It will not be a complete teardown, however the property is getting an $850 million makeover and it’ll now not be run by one of many largest gamers on the Las Vegas Strip.
Caesars Entertainment (CZR) – Get Free Report spent a lot of final 12 months speaking about promoting a Las Vegas Strip property so it may lower down its variety of accessible rooms.
The firm in the end by no means made that transfer, as Caesars hung a for-sale signal (not actually) on The Flamingo. No deal was ever made.
The concept of promoting a Strip asset, even one as dated as The Flamingo, was met with plenty of pushback. Caesars Chief Executive Tom Reeg commented on the suggestions his firm obtained throughout its second-quarter-earnings name.
DON”T MISS: Las Vegas Strip Failure Turns Into a Huge Win
“When I first began speaking about we’re to promote our Vegas Strip asset, the response from full sell-side and buy-side was: ‘Why would you need to promote the Vegas Strip asset? Look at how nice it’s.’ And we mentioned there are occasions out there that you do not have to return very far, that the place — we did not — we would not need to have owned this many rooms,” he said, “And now the conversations have turned to, oh my god, are you able to get this accomplished? This is vital. This is a change in you, not in us.”
Now, Caesars has determined to not promote a Strip asset, however it’s shedding management of certainly one of its Las Vegas properties: the Rio, which sits a few mile off the well-known 4.2-mile stretch of highway.
Caesars Is Losing Control of Rio
Caesars, like its key rival MGM Resorts International (MGM) – Get Free Report, doesn’t personal the land on which most of its Las Vegas properties sit, Instead, it bought the land to Vici Properties (VICI) – Get Free Report and leased it again beneath a long-term deal.
In late 2019, Caesars bought the land beneath the Rio, Las Vegas’s first all-suites resort, to Dreamscape however the on line casino big continued to function the property.
That will change in 2023 after the brand new proprietor undertakes a multiphase renovation of the property.
Dreamscape has raised $850 million to finance what it calls a “reimagining” of Rio’s two-tower construction, “restoring it into a premiere resort and casino experience with modernized amenities and an array of offerings that speak to today’s gaming and hospitality consumer,” the corporate mentioned in a information launch.
Rio will not shut through the renovation and Dreamscape will take over operations from Caesars in some unspecified time in the future in 2023. On a sensible degree, which means Rio will now not be a part of Caesars’s reserving system or a part of its casino-rewards program.
“As Dreamscape continues to evolve and expand, we knew the gaming and entertainment sector would be a natural fit and become a central part of our business,” mentioned CEO Eric Birnbaum.
“We are passionate about creating dynamic lifestyle experiences. I strongly believe that with our team’s unique development capabilities, investment acumen, and deep operating expertise, we are poised to become a differentiated player within this space.”
Caesars Gets Its Las Vegas Wish
Reeg made clear that he needed Caesars to have fewer rooms on the Las Vegas Strip when the sale of a property was nonetheless in play.
“Well, we’re 23,000 rooms today. You’re taking out the Rio rooms, and then you take out a property, depending on which property it is, let’s say 3,000 to 4,000 rooms,” Reeg mentioned throughout his firm’s fourth-quarter-earnings name.
Flamingo, with 3,450 rooms, would have completed that.
“So you’re going to be down to, call it, 16,000, 17,000 rooms in the market. That’s about one-quarter of our existing capacity,” the CEO added.
Losing Rio, which was possible one thing Reeg was conscious was going to occur throughout that decision, nonetheless provides Caesars fewer rooms to hire within the total Las Vegas market.
That might develop into the suitable transfer as values on the Las Vegas Strip have skyrocketed and promoting Flamingo to pay down debt and lift the worth of the corporate’s remaining rooms possible would have value it cash in the long term.