Caesars Entertainment (CZR) and MGM Resorts (MGM) dominate the south and central Las Vegas Strip. Their properties serve all audience segments, from high-end experiences like MGM Grand and Caesars Palace to lower-end properties like Caesars Bally's and Flamingo and MGM's Luxor and Excalibur.
Low-end is, of course, relative when it comes to Las Vegas. All those properties are fairly impressive resort casinos.
The most dated of them, however, may be Caesars Flamingo, which has an old Las Vegas feel with its literal flamingo habitat and older room decor..
The need to update Flamingo factors into why it appears to be the property that Caesars intends to sell. Caesars Chief Executive Tom Reeg has made clear that his company intends to shed one of its Las Vegas Strip properties, and Flamingo appears to be the one with the "for sale" sign out front.
He provided an update on that complicated process during the company's second-quarter-earnings call,
Daniel Kline/TheStreet
Flamingo Looks to Be for Sale (It's Complicated)
Caesars wants to sell Flamingo, but Vici Properties (VICI) has the right of first refusal if another company makes an offer. That leads to a situation where Caesars could end up selling the property, but still operating it.
"As you know, we have an ongoing sales process for a Strip asset that's governed by the Vici agreements [with] about another month to run. So I'm not going to provide play by play there, but know that we are in very good shape balance-sheet-wise," Reeg said.
Later in the call, the CEO was pressed on the issue.
"So just to be clear, we've talked about this on other calls," he said. "It's very clear the timeline that is laid out in the Vici documents that govern this. So we launched early this year; the deadline is by the end of the summer. And every deadline I've ever seen in deal land, the work goes into that deadline. For us -- and there's -- there are plenty of interested parties."
Reeg did say that market conditions could complicate a sale.
"Obviously, the financing environment is what it is. And if that's going to impact what someone will pay, there is a level where we're not going to chase it. I'm very happy to just clip the free cash flow and come back later," he said.
The Caesars CEO says the deal will happen but also made very clear that the company does not have to sell Flamingo (or any other property).
"But as we have discussed, this is a discretionary trade for us," he said. "We still think we can get it done within the parameters that we had set at the outset. But ... we certainly recognize we live in a market that moves day-to-day. And if financing conditions change, the outcome might change."
Why Is Caesars Selling Flamingo?
Caesars wants to sell Flamingo even though the property sits in a strategic location for the company. The casino giant owns Linq, which sits next to Flamingo and essentially shares its outdoor restaurant/bar/retail area with its sister property.
Despite that, Reeg has said clearly why he wants to sell.
"But this has become -- for me, it's kind of amusing because when I first started talking about we're to sell our Vegas Strip asset, that the response from full sell side and buy side was why would you want to sell the Vegas Strip asset? Look at how great it is," he said.
"And we said there are times in the market that you don't have to go very far, that where -- we didn't -- we wouldn't want to have owned this many rooms."
Basically, Flamingo needs a lot of investment and Caesars does not want to revamp the property. Selling it would not only enable the company to pay down its considerable debt, it would also shrink the number of rooms the company has on the Strip, which should make its remaining inventory more valuable on a night-by-night basis.
