Back when Las Vegas Sands was waffling over the completion of Sands Bethlehem and rattling its tin cup for joint-venture partners, I suspected that Sheldon Adelson had lost his stomach for the project and would probably sell it. Sands has even been hinting at it for the past 18 months. At a rumored $1 billion, a price which may be more than the market can bear, Sands would probably just about recover the project’s construction cost. According to the Lehigh Valley Morning Call, Adelson spent $800 million on the place … but the price tag had hit $743 million long before the hotel was completed, the outlet mall built, etc. The company carries the property at a book value of $944 million and has been known to subtract gaming equipment and the price of Pennsylvania casino license from the project cost (as though one could open a casino with neither a license nor games). Its current ROI appears to be in the 11.5%-13% range. But Sheldon’s got a long and ultra-costly international wish list, so he’s evidently selling today to pay for tomorrow.
Adelson had incautiously bragged that his then-slot parlor would generate 17% ROI (that was without table games). It didn’t come close and Adelson has smarted unduly ever since, even calling the casino a “mistake.” In a convenient fit of amnesia, Bethlehem Mayor John Callahan lauded Sands by asking, “What other casino company could have continued building the way they did right through the recession?” Actually, Your Honor … they didn’t. But hey, what’s history? And unless Steve Wynn or Bart Blatstein suddenly gets a hankering to buy in Bethlehem rather than build in Philadelphia, Sands appears to be taking soundings in a shallow marketplace.
That’s part of why the timing appears so odd. There’s a case to be made that Sands would be getting out while the getting is good, when Sands Bethlehem’s performance is at its peak … but why? Resorts World New York hasn’t put a dent in Sands’ armor and Adelson’s dream of a Manhattan casino has gone up in smoke. New York Gov. Andrew Cuomo (D) wants new casinos placed upstate. Assembly Speaker Sheldon Silver (D) — and in the Empire State, he’s the only Sheldon whose opinion matters — would like them in the outer boroughs of New York City. And if those two ever agree, it still would be 2018 or so before serious, new competition manifests itself. So if Sands is dissembling and conducting a covert dog-and-pony show, it seems like a tetchy overreaction to things that might or might not occur. Not that we’ve ever known Sheldon to be tetchy or over-reactive, right?
To quantify how eccentric Sands’ timing is, the Bethlehem casino was up 8% last month, when the state’s casino revenue was -3% on a same-store basis (i.e., subtracting new Valley Forge Casino Resort). Nobody else did so well in percentage terms and, in dollars, Sands came within arm’s reach of the #1 spot in the state, only $2.4 million behind perpetual leader Parx Casino. (Rural rival Mohegan Sun Pocono Downs was not so fortunate, off 14%; new competition from Ohio bothered no one but Presque Isle Downs, which fell 25%.) With a 2012 gross of $438 million (up 16% from 2011), Sands Bethlehem is far and away one of the best performers in the state. Why dump it now, as market forces have swung decisively in Pennsylvania’s favor? Heck, by waiting until Penn National Gaming was tied up in REIT-ization (I have a theory about that … ) and Pinnacle Entertainment just got engaged to Ameristar Casinos, Sands execs look like they got caught napping. And if it’s an elaborate ruse to sell Venelazzo instead … well, who besides Genting Berhad has the liquidity and risk appetite to swing that deal? All of the U.S. biggies are either otherwise engaged or maxed out on their credit lines.
Anyway, this will put a kibosh on all the nonsense about Sheldon putting in a bid for Ameristar. That idea always was a hoot.