Red Rock Resorts, Inc. Q1 FY2025 Earnings Call

Good afternoon, and welcome to Red Rock Resorts First Quarter 2025 Conference Call. All participants will be in a listen-only mode. Please note, this conference is being recorded. I would now like to turn the conference over to Stephen Cootey, 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' first quarter 2025 earnings conference call. Joining me on the call today are Frank and Lorenzo Fertitta, Scott Kreeger, and our executive management team. I'd like 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. Let's start off by stating that the first quarter represented another strong quarter for the Company by all measures. Our Las Vegas operations achieved its highest first quarter net revenue and adjusted EBITDA in our history, while maintaining near-record adjusted EBITDA margin. In addition to delivering strong financial results, we remain pleased with the continued performance of our Durango Casino & Resort. Following a successful first year, Durango has continued to grow the Las Vegas locals market as well as drive incremental play from our existing customer base, while attracting new guests to the Station Casinos brand. Property continues to show positive momentum with increased visitation and higher net theoretical win from carded customers in the surrounding Durango area, while adding over 95,000 new customers to our database. The property remains on a solid ramp trajectory and is on pace to become one of our highest-margin properties, generating return net of cannibalization of nearly 16% through the first quarter of 2025. As we've noted on prior earnings calls, some cannibalization has occurred primarily at our Red Rock property as a result of Durango's opening. However, we are encouraged that the revenue backfill is ahead of pace and early trends suggest the worst of the cannibalization impact is behind us. Consistent with our historical experience, we continue to expect full revenue recovery over the next couple of years, supported by the strong long-term demographic growth across the Las Vegas Valley, particularly in Summerlin, where the combined buildout of Downtown Summerlin and Summerlin West is projected to add approximately 34,000 new households. As stated on our last earnings call, construction continues on the next phase of our Durango Master Plan. This expansion will add over 25,000 square feet of additional casino space, including a new high limit slot area and bar. In total, the project will introduce 230 new slot machines with 120 allocated to the high limit room. As part of this phase, we are also building a new covered parking garage with nearly 2,000 spaces, which will enhance customer access and provide infrastructure flexibility to support future growth of the property. The total project cost is approximately $120 million and is currently operating under its guaranteed maximum price contract, with completion of the project expected in late December. Where there has been some construction disruption on the south side of the property, we are taking proactive steps to minimize guest impact. Across the rest of the portfolio, we maintain strong operational discipline, continuing to execute our core strategy of reinvesting in our existing properties to enhance amenities while remaining focused on delivering best-in-class customer service. Despite a return to more typical seasonal visitation patterns, we effectively manage expenses, delivered record financial performance with near-record margins, reinvested in our properties, and returned capital to our shareholders. Now, let's take a look at our first quarter. With respect to our Las Vegas operations, our first quarter net revenue was $495 million, up 1.9% from the prior year's first quarter. Our adjusted EBITDA was $235.9 million, up 2.7% from the prior year's first quarter. Our adjusted EBITDA margin was 47.7%, an increase of 34 basis points from the prior year. On a consolidated basis, our first quarter net revenue was $497.9 million, up 1.8% from the prior year's first quarter. Our adjusted EBITDA was $215.1 million, up 2.8% from the prior year's first quarter. Our adjusted EBITDA margin was 43.2% for the quarter, an increase of 42 basis points from the prior year. In the quarter, we converted 43% of our adjusted EBITDA into operating free cash flow, generating $93 million or $0.88 per share. This strong level of free cash flow was strategically deployed to support our long-term growth initiatives, including our most recent projects at Durango Sunset Station and Green Valley Ranch, or return to stakeholders through debt reduction and dividends. As we begin 2025, we remain focused on our core local guests while continuing to grow our regional and national customer segments across the portfolio. Compared to the first quarter of last year, we saw continued strength in carded slot play across a majority of our database. Strong customer engagement and robust spend per visit helped drive near-record revenue and profitability in our gaming segments for the quarter. Turning to our non-gaming operations. Both hotel and food and beverage divisions delivered a strong quarter, achieving record revenue and profitability in the first quarter. Our hotel division recorded its second-highest first quarter revenue and profit, driven by our team's success in driving increased occupancy across the portfolio. Not to be outdone, the food and beverage division also achieved near-record performance, supported by higher cover counts across our outlets. Regarding Group sales and catering, as noted on our last earnings call, we faced a challenging year-over-year comparison in the first quarter. However, we are seeing positive momentum in both lines of business and expect stronger performance throughout the remainder of 2025. As we look ahead into the second quarter, we are seeing stability in our core slot and tables business in the locals market and across our carded database. We remain confident in our business prospects moving forward. Now, let's cover a few balance sheet and capital items. The Company's cash and cash equivalents at the end of the first quarter was $150.6 million and the total principal amount of debt outstanding was $3.4 billion, resulting in net debt of $3.3 billion. As of the end of the first quarter, the Company's net debt-to-EBITDA ratio is 4.1 times. Also during the first quarter, we made distributions of approximately $27.6 million to the LLC unitholders of Station Holdco, which included a distribution of approximately $16.1 million to Red Rock Resorts. The Company used the