Two decades ago: Worries surrounded Atlantis opening
Two decades ago, John Farahi and his brothers were terrified.
The brothers John, Bob and Ben had won a lengthy and expensive battle with the City of Reno in its city council chambers and, later, the courts.
Now they’d pledged every personal asset they had, including cars and houses, to finance construction of a 17,000-square-foot casino and 160-room hotel tower in what was then the farthest reaches of south Reno.
As the new property opened its doors in April 1991, the Farahi brothers’ broad smiles hid a secret: The new hotel and casino had cost more than budgeted, and they had no idea how they would make their first payroll.
“When we opened, we didn’t think we would survive,” John Farahi recalled a few days ago. “We were scared.”
Things worked out just fine for the family as the new hotel and casino quickly grew into today’s Atlantis Casino Resort Spa with its 824 guest rooms, 61,000-square-foot casino and 10 food outlets.
The parent company of the Atlantis, publicly-held Monarch Casino and Resort, today is valued by investors at about $148 million.
But Farahi says the owners of the property didn’t feel confident about their prospects for the better part of a year after opening the doors of the hotel and casino. And the risks had been substantial.
“Everything we had worked for during the previous 15 years, we had to put up as collateral,” he says.
The company traces its roots in Reno to 1972, when a rundown 142-room motel in south Reno was purchased by David Farahi and his brother-in-law, Isaac Poura. (Poura was bought out slightly more than a year later.)
The three sons of David Farahi graduated from universities in the Bay Area, working at the motel during school vacations. By 1976, their father transferred ownership to them and their sister, Jila.
It was a tough grind for the property known initially as the Golden Road Motel a name that lingers in legal documents as the company that operates the Atlantis and later became a Travelodge franchise.
Things began to change at the motor lodge and its neighboring coffee shop in 1986 and 1987 when the Farahi family purchased the land on which the motel was located along with nearly 16 acres of neighboring property.
They thought the zoning they won for the property would allow construction of a hotel and casino, but they needed to turn to the courts after the Reno City Council turned down their plans.
“We were fighting the political and economic establishment,” says John Farahi.
But even with a favorable court decision in hand, they found little financial support for a major development project miles from the downtown center of gaming activity.
First Interstate Bank finally stepped forward to lead an $18 million lending syndicate demanding extensive personal guarantees from the Farahi family in the process and the property opened in April 1991 as the Clarion Hotel Casino under a new licensing agreement with Choice Hotels International.
And that’s when the brothers didn’t know they’d make the payroll. They knocked on doors of friends and business acquaintances, but none were interested in making an unsecured loan to guys who didn’t have any remaining assets to use as collateral.
Skillful juggling kept creditors at bay long enough to get the new casino and hotel established. (The experience still shines through the public company’s financial reporting. More than most companies, Monarch Casino each quarter makes special note of its efforts to pay down any debt it has outstanding.)
Rapid growth in revenues helped, too. With its new 160 rooms joining 145 motel units and the casino operations, revenues at the Clarion Hotel Casino in 1991 totaled $23.2 million. That compared with revenues of $5.2 million in the year before the expansion.
The growth set the stage for another big challenge taking the property public.
Underwriters weren’t crazy about a one-property gaming company analysts sometimes still knock Monarch for lack of diversification and the company knocked on numerous doors before it found a firm to handle its initial public offering.
The IPO in 1993 raised about $17 million from the sale of 20 percent of the company to the public.
“When you go public, the public becomes your partner. You have to run your business in a different way,” Farahi says.
Cash from the IPO helped finance the addition of another hotel tower, adding 283 rooms in 1993. Another $120 million expansion added a 27-floor hotel tower a couple of years later.
A steady stream of improvement projects since then continue to boost the market share of the Atlantis even while the northern Nevada gaming market has declined by 30 percent, Farahi says, and the company was one of the few in the industry to show growth in 2010 compared with 2009.
After completion of the latest round of upgrades at Atlantis, Farahi says Monarch is widening its focus.
“Our goal is to diversify,” he says.
With more than $10 million in cash and no long-term debt on its balance sheet at the end of the first quarter, Monarch might be in position to make an acquisition.
But Farahi says the money isn’t burning a hole in the pockets of Monarch’s management team.
“We’ll make an acquisition only if and this is a big if we find a property that makes economic sense,” he says.
Initial claims for unemployment in Nevada have remained relatively flat for more than two months and totaled 8,158 in the week ending Oct. 31.