The Nevada Gaming Commission approved the sale of two Mesquite casinos by gaming legacy families to a Los Angeles-based private equity firm.
The Casablanca Resort and Virgin River Hotel & Casino, owned by Mesquite Gaming, are being taken over by the Mesquite OCM Voteco LLC, a fund of Oaktree Capital Management. The price has not been disclosed.
The Michael Gaughan family and Anthony Toti Gaming Trust currently have ownership interests in Mesquite Gaming, at 35% and 25%, respectively, along with a 40% stake by Newport Global Advisors LP, a Woodlands, Texas-based investment company.
Toti is the chairman of the board and CEO of Mesquite Gaming, while Gaughan is the owner of the South Point Casino in Las Vegas.
Matthew Wilson, a managing partner with Oaktree, was appearing before the Commission for the second time in the last 18 months. He was there in May 2022 for Oaktree’s investment in Interblock Gaming, a developer and supplier of electronic table games, and to seek personal licenses.
“At that time, we told you we’d be back again and be active in the market and make investments in gaming,” Wilson said. “This is our second foray in front of the Commission and with a little luck, we should see you next month for another deal we’re looking to get in on.”
Wilson told the Commission that as a private-investment firm, it has 20 offices in 15 countries. It manages about $180 billion in capital. The capital comes from limited partners, including some of the biggest sovereign-wealth funds in the world – blue-chip pensions, endowments, and insurance companies and repeat investors over 30 years of the company’s existence.
“We’re focused on four core buckets – credit, private equity, public equity, and real assets,” Wilson said. “This would fall under our private-equity strategy, making an investment to own the casino and operation.”
Wilson has been with Oaktree about 20 years and emphasized consistency in returns. “Whether things go up or down, we want to consistently perform, to preserve our client’s capital. That’s how we’ve grown to $180 billion in assets, performed in and out of cycles, and delivered when times are tough. It’s not about being the highest fund every year, although we do try to achieve that. It’s making consistent returns for our clients and not losing their money.”
Oaktree has about 1,100 employees with many funds around the world, Wilson said.
“This investment fits in our Special Situations Fund III, a 2022 vintage fund closing at the end of this month, and we will raise about $3 billion in that strategy,” Wilson said. “Private equity in most asset classes is a difficult fundraising market now and investors aren’t getting money back like they used to. Money isn’t going into funds as easily as it has for the last 15 to 20 years. It’s a function of our discipline and understanding how to invest in cycles. With this investment, we think we’re going into something where the operations have been well run for many years. We have the opportunity to take the ball to the next level.”
Oaktree holds investments for three to seven years and longer if they continue to create value for investors, Wilson said.
“We’re not short-term investors and looking to make a flip here, but we’re looking to take the time and do the right thing and invest in the people assets and drive value through growth and cost improvement,” Wilson said.
About a third of Oaktree’s investments are in hospitality, restaurants, and leisure, Wilson said. Their focus is on consumers, which gaming falls into, in addition to industrial and business and financial services.
“Those are our four key pillars, but if you look at our investments for the last five years or so, they’ve been focused on the consumer side in the gaming sector with a third of those assets going there,” Wilson said. “It is a very attractive space for us. We’ll hopefully be back in front of you next month with another one and we continue to see very good opportunities in Nevada as well as across the globe.”
The transaction didn’t raise any objections from the Federal Trade Commission and can close at any time, Wilson said.
“This is a very impressive group,” said Commissioner Ogonna Brown. “The background and the fact you have longevity are impressive to me. I know (Nevada Control Board member) George Assad said you have big shoes to fill with the Gaughan family and Toti family. These are legacy families here in Nevada. They treat their employees like family. I think you know what you’re getting into and based on your background, I have no areas of concern.”
Commissioner Brian Krolicki seconded Brown’s contention that Oaktree is “impressive” and said, “This feels right.”
Commissioner Rosa Solis-Rainey said she’s happy to see Oaktree is looking to retain most of the employees, given the importance of the two properties to Mesquite.
