Last updated: April 12, 2024
An analyst advises Bally’s to sell Tropicana rights for cash to support its Chicago project. However, a takeover by Standard General seems unlikely, with less than a 50% chance, creating uncertainty amidst financing needs and discussions over Tropicana’s future. The report outlines potential challenges and strategies for Bally’s moving forward.
Main Body
By offering Colin Mansfield, an analyst from CBRE Credit Research, the concession rights to the recently closed Tropicana Las Vegas, CBRE would be able to get the money required for the Bally’s Chicago casino hotel project, as for the recent development of Tropicana into a Major League Baseball Stadium which might be considered when Oakland Athletics decide to relocate to Las Vegas.
Bally’s sees the project as a financial burden. However, Mansfield states that the additional value of the site after its purchase is now higher. In April 2021, Bally’s purchased Tropicana’s non-asset-backed assets for $150 million while entering into a 50-year lease contract with Gaming and Leisure Properties. Therefore, despite Bally’s giving up on Tropicana rights, it has to continue paying $10.5 million in rent on a yearly basis until it opts for the future of Tropicana rights.
Bally’s has shown its readiness to accept any offers for its Tropicana lease including resort properties. There might be a possibility that it would be engaged in piecing together offers from various assets. According to the board of directors, they would like to set a price per acre of $9 million for the Tropicana site, which would, in turn, add up to more than $300 million in return.
On the other hand, because Bally does not own the land, there are doubtful possibilities that such an amount will come from a Tropicana trade deal. While opportunities for selling the lease right are still available, doubts about the property’s future also still exist.
On the flipside, the owner of the land at the Tropicana which is a subsidiary of Gaming and Leisure Properties GLPI has revealed their readiness to discuss selling the real estate. The REIT further talks about the possibility of a situation in which the new hotel and casino development at the Tropicana site cannot be done. Here, Bally’s will be remunerated.
On a separate topic, analyst Mansfield furthered the discussion about the possible actions of Bally’s involving Tropicana Las Vegas, and she presented herself saying there is less than a 50% chance for the company to accept a takeover offer from SG at $15 per share.
Mansfield emphasized that this offer could complicate Bally’s financial situation as it seeks funding for its Chicago project and navigates decisions regarding Tropicana Las Vegas. He noted that the SG offer may divert attention from Bally’s efforts to secure financing for its Chicago venture. Mansfield’s observations were made public before reports emerged that Bally’s special committee was engaging in discussions with the suitor.
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