Full House Resorts Inc (FLL) 2017 Q4 法說會逐字稿

Good day, everyone, and welcome to the Full House Resorts fourth quarter earnings call. Today's call is being recorded.

At this time, I would like to turn the conference over to Lewis Fanger, Chief Financial Officer of Full House Resorts. You may begin, sir.

Thank you. Good afternoon, everyone. Welcome to our fourth quarter earnings call.

As always, before we begin, we remind you that today's conference call may contain forward-looking statements that we're making under the safe harbor provision of federal securities laws. I would also like to remind you that the company's actual results could differ materially from the anticipated results from these forward-looking statements.

Please see today's press release under the caption Forward-Looking Statements for the discussion of risks that may affect our results. Also, we may make reference to non-GAAP measures such as adjusted EBITDA. For a reconciliation of those measures, please see our website as well as the various press releases that we issue, including today.

And lastly, we're also broadcasting this conference call at fullhouseresorts.com, where you can find today's earnings release as well as our SEC filings. And we actually just posted a few minutes ago the latest renderings for our Bronco Billy's expansion.

So with all that said, we're ready to go. Dan?

All right. Well, I mean, quite honestly, it wasn't a great quarter. I hate to blame weather, but sometimes the weather matters, most significantly in this quarter. Hurricane Nate went directly over the Silver Slipper. And it actually affected us for most of the week. I mean, we were closed for a good chunk of the weekend and actually had to evacuate the hotel because we're kind of at the end of the powerline and at the end of a single road. And if the road floods or the power goes out, we have life safety issues at the hotel. The other casinos didn't, for the most part, have to evacuate.

But we knew the storm was coming, and that was a key weekend. And it's normally when there's a big cruising on the coast, car rally with tens of thousands of people. And midweek, leading into that weekend, they -- all that was canceled. The mayor's told people to please leave town, the hurricane was coming. And the hurricane actually came right over us and then moved on. And it actually did very little property damage to us. We got a little saltwater in the swimming pools. That's about it. And -- but it hurt our business quite a bit.

The -- and then we had a lack of snow in Tahoe, the other end of the country. It's snowing now big time. Interstate 80 closed about 1.5 hours ago. They're expecting to get 1 to 3 feet at Incline Village and about 5 feet at the (inaudible), and it's way past time. I mean, I drove over Spooner Summer (sic) [Summit] last weekend, just one of the passes leading in Incline Village last week, not last weekend. And a year ago, it probably had 10 feet of snow on it. And this year it had green grass, which was startling. So I don't know if that's global warming or what. But last year, we had so much snow, we were complaining about being hard to get to. This year, we have so little snow, and I can tell you that too much snow is way better than too little snow. So we were hurt in Tahoe. And then on top of that, there were ice and snow storms in Indiana and Mississippi going into New Year's Eve weekend. And to put that in perspective, they don't have snowplows in Mississippi. So when they get a little bit of ice, they just close roads. And so it was a pretty rough quarter.

Now our revenue, despite all that, was only down 9%. Our EBITDA was down like 40%. And it's an off-season quarter, so little small swings, plus big percentages. If you look at the absolute dollar numbers, though, our revenues were up about $400,000 and our expenses were up about $1.4 million, which is not a great scenario, though it's not as bad as it first appears. This came on the tail of 3 very good quarters where revenues grew nicely and our EBITDA grew nicely. And when you put it all together, you end up with kind of a lackluster year.

Well, that prompted us to start the new year with kind of a focus on becoming more efficient. If you look at our margins, they could be better if you compare them to most other casino companies. It's pretty obvious. Now some of that is like Tahoe is rented from the Hyatt people, so there's a capital cost that's taken out before you get to EBITDA, which distorts things a little bit. And at Rising Sun, we have kind of a large footprint to operate. And until we get revenues better, it's going to have low margins. But even if you adjust for those things, we think we can do better.

