Boyd Gaming Unlikely to Monetize Las Vegas Real Estate Holdings

Posted on: February 11, 2023, 06:07h. 

Last updated on: February 13, 2023, 01:12h.

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

As the dominant name in downtown Las Vegas and one the largest operators of locals casinos across the valley, Boyd Gaming (NYSE: BYD) owns a treasure trove of Sin City real estate, but it’s unlikely to sell those properties to raise cash.

Boyd real estate
Boyd Gaming’s Aliante Casino-Hotel in North Las Vegas. The company isn’t interested in selling any of its Las Vegas real estate. (Image: Vegas Means Business)

Boyd CEO Keith Smith recently said as much in an interview with Howard Stutz of the Nevada Independent. The Las Vegas-based company runs 10 gaming venues in its home market, including Aliante, California, Cannery, Fremont, Gold Coast, Jokers Wild, Main Street Station, Sam’s Town, Suncoast, and The Orleans.

With the strength of our balance sheet, the strength of our cash flows and our ability to access other forms of financing, we just don’t have a need (to sell real estate),” said Smith in an interview with the Independent  following the company’s fourth-quarter earnings report.

Indeed, Boyd’s cash flow position is strong, enabling the operator to pay a dividend and buy back its own shares — a rare “twofer” in the gaming industry these days.

At the end of 2022, the firm had $283.5 million in cash on hand and $3.05 billion in debt.

Boyd Not Eyeing Sale-Leaseback Deals

In recent years, transactions known as sale-leasebacks have become increasingly common in the gaming industry. In those deals, a casino operator sells the property assets of a venue or multiple venues to a real estate investment trust (REIT) or a private equity economy firm for an upfront cash payment.

It’s an effective avenue for raising cash and is largely preferred to issuing new shares or bonds. However, the gaming company is still responsible for ongoing maintenance of the sold properties and takes on long-term rental obligations to the buyer in exchange for cash.

Boyd currently has a relationship with Gaming and Leisure Properties (NASDAQ: GLPI) because that gaming REIT owns the property assets of four Boyd casino hotels in Indiana, Missouri and Ohio. However, as Smith told the Independent, that arrangement was in place with a prior tenant when Boyd acquired the operating rights to those venues in 2018.

The Boyd chief executive officer also acknowledged that the company has had talks with VICI Properties (NYSE: VICI) — the largest casino landlord. Still, a deal is “just not an option for us.”

Red Rock Not Looking to Sell Real Estate, Either

In Las Vegas, Red Rock Resorts (NASDAQ: RRR) is Boyd’s most direct competitor in the local demographic and also boasts a substantial portfolio of occupied and used real estate.

However, like Boyd, the Green Valley Ranch operator owns the real estate of all of its Sin City venues and isn’t looking to change that.

“I think we like owning the real estate. Again, it doesn’t mean we’re beholden to holding it forever. We’re going to what’s right to the — what’s in the best interest of our shareholders over the long term, Cassandra, but keep looking back, owning the real estate provides max — provide us maximum flexibility, including the ability to keep our employees through COVID,” said CFO Stephen Cootey in response to a question from Jefferies analyst Cassandra Lee on Red Rock’s recent fourth-quarter earnings conference call.