit and we're really encouraged by that and so when we look forward into this year, we're seeing strength in all of those areas specifically.
The return of convention guests and also strong catering revenues as we go forward.
Okay.
And what Youre seeing in <unk> to date.
You characterized that.
Very favorable it's stable and consistent Joe I need as we've talked about in the remarks, so we glad to position customers at this point.
Great and then.
My follow up question is maybe can you talk a little bit about how you're thinking.
About development.
Following Durango.
How are you thinking about the timing had been brought in Skye Canyon.
And others.
I guess, what do you need to see in the locals market, what do you need to see.
And the ramp of Durango, and how do you factor in balance sheet considerations.
I think we want to see continued stability in the Las Vegas market.
Everything we see right now continues to backup what our long term pizza.
The macro environment with population migrating into Las Vegas continued to grow.
Limitations on supply where all the rooftops.
<unk> are being built which is part of the pieces.
<unk> fits right into that.
And basically what we're doing is working on being in a position to have a ready to go project, but to Greenlight a project, we're going to have to prove out Durango.
Before we would green light is that being said, we're very confident in Durango. It's location the product that we're going to build there I think the market is going to really really like what we're doing so we're excited about it.
<unk>.
Once we believe that we have stability, whether it be over 234 quarters, we'll decide that based on the strength of the business.
And Steve you can address kind of where we are relative to the balance sheet, but we would expect with Durango opening.
Rapidly.
Deleveraging the balance sheet.
And to Echo Joe with Frank said, I mean, we're moving forward the entitlement process across all of our development properties with the goal to have these all shovel ready and this just gives the team the management team maximum optionality.
As we're moving into the let's call. It a stability point of Durango to assess the macro environment assessed the balance sheet and our ability to generate a return for our shareholders to determine the next project.
As Frank mentioned the balance sheet is in good shape, we have a low very low cost of capital no long term maturities, we have plenty of liquidity.
To go around so we feel we can execute that strategy and as you also mentioned in our remarks, the leverage will be trending upward as we go through Durango. This has been expected and I think well communicated to the street.
As Frank alluded to once Durango hits, we expect that leverage to come down and start moving slowly toward our long term leverage target of three times net.
Thank you very much.
The next question comes from Carlo Santarelli with Deutsche Bank. Please go ahead.
Hey, everybody. Thank you.
Guys, Steve you kind of outlined the Capex I thought you said 256 or something like that had been spent on Durango. This year and then obviously the bulk will be spent in 2023 I guess my question is it looks like embedded within the 500 600 growth Capex seems to be a 100 or so odd million.
Yes.
Other I was just wondering how much of that relates to development activity of new stock versus core.
Reinvestment new amenities that existing assets.
Yes, I think if you just if you break that out in Durango.
Durango was probably about $230 million, let's call. It life to date, you have about 518 $520 million left to spend on Durango, we still have about $9 million related to the opening of Fremont, which is obviously committed to the project to opening up.
Literally this week the rest of the Capex is related to strategic investments, mostly in our same store to improve the amount of these and offerings to our existing customers.
Got it and then just a follow up historically speaking.
If I am correct or I should say the model I'm looking at is accurate <unk> has historically been seasonally better in the locals market than <unk>.
From a revenue and EBITDA perspective is there anything different about the seasonality now.
We look into 2023 throughout the year that you would expect to see or anything that we need to be mindful of in terms of changing patterns or habits.
No.
Youre spot on generally Q1 is the strongest of the quarters in Las Vegas, I think last quarter you.
We saw probably a little bit flatter is flatter in terms of what you would expect and seasonality.
But theres nothing in 2023 that would tell us that seasonality is not going to return.
Great. Thanks, Steve.
The next question comes from Shaun Kelly with Bank of America. Please go ahead.
Hi, good afternoon, everyone. Thanks for taking my question.
Just high level you all have great insights on the broader commercial real estate market and clearly with some of the land deals you guys have been pretty active there was kind of hoping for a little bit of color on just what you're seeing from maybe on the buy and sell side of some of that activity.
