Trop sale teased; Michigan sports betting explosive

Gaming & Leisure Properties Inc. hosted JP Morgan analysts last week and tried to get them all hot and bothered with talk of a Tropicana Las Vegas sale. It said it felt one would happen sooner, not later, adding that it “feels like it is signing one [non-disclosure agreement] per day.” Before we get our panties wet, let it be known that GLPI then admitted that it’s only “a handful of serious buyers that have capital to effectuate a transaction.” Talk is cheap and so are NDAs, it would appear. The Trop would have to endure yet another market repositioning, whoever buys it and GLPI confesses that a sale will be easier said than done (it “has heard a broad range of prices, it notes the devil is in the details to finalize a deal”). A bigger opportunity would appear to be the eruption of sports betting, which “should help crossover play to table games.” It also makes casino operators more credit-worthy, which GLPI can exploit by purchasing their real estate.

The REIT is bullish on the market, expecting to be “on offense” in 2021 as far as acquisitions are concerned. Though uninvolved in the Venelazzo sale, it likes what that said about purchase prices moving in the right direction. Wrote analyst Joseph Greff, “The level of M&A activity has not changed much in the past few months, but GLPI does note the broader trend of operators beginning to shift their focus from defense/liquidity focus to offense/growth opportunities. Given this shift, it sees more industry rationalization, consolidation, and building out of strategic footprints for sports betting/iGaming.” Those companies can look to GLPI as a source of funds, as well as a company with strong tenant/landlord relationships, as shown by its history with Penn National Gaming. However, if you’re leasing with GLPI, expect The Man to start looking for the security of annual rent increases over percentage-based deals. We guess GLPI learned that lesson the hard way last year.

Speaking of REITs, MGM Resorts International continues to cannibalize its real estate to finance future development. It sold down its position in MGM Growth Properties from 53% to 42%. Greff liked the deal as it “gives the company additional liquidity to bolster its balance sheet … and also provides dry powder/growth capital.” We wonder how much of that will be sunk into the money pit that is Osaka.

In a move that must have Nevada casino operators jumping for joy, Gov. Steve Sisolak (D) raised capacity limits to 50% yesterday. Also, meetings of 250 people or so are now permitted. The somewhat complicated directive appears to lift mandatory-mask orders “inside and outside when social distancing is not possible remain in effect.” We’d hate to try policing that edict. Covid-19 positivity continues to hover around 6%, with 222 new cases reported last Sunday. Should those rates decline further, another capacity expansion could take place as soon as May 1. Caesars Entertainment responded to the move by taking midweek bookings for Planet Hollywood and The Linq. The company said “we are encouraged Las Vegas will continue to rebound beyond expectations.” Given recent economic developments, it’s hard to argue with that. Up the Strip, Palazzo has also gone to week-long bookings, another positive augury.

On the subject of expansion, more casinos in New York State is looking like a sure thing, having passed out of the state Senate yesterday. A set of criteria were attached to the provision for three additional, full-service casinos, which was weighted 60% toward “job creation, highest caliber facility, ability to fully finance project.” 10% of consideration should be given to “speed to market.” Of the latter, Credit Suisse analyst Benjamin Chaiken writes, “Speed to market gives a nod to MGM and Genting, but doesn’t seem like a guarantee.” Although MGM has floated hotel development, it and other contenders might want to rein that in, as 20% of consideration is given to “public support, promote local hotels and restaurants.” (Emphasis added.) In other words, lawmakers seem to be going for an amenity-light approach. As for the final 10% of weight, it is assigned to “LEED certified building, measures to address problem gambling, etc,” which also should work in MGM’s favor.

As for mobile sports betting, the Lege blew off Gov. Andrew Cuomo (D), specifying two skins per operator, distributed amongst four existing commercial casinos and three tribal ones. That should make almost everyone happy, except the horse tracks. If the three new licensees are grandfathered, there could be as many as 20 OSB operators in the Empire State. The state House must act swiftly, as the new fiscal year begins on April Fool’s Day.

Sports betting continues to burgeon in Michigan, which became the earliest state to pass the $300 million mark in handle. “It took less than 40 days to transform Michigan into one of the largest U.S. gaming markets. Operators’ enthusiasm for the state before launch has proven prescient,” said PlayUSA analyst Matt Schoch. February saw $302 million in online handle (plus another $24 million from walk-up sportsbooks as Michiganders avidly bet. However, that only boiled down to $9.5 million in revenue. FanDuel/MotorCity led in handle ($87 million) but posted a slight loss, while BetMGM/MGM Grand Detroit followed with $76 million. The latter dominated revenue, with over $5 million. DraftKings/Bay Mills Indian Community‘s $73 million handle made it a close third but it, too, lost money. The most impressive of the also-rans was easily Barstool Sports/Greektown Casino, with $40 million in handle and $2 million revenue. The remainder of the handle was divided between PointsBet/Lac Vieux Desert Band of Lake Superior Chippewa ($7 million), WynnBet/Sault Ste. Marie Tribe of Chippewa Indians ($7 million), William Hill/Grand Traverse Bay Band of Ottawa & Chippewa Indians ($5.5 million), BetRivers/Little River Band of the Ottawa Indians ($3.5 million), FoxBet/Little Traverse Bay Bands of Odawa Indians ($3.5 million) and Twin Spires/Hannahville Indian Community ($2 million), with two remaining operators fighting over pocket change.

When it came to revenue, i-gaming was robust, engendering $78 million. That trajectory has Michigan poised to surpass Pennsylvania as the second-biggest state for Internet gambling. BetMGM was dominant here too, bringing home $27 million. Gov. Gretchen Whitmer (D) also had to be a happy camper, as she’s promoting infrastructure improvements without tax increases, and February’s Internet haul made the state $10.5 million wealthier. Elsewhere, PlayUSA analysts have been busy crunching the numbers for March Madness, which they reckon will bring in anywhere from $1 billion to $1.5 billion in legal bets, the biggest sports-betting event ever. The analysts warn that it is virtually impossible to pin down how much money will be wagered as there was no March Madness last year and in 2019 the sports-betting market was drastically smaller, as in -67%. 2019 saw $440 million in action from just seven states, compared to 21 states and territories today. The continuing pandemic could redound to the benefits of states like New Jersey and Michigan, which are overwhelmingly online-driven, and to the detriment of Nevada, which is still predominantly a brick-and-mortar market.