Property value of Paris/Bally's and Rio All Suites
Last edit: jucifers on Wednesday, 8th February 2017 5:26 pm
Last response by antcomp 13th March 1:52am
Recent speculation on the property value of Casino Royale piqued my curiosity about the property values of Paris/Bally's and Rio All Suites. Here are links to several articles, including some about recent sales of Cosmopolitan ($1.73 billion) and Palms ($313 million) and the non-sale of Mirage ($1.3 billion offer rejected).
Would anyone care to take a crack at estimating the value of Paris/Bally's and Rio based upon these sales?
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VegasFanboy responded on Thursday, 9th February 2017
I don't have the numbers in front of me, but a start would be determining the cash flow multiple from the hotels that have been sold. What was their selling price based on their cash flow from the previous year?
Then, apply a similar multiple to that of the cash flow of Paris, Bally's, and the Rio. Of course, location matters, and the value of center Strip properties will command a higher multiple than that of Rio, which is more akin to the Palm's sale.
This is a rudimentary method.
I'm not sure exactly what the standard casino industry discount rate is or how they are applying the discounted cash flow method.
MinVegas responded on Saturday, 11th February 2017
So is "property value" determined as "what this is worth in a sale?" Because the sale price of a resort is going to be a multiplier of revenue. On top of that, we don't have a whole lot of sales going on anymore to base estimates off of.
My context for calculating imaginary sale prices? MGM sold Treasure Island to Phil Ruffin at a cost of 7x annual revenue. Revenues were lower because of the recession, but everyone who looked at that sale felt MGM was getting fair value for the place.
I don't know if Caesars breaks down their numbers by property. MGM used to but stopped doing that at some point.
jucifers replied on Saturday, 11th February 2017
"So is 'property value' determined as 'what is this worth in a sale?'" Yes, that's what I was asking. I would imagine that location and property acreage would also factor heavily into the sale price. Maybe that would be an easier value to estimate, since Caesars doesn't seem to release earnings per property?
Drake responded on Tuesday, 14th February 2017
No clue about value, but my question is: now that Caesars is emerging from bankruptcy, does anyone think they're going to sell any of their properties?
antcomp replied on Monday, 13th March 2017
It's always possible. Ballys/Paris would likely be sold as a pair, but would then orphan Planet Hollywood which accordingly to some employees is managed administratively along with the other two. It's not impossible for ParBal to be broken up, but as credit card statements with charges reading "ParBal inc." (also an acceptable paid to name for use on front money cashiers checks at both properties by the way) suggest, there is a deeper link between the two even today then many would ordinarily think.
The Rio, is a slightly different matter. There is almost constantly a rumor that it is for sale. However as several friends who work at the Rio have told me, Caesars is currently sinking money into it amazingly. There is going to be a massive room renovation coming up soon, and convention business is still brisk. This is something that the Rio handles better than most of Caesars other properties. With the possible exception of either Caesar's Palace itself, or Paris, The meeting capacity at Rio is unmatched within the company in Las Vegas. In the event of a sale, Caesars would most likely lose those meeting contracts as well. While there may be space to accommodate them at the other after mentioned properties, it may not be possible to offer planners the same price, or attendees comfortable room rates given the relative difference in price, supply in demand, and other factors when working at hosting an event at the Rio, or on the strip. There is also WSOP, which as is often mentioned, could be relocated to another property, poker players can being a Tory asleep fickle in their choice of where to play. Many may be upset about having to go to the strip, for the annual event. Would they be upset enough to no longer into the tournament? Probably not.
Finally, the one factor that must be taken into consideration when ever Caesars sells a property, regardless of market, to another operator is the value of total rewards. With limited exceptions, this is a huge deterrent to a purchase for all but a few large gaming companies who could replace TR with their own players card system relatively fast. While the arrangement of Caesars removing themselves from properties in St. Louis, and Ohio, was a little more orderly due to the regional nature of these markets, it is very unlikely that such an arrangement would be reached in Las Vegas. These are players that Caesars can easily retain at other properties, and all for except maybe a few players at the top and some at the bottom who don't really care, most gamblers from these properties will be more loyal to the empire as a whole. Even compared to MGM selling off treasure Island, this is a much bigger proposition. M life only has four properties outside Las Vegas. Caesars has many times more than that and with it a larger base of players around the country, dropping money at their local riverboats in exchange for comps in Vegas.