Category: Entertainment

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Trop flipped; Arizona, Maryland join sports-betting club

The Gaming & Leisure Properties Inc. regime at Tropicana Las Vegas was (as planned) a short-lived one. GLPI just announced that it has flipped the Trop to Bally’s Corp., which evidently couldn’t wait one minute longer to get onto the Las Vegas Strip. For an unspecified “value” of the property, Bally’s gets the casino and pays $22.5 million in “incremental rent.” Not done yet, Bally’s sold the real estate of its Black Hawk, Colorado casino and that of Jumer’s Casino Rock Island for a combined $150 million. That’s a neat trick for Bally’s, considering that its purchase of Jumer’s (a real turkey) hasn’t closed yet. Sell something you don’t own? That’s clever. We wonder what Illinois regulators will think of this three-card monte. The Black Hawk and Rock Island casinos will be consolidated into a GLPI master lease that includes Bally’s rentals of Tropicana Evansville and Dover Downs. “Recall, last year, early on it the pandemic, GLPI received the Trop from PENN … last year in exchange for 2020 rent credits (since used and expired). We look at today’s news as a creative way for GLPI to extract long-term value from last year’s deal with PENN (which is no longer the OpCo nor has any economic/equity interest in the Trop),” wrote JP Morgan analyst Joseph Greff. As for Bally’s, it may need a stout dose of Geritol, as it is making a habit of buying casinos with tired blood in their veins.

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Maryland has best month ever; Rio reopens

Even with capacity restrictions still in place at MGM National Harbor and Horseshoe Baltimore, the Free State enjoyed an epic March with casinos posting an all-time-record $169 million. On March 12, MGM and Horseshoe were bumped up to 50% capacity (from 25%) and restrictions at the state’s four smaller casinos were lifted. (Last year, casinos were closed March 16-June 19.) As usual, MGM was out front with $66.5 million, 6% better than March 2019. It and Maryland Live dominated the market, with 39% and 36%, respectively. Maryland Live gained 9% to $61 million but while Horseshoe Baltimore grew sequentially (up $5.5 million from February), it was still the state’s lone disappointment, down 23% to $20 million. Ocean Downs was up 13% to $7.5 million, Hollywood Perryville vaulted 21% to $9 million and Rocky Gap Resort was up 8.5% to $5.5 million. The leading edge of a trend? We certainly think so. As America goes, so goes Maryland—only more so.

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A cautionary tale

Las Vegas, be warned: This could be you. We’re referring to the chaos in Miami, where an 8 p.m.-6 a.m. curfew has been imposed by police in response to widespread hooliganism. The out-of-control situation in the streets was brought on by Gov. Ron DeSantis‘ open-for-business, head-in-the-sand attitude toward Coronavirus. There are no capacity limits, no masking mandates and a general elimination of restrictions meant to protect the public health. The result was thousands of overeager party animals descending upon Miami to, as City Manager Raul Aguila put it, “engage in lawlessness and an anything-goes party attitude.” Add Mayor Dan Gelber (D), “there are very few places that have been open as our state have been open. We’re in the middle of a pandemic. The virus is still very present in our community. We have 1,000 infections a day on most days.” That will fall on deaf ears in the governor’s mansion, where a Luddite, anti-science attitude holds sway.

Consequently, you have what The Associated Press describes as an “unruly spring break crowd gathering by the thousands, fighting in the streets, destroying restaurant property, and refusing to wear masks.” Five combined police forces and even SWAT teams have been all but powerless to control the rabble. DeSantis probably thinks the mob is good for business but Aguila responds that they’re not patronizing local businesses or restaurants, merely crowding the streets … twerking and ‘making it rain.’ Streets have been blocked by rioters, shots fired and at least one restaurant destroyed outright. As for the law-enforcement response, tourist Heather Price moped “I just feel like it’s really not fair. People paid a lot of money to come all the way out here, just to not be able to do the activities they wanted to.”

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Las Vegas: Are happy days here again?; Sands dibs NYC

As we’ve often said, when the American economy gets the flu (literally, in this case), Las Vegas catches pneumonia. During the depths of the Covid-19 pandemic, unemployment in Vegas levitated to 34%. Today it is a still-unhealthy 10.5%. Nonetheless, the Wall Street Journal paid a visit to Sin City and found a spirit of optimism, whether manifested in full classes at dealer schools or the $6.25 billion paid for Venelazzo. As one dealer-school manager put it, “You have to invest in the idea that Vegas always comes back bigger and better.” As the WSJ noted, Las Vegas may be attempting to diversify economically but it lives or dies with tourism.

