The Las Vegas Strip has little sympathy for people with money troubles. That’s true if you can’t pay your hotel bill, run out of money at the tables, or have your credit card declined at dinner.
Las Vegas casino owners including Caesars Entertainment (CZR) – Get Free Report and MGM Resorts International (MGM) – Get Free Report may no longer take you into a back room to break your legs, but they will get their money. If you hit the end of your credit line or just run out of cash, you’ll be shown the door and if a casino did extend you credit, it will come after you to get paid.
The same thing happens with developers on the Las Vegas Strip. If you’re building a property and run out of money, banks will foreclose, and someone else will end up owning that property. That happened multiple times with Fontainebleau Las Vegas, a resort/casino that has been under construction for roughly 20 years. That property has gone through multiple owners and a variety of financing deals before ultimately ending up in the hands of its original owner.
Basically, Las Vegas is a “show me the money” city. If you don’t have the cash — especially as a developer — things fall apart quickly and you lose control of your project. That, to some extent, appears to be what’s happening to one of the Strip’s players, Madison Square Garden Entertainment (MSGE) – Get Free Report.
That company, which owns the Tao Group, a number of luxury day clubs, nightclubs, and restaurants, has been building a first-of-its-kind performance venue on the Strip called MSG Sphere. That venue, which was originally budgeted at $2 billion, has seen costs increase by at least $175 million.
Because of those overruns, the parent company appears to need cash. Apparently, it’s set to raise that by selling the Tao Group, according to a report in the New York Post.
MSG Sphere Las Vegas
Las Vegas Strip Billionaire Could Become a Bigger Player
Madison Square Garden Entertainment, which owns Madison Square Garden, Radio City Music Hall, and the Rockettes, among other properties, has hired Goldman Sachs to explore a sale of Tao Group, according to the paper.
“First-round bids for Tao — whose pricey clubs have long been playgrounds for Wall Street financiers and celebrities like Leonardo DiCaprio, Bella Hadid, and Justin Bieber — are being submitted now, two sources with knowledge of the situation said. Houston Rockets and Golden Nugget Casino owner Tilman Fertitta is a rumored suitor for Tao, one of the sources said.”
Fertitta, who owns the Golden Nugget casino on Fremont St., has been somewhat quietly raising his holdings on the Las Vegas Strip. He bought a piece of land in April on the Las Vegas Strip located between Caesars’ Planet Hollywood and the MGM Grand. And while he has not confirmed plans for that property, he is expected to build a high-end resort casino (not a Golden Nugget) on the site.
In addition, the billionaire, who also owns the Landry’s restaurant group, has also taken a 6.1% stake in Wynn Resorts (WYNN) – Get Free Report, which owns two major Strip resorts/casinos.
Madison Square Garden Entertainment declined the Post’s request for comment.
MSG Sphere Costs Spiral Out of Control
Madison Square Garden Entertainment has insisted that it can pay for the rising costs of its massive Strip project without a sale. The company’s CFO David Byrnes commented on its funding plans during the company’s first-quarter earnings call.
“We continue to expect to fund the remaining construction costs from cash-on-hand and cash flow from operations. This includes the impact of our plans to implement a cost-reduction program across our businesses and reduce and/or defer certain discretionary capital projects. We also continue to have revolver capacity available to us if needed,” he said.
MSG Sphere, which sits on property on the Las Vegas Strip near the Venetian, is expected to open in the second half of 2023 with a U2 residency rumored as its first artist.
“Work continues on the exterior of the venue with the installation of the LED mega panels on the exosphere, where crews have been progressing from the top of the venue down,” Byrnes said. “And inside, we are continuing to build out the interior spaces, including the atrium and hospitality areas as we prepare for the installation of some of the venue’s signature immersive technology features. This includes the interior display plane, which will be the highest-resolution LED screen in the world.”
The screen, which at 160,000 square feet is bigger than three football fields, “will wrap up over and behind the audience, creating a fully immersive visual environment at an unparalleled scale, and a powerful canvas for artists and partners to showcase captivating content and storytelling in new ways,” according to the CFO.
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