Strip Venue Likely to Hit Market this Year, Says Analyst – But Not Caesars

Posted on: April 7, 2023, 04:00h. 

Last updated on: April 7, 2023, 03:10h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

A Las Vegas Strip casino resort is likely to hit the auction block this year, and it won’t be one of the venues currently operated by Caesars Entertainment (NASDAQ: CZR).

Caesars
Caesars Palace Las Vegas. The operator isn’t likely to buy or sell a Las Vegas property this year. (Image: YouTube)

Nor will the Horseshoe operator look to add its already robust Strip portfolio. That’s the take of Deutsche Bank analyst Carlo Santarelli, who recently met with Caesars management. In a note to clients following those meetings, the analyst hinted that an unidentified Strip property will be available to bidders in the coming months.

The fact that such a transaction won’t involve Caesars isn’t surprising. On the company’s fourth-quarter earnings conference call in February, executives overtly said the sale of one of its Las Vegas properties this year is unlikely.

Likewise, Caesars already operates nine integrated resorts on the Strip and is aiming to at least mirror 2022’s $1.2 billion in reduced debt, meaning it’s an unlikely suitor for any Las Vegas property.

Bellagio Possibly Candidate for Sale

To be clear, Santarelli didn’t list which Strip venues could come to market later this year, and what follows is speculative. But the property assets of Bellagio, operated by MGM Resorts International (NYSE: MGM), could be put up for sale.

Here’s why that’s a possibility. Last December, Blackstone Real Estate Income Trust (BREIT), which owns Bellagio’s real estate, was hit with a slew of redemption requests from investors, prompting it to sell some assets to raise capital. Those transactions include the sale of 49.9% stakes in Mandalay Bay and MGM Grand to VICI Properties (NYSE: VICI) for $4.27 billion.

Since last November, BREIT has paid out $5 billion in redemptions; last month, it limited such requests. In March, the $70 billion real estate income trust received redemption requests totaling $4.5 billion, but it fulfilled just $666 million of that amount, or 15%, according to Reuters.

BREIT isn’t an open-end mutual fund. Parent Blackstone (NYSE: BX) hasn’t commented on future BREIT asset sales nor mentioned that Bellagio could be on the block if it pursues property divestments.

Other Potential Candidates for Strip Sales

In the report, Santarelli implied the Strip venue likely to hit the market is already operational, meaning Dream Las Vegas and the 6.2 acres of land at Las Vegas Boulevard and Harmon Avenue owned by Tilman Fertitta are unlikely to hit the market.

Other possibilities include MGM selling the operating rights to Excalibur and Luxor, which has been the subject of rumors regarding its fate. The gaming company hasn’t said it’s looking to trim its Las Vegas portfolio.

Another possibility is that the owner of a Las Vegas Strip casino hotel engages in a sale-leaseback transaction whereby it sells its property to raise cash while maintaining operational control of the venue. With all of MGM’s venues already leased and Caesars unlikely to divest a Sin City venue, the number of Strip properties making for viable sale-leaseback isn’t as large as it was several years ago.