Eleven figures! You’re right: MGM Resorts has $13 billion ($13,000,000,000) and Harrah’s has $19 billion in debt.
(What with hundred-billion-dollar bailouts and trillion-dollar deficits, one tends to forget that tens of billions is still quite a bit of money. But 11 figures is a good reminder – especially to people like us, with mere five-figure salaries. We recently saw two interesting ways of looking at these astronomical numbers. A million seconds is 12 days. A billion seconds is 31 years. A trillion seconds is 31,688 years. Or, to save a million dollars, just squirrel away $500 every week for 40 years. To save a billion dollars, stash $50,000 every week for 40 years. To save a trillion dollars, put by $500,000 every week for 40 years.)
Anyway, back at the casino, they are going for a song these days, no doubt about that. Earlier this year, Carl Icahn, one of the shrewdest investors and most relentless negotiators in modern history, picked up the $2 billion 3,800-room Fontainebleau for $156.5 million. Granted, F’bleau is barely 70% completed and Icahn is expected to mothball the property for five years or so, then flip it when the time is right. And Icahn being Icahn, he’s a favorite to make a profit. Still, given that he paid less than 10 cents on the dollar for the joint, he can come out ahead selling at a 90% discount on current construction costs.
Similarly, Penn National Gaming picked up M Resort, which cost a billion to build, for $230.5 million, less than 24 cents on the dollar.
And just a few weeks ago, the Siena Hotel-Casino-Spa in downtown Reno was auctioned off for $3.9 million, less than 10 cents on the dollar of the Siena's estimated $50 million in debt. (And that was only after two bidders drove the price about a million dollars higher than expected.)
In 2006, Starwood Capital Group offered to pay $17 a share for the Riviera. Since then, the Riv stock plunged to 25 cents a share, then was wiped out when Starwood, which had bought up the Riv’s debt for 50 cents on the dollar, negotiated a pre-packaged bankruptcy and emerged with control of the property.
CityCenter cost somewhere in the vicinity of $9 billion to build and now has an equity value of $2.65 billion. MGM Resort also just made a deal to sell its 50% share in Atlantic City's Borgata for a little more than $250 million, plus assuming $875 million in debt. If the sale goes through, MGM will lose $128 million on its investment in Borgata.
Also in Atlantic City, Resorts was sold to gaming veteran Dennis Gomes for $35 million, the lowest price ever paid for a New Jersey casino and again, about 10 cents on the dollar of the $360 million mortgage (on which Colony Capital defaulted a year ago). Trump Marina is for sale again. Analysts predict that, if it sells, the price will be a fraction of the $316 million offered two years ago. Pinnacle Entertainment claims it will be lucky to sell casino-zoned property it owns in Atlantic City for $185 million, nearly $100 million less than it paid in as recently as 2006.
One casino that might interest you (or your fronts) is the Rio, which Harrah’s has been selling since the spring. Recent reports have indicated that Harrah’s can’t sell it for any less than $300 million; if it sells it for less than $425 mil, the entire sales price must be used to pay down a loan against the mortgage-backed security, a stipulation made when the loan was made in 2008. Rumor has it that potential buyers have been making extremely lowball offers on the Rio, which, when it’s separated from Harrah’s massive Total Rewards marketing programs and the World Series of Poker, will be worth even less.
Another casino you might consider buying is the Palms. Harrah’s made a run at it awhile ago, and though we haven’t heard that it’s officially for sale, for the right price, you never know.
Other possibilities might include Hooters, Green Valley Ranch, Fitzgeralds, and the El Cortez.
