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Red Rock Resorts To Acquire Palms

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Palms Casino Hotel Towers
Palms

It was a rumor yesterday and it’s confirmed today.

Red Rock Resorts Announces Agreement to Acquire Palms Casino Resort

LAS VEGAS–(BUSINESS WIRE)– Red Rock Resorts, Inc. (“Red Rock Resorts”, “we” or the “Company”) (NASDAQ: RRR) today announced that Station Casinos LLC has entered into a definitive agreement to acquire the Palms Casino Resort (the “Palms”) in Las Vegas, Nevada for total cash consideration of $312.5 million.

“With the acquisition of the Palms we gain a leading gaming asset in Las Vegas with key strategic benefits in the Las Vegas locals market and close proximity to the Las Vegas Strip,” said Marc Falcone, Executive Vice President, Chief Financial Officer and Treasurer of Red Rock Resorts. “With its appeal to both Las Vegas residents and tourists alike, the Palms is a hybrid gaming property that is uniquely positioned to benefit from the strong economic trends in Southern Nevada and record visitation levels in Las Vegas. With our experience owning and operating other hybrid offerings in Las Vegas, it is a compelling strategic addition to our portfolio of properties and we look forward to welcoming the Palms’ team members to our Company.”

“We are very proud of our team members for their hard work, dedication and commitment to guest service and the community,” said Palms Chief Executive Officer Todd Greenberg. “We are extremely excited for all the great opportunities our team members will have with Red Rock Resorts and Station Casinos.”

Factoring in anticipated synergies, the Company estimates that the Palms will generate $35 million in EBITDA during the Company’s first full year of ownership, resulting in an implied multiple of 8.8 times EBITDA for the transaction. The Company expects the acquisition to be accretive to earnings per share and free cash flow positive in first full year of operations.

Located directly across I-15 from the core of the Las Vegas Strip, Palms features a 95,000-square-foot casino with approximately 1,250 slots and 48 table games, a race and sportsbook, approximately 710 hotel rooms across two towers with 85 suites and 19 penthouses, 599 AAA Four Diamond award-winning condos, 15 fine dining and casual restaurants (including the award-winning N9NE Steakhouse and Nova Italiano), 60,000 square-feet of meeting and convention space, Ghostbar Nightclub, the 2,500 seat Pearl Theater, luxury spa, two acre Palms Pool and year-round Palms Place Pool, and a 14 screen Brenden Theatres & IMAX movieplex.

The transaction is expected to close during the third quarter of 2016, subject to the satisfaction of customary closing conditions, including the receipt of all required gaming approvals and the expiration of the waiting period under the Hart-Scott-Rodino Act.

Milbank, Tweed, Hadley & McCloy LLP served as legal advisor to Red Rock Resorts, Inc. for the transaction. Macquarie Capital served as financial advisor and Willkie Farr & Gallagher LLP served as legal advisor to FP Holdings L.P. dba Palms Casino Resort.

The Company will discuss the transaction during its scheduled first quarter 2016 earnings conference call on Thursday, May 12 at 4:30 p.m. ET.

Steve Wynn Just Said F U To Gamblers

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Steve Wynn Is The Worst Person In The World On MSNBC
Steve Wynn Is The Worst Person In The World

An oldie but a goodie above.

On last week’s Wynn Resorts earnings call Steve Wynn went into a long discussion of how Wynn Las Vegas is adjusting their casino floor to maximize revenue. Here’s an excerpt of the call from Vegas Hotel News.

I also rearranged the floor in the casino to put our specialty games that are very popular with the public – that have a higher margin – and I put them in the hundred percent location. And I moved my games with less of a margin to secondary locations. Those changes have worked out favorably to us in the past three weeks, and that kind of re-examination… our slot floor has been re-done. We win more money with less games now. These are some of the reasons why we make more money than anybody else in Las Vegas.

You can read the full segment on gambling at Wynn from the Wynn Resorts earnings call from Vegas Hotel News.

Every business has the right to maximize their earnings potential. At the same time every customer has the right to take their money elsewhere.

I haven’t gambled at Wynn in almost a year and I don’t see myself returning any time soon. The emphasis on 6:5 blackjack, 2x craps (info on Vegas Chatter), poor video poker pay tables and the focus on prominently featuring games with a high house edge really isn’t of interest to me.