Meaningful.
Renewed interest in the valley.
<unk> and behavior from developers or how they are kind of looking at underwriting Las Vegas in the future.
Yes.
Let's kind of take it through steps, so quite a bit of land holding activity over the last few years. So we divested about 118 acres of land.
Have about.
Roughly 47% 48 acres of land under contract and we have about 120 acres of land that is active.
And so.
We feel that the market still has.
<unk>.
Steam and power to it we still have expressions of interest and we are actively under contract on a majority of our land holdings that are up for sale.
We still think that the price per acre in the valley is strong.
And accretive to us continuing our strategy to improve our placement around the valley.
Great. Thanks, very much and maybe just as my follow up can we just touch on wildfire downtown a little bit more I mean, thats sort of a unique submarket kind of curious on how you are expecting it to look and feel relative to hitting your core local properties.
Is it a little bit of a different customer base or are you pulling from a little bit more of the tourist base that ends up down there kind of how are you thinking about positioning that.
I think first it's probably good to categorize the products that we announced a big box products that are your typical products like Green Valley Ranch and Red Rock and then we have what's called small non restricted on these are a bit of a different format. They are a little bit more local in there they are right.
So a customer catchment they are a little more convenient getting in and out.
And they offer a little bit more of a personalized service on our big box operations.
We characterize the wildfire Fremont this is kind of our new benchmark for these assets. This is this is a neighborhood casino. So true neighborhood concerns. So the quality is quite far the box on the Boulder strip.
And it does relatively close to downtown but.
But we do think that it's going to be predominantly for folks in that neighborhood and we think that it's going to be.
Something thats fresh and new on the Boulder strip that we haven't seen in years. So we're pretty excited about the opening.
Thank you very much.
The next question comes from Steve <unk> with Stifel. Please go ahead.
Hey, guys. Good afternoon, so I wanted to ask about your older demographic.
Maybe if you saw any material changes in that customer over the past couple of months and then second part of that question is going to be.
Did you see any kinds of changes in that customer base in January and the reason I ask is just given the fact that a lot of those folks got a somewhat decent bump in their social security checks.
At the beginning of the year.
Okay.
Pardon me.
Yes Hello.
Let me remind of blocker speakers.
One moment, while we reconnect.
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Yes.
Yes.
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We have reconnected with our speakers and thank you for your patience.
Oh, a question, we have Steve <unk> with Stifel.
Yes.
Steve If you can and it's not that we didn't like your question.
Okay.
You repeat the question and pullback.
Go back we had a little technical difficulty here sure. Yes, I thought you didn't like and you just hung up on me, but.
So thanks, guys. So I wanted to ask you about your older demographic and if you saw any material changes in that customer over the past couple of months and the second part of that question is did you see any.
Kinds of material changes in that customer base in January given the fact that.
I think a lot of those folks got a decent bump in their social security checks at the beginning of the year.
Yes, Hi, Steve This is Scott.
Yes, specifically with the let's call it 50 565 plus demographic.
We're very encouraged.
We're seeing good growth in that demographic and I know we've talked in previous calls about them coming back into the fold I think we can say with confidence that they are back.
And producing positive gains for us. So we're really encouraged by that and if you look at Las Vegas demographics in Las Vegas inbound resident profile.
That age group.
Not only is coming in at a greater capacity than other age groups to the tune of about three eight times. The average but also their average income is increasing quite a bit. So we're encouraged by all of those and we're seeing that come through in the database.
Okay. Thanks for that Scott and then Steve as we think about margins for this year.
Anything you would call out there in terms of headwinds or tailwind to the margin structure that we should be thinking about and I don't know if you can help us with.
Maybe how corporate costs will look this year and maybe interest as well.
Yes.
I think what you.
As you've seen we've been pretty consistent with the margins right as our 10th quarter in a row generating exceptional margin.
So yeah, we expect headwinds such as utilities.
<unk> been consistent on our side and we expect that to be consistent on our side as we move into.
Moving into 2023.
The team is executing in all sorts of challenging macroeconomic environments.
