Good morning, and welcome to the Indy Gaming newsletter, a weekly look at gaming matters nationally and internationally and how the events tie back to Nevada.

If a colleague or associate emailed this newsletter to you, please click here to sign up and receive your own copy of Indy Gaming in your inbox. - Howard Stutz

(Note: This will be the last Indy Gaming for 2021 as we will be off the next two weeks. Thank you for reading our newsletter and I wish everyone a Happy holiday season and a Happy New Year. Indy Gaming will return on Jan. 5).

---

In October, Hard Rock Entertainment CEO Jim Allen shared the stage at the Global Gaming Expo in Las Vegas with MGM Resorts International CEO Bill Hornbuckle and Wynn Resorts CEO Matt Maddox during a keynote roundtable discussion about the industry.

Off stage, Allen and Hornbuckle were quietly discussing a potential sale of The Mirage.

“Frankly, we’ve been having conversations about it for quite some time. They even go back to [former MGM CEO Jim Murren],” Allen told The Nevada Independent Tuesday morning, a little more than 12 hours after Hard Rock announced it was acquiring the operations of The Mirage for $1.075 billion. MGM Resorts said on Nov. 3 it wanted to sell the iconic Strip property.

“Certainly, we needed to wait until MGM started their official process, but we had identified [The Mirage] as a premier location,” Allen said. “We were very enthusiastic to have the opportunity to participate in the [request for proposal] process and it was certainly better news when we went under exclusivity.”

Allen, who is also chairman of Seminole Gaming, the business arm of Florida’s Seminole Indian Tribe that owns Hard Rock, called The Mirage and its 77-acre site “the 50-yard line” of the Las Vegas Strip and the perfect location for the company’s signature hotel tower, which resembles the body of an electric guitar.

The Seminoles will become the third tribal gaming operator to land in Las Vegas in less than a year, following Connecticut’s Mohegan Gaming taking over the casino at Virgin Hotels Las Vegas and Southern California’s San Manuel Band of Mission Indians in the process of buying the Palms Casino Resort. But this will be the first tribe-run gaming location directly on the Strip.

“The beautiful thing about Native American capital is that it is generational and Hard Rock will be able to do this right without concern for short-term return on investment hurdles, which is a positive for all of Las Vegas,” CBRE gaming analyst John DeCree told investors in a research note Tuesday.

Allen, who has spent 20 years directing the gaming, hospitality and entertainment operations for the Seminoles, called the deal “a great opportunity for us.” He noted gaming revenue throughout the U.S. is “basically a 50-50 split” between commercial casinos and tribal operators.

In calendar year 2019, commercial casinos produced more than $43.6 billion in gaming revenues, according to the American Gaming Association. Tribal casinos that same year produced $34.6 billion in gaming revenues, according to the National Indian Gaming Commission.

“If you back out the racetrack pari-mutuels, there are some studies that say there is slightly more business in tribal casinos,” Allen said. “The experience in tribal gaming now is identical to commercial and I think some people would argue that in many locations, even more than one step above.”

Location ‘is a gift’

During the 15-minute conversation, Allen didn’t share many additional details beyond Monday’s announcement. He said the company is still determining how many rooms the Guitar Hotel tower will include. The first Guitar Hotel opened in 2019 at the Hard Rock Hollywood near Fort Lauderdale, Florida. It has 683 rooms and cost more than $1.15 billion to construct.

Allen said timing will determine whether Las Vegas’ Guitar Hotel expansion will be the company’s second venture. Another four Guitar Hotel concepts are in the planning stages at other Hard Rock locations outside the U.S.

“It really is a gift,” Allen said of The Mirage’s Strip real estate. “It's obviously where the little curve [in the Strip] is located, and it fits in nicely in that location.”

Real estate investment trust VICI Properties, which is acquiring The Mirage site and will be Hard Rock’s landlord, said it would fund up to $1.5 billion of the renovations.

Allen said the entire footprint of The Mirage, which was opened by Steve Wynn in 1989, would be renovated. The Mirage name will eventually be removed with the property rebranded as Hard Rock Las Vegas.

“MGM has just really kept it in great condition, but certainly I think we all know that it's extremely dated,” Allen said. “You will see concrete on the floor and concrete on the roof and everything else will be brand new. Frankly, some of the structure will change. For the existing 3,000 rooms, it's our plan to gut them completely, bathrooms and everything, and start over.”

Allen said no decision has been made concerning several non-gaming attractions, including Siegfried & Roy's Secret Garden, which houses some of the lions and tigers raised by the late Strip entertainment icons, and The Mirage’s Dolphin Habitat, which serves as a scientific research, education and conservation outreach program.

