Economy has changed
The United States casino industry has gone through changes in the last few years, as companies have bought and sold casinos, shut some down, and renamed others. On Tuesday, we found out that one thing will stay the same in the immediate future: Caesars Entertainment is not going to sell any of its properties on the Las Vegas Strip.
In a third quarter earnings call, Caesars CEO Tom Reeg said that, despite previous messaging that his company was looking to offload one of its Strip casinos, it is now going to stand pat. He cited unfavorable market conditions and increasing cash flows of the property Caesars was considering selling as reasons for the change of heart.
“Despite us talking about how this was a discretionary process for us, it created an unnecessary overhang in the stock,” Reeg said. He actually apologized to shareholders for that.
In his second quarter earnings call, Reeg did warn that rising interest rates could put a damper on interest in one of Caesars’ properties. There are obviously limited possible suitors and if capital is more expensive and harder to come by, bidders would be few and far between. Additionally, VICI Properties, the REIT spun off from Caesars a few years ago, has the right of first refusal, which is something potential buyers might not want to deal with.
The company was going to sell a property as a means to pay down some of its debt. El Dorado acquired Caesars (and the new company kept the Caesars name for brand recognition) in a $17.3 billion dollar deal – that’s a hefty bill to pay.
Identity of the property is a mystery
Reeg never publicly stated which Las Vegas Strip property Caesars was geared up to sell. The company owns six on or just off the Strip: Bally’s, The Cromwell, Flamingo, The Linq, Paris, and Planet Hollywood. It operates another three that it used to own: Caesars Palace, Harrah’s, and Rio.
The Flamingo is one of two properties that have garnered the most speculation as the ones Caesars wanted to sell. In May, Bloomberg reported that Caesars wanted at least $1 billion for the old school gambling venue. One problem there is that it would likely need extensive renovations, which would just add to the sky-high price.
The other rumored possibility was Planet Hollywood, though not much of anything concrete had come out about it. It was thought that the price tag, even for Flamingo, could have been as high as $2.5 billion.
In the meantime, Las Vegas has bounced back well from the pandemic shutdowns and slowdowns. Reeg said that October was the best month Caesars has ever had in Las Vegas.
“We’re certainly cognizant of what’s out there (in macroeconomics),” he said. “I can’t point you to anything in our business, in or out of Vegas, that shows any slowdown in the consumer. So, we feel very good.”
