With its purchase of the aging Tropicana resort, Bally’s Corp. has achieved a much-desired presence on the Las Vegas Strip without having to spend a lot to get there.
A “key step for us,” is how CEO George Papanier characterized the agreement with industry REIT Gaming and Leisure Properties. With the latest deal, the 65-year-old resort will change hands for the fourth time in six years.
Rhode Island-based Bally’s will pay GLPI $150 million to own and operate the Trop and an initial $10.5 million a year to lease the 34-acre site, which encompasses 1,470 hotel rooms, a 50,000-square-foot casino, a 1,200-seat showroom and 100,000 square feet of convention and meeting space.
GLPI also will buy Bally’s casinos in Black Hawk, Colorado, and a casino Bally’s is acquiring in Rock Island, Illinois. Paying $150 million, the REIT will rent the operations to Bally’s for an initial $12 million a year.
The two companies also have agreed to join forces down the road, with GLPI having a right of first refusal to fund possible acquisitions and developments in New York, Michigan, Maryland and Virginia.
As J.P. Morgan analyst Joe Greff broke it down, GLPI gets $22.5 million” in incremental rent in exchange for the value of the Tropicana Las Vegas as well as a pipeline of acquisition-related growth.”
Bally’s, in return, gets a sizable footprint on the Las Vegas Strip at a relatively modest price point.
Bally’s Chairman Soo Kim says that his company needed to be in Las Vegas.
“If we have aspirations of being a national brand, we had to have a presence on the Strip,” he explains. “Now we have a place to send our customers who want to make that annual trip to Vegas.”
He believes Bally’s got in at a reasonable price, but time was of the essence.
“The Tropicana is 36 acres at the beginning of the Strip,” he says. “It only has 600 slots and in some instances it feels like it hasn’t been touched since 1960. We truly believe that Las Vegas is going to recover quickly, and this gives us a chance to be there, invest a little money, and decide later what would be the best fit as a real attraction.”
Kim didn’t comment about whether the Tropicana would be rebranded as a Bally’s. But with Bally’s Las Vegas being the only Bally’s brand left in the Caesars’ portfolio, one has to wonder whether it would make more sense to be re-branded a “Horseshoe” casino, the third powerful mark behind Caesars and Harrah’s, a valuable asset for the company. Judging by how quickly Bally’s has been making deals, and given the good relationship Bally’s has with the management team at Caesars Entertainment, Tropicana may be Bally’s if a deal can be worked out.
Penn National Gaming bought the Trop in 2015 for $360 million and sold it to GLPI last April in exchange for $337.5 million in rent credits.
“While we think it’s possible GLPI could have gotten a higher price tag, we believe the wider Bally’s relationship was likely an overriding consideration,” said Truist Securities analyst Barry Jonas.
Papanier said the purchase “will significantly enhance Bally’s customer base and player data base as well as unlock marketing opportunities to leverage the iconic Bally’s brand,” including in the online space, where the company made headlines recently with an offer of $2.8 billion to buy UK-based betting operator Gamesys Group.
“We saw an opportunity that might not come again in the future,” said Kim.
The deal was announced on April 13, just a week after Nevada regulators granted Bally’s a license and the company closed on its $155 million purchase of Lake Tahoe’s Montbleu Resort Casino & Spa from Eldorado Resorts.
It crowns a shopping spree that began in 2019 and has seen publicly traded Bally’s (NYSE: BALY), formerly Twin River Worldwide Holdings, buy or plan to buy 10 gaming properties in almost as many states. The company currently owns or operates 12 properties and will grow that to at least 15 in 11 states over the next couple of years.
Papanier said Bally’s envisions a “significant redevelopment” of the resort but is in no hurry.
“The light financial burden of this transaction allows George and his team to go in and get the operations in order,” Kim said. “We’ll wait for the right time to redevelop it.”
