As we head toward the New Year we enter the season of predictions about the future.
In looking for future trends, one can look at the past year or so and see that a revolution in ownership has taken place in Las Vegas and the gaming industry.
The casino world is increasingly one not of the entrepreneurs whose disappearance is so often lamented, and not even of the corporations that replaced them. It is of a more remote ownership such as REITs and private equity firms.
The latest development in this trend was the announcement that VICI, the experiential REIT born out of Caesars several years ago, will buy from Blackstone its 49.9 percent share of their joint venture entity that owns the real estate of Mandalay Bay and MGM Grand.
The announcement came on the day after the Las Vegas Convention and Visitors Bureau reported record visitation in October as Sin City is clearly back from the Covid pandemic. It also comes as LV looks towards several powerful trends working in its favor such as the return of international visitation and the coming of important events like the Super Bowl, Formula One racing and the Final Four weekend of the national men’s college basketball championships.
It also came during a trailing year or so in which Apollo bought the Venetian-Palazzo-Sands Expo Center complex, which followed Apollo’s purchase of Great Canadian Gaming and private equity firm Brookfield’s acquisition of Scientific Games, which brought the trend to the non-casino side of the gaming industry.
These are just several examples of the ownership changes involving non-traditional investors into gaming.
The changes aren’t just coincidence. Blackstone’s sale followed its earlier sale of Cosmopolitan gaming operations to MGM Resorts and its real estate to VICI. Both the Cosmo and Mandalay-MGM Grand sales brought big profits on Blackstone’s Las Vegas investments.
Blackstone has its own reasons for cashing out of Las Vegas at a profit, but the broader point is that neither it nor private equity groups like Apollo are in the business of running casinos. They buy, and sell, Las Vegas assets because they see rising values in the Mojave Desert.
All of which gets us back to the purpose of this column—talking to equity investors in the gaming industry.
Simply, folks at Apollo, Blackstone and VICI are smart guys. They see the rising values of both the real estate and gaming operations. They see that Las Vegas, which has so famously reinvented itself so many times, is transforming into what may be its final incarnation – a metropolitan area of global importance built upon entertainment and hospitality. Where entertainment is an important component of other great cities from New York to Paris to Tokyo, for Las Vegas, the industry is its raison d’etre.
And entertainment, it should always be remembered, never goes out of style. People will always want to be entertained in person, no matter the economy, the world’s geo-political woes or promised technology marvels like some future metaverse.
This transformation into great metropolis will be to the benefit of the big Las Vegas Strip casino operators such as MGM, and more so to Caesars and Wynn, which further benefit by owning their real estate along the appreciating boulevard.
It also benefits companies focused on local players and that happen to own their real estate, such as Boyd and, most especially, pure Southern Nevada plays Golden Entertainment and Red Rock Resorts.
In brief, for long-term and strategic investors, it will pay to do like Apollo and VICI and own a piece of this extraordinary city of the future.