“As far as the dolphins and the tigers, that's part of the agreement between MGM and ourselves that we have no comment on this time,” Allen said. “Certainly, we want to protect them and make sure that their lives as animals are as comfortable as they are today.”

Still unclear, however, was the fate of The Mirage’s Strip-front 90-foot volcano, which appears to sit directly on the footprint of the future Guitar Hotel.

The transaction is not expected to close until the second half of 2022 and Nevada gaming regulators will need to sign off on the deal and license Seminole Gaming.

MGM meets strategic objectives

MGM Resorts said in a statement that it would retain The Mirage name to potentially be used in future projects.

“I’m obviously saddened that The Mirage brand will be leaving the Strip for now,” said former MGM Resorts spokesman Alan Feldman, who came to Las Vegas in 1989 as an outside public relations consultant to assist in the property’s opening.

“It’s also good to know that MGM is retaining the Mirage brand and that it may someday return to Las Vegas or another market someplace in the U.S. or around the world,” Feldman said.

The investment community focused on what the transaction means for MGM Resorts. The company spent the past couple of years remaking its balance sheet and its company structure, selling its entire Strip portfolio to several REITs and leasing back the operations. In addition, MGM Resorts is acquiring the operations on the Cosmopolitan Las Vegas as part of a $5.68 billion sale that was announced in September and is awaiting Nevada regulatory approval.

The company’s focus is now south of Flamingo Road down to Russell Road where its 10 developments are located.

Macquarie Securities gaming analyst Chad Beynon said in a research note MGM Resorts will have $11 billion in cash after its recent deals and once the sale of MGM Growth Properties and The Mirage are finalized.

“MGM has now announced all its strategic actions it talked about doing in the last several years,” Beynon said. “We commend MGM’s recent progress towards better aligning the business with its long-term vision and they walk away with a clean reporting structure and healthy balance sheet.”

MGM Resorts Chairman Paul Salem said in a statement the transactions “position the company with a fortress balance sheet, premier portfolio, and significant financial resources to pursue our strategic objectives."

Meanwhile, analysts said other gaming operators along the Strip were evaluating The Mirage sale with great interest.

Jefferies gaming analyst David Katz said Caesars Entertainment “should see strong demand” from the company’s previously announced plans to sell one of its Strip resorts next year.

“We expect there could be further redevelopment activities around the older, mid-market properties across the Strip, some owned by MGM Resorts and other disparate owners,” Katz wrote in a research note.

---

Analyst: Companies operating in Vegas and digitally have ‘underappreciated value’

Gaming analyst John DeCree has been sidelined since June after Las Vegas-based Union Gaming Group was acquired by CBRE.

With regulatory approvals in place, DeCree relaunched his coverage last week with a bullish view of the U.S. domestic casino market, particularly Las Vegas. He said the return of international visitors and a boost in convention business would accelerate the earnings by five casino operators, two gaming real estate investment trusts and three sports betting companies.

“The recent selloff in global gaming equities created a number of great opportunities to get involved in the sector at some of the most attractive levels in months,” DeCree wrote in his research note.

He has an optimistic view of the digital side of the gaming industry globally, and a favorable emphasis toward the U.S. sports betting market, which is live in 30 states, as well as the potential expansion of online casinos beyond the current five-state footprint.

DeCree told investors that companies with exposure to both Las Vegas and the digital gaming industry “have a longer tail to their recovery. We believe there is still significant underappreciated value.”

Caesars Entertainment, which is expanding its Caesars Sportsbook subsidiary, MGM Resorts International and its 50-50 United Kingdom-based partner Entain in BetMGM and Flutter Entertainment, the parent company of FanDuel, fit that profile, he wrote.

But DeCree wasn’t optimistic about Macau, where gaming revenues have fallen dramatically since the market reached a record $45 billion in 2013. Macau ended 2020 with its lowest revenue total in 14 years: $7.56 billion. Through the first 11 months of 2021, Macau gaming revenues are down 71 percent versus 2019, but up 49.9 percent versus 2020.

Also, the arrest of the CEO of Macau largest junket operator and a confusing relicensing process for the six concession holders keeps him “guarded on the outlook in Macau.”

However, DeCree said Wynn Resorts could be a “contrarian play” for stock investors because of the company’s casinos in Las Vegas and Boston.

“We believe newly-promoted CEO Craig Billings will have plenty of levers at his disposal to unlock value while waiting for a broader reopening and recovery in Macau,” DeCree said.

---

Maryland governor spreads his money around as the state welcomes sports betting

Maryland Gov. Larry Hogan, a Republican, made his way to the openings of the first three sportsbooks in the state last week and placed the first wager in two of the locations.