With gave us reason to believe.
Maintain margin.
'twenty three.
And anything with you would help us with corporate or interest side of things.
Well the interest the interest is going to depend on the interest interest costs are up I would say that we are about 43% fixed what that just means that every bump in.
Every bump in interest 1% is about $17 million in interest expense as I mentioned that interest expense should go up as at least alluded to before I, we'll be leveraging up as we go on to Durango, but that interest expense is going to fall right down as we start deleveraging.
Corporate what Youre seeing right now is pretty much a good run rate.
So we'd expect that to remain consistent.
Okay, great. Thanks, guys appreciate it.
The next question comes from Barry Jonas with <unk> Securities. Please go ahead.
Hey, guys actually just following up corporate.
Was was nicely ahead of us.
G&A as well just curious if there are any call outs, there and how it sounds like that's not sustainable whatever you're doing.
Yes, I think G&A, if you kind of dig in deepening G&A.
Yes.
Marketing and advertising it was much more efficient year over year as.
As well as.
As part of our managing the SBC control the controllable.
We're able to reduce costs and consulting and outside services for the quarter, which resulted in lower G&A and we do feel that's sustainable.
Got it and then just for my follow up Red rocks, obviously concentrated in.
Las Vegas locals market, recognizing north Fork and all your land holdings in the pipeline are there any scenarios that would find you extending more beyond Las Vegas.
Okay.
Look we're always looking at opportunities.
Valuation then, but if there's something that we think makes sense for the company for the shareholders. We would we would take a look at that.
Great. Thanks, so much.
The next question comes from Stephen Grambling with Morgan Stanley . Please go ahead.
Hi, Thanks, a couple of follow ups first on Durango, and I know you talked about this a little bit but as you see the market continue to evolve how do you think about the ramp of the property and where our growth will come from if we think about new customers are growing the market versus any kind of cannibalization of other properties versus taking share from.
Some competitors.
Mmm your periods, if we look at historical ramps in the valley and we do find that that we grow markets. So what the demographics are today will grow as we as we bring those products online and bring those to the neighborhood also as we look at new amenities and adjust the.
The model of the property, we see upside there as well.
And then I think.
Past that you know we look at other opportunities in the valley to grow once we get Durango up an operator.
[laughter] gotcha.
Then when we were talking about there's no competitive within a five mile radius and this is you have the that southwest Vegas.
Part of the valley's by the fastest growing demographic in the valley and with the highest income.
Yeah.
Fair enough and then seconds just following up on the group in catering strength, clearly I'm I'm very good calendar for the shrimp.
And the year ahead with kind of idea and Formula one can you remind us what you typically see when <unk> hit submit even compare and contrast, what that might look like for you all relative to what's going on with Formula One as you look ahead.
Well, let's take a step back and maybe talk more broadly about what we're seeing in hotel sales pace, meaning that those are hotel rooms, coming from a events or groups, where you know.
<unk> pretty strong increases as we look at the fourth quarter and look forward into 2023, we're looking at room night bookings and 20 per cent taio increases in revenue up quite substantially and then when we look at the catering revenue that's on the books as a function of those.
Hotel rooms.
We're seeing quite substantial increases in catering revenue as well so when we look in our committed bookings throughout the rest of 2023, it's very encouraging.
Got it thanks, so much.
The next question comes spam scam content with well I don't think I had.
Hey, good afternoon, and thanks for taking my questions I was hoping to get some color on kind of the real time trend that you're saying in a residential real estate marketing and to what extent does that help that market impact the consumer psyche versus the other metric system, such as unemployment our income levels.
In terms of the impact of the housing market, obviously, I mean, your heart back to the 2007 2000 Ain't got the impact of the housing market I just wanted to get it you know what's going on here from an economic perspective, while you're seeing some prices down and you're also seeing transactions down which is <unk> and the housing market.
Actually fairly stable.
And it's not it's not a reiteration of what 2007 2008 is you have a lot of folks that are in fixed loans as opposed to variable late loans like they were in a recession and they're all you for the most of those EBIT. Despite maybe a slight price downward they're all they're all positive equity. So there's no reason to sell.
