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? 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 finally became a “legit” resort.
The Tropicana was always a low-rise, bungalow-style hotel resort. Then in 1986, they added the 21-story Island Tower. Ramada wanted to be a “legitimate family friendly” hotel operator, so in 1989, they spun off all of its gaming properties, including the Tropicana. The name of the new company was The Aztar Corporation.
For the next twenty years or so, the resort changed hands multiple times. You needed a scorecard to keep up with the change of ownership. As Las Vegas started to really bloom and flashier resorts started to come online, the Tropicana was just holding its own. Keeping it fresh looking with a new coat of paint and occasionally changing the towels. The various owners were all out-of-town operators who just liked to cash the checks. Why change anything if the bank account is full? It was making money, who wasn’t back then? But any profits seemed to find their way back to the new owners, nothing for the resort itself.
In 2008, everyone was over-extended on credit. The Tropicana owner at the time was Columbia Sussex Gaming, they 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.
Moving Forward.
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. Got all that?
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 from you? It 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 and operated 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 (RET) and let the big shots get the first option to “buy-in” to the RET.. Then the resort company leases the property from the trust. The resort now has to pay rent each month.
This new arrangement has helped fend off a few hostile takeovers and other issues they thought they were having over who had control of the Las Vegas Strip.
This new way of operating works now because gaming is no longer the breadwinner of the resorts. In what many people call “the good old days” of Las Vegas, it was the casino profits that paid for much of the resort’s upkeep and guest perks. That’s what kept the dinner buffets cheap and the drinks and lounge acts free. 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 great 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 that you can say the real takedown of the Las Vegas Mob really began. When in 1979, the Kansas City Mobster Carl “Tuffy” DeLuna, had his home raided by the FBI, they found copious notes on who got what from each of the skims at the Tropicana. Yes, that scene in the movie Casino took its cue from the real event. Although in real life, he lived and was entenced to 30 years in prison, DeLuna was released in 1998 and died 10 years later.
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. Across the street sits one of the largest hotels in the world, the MGM Grand.
Why The Interest in Selling?
The Tropicana Resort property has one thing few if any other resorts on the Las Vegas Strips have: OPEN LAND! Lots of it! 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 as well as expand.No time lost.
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??
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