We started the process to be smarter about scheduling our people. We're targeting to reduce our payroll cost by about 10%, and we think that's doable. We haven't really focused on this as well as we should have before. We're also looking for ways to improve service while reducing costs. I'll give you a simple example and it makes a good example of when there's other things we're looking at. We operate a -- the buffet at Rising Sun for breakfast. It's pretty expensive to operate a buffet. And at breakfast, it can look that great. You get there and have scrambled eggs and then sit there for a while and so on.

Most of our breakfast customers are comped, anyway. It's people staying in our 300 hotel rooms. And we've determined that if we go to an a la carte breakfast, which is, frankly, what we do down for Silver Slipper, we give people better quality and it's cheaper for us to operate. And so there'll be -- so we're transitioning in the next few weeks to an a la carte breakfast, which, for the most part, will still be comped for people. There's [no 2 dinner place] at breakfast. And that saves us about $200,000 a year. So it's a great example of how we think we can actually provide better service at a reduced cost.

And another area we're going to look at is our leased and participating slot machines. We spend about $350,000 a month to the slot companies for leased and participating games. You can't live without any of them because, a lot of times most of the more popular games and to be competitive, you have to have them. But we're going to examine whether we have to have that many of them. And so maybe instead of having 8 Wheel of Fortunes, we'll have 6. And we'll try to focus on making sure that where we have a leased and participating game, we have owned game surrounding it. And we may do promotions that we have -- [10 tops] on top of only the owned machines. So you get double points, but you won't get them on leased and participating slots.

I mean, the slot companies are our friends and they are our enemies. I mean, they provide us new and better machines all the time, but then they put their hands in our pocket. And if you look at that $350,000, that's $4 million a year. For us, that's a pretty big number. And if we can reduce that by 10%, it swings the numbers. And maybe we can do a little better than that. So we're trying to continue to do leased and participating slots but try to do it in a smarter, more careful way. And so that's something.

There were 2 major improvements that we did last year that recognize -- don't help us in the winter. Both of them open later than we would have liked, but they're done. One is the RV Park at Rising Sun, which opened in late August. Obviously, it's closed in the winter. It'll open later this month. And RV Parks are summer seasonal business, so we think that will be a nice asset for us in the second and third quarters and help generate growth.

The other one is the beach club down at the Silver Slipper. They don't have snowplows and nobody wants to set out at our beach club in the winter. Now it's starting to warm up there, and I think it was 83 in Bay St. Louis today. And so the pool will open later in March as well. And again, that should help us in the second and third quarter comparisons.

We also made great progress on the other improvements we're doing around the company. I'll start with the smallest one up in Fallon. We've built a new porte-cochère and everything. We've been waiting for the temperature to get above 40 degrees, so we can fix the stucco and take down the scaffolding and open our new entrance. And that, we think, will be done next week. It was going to be done this week, but a cold snap has gone through and the stucco can't cure under 40 degrees. So that porte-cochère and entrance has been a long time coming, frankly, too long, but I think the finish line is now in sight.

At Rising Star, if you've watched the news, you can see the Ohio River has been at flood stage. It's the highest it's been since 1997, so it's kind of a 20-year flood. Our property is fine. But the road flooded the other day, and we had to close for about 36 hours. That's less than some of the other properties. Some of the other properties have been closed for several days. Now it was a Sunday, so it wasn't a good day. But the river's receding now and, as I said, didn't do any damage to the property at all. But we now after got 2 years of effort, finally, the Corps of Engineers has told us that they have completed all their processes. They've conversed with all the state historical preservation offices in both states and the Environmental Protection Agencies in both state and the local Indian tribes and whoever oversees the bats with dots on their wings and stuff like that. And they have seen no reason not to issue our permit, and they expect to issue our permit no later than mid-March, so 2 weeks from now. So we have spooled up ready to go to build the roads and the ramps as soon as they issue that permit. And then, in fact, some of the work we can actually start before that because some of it is above the flood zone. And of course, the cornfield that the road goes across at the moment is under a couple feet of water. But at the time we get to mid-March, it probably won't be under a couple of feet of water and we can build that. And recognize that cornfield has not been flooded in many years. This is really a very rare event that there's been floods. And the road is designed so if it does flood, the road will be fine.

