Bally’s weighs “significant redevelopment” of Tropicana Las Vegas

September 22, 2022 6:18 PM
Photo: Shutterstock
  • Buck Wargo, CDC Gaming Reports
September 22, 2022 6:18 PM
  • Buck Wargo, CDC Gaming Reports

Bally’s Corp. received approval Thursday to take over the operations of the Tropicana Las Vegas and the company said it’s evaluating “the potential for a significant redevelopment” of the Strip property to make it more competitive.

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The Nevada Gaming Commission’s go-ahead allows Bally’s to close immediately on the purchase from Gaming and Leisure Properties, a gaming-focused real estate investment trust, for $308 million. Penn Entertainment currently operates the casino.

Under the terms of the deal, the purchase price for the Tropicana property’s non-land assets is $150 million. In addition, Bally’s has agreed to lease the land underlying the Tropicana property from GLPI for an initial term of 50 years at annual rent of $10.5 million, subject to increase over time.

The Tropicana sits on a 35-acre parcel on the corner of Tropicana Avenue and Las Vegas Boulevard. It includes 1,470 guest rooms, a 50,000-square-foot casino, a 1,200- seat theater, and 100,000 square feet of convention and meeting space.

Bally’s President George Papanier said the company views the Tropicana as a flagship property in its western region. They will spend 90-180 days developing a marketing strategy to enhance the current performance level with some capital expenditures, a strategy that served them well with recent acquisitions. “But in this case, we think we should also evaluate the potential for a complete redevelopment, because of its competitive position in the market right now,” Papanier said.

Papanier touted Bally’s as the third largest casino company in the U.S., with 17 casinos in 11 states. They also have access to sports betting in 19 states. The company operates a profitable icasino in New Jersey and has a partnership with Sinclair Media with a Bally’s Sports branding presence in 19 regional sports networks.

“Bally’s looks forward to bringing its first-in-class interactive technology to Nevada and to leveraging our growing North American interactive segment through our omnichannel approach to maximize the retail database and grow our brand awareness through our relationship with Sinclair.”

Papanier said his company is also excited about winning the bid to build a casino in Chicago, which will allow them to open a temporary casino by June 2023 and permanent facility by the end of 2026 at a cost of $1.7 billion.
Gaming Commission member Ben Kieckhefer wasn’t to know how Bally’s could be committed to Las Vegas at the same time it’s spending that much money in Chicago. He said more than $2 billion has been committed for the Chicago project through 2026.

“You have all these capital-intensive and focused plans on the books already and on the lease agreement for the real estate (in Las Vegas). There’s no investment requirement in the existing plan,” Kieckhefer said. “I worry that without that, the property as it currently sits is going to sit there and deteriorate further, as some of the focus is put on these other jurisdictions. Chicago isn’t an easy place to do business, so it’s going to take some focus and attention. How do you see those two competing interests working together and how much focus will be on the Las Vegas property with everything else?”

Papanier said they intend to run the Tropicana for 18 to 24 months before they come to a determination on redevelopment. They’re in discussions for opportunities with partners who would bring capital.

“We look at every jurisdiction independently, based on the markets and what we can generate from them,” Papanier responded. “I think at the end of the day, it will be a self-fueling opportunity from a capital-requirement perspective. We certainly have the bandwidth in our company to do that.”

Papanier told Kieckhefer that Bally’s could bring to fruition a Chicago and a Las Vegas project simultaneously.
GLPI has approval rights, but that’s more to ensure it’s not redeveloped in such a way that underutilizes the property — as a convenience store, for example — as opposed to a resort-hotel. Those rights kick in at $250 million and higher, but they don’t extend to design decisions, unless they render their real estate investment to be depreciated.

“We have not encouraged any situations based on the relationship we have with them,” Papanier told the Commission. “As long as they see the ability to get the rent payment through the transaction (and it remains a casino), it’s not a problem.”

CFO Bobby Lavan said landlords have oversight over any investments Bally’s makes, but GLPI is a landlord on six properties and both companies have a good working relationship.

“They won’t be involved in anything related to the redevelopment of the site,” Papanier said.

Lavan said Bally’s currently has a $620 million revolving line of credit that has been used for working capital. He expects to have more than $1 billion in liquidity by the end of the year from sale-leasebacks of properties in Rhode Island and Mississippi that will generate more than $600 million. Some $150 million of the $308 million needed will be used for the Tropicana Las Vegas sale.

Commission members also asked how Bally’s will handle player disputes over loyalty points, since the Tropicana is currently operated by Penn National.

“Pending the Commission’s approval, we would coordinate with Penn National. They’ll put up signage and put out notifications through their existing database. Then we would launch our Bally’s players club,” Papanier said.