Question of the Day - 01 May 2021

[Editor's Note: This answer is provided by our own David McKee.]

You’ve got it absolutely right. It’s a complicated saga, but you’ve dotted all the i’s and crossed all the t's.

Tropicana Atlantic City and Tropicana Las Vegas were both owned by Columbia Sussex back in 2007. But as part of a May 2008 bankruptcy reorganization (which took two years), the Trop LV was split off as a separate entity. In this incarnation, it was acquired by Canadian firm Onex Corp., which bought a $440 million delinquent loan on the property in July 2009.

During this same period, Carl Icahn gained control of the rest of Tropicana Entertainment and wished to suppress the Las Vegas moniker. Failing that, Icahn wanted royalties of $2 million a year for five years. He sued — and lost. Onex got use of the Tropicana name royalty-free.

Since the Trop has 64 years of "brand equity" behind it — and because there's already a Bally’s on the Las Vegas Strip — that time-honored name is likely to stand.

Onex tried for six years to refresh and reposition the Trop, not entirely without success. However, some of its attempts — such as an alliance with Nikki Beach nightclubs — were unsuccessful. The Trop lost sufficient value that Penn National Gaming was able to pick it up in April 2015 for $360 million.

Penn attempted to re-reposition the property for mid-market customers, but it found itself competing with its own newer M Resort and couldn’t gain traction on the Strip (Penn is an otherwise exclusively regional operator and destination resorts aren’t in its DNA). A promised $250 million in capital reinvestment didn’t materialize and (perhaps thankfully) neither did a plan to paste a shopping mall onto the front of the Tropicana, a la Bally's Grand Bazaar Shops.

Penn proceeded to make desultory attempts to sell the Tropicana, but eventually realizing that its main value was the 34 acres of real estate across from MGM Grand, Excalibur, and New York-New York, and strapped for cash during the pandemic, in April 2020, Penn made a deal with Gaming & Leisure Properties for another loss: $307.5 million in rent credits. In other words, GLPI picked up the land in exchange for "credits applied to rent due under the parties’ existing leases for the months of May, June, July, August, September, October, and a portion of November 2020."

GLPI’s stated position was to proceed with all deliberate speed to flip the Trop. It took only a year, as Bally’s Corp. ponied up $308 million. Unlike Penn or Onex, Bally’s already has roots in two destination markets, Atlantic City and Biloxi, so it will be interesting to see if it succeeds where Onex and Penn came up short.

So now, Bally's Corp. owns the Tropicana on the Las Vegas Strip. Caesars Entertainment owns Bally's on the Las Vegas Strip. Caesars owns three Tropicana-branded casinos (purchased from Icahn): one in Atlantic City, another in Laughlin, and a third in Evansville, Indiana. However, Bally’s is buying Tropicana Evansville.

As Global Market Advisors' Brendan Bussmann said, “The sale of the Tropicana in Las Vegas to Bally’s, while not owning Bally’s Las Vegas itself, will take some further differentiation for the consumer in the market.”

In other words, confusion over ownership, especially as it pertains to players clubs, will need to be unraveled. As the transaction isn't expected to close until early 2022, there's time for it to happen.

The easy solution would be for Bally's Corp. to buy Bally's Las Vegas. Failing that, if Caesars were to sell Bally's to a different casino company (fulfilling its stated intention to offload at least one Strip property), a name change after the sale would help clear the air.