Caesars Shopping Flamingo Las Vegas for North of $1 Billion
Posted on: May 4, 2022, 08:39h.
Last updated on: May 5, 2022, 11:40h.
Caesars Entertainment’s (NASDAQ:CZR) long-running plans to divest one of its Las Vegas Strip venues may be coming to life. The operator is said to be shopping the Flamingo at a price tag of more than $1 billion.
It’s been no secret that Caesars is looking to offload one of its Sin City assets to reduce debt, which stood at $13.5 billion at the end of the first quarter. When Eldorado Resorts acquired “old Caesars” in 2020, Tom Reeg — then chief executive officer of the buyer — made clear “new Caesars” would sell one of its Strip properties to tame one of the gaming industry’s largest debt burdens.
Since then, the only debates centered around when the operator would formally announce an asset sale and which Las Vegas venue it would be. At least one analyst says it’s going to be the Flamingo that Caesars sells.
We continue to believe CZR is likely to sell the Flamingo,” said Deutsche Bank analyst Carlo Santarelli in a note to clients. “While investors focus primarily on the deleverage associated with the asset sale, we see the transaction as favorable for room night mix/ADR compression/margins.”
He believes it’s possible a deal is reached in the third quarter.
Flamingo Sale Price Could Be Disappointing
Given the recent price points at which Las Vegas Strip venues changed hands, there was speculation Caesars could fetch $2 billion to $3 billion for one of its properties there.
Flamingo, which was opened in 1946 by gangster Bugsy Siegel, appears unlikely to command $2 billion, let alone $3 billion. Other Strip venues that have been rumored to be potential targets of divestment by Caesars include Bally’s, the Linq, Paris, and Planet Hollywood.
Unidentified sources with knowledge of the matter told Bloomberg that Caesars was in talks to sell Planet Hollywood, but decided against it because of the venue’s theater that can be used for cash-generating concerts.
Reportedly, some buyers already balked at acquiring the Flamingo because it needs significant refurbishment. It’s believed Caesars is in talks with other gaming companies, as well as private equity companies about the venue, according to Bloomberg.
Where VICI Fits In
At the moment, it’s unclear how or if VICI Properties (NYSE:VICI) fits into the Flamingo sale discussion.
The owner of Caesars Palace real estate has rights of first refusal on Bally’s, Flamingo, the Linq, Paris and Planet Hollywood by way of a deal reached with Eldorado Resorts in June 2019, when that company announced its $17.3 billion takeover bid for old Caesars.
VICI is less than a week removed from closing its $17.2 billion purchase of rival MGM Growth Properties, meaning it’s now the largest landlord on the Strip. Should the real estate investment trust (REIT) buy the Flamingo, Caesars could continue operating it under a sale-leaseback transaction. But such a deal may not generate the proceeds hoped for in terms of debt reduction, and it’s guaranteed to create another long-term bill for the operator.
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Last Comments ( 3 )
I ♥️ the Flamingo but it needs more TLC then Caesars wants to spend (I'd say offer it up to Hilton for $800 million and walk away!) Planet Hollywood is (formerly known as the Aladdin Theatre for the Performing Arts is worth more as a profit generating Venue than the Casino + Shopping Center aka that place that has shootings!) Paris is too embedded into Bally's (soon to be the Horseshoe!) and vice versa. Linq still has value with the LINQ Promenade.
At least CZR didn't unload their properties during covid-panic alá Adelson.
While I don’t think this is what Caesars intended to do, but they should sell the Flamingo to VICI, and continue to operate the Flamingo. I also think that Caesars could/should follow MGM’s lead in selling their real estate (casinos & other land holdings) to VICI and lease them back, giving Caesars cash toward paying down debt. Since Caesars doesn’t seem to have a plan for the land behind Horseshoe/Paris/Planet Hollywood, they should sell it to a developer who will build something.