In a dramatic, dead-of-night deal, Las Vegas Sands sold The Venetian and Palazzo to a REIT/private-equity combo of Vici Properties and Apollo Management for $6.25 billion. Vici and Apollo obviously have a considerable appetite for risk on the Las Vegas Strip, still moribund, as Sands got every dime for which it was asking, maybe a bit more. The cash-flow multiple was 13X for those trophy assets, which seems in line for Strip real estate to us and which Credit Suisse analyst Ben Chaiken called “healthy however you cut it.” He added that the money would probably be funneled into development in New York City, Texas or Macao. We’d add one other possibility. According to Global Gaming Business, Sheldon Adelson‘s New Year’s Eve meeting with James Packer may well been to explore a Sands buyout of troubled Crown Resorts (facing multiple regulatory probes in Australia). Adelson talked a great deal about using Sands’ vast liquidity for mergers and acquisitions during the Great Shutdown. If CEO Rob Goldstein is of the same mind, that $6.25 billion would go a long way toward snapping up Crown and its Antipodean assets.
“Not leaving any Las Vegas value on the table” was JP Morgan analyst Joseph Greff‘s immediate take on the deal. And what will Goldstein do with all that lucre? “LVS will likely use the proceeds here to invest in mobile gaming, where its efforts thus far have lagged peers, and for it to get involved in the next great thing in gaming, the company would likely have to buy its way in, and now has a pot of money to do so,” he wrote. Goldstein rationalized the move by saying that LVS “is focused on growth, and we see meaningful opportunities on a variety of fronts. Asia remains the backbone of this company and its developments in Macao and Singapore are the priority.” So long Vegas and don’t let the doorknob hit you in the ass. The deal, of course, includes Sands Expo Center, the linchpin of Venelazzo, as well as the MSG Sphere, whose future seems very secure, even if it won’t open for another two years. (No reason to hurry in the present Strip economy.) Sands shares traded a wee bit higher on the news while Vici remained flat.
The losers in this arrangement are Venelazzo employees, thrown under the bus along with Adelson’s corpse. The operations have been sold to Apollo, a friend of Caesars Entertainment, which means cheap and terrible things could be visited upon a megaresort and workers, both of which Adelson protectively shepherded through the worst year in Las Vegas’ history. Vici gets the physical properties for $4 billion, which it will lease to Apollo, a vulture capitalist, not an operator, meaning it will have to job in management, surely its pals in the Roman Empire. Whoever it is will have an initial tenure of 30 years, with two 10-year extensions on the table. As for those unbelievable levels of business in Las Vegas that Goldstein claimed to be seeing starting next year, either that was so much mouthwash or the temptation of $6.25B in ready cash was too great to resist. However you slice it, this is a dark day for the Strip.
As for the cutpurses at Caesars, Greff colleague Daniel Politzer weighed in with a few thoughts this morning. He opined that the size of the Venelazzo deal boded well for CEO Tom “Rain Man” Reeg‘s oft-bruited but vague plan to sell one or two Strip assets. “It shows there are buyers today (especially private equity), willing to pay a full valuation for exposure to the LV Strip, which could begin to recover as soon as the 2H21.” (That’s summer and autumn to the rest of us.) Describing the Sands EBITDA multiple as “rich,” Politzer added, “Reeg commented he wanted to be marketing its LV Strip assets on actual performance under their stewardship, as opposed to building a story/bridge to what its potential EBITDA could be.”
In an unrelated development, DraftKings inked a pact with Dish TV to integrate DKNG content onto Dish’s Hopper platform. That’s nine million satellite subscribers on tap. Politzer sees this as the first in a wave of such sports-betting/TV deals, one of which could encompass CZR subsidiary William Hill, “as the company continues to formulate its sports betting/media strategy, which we expect to be further clarified following the early 2Q21 close of its WMH acquisition. CZR/WMH currently has media partnerships with both ESPN and CBS Sports, and we believe will be looking to leverage sports media deals that cater to a national audience (given its large footprint; expects to be in 20 jurisdictions by year-end 2021) and are more integrated into the live sports viewership experience.” As for DraftKings, “the deal will create a more integrated sports entertainment/betting experience, with … customers able to access the DraftKings app to view betting odds/fantasy contests and initiate bets or contest entries with DraftKings directly from their TVs. Once a bet is initiated, customers will be prompted with a text message to complete the transaction within the DKNG app on their personal mobile devices.” The sports-betting cat is truly out of the bag and not to stopped. Why should it?
I differ some on the “dark day for the Strip” statement, yes it likely is a dark day for the employee’s of Venetian, who have been thus far been treated pretty well by LVS. But as any veteran horseplayer would tell you, when big ass money talks, give it a listen. Sometimes after you spend hours handicapping a horse race, the odds board throws a wrench into it, a horse you have thrown out attracts action. Happened a couple of Breeder’s Cup’s back, in the Filly And Mares Turf Championship I had it narrowed down to a couple of mares, the first tick of the odds board showed a morning line forty to one longshot 3 year old filly Wuheida at four to one. Shocking. This was a lightly raced three year old going against seasoned older mares. I jumped on it, by race time it was twenty five or so to one. She won going away, my other two finished second and third. The lesson that applies to this shocking sale is that vultures are betting on Las Vegas, they know something. Room rates are creeping up, the Las Vegas housing market remains solid. I smell a resurgence, I smell big ass money, someone pulled the courtesy flush lever, I smell roses in Las Vegas…
Caesars picks up a great asset and now both Caesars and MGM Resorts control even more of the Strip. Maybe now Caesars will finally sell Planet Hollywood and either Hard Rock International or Tilman Fertitta is the most likely buyer. Also I think MGM Resorts will sell Mirage if they can find a company that wants to spend around $900 million dollars to buy it.