Huge Casino Deal on the Las Vegas Strip Looks Dead (At Least For Now)

Huge Casino Deal on the Las Vegas Strip Looks Dead (At Least For Now)

Selling an asset on the Las Vegas strip, at a time when any property on this historic 4.2-mile road has become incredibly valuable, seems like a horrific idea. Yes, prices have hit historical highs, but the value of the asset still seems higher than any price you might get for it.

This makes it at least somewhat questionable why Caesars Entertainment (CZR) He wants to sell a property in the Gaza Strip. The company has made it clear that it believes it has too many rooms on the Las Vegas Strip and that getting rid of one property would actually help drive up prices at the resort’s other casinos.

Flamingo, which appears to be the property Caesars will sell, needs a lot of work. It’s a more old school property than other Caesars assets in a segment, and the company hasn’t invested significantly in the way it has many of its other properties..

For example, Paris Las Vegas recently added Vanderpump ร  Paris, an upscale bar/restaurant, and will soon add a new one by Martha Stewart. The company’s Harrah location revamped its food court by adding a Bobby Flay Burger bar while adding Walk-Ons as a sports bar. The company has invested heavily in Ballys, which will soon be rebranded under the gambling-friendly Horseshoe brand.

It is clear that Flamingo has not received any significant investment as the casino company is approaching the deadline to sell the property.

Caesars has a deadline to sell flamingo

Caesars didn’t say much about the sales process, but CEO Tom Reeg commented on it during his company’s second-quarter earnings call.

โ€œItโ€™s very clear the timeline set out in the VICI documents that govern this. So we launched early this year, and the deadline is the end of the summer. And in every deadline Iโ€™ve seen in the deal land, work continues on that deadline.โ€

These comments were made on August 2, we are now approaching the end of September and the company has yet to sell the property. It is possible that the deadline has already passed or the company has modified its agreement with VICI Properties (VICI) which has a first refusal on the property.

Reeg was clear that Caesars did not need to sell the property.

โ€œFor us – and there – there are a lot of interested parties. The financing environment is clearly what it is. And if it is going to affect what someone is going to pay, there is a level that we are not going to chase. I am very happy to just cut off the free cash flow and come back later.โ€

Caesar may not sell flamingo

The sale of Flamingo will help Caesars pay off some of the debt it incurred upon its merger with Eldorado Resorts in 2020, amounting to $15.5 billion.

However, demand has rebounded and it appears that Caesars is able to not only manage its debt, but pay off part of it. This makes selling a flamingo a luxury for the company rather than a necessity.

โ€œAs we discussed, this is a discretionary trade for us,โ€ Reg said, โ€œwe still believe we can get it done within the parameters we set out initially. But we โ€“ we certainly recognize that we live in a market that moves from day to day. And if financing conditions change, they may change.โ€ The result “.

The CEO also noted that he finds the interest in the potential deal “kind of amusing.”

โ€œWhen I first started talking about that we’re selling our assets on the Vegas Strip, the response from the whole sell side and the buy side was why you wanted to sell the Vegas Strip asset? Look how cool it is. And we said there are times in the market when you don’t have to go back So far away, whereโ€”we didn’tโ€”wouldn’t have these many rooms,” and now the conversations turned to, Oh, my God, can you get this done? This is critical. This is a change in you, not in us.”

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