Meet the REITs; Station’s full platter

JP Morgan analysts met with MGM Growth Properties CEO James Stewart and CFO Andy Chien, whose assured them that MGP had a full pipeline of deals. (Could MGM Resorts International inoculate itself against the Federal Trade Commission by running a purchase of Caesars Entertainment through MGP?) The company “views pricing as reasonably full relative to historic levels, but commented there are only a handful of bidders in most of the deals they look at and that the best deals are still in gaming (as opposed to non-gaming).” MGP wants to diversify but does not see that as an end in itself. “And while the best deals to be had are still within gaming, MGP has come close to a handful of non-gaming deals,” Morgan analysts wrote. The REIT is looking at an acquisition of MGM Springfield and possibly of CityCenter which, while it would be complex, is hardly impossible.

Next up was Gaming & Leisure Properties, whose thesis seems inarguable: “GLPI expects that consolidation will continue to take place across regional and U.S. gaming, and that given industry fragmentation, the company can serve as a source of capital to operators.” By doing deals with companies that are essentially OpCos, GLPI has greater flexibility, as well as a long history in regional gaming. Indicating their priorities, “Management noted the resiliency of regional markets is second to none, given they are not as sensitive to ‘fly-in business,’ conference/convention business, and consumer discretionary trends. The LV Locals market is somewhere in the middle, while the LV Strip is more volatile given the higher fixed operating costs of the market.” So don’t look for GLPI to be sniffing around the Strip anytime soon.

Using the Tropicana Atlantic City as an example, CFO Steve Snyder and colleagues said they wouldn’t do deals that involved one property in a competitive market. So if MotorCity in Detroit or The Rio is looking for a buyer, GLPI won’t come knocking.

* Also on the JP Morgan docket was Station Casinos. The company sent CFO Stephen Cootey and Senior Vice President of Development Kevin Schubert to meet with Wall Street‘s envoys. The latter found Station in “harvest mode,” preparing to reap free cash flow now that upgrades to the Palms and Palace Station are pretty much finished. Unionization was alluded to (“3% wage inflation”) and, perhaps not coincidentally, “increased labor efficiencies.” If you think KAOS at the Palms (the “main inflection point” for the property) is going to be a loss leader, think again. Station plans to make it profitable and also “will bring in new casino hosts and implement a formal credit program to better compete with LV Strip peers.” In other word, Station believes it can do Strip-sized business in an off-Strip location and I, for one, would like to see how they perform.

More excitingly, Station is finally moving some long-in-abeyance sites off the back burner. A “Red Rock Lite” is envisioned for the company’s Reno acreage (and we think it would perform well), while the proximity of Raiders Stadium is impelling Station to pull the trigger on a teardown/replacement of Days Inn at Wild Wild West. A few shoves with a backhoe ought to finish that place off. Finally, after two decades of being variously “on” and “off,” Durango Station is back “on” again. ” “Durango is seeing a growing population with no proximate gaming competitors,” write Morgan analysts and that seems like a good rationale for development to us.

* Continuing to innovate, Hard Rock Atlantic City will host the Boardwalk‘s first-ever “reel time” online slot tournament, a tilt in which you can follow your winnings as they acrue. “The contests will pit New Jersey players against each other on the website or with the Hard Rock Casino apps available to iOS and Android users,” reports Gambling.com. We don’t think it will have the excitement as actually being there but Internet punters will surely disagree.