Posted on: February 15, 2021, 01:56h.
Last updated on: February 15, 2021, 01:56h.
Casino executives and gaming industry leaders continue to forecast a strong recovery, primarily due to pent-up demand.
D Casino owner Derek Stevens, seen here last fall inside his new property Circa, is bullish on the gaming industry’s post-coronavirus recovery. The downtown Las Vegas visionary expects pent-up demand to generate a new “roaring twenties.” (Image: Las Vegas Review-Journal)The frequent talking points from gaming industry brass recently point to a new “Roaring Twenties.” Wynn Resorts CEO Matt Maddox was first to link the current decade to the 1920s when the US experienced economic prosperity and ushered into a new culture highlighted by modernity and the changing role of women.“I think it will be similar to the Roaring Twenties after the pandemic of 1918 and 1919,” Maddox said of the US gaming industry post-COVID-19 outlook.Downtown Las Vegas casino magnate Derek Stevens issued a similar sentiment last Friday.A lot of people have said it’s going to be like the Roaring Twenties,” the Circa owner told KTNV. ” Well, it may be because I think there is so much demand to be able to get back out of the house and have a little bit of fun.”The Roaring Twenties were unfortunately followed by the Wall Street Crash of 1929 and Great Depression. But that isn’t stopping casino heads from believing that the gaming industry is poised to enter its own roaring period in the 2020s.Industry Bets on Roaring 2020sMaddox and Stevens aren’t alone in believing that travel and hospitality will flourish once Americans feel safe. The notion is backed outside of Las Vegas, too.In Atlantic City, Steve Callender, Caesars Entertainment’s top executive in town who chairs the Casino Association of New Jersey, said he’s “guardedly optimistic.”It’s going to take a couple months for the vaccine to be widely distributed, but there is incredible pent-up demand,” Callender told the AP. Bob McDevitt, Atlantic City’s top casino union rep, said the “pent-up demand is going to be explosive.”Mohegan Gaming and Entertainment, in a filing with the SEC, said its business “has been optimized to benefit from … significant pent-up demand for leisure consumption in the months and years ahead.”Bill Miller, president of the American Gaming Association, expressed his confidence of a 2021 recovery.There’s huge pent-up demand for gaming,” Miller said. “I’m upbeat about the second half of the year in particular. As vaccines roll out, people will be excited to travel, hungry for entertainment, and desperate to get out and have fun again.”Research suggests there’s pent-up demand not just for fun, but also non-remote business. A recent study commissioned by the Las Vegas Convention and Visitors Authority found that 91 percent of former convention goers miss in-person events.Casino Expansion Continues2020 was unlike any year prior for the US gaming industry. And casino companies are betting it will be unlike any in the near future, too.Despite the industry’s struggles over the past 12 months, casinos are continuing to invest in new markets. States that recently legalized commercial gambling include Illinois, Virginia, and Nebraska.New casinos also continue to come to Pennsylvania, which has surpassed New Jersey to become the second richest gaming state in terms of revenue behind only Nevada. Live! Philadelphia, a $700 million integrated casino resort, opened this month.
Posted on: February 15, 2021, 12:12h.
Last updated on: February 15, 2021, 12:12h.
Last year, the real estate sector languished as hotel and office real estate investment trusts (REITs) were punished at the hands of the coronavirus pandemic. Surprisingly, gaming landlords proved sturdy despite multi-month casino closures.
