Las Vegas casino sales are on fire. Sorta. Not all casino deals are the same and that tempers the excitement of new blood in a casino market mostly operated by two casino companies.
MGM Resorts International’s recent confirmations (after months of rumors) are a perfect example of recent casino sales. The casino operator announced the sale of Bellagio and Circus Circus on the same day. However, they’re very different deals.
MGM Resorts’ sale of Circus Circus was a traditional deal to a new owner. Treasure Island owner Phil Ruffin will take control of Circus Circus when the deal closes. The sale of Bellagio was a land deal with a real estate company. Nothing will change at Bellagio and MGM Resorts will continue to operate the Bellagio.
Casino deals aren’t as simple as they used to be and there may be even more in the future. Let’s break down these sales in detail, as well as digest some other casino news.
MGM Resorts Sells Circus Circus
Circus Circus and the land being used for the Las Vegas Festival Grounds was sold to Ruffin for $825 million. This was a traditional casino transaction from one operator to another. Ruffin has been trying to purchase Circus Circus–popular and beloved for its value deals and family atmosphere–for years and already has some ideas for the property.
Ruffin told the Las Vegas Sun that he already has plans for the future of Circus Circus. His initial plans include the following:
- Renovate Slots A Fun
- Keep hotel room prices moderate – no upgrades planned
- RV Park may be repurposed
- Las Vegas Festival Grounds will become an entertainment complex
It makes too much sense not to happen but Ruffin hasn’t discussed linking Circus Circus and Treasure Island players clubs. Don’t expect to see any changes anytime soon. The deal is expected to close in the fourth quarter.
MGM Resorts deals Bellagio
The MGM Resorts sale of Bellagio wasn’t as cut and dry as Circus Circus. MGM Resorts announced that it has an agreement to form a joint venture with Blackstone Real Estate Income Trust. The valuation of the Bellagio was for $4.25 billion. MGM Resorts will receive a 5% equity interest in the joint venture and cash of approximately $4.2 billion.
While Blackstone owns Bellagio, MGM Resorts will pay $245 million in rent. MGM Resorts will continue to operate the casino. This deal will be seamless and Bellagio will remain part of the MGM Resorts’ M Life player loyalty club.
Unfortunately, there’s not much more to report about the Bellagio sale besides transaction details that note MGM Resorts’ shift to an asset-light business model. The deal is significant because it involves one of the most prestigious names on the Vegas Strip. Otherwise, it’s a real estate deal and nothing changes.
On its third quarter earnings call, MGM Resorts said they expect to have a similar real estate deal for MGM Grand before the end of 2019. Once that deal closes they will consider selling more real estate assets. Next year they will explore deals for Aria and Vdara in Las Vegas and MGM Springfield in Massachusetts. They are also planning on selling all or some of their real estate investment trust, MGM Growth Properties.
Caesars Entertainment sells Rio
Caesars Entertainment recently announced the sale of Rio All-Suite Hotel & Casino to a principal of Imperial Companies. This real estate deal is similar to the Bellagio sale by MGM Resorts. Caesars will continue to operate the Rio–which is home to the World Series of Poker–with a lease for a minimum of two years. Rent for the off-strip property is only $45 million.
This is a short two-year lease with an option for a third year. At the end of the lease term and at the request of the buyer, Caesars may continue to manage Rio or may provide transition services to the buyer.
Caesars is currently in the middle of a huge merger with Eldorado Resorts. Eldorado plans to reduce expenses and shed duplicate properties in certain markets. This deal allows the future operators of Caesars time to make plans on whether or not they want to keep Rio in the family.
Another casino landlord is looking to sell
Located in west Las Vegas near Summerlin, Suncoast Hotel & Casino is owned and operated by Boyd Gaming. However, they don’t own the land. The owners of the dirt underneath the casino have put the 50-acre plot of land up for sale. The deal includes a 35-year lease of Suncoast by Boyd Gaming.
The casino won’t be going anywhere soon but the casino will likely have a new landlord soon. The end result of this real estate deal means nothing to casino guests.
Rumors abound for more Las Vegas casino sales
The recent casino and real estate deals in Las Vegas is just the tip of the iceberg. Before purchasing Bellagio, Blackstone put a “For Sale” sign on The Cosmopolitan. The asking price is at least $4 billion dollars for the casino they purchased for less than $2 billion in 2014.
The Cosmopolitan is an expensive property so finding a buyer hasn’t been easy. There just aren’t too many companies with that much money laying around. Hard Rock International (owned by Florida’s Seminole Tribe), is one company that has been in the rumor mill to buy the Cosmopolitan. A spokesperson for Hard Rock recently admitted that Las Vegas would be a great opportunity for the company.
Time will tell if Hard Rock and Cosmopolitan were meant to be. It’s possible they will target another property in Las Vegas that could be available for purchase. When Eldorado announced the merger with Caesars, they said they plan to shed at least one Vegas Strip property. Planet Hollywood, Bally’s, and Rio (before it was sold) have been thrown around as potential properties to be sold.
More recently, gaming industry analysts have been saying Penn National Gaming (PNG) could sell Tropicana. During its second-quarter earnings call, PNG said they were looking into potential partners for 35 unused acres of land. Perhaps they’re willing to accept one buyer who may be looking to redevelop everything.
On its third-quarter earnings call, PNG said they have received unsolicited offers to buy the Tropicana. When PNG acquired the Tropicana, they thought having a Vegas Strip casino would be a vital part of growth. Since sports betting has expanded, the company has changed its thinking. They no longer think regional casinos need the Las Vegas Vegas “hub.” Keep an eye on this one.
Lastly, there could be a massive Las Vegas locals casino sale. Vital Vegas shares a rumor that Station Casinos is on the market. One major stipulation with this rumor is that the newly renovated Palms and Palace Station would not be part of this deal.
There are a lot of potential deals on the table for next year. These turnover rumors are just the tip of the iceberg of new blood in Las Vegas. Circa, Resorts World, and Virgin Hotels Las Vegas are all scheduled to open in Las Vegas in late 2020.