Bally’s Should Sell Tropicana Rights, Takeover Unlikely, Says Analyst
Posted on: April 9, 2024, 04:45h.
Last updated on: April 10, 2024, 10:13h.
Bally’s (NYSE: BALY) should consider selling its rights to the recently closed Tropicana Las Vegas to raise cash to support its Chicago casino hotel project, says an analyst.
![Tropicana Las Vegas, Raimond Irimescu, Watch & Jewelry Guild expo](https://www.casino.org/news/wp-content/uploads/2023/10/Trop-858x482.jpg)
In a new report to clients, Colin Mansfield, vice president of credit research for CBRE Credit Research, noted Bally’s role in the future of the Tropicana site isn’t clear. The casino hotel occupied nine acres, which is slated to be used for a Major League Baseball (MLB) stadium assuming the Oakland Athletics (A’s) execute a move to Las Vegas. The venue is scheduled to be demolished in October.
It is a net-negative carrying asset for Bally’s, but the attractiveness and potential value of the site has gone up since the time of purchase, in our opinion,” Mansfield told clients.
In April 2021, Bally’s announced the $150 million purchase of Tropicana’s nonreal estate assets and the start of a 50-year lease costing $10.5 million annually with Gaming and Leisure Properties (NASDAQ: GLPI), which owns the 35 acres associated with the now-shuttered Strip venue. Bally’s remains on the hook for that rent until it decides to make a move with its Tropicana rights.
What Bally’s Could Fetch in Tropicana Sale
Bally’s has expressed a willingness to entertain offers for its Tropicana lease with management noting it would consider offers on any of its assets if the bids are compelling.
Executives “called out a price of $9 million per acre as a reasonable price to offload the Tropicana site, which could bring in over $300 million of proceeds,” said CBRE’s Mansfield.
While $300 million would contribute to closing an $800 million shortfall on Bally’s Chicago project, Bally’s getting $300 million in a Tropicana transaction seems unlikely because it doesn’t own the land. It could sell its lease rights to another entity, but that could prove tricky with the fate of the property far from guaranteed.
For its part, GLPI, which does own the Tropicana land, has said it would consider a sale of that real estate. The real estate investment trust (REIT) has also previously said it could compensate Bally’s should it become clear that a new casino hotel development at the Tropicana site isn’t feasible.
Bally’s Sale Not Likely, Says Mansfield
Separate from the commentary on Bally’s possibilities for Tropicana Las Vegas, Mansfield said there’s a less than 50% chance the company accepts a $15 per share takeover offer from Standard General (SG).
The SG offer adds to the overhang on the credit, which comes at a critical time as Bally’s seeks financing to fund its large-scale Chicago development, weighs its options for the recently closed Tropicana Las Vegas, and works to improve the equity and credit narrative,” Mansfield said in his report. “At the surface, we believe the SG offer creates more noise and may distract from Bally’s Chicago financing efforts.”
Mansfield’s note was published on Monday, a day prior to reports surfacing that the special committee formed by Bally’s to evaluate the bid is holding talks with the suitor.
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Last Comments ( 4 )
Bally's chances now for a successful new casino are identical to a blank vaccine card. They don't have a shot!
Investors in Bally's are watching closely how BALY stock struggles to surpass even a $14.00 valuation. When will Bally's accelerating casino revenue that is hoped for actually be achieved? An important factor in generating that revenue includes retaining new customers. Bally's Chicago will get only one chance to make that first impression with each new customer. Ask Bally's current casino hotel guests nationwide if they are genuinely happy with their most recent visits to the many Bally's casino hotel properties throughout the country. Read the most recent online reviews for Bally's casinos posted in just the past six months. Ask those same patrons how soon they plan to return. Are they telling their friends, "That was really a great time at Bally's last weekend! It was over the top and I enjoyed everything about ithe place. Let's plan to go back there as soon and often as we can!" You won't find a single review like that, especially if you don't take the time to actually look for the current pulse check of what is going on right now. Maybe repeating the same actions over and over again while expecting different results will not contribute to the accelerating casino revenue that is being hoped for by Bally's. Those current customer reviews spell it out right now in real time.
With the Bally's financial chaos described above, how can Bally's possibly build a Major League baseball stadium in Las Vegas at the very same time as the Bally's Chicago $1.1 billion permanent casino? The City of Chicago has mandated that Bally's Chicago permanent casino is required to open by September 2026. The A's new baseball stadium in Las Vegas is supposed to be ready for the start of the 2028 baseball season. What will Bally's tell the Oakland A's when the team starts getting nervous about not seeing a plan for a ground-breaking in Las Vegas? Will Las Vegas soon open a betting line on the odds on the stadium's 2028 ribbon-cutting ceremony happening before opening day of baseball season that Spring? What will similar betting line odds be for the permanent Bally's Chicago casino to open by September 2026? Just don't go all in on either one of those bets!
Mike Pence had a more realistic chance of winning the 2024 Presidential election than Bally's now has in their hope to build a new casino anywhere. Strong emphasis here on the word "anywhere."