And then I think Frank is always reiterated from a housing perspective that we we loved the longterm demographic profile of Las Vegas, and Petite people continue to block here, which drives demand for housing. So I think you know arguably from a housing perspective, it's yeah. We're under supplied from actually actual demand that it is.
In need of housing.
Got it and then just a native American.
Although housing prices or go for more of a.
Were they were really what I would consider.
<unk> favorable pig.
So what you've added you guys talked about with <unk>.
Increases in interest rates and things like that you just have a bit of a slogan but.
Still have a lot of people that have significant equity.
<unk> right now it's not like.
2000, and we were like 74% of the holes were underwater equity of business is that what we're saying.
Right now, we're seeing a healthy I hope he slowdown Rebecca Shaw from what I think was unsustainable.
And and people know valuing the loan as an asset.
Which allows them to have kind of more discretionary.
Which is not a bad thing.
Right makes sense and it's just for my follow up on the native American fees that I think the quarter. There was there was around 5 million and EBITDA.
I mean, <unk>, great and clothes I think it was in the <unk> or the the management contract and in the first quarter Uhm I think this was the biggest kind of line item that hit I mean, what what exactly was that and should we be anticipating anything like that in 2023 as it relates to north Fork.
No that was a one time settlement of an arbitration case and and we do not expect.
That that EBITDA returned in 2023.
Got it thank you.
The next question comes from Chad <unk>. Please go ahead.
Afternoon. Thanks for taking my question I wanted to ask about the promotional environment I guess in the in the local region and then also for the out of Towners and if you've seen anything exorbitant from I guess your your legacy competitors or I guess the newest competitor. That's currently running the palms next.
My God, It's Scott Happy to report the marketing in the valley remains rational and stable. So it is very consistent with what we've reported in the past and it remains so.
Great. Thanks, and then one I guess nuance question I think in the past you know we did we had thought that there were some local customers that would maybe drive an hour hour and a half or you know some more value option and we've seen some of those markets actually lose market share I don't know if you if you have more valued customer.
<unk> that you know historically left Clark County, and kind of gone out to to Laughlin, but do you have a sense just looking at your database. If you are getting you know just just higher frequency and more kind of allegiance to to your product versus you know what you may have seen in the past.
Our our business is always spam location location location convenience value in service.
I mean, our customers typically.
Live within three to five mile radius.
Of our properties and they they visit <unk>.
Multiple times a week you know.
And again, it's based on the quality of the facilities, we have the convenience of the facilities the.
The humidity is the team members service.
Recognition of the customer.
So I don't think we really street la furniture.
Competitor a horse.
Let's see most Las Vegas locals are spending more time in their local neighborhood properties like hours versus going to the strip. So.
The difference between five years ago, and now is we're providing amenities that give remove the reason for you to need to go to the strip if you're a local resident.
That's great. Thank you very much.
The next question comes from John Decree with C. B R. E Security. Please go ahead.
Okay, everyone. Thanks for taking my questions.
I wanted to ask you about a smaller piece of your kind of capital allocation that is on your kind of same store amenity upgrades.
Ross the portfolio that are pretty much you have been been a pretty good core piece of your business and I was wondering if you could.
Qualify or give some color on your kind of our lie expectations for those investments and where you see that staffing with some some things have come online recently, he's talking to prepared remarks about recovery Nongaming I don't know if you.
Sure I guess as to how much is being driven by your recent investments versus just brought her recovery in the market helpful.
<unk> <unk>, John I'm Gonna keep this a little bit high level, rather go in the returns of every single asset, but we focus on your <unk>. Our most recent addition to the Red rock right. The Highlander table, Rhode Island slot room, putting the casino bar. We also put a notice in the edges alluded to we're also getting the Rouge room, and then our Greek restaurants opening up.
In the next couple of weeks, we were incredibly happy.
With the returns on all of the assets, which is why we advocated that additional capital to strategic investments across that way, they're all serving you yeah.