But the -- so if the Corps follows through on what they told us and we hope they will, I actually am planning if they don't to be in a pop tent in front of the Corps of Engineer office in Louisville on March 16. And I will sit there until they give us the (expletive)ing permit. But assuming they come through on their word, we will have this done by July 4 weekend. The boat itself is done. The boat has 2 components. There's a push tug and, we opted to purchase a newly built one. That's in a shipyard in Cincinnati. And then, the ferry, which is really a custom-design barge and it has ramps on the ends that go up and down to allow cars to get on and off it, and that was newly built in a Jacksonville, Florida shipyard to our specifications. And it's working its way up the intercoastal canal system to Cincinnati and should be there in a couple weeks. And then the shipyard in Cincinnati just puts the 2 together. There's a little attachment they do. And so by the end of March, the ferry boat will be ready. And then we have to hire a captain and crew and they have to practice on it and so on, all of which will take place while the road and the ramps are being built.

When this is done, it's pretty big deal for us, and particularly for Rising Star. There's 120,000 people in Boone County, Kentucky, which is directly across the river from us. Today, they have to drive around and take bridges and drive past other casinos to get to us. With this ferry boat, they won't. And so it makes us physically closer to a lot of people. I can tell you from our slot system, the people who live on our side of the river near our casino, we receive on average about $150 per person per year. And the people directly across the river 2,000 feet away in that ZIP code, we get something like $4 per person per year. And so the ferry boat would be a pretty significant plus.

At the same time, we are fixing up and doing the first significant improvements to the pavilion, which is kind of where you arrive as you come to that casino. And we have large fake trees, at least 10 of them. We have new flooring, lighting, carpet, wallpaper, lobby furniture, et cetera. It's all purchased, staged and ready to go in. And that will start in April. And so we will have significantly refurbished the arrival by the time the ferry service begins in early July. So a lot of exciting stuff coming at Rising Star. And I think as it pulls away from operating close to the breakeven point, you'll see margin improvement there as the revenues fall to the bottom line. We are -- it's kind of a progressive tax rate in Indiana, and we're in the lowest tax tier of any casino in the state. And so as our revenues improve, quite a bit of it falls to the bottom line.

Then most excitingly, in Colorado -- in Cripple Creek, which is outside of Colorado Springs, we have a project we announced a couple months ago that has the potential to double the size of the company. And we've been doing a great deal of work. We've been working with the development staff of the city of Cripple Creek, which is really actually a small town, and trying to resolve any and all concerns they have before we make the formal submittal. We think we accomplished that. We're planning to submit formally on Monday. They -- we have additional renderings that we produced to show them what it looks like in every angle. And these are on our website now. We have a Facebook -- it's on our Facebook page, right?

Facebook and our...

And our website. And it's quite exciting, and we think it helps Cripple Creek attract more people from Colorado Springs, maybe even from Denver. The gaming per capita in Colorado Springs is very low and Denver's also low. Both of those cities are growing in leaps and bounds, and we think this takes Cripple Creek and Bronco Billy's to a new level. I mean, just to put it in perspective, there are several casinos in Black Hawk that make more than $20 million a year. And the gaming commission produces the combined income statement for each market, and the EBDIT of the entire Cripple Creek market is only $20 million a year. We're about 5 of that. And so we think if we build it into a more significant casino, we will have a very big impact positively on Cripple Creek as well as on our company.

We've had 4 public hearings there in Cripple Creek a couple weeks ago, describing the project to anybody in the community who wanted to listen, took questions from them. We hope to go in front of what they call a historical preservation committee in March, seeking their recommendation. They make a recommendation to city council. City council does not have to follow that. But obviously, it's easier at city council if you have the backing of the historical preservation commission, so we hope to have that. And then we go to city council in April. And frankly, judging by the public hearings and the conversations we've had to date, we're optimistic that our project will be approved.

The key thing that we need really is we've assembled this land, and it has a public street and a public alley that kind of bisects it. And to build this, we need those vacated. There's a couple of other things, but that's the one issue that is very important to us. And there's very little traffic on either of those at the moment. And judging from all the conversations, we don't think it would be a problem. We did provide a traffic study that showed that there is very little traffic on those rights of way, and the traffic can easily be accommodated by other streets.