“An all-time high of 42.9 million people visited Las Vegas in 2016, and convention attendance reached a record-setting 6.6 million meeting attendees in 2019,” reports the WSJ and while Vegas is recovering perhaps faster than anticipated, the brain trusts with whom reporters spoke don’t expect pre-pandemic numbers to return until sometime in spring 2022 or later. It’s a long climb back from 2020’s perigee of 55% fewer visitors (numbers not seen since 1991) and 43% less Strip gambling revenue, after all. A state budget overly dependent on gaming revenues and entertainment taxes is looking at a recovery not before 2023 at the earliest. Room rates have yet to recover their January 2020 average of $153/night. Hopefully, for the average Las Vegan, the road back will not be as long as after the Great Recession, when inflation-adjusted personal income didn’t return to normal until 2014.

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Next stop … Richmond?!?; Alabama covets casinos

No fewer than six companies, some of them major, have descended upon Richmond, Virginia, seeking the Dominion State’s last casino license. They are: Bally’s Corp. ($650 million), Cordish Cos. ($600 million), Golden Nugget ($400 million), Pamunkey Indian Tribe ($350 million), Urban One/Pacific Peninsula Entertainment ($517 million), Wind Creek Hospitality ($541 million). The bigger the proposed investment, the more politicians tend to like it, so Bally’s and Cordish have that in their favor. The only proposal we’re tempted to rule out is the Pamunkey Tribe’s, partly because they’ve already got a bite of the apple in Norfolk and partly because of the low level of spend, barely half of Bally’s. (Peninsula Pacific already owns Colonial Downs and the Rosie’s slot routes, so either them that has will get or it will be adjudged to have too much of the pie already.) Bally’s has pitched its project for the same site as Golden Nugget, so we don’t know how that be resolved. Maybe if Tilman Fertitta goes on CNBC and cries about it Bally’s will take pity. Not.

But seriously … if Richmond wants a heavy hitter with brand equity, the Nugget is the ticket. Cordish has shown it can be a money-spinner in other East Coast markets, so it’s got that going for it, while Wind Creek has a more limited but auspicious track record and would build the largest number of hotel rooms (252). Urban One and the Pamunkey are minority-owned, while Fertitta is offering minority businesses 5% of his Richmond stake, which is mighty white of him. (Cordish numbers NFL great Bruce Smith among its minority investors.) The Bally’s and Pamunkey designs are the sexiest, even if the latter looks suspiciously like what the tribe is supposed to be building in Norfolk. Bally’s CEO George Papanier may have committed a faux pas when he condescendingly promised a “vibrant new attraction that is sure to turn Richmond into a dynamic tourist destination.” As though it weren’t already. Perhaps the $100 million entrance fee he’s promised the city will smooth any hurt feelings. Voters get the final say, choosing the winning proposal in a Nov. 2 referendum.

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Boyd better than expected; Marching through Georgia

Boyd Gaming leaked January data, what Wall Street calls “offered an encouraging commentary,” to help put an upbeat spin on its 4Q20 numbers. It worked like a charm. JP Morgan analyst Joseph Greff moved his price target up $8 to $62/share. He was motivated by news of “improving gaming customer spend trends thus far in the 1Q21 relative to its results in the 4Q20 … this is despite the older casino patron demographic not really returning to any great extent, which is something that could serve as upside or a cushion to the presently strong/growth trends from younger, non-rated players.” He liked a business plan structured around a “favorable localized/regional footprint predominantly focused on a drive-to, leisure gaming customer.” Greff also raised his cash flow estimates based on strength in the Midwest and South regions of BYD and on its strong sports-betting prospects, thanks in part to FanDuel (“DFS Operator #2” in Wall Street code).