I’ve always liked gambling at Wynn and especially Encore. While I’m looking forward to the renovations at Encore (details on Travel Vegas) and I love dining at SW Steakhouse I’m not sure I want to support Steve Wynn any time soon.

Nightclub Revenue In Vegas Will Shock You

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Steve Aoki At Hakkasan Las Vegas
Steve Aoki At Hakkasan

I know casinos and Vegas but I’m not an investor. Sometimes when I see Motley Fool or other investing websites break out revenue in certain ways I can be surprised.

We all know that nightclub revenue is big for Las Vegas casino operators. What is surprising in this chart is seeing how much of the overall revenue nightclubs are for some of the casino operators.

Las Vegas Casino Nightclub Revenue
Oontz, Loot, Oontz, Loot

Hakkasan (MGM Grand) , XS (Wynn) and Marquee (Cosmopolitan) are the Big 3 of nightclubs in Vegas. It comes as no surprise that their revenue last year was about the same (see full article for specifics).

Hakkasan revenue seems to be ahead of the pack this year. This shouldn’t come as much of a surprise as Hakkasan is the largest nightclub with the most famous DJ’s and a marketing arm that will use landmarks like the Bellagio fountains to promote you (See Tiesto show).

Besides the percentage of overall revenue for nightclubs there isn’t much in the chart that’s a surprise. That said, it’s always interesting to see casino revenue examined in different ways.

Photo: Hakkasan 

Vegas Is Getting Younger Quickly, You’re Not Aging That Fast

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Vegas Is Getting Younger
Say Goodbye To These Folks

John Unwin, CEO of Cosmopolitan of Las Vegas, did a sort of strange interview with Bloomberg last week. He was lobbed some softball questions about Las Vegas before being asked about Atlantic City, a market he’s never worked in. Since the Cosmo or any of his previous jobs have no connection to Atlantic City he seemed very lost. That part of the interview was a bad look for Unwin and Bloomberg.

The softball questions surrounded why Las Vegas is in such good shape. One of the interesting bits of information from this interview is that the median age of the Las Vegas customer has gone from 50 To 44 in the past two years. That’s a huge drop.

The large decrease in median age makes sense when you look at all of the new properties and club openings. As the reinvention of Vegas continues it seems as though that median age will continue to fall.

After G2E it seems as though all marketing focus has switched to millennials. If  there is any success with this group of consumers the median age of the Las Vegas customer will continue to surge downward rapidly.

If you feel old when you’re in Vegas today get ready to feel really old in a couple of years.

You can see the complete 5 minute interview below for more information and context.

Photo: Lehigh Valley Live

Planet Hollywood Feeling The Britney Spears Effect To The Tune Of $20 Million

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Britney Spears "Piece of Me"
Britney Spears “Piece of Me”

If you’ve been reading any of my work over the past few years you know that I like Britney Spears a bit too much. We go back to the swamps of New Jersey just like my ill-fated love for the New York Jets.

Anyway, I loved the “Piece of Me” show at Planet Hollywood (see my review on Vegas Chatter) and I’m happy to see it succeed. Despite the avalanche of negative reviews the shows are packed and Britney Spears is making bank for Planet Hollywood.

she’s boosted the hotel-casino’s annual operating earnings by about $20 million. Now we understand why the first run of her contract ending next year was renewed for an additional two years.

Having seen Britney a couple of times before “Piece of Me” I knew not to expect much (if any) singing and lazy dancing. I did expect to here some awesome JAMS (here’s a link to the original setlist on spotify that I’m listening to right now).

I didn’t expect such a great audio-visual experience at the Axis Theater. It really is a great theater that would be great for a band with progressive instrumentation like Tool.

I passed up an opportunity to see Britney a couple of weeks ago because I know the show isn’t going anywhere. I will definitely see “Piece of Me”, or a new version of the show, but probably won’t drop $100+ for the show that’s a live version of that spotify playlist.

Wynn And Las Vegas Sands Gambling Revenue Per Day Might Surprise You

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Las Vegas Sands Gambling Revenue
The Venetian

The casino always has the advantage in gambling so they’re guaranteed to make money as long as they have customers. The amount of money made in a casino probably wouldn’t surprise anyone. When we see gaming revenue it’s usually in bulk form from quarterly reports.

