Bally’s Should Sell Tropicana Rights, Takeover Unlikely, Says Analyst

Posted on: April 9, 2024, 04:45h. 

Last updated on: April 10, 2024, 10:13h.

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

Bally’s (NYSE: BALY) should consider selling its rights to the recently closed Tropicana Las Vegas to raise cash to support its Chicago casino hotel project, says an analyst.

Tropicana Las Vegas, Raimond Irimescu, Watch & Jewelry Guild expo
The Tropicana Las Vegas. An analyst said Bally’s should sell its rights to the now-closed property. (Image: New York Times)

In a new report to clients, Colin Mansfield, vice president of credit research for CBRE Credit Research, noted Bally’s role in the future of the Tropicana site isn’t clear. The casino hotel occupied nine acres, which is slated to be used for a Major League Baseball (MLB) stadium assuming the Oakland Athletics (A’s) execute a move to Las Vegas. The venue is scheduled to be demolished in October.

It is a net-negative carrying asset for Bally’s, but the attractiveness and potential value of the site has gone up since the time of purchase, in our opinion,” Mansfield told clients.

In April 2021, Bally’s announced the $150 million purchase of Tropicana’s nonreal estate assets and the start of a 50-year lease costing $10.5 million annually with Gaming and Leisure Properties (NASDAQ: GLPI), which owns the 35 acres associated with the now-shuttered Strip venue. Bally’s remains on the hook for that rent until it decides to make a move with its Tropicana rights.

What Bally’s Could Fetch in Tropicana Sale

Bally’s has expressed a willingness to entertain offers for its Tropicana lease with management noting it would consider offers on any of its assets if the bids are compelling.

Executives “called out a price of $9 million per acre as a reasonable price to offload the Tropicana site, which could bring in over $300 million of proceeds,” said CBRE’s Mansfield.

While $300 million would contribute to closing an $800 million shortfall on Bally’s Chicago project, Bally’s getting $300 million in a Tropicana transaction seems unlikely because it doesn’t own the land. It could sell its lease rights to another entity, but that could prove tricky with the fate of the property far from guaranteed.

For its part, GLPI, which does own the Tropicana land, has said it would consider a sale of that real estate. The real estate investment trust (REIT) has also previously said it could compensate Bally’s should it become clear that a new casino hotel development at the Tropicana site isn’t feasible.

Bally’s Sale Not Likely, Says Mansfield

Separate from the commentary on Bally’s possibilities for Tropicana Las Vegas, Mansfield said there’s a less than 50% chance the company accepts a $15 per share takeover offer from Standard General (SG).

The SG offer adds to the overhang on the credit, which comes at a critical time as Bally’s seeks financing to fund its large-scale Chicago development, weighs its options for the recently closed Tropicana Las Vegas, and works to improve the equity and credit narrative,” Mansfield said in his report. “At the surface, we believe the SG offer creates more noise and may distract from Bally’s Chicago financing efforts.”

Mansfield’s note was published on Monday, a day prior to reports surfacing that the special committee formed by Bally’s to evaluate the bid is holding talks with the suitor.