MGM Grand Las Vegas. An asset manager is bullish on owner MGP and other gaming REITs. (Image: Bloomberg)The three publicly traded casino REITs — Gaming & Leisure Properties (NASDAQ:GLPI), MGM Growth Properties (NYSE:MGP) and VICI Properties (NYSE:VICI) — offer a compelling business model and strong dividend yields at a time when interest rates are at historic lows.Unlike hotel REITs, casino REITs typically own properties under a long-term, triple-net master lease structure, leaving most of the financial and operational risk to their tenants — the casino operators,” according to Hoya Capital research. “Owing to this lease structure, rent collection and occupancy rates have remained essentially spotless throughout the pandemic.”Owing to capital markets being open to gaming companies during the darkest days of the pandemic, GLPI, MGP and VICI encountered little difficulty in collecting rent. There were occasions when the real estate companies — thanks to their own sturdy positions — worked with clients on financing, but no foreclosures arrived.With Casino REITs Selectivity MattersWhile GLPI, MGP and VICI operate in the same realm, the companies are not carbon copies of each other. Pennsylvania-based GLPI prefers to maintain a portfolio comprised largely of regional casinos. To that end, it’s looking to unload one of its few Nevada properties — the Tropicana Las Vegas.Conversely, the bulk of MGP’s revenue is derived from the Strip. There, it either completely controls or partially owns the real estate assets of all of MGM Resorts International’s venues except the Bellagio. For its part, VICI depends on Sin City for less than a third of rental income although it owns the property of Caesars Palace.“Selectivity is critical, and we prefer the ‘destination’ casinos and tenant operators with a solid foothold into the online gaming ecosystem,” said Hoya Capital.While the firm views online gaming and sports betting as a potential long-term headwinds for land-based casinos, it sees near- to medium-term benefits because those iGaming and sports wagering will support profitability and tenants’ ability to pay rent.The REITs’ major clients — Caesars Entertainment, MGM and Penn National Gaming — are among the major players in both internet casinos and mobile sports betting.Tradition of Out-PerformanceIn financial markets, history doesn’t always repeat, but it often rhymes. That’s relevant for the likes of GLPI, MGM Growth and VICI because their performances are often correlated and the trio has a history of beating broader REIT benchmarks.“Through the end of 2020, Casino REITs have outperformed the broader REIT index in four of the past five years,” said Hoya Capital. “Since the start of 2015, the casino REIT sector as a whole has produced an annualized total return of 14.5 percent, outperforming the 6.5 percent annualized total return on the Equity REIT Index.”Even with that, GLPI, MGP and VICI are more attractively valued than the broader real estate sector. The casino REITs trade at 13.7x funds from operations (FFO), well below the ratio of 21.1x for the average REIT.
Posted on: February 11, 2021, 12:02h.
Last updated on: February 11, 2021, 01:48h.
MGM Resorts International (NYSE:MGM) reported fourth-quarter results after the close of US markets Wednesday and in a subsequent conference call with analysts. The BetMGM unit and the operator’s plans for its equity in MGM Growth Properties (NYSE:MGP) took center stage.
The Bellagio Las Vegas, seen here. MGM reported a fourth-quarter loss, but Wall Street is focusing on other topics. (Image: USA Today)On the basis of generally accepted accounting principles (GAAP), the largest operator on the Las Vegas Strip lost 92 cents a share on revenue of $1.49 billion in the October through December period. Analysts expected a loss of 86 cents on sales of $1.59 billion. Those results sparked retrenchment in MGM stock, with the shares lower by 3.69 percent in late trading.While that’s a glum response following the report, some analysts see reasons for optimism with MGM, particularly for investors that wait out what are expected to be lengthy recovery periods in Las Vegas and Macau.Management provided additional nuggets around the Las Vegas recovery, highlighting that conventions/events appear to be relatively solid in the medium-term,” said Macquarie analyst Chad Beynon in a note to clients today. “Las Vegas margins could outperform, given permanent cost-cutting initiatives.”Beynon reiterates an “outperform” rating on MGM stock while boosting his price target to $42 from $38, implying upside of 20 percent from current levels.Plans for MGP InvestmentCEO Bill Hornbuckle and new CFO Jonathan Halkyard also discussed the gaming company’s plans for its remaining interest in real estate investment trust (REIT) MGM Growth Properties (NYSE:MGP).MGP is the operator’s primary landlord, and even with two $700 million sales of the real estate company’s equity last year, MGM still owns 53 percent.It’s a nice chip to have, particularly with the REIT yielding 5.93 percent and delivering hundreds of millions of dollars in dividends to the casino company. However, some analysts believe both companies would be better off with a less intimate relationship. Under that scenario, MGM benefits by raising more cash while MGP gains more independence. MGM has has close to $6 billion on the balance sheet.Hornbuckle said the intent is to reduce MGM’s position in the REIT over time, if not eliminate the position entirely.“It certainly is our goal over time to reduce our ownership stake in MGP. I think it would, in some ways, simplify our story and our corporate structure,” added Halkyard on the call. “So we certainly need to balance our moves with that, which is right now an appealing return on that investment. But the direction is certainly over time to reduce that.”BetMGM to ExpandWith land-based operations in Sin City and Macau still sluggish because of the coronavirus pandemic, Wall Street and investors are focusing on iGaming and sports betting. MGM obliged, with Hornbuckle noting the BetMGM unit is expected to be live in 20 states by the end of this year, providing access to 40 percent of the US population.He said BetMGM’s market share is 17 percent in the states in which it’s operational. This figure jumped to 19 percent when excluding Pennsylvania because the company was live there for just part of December. In Michigan, the online gaming entity registered 138,000 new customers in the first 10 days, posting gross gaming revenue (GGR) of $13 million.Roth Capital analyst David Bain said BetMGM is outperforming expectations, and he now assigns $7 a share in value to MGM stock from that unit.Stifel analyst Steven Wieczynski says the online business could generate $500 million to $600 million in annual EBITDA by 2024. But he reminds investors BetMGM is a 50/50 joint venture with Entain Plc, meaning only half the economics accrue to MGM.
