More than three years after buying the Rio Hotel & Casino, New York-based Dreamscape Cos. is ready to focus on a multi-phased renovation of the 33-year-old off-Strip resort. 

The real estate development and investment firm announced last week it had secured $850 million in funding, a portion of which will be dedicated to redeveloping the 2,522-room resort. Dreamscape also plans to form two companies with the financing: a real estate investment trust and an operating company – both focusing on gaming, hospitality and entertainment businesses.

The financing arrangement will fund Dreamscape’s redevelopment of the Rio, which it acquired in 2019 from Caesars Entertainment for $516.3 million. Caesars has been operating the property under a lease agreement.

Dreamscape CEO Eric Birnbaum said the company will take over Rio’s operations later this year ahead of the redevelopment, with the property staying open through the renovations. He didn’t offer many details, other than saying the Rio name will be retained and confirmed that former Cosmopolitan of Las Vegas CEO Bill McBeath remains a consultant to the project.

“There is a lot of brand awareness with the name Rio,” Birnbaum said. “What we want to do is reinvigorate the property and capitalize on the name.”

But there’s a possible curveball coming to the redevelopment.

Birnbaum confirmed Dreamscape has been in discussions with the Oakland A’s about putting a $1 billion, 35,000-seat domed stadium on roughly 22 acres of the Rio’s nearly 90-acre site on West Flamingo Road, just west of Interstate 15 and roughly a mile from the Strip. The Major League Baseball franchise has been exploring a possible relocation to Las Vegas for much of the last two years amid spats with Oakland city leaders over a desired new waterfront stadium.

“We certainly think that our site has a lot of benefits to it,” Birnbaum said. “It has great access that certainly appeals to the local market. Given its adjacency to the Strip, the location can attract transient customers, as well. We’ll see what the A’s decide they want to do.”

A spokesperson for the A’s told The Nevada Independent that team officials have met with Dreamscape representatives “and are exploring the Rio location, in addition to other locations near the Las Vegas Strip.”

The timing of Rio’s renovation coincides with broader gaming development along the West Flamingo corridor.

Last year, Southern California’s San Manuel Indian Tribe acquired the Palms Casino Resort for $650 million and reopened the property after it had been closed for more than two years. Across Valley View Drive, Boyd Gaming’s Gold Coast Hotel and Casino draws a large clientele from Las Vegas’ Asian community, given the casino’s proximity to the city’s Chinatown area.

Truist Securities gaming analyst Barry Jonas said when the Rio opened in 1990, there was nothing comparable west of the Strip. Las Vegas builder Tony Marnell, associated with the development of several Strip resorts and venues, designed and initially operated the Rio.

“It hasn’t been touched in a while and the bones are relatively good across the Rio,” Jonas said. “It’s just a function of what they can do to revitalize the place, what renovations are added and if their marketing strategy is done the right way.”

Birnbaum said the Rio’s success isn’t dependent on the location, but on how the company markets the resort. Dreamscape owns hotel properties in New York, Miami, Phoenix, Los Angeles, Nashville, New Orleans, Charleston and Philadelphia, including The Pod Hotel in New York’s Times Square and The Goodtime Hotel in Miami’s South Beach. The Rio is the company’s first gaming property.

“There's a misnomer out there that you have to be on the Strip,” Birnbaum said. “What you have to do is create a good product, whether you're on the Strip or you're off the Strip.”

He described his company’s hotels and resorts as approachable luxury.

“We think there's a big market that has been overlooked,” Birnbaum said. “We want to give that customer a very good experience at a price point that they feel is reasonable.”

Caesars won’t miss the Rio

Analysts said the Rio has been an afterthought to Caesars, which sold the casino ahead of the company’s $17.3 billion merger in 2020 with Eldorado Resorts. 

Revenue and cash flow from the operations are included in the quarterly results covering the company’s nine Strip-area operations, but Caesars executives rarely comment about Rio’s business during quarterly earnings calls.

Caesars had expected to operate the Rio for just two years following the sale, paying $45 million in annual rent, but the agreement was extended. The Rio was the final property Caesars reopened after the gaming industry’s shutdown in 2020 due to the pandemic.

Caesars representatives did not respond to emailed questions about the planned changeover.

Las Vegas-based gaming industry adviser Brendan Bussmann said he didn’t think Caesars would miss the lost revenue from the Rio.

“Most of that revenue from Caesars players has likely shifted to other properties,” said Bussmann, the managing partner of B2 Global. “Caesars has largely shifted those players to keep them within the Caesars family. It will be Dreamscape’s role to try and lure those players and other customers back to the property.”

Jonas suggested Dreamscape would like to be operating the Rio ahead of Formula One’s Las Vegas Grand Prix, scheduled for mid-November. He suggested Caesars already booked rooms at the Rio at “elevated rates” given the property’s proximity to the race.

One of three sites being considered

After acquiring the Rio in 2019, Birnbaum shot down rumors that the Rio would be replaced by a baseball stadium. Now, he says a baseball stadium and the Rio could coexist on the site bordered by Flamingo Road, Valley View Drive, Twain Avenue and the Union-Pacific Railroad tracks.

“We're entering into a rather extensive renovation and repositioning of the [Rio],” Birnbaum said. “We have been and continue to be in conversations with the A's. We think we have a great site and what we’re creating, hopefully, the A’s will want to enhance the experience. If they want to be part of it, we're certainly all ears.”

Birnbaum didn’t reveal details of the talks with the team, which recently hired several high-profile Nevada lobbyists to represent its interests if the franchise secures a Las Vegas location with favorable financing terms.

In addition to the Rio, the baseball franchise is considering two other locations — the festival grounds at the corner of the Las Vegas Strip and Sahara Avenue owned by billionaire Phil Ruffin, and a portion of the land that houses the Tropicana Hotel, which is owned by Gaming and Leisure Properties and operated by Bally’s Corp.

Jonas said a 35,000-seat stadium near the Strip could be the venue for certain special events in which “Allegiant Stadium (65,000 seats) is too large and T-Mobile Arena (18,000 seats) is too small.” He added that a stadium at the Rio site would give Dreamscape “a massive leg up” as the company proceeds with the Rio renovation.

Bussmann said that Rio’s land “should be strongly considered” by the A’s and Major League Baseball.

“The stadium needs to be in the resort corridor for a host of reasons,” Bussmann said. “I’m still a proponent of the Ruffin land on Sahara and Las Vegas Boulevard, but Rio becomes a strong alternative to other sites that have been discussed that likely offer the most complex solutions between stakeholders." 

Another gaming REIT

The bulk of the $850 million in financing – which was led by Raymond James Financial and Wells Fargo – will help create Dreamscape’s real estate investment trust (REIT) and the operating company.

Birnbaum said the Dreamscape REIT could operate in the same space dominated by two gaming-centric REITs – VICI Properties, which owns the land and buildings associated with 49 casinos in the U.S. and Canada, including 11 properties on the Strip; and Gaming and Leisure Properties (GLPI), which is predominately focused on regional gaming markets.

REITs are exempt from corporate income taxes and pass along most of their earnings to shareholders.

“We see the REIT doing exactly what GLPI and VICI are doing, but we're going to be focused more on the small gaming and entertainment companies,” Birnbaum said. “VICI and GLPI are kind of elephant hunting if you will. We think there's a whole underbelly and whitespace that we're looking at.”

Birnbaum suggested the Dreamscape REIT could also serve as a lender and finance a project, or finance its own gaming, hospitality and entertainment operations.