distribution to pay its previously declared dividend of $0.25 per Class A common share. Capital spent in the first quarter was $68.2 million, which includes approximately $32.2 million in investment capital as well as $36 million in maintenance capital. For the full year 2025, we now expect to spend between $350 million and $400 million, down $25 million from our previous earnings call, mainly due to the timing of capital payments. The full year capital spend includes $260 million to $300 million in investment capital as well as $90 million to $100 million in maintenance capital. As mentioned on our last earnings call, we are making investments in both our Sunset Station and Green Valley Ranch properties. At our Sunset Station property, we are building up the success we are seeing with our recently renovated race and sportsbook and partial casino remodel by continuing to refresh the podium in order to better position the property to capture the continued growth in Henderson, including the master-planned communities of Skye and Cadence, which are expected to total over 12,500 households upon final completion of both communities. As part of the project, we are adding an all-new country western bar and nightclub, a new Mexican restaurant, an all-new center bar along with a completely renovated casino space. Work continues to move forward on this project and the total cost of the renovation is expected to be approximately $53 million. At our Green Valley Ranch property, we are expected to start a complete refresh of our room and suite product as well as our convention space, aligning the hotel with our most recent renovations made to our well-received high limit table and slot rooms at the property. The work is expected to start in June of 2025, with the majority of our rooms being back in service by year-end. The cost of the room and convention renovation is expected to be approximately $200 million. Like our other recently introduced amenities, we expect these to be solid investments. However, we do expect some disruption challenges at these properties while we introduce these new amenities to our customers. Turning now to North Fork, construction is progressing well. We anticipate completing the slab on grade in July and closing the facility by October, keeping us on track for a mid-2026 resort opening. The total all-in project is expected to be approximately $750 million and is currently operated under a guaranteed maximum price contract. When complete, this best-in-class resort will include approximately 100,000 square feet of casino space with over 2,400 slot machines, including 2,000 Class III games, 42 table games and two food and beverage outlets and a food court with many exciting options. Subsequent to quarter-end, we are pleased to announce the successful closing of construction financing for the project, which is both a major milestone in our 20-plus year relationship with the North Fork tribe and we believe a landmark transaction in the arena of tribal greenfield development. The $750 million financing package will consist of a $25 million revolving credit facility maturing in 2030, bearing interest at 4.50% over SOFR, a $340 million delayed Term Loan A credit facility maturing in 2030, also bearing interest at 4.50% over SOFR, and a $385 million delayed draw Term Loan B credit facility maturing in 2031, bearing interest at 7.25% over SOFR. The delayed draw structure of the project financing will significantly reduce the project's cost by lowering capitalized interest expense by nearly $100 million. In addition, the majority of the credit facility is immediately accessible without the need of a declination letter, providing the tribe with more cost-effective capital structure, while simultaneously ending Red Rock Resorts need to fund the project off its own balance sheet. As part of the financing, Red Rock Resorts received $110.5 million in return capital along with accrued interest that invested in the project over the past 20 years. After this repayment, Red Rock Resorts outstanding note balance for the tribe stands at approximately $69.6 million. We are excited about this project, very happy with the execution of the financing and look forward to providing further updates on future earnings calls. Consistent with our balanced approach to investing in long-term growth while returning capital to our shareholders and following the return of a significant portion of our capital invested into North Fork project, we are pleased to announce that the Company's Board of Directors has declared a special cash dividend of $1 per Class A common share, payable on May 21 to Class A shareholders of record as of May 14. This action reflects the continued confidence of our Board and the management team in the strength of our business model and the resilience of the Las Vegas locals market. Lastly, the Company's Board of Directors has also declared its regular cash dividend of $0.25 per Class A common share, payable on June 30 to Class A shareholders of record as of June 16. After the payment of our special dividend and our regular dividend, we have returned approximately $159 million to our shareholders in 2025. The year is off to a strong start and we remain confident in the strength and resilience of our business model. Durango continues to validate our long-term growth strategy and highlight the value of our own development pipeline in real estate bank, which includes more than 450 acres of developable land positioned in highly desirable locations throughout the Las Vegas Valley. Combined with our existing portfolio of best-in-class assets in premier locations, this pipeline positions us for significant growth and enables us to fully capitalize on the favorable long-term demographic trends and high barriers-to-entry that define the Las Vegas locals market. We want to take a moment to recognize and sincerely thank all of our team members for their continued hard work and dedication. Our success begins with them. They are the driving force behind the exceptional experiences that keep our guests coming back. Thanks to their efforts, we are proud to have been voted Top Casino Employer in the Las Vegas Valley for the fourth consecutive year, certified as a Great Place to Work for three years running, recognized by Forbes as one of America's Best in-State Employers, and named Top Place to Work by USA Today. Finally, we extend our heartfelt gratitude to our loyal guests for their unwavering support over the past six decades. Operator, this concludes our prepared remarks for today, and we are now ready to take questions.

