Flamingo Sale Bell Tolls with No Answer
Posted on: September 26, 2022, 07:24h.
Last updated on: September 27, 2022, 04:45h.
It’s widely known that Caesars Entertainment (NASDAQ: CZR) is looking to sell one of its Las Vegas Strip properties — a transaction many industry observers expected to be announced earlier this year.
That news hasn’t hit the wires, and as TheStreet.com reports, the casino giant is bumping up against a deadline in a previously established agreement with VICI Properties (NYSE:VICI). That target date is sometime this summer, but with just four days remaining in the third quarter, the likelihood of Caesars exceeding that time limit appears elevated.
As you know, we have an ongoing sales process for a Strip asset that’s governed by the VICI agreements and ends about another month to run,” said Caesars CEO Tom Reeg on the company’s second-quarter earnings conference call on Aug. 2.
The Caesars/VICI accord was established in 2019 when Eldorado Resorts — the company that acquired “old Caesars” – struck an agreement with the casino landlord.
In addition to buying the land and real estate assets of Harrah’s New Orleans, Harrah’s Laughlin, and Harrah’s Atlantic City, VICI earned some other benefits. Namely, the real estate company earned rights of first of refusal on the Flamingo Las Vegas, Bally’s Las Vegas, Paris Las Vegas and Planet Hollywood Resort & Casino. The second would include the remainders from that group and the LINQ Hotel & Casino.
Probably Flamingo on the Auction Block
Reports surfaced five months ago that the Strip asset Caesars is likely shopping is Flamingo and that the operator is seeking at least $1 billion.
The company hasn’t confirmed that Flamingo is the venue on the block, but through the process of deduction, it makes sense. Reportedly, Planet Hollywood was the property Caesars was looking to sell, but management realized there’s considerable, ongoing value in the resort’s concert venue. As TheStreet notes, Caesars is making investments in Bally’s — soon to be the Horseshoe — Harrah’s and Paris.
Interestingly, it’s common knowledge in the industry that Flamingo needs some sprucing up as well. As a triple-net real estate investment trust (REIT), VICI wouldn’t be on the hook for those expenses if it acquires the property. The operator of the venue would take on that responsibility.
There’s speculation that Flamingo’s need for enhancements could keep buyers at bay, but Reeg said there’s ample interest in the venue.
“For us — and there’s — there are plenty of interested parties,” he said on the August conference call.
Rising Interest Rates Could Be Factor in Flamingo Sale
Caesars hasn’t clarified that a Flamingo transaction will be a sale-leaseback whereby it sells the real estate to VICI and continues operating the venue or an outright sale to another suitor. However, the $1 billion rumored asking price and other recent Strip transactions imply the latter.
Rising interest rates could factor into the equation because some interested buyers may need to finance the purchase and pay more today than they would have at the start of 2022.
As a result of those tighter financing conditions, Caesars — assuming it’s still shopping Flamingo or another venue — could prefer a cash buyer. Still, the number of suitors fitting that bill may be dwindling and perhaps limited to private equity and some tribal casino operators.
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Last Comments ( 5 )
I've been staying at the Flamingo for the last 20-30 years. At first it was great, right in the middle of all the action, nice-ish rooms at a great rate, and free self parking. Slowly but shorely all that was good was removed from my experience. Although I wouldn't call it a dump today, it's probably only a 2 star resort and they charge for parking even if you're a guest. ( don't get me started on the resort fees ) The hotel and casino just look and feel veryl old. I could tolerate all of this if the prices were right, but they price everything like it's a much higher quality hotel. Good luck on whoever buys it, they're going to need it.
Remodel it so they can raise the room rates?
I have stayed at the Flamingo as my go to Hotel while in Las Vegas. The last couple of times that I stayed, the Marijuana smoke in the Hallways on the Smoking floors were so overwhelming walking from the elevator to my room. It wouldn't hurt for security to make rounds on those floors! I'm just saying!
My wife and I were married at the Flamingo. We went back 25 years later to resay our vows. We also paid a premium for a mini suite. The bathroom ceiling leaked the entire time while we were there. When we asked if we could be moved, we were told they didn't have anything else. Keep in mind that this was in the middle of the week. I never did buy into that. Although the hotel has its history. Prehaps it is time that it changes to something new.
We recently stayed at The Flamingo a d I gotta say it needs some upgrading. Rooms were old like a 70's porn set. Also the hidden "didn't" gamble enough fee when checking out. We didn't come to just gamble, we came for other things as well. Grounds need lots of work. We still enjoyed our vacation, but we were abit disappointed by the experience of the hotel.