Assuming all of that happens in April, we are going to be ready to start construction on the first phase beginning in May. The first phase is a parking garage with about -- I guess, 270 parking spaces. It's a relatively small parking garage. But most of our competition in Cripple Creek has parking garages, and we don't. Instead, we have large surface parking lots. And those surface parking lots are where we're going to build the hotel. So since we're going to continue to operate the casino throughout this process, we want to first build the parking garage, so our customers and employees have a place to park. And then we'll -- that parking garage, we hope to finish at or about year-end, and then we can roll into starting construction on the hotel.

Now obviously, the bulk of the expenditures on the hotel and the spa -- there's a casino refurbishment that comes with that and so on. And we don't have a final number yet, but it's probably in the ballpark of $100 million all in, maybe we can do it for a little less than that. But just to -- if you look at a 200-room bay, 4-star hotel with a high-end restaurant refurbishment of about 20,000 square feet of casino space, that's the number you're kind of driven to. And we would arrange the financing for the bigger project while we build the parking garage. Parking garage is a much smaller number. Do that largely out of cash flow. And so the -- so basically, we think we're off to the races. We'll make the formal filing on Monday, city council in April, start construction on the garage in May, work on arrangement of the financing. I don't want to arrange the financing today and then have to pay interest for 6 months while we build the garage. So we'll figure that out with where the capital markets are -- in the fall. And then we can be open roughly mid-2020.

Now that's not the only thing we look at. We still intend to try to relocate half of our gaming capacity out of Rising Sun. We're permitted to have far more gaming capacity than we need. We've had several proposals, but we've been actively talking with Terre Haute and continue those discussions. The -- that requires a change in the Indiana state law. The Indiana legislature meets every year. But on even years like this one, it's a shortened session, and they only take up fiscal matters. Sometimes they'll sneak something else in, but something as controversial as this will get a full discussion. And so we opted not to push it in this session. And they're all distracted as well because the racetracks outside of Indianapolis are being sold for a very nifty price, by the way. And so let that transaction happen. I think everybody's kind of afraid if they allow a casino in Terre Haute that might rock the boat. And so -- and it's such a short session, anyway. So I think even apart from that transaction, we're supposed to be able to push it. But next year, I think we have a pretty good shot at it in Terre Haute. No freaking idea how we feel for that at the moment. It's a pretty big project, but we'll figure it out down the road. And there's, frankly, other stuff we look at all the time. But that's quite a bit on our plate that I just outlined there.

Lewis, did I forget anything?

No, Daniel. The only other thing is we have a brand-new debt. And I know it's important.

Yes, please, talk about that. That's actually really important.

So well -- so on February, we effectively refinanced all of our first- and second-lien debt with our brand-new senior secured notes, very excited to have those in place. We have a great group of new lenders. Our interest rate, just based off of current rates, will stay in the ballpark of $1.2 million this year, just on interest expense alone. There is also the mandatory amortization that happens every quarter. And under our old facility, we were paying about $563,000 a quarter until July 1 of this year when it was going to go up to about $844,000. Under our new notes, it's $250,000 a quarter. So it's significantly less there, and we'll use some of those savings to plow into some of these projects and -- these growth projects. So very excited there.

Well, and actually, equally important, the lenders in this are big blue-chip firms. Are we allowed to say the names of the firms?

Some people have figured it out from the signature pages in the indenture.

Okay. One is Sagard, which is part of the Power Corporation of Canada who owns Putnam among other things. But the largest is actually PIMCO. Well, I think it's the largest single bond fund in the world. And then the third one was...

Our friends at [Graydown].

Our friends at [Graydown]. That's right. And for these really big firms, they normally wouldn't do a deal this small or with a company this small. And I think part of what attracted them to it is they know that we want to finance this project in -- at Cripple Creek. And so the deal is structured in a way that's pretty easy for us to do add on notes. There's no certainty that they will agree to buy those notes, but it's structured so it's easy to do once we have provided to them forecasts and construction contracts and all of that stuff. And recognize it's much better to have lenders who are griping about how small their exposure is versus a real deal, which had a bunch of tiny banks in it who are always griping about how big their exposure was to us. And so that was a pretty important deal for us on many different levels. Did I miss anything else? No? I look around the table here.

