Late last week, Churchill Downs was awarded a racing license in Oak Grove, Kentucky, putting CHDN within an hour’s drive of the Nashville market. The plan is to invest $150 million in a racing oval, a hotel and — most importantly — VLTs. Churchill Downs is 
literally going to use its thoroughbreds as stalking horses to creep up upon casino-averse Music City. Wrote JP Morgan analyst Joseph Greff, “We expect construction will commence in the near future, as the license stipulates Standardbred racing dates will begin in October 2019,” helping drive a projected $40 million in cash flow. Greff assumes 1,500 ‘historical racing’ terminals, opining “We use Kentucky Downs’ ~$233/win/unit/day as a proxy (~60 miles from Oak Grove with, 750 machines), and estimate the gaming facility could generate $235 win/unit/day, which … could imply annual net gaming commissions of $~130m. We believe the hotel will provide a modest EBITDA contribution, as we expect most rooms will be targeted to gaming customers.” $235/win/day per device is above average in the slot world so the prospects for Oak Grove must look pretty green. Even if the sport of kings is on wobbly hooves, historical racing has made it a good investment again.
* Dan Gilbert is sending mixed signals about the Greektown sale as to whether it portends other casino divestitures or not. Meanwhile, buyers Vici Properties and Penn National Gaming are inheriting $400 million in debt, which will impede return on investment. Still, Wall Street is giving the transaction rave notices, with Deutsche Bank analyst Carlo Santarelli writing, “Given the reasonable purchase price, the addition of a new/untapped market for Penn and healthy commercial casino gross gaming revenue in Michigan, we believe the deal is likely to be well received.” Ironically, while Penn was expected to siphon revenue from Detroit into its Ohio casinos, a doomsday scenario that never happened, now it’s hooked up the spigot to Motown directly.
* In deeply tragic news, MGM Grand has finally run out of spare parts for Sigma Derby and sent the long-in-the-tooth but much-loved racing game to the big glue factory in the sky. There are other games like it which MGM could use as a replacement but that would be highly unlikely because Sigma Derby is much slower (read: player-friendlier) than a slot machine and casinos want to churn through our bankroll as quickly as possible, don’t ask me why.
* VitalVegas has a tranche of Las Vegas news that is particularly credible in this M&A-made climate. The best odds from sleuth Scott Roeben have The Rio being sold, perhaps even imploded to make room for an MLB stadium. Gary Loveman tried (and failed) to get $500 million for The Rio when he was Caesars Entertainment CEO and it didn’t merit such a steep price, partly because Loveman had allowed the once-beautiful resort to fall into a state of dilapidation. We’re curious to see if CEO Mark Frissora pulls off a deal on his way out the door. Other Roeben rumors include Genting Group making a play for Wynn Resorts. Genting just can’t keep its eye on the Resorts World Las Vegas ball, can it? I’d love to comment on Roeben’s other reports but will wait for you to read them yourselves. At least S&G gives credit where it’s due: Global Gaming Business dissed VitalVegas as “A Vegas-focused blog popular with the locals.”
* The tortoise-powered Nevada Gaming Control Board is still, slowly investigating Steve Wynn. Why does this matter? Because the NGCB won’t promulgate new regulations on sexual harassment until’s done with Wynn. Considering that the latter is out of the casino business for at least another year, we think the NGCB should pause its Wynn probe instead and get those new sexual-misconduct rules onto the books.
* Lastly, I had an interesting conversation with my barber about casinos in Georgia. Although he voted for Brian Kemp, who is starchily anti-gambling, my barber wants to see a casino in Augusta. He thinks if gaming companies dangle enough shiny objects in front of Kemp he’ll have a change of mind. It certainly seems myopic to oppose an industry that will invest billions of dollars without asking for a cent in tax breaks. Even if Kemp is overcome, there’s still the deep-pocketed Georgia Lottery to contend with, as it would resent any incursion on its lucrative turf. And if Sheldon Adelson wants to make a good impression he’d better not arrogate gubernatorial parking spaces for his limousine, as he did on his last visit.
