A former Las Vegas casino executive believes the Seminole Tribe has a chance to hit a “home run” with its takeover of the Mirage, overtaking the Cosmopolitan via its vibe with younger guests.
Gaming attorney Michael Brunet, former vice president and general counsel at the Palms Casino Resort and former executive at Station Casinos, Affinity Gaming, and Tropicana Entertainment, shared his insights Friday during the symposium “Indian Nations Gaming Past and Present” at UNLV’s William S. Boyd School of Law in Las Vegas.
During the panel discussion “Future of Tribal Gaming: Convergence with Commercial Gaming,” Brunet said the Seminole Tribe, through its Hard Rock International, is best positioned among the three tribes with a current presence in Las Vegas.
In December, the Seminole took over operations at the Mirage from MGM Resorts International for just over $1 billion. Hard Rock has announced it will do an extensive renovation and build a guitar-themed hotel along the Strip.
In April 2022, the southern California San Manuel Band of Mission Indians reopened the Palms after acquiring the property from Red Rock Resorts for $650 million. In spring 2021, the Mohegan Sun of Connecticut started managing the casino at Virgin Hotels Las Vegas.
“The three tribes buying these commercial properties in Las Vegas, it’s the good, the bad, and the ugly,” Brunet said.
Brunet deemed the acquisition of the Mirage a “game changer” for Las Vegas and tribes owning commercial properties outside their traditional lands.
“They’re putting a boatload of money into it, building out that enormous guitar-shaped hotel and clearing out the jungles, dolphins, volcano, and all the silly crap leftover from the ’80s. Their phenomenal beautiful property will be filled with great customers from their nationwide database. That’s a great investment long term and they’ll make their money back and then some.”
Brunet believes the Mirage could “unseat” the Cosmopolitan in terms of coolness and become the Las Vegas leader with “the hip property everybody wants to go to.” MGM sold The Mirage and in May acquired the operations of The Cosmopolitan for $1.6 billion.
Brunet was blunt in his assessment of the San Manuel Band of Mission Indians in its acquisition of the Palms, relegating it to the bad category. He said he served as a consultant for the tribe in 2019.
“We looked at a lot of different opportunities to deploy capital built up over the years from their successful operation in southern California,” Brunet said. “One deal was phenomenal, but unfortunately we couldn’t get it done. Just as we were getting close to making a decision on a couple of other acquisitions on the Las Vegas Strip, COVID happened. That was the end of that plan. Many months later after the tribe had a change in management at the casino level, they acquired the Palms.”
Brunet recounted his own experience at the Palms. Station Casinos bought it for $312 million, then sunk another $700 million into the property over two years. But it didn’t even approach the success of the previous ownership. He said that trend has continued under the San Manuel.
“An EBITDA of $19 million is probably not the return on your investment you anticipated when you wrote that check for $650 million a couple of years ago.”
In defining the “ugly side,” Brunet cited the management agreement of the Mohegan Sun at the former Hard Rock in Las Vegas.
“If everything I hear is true, it’s an ugly situation. The moral of the story is if you’re a tribe trying to operate outside your lands, you don’t have the exclusivity and other protections that you get via the state compact process. You’re in a highly competitive environment in places like Las Vegas, Atlantic City, Mississippi, and other more mature markets.”
Brunet said that if tribes understand what has worked for them at tribal casinos, where they may make more EBITDA in three weeks than an entire year operating a property like Virgin or Palms, opportunities are out there.
“They may not necessarily be the home run I think the Seminoles will have with the Mirage, but other potential home runs for gaming operators on the tribal side may come to fruition someday.”
Brunet expanded his cautionary tale to commercial operators coming to Las Vegas, offering the Genting Group’s opening Resorts World Las Vegas as an example. He said Genting’s latest earnings report showed Resorts World as having record revenues and earnings. But, he admonished, it was only a record compared to what they did since they opened in June 2021.
“If you look at EBITDA for 2022, it’s $116 million on a $4.5 billion investment,” Brunet said. “Top-20% tribal properties are doing four to five times that on one-fifth the investment. If you’re a tribal operator and want to be in that class, do you want to pay an 18-times multiple on a $116 million EBITDA? Do you want to pay a 16- or 14-times multiple? I don’t think you do.”
Aurene Martin, president of Spirit Rock Consulting and a tribal-government advocate, called it an exciting time in the gaming industry, with sports-betting expansion, igaming growth, and a greater number of tribal partnerships with commercial casinos, especially outside Las Vegas.
“People would be fooled if they read the headlines and thought it was an overnight trend of tribes buying commercial operations, but the trend started more than 15 years ago when the Seminole purchased Hard Rock International,” Martin said. “Things have been gearing up and moving forward ever since.”
Martin noted that Connecticut’s Mashantucket Pequot, owner of Foxwoods, opening the Foxwoods El San Juan Casino in November 2021. The Pueblo Indian Tribe of New Mexico acquired the Ellis Park horse track and gaming parlor in Kentucky for $11 million in 2019 and sold it last fall for $79 million.
The Eastern Band of Cherokee Indians in North Carolina acquired Caesars Southern Indiana in September 2021.
In June, Cherokee Nation Entertainment Gaming Holdings, a subsidiary of Cherokee Nation Businesses, agreed to acquire the operations of Gold Strike Tunica for $450 million in cash.
“A lot of deals are happening that you don’t see a lot of coverage on,” Martin said.