Bally's should sell Tropicana rights, analysts say, but acquisition unlikely
Bally's (NYSE: BALY ) should consider selling the rights to the recently closed Tropicana Las Vegas hotel to raise funds to support its Chicago location, an analyst says casino hotel project.
In a new note to clients, Colin Mansfield, vice president of credit research at CBRE Credit Research, noted that Bally's role in the future of the Tropicana site remains unclear. The hotel-casino sits on nine acres and will serve as a Major League Baseball (MLB) stadium if the Oakland Athletics (A's) move to Las Vegas. The venue is scheduled to be demolished in October.
This is a net negative balance sheet for Bally’s but we believe the desirability and potential value of the site has increased since the purchase,” Mansfield told clients.
In April 2021, Bally's announced a $150 million acquisition of Tropicana's non-real estate assets and the commencement of a 50-year lease from Gaming and Leisure Properties (NASDAQ: GLPI), which owns 35 acres, at an annual fee for $10.5 million associated with the now-closed strip joint. Bally’s must continue to pay rent until it decides to relinquish its Tropicana rights.
Bally's at Tropicana Sale
Bally's has expressed a willingness to consider lease offers for its Tropicana, with management noting that it would consider offers for all of its assets if the offer was attractive.
CBRE's Mansfield said executives were "demanding $9 million per acre as a reasonable price to dispose of the Tropicana property, which could generate proceeds of more than $300 million."
While $300 million will help cover an $800 million deficit on Bally's Chicago project, Bally's amount in the Tropicana deal is $300 million because it doesn't own the land. It could sell its leasehold rights to another company, but that might be difficult because the fate of the property is far from guaranteed.
GLPI, which owns the Tropicana property, said it would consider selling the property. The real estate investment trust (REIT) has also previously said it may compensate Bally's if developing a new casino hotel at Tropicana proves unfeasible.
Mansfield says Bally is unlikely to be sold
In addition to commenting on Bally's choice of Tropicana Las Vegas, Mansfield said there was less than a 50 percent chance the company would accept Standard General's (SG) $15 per share takeover offer.
"SG's takeover bid adds to its debt load and comes at a critical time as Bally's seeks financing for its major Chicago project, weighs options for the recently closed Tropicana Las Vegas and works to raise equity," Credit Narrative, Mans Field said in his note. "On the face of it, we believe the SG offering will draw more attention and potentially undermine Bally's financing efforts in Chicago. "
However, the analyst's report was published on Monday, a day before reports emerged that a special committee set up by Bally's to assess the offer was in discussions with the applicant.
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Source: www.casino.org
