CET Moving Up Timeline for Selling A Property

Maybe it's me but Bally's seems a natural to be turned into a Horseshoe . It would fit with the more traditional decor which only will need updating, not a complete redo. And if that's the final home of the WSOP, it has the nostalgia tie as well. They can bring over the PH restaurants or they can bring in the dining outlets associated with the brand. Most poker players will find something that suits their tastes on that corner for lodging.

 

I could see PE being in here as well, although the case for the V/P is probably easier to make as a non locals operator given it was already full without any real locals feeder network. The value of Harrahs is probably higher if you're Boyd, Penn, a California tribe, Hard Rock, etc. and you can funnel some players from your locals.

No one is going to buy PH at these current EBITDA multiples and put in a bunch of looser games. They might run some comp promos to keep players for awhile, though. IMO, this is part of why Ruffin is out on Mirage - his model doesn't fit the quality of the resort and the profit you need to clear the likely purchase price. Remember that he bought TI for cash during the recession when MGM was pretty desperate.

 

Based on what I've heard, Flamingo will be sold to Hard Rock.

 

First I have heard of that one. Sounds strategically horrible for CET. Their guests tromping through the empire will stumble into a shiny renovated property run by a competitor, and they will question why they bother to play at Bally’s or Harrahs or wherever CET.

However, if they are going to focus all their resources at CP and secondarily Paris, how many boarding houses with cheap rooms and minimal maintenance do they really need in the vicinity? Flamingo is a large property in an excellent location and could fetch a huge price. I just don’t see that as the most logical property for them to part with.

 

Maybe do a combo flamingo/Cromwell deal and they get the whole corner

 

This just does not sound logical for a CET move.

However, CET has proven that not all of their moves are logical!

 

When you say "shiny renovated hotel" that may be the issue...Flamingo is a dump in dire need of a /refresh. The location and footprint are great, but it's not a good property relative to even the Linq or Harrahs. Bird Bar is atrocious. The poker corner is now wide open with that closure. Carlos n Charlies is an abomination. The buffet is closed. The sports book is dreadful and the back left corner (shops/etc.) is a mess. The back courtyard is awesome although not a big moneymaker. The core hotel room isn't that big; you cannot make this a high end joint even if you want to. You don't have to rebrand the Flamingo they way you would a Ballys or Harrahs. I...I think I can see it, actually? Flamingo's target customer is a poor 21-35 year old who just wants to get to Vegas as cheap as possible. This is not a market Caesars is dying to capture.

From the buyer side, you get a full service resort, Strip frontage, and you're in the middle of it all.

I can see it, actually? They just have to be willing to split up the Harrahs to Paris block.

 

Eh, if you get as good/better of a multiple on Flamingo as you'd get on Ballys or P Ho, and you think it needs 200 M more of Cap Ex than P Ho would...suddenly it seems logical.

 

Now, about Flamingo, are you actually talking about total sale, as in lock, stock, and slot club, or one of those lease-back things where real estate and capital facilities are "sold" but CET would continue to operate?

 

The way CET has always phrased the Strip sale is they'd sell it all and no longer be the casino operator

 

To me, the biggest factor that plays against a Flamingo sale is the fact that it sits adjacent to the Linq promenade. They've put so much money and effort into that, that to me it makes very little sense to sell one of the two properties facing it.

For me it's still Cromwell > Harrahs > PHo > Ballys > Flamingo > Paris > Caesars. Standing hard on my "make top floors of Paris a boutique hotel a'la NoMad, move Drai's and Giada, sell Cromwell" bet.

 

I agree with all of this. Flamingo is currently set up to be as cheap as possible, and is unappealing to most. "Can't wait to get out of here, never need to go back" is my usual takeaway from my annual 5 minute walkthrough.

I would expect a buyer would pretty much have to gut and renovate the place completely, but as you say the bones are old and there is only so much you can do with small rooms, low ceilings etc.

If CET got rid of Flamingo, it would put upward pressure on rates and occupancy at Harrahs/Linq/Ballys which would be a positive for them in a variety of ways.

 

A large number of people stay at the lower end CET properties because they are comped based on local play, or because they are cheaper room rates than most other Strip options.

CET came across Cromwell after exercising an option on the demolished Westward Ho land. Boyd ended up with Barbary Coast when the Gaughans cashed out their existing coast casinos (Barbary, Gold Coast, Orleans and Suncoast) with Boyd, which they used to build South Point. They swapped the two when Boyd thought they were building Echelon.

I can see them trying to sell Cromwell in a Flamingo deal to maximize the land sale. It also makes sense after they axed the table games at Cromwell, closed the Flamingo poker room, and who knows what cost cutting they will roll out next.

I do agree with your statement, though they would still own the Promenade. It would make more sense to sell Flamingo than to split up Bally's and Paris, they share garages the buildings and promenade are connected. Nobody is buying Cromwell standalone without Flamingo, it makes no sense - too much overhead for a tiny landlocked property.

Flamingo or Flamingo / Cromwell will maximize purchase revenue, Harrah's seems to be the only logical other property for someone looking for a smaller deal. Makes more sense to implode Flamingo or Harrah's, but that would depend on whether the purchaser had access to the capital that would allow them to build from scratch in this highly inflationary time.

 

They are always talking about selling a strip ASSET, not necessarily a strip hotel…maybe the Linq promenade is in the mix. The High Roller wheel can’t possibly be meeting expectations and can’t really be driving much if any traffic into the adjacent properties either.

 

I agree they might sell the mall as well, who knows, but the core statement has always been that they don't need this many casino hotels.

 

They just spent a lot in Harrahs on the rooms, food hall, the new Drew Brees restaurant, etc. It's in better shape than the Flamingo and it would absolutely require a rebrand because they will want to keep the Harrahs name clean. Plus it fits an obvious niche in their portfolio (it's the place for slot queen diamonds from Kansas City/Indianapolis/etc. who aren't high end enough for Caesars). I could see it geographically since it's at the end, but I can also see why CET would choose to keep it.

My feeling with Ballys is more and more of it becomes Paris over time. That's how they make more money.

 

Giada's, maybe, but I do not see Drai's going anywhere. The whole point of Drai's is that it's outside the circle of Marquee-esque megaclubs, and the afterhours space downstairs is a Vegas institution. Victor Drai is a legend and I don't see CZR risking getting him mad. Drai's in a repurposed version of Chateau is just not something I envision working to his standards. XS is still up and kicking more than a decade later, and his hand in designing the Cromwell location is arguably one of the main reasons they're still doing so well..

Plus he produced Weekend at Bernie's.

 

They custom built the place with him there instead of at Paris/Flamingo/whatever other casino for a reason. And, really, the whole value of this property is the club hotel aspect. No one is going to move Drai's.

 

My instinct has always been PH, other than I swore I read somewhere that they didn’t want to lose the Zappos theater.

This conversation was going on in a FB group last couple of days also. Leaned towards Ballys rebranding as Horseshoe, sell PH and then Tropicana taking the Ballys name like their other props have.