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Real Estate Giants Roll The Dice On Growth In Vegas. Is There Still Room To Run In The Desert?

When Daniel Cohen and his colleagues at private equity giant Apollo began due diligence on a $6.25B acquisition of the Venetian casino and hotel in Las Vegas in autumn 2021, the business was losing $1M a day.

Casinos had only just been allowed to operate at full capacity and there was no debt available to finance the acquisition. But the company still believed in Vegas.

“We’re in the business of taking measured bets,” Cohen, a partner in Apollo’s private equity division, told Bisnow. “Las Vegas is an incredible, resilient investment destination, and we thought that people would want to be together again here in the post-pandemic world. So far things are panning out beautifully.”

Courtesy of VICI Properties

The Venetian hotel and convention center in Las Vegas

Las Vegas was one of America’s boomtowns in the years before the pandemic: In the decade leading up to 2022, its population grew from 2 million residents to 3 million, with employment growth rising in lockstep. Real estate investors, developers and private equity firms were quick to bet big on the city, investing heavily in casinos and hotels as well as logistics, multifamily and retail.

A disease like the coronavirus could not have been worse for a town so heavily dependent on people flying in from around the world to gather indoors, elbow to elbow, at card tables, concert halls, restaurants, nightclubs and sports stadiums. The pandemic cost the local economy $34B, and during the height of the lockdown in spring 2020, unemployment jumped from 5% to nearly 30%, according to a report from Applied Analytics for the Las Vegas Convention and Visitors Authority.

But the city has recovered faster than Cohen could ever have hoped. The question now is, can Las Vegas’ streak be extended?

Pent-up demand spurred a bounce in travel, with visitor levels now broadly the same as in 2019, but the city will need to see continued and sustainable growth. Its broader economy, hindered by a low-ranking state education system, needs to diversify. And Las Vegas has not been immune to the slowdown in real estate investment created by the sharp rise in debt costs, though big investors are still on the hunt for deals.

“Las Vegas today is about more than just gaming,” Blackstone Head of Real Estate Asset Management Americas Rob Harper said. “It’s a more diverse economy, there’s a low cost of living, lots of job growth and economic growth, and that makes it interesting in real estate terms. 

“A lot of what we’ve done has been in residential and logistics,” he added, as well as the odd multibillion casino and hotel trade.

High Rollers Come To Town

By far the most eye-catching area of Las Vegas real estate in the past decade, both literally and metaphorically, has been the spike in trades of enormous, well-known hotel and casino complexes, often completed through an “op-co/prop-co” structure.

Until a decade ago, most big casino and hotel operators owned the business that ran their properties and the real estate they occupied. Then REITs like GLPI started to buy casino and hotel real estate to lease back to operators, splitting the property from the operations. Real estate investors put a higher value on the real estate than operators, was the theory, while operators can reinvest proceeds into improving the value and revenue of their business. 

In 2016, specialist gaming real estate company VICI properties bought the Harrah’s Las Vegas Hotel and Casino from Caesars Entertainment for $1.14B, completing the fourth-largest REIT IPO in U.S. history a year later. It bought the real estate of the famous Caesars Palace two years later, and in 2021, it teamed up with Apollo to buy the Venetian from Las Vegas legend Sheldon Adelson’s Las Vegas Sands. VICI bought the real estate for $4B, while Apollo paid $2.25B for the operations, a structure that allowed Apollo to finance the deal at a time when debt for big hospitality private equity acquisitions was nonexistent from risk-averse banks, Apollo’s Cohen said.


Bisnow/Mike Phillips

Gambling revenue in Las Vegas has been resilient in recent years.

Later in 2021, VICI bought MGM Growth Properties, a REIT set up by operator MGM, for $17B.

Blackstone was an early entrant into the Las Vegas market, buying the Cosmopolitan hotel and casino for $1.73B in 2014, before selling its operations to MGM Resorts in 2022 for $1.625B and buying the real estate for its private REIT alongside Stonepeak Partners and Cherng Family Trust for $4B. That uplift made it the most profitable single-asset real estate deal in the firm’s history. 