Sure the bulk numbers are impressive but when you see the table game and slot machine revenue from Wynn and Las Vegas Sands (The Venetian and The Palazzo) broken down by day per table (updated for clarity) by fool.com you might be surprised.

Las Vegas Sands

  • Table Game Revenue Per Day – $3,737
  • Slot Machine Revenue Per Day – $185

Wynn

  • Table Game Revenue Per Day – $8.130
  • Slot Machine Revenue Per Day – $276

These numbers are impressive but are dwarfed by similar revenue from Las Vegas Sands and Wynn Macau casinos (see full chart here).

Wynn has some of the biggest baccarat games in Las Vegas so the difference in table game revenue between Las Vegas Sands and Wynn doesn’t come as much of a surprise. The difference in slot machine revenue is a bit surprising since Las Vegas Sands has so many more slot machines between their properties.

Whatever the case people are losing a lot of money every day gambling in these casinos. If we do win the casino will just sue for their losses anyway.

Jay-Z, Magic Johnson And Now Sam Nazarian

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Sam Nazarian SLS Las Vegas Sahara Photo
Sam Nazarian

At a licensing hearing for SLS Las Vegas a couple of weeks ago it was noted that Sam Nazarian’s  SBE only owns 10% of the hotel opening this week.

Stockbridge owns 90 percent of the SLS Las Vegas while SBE Entertainment owns the remaining 10 percent but does not have any voting rights.

This surprised and confused many people as Sam Nazarian has been touted for “Shaking Up Las Vegas” since SLS Las Vegas was announced.

In just three months, on August 23, Life will open as the centerpiece of Nazarian’s new SLS Hotel and Casino. It’s where rowdy bachelorettes and drunk conventioneers will buy $1,000 bottles of champagne while aerialists perform overhead. 

Yes, SLS Las Vegas is being touted as Sam Nazarian’s hotel despite his company’s small ownership stake. As I’m writing this there’s a hearing for SLS Las Vegas’ gaming license where it was clarified that SBE/Nazarian “work for Stockbridge” and that technically Rob Oseland will really be running the ship day to day at SLS Las Vegas..

Sam Nazarian is a figurehead and spokesperson. He’s the famous name that SLS Las Vegas can use to market itself. In today’s media landscape this small ownership stake by a spokesperson should come as no surprise to anyone.

Jay-Z owned less than 1% of the Brooklyn Nets when he was called an owner. Magic Johnson owns the Los Angeles Dodgers but owns less than 3% of the team.

Even though calling these people “owners” seems like false representation it isn’t. They are “owners” hired as spokespeople. Jay-Z (especially) and Magic Johnson bring a cool factor and little more to their businesses interests. This arrangement benefits both parties as it offers something neither would have without each other.

Nazarian and SBE offer almost the same thing to SLS Las Vegas but they actually bring some kind of business portfolio to SLS Las Vegas. That’s probably why they own 10% and not less than 3% of the business.

Photo: Review Journal

Sam Nazarian SLS Las Vegas Sahara Photo
Sam Nazarian

 

These Are American’s Favorite Casino Games

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I love a good survey. Today’s question from the American Gaming Association is a simple one.

What’s your favorite casino game?

  • slots 48%
  • blackjack 16%
  • none 14%
  • poker 6%
  • roulette 5%
  • video poker 4%
  • craps 4%
  • sports book 2%
  • baccarat 1%

These results are from casino customers across the country. Since slot machines and video poker are combined in revenue reports this almost makes perfect sense.

The only minor surprise is that poker sneaks in with 6%. If it wasn’t such a popular home game I might be more surprised.

What do you think of these results?

Caesars Turmoil

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Caesars Entertainment Chapter 11
Caesars Entertainment Chapter 11?

To say this was a chaotic weekend for Caesars Entertainment would be an understatement. On Friday they announced that they were leaving a casino project in Suffolk Downs, MA.

Partner Suffolk Downs asked Caesars to withdraw following an investigation by the state’s gaming commission, according to a statement yesterday from the horse-track operator, which didn’t didn’t specify the findings and said it was confident it would receive approval on its own.

Whoa. Before anyone could speculate what was happening Caesars Entertainment announced that they were cutting ties with Gansevoort. There would be no Gansevoort Las Vegas.