I think we're good. Do you want to do some Q&A, Dan?

Sure.

Let's take some questions.

By the way, I saw 4,000 shares of our stock traded today. Let's just sell a used car and buy some stock. The stock doesn't trade much, which explains some of the volatility. So...

(Operator Instructions) First, we'll take Chad Beynon from Macquarie.

Congrats on the debt deal. Very attractive rates, great to see that, that's over the goal line. So with that kind of behind you and you've outlined the Cripple Creek project and we've seen the renderings and you projected a 2020 opening if everything goes as planned, how do you think about the returns on an asset like that versus potentially acquiring some of the smaller assets that all of your regional gaming peers are looking to divest and really just bring in the current EBITDA plus the synergies and have good current free cash flow versus a bigger project like a Cripple Creek, which will take a lot more time designed, maybe have a little bit more risk in opening a couple of years.

Yes, that's a good question. The -- when I look at these projects, at least in my head, I'm usually looking for about a 15% cash-on-cash return. And so if we invest, I don't know, $5 million in something, we expect to make $750,000 in cash flow of it going forward. And when I look at stuff being bought and sold, it's at 9, 10, 11x cash flow. And in a lot of cases, they might be buying the stock of a company and getting the reduced tax basis, so they don't get the full tax shelter. Whereas when you build something new, you could accelerate the depreciation on it. So the returns are even better than that. If you take the inverse of 15%, it's like a fixed multiple. And the new asset, now there is more risk, no question. And -- but I think the extra return we hope to get offsets that risk. Now that doesn't mean we wouldn't acquire something. After all, we did acquire Cripple Creek, and we bought it for $30 million. That's $4.8 million last year in EBDIT. When we bought it, we had assumed $5 million. So we were a little bit off, but not much. And that was a pretty good multiple. And on top of that, it had a great growth opportunity. We knew it had some excess land. Turned out the market is a better market than we thought it was when we got into it when we started looking at what the places Black Hawk do. So we do look at acquisitions. If somebody wants to sell us something with good growth opportunity at 6x cash flow, we'll jump on it right away. But -- and we do look at an awful lot of things. And some of them, frankly are -- we've looked at some deals that were just -- that were really good deals that we wanted to do, but it would have been betting the company. We're not willing to bet the company on something. And we looked at some other deals. There was one deal that we thought was a really good deal, and it turned out to be too small. They had less than 50 employees and they didn't provide a health plan to their employees. And late in the due diligence, we figured out that if we acquired them, we would have to give them a health plan because we have more than 50 employees and that, that hurt the earnings of what we would be buying. And we went back to the seller, said we need an adjustment in price. They wouldn't adjust the price, so we didn't go ahead. So we look at stuff. And I guess, you look at where do we go someday. Are we a buyer or a seller? You got to work every day and you try to create shareholder value. I love to see companies get sold at 10, 11, 12x cash flow. And what's funny is, as some of you may know, I was a sell-side analyst that specialized in casinos back in the 1980s, right. So I did what Chad does. And back then, I used to say casinos are worth 6 to 8x cash flow, and the prime rate was 10%. And Steve Wynn built the Mirage with 14% money and so on. And I watched, over the years, interest rates came down dramatically to like the lowest in our lifetimes and people still talking about casinos being worth 6 to 8x cash flow. And it's only recently you started to see 10x, 11x. Like [Prescott] was like 10x and some of those. And it was like, geez, it's about time. Because if you ran the math, if you could borrow money at 4%, 5% and 6% and go acquire a casino company at 10x, obviously, it works. And so I've always had that out there. And frankly, I think that's probably the upside.

