Boyd's Best Bet: Ditch the Casino, Sell the Land?

Boyd Gaming's(BYD) management must execute flawlessly on the company's ambitious Echelon Place development. Otherwise, the casino owner would be better off selling the entire 87-acre land parcel today, given the record prices being paid for Las Vegas real estate.

Boyd plans to break ground on the $4.5 billion Echelon Place project next month, with completion set for late 2010. The project, which sits on the northern part of the Las Vegas Strip on the site of the old Stardust Hotel, has been a contentious one for shareholders.

Several large investors, including some short-term-oriented hedge funds that own Boyd's stock, have urged management over the past year to sell the land rather than develop Echelon, buy-side sources say.

For now, Boyd's management isn't budging on its plan. But given the buzz surrounding Kirk Kerkorian's interest in buying the Bellagio and City Center development project from MGM Mirage(MGM), it's a great time for Boyd to explore alternative ways to monetize the value at Echelon Place.

Development Doubts

Echelon -- the largest project Boyd has ever developed -- will consist of five hotels, a 140,000-square-foot casino, a large convention center and several other resort attractions. Its size has left some investors concerned, as has its location.

Echelon will sit on the northern-most part of the Las Vegas Strip, which is considered the next growth area of the city. But it's uncertain how well this region will eventually perform, even if developers continue to grab older properties in the area with plans to rebuild them as luxury resorts.