Las Vegas Sands Corp. should draw plenty of interest for Strip properties, analyst says

A view of the Palazzo and the Venetian, with green letters in honor of Earth Day, on the Las Vegas Strip Wednesday, April 22, 2020.

The list of potential suitors that may be interested in buying the Venetian, Palazzo and Sands Expo and Convention Center — now being shopped by the Las Vegas Sands Corp., according to published reports — is filled with big industry players, according to one analyst.

Chad Beynon, gaming and lodging analyst with Macquarie Group Limited, said his list included Australian company Crown Resorts, billionaire restaurateur and Houston Rockets owner Tilman Fertitta, Macau casino operator Galaxy Entertainment Group and Churchill Downs Inc.

“Buying Venetian and Palazzo, that’s not just buying a property on the Strip, that’s buying a convention business,” Beynon said. “The buyers that were looking at Caesars, they’re probably the same ones that would at least look at this. Tilman Fertitta was interested in Caesars, so I certainly think he’d be interested. On paper, it seems like that could work.”

Fertitta, the chairman and CEO of Landry’s Inc., one of the largest restaurant corporations in the U.S., also owns the Golden Nugget in downtown Las Vegas and has made known in the past his desire to own a property on the Strip. He is a third cousin of Lorenzo Fertitta and Frank Fertitta III, owners of Station Casinos.

Crown Resorts, led by Australian billionaire James Packer, has shown interest in entering the Las Vegas market in the past.

Several years ago, Crown had plans to build a resort called Alon Las Vegas on nearly 40 acres near the Fashion Show mall. Nearly three years ago, before the idea got very far off the ground, Crown sold the land to Wynn Resorts, which has yet to develop the parcel.

Churchill Downs Inc., which owns the famed racetrack in Louisville, Ky., that annually hosts the Kentucky Derby, is a publicly traded company with race and casinos operations in eight states.

Representatives for Tilman Fertitta, Crown Resorts, Churchill Downs and Galaxy either declined comment or did not return messages requesting comment.

A Las Vegas Sands spokesman late last month told Bloomberg “very early discussions” had taken place over the possible sale of the company’s Venetian, Palazzo and the Sands Expo and Convention Center. Bloomberg reported that Sands was “working with an advisor” on a potential sale of all three properties, which, according to the report, could fetch $6 billion.

A Caesars Entertainment spokesperson called the shopping of the Sands properties “big news” but declined to comment further. Caesars officials have been public with their desire to divest of a Las Vegas property, which only adds to the intrigue in the market now.

The sales talks come as Las Vegas faces unprecedented challenges in the face of the COVID-19 pandemic, which has depressed travel and tourism dollars worldwide. Las Vegas resorts mostly reopened in June after nearly 80 days of closures, but many of their offerings such as dining, shows and nightlife are still shuttered. Convention business, a stalwart of the Resort Corridor economy, has been virtually nonexistent since the onset of the pandemic.

As a result, Sands has only seen a fraction of the revenue normally generated in its Las Vegas properties — just $1.8 billion thus far in 2020 compared to $13.7 billion for the same period in 2019.

Some industry insiders wonder if Sands founder and chairman Sheldon Adelson, the 87-year-old billionaire and GOP megadonor long lauded for his prowess in the meetings and conventions realm, could be looking for a way out of the lagging Las Vegas convention business.

Through September, according to figures provided by the Las Vegas Convention and Visitors Authority, only about 1.7 million people had attended a convention here this year. That’s down from 5.1 million through the first nine months of 2019.

The drop in conventions and attendance means that the Sands Expo’s roughly 1.2 million square feet of exhibit and convention space has gone unused for much of the year.

“The convention industry is going to be one of the last things that comes back from this downturn,” said Beynon. “I guess, in some ways, there probably is some credence in thinking about this in terms of Sands wanting to get out of that business in Las Vegas, especially because they’re the only (Strip) company that hyperfocused on the convention segment.”

“Last year, (Las Vegas) accounted for about 15% of Las Vegas Sands’ revenues,” said Matthew Jacob, a casino and gaming industry analyst with research firm M Science. “I imagine, if COVID-19 hadn’t occurred, that would have gone lower over time.

There will be plenty of competition — old and new — once the convention business makes a comeback.

A $980 million mega-expansion to the Las Vegas Convention Center is nearly complete — the venue is expected to host CES and its 170,000 or so attendees in early 2022. The in-person portion of the event scheduled for January 2021 was canceled earlier this year due to COVID-19.

Other Strip resort companies have spent handsomely on convention center upgrades or expansions.

Caesars Entertainment this year completed the 650,000-square-foot Caesars Forum convention and meeting space at a price tag of $375 million.

Resorts World, the $4 billion-plus casino campus going up on the north end of the Strip, will also feature new meeting space. That resort is scheduled to open sometime in the summer of 2021.

Jacob wondered about the timing of selling the properties.

“It’s surprising to me that Las Vegas Sands would talk about selling those properties now given that results are so depressed due to COVID-19,” Jacob said. “You would think that would potentially impact what they could sell it for. If they waited six months or a year, that might offer a better idea of what’s going to happen with the Las Vegas market in general.”

During a quarterly earnings conference call last month, MGM Resorts International CEO Bill Hornbuckle said he hoped to once again be hosting conventions at MGM properties “early next year,” adding that “meetings and events at scale will eventually fully return” once the threat of the coronavirus subsides.

“We continue to believe that the material recovery in Las Vegas is dependent on the return of larger-scale conventions and entertainment platforms, along with significant air travel,” Hornbuckle said.

Asked if MGM would be interested in the Sands properties, Hornbuckle said MGM “has enough of Las Vegas right now,” adding that the idea of Sands exiting the Las Vegas convention market could end up being a positive for his company.

“They’re very good operatives, good competitors when it comes to the convention business,” Hornbuckle said. “If somebody else comes in that’s not as strong, I think that bodes to our benefit. I think if they get anywhere near the $6 billion they’re talking about, that would speak well for Las Vegas, fundamentally, in the long run.”

While Hornbuckle indicated that MGM Resorts wouldn’t likely be interested in making a play for the Sands properties, locally-based spinoff real estate investment trust MGM Growth Properties said it would have interest in acquiring additional Las Vegas properties, said James Stewart, its CEO.

“We’re long-term believers in Las Vegas,” Stewart said. “Out of any (real estate investment trust), I think we’re the most aware of the trends on the Strip, given that we’re in Las Vegas and 50% of our portfolio is on the Strip. The city, in particular those properties (on the Strip), will be set up for very significant growth once we get to the other side of COVID. We think a deal could get done on the Strip, and we’d be interested.”

Stewart wasn’t specific about whether MGM Growth had interest in the Sands assets.