In 2020, Blackstone bought 50% of the MGM Grand and Mandalay Bay hotels in a deal that valued the hotels at $4.6B, before selling the stake to VICI at the end of last year in a trade that valued the pair at $5.5B.

“Vegas has been good to us on the investment front,” Harper said. “We bought a newly constructed asset that was distressed at below-replacement cost, invested another $500M and successfully exited.”

That spate of deals around the turn of the decade saw Vegas real estate investment volumes jump from $9.9B in 2018 and $20.8B in 2021 to $27.1B in 2022, according to CoStar data. 

That frenzy paused in 2023, with year-to-date volumes of $1.75B, per CoStar. But that’s a function of financial markets and rising interest rates rather than a comment on the underlying strength of operators’ cash flows. Blackstone’s Harper, VICI CEO Ed Pitoniak and Apollo’s Cohen all say they are on the lookout for more deals at the right price.

“Buyers and sellers will need to have more confidence in where values are before we see any significant transactions,” Pitoniak told Bisnow. “But there’s still real estate along the strip owned by operators, and you may see them choose to unlock that value.”


Courtesy of VICI Properties

VICI Properties’ Ed Pitoniak

There may be no deals happening to reveal where values have gone, but as an indication of the sector’s resiliency, VICI’s share price has risen by 2% in the past year, compared to a drop of around 40% in REIT indices.

Investors who spoke to Bisnow consistently cited the Wynn and Encore towers as operator-owned real estate to keep an eye on, along with the Fountainbleau, which is scheduled to open in December this year. On the latter, however, real estate buyers may be disappointed.

“We’re long-term holders and we want to be owning our real estate for the long term,” Fountainbleau Chief Financial Officer Stephen Singer told the NAREE journalism conference held in the city this week. As a privately owned company, the firm is under less pressure to monetize its real estate assets, he said.

Back To The Future

The faith in Las Vegas’ prospects shown by investors is about the resiliency of the pastime for which it’s best known, gambling, as well as its ability to find new ways to make money, an ability the city has drawn on to evolve in the past.

“Gaming operators are among the finest and most innovative hospitality organizations on earth; and in particular, the Las Vegas strip is one of the most economically productive streets in the world, if you calculate the revenue and profit that’s generated in those few miles,” VICI’s Pitoniak said.

On the gambling side, he pointed to the sector’s resiliency in the face of recessions. U.S. gaming revenue only dropped 3.9% in 2008, and Las Vegas hotel occupancy stayed robust at around 86%. (It was 84% in April of this year, according to the University of Nevada’s Las Vegas’ Center for Business and Economic Research.) Not a single large property on the Las Vegas strip missed a rental payment during the pandemic, he added, despite being fully closed for almost three months and having to operate at 50% capacity or below for more than a year.


Bisnow/Mike Phillips

The Cosmopolitan was the most profitable single-asset deal in Blackstone history.

Gambling revenue in Nevada has been $1B or higher for 26 straight months, Nevada Gaming Control Board data showed. That run stretches back to March 2021, before casinos were even permitted to operate at full capacity.

But in the past two decades in particular, the city’s tourism economy has moved beyond just gambling.

“Rewind to the mid-2000s, and gaming revenue for the big hotels on the Strip was 60-70% of income,” Cohen said.

Today, that’s inverted, and the majority is non-gaming revenue.

“Las Vegas always used to be called recession-proof, but I don’t believe that’s true,” Paragon Gaming CEO Diana Bennett told the NAREE conference. “We overexpanded and we got too expensive. But Las Vegas always evolves and reinvents itself, and people really considered what they needed to do to get people to come here.”

What operators did was reinvent an element of the Las Vegas golden era for the modern age. Residencies from big stars like Frank Sinatra and Elvis in the 1960s were a big draw for gamblers, Cohen said.

