Leaving Las Vegas: Is Sands ready to become a true Asian company?

October 31, 2020 9:00 AM
  • Howard Stutz, CDC Gaming Reports
October 31, 2020 9:00 AM
  • Howard Stutz, CDC Gaming Reports

Sands China is the Macau-based, Hong Kong Stock Exchange-listed subsidiary of the Las Vegas-based, New York Stock Exchange-listed Las Vegas Sands Corp.

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The roles might soon be reversed or dramatically altered.

Confirmation by Las Vegas Sands that its leadership is having preliminary discussions with an advisor that could lead to a sale of the company’s Las Vegas Strip gaming and convention operations – valued at $6 billion – perplexed the investment community.

Most were dismissive.

“While there could be some strategic merit, we are cautious on the likelihood here, at this price, given limited liquidity or cash needs, a dearth of potential buyers, especially for a sizable operating company, and Las Vegas being the corporate center of the company,” wrote Bank of America gaming analyst Shaun Kelley.

Roth Capital Partners gaming analyst David Bain speculated what a sale might mean to Wynn Resorts and MGM Resorts International, the two other casino operators with businesses in both Las Vegas and Macau.

“A $6 billion potential price tag, on the surface, may show well for other operator-owned Las Vegas assets,” Bain said. “Further, some may read into a potential sale as a sign of overall lack of long-term confidence in Las Vegas made by one of its founding fathers of sorts.”

Sheldon Adelson and Miriam Adelson at President Trump’s inauguration in January 2017.

There is no question that Las Vegas Sands Chairman and CEO Sheldon Adelson, the 87-year-old billionaire who, along with his wife Miriam and family, controls roughly 58% of the company’s stock, is more upbeat about a recovery from COVID-19 issues in the company’s massive Macau operations than he is about Las Vegas.

He said as much on Las Vegas Sands’ third quarter earnings conference call on Oct. 21.

“I remain steadfast in my belief that Macau has the potential to become one of the greatest business and leisure tourism destinations in the world,” Adelson said. “As I have said on many occasions, we would welcome the opportunity to invest billions of additional investment dollars and extend our contributions to Macau’s diversification and evolution into Asia’s leading leisure and business tourism destination.”

Las Vegas Sands is already spending $2.2 billion in Macau to transform Sands Cotai Central into The Londoner Macau, a London-themed resort.

Prior to the pandemic shutdowns and business disruptions, Macau was much more important to Las Vegas Sands’ bottom line, contributing almost 65% of the company’s total 2019 revenues. The figure grows to 77% when the Marina Bay Sands in Singapore is factored into the equation.

With Las Vegas Sands spending $3.3 billion to expand its Singapore property, it’s clear the company has become an Asia-centric operation.

So what does that mean for Las Vegas?

On the Strip, Las Vegas Sands’ Venetian and Palazzo resorts and the Sands Expo and Convention Center cover 63 acres, 7,000 hotel rooms, more than 200,000 square feet of casino space, and 1.7 million square feet of convention facilities. All are interconnected on one campus. The attached 740,000-square-foot Grand Canal Shoppes retail space is owned by Brookfield Properties Retail Group.

A message on the Venetian on the Strip during the gaming industry shutdown in April/Photo via KLAS-TV

Las Vegas Sands also owns 19 acres east of the Strip where Madison Square Garden is building the $1.7 billion MSG Sphere, an entertainment complex.

“The square footage (and) land of the Las Vegas consolidated offering is significantly greater than almost all other assets the Strip, and each of the assets holds a unique position within the market,” Bain told investors.

Kelley said the company would be challenged to find a purchaser.

“The pool of potential buyers who can write $6 billion checks for any real estate asset is typically small,” Kelley wrote. “But post-COVID and with negative earnings today, we think it is even smaller and is coupled with much less favorable capital markets.”

Fitch Ratings analysts recently said it will take until 2024 before Las Vegas is back to its pre-COVID 2019 levels.

Las Vegas Sands has taken a one-two punch on the economic chin from the lack of airline flights into McCarran International Airport – especially travel from international destinations – and six months of zero attendance for meetings and conventions.

In July, Las Vegas Sands President Rob Goldstein said, “We’re in a world of hurt in Las Vegas.” On Oct. 21, he said it might be late summer 2021 before the company’s convention business shows any meaningful signs of life.

Maybe the Adelsons aren’t ready to wait things out.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.