Bally’s Open to More Sale-Leaseback Deals

Posted on: February 24, 2023, 03:46h. 

Last updated on: February 24, 2023, 03:46h.

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

Coming off a series of cash-generating real estate sales in 2022, Bally’s (NYSE: BALY) could explore related transactions in the future as avenues for funding mergers and acquisitions and new projects.

Bally's
Bally’s on the Atlantic City Boardwalk. The operator could sell more real estate in the future. (Image: Bloomberg)

Incoming CEO Robeson Reeves made comments to that effect on the casino operator’s fourth-quarter earnings conference call on Thursday.

I mean, we will always view our land bank as a tool to continue to grow earnings before interest, taxes, depreciation and amortization (EBITDA) for the business. It just has to be the right deal,” said Reeves in response to an analyst question. “We’re comfortable with Chicago funding at this point. So we wouldn’t go and tap a way and make unless it’s for another project or M&A opportunity.”

Last year, Bally’s engaged in sale-leaseback transactions with Gaming and Leisure Properties (NASDAQ:GLPI) on one of its Rhode Island casinos and the Hard Rock Biloxi in Mississippi. The landlord also has an option to acquire the real property assets of Bally’s Twin River Lincoln Casino Resort in Lincoln, RI before the end of 2024 for $771 million and additional rent of $58.8 million.

Bally’s Has Real Estate Versatility

Even with the aforementioned transactions and others, Bally’s sits on a treasure trove of casino real estate across the US, giving it flexibility to raise capital without issuing shares or heading to debt markets.

While some regional casino operators prefer to hold onto property, Bally’s could monetize some of its existing portfolio of casino real estate to fund further expansion in its land-based gaming business or reduce debt.

“BALY retail casinos are set to grow +15% given M&A and organic builds. Beyond ’23, growth should continue and significantly step up when it opens the ~$1.7 billion CBD Chicago property in June 2026, which we currently assign as $2 of valuation, but could be as high as $7 of value if successful,” wrote Macquarie analyst Chad Beynon in a note to clients.

A particularly valuable piece of real estate owned by Bally’s is the Tropicana on the Las Vegas Strip. While that’s the operator’s only venue in the US gaming hub, it could also be the site of a new stadium for the Oakland Athletics. Should that happen, Bally’s would likely command a strong price for that real estate.

New York Plans

It’s also possible that Bally’s could engage in future sale-leaseback deals to fund a New York City casino project if it is awarded one of three downstate gaming permits.

The operator recently threw its hat into that ring, pitching a gaming venue at the Trump Golf Links at Ferry Point in the Bronx. Bally’s has an agreement in place to sub-lease 17 acres there from the Trump Organization.

There’s chatter that Bally’s would like to eventually acquire the entire 192-acre site and use some of the land not occupied by the casino for parks and green space for public consumption.