Analysis: $6.25B sale of Sands’ casinos underscores Strip value, company’s Macau focus Howard Stutz, CDC Gaming Reports · March 4, 2021 at 8:01 am Las Vegas Sands will be a full-fledged Asian conglomerate once the $6.25 billion sale of its flagship Strip resort and convention complex becomes final by the end of 2021. The deal – coming roughly two months after the death of company founder Sheldon Adelson – wasn’t a surprise. Las Vegas Sands’ integrated resorts in Macau and Singapore provided 87% of the company’s $13.74 billion in total revenues in 2019. Even in pandemic-stricken 2020, Macau and Singapore were responsible for 79.5% of its $3.6 billion overall revenue. The Venetian on the Las Vegas Strip What left the investment community elated was the value the transaction placed on Las Vegas Strip real estate and the idea that two companies – investment fund Apollo Global Management and real estate investment trust VICI Properties – are banking on the destination rebounding from its worst-performing year since the mid-1990s. “We believe the transaction highlights the value of Las Vegas and further confirms others’ views that the recovery will be faster than feared,” Macquarie Securities gaming analyst Chad Beynon told investors. Roth Capital Partners gaming analyst David Bain concurred, saying Strip landowners should be buoyed by the sale. “Today’s announced transaction also underscores institutional investor interest and confidence the Strip’s long-term sustainability and earnings power, despite current, well-known COVID related challenges,” Bain said. Shares of Las Vegas Sands hit a 52-week high of $66.76 before closing at $65.97 on the New York Stock Exchange, up $1.02 or 1.57%. VICI also hit a 52-week high of $29.33 Wednesday on the New York Stock Exchange, before closing at closed at $29.19, up 71 cents or 2.49%. J.P. Morgan gaming analyst Joe Greff said Las Vegas Sands “didn’t leave any Las Vegas value on the table.” Also, the transaction spoke well not just for the Strip, but regional gaming markets and the online sports betting and igaming communities. “Gaming assets continue to appeal to private equity, which, in our view, elevates the valuation floor across the board for the sector,” Greff said. Asia is Sands focus Las Vegas Sands said last fall it engaged with an advisory firm to explore a divestment of its Las Vegas operations. Many analysts speculated Las Vegas Sands was following the playbook of MGM Resorts International, which sold Bellagio, MGM Grand, and Mandalay Bay in two separate REIT deals, collecting $8.2 billion but retaining the operations through a leaseback agreement. Las Vegas Sands leadership had other plans. Some industry insiders surmised the idea was set in motion by Adelson, who survived non-Hodgkin’s Lymphoma in 2019. He went a medical leave on Jan. 7 after resuming treatments for the disease but died five days later at age 87. Sheldon Adelson, who died in January at age 87 On his final earnings call in October, Adelson expressed his optimism in Macau’s economic recovery from the COVID-19 pandemic. An outright sale of the Las Vegas holdings means his widow, Dr. Miriam Adelson, who is the company’s largest shareholder with a 57% stake, will not be subject to licensing by Nevada gaming regulators. The discussions with the advisor culminated with the sale of 63 acres on the Strip that house 225,000-square-feet of casino space and 7,000 hotel rooms between the Venetian and Palazzo, and 2.3 million square feet of convention space from the Sands Expo and Convention Center. Another 19 acres on the backside of the Venetian are associated with the under-construction MSG Sphere, a $1.7 billion, 18,000-seat entertainment venue expected to open in 2023. Las Vegas Sands was clear its focus is halfway across the globe. “Asia remains the backbone of this company and our developments in Macau and Singapore are the center of our attention,” said Las Vegas Sands Chairman and CEO Rob Goldstein. “We will always look for ways to reinvest in our properties and those communities.” In the last five years, the company has spent $5.7 billion on renovations and expansion in Macau, which includes $2.2 billion to rebrand Sands Cotai Central as The Londoner Macau. Las Vegas Sands has already spent $1 billion of a planned $3.3 billion on expanding the non-gaming aspects of Marina Bay Sands in Singapore. Apollo is back on the Strip The deal brings together two companies associated with the 2017 bankruptcy reorganization of Caesars Entertainment. Apollo was one of the two private equity firms that invested $31 billion into a leveraged buyout of then Harrah’s Entertainment in 2008. By 2015, the renamed Caesars Entertainment, after suffering along with the rest of the gaming industry through the devastating recession, filed Chapter 11 with more than $24 billion in debt. Apollo lost its ownership in Caesars – which it had paired down over time – through the reorganization. VICI was born out the bankruptcy and took ownership of more than a dozen Caesars properties, which were leased back to the company. Today, VICI owns nearly 30 gaming properties leased to five operators. Apollo will be VICI’s sixth tenant, but it needed a little help from Las Vegas Sands, which is putting up $1.2 billion in seller financing in the form of a term loan credit and security agreement. Apollo is kicking in $1.05 billion. VICI is paying $4 billion for real estate and buildings. Apollo has current gaming industry investments, including Canada casino operator Great Canadian, IGT’s Lottomatica business, and a pending investment in Sazka, Europe’s largest lottery operator. But Apollo hasn’t been a casino operator. The current Venetian-Palazzo management team – headed by CEO George Markantonis – will continue to oversee the complex. “The Venetian has one of the best teams in the industry, focused on delivering world-class customer service and experiences,” Apollo Partner Alex van Hoek said in a statement. “We are honored and excited to support this talented and dedicated team and build upon the strong foundation set by Mr. Adelson and Las Vegas Sands.” Leaving Las Vegas Las Vegas Sands isn’t totally leaving Las Vegas. For now, the name and corporate headquarters will remain ensconced in Southern Nevada. Las Vegas Sands wants to use the $6.25 billion from the deal on other opportunities in the U.S., including a possible push into online gaming and online sports betting, the potential legalization of casinos in Texas, and an opportunity in New York City, where lawmakers are being pushed to move up the timeline on awarding an integrated resort license for Manhattan ahead of voter mandated 2023 start date. “There are also potential development opportunities domestically, where we believe significant capital investment will provide a substantial benefit to those jurisdictions while also producing very strong returns for the company,” Goldstein said Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.