Yes. I'll -- to add on to that, Chad, the -- I'll tell you, there isn't today -- in fact, there's (inaudible) right now for casino looking to get sold. So there's always stuff out there to buy. But I'll tell you when we look at this Bronco Billy's expansion, it, to us, is a bigger -- the investment rationale for that project is bigger to us and better to us than when we were at Pinnacle looking at L'Auberge du Lac. We -- when you look at the gaming spend metrics out of Houston, heading into Lake Charles and compare that to the national average, those numbers back in the day indicated pretty strongly that Houston was underserved. When we look at Colorado Springs and that broader market now with Bronco Billy's, it's even more underserved. And so I'll tell you, there's -- the level of excitement that we have for that project is -- I don't want to speak for you, Dan, but I would say it's probably unparalleled given...

In fact, L'Auberge didn't put Pinnacle on the map. I think this one puts us on the map.

Okay, yes, well said. And then just moving down to Silver Slipper. You mentioned weather obviously impaired your results this quarter. You had, had, I guess, 3, maybe even 4 straight quarters of some really good growth. Outside of that incident, that kind of weather weekend, was the business still humming along? And as we look at 2018, you mentioned obviously the new amenities that will help bring customers to the property. But is there any reason why we can't kind of return to some of the growth rates that we're seeing before the weather impaired the property?

Yes. I think it's still doing pretty well if you back out the iffy weather. Now we had some rocky weather in January as well. And -- but I will tell you, last weekend was one of the best weekends in the history of the property. And the outlook for March is pretty good. So I think the property is doing just fine. And in fact, we have designed an expansion for it that if you've been to the property, and I know you have, Chad, but for anybody else on the line, there's kind of an abandoned pier that sticks out into the Gulf of Mexico in front of us. And it was kind of demolished by Hurricane Katrina. So it's been there 15 years. It's a bit of an eyesore. And everything we have there is kind of squeezed on 7 acres. And so we've -- we're designing with Brad Friedmutter a hotel expansion that would go where that pier is. In other words, it goes out over the water. And with that, we'll build some meeting rooms and convention rooms to -- which the property has none at the moment. And so that would help fill the new tower and also give us a place to host entertainment and stuff. That's a very long range process because the water itself and that pier is owned by the state of Mississippi. And John Ferrucci and I went and met with the Secretary of State to kind of take his pulse on the idea of leasing us some bottom of the Mississippi for us to build a hotel tower. He's open to the idea. It also takes Corps of Engineering permit, which we have a lot of experience with. We know it takes a long time. It takes a bunch of environmental approvals. And if we do that, we're going to need some more parking, so we will also seek permission to fill in some of the wetlands. Our lease has an awful lot of wetlands. And it's not like it's sensitive wetlands where ducks go and have their ducklings. It's, in fact, got mosquito ditches carved into it and so on. And the way you get permission to fill some of that in is to agree to buy some truly -- what am I trying to say, more sensitive wetlands somewhere else and put it into trust so that soundly environmental land is kept soundly environmental. And something like this, there's a lot to be filled in. But it's a long laborious process. This is something that will take years. But we have started the process because we think the property can support a hotel addition. And we also think that getting the entitlements to build that increases the value of the company. So there's no reason not to start the process, even though it will be lengthy. And I have no idea of the date at which we could break ground. It's so far out. But we are starting the process because we think it's the right thing to do for the property. Otherwise, we're shaping up for a good summer. We have -- Island View is going to add an expansion in June, but we think we're fine. We don't think that's going to impact us. And I think we're in pretty good shape. We have the closest white sand beach to New Orleans and Baton Rouge. It gets really hot in New Orleans and Baton Rouge in the summer. And this is the first summer where we've actually had amenities where we can tell people to come out and sit on the beach and enjoy a margarita and maybe play a slot machine. And so we're looking forward to doing that.

To help make it a little more concrete for you, Chad, this past Saturday, now that we're filing out of the big chiller, as we call it around here, slot win was at its best in over 40 years. This past weekend, our guest counts were up 7% for this weekend compared to prior year. So we feel good with these weather effects starting to disappear down there.

Great. Okay. The last one, just going back to Cripple Creek, the process. So I don't know if you want to handicap it on the line, but what would really be the reasons why the city council would not want a project like this and jobs and tax revenues in the market? Are there other factors that we might not be aware of in terms of traffic congestion or something else? Or I don't know if you're willing to handicap it on the line or maybe just point out some of the reasons why the city would not want this to go through, just trying to figure out the probability of this going through.

