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Michael Gaughan Trades in His Boyd Gaming Stock in Exchange for the Keys to
 the 1,350 room South Point Hotel, Casino and Spa
The South Coast Hotel & Casino)

By Howard Stutz, Las Vegas Review-JournalMcClatchy-Tribune Business News

Oct. 25, 2006 - The corporate gaming world didn't suit Michael Gaughan's tastes.

But this morning, he gets to be his own boss again.

Gaughan, who built Coast Resorts into a locals' casino giant before selling the business to Boyd Gaming Corp. for $1.3 billion two years ago, takes over as sole owner and operator of the 10-month-old South Coast. In July, Boyd agreed to trade Gaughan the property in exchange for his stock in the company, valued at $512 million.

The casino is getting a new name -- Michael Gaughan's South Point -- and a slight makeover. Signs will change gradually, but new gaming chips and other casino equipment, advertising and the Web site already bear the new name.

The 63-year-old Gaughan said he was never comfortable in the corporate environment, although he remains close with Boyd Gaming Chairman Bill Boyd. The chance to run his own "joint" has given the gaming industry pioneer a passion similar to one he felt in 1979 when he opened his first casino, the Barbary Coast.

"I'm having a good time. I've got a little bit of a spring back in my step," said Gaughan, who resigned his position as a director of Boyd Gaming in the transaction.

He also agreed to give up control of the Coast Casinos brand, which included the Barbary Coast, Gold Coast, Orleans and Suncoast. Boyd Gaming has since agreed to trade the Barbary Coast to Harrah's Entertainment in a Strip land swap.

"This is actually tougher than opening up a new place," Gaughan said. "You have to empty out all the slots, change out all the chips and take down all the stuff while keeping it open."

Most of the modifications happened early this morning, beginning shortly after midnight.

The South Point's 2,200 employees became Gaughan's workers upon the transfer. He said he asked Boyd for permission to take about 70 key corporate employees with him.

"There's a lot of good people I had to leave behind," Gaughan said. "I had a lot of Coast employees who were with me 15, 20, 30 years. That was the hard part about doing this."

Gaughan has been praised as an innovator in the locals casino market. The Gold Coast was the first casino to have a movie theater offering mainstream films with low-priced refreshments such as 50-cent popcorn and sodas.

At The Orleans, he built a $65 million arena that is the home of the Las Vegas Wranglers hockey team, sporting events and concerts.

Gaughan also brought bowling into casinos. At one time, his properties included 268 lanes.

His return as an operator adds another player into the locals' mix, competing with Station Casinos, Boyd Gaming and Cannery Casino Resorts.

"It doesn't really change the dynamics all that greatly because it's a pretty strong market with a good supply (of casinos)," Morgan Joseph gaming analyst Adam Steinberg said. "Michael is a good operator and he'll add something."

When he decided to cut his ties with Boyd Gaming, Gaughan had to give South Coast a new name.

He wanted to keep "South" in his casino's title and toyed with "South Strip." But he didn't think that name would work if he ever decided to take the brand elsewhere.

Going from "Coast" to "Point" seemed like the easiest solution, he said.

"Five letters; that's the cheapest way to change out those big signs," Gaughan said, adding that his name will only appear in the property's advertising and not its exterior signs.

The Coast chain of casinos are somewhat synonymous with Gaughan, but it was the brand's reputation that Boyd Gaming wanted to retain.

"We recognized the value of the Coast brand and it's a product we want to continue to leverage within our company," Boyd Gaming spokesman Rob Stillwell said.

He said a new Coast property might be built on land the company owns in North Las Vegas, but that is still to be determined.

Gaming analysts said Boyd Gaming should be able to promote the brand without Gaughan at the helm.

"It's a strong brand and I think Boyd will still be able to capitalize on it," CRT Capital Group gaming analyst Steve Ruggiero said.

Steinberg said Coast Resorts retained most of Gaughan's management team. However, Boyd Gaming will have a learning curve to overcome, he said.

"Boyd wanted Coast for its properties and the customer base," Steinberg said. "Even without Michael, it's still an operation in which Boyd should see a good return."

For Gaughan, keeping South Point was an easy decision. He oversaw development of the $600 million project for Boyd, but the casino never met the gaming company's expectations.

Its location on Las Vegas Boulevard's far southern end, in the middle of a construction area that is absent adequate freeway access to and from Interstate 15, may have hindered the casino's results.

Ruggiero said Boyd Gaming wasn't happy with South Point's design, although it's similar to the Suncoast near Summerlin. The casino was already under development when Boyd bought out Coast.

Gaughan said there was nothing wrong with the property. He's already devising expansion plans.

"The South Coast was not losing money," Gaughan said. "What it had was a (return on investment) problem. I need to bring the (cash flow) up, but this was the best deal I thought for me personally. They (Boyd) weren't happy with it and I think it's a new and exciting place."

Gaughan said more than 4,000 condominium units and timeshare rooms are under construction adjacent to the South Point. Also, Gaughan said he's been assured by Clark County officials the initial phase of a freeway interchange from Interstate 15 onto Silverado Ranch Road could be in place by March with a full interchange completed by November.

Steinberg said the casino opened too soon for its location in the market.

"With everything being built around it, the casino is in a very good position," Steinberg said.

South Point's hotel opened in two phases and now has 1,350 rooms. The 80,000-square-foot casino has 2,400 slot machines, 60 gaming tables, a 300-seat race and sports book and 600-seat bingo hall. The property's key feature, Gaughan said, is the 4,400-seat equestrian complex.

Gaughan said he plans to add space for a several more restaurants, including Michael's, the upscale gourmet eatery inside the Barbary Coast that will move to South Point by next spring.

He said construction could begin on a third hotel tower by the end of 2007 or early 2008. In addition, the South Point has 40,000 square feet for future casino space and 30,000 square feet of potential public space.

"There's a lot of opportunity here," Gaughan said.


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