Posted on: February 11, 2021, 01:18h.
Last updated on: February 11, 2021, 01:18h.
About a month after Tropicana was listed for sale again, owner Gaming & Leisure Properties (NASDAQ:GLPI) has an official asking price: $384 million, according to real estate web site MyHouseDeals.com.
Tropicana Las Vegas. It’s for sale for $384 million, but it may be worth more. (Image: AP News)Rumors about the fate of the venue have circulated since March 2020 when GLPI acquired the property and the ground lease of an asset in Morgantown, Pa. from Penn National Gaming (NASDAQ:PENN) in exchange for $337.5 million in rent credits. Today, GLPI owns Tropicana’s land while Penn maintains operational obligations.Both the real estate and operating rights are for sale, but the aforementioned $384 million price tag references the physical asset. That asking price is well below Tropicana’s estimated worth, at least in the eyes of som.Should a buyer make needed enhancements and refurbishments, the famous gaming property could sport an after repair value (ARV) of $500 million, according to MyHouseDeals.com. That means a buyer could walk right into $116 million in equity.
Tropicana Las Vegas could be worth more than its asking price. (Image: MyHouseDeals.com)Discount UnderstandableIt’s reasonable to ponder why the Tropicana isn’t being spruced up prior to the sale in the essence of fetching a higher price, but the strategy is easy to comprehend for investors familiar with GLPI’s way of doing business.The real estate investment trust (REIT) owns a sprawling portfolio of gaming real estate across 15 states, but its preference is for regional casinos, not destination markets such as Las Vegas. In fact, Tropicana isn’t listed on GLPI’s property roster on its web site.Assuming Tropicana Las Vegas sells, the REIT’s Nevada exposure will consist of M Resort, Spa & Casino in Henderson, Tropicana in Laughlin, and Cactus Pete’s Casino Resort in Jackpot.Penn, GLPI’s largest tenant, operates M Resort and Cactus Pete’s, but reducing its Sin City footprint makes sense as well because, at its core, the company is a regional gaming firm — the largest in the US.Expect Plenty of SuitorsGLPI hasn’t identified potential buyers for Tropicana, but last year executives from the company said there was plenty of interest though much of that boiled down to tire-kicking, not actual deal-making.With rumors swirling that Caesars Entertainment (NASDAQ:CZR) could soon put Planet Hollywood on the block, there could be competition among sellers looking to unload Strip assets. There’s also likely to be a receptive audience for both venues. The coronavirus pandemic depressed gaming real estate prices, meaning it’s a buyer’s market.The Strip casino real estate rumor mill usually kicks up private equity companies, tribal gaming entities and operators currently lacking exposure to the US gaming mecca. To that last point, Bally’s Corp. (NYSE:BALY) is a name to remember for several reasons.First, the Rhode Island-based company has a deeply acquisitive history. Second, it has no Las Vegas footprint. Finally, it has relationship with GLPI as it leases Dover Downs Hotel and Casino in Delaware and Tropicana Evansville in Indiana from the REIT.
Posted on: February 10, 2021, 10:03h.
Last updated on: February 10, 2021, 11:07h.
Red Rock Resorts (NASDAQ:RRR) isn’t planning to reopen Palms Las Vegas or its three other shuttered gaming outlets sooner than expected. Instead, the company will wait out Sin City’s slow coronavirus recovery while emphasizing free cash flow generation at venues that are operational.