Fourth-quarter revenues were a better-than-expected $636 million (Greff anticipated $608.5 million), despite being 24% down from 2019. But the Midwest and South were only 15.5% off the pace, bringing home the bacon to the tune of $456 million. This enabled the company to shrug off the temporary closures of Par-A-Dice and Valley Forge Casino Resort. In Las Vegas, support from locals was somewhat undone by lackluster tourist biz, particularly at The Orleans. Vegas numbers overall were down 28%, a $161.5 million take. Downtown needs a defibrillator, generating just $18 million, a 74% collapse “pressured by weaker tourism to southern Nevada, especially from the core Hawaiian customer base.” In other words, Main Street Station isn’t coming back any time soon and no reopening date was floated for Eastside Cannery on the Boulder Strip. Greff forecast a recovery in locals biz (good for Cannery) but only “modest” improvement in Downtown numbers.

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F-blue returns from the grave; Caesars socks it to you

The Thing That Wouldn’t Die, aka Fontainebleau, is back again. Former owner Steven Witkoff has sold it to Koch Real Estate Investments for an undisclosed price. Considering that Witkoff bought it from Carl Icahn for $600 million and estimated that “The Drew” (as it was briefly called but never came to be) would cost in the neighborhood of $3 billion to finish, we’re looking at a very pricey megaresort project for Koch (as in Koch Brothers). The latter is in partnership with Fontainebleau Development so, yes, F-blue is a thing once more. Mind you, we’re talking about a casino-resort that’s been under construction for 14 freaking years (so old that Harry Reid was Senate Majority Leader when the original owners came cadging for a bailout). That $3 billion figure may have been optimistic.

Looking on the bright side, Koch trumpeted, “With Las Vegas‘s tourism recovery underway, the city has safely reopened to millions of visitors since June with even more success on the horizon.” Koch assures us that it practices “an agnostic approach to product, geography, and capital position,” which I guess is meant to assure us that this isn’t a leap of faith. As for Fontainebleau Development, it’s—oh no!—the return of the Soffer clan, the people who got us in this mess in the first place. Let’s hope their edifice complex is better-financed this time around. Even so, it may indeed take an act of God to make F-blue pencil out. As Scott Roeben emphasizes, it’s dumping—er, debuting—3,780 hotel rooms into a market that will be hard-pressed to absorb them, even a couple of years down the road. After all, F-blue is being beaten to the punch by not-unchallenged Resorts World Las Vegas. So there’s that. Even Resorts World fan Roeben is nervous about the latter’s prospects. “We suspect Koch will take a wait-and-see approach, sitting on this asset until market conditions improve, should that ever happen,” Roeben writes. Which means the butt-ugly corpse of F-blue is with us to stay for a long time.

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The Strip plays Capitol Hill

It was like the good old days of the Las Vegas Strip were back in full flower at President Biden’s inauguration. It featured two Strip headliners-in-limbo, Lady Gaga and Jennifer Lopez, as well as former headliner Garth Brooks, crossing party lines to deliver a moving “Amazing Grace.” Her Ladyship’s very personal rendition of “The Star-Spangled Banner” got the proceedings off to a rousing start and every performer gave hope of better times ahead for Sin City.

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Massachusetts hit hard; NFL playoffs a tossup

Between Covid-19 capacity restrictions (33%) and statewide curfews (9:30 p.m., when the night owls are just getting rolling), Massachusetts casinos were between a rock and a hard place last month, with revenues falling 40% to a meager $50 million. If there was a silver lining for anybody, it was at Plainridge Park, whose slots collected an above-average win/slot/day of $247 and whose market share was 18%, closing the gap with MGM Springfield‘s 23%. Encore Boston Harbor remained dominant with 59%. Encore revenue plummeted 46% to $29 million, MGM made $11.5 million (-40%) and Plainridge Park won $9.5 million, only 10% off the pace on 10% less coin-in. (They must have some pretty loyal customers.) MGM saw 33% less slot handle (an anemic $118/win/slot/day) and a disastrous 60% plunge in table game revenue. Where JP Morgan analyst Joseph Greff had predicted a 15% decline in the fourth quarter, MGM delivered -34%.

At Encore, it was the opposite story. Greff expected a 50% 4Q20 decline and Encore managed -34%, a victory of sorts we suppose. Slot handle fell 29% and so did revenue from the one-armed bandits. Table game win was $2,972/table/day (contrast that to MGM’s $543). But even tightening the hold on the slots didn’t help that department. Plainridge Park is obviously doing things right, Encore somewhat the same but a serious rethink of MGM’s gaming product appears in order. Connecticut tribes who feared competition from Springfield can sleep easily at night.

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