My barber, by the way, had some strong opinions about staying and playing on the Las Vegas Strip. Next time he’ll probably go Downtown instead. His two main points of resentment were the inability to find a good poker room and — wait for it — resort fees. When will Big Gaming get the memo?
The Rio has been up for sale for around a decade now and the Palms was bought for $312 million dollars by Station Casinos in 2016. It is unlikely that the Rio could be sold at that price let alone $500 million
dollars unless a major league sports franchise (MLB or NBA) buys the land and implodes the Rio.
The Rio’s land is vast and valuable (over 100 acres) one mile west of the Strip so there is definitely enough land for a new MLB stadium. In July of 2018 MLB Commissioner Rob Manferd talked about expanding MLB to two more cities. Here are the 6 cities being considered: Las Vegas, Portland, Charlotte and Nashville in the USA and Montreal and Vancouver in Canada.
Since Montreal used to have a team up until 2004 they would probably get another team first and that would be the team in the Eastern division. Las Vegas would probably beat out Portland and Vancouver would lose out because of Montreal already getting a team for Canada. Las Vegas would then be the team in the Western division.
I had a long post on this blog around a year ago about different locations for a new NBA basketball arena in Las Vegas and the Rio site would also work out great for a NBA arena.
The Raiders paid $77.5 million dollars for 62 acres of land across from Mandalay Bay in May of 2017. In my opinion the best location for Raiders Stadium would have been where the Rio currently resides one mile west of the Strip on Flamingo Road. There is over 100 acres of land there and plenty of parking for tailgaters to drink and eat at before and after football games.
The Raiders Stadium cost $1.8 billion dollars to build and public funding will cover $750 million dollars of the new stadium. These funds will be drawn via an increase on the tax on hotel rooms. Lastly if a new MLB
or NBA facility would be built where the Rio resides the new owner would need close to $500 million dollars for the land and then they need to build a new stadium/arena. Public funding once again? Your guess is as good as mine.
Chris Mannix from Yahoo Sports wrote an interesting article from December of 2017 regarding teams in new cities entitled: “Hope is Alive in Seattle’s Quest to get another NBA team”. The article talks about a possible expansion team in Seattle and then this comment: “Two cities are needed for expansion — the league is still iffy on Las Vegas, though Mexico City is gaining momentum, league sources told Yahoo Sports.
Kevin Arnovitz from ESPN recently wrote this long article: “The NBA’s next big Cash grab: Taking over your Downtown”. Here is a quote from this excellent article: “That’s why a number of other NBA franchises, including the Golden State Warriors, are looking to tech giants, million-dollar condos and buzzy restaurants to offset the construction of new facilities, as well as the price of running a team in a league whose salary cap and infrastructural budgets are ballooning”. Currently the Sacramento Kings, Atlanta Hawks and Orlando Magic are also building large multimillion dollar arena projects in their downtown locations.
“Teams have traditional revenue streams — sponsorship, ticket sales, media rights and what you can generate inside your arena,” says Steve Koonin, the Hawks’ CEO. “Those can grow over time, but real estate development can represent a hedge against future uncertainty in all of these revenue areas”.
Lastly, Jon Werthiem from the latest Sports Illustrated column entitled: “Just Duh Facts, Eight so-obvious-it-has-to-happen visions of the near future”: How fast does the wheel of change spin? In 2003 the NFL rejected a Super Bowl ad promoting Las Vegas as a resort destination, so toxic were the city’s ties to gambling. The Raiders will be in Las Vegas soon and will be joining the NHL’s Golden Knights, various Pac-12 tourneys and the fastest growing league, the UFC, in Vegas. That boom traces evolving views on gambling. Given the rise of sports betting, a growing young population, an agreeable climate and all those hotel rooms, Sin City will become the new gravitational center for American sports.