So what is the real scoop on the “Sale” of one of the most iconic and historic resorts on the Las Vegas Strip? Is it for sale?
Do You Want The Short Answer? Yes and No.
The Tropicana first opened in 1957 and for most of its life was owned by if not operated by the mob. It wasn’t until 1979 when it was sold to the hotel chain Ramada Inn, that it became a “legit” resort.
Always a low-rise, bungalow-style hotel resort, the 21-story Island Tower was constructed in 1986. Ramada spun off its gaming properties, including the Tropicana, in 1989 as Aztar Corporation.
For the next twenty years or so, the resort changed hands multiple times. Las Vegas started to really bloom and the resort was making money for the out of town owners. As newer, flashier resorts opened, the Tropicana was never really updated. Any profits seemed to find their way back to the new owners, nothing for the resort itself.
In 2008, Tropicana owner Columbia Sussex Gaming filed for bankruptcy. They had used the Tropicana as collateral for a $440 million secured loan that was bought by its creditors in 2009. This buyout was led by Canadian private equity firm Onex Corporation and former MGM Mirage CEO Alex Yemenidjian, who took over as CEO.
In August 2015, Penn National Gaming purchased the Tropicana for $360 million.
April 2020 Penn National sold the property to its spin-off real estate holding company called Gaming and Leisure Properties for $307 mill in rent credits. So the Tropicana resort property is now owned by Gaming and Leisure Properties who are leasing the property to Penn National Gaming who run it as The Tropicana Resort.
Penn National has two years of rent credits as well as the option of three one-year extensions. They have the same deal with its sister property, The M Resort at the south end of the Las Vegas Boulevard.
Resort Property Leasing?
The idea of the resort leasing the building from a real estate trust is nothing new for most of the resort and travel industry. Most hotels do not own the land or buildings but lease them from a development company. That Holiday Inn Express down the street can quickly become a Comfort Inn or a Motel Six without much more than a different lease agreement and some new signs.
In Las Vegas, this is kind of a revolutionary idea. Up until about five years ago, the resorts owned it all. The buildings, the land, and the resort were all one company. Then the CEO’s and Board of Directors, in a hot streak of profitability and multi-million dollar bonuses came up with the idea to do the same thing here. Create a Real Estate Trust (they get to buy into first). Then “Sell” the properties to the trust. The resort company leases the property from the trust. They now pay rent.
This helped fend off a few hostile takeovers and other issues they thought they were having over who had control of the Las Vegas Strip.
As well, this new way of operating works now because gaming is no longer the breadwinner of the resorts. Earlier, it was the casino profits that paid for much of the resorts upkeep and guest perks. But now gaming is only about 30% of the income for your typical Las Vegas resort. The other areas of the resort are now required to pay their share of the expenses.
The Tropicana Benefits
The trust owning the land the Tropicana sits on has recently let the world know they are looking at offers for the property. With the potential new boom coming to the south end of the Las Vegas Strip, this corner could be a deal given the right circumstances.
The Tropicana is a very historic resort. The name carries some great history as well as some possible baggage. It was here where the takedown for the Las Vegas Mob really began. When the Kansas City Mobster got caught with the list of casino cage skims and who the money went back to, in his hands as he died in the entrance to the casino. Recreated in the movie Casino as happening the mobster’s mother’s house in Kansas City.
It sits on one of the busiest corners in America, if not the world. Hundreds of thousands of cars (and people) from all over, (normally) pass that corner every week.
The Tropicana Resort property has one thing few if any other resorts on the Las Vegas Strips have: OPEN LAND! If, say, the Hard Rock wanted to get back on the Strip fast, this would be a great place for them to open. No real downtime. Take it over, change names, and keep the doors open. As you operate the resort, use the open land to start rebuilding and expansion. No lost time.
Personally, I would hate to lose the Tropicana name from the Strip. It has a legacy there that could be tapped for some great marketing for the right owner.
The Answer to the Question
Recently, the real estate trust and the operators of the resort have made fresh comments regarding the potential of the sale of the resort. With the possible opening of the new stadium a few blocks away, with the potential for the new businesses that are also in planning stages for the south part of the Strip, they were sending out signals out to evaluate the potential of any sales. Not needing to actually find new owners right now, but to see what the interest was(?).
However, if such a deal had made them go to the next step, this was the idea. The Tropicana property is for sale. The 31 acres and all structures on the land (Gaming and Leisure Properties) are what’s offered for sale. The Tropicana Resort operator (Penn National Gaming) has to years’ worth of rent credits, plus potential extensions that would be passed on to the new owner of the land. OR the new landowner could purchase the land and purchase the resort rent credits and take over the resort as well and start new.
Did That Make Sense??