Two Way Hard Three | Las Vegas Casino & Design Blog

January 23, 2007

Next Generation Casino Financing: Selling The Physical Plant

Posted by Hunter

This is a WSJ article so it requires a subscription or you'll have to find some other way to read it but it's recommended - interesting stuff.

Casinos Divide to Conquer

Basically the concept is that operators could sell their real estate holdings and then sign long term management deals with the new owners of the real estate. This lets them monetize these assets and many of these companies like Harrah's or MGM MIRAGE are sitting on billions in real estate.

From the article by Peter Sanders:

"Blackjack players who are dealt a pair of aces often "split" the cards into separate hands, giving them two shots at hitting the jackpot. Now, some casino companies are considering a split of their own: effectively dividing their real-estate assets from the operating companies that run the casinos."

Technorati Tags: , , , , , ,


Categories: Business of Gaming, Caesars/Harrah's, Las Vegas Strip, MGM Resorts International, Venetian/LV Sands, Wynn Resorts


Comments

Read archived comments (2 so far)
January 23, 2007 2:53 PM Posted by Tom M

This is what most luxury hotel operations do. They get a set of investors to build the physical hotel and they operate it for them. To me it is a "win-win" for both.

January 25, 2007 12:36 AM Posted by motoman

I guess that makes sense in a way....As we saw in the thread about the 5-star ratings, it's largely about the service, which is what the operators do. In this case of course the casino/hotel operations generate the income while the physical real estate kind of sits there, "on paper."

Of course there could be other, legal liability or tax reasons, why they would do this. Like a big airline not really "owning" their own aircraft, even though the planes have the company logo and aren't used by anyone else.

Interestingly (but off-topic), when I used to attend Macworld Expo NY the hotel building was onwed by one entity, I suppose as an investment, and the hotel operations were later contracted out to a major hotel chain. (The owners had originally run the hotel but I guess found this easier/cheaper/better.) Kind of the reverse situation.