Well, I handicap these things all the time, like I pointed out Terre Haute is something we're working on. But it's a long shot, right. And we'll continue to work on it, but it's a long shot. This thing in Mississippi, I think we can eventually get permissions, but it's a long ways down the road. In Cripple Creek, this is a very fast process. I mean, it's a small town. This is exactly what the town needs. I think, in general, it's what the people want. I've attended, I don't know, half a dozen city council meetings now. We have these poor public meetings. We're not allowed to talk directly to any of the city council people under the laws and rules of Colorado, I guess, it is. But I mean, I have ex city council people coming up to me all the time saying this is great. This is exactly what we need. And there really is no reason not to approve it. I mean, the streets we're seeking are closed. They're streets that are not used, anyway. One of them is an alley behind Bronco Billy's that has dumpsters and stuff on it, pretty all that up. The other one is Second Street. About half the time, Second Street is closed for a beer tent that we put up for different festivals and so on, so not used much anyway. The ordinance calls for buildings not to be more than 5 stories tall above the adjoining historical street, and then it lists a bunch of historical streets. And so we took that to mean we can be 5 stories above Carr. Now that's a very hilly town. And Carr is like 20 feet higher than Bennett. And so technically, the lobby of our hotel is a walkout basement of a 5-story building that's on Carr. And people in the city were like, huh, that's actually 6 stories above Bennett. And we said, yes, but read your ordinance, that's actually permitted. And people were like, yes? And we pointed out that Double Eagle did exactly the same thing. And so out of an abundance of caution, we just said, you know what, we'll just seek a variance so that we can be 6 floors above Bennett. So if somebody files a lawsuit down the road saying you can't be more than 5 stories above Bennett, we'll have a variance. I can't imagine why we wouldn't get it. Don't even think we need it, to be honest, when you read the ordinance. So we're trying to be very careful here in case some competitor tries to sue us on anything, but I don't think we've given them any cause to sue us at all. I don't think there's any reason for the town to say no. In terms of traffic coming into town, it's a big 4-lane road coming out of Colorado Springs. You get to a town called Divide. There's a traffic signal there where people how to turn left. That would be the pinch point, if you will, because, at that point, you turn on to a 2-lane road. If you look at the capacity of that intersection and the amount of traffic we'll be generating, it doesn't even move the needle. And then from there, you drive for 20 minutes over kind of a mountain pass on a 2-lane road. And as you come into town, the street start to split off, so people stop at the Wild -- no, what is it?

Wildwood.

Wildwood. And so some people pull into Wildwood and a little further down. Some people pull into Double Eagle. And there's different streets, they're all right turns. So there isn't a chokepoint in the traffic really at all. And we have a big traffic study that shows all that. And so closing Second Street shouldn't be controversial. The height shouldn't be controversial. Probably the biggest thing that people complained is some of our guestrooms have glass windows. And we're like, well, okay. So we reacted and said, "What do you want?" And they said, "Well, could it be tinted a little bit kind of gold because gold is part of the town?" Sure, we could do that. And they were like, well, what about can you do this? We said, yes, we could do that. And for the most part, you can't see that glass because the lower parts of the building are kind of done in brick to resemble the rest of the town. And the hotel itself is kind of hidden behind Bronco Billy's which is a historic building and some new structures we're building that are historic looking. And so we think we've addressed those concerns. Honestly, there's no reason for the town to say no. And I don't expect them to say no. Now we have a pretty aggressive time schedule. Could April slip into May? Sure, it could slip into May. But I'd frankly be astounded if we weren't approved at this project. I have been careful. The land we've acquired, it's under auction. So I haven't -- we haven't actually committed much money. So if we weren't approved, we could -- we would just pull out. And -- but I'm pretty sure we'll be approved, and I think we'll be approved in April.

(Operator Instructions) Next, we'll go to Gary Ribe from MACRO Consulting.

