Confirmation on Tuesday of talks to sell the Las Vegas venues of Las Vegas Sands Corp (LVS) with a circa US$6-billion price tag, could eventually lead to a sale and leaseback structure, featuring a real estate investment trust (REIT) for the properties, said some investment analysts.
The U.S.-listed gaming group is the parent of Macau casino operator Sands China Ltd, and also parent of the promoter of the Marina Bay Sands casino resort in Singapore.
Sale of the parent’s Nevada assets could see a “possible transaction scenario” involving “a sale-leaseback transaction with a gaming REIT,” said analysts Vitaly Umansky, Kelsey Zhu and Tianjiao Yu, in a Tuesday note from brokerage Sanford C. Bernstein Ltd in Hong Kong.
They added: “The sale-leaseback structure has been commonplace for casinos in the United States for some time with for example, MGM Resorts International, Caesars Entertainment Corp and Penn National Gaming Inc having done such transactions.”
Las Vegas Sands runs the casino resorts the Venetian Las Vegas and the Palazzo, as well as Sands Expo and Convention Center, which are all located by the Las Vegas Strip. The gaming group “owns the land assets” concerned, according to Sanford Bernstein.
A memo from Bank of America Corp said it was “cautious” about whether disposal of U.S. assets might go ahead.
“The pool of potential buyers who can write US$6-billion cheques for any real estate asset is typically small, but post Covid[-19] and with negative earnings today [currently], we think it is even smaller and is coupled with much less favourable capital markets (the MGM [Resorts] deals mostly utilised commercial mortgage-backed securities financing),” wrote Bank of America.
Sanford Bernstein observed that Las Vegas Sands’ management had expressed a “cautious view on recovery in Las Vegas, and the Las Vegas operation makes up an almost immaterial portion of Las Vegas Sands’ value and profits”.
That institution added the Las Vegas operation represented “less than 10 percent of Las Vegas Sands’ equity value and less than 10 percent of its consolidated EBITDA [earnings before interest, taxation, depreciation and amortisation].”
The brokerage further noted Las Vegas generated “only US$487 million,” of the casino group’s property EBITDA in 2019, “compared to US$3.2 billion in Macau and US$1.7 billion in Singapore”.
David Bain, an analyst at Roth Capital Partners LLC, also cited in a Tuesday memo “perception Las Vegas assets have become non-core,” to the gaming group.
Mr Bain mentioned some other arguments in favour of disposal. They included “early resumption of gaming’s preeminent public equity dividend payer” – a reference to the fact Las Vegas Sands has currently suspended its dividends as a cash conservation step amid the business disruption wrought by the pandemic.
Others were: “Headquarter transition to Macau/Asia,” that would be “potentially beneficial in wake of [Macau] concession… negotiations,” with the current rights due to expire in June 2022.
Mr Bain also identified as a positive reason for a Las Vegas disposal, “even greater ability to invest in significant worldwide gaming assets, which could offer far larger and stronger returns than its current basket of Las Vegas assets.”
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