The first question today comes from Carlo Santarelli with Deutsche Bank. Please go ahead.

Hi, everyone. Thanks, and good evening. Steve, in Las Vegas, it seems that OpEx growth was quite low, and the flow-through in the first quarter was over 60%. Considering March Madness for your sportsbook and the challenges you faced last year, could you discuss how you managed to achieve that flow-through with relatively modest revenue growth? Additionally, were there any other headwinds in the first quarter, particularly related to sports?

Yes, Carlo, this is Scott. I'll take the beginning of it, and then I'll let Steve pipe in as well. We performed better from a sports win perspective, both in Super Bowl and in March Madness. So, that was some upside. From a payroll perspective, which is one of the larger impacts to margin, we saw that leveling-off. Our payroll rose about 2%, mostly attributable to last summer's minimum wage increase. We continue to see IT costs shift from CapEx to OpEx. So, there's a little bit of that in there. But on the solid front, COGS remained flat year-over-year and utility costs were down over 35%, which in the past, you might have remembered that we were struggling with high utility costs. So, those things attributed mainly to the margin improvement, especially if you look sequentially quarter-over-quarter.

Yes. I think the only thing I would add to Scott on the costs side is that we are seeing insurance costs creep up, and we expect that to remain some headwind as we go through 2025. And Carlo, to point to some revenue growth, we are coming off the trial period of Durango. And so, the fact that we've actually had revenue growth on top of Durango really kind of points to the growth in our core six business.

Much of this was driven by slots as well, which are high-margin.

That's right. So, our gaming, it was up quite a bit.

Great. Steve, you mentioned the backfill efforts at Red Rock in year two. Although you may not be able to provide specifics, could you share how this compares to the lowest point relative to 2023 or before the opening of Durango, and your expectations for progress toward 2023 levels?

Yes. As we kind of walk through, the one thing we have working in the locals market for over six decades is plenty of data. So, we modeled with the potential impact of backfill using our Sunset and Green Valley as a template, and that's where we came up with backfilling usually occurs around the three-year period. And we've been giving you guidance that we expect the cannibalization to be about 10% of Red Rock, and we think we nailed it. Right now, again, I think we're running probably about six months ahead of schedule in terms of that backfill. So, we're pretty happy with that.

Great. And then, just one clerical thing. Steve, the $110 million that you got back post the closing of the financing, is that in your first quarter or is that coming back subsequent to first quarter and 2Q upon the closing of the transaction?

It will be in the second quarter.

The next question comes from John DeCree with CBRE. Please go ahead.

Hi, everyone. I have a quick question, possibly two, to follow up on Carlo. Does the decision to pay a special dividend align with the return of capital from North Fork? Additionally, regarding capital allocation, I believe you still have a couple of hundred million remaining for the buyback. How are you planning to balance share repurchases with the special dividend in this situation?