Hogan was the primary proponent in Maryland’s sports betting legislation, which was overwhelmingly approved by state voters in November 2020 and subsequently was set into place by state lawmakers in May. Maryland has six casinos, including Penn National’s Hollywood Casino in Perryville and Rocky Gap, which is operated by Golden Entertainment.

Maryland is the 30th state to offer legal sports betting. It would have been the 31st, but a federal judge in Florida halted the Seminole Tribe from offering sports betting because it violated the state constitution and federal Indian gambling law.

On Thursday, Hogan arrived at MGM Resorts International’s MGM National Harbor, which is located just across the Potomac River from Alexandria, Virginia and less than 10 miles from Capitol Hill in Washington D.C., and placed the state’s first legal sports wager moments after cutting the ceremonial ribbon along with NFL Hall of Fame quarterback Joe Theismann.

Hogan bet on the Baltimore Ravens at plus 700 (what he would win if he bet $100) to win the AFC, and on the Washington Football Team (at plus 5,000) to win the NFC. Both wagers, especially the bet on Washington, are considered longshots.

“The only loser is MGM, because they’re going to have to pay me more than 20 grand when I hit this one,” Hogan told reporters after placing the bet. 

A day later, Hogan visited the Caesars Entertainment’s Horseshoe Casino Baltimore and placed a more winnable college football wager, taking the University of Maryland Terrapins in a money line wager – minus 115 – to beat the University of Virginia Hokies in the Pinstripe Bowl at Yankee Stadium on Dec. 29.

"Today marks the culmination of more than a year of effort to get sports betting up and running here," Hogan said in a statement released by Caesars. "Sports betting will … help to keep more dollars in-state and will provide another critical revenue source for public education without raising taxes on families and small businesses."

Earlier Friday, Hogan’s gambling excursion took him to Live! Casino Hotel in Hanover. He helped cut the ribbon at the Cordish Companies’ suburban casino, which is in between Baltimore and National Harbor.

However, Pro Football Hall of Famer Ed Reed placed the first bet at the FanDuel-operated sportsbook —  $20 on Dustin Poirier on the money line at UFC 269 Saturday in Las Vegas. Poirier, however, lost to Charles Oliveira.  

In addition to Florida, Nebraska has legalized sports betting, but the activity is not yet operational. Ohio lawmakers approved a sports betting bill last week that is awaiting the governor’s signature. Massachusetts lawmakers are considering sports betting legislation.

---

Other items of interest

Wynn Resorts appointed Julie Cameron-Doe as its chief financial officer, marking the second new executive appointment since CEO Matt Maddox announced his plans to depart the company on Jan. 31.

Craig Billings will become Wynn’s new CEO on Feb. 1 and Cameron-Doe will join the company sometime after March 31. She needs to complete her notice period with her current employer, gaming equipment provider Aristocrat Technologies. Cameron-Doe has been Aristocrat’s CFO since 2018 and held several senior finance positions with the company since 2013.

“Coming from the gaming industry, she understands many aspects of our business and she has diverse international experience,” Billings, who had been Wynn’s CFO, said in a statement. He added that Cameron-Doe “rounds out” the company’s senior executive management team.

Last month, Ian Williams took over Billings’ other role as president of Wynn Interactive, the company’s digital gaming and sports betting operation.

International Game Technology (IGT) will utilize Sightline Payments’ loyalty platform in addition to the company’s cashless payment system as part of the mobile wallet it provides to casino operators. Sightline’s mobile loyalty platform has allowed nearly 100 casinos nationwide to create their own apps and reward programs.

The Sightline system allows operators to send targeted messages to customers through personalized and interactive mobile campaigns.

“As the adoption of cashless solutions continues to grow in our space, questions around mobile app strategy come up more and more,” IGT Senior Vice President Ryan Reddy said in a statement. He said the system “allows us to answer those questions.”

Fitch Ratings Service is concerned about Macau. The company placed a Rating Watch Negative on all Macau casino operators last week over the government-approved gaming concessions that expire on June 26, 2022. 

“Near-term credit risk has increased with limited visibility into the re-bidding procedures, how the future regulatory and operating environment will impact cash flows and leverage, and the likelihood and consequences of incumbent operators' ability to secure a new gaming concession,” Fitch wrote in statements concerning both Las Vegas Sands Corp. and MGM Resorts International. Wynn Resorts also operates casinos in Macau.

As of Sept. 30, Las Vegas Sands had $14.50 billion in long-term debt. MGM had $12.7 billion in debt including $3 billion tied to its MGM China subsidiary. Wynn’s total debt of $11.74 billion included $5.77 billion related to Macau.

Corrected at 5:10 a.m. on 12/16/2021 to clarify the location of MGM National Harbor.