Bally’s Corp. CEO Soo Kim worried the market for casino acquisitions on the Las Vegas Strip was “tightening up” after Las Vegas Sands parted ways with Venetian, Palazzo, and Sands Expo for $6.25 billion, the unfinished Fontainebleau-Drew was sold to Koch Real Estate Investments, and Caesars Entertainment said it wouldn’t sell one of its properties until 2022.
The company took another look at Tropicana Las Vegas.
“This was a classic Twin River-Bally’s transaction,” Kim said Tuesday. “We were able to get a quite important property in an efficient manner.”
Since 2019, Bally’s – formerly Twin River Worldwide Holdings – has acquired or is in the process of buying 10 gaming properties. The Rat Pack-era Tropicana, a mainstay on the south end of the Las Vegas Strip, became its 11th acquisition Tuesday.
“We saw an opportunity that might not come again in the future,” Kim said in response to a question during a conference call with analysts to discuss another Bally’s deal – the company’s planned $2.8 billion acquisition of United Kingdom-based online betting operator Gamesys PLC.
“It’s very important for a casino operator with national ambitions to have a Las Vegas presence on the Strip,” Kim said.
Last fall, when then-Twin River acquired Bally’s Atlantic City from Caesars Entertainment for $25 million, Kim negotiated a separate deal – paying Caesars $20 million for the rights and trademarks for Bally’s name. Caesars retained the name in perpetuity for just its property on the Strip, Bally’s Las Vegas, which is attached to Paris Las Vegas.
That’s where some ownership confusion may arise.
On the Strip, Bally’s Las Vegas is owned by Caesars and Tropicana will be owned by Bally’s. Three other casinos that carry the Tropicana name have different owners. Tropicana Laughlin and Tropicana Atlantic City are owned by Caesars. Tropicana Evansville in Indiana is currently owned by Caesars but is in the process of being sold to Bally’s and Gaming and Leisure Properties for $480 million.
In an interview earlier this month with CDC Gaming Reports, Kim and Bally’s CEO George Papanier said all of the company’s casinos – except for Hard Rock Biloxi in Mississippi – would be renamed as Bally’s. MontBleu Casino Resort in Lake Tahoe, which Bally’s acquired last week, will be renamed under the Bally’s brand.
Kim said Tuesday Tropicana Las Vegas would not be completely redeveloped until sometime next year. Papanier said the Strip resort would enhance Bally’s customer database, but analysts said there may need to be an education process.
Global Market Advisors Partner Brendan Bussmann said the gaming industry’s merger activity in the past year could confuse the consumer when individual property brands are owned by different operators.
“The potential sale of Tropicana in Las Vegas to Bally’s, while not owning Bally’s Las Vegas itself, will take some further differentiation for the consumer in the market,” Bussmann said.
“As companies shop their properties across their databases, they will have to educate their consumers that it is not just the name on the outside of the building,” Bussmann said. “If they want to stay within their preferred player program, they will have to pay close attention to who runs the facility and not just the logo on the front.”
Bally’s shares fell almost 11% on Tuesday, but Truist Securities gaming analyst Barry Jonas said in a research note the story is somewhat complex.
“We continue to see a compelling opportunity (for Bally’s) with a land-based casino recovery more evident … and the potential to be a meaningful player in the emerging and high multiple U.S. sports betting and iGaming landscape,” Jonas said.
Tropicana is available
Tropicana, which opened in 1957 and was the target of a mob skimming operation in the late 1970s, was owned by Penn National Gaming, which acquired the property in 2015 for $360 million. Last year, Penn sold the resort and its 35-acre site to GLPI for $337.5 million in rent credits.
The deal between Bally’s and GLPI involves more than just the Strip resort.
The transaction is valued at $308 million, and Bally’s is paying GLPI $150 million to own and operate the hotel-casino, and $10.5 million annually over the next 50 years to lease the site. The rental agreement is subject to increases.
Also, Bally’s entered into a sale-leaseback agreement with GLPI for its properties in Black Hawk, Colorado, and a casino Bally’s is acquiring in Rock Island, Illinois. The lease has initial annual fixed rent of $12 million, subject to increase over time, and GLPI will pay $150 million to own the properties.
Bally’s also granted GLPI a right of first refusal to fund property acquisition or development project costs associated with any and all potential future transactions in Michigan, Maryland, New York, and Virginia through one or more sale-leasebacks or similar transactions for a term of seven years.
“While we think it’s possible GLPI could have gotten a higher price tag, we believe the wider Bally relationship was likely an overriding consideration,” Jonas said.
Macquarie Securities gaming analyst Jordan Bender said the transaction has “positive catalysts for GLPI,” and the REIT is gaining several rights of first refusal deals.
“We look at today’s news as a creative way for GLPI to extract long-term value from last year’s deal with Penn,” J.P. Morgan gaming analyst Joe Greff told investors.
GLPI and Bally’s also agreed to a $500 million structure in which the REIT has the potential to acquire additional hotel casinos in sale-leaseback transactions, should Bally’s utilize the company as a funding source for its proposed acquisition of Gamesys.
GLPI said the commitment provides Bally’s an alternative financing commitment which at GLPI’s sole discretion may be funded in the form of equity, additional prepaid sale-leaseback transactions, or secured loans.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.