Penn National Is Looking for Potential Tropicana Buyers (Again); Virgin Hotels’ Opening Is Delayed

Article by : Helen Jan 20, 2021

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In the wake of an unprecedented slump in visitation (it is the lowest since 1993) caused by COVID-19, the Las Vegas casino landscape keeps changing. Some companies seek to sell some properties to get their hands on some oh-so-needed cash, while others use the opportunity to expand their portfolios.

Penn National Gaming is among the first ones. Rumors that first surfaced back in October last year turned out to be true: the casino operator is looking for someone to offload its Tropicana property to, as confirmed by CBRE Vice President Michael Parks.

There are no details regarding how much Penn National would like to get from the deal or who could be on the list of potential buyers.

This is the third time Tropicana Las Vegas is put up for sale over the past decade. Penn National Gaming bought it in 2015 for $360 million (and it was called “the biggest deal of 2015” back then). But the pandemic made the company’s life so hard that it struggled for cash amidst the forced closures. So, Penn National sold Tropicana to Gaming and Leisure Properties, its spin-off real estate investment fund, in April last year for $337.5 million in rent credits in return (equivalent to 5 months of rent, according to Bloomberg).

The casino operator retained the operation rights for the next two years, so Gaming and Leisure Properties essentially became Penn National’s landlord until the two years are over or Tropicana is sold. Both Penn National Gaming and Gaming & Leisure Properties seem to be in favor of distancing themselves from the highly volatile Las Vegas market and concentrate on regional operations to ensure the companies’ survivability. Hence, they seek to sell Tropicana.

If we look at the latest financial performance stats, Penn National Gaming seems to be doing a lot better than many of its counterparts, mostly due to its focus on regional operations. In 3Q2020, the company brought in $1.1 billion in revenues (down from almost $1.4 billion in 3Q2019), and its adjusted EBITDAR was higher than a year before – $452.6 million, compared to $407.9 million in 3Q2019.

So, even though we can observe some economic slowdown, the casino operator’s bottom line remains in the black – and it’s not something many casino operators can boast. Another awaited change to the Las Vegas casino landscape – Virgin Hotels Las Vegas grand opening scheduled for January 15 – it looks like we’ll have to exercise some patience and strap in for more waiting.

Several days before the expected opening date, reports started circulating, saying that the event will be delayed for an unspecified period of time. The reason behind the delay is easy to guess – the unfavorable pandemic-induced market situation. Virgin Hotels Las Vegas replaced Hard Rock Hotel that stood in the east of the Strip for 25 years. Virgin Hotels acquired the property in March 2018 for $500 million. Hard Rock was initially planned to get closed in February 2020 for renovations and reopened under the Virgin brand eight months later.

While it did close its doors as expected, its scheduled November 2020 grand opening was put off until January 15, 2021, due to the pandemic, even though the renovation works were finished according to the schedule. Now, we’ll have to look out for another announcement from Virgin Hotels to know when the company plans to open the new resort’s doors.