Caesars Entertainment Corp. is ending its partnership with Gansevoort Hotel Group to transform Bill’s Gamblin’ Hall & Saloon into the luxury Gansevoort Las Vegas on the Strip.

Caesars executive vice president Jan Jones confirmed the move on Sunday, two days after the Suffolk Downs ownership group said it had dropped partner Caesars Entertainment from its bid to build a $1 billion resort casino at the Massachusetts racetrack.

In other words it seems as though Massachusetts wouldn’t allow Suffolk Downs to proceed with Caesars, in part, due to their ties with Gansevoort because they have ties to the Russian mob.

The Las Vegas Review-Journal reports the move came after Massachusetts gambling investigators, during routine background checks of Caesars’ business partners, found an investor in New York-based Gansevoort was alleged to have ties to organized crime in Russia.

This sounds like a scene from on of the awful Netflix Instant movies I watch. The hotel project formerly known as Gansevoort will continue. The rarely reliable Robin Leach says that Giada’s restaurant and Drai’s nightclub business will continue as things move forward.

The Las Vegas project will continue for Caesars seeking a new partner. I don’t think Kimpton Hotels will be a demographic match for what Caesars was trying to put together for this property but I’d love to see them have a hotel in Las Vegas.

The Suffolk Downs casino project will also proceed with a new partner. More on that another time.

Throw all of this into the pot of reasons for people to speculate about Caesars filing for chapter 11. I don’t think it’s a matter of if Caesars will file for bankruptcy, only a matter of when. All of this doesn’t help.

PS: If you get bored you can check out a blog I made a few years ago (pimpin at kimpton) after a fantastic stay at Hotel Monaco in Chicago.

Update: Now it seems as if there are possible money laundering problems.

Update 2: There was a shooting at Bally’s Las Vegas this morning.

How Caesars Bankruptcy Can Benefit Everyone

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Caesars Entertainment Chapter 11
Caesars Entertainment Chapter 11?

Rumors about Caesars Entertainment filing for chapter 11 bankruptcy protection gets louder every day. It’s easy to poke fun at a business failing but the ramifications from filing for bankruptcy can be good for both Caesars and casino customers. Read chapter 11 details here, you can read about more debt restructuring here and you can read about their unrealistic projections for Suffolk Downs here.

I want to look at the day-to-day operations that affect me and people like me. When/If Caesars files for bankruptcy they’ll be forced to deal with their outstanding debt problems. The easiest way for them to pay down their debt will be to sell off some of their assets.

Some of the assets that may be sold include Bally’s and Showboat in Atlantic City. These properties have long been rumored to be on the market for years but they may have to finally pull the plug to get some quick cash.

Las Vegas may see Caesars shed a combination of Bally’s, Paris and Rio. I’d be surprised if Paris was a sold but it’s one of Caesars most valuable non-core Las Vegas hotels and they need cash. I think Flamingo and Harrah’s are too close to The Linq and The Quad to be shed. These properties give Caesars a great chance of capitalizing on the traffic in the area.

I’m not sure about Caesars properties in other markets but you’d have to imagine a few of those will go too. I’m more focused on AC and LV but you probably know that already.

By shedding some properties in AC and LV Caesars will be able to focus on creating a better value for their customers at the properties they still own. In theory a leaner staff would focus on housekeeping and maintenance while corporate focused on creating a better product for the customer.

Additionally by selling properties in each market Caesars will bring in more competition. Competition always benefits the customer. Increased competition will force all hotel operators in each city to be on their toes to stay ahead. Again, that’s theory.

Not only will increased competition in Atlantic City and Las Vegas provide better casinos and hotel experiences but they will also add new players clubs that would link other cities and casinos throughout the United States with Atlantic City and Las Vegas. The new customers will benefit all casino operators – not just the property owners bringing in the customers.

When all is said and done I envision Caesars having the potential to come out of bankruptcy a tighter company able to provide more value for their casino customers. I also envision increased competition in Atlantic City and Las Vegas which will benefit casino customers by cleaning up old properties and offering new players club reward opportunities.

Even though it’s embarrassing it looks like Caesars filing for bankruptcy may be a win-win.

Note: Caesars hasn’t filed for bankruptcy, this is just speculation for when/if they do.

Copyright © 2017 Marc Meltzer & EDGe Vegas