<unk>, that's that's fair, maybe one on wages and we kind of talked about it a little bit throughout the call I think specifically about social security increase but you know private payrolls wages in Las Vegas are certainly I'll paste and a lot of other markets and and the folks that are moving from California coming from from high income jurisdictions.
At the same time, we still get the question about spend per visit being elevated relative to to 2019, we talked about real estate, how how important do you look at the wage growth side of things as a driver of the business and you know if you think that's one of the reasons that I spend per visit.
They were seeing a sustainable maybe your thoughts on on private wage growth in Las Vegas, and its impact on your business.
Yeah, I can start and she can direct you towards the page, but in the investor deck. We have a couple of slides on the average income of Las Vegas workers, an incoming average income.
Over the next five years that looks really strong and of course, the more money you make the more discretionary income you have and and we're starting to see those effects at the properties as well bring it on new amenities that are you know incremental too just gaming and making.
Are are properties kind of local regional destination centers.
Steve maybe you Wanna give him some more detail in the exact numbers yeah, I mean, I mean, John this is all the investor deck, but we've kind of showed the that average wages from basically <unk> year over year, Las Vegas, probably one of the top cities and in the Western United States growing $6 seven per cent and then as as Scott alluded to you know from a personal income per capita.
Uhm or expect to grow almost 17 per cent over the next five years, so as migrants come in from wealthier areas in California, they're bringing with them.
Higher disposable discretionary income S. S. I think you're saying our business models built up people and disposable income. So that's a good thing for us.
Oh.
Oh the factory.
Promotional.
Environment, and we have significantly less <unk>.
This is just focusing on <unk>.
Poor customer that wants to come to our facilities.
Because of our location for <unk> or cream members.
So you know we've gotten out about promotional business.
Then we ran to the back in 2019.
You're naturally going to have a harsh ma'am per visit couple alone.
Three four having more disposable income from her way through.
That's great. Thanks for all the color that's congratulations on a great ear.
Thank you.
The next question comes from Cassandra Leanne Kathleen. Please go ahead.
Okay.
Hi, Good afternoon. Thank you for taking my question.
Ask about Uhm a T. R. I think looking at Las Vegas, overall, and you're and you're ready to pass your queries, it's been significantly higher than <unk> levels Uhm, how sustainable using those are and how might that be impacted actually going to a recession.
So I think as it relates to 80 or that's kind of a market driven.
Factor, So we're very competitive we shop and yoga right and we hope to see increased upside in a D. R. I do think that there is opportunity for us to grow occupancy. So we're constantly looking in the mix of business between <unk>.
Corporate and centered in sales rooms, and casino room mix as well to maximize that occupancy.
And then certainly in light of any type of headway in which we really don't see Ah Hershey any of that coming in the in the near term we have lots of different variable expense way levers that we can deploy to continue to to stay at high margins and I.
Revenues within the hotel.
Okay. Thank you and for my follow up I know in the past you said that you like owning your real estate versus renting but with interest rate.
Becoming more expensive can we get your updated thoughts on owning verses species.
Yeah, I mean, I think we'd like owning the real estate again, it doesn't mean, we're more beholden to holding in forever and will do what's right what's.
What's in the best interests of our shareholders over the long term Cassandra, but keep looking back it is.
<unk> the real estate provides max as preventative maximum flexibility, including the ability to keep our employees with COVID-19.
Including the ability to quickly.
Regular companies.
Companies are gonna have significant free cash flow.
<unk> balance sheet here, we'd like that unfortunately, that's right and I think as you as you know we're also in the local business were over 50 per cent of our covers.
More than five times, a month that means we've got to keep our amenities rash, we gotta keep the places fresh and noting that real estate allows Frank and the <unk> on the T. Two focus longterm on vacation those assets.
Okay. Thank you very much.
Thank you.
This concludes that question answer session I would like to turn the conference back over to Stephen Cooney Frank clothes on my back.
Thank you everyone for during the call I apologize for the the technical glitch and I look forward to see you in 90 days take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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