The Palms Las Vegas, seen here. Operator Red Rock Resorts is keeping the venue closed for the time being. (Image: USA Today)Executives delivered the comments regarding the closed properties yesterday on the company’s fourth-quarter earnings conference call with analysts. Buoyed by stout earnings before interest, taxes, depreciation, and amortization (EBITDA) and rising margins, the Station Casinos operator delivered better than expected results, sending its shares to a 52-week high today.Last June, Red Rock filed documents with the Nevada Gaming Control Board (NGCB) to keep Fiesta Henderson, Fiesta Rancho, Palms, and Texas Station closed through June 30, 2021.Although Red Rock’s fourth-quarter net revenue and adjusted EBITDA slumped on a year-over-year basis, due in large part to the aforementioned quartet of casinos being closed, adjusted EBITDA and margins impressed. The gaming company said adjusted EBITDA for the last three months of 2020 surged 16 percent, while adjusted EBITDA margin increased 832 basis points.Palms, Others Take Back Seat to Cash FlowIn the wake of the COVID-19 pandemic, many gaming operators are emphasizing cash flow, leaner operations, and stronger balance sheets. Red Rock is part of that club.During the October through December period, the gaming company converted 76 percent of adjusted EBITDA to free cash flow. This is the equivalent of $114.7 million, or 98 cents a share. From June through the end of 2020, Red Rock $259.1 million of free cash “with virtually every dollar going to pay down debt and improve our financial flexibility, as we look to emerge from the pandemic,” said CFO Stephen Cootey.That’s a sizable amount of free cash relative to the company’s market capitalization of $3.10 billion and indicates the operator can afford to be pragmatic in reopening the aforementioned venues.Another tidbit from the conference call: Unlike prior calls, there’s was no direct mention from analysts of the Palms perhaps being sold. Fertitta previously rebuffed those rumors. On Tuesday, Cootey said, “Everything is on the table and it’s all value-related.” But that comment didn’t include mention of a specific venue.Red Rock’s Favorable TraitsIn a note to clients today, Macquarie gaming analyst Chad Beynon reminds investors that Red Rock owns all of its real estate and another 475 gaming-entitled acres in Nevada. These holdings are worth $3 a share and could be monetized if the company needs cash.Citing Las Vegas’s strong population growth, steady housing market, and supply restriction, the analyst said the locals gaming market — Red Rock’s core clientele — is attractive from an investment perspective.Beynon rates Red Rock “outperform,” with a price target of $33, which is up from $30 and implies upside of more than 10 percent from current levels.
Posted on: February 10, 2021, 12:45h.
Last updated on: February 10, 2021, 12:45h.
Officials in Danville, Va., plan to use associated tax revenue from the city’s forthcoming casino resort to better fund area public schools.
Danville Mayor Alonzo Jones, seen here in front of the city’s George Washington High School, says tax income from the Caesars casino will be used to help improve public schools. George Washington High is one of the lowest-ranked schools in Virginia. (Image: WSET)Sixty-nine percent of Danville voters backed a local casino referendum during the November 2020 election. The vote authorizes Caesars Entertainment to construct a gaming property in the city. The Danville City Council subsequently formed a committee to determine where its local gaming tax share would be allocated.The committee asked residents for their opinions on how the gaming tax money should be spent. Public education came back in the top spot.If we want our community to truly thrive, Danville Public Schools needs to reclaim its status as a destination school system,” declared Mayor Alonzo Jones.Following education, Danville residents said the next top priorities are economic development and programs tailored to generate new jobs.“I am pleased that our residents have confirmed that we are putting our focus on what the public believes is most important. We look forward to working with the Dr. Hairston and the School Board to transform our schools for the better,” Alonzo added.Danville Education System Needs ImprovementThe Danville City Public Schools system has two high schools. According to US News & World Report’s “Best High Schools,” there are 332 high schools in Virginia.Danville’s Galileo Magnet High School ranks No. 45 in the state. Last year, Galileo students had an 89 percent mathematics proficiency, 94 percent reading proficiency, and graduation rate of 95 percent.But Danville’s other secondary public education school — George Washington High — ranks No. 300 in Virginia. George Washington students have a mathematics proficiency of just 50 percent, reading proficiency of only 70 percent, and overall graduation rate of 80 percent.Virginia’s statewide high school graduation rate was 92.3 percent in 2020.Under the regulations that will govern casino gambling in Virginia passed last week by the Virginia Lottery Board, Caesars Entertainment will pay a one-time $15 million licensing fee to the state. Gross gaming revenue (GGR) from slot machines and table games will be taxed on a scale ranging from 18-30 percent dependent on total win.The bulk of the gaming taxes will stay in Danville. Caesars projects that the casino will deliver Danville more than $20 million a year.Along with the gaming taxes, Caesars has pledged to pay the City of Danville $15 million to help build infrastructure around the casino destination.Caesars Danville DetailsDanville’s casino is being developed in the Schoolfield neighborhood. The site was once a textile mill owned and operated by the Dan River Mills Company.Caesars is expected to use its Horseshoe brand for the regional casino. Caesars has Horseshoe casinos in Baltimore, Bossier City, La., Council Bluffs, Iowa, Hammond, In., and Tunica, Ms.The $400 million Danville casino will feature 2,000 slot machines and 75 table games, hotel with 300 rooms, restaurants and bars, 2,500-seat theatre, and conference center.