Yes, no problem. I think the special dividend really reflects our balanced approach to investing in long-term growth. Through Sunset Station, Green Valley Ranch, and Durango, we're returning capital to our shareholders. With the successful closing of the North Fork financing and the return of $110 million of capital that we previously invested into the project, along with the strength of our balance sheet and the continued confidence in our business model, the Board determined that this was the right time to reward the shareholders for their long-term support of North Fork. Regarding capital allocation, as we've always said, we'll take a balanced approach and continue to evaluate all options. The Board decided on the special dividend for the reasons we discussed. Since 2021, we've purchased over 14.3 million shares for $646 million, reducing our share count by over 12%. We are not adverse to buying shares back and have $309 million left of capacity under the current program, which gives us flexibility to execute on that program when conditions are favorable.

Thanks, Steve. Maybe one bigger picture, since we're getting questions about the consumer in a number of different ways, given policy changes in DC and the potential for recession. So, I guess, what I'll ask you guys, obviously, you're seeing really strong trends in your business, but the big picture, you put out a great slide deck with everything that's going on in Las Vegas. I don't know if you could give us some color about how you see the Las Vegas locals market, your business being positioned to manage a recession now perhaps versus the last one we've seen, the Great Financial Crisis given all the things that have changed and assuming you'd expect your business to be more durable, if there's any recession and kind of some of the things you'd look at that differentiate the market today than say maybe 15 years ago?

Yes, I think, John, I think we got to look farther back than 2008. I think when you think of 2008 crisis along with COVID, we're talking about two very unique situations, right? The former was driven by a complete collapse of the housing and credit markets with the epicenter being Las Vegas primarily and the latter being a government management shutdown. But overall, when you think about the resilience of the Las Vegas locals market, any particular Red Rock Resorts, when we look back at, let's call it, typical recessions, Red Rock in fact grew in recessions in the early '80s, the early '90s, and the early 2000s, and it's pretty much what you said. The customer base values convenience, proximity, and affordability, and that supports consistent visitation even in softer economic environments, which is slightly different than the way the strip reacts during a recession. To combine that with our efficient business model and a strong balance sheet, we're well-positioned, we believe to manage through any recession.

Great. Thanks, Steve. Thanks, all.

The next question comes from Shaun Kelley with Bank of America. Please go ahead.

Hi, great. Good afternoon, everybody. Thanks for taking my question. Steve or team, just wondering if you could give us your thoughts on sort of the broader construction environment. Obviously, development is a little bit of a key part to your story, which differs from others in the industry. So, sort of what's the backdrop today as it relates to sort of the uncertainty around some of the construction cost elements? And does this impact either staging or ordering of how you're thinking about your development pipeline going forward? Thank you.

This is Lorenzo. It's been a significant topic of discussion regarding the tariffs affecting the marketplace. Over the past month, we’ve worked closely with our procurement firms, especially since we have projects underway in North Fork and Durango, along with the room remodel at Green Valley that we recently announced. Certain materials sourced from China, such as lighting packages, stone finishes, and electrical gear, will be impacted. However, we have successfully sourced steel and concrete domestically and have identified alternative suppliers for items that typically came from China. Although there are challenges, we are closely managing the details to navigate this situation as effectively as possible. Overall, we believe there won't be any significant impacts on our announced projects. We estimate that the cost impact will be around 4% to 6% of the project costs, and we are comfortable managing this with the contingencies we have in place and exploring additional cost management strategies. Does that address your question?

Sorry, that's perfect. I have a follow-up question. Can you explain how the mechanism works regarding the contracts you operate under? I know that these contracts provide some level of protection, but I've heard there might be tariff clauses included in some of the more recent agreements to safeguard the contractors. How does that function in general terms? Does it offer you protection, or is it still a potential cost that could be passed on to you?

I think it, sorry, go ahead.

Go ahead. At the end of the day, you're correct that future contracts will address this in more detail than in the past, where they may have been more vague, even in a G&P contract. This will require negotiation, and we will figure it out. We don't expect to bear the full impact of the tariffs, whether from previous contracts or moving forward. As I mentioned before, we are examining each aspect of procurement, assessing where these items originate and exploring alternative sources. It is a bit more complex, but our construction, design, development, and financial teams are effectively navigating these challenges. Moving forward, I believe this issue will definitely be covered in upcoming contracts.

Yes. And just Shaun, to emphasize, as Lorenzo mentioned, this will have a minimal effect on project budgets for the announced projects.