I don't think you guys mentioned this. But at some point during the last quarter, you guys did file a fairly decent sized mixed shelf. And I was just kind of curious, you mentioned kind of in the fall kind of getting going on Cripple Creek. What kind of capital structure, how might you -- you might that expect to affect the capital structure? And kind of what would the mix look like as you get going with that?

I don't know. The mixed shelf was a little bit of a function of the Century Casino, who's a competitor of ours in Cripple Creek and other small company. They're actually pretty similar to us in size, but they have more equity less debt. So they have a bigger market cap. And they had filed the shelf. And then several months later, they did an equity deal and raised like $30 million. And literally, I asked Lewis, are we big enough to file a shelf? And he came back and said you have to be $75 million at market cap not including shares held by the board and the management. And we were just above that number. And so we ran out and filed the shelf to get it on file when we qualified. And I thought that the SEC might give us a full review and stuff, and they reacted very quickly and approved it in early January. We sized it to be big enough that if we hadn't gotten there with the lenders of our new notes, we could have entertained doing bonds or something under the shelf. As it turned out, we didn't have to. We got there successfully. The shelf stays out there for us to do stuff. So...

And as you know, Gary, those were $100 million in size. So...

Yes. That was a $100 million in size, so that's why the shelf is as big as it is. Now down the road -- and again, this is a tentative number of $100 million on what this thing costs in Cripple Creek. I'd love it to be less, but it's somewhere in that ballpark. When you've got to finance that -- we're a pretty levered company. I doubt we can do it all with debt. But we could probably do a lot of it with debt, but we'll figure out where the debt markets are later this year. And do you do it with that shelf? We can do a combination of debt and equity. We can do equity. We can do a convert, just about anything. And it was -- so we filed it just to have the flexibility to do publicly traded securities of any kind, which is why it's a universal shelf, and a size that was structured so that if we had to do it to refinance the old debt, we could.

And that's a 3-year shelf as well, Gary, pretty standard. So if we wanted just to be extreme, take out these notes in 3 years, we could always do that with unregistered securities as well. So it was meant to be a little forward thinking but also to encompass our current debt.

Yes. I've even had a couple of overtures on whether we'd be willing to partner Bronco Billy's. And -- but I think when you go through that, it's ultimately more -- it's not as good for our shareholders as it would be if we can do it on our own. So...

That makes complete sense. If you do need to raise some equity for Bronco Billy, just as a shareholder, being able to participate in that via a rights offer and there's something might -- I think you probably have a good appetite among your shareholder base.

I appreciate that. We did do rights offering 1.5 years ago, which was pretty successful. And I backstopped it, and I think it worked out well for everybody. And I hear that. We'll figure it out when -- this is a ways down the road but -- the real financing for Bronco Billy is a ways down the road. We'll figure it out in time. We keep right our stocks. It's so volatile. We were $4 a share when we filed the shelf and we dropped almost to $3 a share, which percentage-wise is a huge swing. So we'll see.

And we have no further questions in the queue. I'd like to turn it back to Dan Lee for any closing remarks.

Yes. And actually, I'm just -- 2 closing remarks. One is we forgot to mention we moved back the maturity date on the debt. So we're now to --

From 2019 to 2024 senior 6-year notes.

Okay. So Lewis has been sleeping well at night lately. And then second, on the rights offering, last time, it was only $5 million. So it was a fairly small rights offering. But one of the downside to the rights offering is you don't introduce new shareholders. And at some point, we'd kind of like to maybe broaden the quote. And then when the stock only trades 4,000 shares a day, we hear from all sorts of people saying, geez, we'd love to buy your stock, but we can't seem to figure out how to get it. And so you kind of juggle all those one against the other. I mean, even if you did do an underwritten public offering, a lot of times you can do it in a way that shareholders can still participate. But then the fees are higher because you typically have an underwriter and all that stuff. So we weigh all those things. And I will point out, I think other than institutions, I think I'm probably the largest single shareholder. So I'm very motivated by figuring out what's best for shareholders because I'm one of them.

So I guess, that's it. All right. Thank you very much, everybody. Take care.

And that concludes our call for today. Thank you for your participation. You may now disconnect.