Shocker: Hard Rock Rocksino sold; New top man at SLS

Despite being the dominant racino operator — hell, gaming operator — in Ohio, it seems that Hard Rock International is throwing in the towel. It’s selling Hard Rock Rocksino to MGM Growth Properties. Early Wall Street speculation is that we’re just seeing the beginning of the transaction. JP Morgan analyst Joseph Greff expects that the operating company half of Hard Rock will be spun off to a third party, but “we’d be surprised if it was MGM or some other operator with a meaningful Ohio operation.” Adds Deutsche Bank‘s Carlo Santarelli, “we believe, given the lessons learned from the GLPI acquisition of Meadows, that some loose agreements/backstops are likely in place.” (Gaming & Leisure Properties acquired the Meadows racino in Pennsylvania with an eye to having Pinnacle Entertainment run it.) MGM is paying a pretty penny for the physical asset: $1 billion or 13 times cash flow. Whew! Given the drawing power of the racino, however, we’d hesitate to say that MGM Growth Properties overpaid.

Still, it’s getting the most strategically located racino in Ohio, exactly midway between Cleveland and Akron. In addition to a horse track, gas station and car wash (never underestimate the importance of a good car wash), it comes with 2,300 VLTs, assets which are sure to make a pretty penny for the eventual tenant.

* Now that Alex Meruelo has taken the keys to SLS Las Vegas, he’s wasted no time in installing a veteran casino executive as general manager. Paul Hobson isn’t a household name, even in gaming circles, but he’s got 27 years in the industry, mainly with American Casino & Entertainment Properties, including six profitable years at the Stratosphere (he seems to have been a casualty of the Golden Entertainment takeover). So he knows a thing or two about operating in the challenging climate that is the North Strip. He’s also got credits on his resumé from Caesars Entertainment, MGM Resorts International and Affinity Gaming. In short, he knows the business. Meruelo would seem to have chosen well.

* Illinois gaming revenues dipped a bit last month, down 2% at $128.5 million. Foot traffic was 6% lower, customer spending 5% higher, thanks perhaps to an extra weekend day. Boyd Gaming beat the odds at Par-A-Dice, up 1.5% to $7.5 million (the property has really suffered from slot-route competition in the past). Penn National Gaming was not so lucky. Its Argosy Belle was flat ($4.5 million) but Hollywood Aurora tumbled 12% to $11 million, while Empress Joliet was up 2% to $11.5 million. Despite grossing $16 million, MGM’s Grand Victoria was off 1.5%. Caesars Entertainment gets a mulligan, since flooding closed Harrah’s Metropolis Feb. 25-March 15.  It was down 41% to $4 million. Harrah’s Joliet picked up some of the slack, grossing $17 million for a 2.5% increase.

Jumer’s Casino Rock Island was flat, grossing $6.5 million while GLPI’s Casino Queen was up 2% to $10 million. That leaves the 800-lb. gorilla, Neil Bluhm‘s Rivers Casino in Des Plaines, which grossed $40.5 million, good for a 4% increase.

* March gaming numbers for Nevada aren’t in yet but JP Morgan’s Greff predicts Reno‘s while be a little damp, thanks to two weekends of snow. Further south, he likes the dynamics of the Las Vegas locals market: “The LV Locals environment remains attractive with low unemployment (~5%), steady wage growth (pacing +5%), a stable housing market, and strong construction pipeline (~$13b, with construction jobs tracking increasing ~10% y/y).” Lastly, he’s got a warm spot for Eldorado Resorts, citing “(1) its exposure to growing markets: Reno (NV), Black Hawk (CO), Columbus (OH), and Pompano (FL), (2) continued synergies at Isle properties, (3) favorable impact from tax reform, and (4) an active M&A environment that provides optionality. We expect ERI to continue to generate steady, above-peer [cash flow] growth on limited/no top-line growth.” Sounds like a solid bet to us.