{"id":4788,"date":"2010-10-08T11:02:49","date_gmt":"2010-10-08T19:02:49","guid":{"rendered":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/?p=4788"},"modified":"2010-10-08T11:11:45","modified_gmt":"2010-10-08T19:11:45","slug":"no-mirage-this-time-penn-enters-vegas","status":"publish","type":"post","link":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/no-mirage-this-time-penn-enters-vegas\/","title":{"rendered":"No (M)irage this time: Penn enters Vegas"},"content":{"rendered":"

\"\"They’ve been busy little beavers at Penn National Gaming<\/strong>, which is — would you believe it? — now the third-largest operator in the U.S. Never mind that Penn bought a horse track in Ohio<\/strong>, on top of building two casinos there, and it just rolled out table games in West Virginia<\/strong> and Pennsylvania<\/strong>. Fresh off opening Maryland<\/strong>‘s first slot parlor (after threatening not to, in a momentary fit of corporate pique), Penn is making a play for Louisiana<\/strong>‘s one open gaming license, has bought half-interests in three Texas<\/strong> parimutuels and — to cap it off — made its much-touted Big Vegas Acquisition.<\/p>\n

Actually, that calls for a few qualifiers. After dickering with MGM Resorts International<\/strong> for The Mirage<\/strong> (and, to hear Steve Wynn<\/strong> tell it, Bellagio<\/strong> too), Penn settled on that surefire winner, Fontainebleau<\/strong>, which it aimed to buy out of bankruptcy. That plan lasted for about all of, oh, five minutes. Then Penn did some belated due diligence, gasped at the $1.6 billion completion cost of F-blew and decided to let Carl Icahn<\/strong> have it after all.<\/p>\n

Also, while Penn management<\/strong> is talking as though yesterday’s purchase<\/a> of M Resort<\/strong>‘s debt puts it in charge of the property, there are still a few hoops through which it must jump. The note on Anthony Marnell III<\/strong>‘s casino must be called in, and the approval — however cursory — of the Nevada Gaming Control Board<\/strong> and Nevada Gaming Commission<\/strong> must be obtained. Even so, CEO Peter Carlino<\/strong> was sounding every bit the man who’d already taken the keys to the property: “M Resort is a unique, differentiated property that we expect will continue to improve its operating results even without the benefit of a rebound in the local Las Vega<\/strong>s economy. Longer-term, the core attributes which contributed to the growth of Las Vegas into one of the world’s pre-eminent entertainment destinations including its favorable climate and low taxes, combined with Penn National’s growing database of 12 million regional gaming customers, many of whom already visit Las Vegas, will further benefit M Resort and the local economy<\/em>.” (Translation<\/span>: Yeah, the locals market is sucking wind but we’re going to bring in so many new<\/em> customers that it won’t matter.)<\/p>\n

No question, Carlino has Marnell where the hair grows the shortest and whatever “negotiation” follows will probably be of a very one-sided nature. MGM’s $160 million investment in M is repaid in full<\/a>. The Bank of Scotland<\/strong> takes a bath, selling a $7oo million mortgage at 10 cents on the dollar. This pickup also qualifies Penn for a nifty tax deferral, thanks to a provision that Sen. Harry Reid<\/strong> (D-NV) juiced through the present Congress, incentivizing companies to buy distressed debt.<\/p>\n

J.P. Morgan<\/strong> analysts put M’s cash flow anywhere between $12 million-$15 million, would place even Penn’s bargain-price transaction in the 13X-19X EBITDA range (i.e., a very steep multiple). Wells Fargo<\/strong>‘s Carlo Santarelli<\/strong> must know something we don’t, because he estimates the purchase price at or near 14X EBITDA, implying a $16.5 million annual cash flow for M. Both investment houses believe Penn can amortize that upfront cost to 7X or 8X cash flow over time, through cost savings — hopefully not of a draconian sort. M is already outsourcing more of its F&B operation<\/a>.<\/p>\n

Financing the deal<\/strong> is not a worry for Penn, which has nearly $400 million in cash still in the drawer, plus another $640 million in borrowing capacity. However, now that it has a “trophy asset” in Vegas which it can use to reward especially loyal players — and given the number of irons in has in the fire in other states, which Santarelli characterizes as “an underappreciated development pipeline” <\/span>— Penn will surely rest on its new laurels rather than continuing to window-shop around here. Green Valley Ranch<\/strong> was on Penn’s wish list for a while but that’s now redundant (and you’d probably have to take some underwhelming Greenspun Cos<\/strong>.\/Station Casinos<\/strong> joint ventures into the bargain) and Penn’s run through all its opportunities on the Strip. Besides, Carlino’s criteria for a Vegas presence were a high-end property and a low purchase price. With M, he’d go 2-for-2.<\/p>\n

Second act for Juliano?<\/strong> Having been tossed aside by new Trump Entertainment Resorts<\/strong> boss Marc Lasry<\/strong>, ex-Trump CEO Mark Juliano<\/strong> might make a speedy comeback. He’s being tipped as the potential boss for Gov. Chris Christie<\/strong>‘s planned Atlantic City<\/strong> tourist district. He’d have myriad qualifications<\/a> and nobody’s been a more vocal cheerleader for the resort corridor in recent years.<\/p>\n","protected":false},"excerpt":{"rendered":"

They’ve been busy little beavers at Penn National Gaming, which is — would you believe it? — now the third-largest operator in the U.S. Never mind that Penn bought a horse track in Ohio, on top of building two casinos … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[23,82,28,42,59,52,84,63,53,72,11,71,69,95,57,32,114,38,139],"tags":[],"_links":{"self":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/4788"}],"collection":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/comments?post=4788"}],"version-history":[{"count":3,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/4788\/revisions"}],"predecessor-version":[{"id":4791,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/4788\/revisions\/4791"}],"wp:attachment":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/media?parent=4788"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/categories?post=4788"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/tags?post=4788"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}