Wednesday, July 29, 2020 / by Ken Couture
Las Vegas had a string of blockbuster casino deals the past few years as investors pumped billions into properties on or near the Strip.
Now the Tropicana is up for grabs, in a business climate that was unthinkable not long ago.
Tropicana landlord Gaming and Leisure Properties is looking to sell the 35-acre hotel-casino and rent it back or sell it outright, listing broker Michael Parks, of CBRE Group’s global gaming group, said Monday.
There is no asking price, though Parks figures that even during the coronavirus pandemic, the Strip resort is worth “at least” what it traded for five years ago, $360 million.
Still, he indicated that he hasn’t yet done extensive outreach to land a buyer.
Waiting for shake out
“We’re just waiting to see how things shake out in the world,” Parks said.
The pandemic has devastated Las Vegas’ economy, with Gov. Steve Sisolak ordering casinos and other Nevada businesses closed in March to help contain the virus’ spread. The normally tourist-choked Strip all but turned into a ghost town, and job losses skyrocketed.
Casinos were allowed to reopen June 4, but several remain closed in Southern Nevada, including the 1,470-room Tropicana, which is scheduled to reopen Sept. 1.
Despite the chaos, Macquarie Group casino analyst Chad Beynon believes there still is demand for Las Vegas properties.
“Anytime it feels like we’re at the bottom and it’s the end of the world, that’s generally when buyers come out and at least have conversations with the holders of some of these assets,” Beynon said.
As he sees it, Gaming and Leisure “could at least explore potential buyers” for now but would probably sell at a higher price in a few years, adding there has been speculation the Tropicana is worth $400 million to $700 million.
Nevada’s casino lockdown came a little more than a month after Jay Snowden, president and CEO of Tropicana operator Penn National Gaming, told analysts there had been “unsolicited interest” in the resort.
“We got another call two days ago with interest in potentially acquiring some or all of the landholdings there, so it’s very active,” Snowden said at the time, adding that the Tropicana is “extremely valuable.”
After the pandemic hit, Penn National sold the property to its spinoff real estate holding company, Gaming and Leisure, for $307.5 million worth of rent credits and leased it back.
Gaming and Leisure has stated publicly that it would try to sell the Tropicana. Joe Jaffoni, an investor relations representative, said Monday that he expects that the company “will address the sale status” when it releases second-quarter earnings this week.
2020 began strong
Before the pandemic turned life upside down, Las Vegas started 2020 on strong economic footing and with a heated real estate market that had been gaining speed for years, following a long crawl back from the depths of the Great Recession.
Investors had bought several resorts for nine figures or more in recent years, including the Hard Rock Hotel (around $500 million), the Rio ($516.3 million), the unfinished former Fontainebleau ($600 million), Circus Circus and adjacent land ($825 million), the Bellagio’s real estate (about $4.2 billion) and the MGM Grand and Mandalay Bay’s real estate (a deal valued at $4.6 billion).
The coronavirus outbreak, however, shut down much of Southern Nevada’s economy virtually overnight. Despite recovering many jobs the past few months as businesses reopened, Las Vegas still is on wobbly ground as unemployment remains high and the tally of coronavirus infections rises again.
Parks, of CBRE, said it was “completely surreal” to see the Strip effectively closed, with empty sidewalks and barricaded resort entrances.
Hopefully, he said, that “never happens again.”
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