- Red Rock Resorts is selling The Palms Las Vegas to the San Manuel Band of Mission Indians and the San Manuel Gaming and Hospitality Authority for $650 million USD.
- The San Manuel Band of Mission Indians own and operate the San Manuel Casino in Highland, California.
- The Palms never reopened following the gaming industry shutdown at the height of the COVID-19 pandemic.
When Red Rock Resorts wasn’t reopened after the end of the Nevada gaming industry shutdown at the height of the COVID-19 pandemic it was initially justified as being due to ‘weak market conditions’. At the time, it was one of four Stations Casinos/Red Rock Resorts properties that remained shuttered including the Fiesta Rancho, Fiesta Henderson and Texas Station. The ultimate fate of these properties remains unknown.
In February, the company reiterated their plan to keep these four properties closed until market conditions improved during the Red Rock Resorts (NASDAQ: RRR) Q4 earnings call. Barry Jonas of Truist Securities posed a question to Frank Fertitta who was joined on the call by his brother, Lorenzo Fertitta who is the Vice Chairman of the Board and Execuctive VP, CFO & Treasurer Stephen Cootey:
BARRY JONAS: Hey, guys. How are you thinking about the closed properties here? Whether that’s timing on reopening them or any other options. Thanks.
FRANK FERTITTA: Look, I think we have tried to take a very disciplined approach to this since we reopened in June. The reality is we have more restrictions on our capacity now than we did when we reopened on June 4. And so we’re going to continue to be very disciplined and we want to be in a position that when we reopen any additional properties that we’re going to know that it’s going to be positive and accretive to our overall cash flow. And we really break that down into two buckets.
I think the Palms is very oriented towards the tourist market visitation to Las Vegas, getting that business to return to normal. And in the local properties we’re going to continue to look at how the older demographic response given the vaccine and get business back to normal before we do anything unless we’re certain that we can be cash flow positive.
That was the last significant bit of information we heard about the Palms–until today. In an interesting shakeup to the Las Vegas casino chessboard Red Rock Resorts is selling The Palms to the San Manuel Band of Mission Indians and the San Manuel Gaming and Hospitality Authority for $650 million USD. These are the same tribal interests that own the San Manuel Casino in Highland, California located approximately 70 miles from Los Angeles. The press release announcing the deal was surprising terse:
LAS VEGAS, May 4, 2021 /PRNewswire/ — Red Rock Resorts, Inc. (NASDAQ: RRR) (“Red Rock” or the “Company”) today announced a definitive agreement between its subsidiary Station Casinos LLC and a subsidiary of the San Manuel Band of Mission Indians (“San Manuel”) to sell the Palms Casinos Resort for $650 million in cash, subject to customary adjustments.
The transaction is subject to regulatory approvals and other customary closing conditions.
Milbank LLP represented Red Rock and Deutsche Bank Securities Inc. is acting as financial advisor to Red Rock on the transaction. Latham & Watkins LLP represented San Manuel and Jefferies LLC is acting as financial advisor to San Manuel on the transaction.
The press release sent by the San Manuel Gaming and Hospitality Authority provided some more context. San Manuel Chairman Ken Ramirez sounds legitimately excited about joining the Las Vegas gaming community:
“Today represents an important step for the Tribe and its long-term economic diversification strategy. On behalf of the Tribe, we are thankful for the opportunity to join a community that we have come to know and appreciate.”
SMGHA Chairwoman Latisha Casas explained the appeal of The Palms:
“The Palms is a well-designed property which has been beautifully redeveloped and maintained by Red Rock Resorts. Our Board believes that the Palms is a casino resort that many of San Manuel Casino’s loyal guests would enjoy. We are excited to move forward with this transaction.”
The Las Vegas Review-Journal offered an interesting quote from gaming analyst Chris Grove of Eilers & Krejeck Gaming. Saying that he expects The Strip and surrounding areas to ‘de-consolidate’ in the near future and as a result looks for more tribal ownership in Southern Nevada he added these specific thoughts on the San Manuel tribe:
“San Manuel has long been one of a short list of elite tribal casino operators thought to have the ambition, financial wherewithal, and operational chops to execute on a Las Vegas opportunity.”
Obviously, no details as of yet about operational plans including the future of The Palms sportsbook. It was in the parcel of property rights that William Hill obtained when they bought out CG Technologies (formerly Cantor Gaming) but there’s little to suggest that the now Caesars Entertainment owned company would be involved under the new regime. Best case scenario–it could bring another new player to the moribund Nevada sports betting scene.
