Ballys in trouble, wants to sell Tropicana Las Vegas lease

One of the largest casino franchises in the US, Ballys, is apparently in a lot of trouble in conjuction with its third-quarter earnings report as the share price plummeted on Wednesday. The executives, following a 14.80% loss in stock price, announced Ballys will reduce its headcount by 300 and that the company is open to selling the lease on the Tropicana Las Vegas casino hotel – if the price is right.

The Wednesday sell-off resulted in a loss of $1.15 a share on revenue of $632.5m in Q3, while analysts expected a loss of 15 cents on sales of $634.5m. The company cited delays in launching its temporary casino in Chicago as the major reason behind the current problems Ballys is facing.

Tropicana Las Vegas is Ballys’ only Las Vegas property, but this one is as troubled as they come. The Oakland Athletics are expected to move to Las Vegas, and the relocation includes plans to build a new stadium – on the Tropicana site.

The Las Vegas Strip property was “performing above expectations” until the announcement that the site would become the future home of the A’s. “We ran into a headwind”, George Papanier, president of Ballys Corp, said at the time.

Tropicana’s future is now in a holding pattern until Major League Baseball owners approve the A’s relocation to Las Vegas to a planned $1.5bn 30,000 seat stadium on 9 acres of the Tropicana site in 2028. An approval from 75 percent of the 30 MLB team owners is required by the end of this year.

Representatives of the A’s told the Las Vegas Stadium Authority recently that the construction is expected to start around April 2025.

Ballys acquired the operations of the Tropicana from real estate investment trust Gaming and Leisure Properties (GLPI) last September and pays $10.5m in rent annually under a 50-year deal.

Ballys owns 15 casinos in 10 states. Ballys doesn’t break out results from individual casinos in the quarterly earnings reports, they are presented in bulk, so Tropicana’s revenue was included in the company’s reported $333.2m casino revenue, an 11.1% increase from the year before.

But now, the 66-year-old iconic casino is to be torn down and, apparently, Ballys executives have a brilliant idea to sell the Tropicana lease despite everyone knowing that the site will be torn down.

“Our cash flow has declined as bookings are harder to manage because we don’t know when (Tropicana) is going to close and also, frankly, our employees are starting to leave as there are new properties in the area and they don’t know when we’re going to redevelop”, said Ballys Director Soo Kim on Wednesday.

Ballys President George Papanier added that “the strategic opportunities this development presents are highly compelling and we’re excited for the value that it has created for us. We bought the Trop for $150m in cash with a 50-year lease and now we have the A’s investing $1.5bn, including $380m of public funds, in this land. Although we have some short-term pain, this is an extremely valuable asset”.

While everyone waits on what will happen with Tropicana, Chicago remains the top priority for Ballys. The company has opened a temporary casino at the Medina Temple Building and is expected to invest $1.6bn by 2026 to build a 500-room resort at a site formerly occupied by the Chicago Tribune.

Ballys is also involved with Rhode Island and it expects to introduce online gambling in the state in March 2024. The company is also among several runners for one of three licenses in downstate New York.

Ballys has plans to introduce its online brand in Europe, more specifically The Netherlands, where it is expected to go live in April 2024. Ballys wants to also enter the saturated and heavily regulated United Kingdom market, replacing Gamesys’ existing Megaways Casino site, after BetMGM did something similar by acquiring LeoVegas for $604m in 2022.

However, The Netherlands and the UK are the two notoriously difficult markets to operate in, which is why many operators are in fact running away, so it remains to be seen if Ballys has what it takes to navigate these markets with success.
It seems Ballys is running into headwind a lot.