WHY DID BOYD GAMING SELL SOUTH COAST BACK TO MICHAEL GAUGHAN?

But regardless of its dressing, South Coast is a locals casino, and outside is not what matters.

Inside, it’s a recognizably average Coast casino with much of the floor devoted to slots and video poker, with the middle section reserved for table play. A sportsbook and poker room anchor the south end. You will certainly not get lost at South Coast, nor will you quite shake that mouse-in-a-warehouse feeling.

For a space that size, though, it’s eerily quiet. Even on a Saturday night.

Or so thought Boyd Gaming, owners of South Coast, who announced they’re selling the casino after just over half a year of being open. The underperforming casino was bringing in an expected return of 6 percent of its investment.

That puts them on track for about $32 million their inaugural year. Not the expected $50 million or even the 15 percent lobbied around to investors.

Still, though, is South Coast’s sluggishness enough to warrant dumping the property after only 7 months of existence?

Many factors contributed to the low return: high gas prices are keeping away locals, lots of construction (which also hinders the entrance to Silverton), there’s no access from I-15 (the exit of which is still a year away from being completed), competition from the newly opened Red Rock, there’s no strong restaurant/nightclub anchor like at Red Rock or Green Valley, and that ugly facade that we’re again compelled to mention.

Let’s think back to what led up to this.

Michael Gaughan, owner and founder of Coast Casinos, built locals-oriented Barbary Coast, Gold Coast, The Orleans, and Suncoast. He had the land and plans for South Coast, and just as building began on his pet project, Boyd Gaming (Fremont, Sam’s Town, Stardust, Main Street Station, The California, among others in Las Vegas and around the country) swooped in with their big pockets and bought up all of Coast for $1.3 billion. Coast Casinos was now a wholly owned subsidiary of Boyd Gaming. And Gaughan suddenly found himself with bigger pockets himself as well as a major stockholder of Boyd.

That was two years ago.

In the interim, Gaughan was kept onboard and continued to run the Coast’s operations.

Once South Coast opened in December 2005 and preliminary numbers were released, perhaps Boyd felt it time to cut their losses and focus on the $4 billion Echelon Place.

Of course, that’s the spin.

Could it be that Boyd never wanted South Coast nor Gaughan, but kept both onboard to appease investors and not affect the stock price too drastically?

A couple weeks ago, it was announced to surprised investors that Gaughan would be taking over South Coast, trading almost all of his Boyd stock (about 15.8 million shares) for the privilege.

Which means not only will South Coast no longer be part of Boyd, but Gaughan will also be severing ties with Boyd.

Perhaps Boyd didn’t want South Coast and Gaughan, but we think it was part of a shrewd master plan set forth by Gaughan himself.

In a statement, Gaughan said he was eager to get away from corporate life and return to casino operations.

And that may indeed be true, yet without the hovering partners Gaughan was saddled with during the Coast years.

Gaughan and Boyd have a friendship dating back 40 years. With Boyd buying Coast for cash, all parties including Gaughan’s partners no longer had ownership.

Flash forward a couple years later, and now Gaughan is sitting pretty, wholly owning his favorite casino debt-free, which he’ll be able to run independently without any partners, rebuilding his empire solo. While it hasn’t been official, reports are that Gaughan will call his new casino South Point or Michael Gaughan’s South Point (reminiscent of his father’s Jackie Gaughan’s Plaza).

As part of the agreement, Gaughan is not allowed to sell the casino for at least five years. And, Boyd still has options to buy it back a couple years after that… say, after the dust settles and Echelon Place is up and running.

Pretty sneaky, eh?