“But they were playing in rooms that might seat a couple of thousand people, not huge arenas,” he added.

Celine Dion struck a deal for a residency at Caesars Palace in the early 2000s, which saw the 1,500-seat Circus Maximus area knocked down to build the 4,000-seat Colosseum theatre. When her residency opened in 2003, Dion played 170 shows, all sellouts, and the Las Vegas residency is now a fixture of the town, with artists like Adele, Rod Stewart and Garth Brooks all making deals with casinos and arenas.

The 20,000-seat T-Mobile arena opened in 2016, hosting concerts and sports events, and MSG will this year complete The Las Vegas Sphere, a 17,500-capacity venue, at a cost of $2.3B. U2 are opening the venue, playing 25 shows in a row, many of which are already sold out. In all, almost 450,000 people are set to see the aging Irish soft rockers play in a little more than three months.

Drive To Survive


Las Vegas investors are banking that F1 and other sports will be major drivers of new visitors to the city.

On top of concerts and shows, sports is the other area currently exciting investors and generating faith in Las Vegas tourism’s future. The city has an NFL team in the Las Vegas Raiders and an NHL team in the Las Vegas Golden Knights, currently playing for the Stanley Cup. The Super Bowl will be held in Las Vegas in 2024.

A bill to provide funding to build a stadium for MLB’s Oakland A’s did not pass earlier this week but could be approved at a special legislative session later this year. If it goes through, the Tropicana hotel and casino would be demolished to make way for an A’s stadium.

But generating the most excitement of all is the deal to bring Formula 1 motor racing to Las Vegas, with F1’s owners signing a 10-year deal to hold an annual race on a track that will be created from the city’s streets. The race will be held in November, on the weekend prior to Thanksgiving, normally a slow period for the city. Yet rooms are booking up fast at prices three or four times the normal room rate for that period, Caesar’s Palace Vice President and Assistant General Manager Terrence O’Donnell told the NAREE event.

“F1’s owners were willing to take the promoter risk for the race, the only place they’ve done that in the world,” VICI’s Pitoniak said, meaning that F1 itself is the marketer and promoter of the event, rather than selling the promotion rights to an outside company. “I think that shows their commitment to the city.”

So does the purchase of a $240M land parcel needed to make the race happen, he said.

It is the growth potential created by non-gambling pursuits — along with the fact that when tourists are in town for other reasons, they inevitably drop some money in the casino — that has Cohen predicting that the Venetian’s revenues could increase by 30%-40% in the coming years. In 2022, the company paid itself a $620M dividend from the casino after revenue recovered faster than expected. 

Other Sectors On A Roll

The growth of the tourism industry has been a major driver of population growth, with a big proportion of the 1 million-person influx coming from Southern California, drawn by job growth, a cost of living that is below neighboring states and 0% income tax. That population growth has fueled other areas of CRE, in particular the industrial and multifamily sectors. 

Industrial has grown due to domestic population growth, but also because Las Vegas is relatively well-positioned to provide some of the logistics for other southwest U.S. markets. More than 30M SF of industrial was built in Las Vegas between 2018 and 2022, CoStar data showed, and another 13M SF will be delivered this year. More than half of that is pre-leased, and vacancy is less than 2% in the sector, per Newmark data.


Residencies by artists like Adele are a major driver of tourism in Las Vegas.

On the residential side, multifamily and single-family rents have grown by more than 30% in the past five years, though that growth has started to slow. Las Vegas’ single-family rents are among the bottom five major metros for growth, essentially flatlining in February, data from CoreLogic showed.

“Essentially rents had grown so fast they couldn’t keep going up,” CoreLogic Principal Economist Molly Boesel said.

On the multifamily side, rents have grown by 30% in the past five years, Newmark Executive Managing Director in San Diego Rick Reeder said, creating a development boom. About 91,000 units were delivered over that period, almost doubling available supply.

“It will take some time to absorb that new supply,” he said. Yardi data showed multifamily vacancy rates jumped 410 basis points to 6.8% and rents dropped 2.3% in the first quarter.

