Penn gets bigger; Cool February in Nevada

Not many casino companies would double down on the Tunica market, let alone triple down. However, Penn National Gaming has an appetite for risk plus a track record of taking distressed properties and turning them around. So, in addition to running Hollywood Casino Tunica, it will soon be in charge of Resorts Casino Tunica and Bally’s Casino Tunica, in a transaction announced this morning. Despite the latter’s brand name, it is not a Caesars Entertainment property. “Bally’s” is sublicensed by outgoing owner RIH Holdings. Penn and partner Gaming & Leisure Properties Inc. snapped up the pair of gambling houses for a bargain-price $127 million. (The low price tells you something about depressed the Tunica market has become.) Resorts defaulted to its creditors several years ago when Colony Capital over-leveraged the property, under CEO Tom Barrack‘s reckless leadership.

“We view this as a good, albeit little, accretive deal for both companies, and while Tunica is not a great/growing market, we view the purchase price as relatively attractive,” wrote JP Morgan gaming analysts, who said there would be “modest” capital reinvestment in two properties. Added Deutsche Bank‘s Carlo Santarelli, “We believe the combination of the now three assets can help overall margins in the region.” Bally’s has the advantage of being closest to Memphis while Resorts is Hollywood’s next-door neighbor, so there may be some synergies to be captured there. GLPI will own the physical assets of the two casinos and Penn will operate them, with both companies splitting the purchase price. These are mid-sized casinos: Bally’s has 947 slots and 16 table games while Resorts owns 800 slot machines and 9 table games. Penn’s definitely taking a gamble here but let’s give them the benefit of the doubt and presume they see opportunities that are not immediately apparent to others.

Elsewhere in the Penn/GLPI empire, lead performer Hollywood Gaming at Mahoning Valley Race Course is getting rewarded. Fifty new VLTs are going in and Penn is adding a high-limit area. The Ohio racino recently nipped Plainridge Park for the highest win/slot/day in all of Penn’s markets.

* A shorter February and an earlier Chinese New Year conspired to pull Nevada gaming revenues down 4.5%. Slot players on the Strip put 2% less coin into the one-armed bandits but revenue fell 5%.  The house was unluckier still at baccarat, with players wagering 16% less than last year and winnings down 21%. Other table games fared slightly better, with 6% less wagering translating into 5.5% less win, As for locals play, despite some end-of-January slot play being rolled into February’s numbers, the house was down 5%.

If the Las Vegas Strip was down 5%, Downtown was up 2%, North Las Vegas slipped 7%, the Boulder Strip fell 9% and Laughlin was flat. Outlying Clark County markets like Mesquite and Primm were down 2%. Upstate, Reno tumbled 7% and so did Lake Tahoe. Except for downtown Las Vegas, which is clearly doing something right, every sub-market in Nevada was revenue negative.

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