Thanks for all the detail. Appreciate it.

The next question comes from Barry Jonas with Truist Securities. Please go ahead.

Hi, everyone. I want to follow up on that topic. Regarding the tariffs you are seeing or expect to see soon, how do you plan to manage operating expense margins? Are there ways to mitigate this impact, either by passing costs onto customers or through other methods? Thank you.

Yes, this is Scott. Maybe I'll take the operating side of that. Steve, you can take the design and construction side. As of right now, we are not seeing major impacts in our operational procurement and costs. That doesn't mean that those things won't start to trickle in. It is our hope that we can manage that through alternative sourcing and negotiating with our vendors. I think it would be a last-ditch effort on our part to start to pass-on cost to the customer.

And I think on the D&C side, to piggyback on what Scott said, I mean, we haven't really seen the impact there yet and these tariff situations are incredibly fluid. But as Lorenzo mentioned and sort of Scott, alternative sourcing like-for-like material substitutions and just disciplined cost control is how we plan to get through it.

Got it. Then, just for a follow-up question. I noticed you recently added TI for your sports betting product. Curious how to think about this from a strategy or a philosophy since this kind of moves you beyond your core locals market to a more strip porous segment? Thanks.

Yes, this is Scott. Those announcements were mentioned in the paper. If we take a moment to consider our sports STN Sports mobile product and over-the-counter business, it's a very strong business. We're consistently seeing an increase in the number of users embracing the mobile app. Our enrolled active customers and deposits on account are both up compared to the same quarter last year. The strategy of adding new locations outside our brand aims to enhance market penetration in areas where we currently lack access. Presently, Nevada requires in-person registration, so having convenient locations for customers to sign up and utilize our sports tools contributes positively to the division's overall revenue.

This is Lorenzo. I'll add that this is one of our core strengths. We've been involved in the sportsbook business since the late '70s or early '80s. We might be the longest-running sportsbook operator in the city. Given that there are many properties on the strip, if you own just one, you might not have the scale to book many games, limit your risk, or offer competitive limits to your customers. As a result, you might seek a third-party partner. This situation is beneficial for properties like Fontainebleau and Treasure Island because they don't view us as competitors, and we don't share many casino customers. Therefore, it aligns well for us and provides a path for growth in the city.

And maybe just a bit of more clarification, not only are we in Mesquite, CasaBlanca and Virgin River, but we're also adding Treasure Island and then we operate the bookmaking for Fontainebleau.

And the El Cortez.

And the El Cortez.

Good afternoon, everyone. Thanks for taking my question. This is your first involvement with the REIT, and VICI answered a lot of questions this morning around the structure. But curious to get your thoughts around how this all came together and should we view this as a unique opportunity just given the tribal aspect or does it change your views on using a REIT for Red Rock owned and operated properties in the future? Thank you.

No, I think we really appreciate the relationship with VICI; it goes back as long as they've been around. They have always been in close contact with us. Regarding the tribal deal, this is a true loan, and VICI stepped forward to offer best-in-class capital at fantastic terms. We appreciate this partnership, as does the tribe, because it's crucial to get this financing across the finish line.

Okay. And Scott, I want to circle back to something you said, utilities costs down 35% in the quarter. In past years, it was a continued call-out of a headwind. But is there something special that happened in the quarter or could we see this be a tailwind for margins moving forward?

Well, look, I can't predict the market and what these energy costs will be in the future, but they usually don't move quarter-to-quarter. It's usually on a longer trend. So, we're hoping that we'll enjoy these reductions for the near term.

And it was mainly electric, and that's generally driven by gas prices.

Got it. Understood. Thank you.

The next question comes from David Katz with Jefferies. Please go ahead.

Hi, good evening. Thank you for taking my question. I want to follow up on the first part and ask if there is a possibility in the future for you to operate leased properties, and what hypothetical circumstances would make that feasible for you.

I don't want to rule anything out. We are always open to evaluating every opportunity. Since going public, we've been fortunate to own our properties, which has served us well in the past. This ownership has allowed us to adopt a long-term perspective in managing our assets and enhancing amenities for our customers. During the COVID downturn, not having the variable cost of rent enabled us to retain all our employees. We appreciate owning our properties, but as I mentioned, we are always willing to consider any options.

Understood. And then, just double-clicking on something you've talked about for probably a couple of years is kind of the lowest end of your database has been a little on the soft side. Is there any change in that, any improvement or any deterioration we should note?

