Representatives of Las Vegas Sands Corp. confirmed that the company was in “very early discussions” to sell its Las Vegas assets, but said Monday that “nothing had been finalized.”
The confirmation follows a Bloomberg News report that the company is considering a $ 6 billion sale of its Las Vegas operations.
The company operates The Venetian, Palazzo, and the Sands Expo and Convention Center, a multi-billion dollar integrated resort on the Strip. Sands has also partnered with Madison Square Garden to invest in the $ 1.66 billion MSG Sphere project, located east of the Venetian’s Sands Expo Center and slated to open in 2023.
Discussions of a potential sale come as Las Vegas’ economic recovery from the coronavirus pandemic looks long and uncertain. Meanwhile, the company’s most lucrative properties are in Asia, where it operates casino hotels in Singapore and the Chinese special administrative region of Macau.
The slow recovery of Las Vegas
In the 2020 earnings calls, the Las Vegas-based company signaled an ongoing commitment to the Asian market, which is expected to recover from the pandemic faster than its Las Vegas counterpart.
Sands’ Macau and Singapore operations each generated more third quarter revenue than its Las Vegas assets. Its Macau properties brought in combined revenue of $ 167 million and its Singapore assets brought in $ 281 million, while its Las Vegas properties brought in $ 152 million, according to documents filed with the Securities and Exchange. United States Commission.
President and CEO Sheldon Adelson said on an earnings call last week that Sands’ business volumes continued to be affected by the pandemic, but operating results have improved, “especially in Asia”.
Much of the company’s recent and future investments are directed to its Asian operations.
Sands plans to spend $ 3.3 billion on a new luxury tower at its Marina Bay Sands property in Singapore, which posted a profitable third quarter.
In Macau, the company recently opened Grand Suites at Four Seasons Macau, a $ 450 million investment in 290 luxury suites spread over two towers. The company is also spending $ 1.35 billion to rename Sands Cotai Central to Londoner, with various upgrades planned through 2021.
“Macau has the potential to become one of the world’s largest business and leisure tourism destinations,” Adelson said on the call. “We would welcome the opportunity to invest billions of dollars in digital investment and expand our contributions to the diversification and development of Macau into the leading business and leisure tourism destination in the world. ‘Asia. “
Las Vegas’ economy has been hit hard by the coronavirus pandemic. Last week, Sands reported an 82% drop in third-quarter net income year-over-year. Net revenue was $ 586 million, up from $ 3.3 billion in the third quarter of 2019. Net loss was $ 731 million, in stark contrast to the $ 669 million. dollars in net profit from the same period last year.
Adelson said there have been improvements in Las Vegas – weekend occupancy rates have reached 70% and the recovery is “well underway” – but the lack of group activity has continued to devastate midweek city visit rates.
An “interesting” movement
Gaming analyst Chad Beynon of Macquarie Research expects Las Vegas resorts to make a full recovery in 2023 or beyond, but he said long-term growth and returns are higher on Asian markets.
“Sands has well-located and well-operated integrated resorts in Las Vegas,” he said. “Given the additional convention capacity in Las Vegas and uncertain levels of demand after (COVID-19), we think this is an interesting time to engage with potential buyers.”
Gaming consultant Josh Swissman, founding partner of Strategy Organization, said he couldn’t imagine why Sands would want to leave the Las Vegas market, given the company’s historic ties to Las Vegas.
“It’s just interesting that they’re getting away from it all after all the time and energy they’ve put into building and growing (their flagship properties) over the years,” he said. declared.
The company has turned its attention to Asia in recent years. Swissman said that “no one more than” Adelson has invested in Macau as a gaming market.
In addition, said Swissman, Sands President and COO Robert Goldstein has been more “realistic” than other gaming operators on the difficult road to recovery that awaits the Las Vegas gaming industry. .
During last week’s earnings call, Goldstein said he expects Las Vegas to experience the slowest recovery among the company’s markets, highlighting capacity restrictions and convention activity and limited air travel.
“Until people feel safe, they don’t come to Vegas,” Goldstein said.
The Venetian and Palazzo rely more on group and convention activities than other local game companies in town, Swissman said.
Nehme E. Abouzeid, president and founder of Launch Vegas LLC, said the decline in convention activity could have been the main driver behind Sands’ decision to receive offers. In addition, he pointed out that the vast majority of the company’s overall revenue comes from Asia and the competition in the United States is getting fierce.
“Sands operates large and beautiful resorts in destination markets that are best in class, but it does not have the network effects, the reach of the loyalty program or the access to the online gaming market and legalized sports betting in the United States which is all the rage right now, ”he said. “Yet its strong financial position and premium brand give it so many options. “
Abouzeid added that Adelson flirted with moving his headquarters to Asia in the past, but always “returned” it.
Brent Pirosch, director of gaming consulting at CBRE, said the sale of Sands’ Las Vegas operations – if it goes through – could highlight the pandemic’s devastating impact on the city.
“Las Vegas is in the midst of an evolution as the market reacts to COVID-19 and braces for new competition,” he said. “This moment is an inflection point that will be discussed and studied for the next decade.”
George Markantonis, president and chief operating officer of The Venetian, Palazzo and the Sands Expo and Convention Center, sent a letter to Sands employees, obtained by the Review-Journal, on Monday regarding the possibility of a sale.
“While I know it will surprise you, it would be premature to draw any conclusions at this point,” the email said. “As you can imagine, this is a complex process and nothing can come of it.”
The company’s shares on the New York Stock Exchange closed on Monday at $ 49.13, down 3.1%, and traded higher after business hours.
The Review-Journal is owned by the family of the President and CEO of Las Vegas Sands Corp. Sheldon Adelson.