Q2 2019 Earnings Call
Good day and welcome to the Eldorado Resorts' 2019 second quarter earnings Conference call. Today's conference is being recorded at this time. It is my pleasure now I'll turn the conference over to Mr., Joe just Tony of Investor Relations. Please go ahead Sir.
Thank you Kerry and good morning, everyone and welcome to the Eldorado Resorts' 2019 second quarter Conference call.
Joining us today from the company are Chief Executive Officer, Tom Reeg.
President and Chief operating Officer, Anthony Cronto, and Chief Financial Officer, Bret younger.
On today's call to review the company's second quarter financial results and the ongoing success and progress the company against the company's key strategic priorities, including the status of Eldorado proposed acquisition of Caesars Entertainment.
Well then open the call to participants for questions.
This morning, Eldorado resorts issued a press release announcing its second quarter financial results for the period ended June Thirtyth 2019.
The result, new leases available in the Investor Relations section of the company's website at Www Dot Eldorado resorts Dot com.
Before we get started I would like to remind everyone that the call is being recorded and a webcast replay will be available for 90 days the details of which are in today's press release.
During our call we may make certain forward looking statements about the company's performance.
Such forward looking statements are not guarantees of future performance and therefore, one should not place undue reliance on them.
Forward looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed.
For additional information concerning factors that could cause actual results to differ from those disgusting. Today's forward looking statements you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the Companys filings with the Securities and Exchange Commission.
Eldorado resorts undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances that occur after the call.
Also during today's call the company May discuss non-GAAP financial measures as defined by FCC regulation G.
The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website at www Dot Eldorado resorts Dot com.
By selecting the press release regarding the company's 2019 second quarter financial results.
Thank you for your patience with that and at this time, it's my pleasure to turn the call over to the company's CEO , Tom Reeg Tom.
Thanks, Joe.
Good morning, everybody thanks for joining.
Hi, Karen I'd characterize the quarter has.
Frustrating from.
Operating perspective, largely due to external events.
And very active on the M&A front unfold.
Buy and sell side.
Coming into the quarter, we knew we were going to be facing.
Difficult comps in the west.
Oh, we had.
Construction disruption in Colorado to give me a sense of.
The quarter in Colorado about 30% of our.
Hi.
Slot floor was I'm, sorry, our hotel rooms were down in the quarter.
How about 35% of our slot floor.
Well its off line. So you get that gives you a sense of the disruption.
Oh that we are facing in Colorado, so that that was a difficult comp.
We're happy to tell you that.
Our Colorado project is complete.
Oh, it looks great. It's been well received we're getting the word out of that.
The construction disruption is a thing of the past.
In Reno, we knew we were facing.
Alaska Volaris and me.
In the quarter and that was 15000 room nights.
In last year's quarter, So that was a headwind that we knew what we didn't know it was coming was.
Oh, the weather in the largely in the Midwest.
As those of you know me.
No I I hate to talk about weather, but it's unavoidable.
When the center of the country flooded.
So we had properties like.
Oh, that's indoors where.
He had flooding you had.
Construction on the Interstate approaching it and so the traffic said to the next exit where.
Our competitor Rhythm City center, so that was a tough.
Competitive situation for us.
You couldn't even get off at our exit.
Ooh unveil Cape Girardeau had bridges out.
Where.
Just from an employee standpoint employees that were minutes from the property normally would take over an hour to get to the property.
Hi, So just a difficult situation, we had an access road.
Vicksburg that.
Effectively disintegrated that we had to rebuild.
A lot of headwinds in the quarter.
Despite those we were able to post a over a 2% increase in same store EBITDA of just under 179.
Billion dollars.
On the plus side, if you look at our Central region, Anthony is going to get into specifics that our central region is the cleanest look at.
Our most recent acquisition since you have.
Elgin Saint Louis and Evansville in there there's no noise for.
Properties owned prior to the acquisitions last fall and you can see that those that region performed exceedingly well.
Our consolidated EBITDA margin, it's expanded to over 230 basis points.
Over 28%.
So we were quite pleased.
With that.
I'd tell you that.
As as the quarter turn.
A lot of the issues that we've been talking about are now in our rearview mirror you've got the bowling comp is done in Reno.
