Pinnacle/GLPI deal gets OK; Hard Rock courts Cypriots

Shareholders of Pinnacle Entertainment have voted to approve a deal whereby all but one of the company’s physical assets would be sold to real estate investment trust Gaming & Leisure Properties, while Pinnacle would continue to exist as a casino-management company. This may constitute the acid test of the major qualm that surrounds casino REITs: that high rents may discourage reinvestment in the properties themselves, of which Pinnacle’s are some of the best-regarded in the business. (Unite-Here is predicating its opposition to the merger on precisely this fear.) The deal is valued at $4.1 billion. Although the result of the consolidation will be that GLPI will own multiple properties in the same market (including two of three in Baton Rouge), the REIT is in the catbird seat, collecting rent while competing managerial entities like Pinnacle and Penn National Gaming slug it out for market share. The merger has passed muster with Indiana gaming regulators but the Louisiana Gaming Control Board is still pondering it.

* Did you know that MGM Resorts International considered converting a hotel tower at Circus Circus Reno into student housing? You learn the darndest things from earnings calls. Eldorado Resorts closed 2015 on a strong note, with 4Q15 revenues up 2% and cash flow increasing by 21%. Although net revenue for the year was almost 15 less than 2014’s, CEO Gary Carano told investors, “We had an outstanding fourth quarter and entire year driven by higher casino volumes across all the properties and especially in Reno [where] increased average daily hotel rates drove significant increases in revenue.” The shortfall from 2014 can be laid at the feet of Mountaineer Casino, Racetrack & Resort, sandbagged by a smoking ban and amped-up competition in Ohio. Carano credited a new Brew Brothers gastropub (horrid term) for an 11% jump in fourth-quarter revenue for Scioto Downs. Revenues from Circus Circus Reno began flowing into Eldorado’s coffers in 4Q15, the transaction with MGM having been closed in the waning months of last year.

Priorities for the new year are to eliminate cost redundancies at Eldorado’s three Reno properties and to reduce leverage. Carano foresees a transformation of the Reno market, as companies like Tesla and Switch relocate to the Biggest Little City in the World. As for Circus Circus, Eldorado will redo its rooms (no student housing, either, but University of Nevada-Reno students are still welcome to use the parking garage), its midway and its restaurant offerings. “We’ll give Circus Circus love in the form of significant dollars spent in the next three years,” said Carano. He was sanguine about the Reno market’s prognosis in re Native American casinos, saying that the worst (2003-04) was well behind it and that now California casinos are feeding upon each other.

* One territory in which tribal casinos are faring better is Connecticut. Not only was coin-in significantly higher at Mohegan Sun, slot revenues rose 13%. Similar figures were reported for Foxwoods Resort Casino, were slot win was up 15%. In the battle for sheer dollars, Mohegan Sun was the victor, with $588 million in slot revenue against Foxwoods’ $441 million. It will be years before we know if destination casinos in Massachusetts can put a dent in those numbers but, so far, Plainridge Park isn’t posing any threat.

* Las Vegas‘ Hard Rock Hotel & Casino — in tandem with Melco International — has emerged as one of three finalists for a casino contract in the Greek portion of Cyprus. It’s a plum deal: a 30-year contract with 15 years of exclusivity, plus the right to build three slot parlors and one satellite casino. But it’s not a slam-dunk for HRH and Melco. Competitors include NagaCorp., most noted for its Cambodia casino, NagaWorld (pictured) and Bloomberry Resorts Corp., much in the news lately for money-laundering at its Solaire Resort & Casino, near Manila. In return for that cushy contract, the winning operator would have to commit to 500 top-quality hotel rooms, 1,000 slot machines and 100 tables. That shouldn’t be a heavy lift for HRH and Melco, if they come out on top.