Hi, David, this is Scott. Short answer is no, very consistent and stable. We do see upside growth in our VIP core regional and national segments for the quarter. So, when you look at our new member sign-ups, taking out Durango because of the first couple of months, the high-volume of sign-ups, if you exclude Durango and look at our new member sign-ups for the quarter, we were up substantially across the core six. So, we like the way that the database is heading.

One other thing to point out is that the way we look at our database is segmented through age groups as well, and every age group was up year-over-year.

Thank you all very much.

The next question comes from Steve Wieczynski with Stifel. Please go ahead.

Yes. Hi, guys. Good afternoon. So, Steve or Scott, if I heard you guys correctly, it sounds like trends in April haven't really changed much relative to what you guys were witnessing back in the first quarter. And you just kind of went through the database tiers and what you're kind of seeing there. But I guess the question I want to ask is, are you seeing any changes in terms of non-gaming spend, meaning folks still coming to the properties, but as they get there, they're still gambling, but they're maybe not doing as much as the other stuff, whether that's food and beverage, retail, you kind of name it?

Yes, this is Scott. Let me take that. A couple of things I want to mention. First, to answer your question directly, and talk a little about disruption as well. You are going up against the opening of the Durango property, where we had a lot of food and beverage trial. And when you parse that out and you look at our food and beverage for the quarter, covers were actually up. Revenue was just slightly down less than 2%. So, if you look at food and beverage, it's probably one of the more discretionary spends, it looks healthy to us. When you look at hotel, as we had said for a couple of earnings calls, January or the first quarter was going to be a tough comp in Group and catering sales. It did end-up being a tough comp. The bright side of that was the operating teams were able to backfill that substantially with wholesale and casino segment rooms. So, net-net, we like what we see going forward in hotel. Our Group bookings for the remainder of '25 and what we can see in '26 are substantially up to the previous year. And so, that would include catering as well. With all of that confidence, I would just point out and maybe Steve can articulate a little more in detail, we are going to start to see heavy disruption as you go into the summer months with Durango, with the rooms going down at GVR for the room remodel, and for some of the more meatier remodel areas at Sunset.

Yes, I can provide additional details. As you may remember, we reported a disruption of $5.4 million for Sunset during the year. We have not experienced significant disruption in the past quarter. However, as Scott mentioned, we are starting to focus on the table games area and the Gaudi Bar, which are central to the construction phase, and we anticipate some disruption there. For Green Valley, we have always indicated that the majority of disruption would occur after June when we begin remodeling the rooms. Regarding Durango, we haven't encountered much disruption so far. As you recall, we projected nearly $6 million in disruption there, but we are now beginning concrete pouring and expanding into the casino. While we will strive to minimize any disruption and its effect on customer experience, we are approaching a period where potential disruption may increase this quarter.

Thanks. Good evening, Lorenzo, Scott, Steve. I wanted to ask a follow-up regarding your response to the backfill question. Why is it six months ahead? Is that due to more effective marketing programs or population growth? That's my first question. Secondly, I wanted to inquire about your California-based customer. What did you observe from them in the first quarter, and how do you view the demand from them so far in the second quarter and moving forward?

Well, I'll take the first part. This is Scott. I think that from a California perspective, you probably had heard some visitation numbers where we saw visitation going down. But from our perspective with the drive-in market, we didn't see anything materially impactful as it relates to California visitation.

No, I think you can look at the inflationary market, specifically at gas prices. For instance, California gas prices peaked in June of '22 at $6.40 a gallon and are now at $4.78. Therefore, driving in from California is still an affordable option compared to Las Vegas.

If you look back every quarter since COVID, we've been up in that segment in California, driving - and continue to be up in first Q2 of this year.

Got you.

And then, on the backfill. So, first of all, I think Steve mentioned this is kind of using historical statistical trends from our other openings. And the other guys might have some view here. One, I think Red Rock is an incredibly dynamic property. It's our flagship property. It has grown every year we've been in operation. It sits in a very high net-worth area, and it's essentially one of the fastest-growing parts of the world.

It's one of the fastest-growing parts of the world.

That's right. So, you've got the Summerlin West expansion of the Howard Hughes Summerlin project, which eventually will represent about 34,000 new rooftops. And so, it is growing very quickly.