But some of the idiosyncrasies of the Las Vegas economy will continue to support the rental market as will continued population growth.

“We’re a state that looks like we have a lot of land, but 90% of that is owned by the federal government, or public bodies, or isn’t suitable for development,” The Agency broker and Managing Partner Zar Zanganeh told the NAREE event. “We’re a tenants’ market.”

Much development in Las Vegas is low-rise stucco and wooden frame housing, he said, adding high-rise development is expensive and only getting more so. The fact that a significant proportion of Las Vegas workers’ wages come from tips and are difficult to declare on mortgage application forms precludes many employees in the city from getting mortgages, keeping them in the rental market.

In terms of the office market, the city has avoided some of the worst problems of its West Coast peers, with vacancy currently around 10%, JLL data showed. As well as jobs in tourism, inward migrants to Las Vegas were also taking higher-income jobs in growing sectors like tech and management consultancy, and the city has an emerging medical cluster, per Oxford Economics. Gaming technology is a particular area of growth, given the proximity of the largest gaming firms. 

But in spite of the low cost of living and attractions like good weather, the city still finds it hard to attract corporate entities from out of state.


Courtesy of NAREE

Bisnow’s Catie Dixon, JLL’s Nick Barber and The Agency’s Zar Zanganeh.

“If you look at a company like Draft Kings, which built a 75K [SF] office here, they had to import talent from Boston,” JLL Executive Vice President and tenant rep specialist Nick Barber told the NAREE event. “The state only has two major universities, and they are pretty far apart, and the public school system needs help. When companies are looking to relocate and ask us where they are going to get their talent from, we show them maps of Southern California or Arizona.”

The state’s economy is diversifying, but slowly, Barber said, leaving it exposed when black swan events like the pandemic cause a downturn.

“Of the 50 largest U.S. metros, it’s by far the most volatile,” Oxford Economics Senior Vice President, Americas Barbara Denham said. “It suffered so badly during Covid that there is still a lot of room for growth.”

Back at the casinos, the real estate of the casino floor and the hotel is another factor persuading those taking on the operations of huge properties that there is more room for growth.

When Blackstone bought the Cosmopolitan, it brought in Las Vegas veteran Bill McBeath as president and CEO; he had previously served as president of the Bellagio, the Mirage, the Aria and Treasure Island. He immediately set about changing the internal configuration of the casino. 

“Ultimately we looked at it like a redevelopment, even though it was only 4 years old,” he said. “Gaming is a commodity: There are things you can tweak to improve the odds, but ultimately every casino has the same games. To grow EBITDA, you need to look at adjacencies, and to improve the services and experience people have.”


Courtesy of VICI Properties

Caesar’s Palace, the birthplace of the modern Vegas residency.

As far as adjacencies go, McBeath moved the sports book from the second floor, where no one would typically go, to its rightful place in the the center of the casino floor. Only lower footfall high-limit games should be on higher floors, he said.

He also took out 180 slot machines and put in their place 22 video poker machines. They turned a higher profit and freed up space for more food and beverage facilities.

At the Venetian, too, Apollo is undertaking a major overhaul, investing $1B in improving the property, including upgrading all 7,100 rooms as well as casino and hotel amenities.

“When we bought the property, we had 300K [SF] of underproductive space on the ground floors,” Cohen said, including F&B facilities that hadn’t reopened after Covid, or areas the previous owner had simply not finished building. Apollo is now investing over $1B into the property and these spaces, debuting new restaurants [like HaSalon and Miznon], a new sports book and additional gaming and entertainment areas. The Venetian has already announced three-to-five new shows, such as Lin-Manuel Miranda’s Freestyle Love Supreme, as well.

“We really like the space, the fact that you have to be licensed, and that reduces competition,” Cohen said. “We’ve been investing in gaming for 20 years, there’s a few assets left on the Strip, and we think there are more deals to be done.”