LVS Looking For Opportunities To Exit Las Vegas And Switch To Asian Market

Article by : Helen Nov 9, 2020

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Taking into account the fact that Las Vegas Sands (LVS) is one of the biggest casino corporations in the world that provides luxury hotels, top-notch gambling venues, Meetings, Incentive, Convention and Exhibition (MICE) facilities, and many other amenities, a rumor that the Sheldon Adelson-led corporation is actively looking for buyers for some of its major facilities on the Las Vegas Strip was rather unexpected. To be exact, LVS is exploring all the possible variants of getting rid of 3 huge Las Vegas gambling venues. These are Palazzo, The Venetian Las Vegas, and the Sands Expo Convention Center. The company expects to get approximately US$6 billion out of the deal, but all of this leads to failure. Instead of trying to get rid of the facilities directly, the analysts suggest the company to make use of the real estate investment trust (REIT), which will allow it to focus on the Asian market without losing its presence in Las Vegas.

Sanford C. Bernstein analysts believe that completing the deal through the REIT is the most likely outcome for the Las Vegas Sands corporation. This is pretty much similar to the deal сut by MGM Resorts International earlier this year. The company sold some of its biggest facilities with the REIT being a purchaser and then leased them back. The sale-leaseback structure is a pretty common thing for those US casino operators who are looking for ways of selling their assets. Thanks to this structure, the operator can reduce its expenditure and benefit from a great amount of cash that can be invested in other activities.

We are not sure how much interest from strategic buyers there might be given the high absolute price, other reportedly available assets on the Strip, and the unique positioning of the properties. However, given the potential for a cheaper OpCo price through a sale-leaseback and historically relatively steady EBITDA, there could be other interest.

Overall, the analysts are positively considering the potential sale of the Las Vegas Sands facilities. First of all, the sale is happening at a time of political uncertainty in the USA, which pushes the corporations towards the changes. Second, stepping away from the “American-like” business models will give the company strength to operate on the Asian market and to switch to the higher ROI projects in Singapore and Macau. “It’s definitely not fun to be in a ‘storm eye’ – positioned amidst a variety of disputes/tensions, both domestic and foreign,” the experts say. Furthermore, picking up some massive cash injections will allow LVS to cover a major part (if not fully cover) of its US$4 billion debt. Having such a massive debt weighs down the company, especially when it comes to exploring new projects and markets.

Morgan Stanley’s Allen is excited to see the impact of the sale on the growth of the Singapore and Macau projects, as they generated more EBITDA in 2019 than the Las Vegas projects. While Las Vegas suffers from the coronavirus consequences, the Marina Bay Sands in Singapore has shown positive results in the 3rd quarter.

Anyway, despite refocusing on a completely different segment of the gambling industry that is considered to be “purely Asian”, the name of Las Vegas Sands will likely remain unchanged.