Yes. To provide some numbers related to Frank and Scott's comments, while the Valley is growing at 1% to 1.5%, Downtown Summerlin is experiencing growth of over 6% within a one-mile radius. Additionally, Summerlin West is growing at 3.6%. This area is one of the fastest-growing regions in the Las Vegas Valley.

Thank you.

The next question comes from Ben Chaiken with Mizuho. Please go ahead.

Hi, good afternoon, good evening. Thanks for taking my questions. You have several projects this year. Are there any that you see as maybe higher or more compelling from an ROI perspective versus ones that are more maintenance or strategic-oriented? And then, one quick follow-up. Thanks.

I think we expect returns from all of them. If I focus on one, Frank and Lorenzo may have a different perspective on what we're doing at Sunset, which has been exciting and innovative from a property standpoint that hasn't been updated since opening. Looking at the race and sportsbook, along with the partial casino remodel, we’ve received excellent customer feedback and almost immediate returns from that area. As we continue to roll out improvements, we're seeing positive customer responses, including for the Yard House restaurant, which the team is very proud of. Durango is a bit different; it serves a couple of purposes. Firstly, it lays the groundwork needed for Frank and Lorenzo to make decisions regarding the future master planning of Durango. Additionally, we will likely be introducing what could be the best high-limit slot room in Las Vegas. Our past experience shows that we excel in the high-limit slot and table business and have achieved great returns when we added those amenities in both Red Rock and Green Valley. Scott, if you want to...

I believe that the remodel of the GVR room convention has a significant immediate impact. The quality of the room we are creating adds value, and with a refreshed convention space, we expect pricing to improve right away. This will reflect in our average daily rate and in how quickly we can confirm and book more business, ideally at a higher price.

And I think at Sunset, we're seeing a broader demographic coming to the property as a result of some of the new amenities that we put in, and we would expect that to continue as we open the country western dance hall and some other restaurants and amenities.

That's all very helpful. And then, one quick follow-up. I know with the construction financing, you mentioned it before and then to Carlo's question, you get the $110 million, but my understanding is there should be accrued interest in there as well. I think it should be in the ballpark of about $50 million or $60 million. Is that correct? What's the accrued interest?

Well, the note right now, with the $110 million, we pretty much paid-off all the accrued interest. So, what you have now is $69.6 million roughly of principal. That said, the note immediately started accruing at SOFR plus 12%. So, we're still getting a good return on that investment.

The next question comes from Chad Beynon with Macquarie. Please go ahead.

Afternoon. Thanks for taking my question. Notwithstanding the comp differences with catering and Super Bowl and some of those items in the first quarter, can you just talk about the core seven properties versus, I guess, the other group within the portfolio, the wildfires. Are you continuing to see separation in terms of trends, meaning the core seven outgrowing from a percentage basis? Or are you seeing the portfolios kind of grow along the same rate? Thank you.

Just to be clear, I'm assuming you're talking about the wildfires and the taverns?

Yes, you're correct.

Okay. So, you're talking about other types of products that we offer in the market. Okay. That's flat. From a top-line perspective, we're seeing very similar trends amongst all the product classes.

Okay. And then, just kind of thinking back to the management opportunity that you're getting into, is it a priority to explore other management contracts in California or other tribal areas, not sure if there's contracts that are expiring with others. I know usually these come about with new builds or expansionary builds, but is this something that you plan to focus on more in the next several years?

This is Lorenzo. We've been focused on this. When we opened our first tribal casino in Thunder Valley in the early 2000s, we were already exploring several development opportunities with tribes across the country, dating back to the '90s. We continue to search for these opportunities, but the reality is that there aren't many available. They do arise occasionally, and due to our history and success in places like Thunder Valley, Graton Resort, Gun Lake in Michigan, and North Fork, we attract attention for substantial tribal gaming development opportunities. People recognize what we've accomplished, and we have built a strong reputation in this area. However, as we've learned with North Fork, these projects can take time. We have demonstrated our commitment, patience, and resilience; once we partner with a tribe, we stick with them and see the project through. We are actively looking, but I wouldn’t anticipate multiple opportunities emerging in the near future.

Great. Thank you very much.

This concludes our question-and-answer session. I would like to turn the conference back over to Stephen Cootey for any closing remarks.

Thank you, everyone, for joining the call, and we look forward to hearing from you next quarter. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.