Construction disruption is done.
In Colorado.
The weather for the most part.
Improved although we did have a tropical storm.
That impacted the south a bit in July , but I'd tell you that despite continuing.
Weather impacts in the beginning of July that's now in the rearview mirror despite those impacts.
On a consolidated basis, we had a very good July .
And feel good about corridor.
In Reno I'd point, you to we just signed.
In agreement with.
The University of Nevada.
That had it.
A shortage of beds do too.
Explosion in existing dorms, we signed an agreement.
Great work by.
Stuart Massey, our West region, VP and Anthony Corrado.
In negotiating an agreement where we can help the university out in a way that.
Make sense for us economically.
So we signed a deal that the University will take the Sky Tower Circus Circus, which was just remodeled.
About 18 months ago, it's 902 rooms, they take them for nine months. So that's 270000 room nights.
Oh, they handle security they handle housekeeping.
So it's a very good piece of business.
For us in Italy, and in addition to.
Uh huh.
Driving that business through the property.
Help us yield.
The rest of the property going into.
2020, as you take days you fill those 900 rooms.
Through the <unk> through May 15th so we get the rooms back for the summer that's a really good pieces.
A business for us.
Also in the quarter.
We.
Hi on the M&A side as everyone is aware we announced.
The acquisition of Caesars I'll touch on that again in a moment.
We announced two sales transactions, we announced.
The sale to century casinos.
Our mountaineer asset in West Virginia.
Correct Zelinski Gerardo in Mississippi, I'm, saying in Missouri.
And then we announced sale to the twin River.
Of our Kansas City asset in Missouri, and Vicksburg, Mississippi, both of those transactions have cleared.
HSR and are on track for their original.
The expected closing date.
Oh, the Caesars acquisition, we have to spend.
A good amount of time with.
Tony and his management team, we continue to do that as we start to work through.
Hi, how we will operate the combined company.
At the time of the announcement.
We told you that we expect to generate.
$500 million of near term synergies and that we see a path.
The four to four and a half billion EBIT dollars in the combined portfolio.
Everything that we've learned to date has further strengthened that confidence.
We feel really good about the numbers.
We put out there.
In terms of timing we have had.
Initial discussions with all of our.
State regulatory agencies, we met face to face with a number of them continue to do that.
We've had initial conversations with the FTC.
We set out in the first half of <unk>.
2020.
Closing target.
So obviously, that's a range in January 1st at June Thirtyth.
As we sit here today I would expect.
Closings to be closer to January 1st in June Thirtyth.
So all in all a challenges in the quarter.
From an external forces that are now in the rearview mirror I should also point out that we've now anniversary the competition and.
The competitive openings in Atlantic City.
Remarkably in the first year.
Uh huh.
These post the competitive openings Atlantic City, Trop Atlantic City EBITDA.
It was almost identical to the prior 12 months.
That was with us coming and expecting a 20% here.
They didnt see ahead at all so we were.
Extraordinarily pleased with the work of.
Steve calendar, Jason Gregorich and their team and Atlantic City and were excited when we can what we can do there going forward now that were.
Topping apples for apples.
Expanded EBITDA margins posted a little bit of growth, we feel good about the third quarter.
Started with a good July .
So we feel good about where we sit today and with that I'll turn it to Anthony for more detail.
Thank you Tom and good morning to everyone on the call I'd like to take a few minutes to provide you with some second quarter operational highlights.
Looking at our five operating segments.
Again, with the East segment, where adjusted EBITDA increased 1.1% year over year to 47.4 million and the adjusted EBITDA margin Rose 130 basis points.
27.8%.
Within the segment adjusted EBITDA for Santa Rosa for 18 consecutive quarter.
I had a delivered a 40% operating margin.
And then Randy City, you can always Ladenburg Thalmann, following the hard rock ocean openings.
Adjusted EBITDA for the South region was down 5.6% and 29.1 million on a 10.3% decline in net revenues.
South region, adjusted EBITDA margin improved 120 basis points.
24.9%.
Revenues in the South region were impacted by high water levels woman.
And in the case of Vicksburg access road damage, but our property level teams reacted well and were able to drive margin growth.
We entered the second half of the year, we look forward to starting construction on our new mandates, but they'll be in lake Charles.
