In the past 12 months, the Las Vegas Strip has seen some massive deals, as MGM Resorts International (MGM) bought the operating rights to the Cosmopolitan while it sold operating rights to Mirage to Hard Rock International (HRI).
That move will, in the next couple of years, lead to a massive change to the Las Vegas Strip skyline as Hard Rock plans to build a massive version of its signature Guitar Hotel where the Mirage Volcano currently sits. No timetable has been given for that move, but it's likely to happen before the three-year license HRI has to use the Mirage name expires.
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In addition to those transactions Bally's (BALY) purchased the Tropicana and plans to take a year or two to figure out what to do with it. One of the potential uses of the site -- as a stadium location for the Oakland A's -- has come off the table as the team has purchased land just off the Strip from Red Rock Resorts (RRR) in order to build its new home.
And, of course, for much of the past year, rumors were flying that Caesars Entertainment (CZR) planned to sell one of its Strip properties. Planet Hollywood and Paris Las Vegas were cited in the rumors, but it ultimately turned out that The Flamingo was the property in question.
Had a deal been offered, Vici Properties (VICI), which owns the land on which most Caesars Las Vegas Strip properties sit on, had the right to match the deal. In that case, Caesars could have sold Flamingo and ended up still operating it as most of the resort casinos are owned by real estate investment trusts with operators like Caesars and MGM paying them rent to operate the properties.
Now, two major Las Vegas Strip resort casinos could be sold, but that likely won't mean a change in operations for either.
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Bellagio and Cosmopolitan Could Be Sold
While MGM has a long-term deal to operate both Bellagio and Cosmopolitan, it does not own either resort casino. Both properties are owned by Blackstone Real Estate Income Trust (BREIT), which may consider selling one or both properties, according to a new report from Hoya Capital.
Last year, BREIT sold its 49.9% interest in Mandalay Bay and MGM Grand to VICI Properties for $4.27 billion.
"Seeking to raise capital to meet redemptions and keep the music playing, BREIT has quickly pivoted from buyer to seller -- spawning its aforementioned deal with VICI at favorable terms for the Casino REIT -- and we believe BREIT’s interest in the Cosmopolitan and the Bellagio are among the most likely assets that BREIT sells next,” noted Hoya Capital," Casino.org reported.
The sales would not functionally change operations at either property. Basically, MGM would simply be writing checks to a different REIT.
Should the properties come up for sale, Vici -- the largest landlord on the Las Vegas Strip -- would be a likely bidder. The REIT already has a business relationship with MGM as it already owns Mandalay Bay and MGM Grand.
Hoya also cited Gaming and Leisure Properties (GLPI) as a potential buyer but said that was less likely because the company has shown more interest in acquiring regional casino real estate as opposed to buying on the Strip.
“Access to longer-term fixed-rate capital has proven to be a significant competitive advantage for public REITs and these casinos REITs’ impressive track record in capital deployment and shareholder-friendly governance justifies our willingness to ‘pay up’ at moderately elevated multiples,” concluded Hoya.
