Las Vegas Market Update-Number of Institutional Transactions Rising Fast
Imperial Companies 是一家位于纽约的地产资本管理基金，创始人Michael Fasciteli曾是沃那多信托基金的CEO兼总裁，联合创始人Eric Birnbaum 是沃那多信托并购和资本项目开发的主管。Imperial是一家垂直一体化的大型地产投资机构，投资足迹遍布全美。该纽约基金总投资额超过数十亿美元，团队曾完成的项目包括库斯纳集团在纽约10亿美元大楼、位于纽约时代广场的新概念酒店，主推精品住宅理念的纽约亨利大楼等。
在另一方面，Imperial Companies的联合创始人Michael Fascitilelli同时也是在役NBA球队雄鹿队的拥有者之一。雄鹿队在这几年正在严肃考虑迁址，并也将拉斯维加斯作为其潜在的目标之一。
Rio Las Vegas, the 2,500-suite hotel and casino that was a Las Vegas innovation when it opened in 1990 has been sold to New York-based Imperial Companies for $516.3 million in a deal announced in a Securities and Exchange Commission filing on September.
The deal, subject to regulatory approvals, is expected to close by the first quarter of 2020.
Under the terms of the agreement, Caesars will continue to operate the property pursuant to a lease for a minimum of two years and pay annualized rent of $45 million. The Buyer has the option to pay Caesars $7 million to extend the lease under similar terms for a third year.
Another Major Transaction in Las Vegas
A Notable Sign in Capital Investment
Rio’s deal shows the capital wave pouring into Las Vegas has never stopped, and is getting even stronger.
Spring Mountain Rd the Hottest Spot
Capital attention are moving north along the Prime Strip, to the Spring Mountain Rd and Desert Inn Rd area, it has become a hotter spot of Las Vegas— Rio’s transaction is another sign as the most recent major deal.
Stable Traffic in Short Term
Rio hotel-casino will continue to operate at least 2-3 years under a lease agreement, brings sustainable needs for close-by retail, restaurant, hotel and residential.
Las Vegas Grabs National Attention
According to various real estate analysts, with the loss of Caesars Rewards and the World Series of Poker, Rio will most likely be re-positioned as non-gaming focused amenities. The NYC Imperial Companies’ deal is an addition to other non-gaming focused action such as the Raider Stadium, Google, Aptiv, etc. Those move indicate that Las Vegas is no longer only available for local gaming & resort participants, but welcomes players from any other states/nations, industry and field. Adding together to develop Las Vegas to an international cosmopolis.
The Buyer: NYC Top Tier Capital Management Fund
Imperial Companies, led by founding partners Michael Fascitelli, the former CEO and President of Vornado Realty Trust, and Eric Birnbaum, a former senior member of Vornado Realty Trust’s Acquisitions and Capital Markets Group and Development Team, is a vertically integrated real estate investment and management platform across all major US markets. Headquartered in New York City. The team has done multi-billion of investment across US, including Jared Kushner’s $1B tower in NYC, the Pod Hotel in New York’s Time Square and Henry Hall the “Boutique Residential” in New York, etc.
NYC Funds’ Insights
Imperial’s team decided that purchasing the Rio at $516M was a suitable entry point into Las Vegas This deal demonstrates that New York Investors and Tier one capital management funds are seeking better returns and targeting Las Vegas for capital investment, they believe this could be the best timing to enter the market.
30-year-old Property Transaction by former Vornado Realty Executives
Rio buildings occupy about 65% of the size footprint. After almost 30 years of operation, plus the property has barely been maintained over the last five years. Any redevelopment would likely require a very large demolition or overhaul of the existing structures. Given the Palms hotel required a $600M capital outlay for a mid-level (no structural demolition) refresh and renovation, the Rio would easily be an $800M to $3B+ redevelopment project. Imperial’s $516 m purchase shows their full confidence in exit, even it requires significant capital of future refurbishment or new construction for end-user developers. The action promotes other investors in decision making of targeting Las Vegas for capital investment.
Property Value Upside
Comparing to Caesars purchased the property in 1998 for $880 million, plus they really haven’t put any significant investment into the Rio for over 20 years. Imperial’s $516 m deal price is still at a high spot considering the fast depreciation caused by lack of major maintenance. On the other hand, the Palms, which is right across the street and newer, sold just 2 years ago for $312.5M. This transaction provides a good example for showing potential value upsides of Las Vegas properties.
Development Potential for Sports Stadium
With two of the four “big four” pro leagues in Las Vegas, which are NFL Raiders and NHL Golden Knights, there’s been plenty of speculation that the NBA and MLB will join in on the Sin City fun as well.
Rumors about replacing Rio to a new MLB ballpark has been around for more than 2 years. Like the $1.8 billion NFL stadium being built just west of I-15 between Hacienda Avenue and Russell Road, an MLB ballpark in Las Vegas would need to be a domed facility due to the Southern Nevada desert heat. The plot of land the Rio sits would be more than capable of becoming an MLB site. The roughly 90 acres is nearly 40 more than the acreage where the Raiders stadium is being built. It is one of the very few remaining prime location in Las Vegas that is capable for a major league stadium.
On the other hand, co-founder of the buyer Imperial Companies, Michael Fascitelli also is the co-owner of Milwaukee Bucks, and the team is actually considering re-location for a while. It is possible to welcoming a future NBA team re-locate to the stadium as replacement of Rio.
Reflection to LVSM
Uniqueness of LVSM
As more capitals focus on the Spring Mountain Road area, plus unique advantages of LVSM as the gate to Chinatown, close to the Prime Strip, relatively lower rebuilding cost and higher development potential, and it is the only prime site available for massive resort or other commercial project in the area to compete with top tier competitors, the LVSM deal price would be even more competitive in the market, bringing higher exit value potential.
Assuming Imperial’s purchase require an attractive return for the risk being assumed, they would need to realize an exit price of about double their entry price to make it worthwhile over a 4 to 6 year period. Using conservative targets, their exit point would mean a 3X to 3.5X return on our LVSM investment as our cost basis is significantly less than their $5.8M per acre.
Similar Deal Strategy
Imperial’s purchase justifies Oasis’ strategy as they are using the exact same “Covered Land” play where they are holding onto a very strategic property asset with the available rental income provided by Caesars.
Future Rio & Oasis Complementary Effect
Transformation of the site will help build a resort community along with the future LVSM Gaming & Resort site, and create complementary effect among each other. The cycle will bring much more traffic, higher accessibility and lease price potential for retail, restaurant, resident, etc.
Traffic Brought by Replacement of Rio in future
no matter it’s for a new major league sport stadium, commercial center or even a brand new hotel, after the commencement of the new property, it will draw more traffic to the Spring Mountain Road area, LVSM would be the first property to be benefited.