Las Vegas on the sidelines as regional market casino mergers fall into place By Howard Stutz, Executive Editor, CDC Gaming Reports August 1, 2018 at 9:00 am More than $8.7 billion of regional casino industry mergers and buyouts are in various stages of completion. It might surprise some that both the Las Vegas Strip and the Las Vegas locals’ market aren’t factored into the current deal making. But the nation’s largest commercial casino revenue market remains on the minds of the investment community. During the recent batch of conference calls covering second-quarter earnings, several analysts asked if Las Vegas – particularly the locals’ gaming market, which covers the residential areas outside the Strip and downtown corridors – could draw the interest of prospective deal makers. Boyd Gaming CEO Keith Smith, whose company completed the last Las Vegas locals’ casino acquisition when it bought two North Las Vegas casinos and a Boulder Highway property in 2016, said there is still opportunity in Southern Nevada. “We’re not represented in all of what I’ll call the sub-markets of Las Vegas,” Smith said. “There are opportunities… it just depends on what becomes available to us.” Aliante Casino in North Las Vegas is owned by Boyd Gaming. (pHoto via Boyd Gaming) Union Gaming Group analyst John DeCree doesn’t see many locals properties that carry a “for sale” sign. Michael Gaughan will never part with the South Point, and Golden Entertainment acquired the two Arizona Charlie’s casinos just last year, leaving only the Rampart in Summerlin and the Silverton on Las Vegas’ south end as attractive targets. “A new entrant would be going up against Red Rock Resorts, Boyd and Golden Entertainment, but there are some opportunities left,” DeCree said. Red Rock Resorts, the corporate parent of Station Casinos, is spending $620 million on a renovation and expansion at the Palms that will go into 2019. A $191 million makeover of Palace Station will be completed this year. DeCree believes the company will then turn its attention toward developing some of its vacant Las Vegas land – namely a 71-acre site in southwest Las Vegas off Interstate 215. The site is closer to an Ikea furniture outlet than any casino. The company has four other potential casino development sites – ranging in area from 30 to 58 acres – but they have been land-banked for more than a decade. However, DeCree had another idea: Red Rock Resorts could buy a regional gaming operator. “Red Rock Resorts would be a logical candidate to merge with one of the large regional casinos if it were interested in expanding quickly across the map,” DeCree said. “Red Rock Resorts has no exposure outside of Nevada, except its Native American management contract in Northern California, and few regional operators, except Boyd, have any real exposure to Las Vegas locals.” For now, Boyd’s concentration is regional. The company is spending $575 million to purchase the operations of four Pinnacle Entertainment casinos – two in Missouri and one each in Ohio and Indiana – and $280.5 million on the Valley Forge Casino outside Philadelphia. The two largest pending purchases – Penn National Gaming’s $2.8 billion deal to acquire the rest of Pinnacle and Eldorado Resorts’ $1.85 billion acquisition of Tropicana Entertainment (in partnership with real estate investment trust Gaming and Leisure Properties) – solidifies those companies’ spots in the regional gaming rankings. The deals do include four Nevada casinos – Pinnacle’s two properties in Jackpot near the state border with Idaho, and Tropicana’s two casinos in Laughlin and Lake Tahoe. Even the Las Vegas Strip’s two largest operators, MGM Resorts International and Caesars Entertainment, have focused on deals outside Nevada. MGM is spending $850 million to acquire the Empire Casino and Yonkers Raceway, a facility located 15 miles from Times Square. Caesars spent $1.7 billion on two Indiana racetrack casinos. Penn’s buyout of 12 casinos controlled by Pinnacle did have a small impact on the company’s Las Vegas Strip resort. CEO Tim Wilmott said during last week’s conference call that expansion plans at the Tropicana “won’t be addressed” until 2019. “Our focus right now, in 2018, is to make sure we successfully close and integrate the Pinnacle business,” Wilmott said. For now, the regional companies are only exploring single-property “tuck-in” acquisitions – Penn is buying Margaritaville in Bossier City, La., and Eldorado is acquiring the Grand Victoria casino in Illinois. “It’s probably unlikely (Penn, Boyd, Eldorado) announce large scale acquisitions or developments until their respective acquisitions close,” DeCree said. As for the Strip, development hinges on the timing of the $1.4 billion expansion to the Las Vegas Convention Center on the former Riviera site, the transition of the SLS to the Grand Sahara, and the never-ending speculation on Malaysia-based Genting’s Resorts World Las Vegas, which is finally showing signs of construction life. Disclosure: I oversaw corporate communications for Golden Entertainment from July 2016 to May 2018. Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.