And the anniversary of the smoking ban implemented in 2018 in Baton Rouge.
Now turning to the West region, you can always down 13.2% to $34.3 million.
Several factors impacted our performance this quarter in the west region, including a tough comp in Rio lunch or when you've gone from 22% due to the addition of the women boardroom.
Additionally, as we discussed during Q1 Black box has been the cost is about $30 million renovation programs redo, our hotel rooms and entire casino floor.
We experienced significant construction disruption in black Hawk.
Thankfully all the work to be completed in Black Hawk, and we're optimistic about the second half of 2019.
Revenues in the mid West declined, 3.3% and segment adjusted EBITDA rose, 2.3% to $36.8 million with four of the six properties achieving year over year increases despite the flooding impacts.
The mid West adjusted EBITDA margin increased 210 basis points to 37.8%.
Finally, our central region delivered an exceptionally strong quarter with EBITDA growth of 17.2% on a 2.5% decline in net revenues.
Early results from the recently acquired Grand Big in Elgin are very promising with the property continues to deliver on the synergy targets, we forecasted at the time of the acquisition.
Lumire place was also a bright spot during the quarter.
Property, delivering close to 30% EBITDA growth.
Our ability to achieve targeted synergies as the three acquired properties and operate more efficiently is evident in the 540 basis point improvement in the segment operating margin of 32.3% during the quarter.
As I reflect upon our Q2 results our diversified portfolio of 26 regional gaming assets performed well my friends, where events like weather and construction disruption.
Our recently acquired assets are performing well and property level teams continue to find ways to improve operating margins as evidenced by the 230 basis point improvement always Martin.
As we move into the second half year I remain optimistic about the future given the trends we're seeing in our business.
With that I'll turn the call over to Brent for some additional insights on the second quarter financial performance and details on our balance sheet and capital structure.
Thanks, Anthony and good morning, everyone I'll begin my remarks, with a review of our capital structure and other important financial items during the quarter.
As of June Thirtyth, 2019, outstanding debt was $3 billion, including the movie or no.
We ended the quarter with 183 million in cash during the quarter.
Repaid the outstanding $40 million balance on our revolver and spent just under 60 million on capital projects.
We continue to estimate full year 2019, capex of roughly 200 million with 120 million spent on maintenance 80 million is that a new project.
Walk of the 80 million project Capex spend is lit among the black Hawk renovations, which are now complete room remodels in Reno and starting to Lake Charles Land based project later this year.
As you know, we recently announced two separate transactions you divest five properties in total.
We're expecting cash proceeds of $615 million.
We expect to apply the net proceeds from these transactions at closing to reduce debt.
For the remainder of the year, we are focused on using free cash flow to further reduce debt out of the expected closing of the Caesars transaction.
We look to the second half of 2019, we encouraged by the pace of operating margin improvement throughout the portfolio.
For two extracting synergies from our recently acquired.
Now, let me turn the call back to Tom.
Thanks, Brad So a couple of things to clean up and then I'll turn it over for questions.
The.
All of the items it by the one time items that Weve talked about bowlers in Colorado.
And weather in the Midwest.
Yeah, our bottoms up analysis, best guess is that cost us.
$8 million to $10 million of EBITDA in the quarter I offer that to you for.
Modeling purposes, obviously, we did what we did in.
EBITDA for the quarter in terms of.
The Caesars transaction.
We have been clear that.
We are considering strongly considering a sale of a Las Vegas strip assets, you should expect that that would happen post closing you shouldn't expect something to be happened happening there pre closing.
Any divestiture activity that.
You see between now and closing.
You should expect to be certainly smaller than a vegas strip assets.
Our intention post transaction is to focus on.
Fixing the.
Caesars.
Operating structure moving it more in line with the way that we operate.
Harvesting free cash flow.
And the proceeds from asset sales and driving leverage down quickly.
Our target post acquisition will be to drive leverage ultimately below three times.
I think that we expect that there is a path to generate $4 billion to $5 billion of debt pay down.
In the first 24 months.
Post transaction and that's what we intend to execute.
So with that I'll turn back to the operator for Q and a.
Thank you at this time, we'd like to open the floor for questions you would like to ask a question. Please press the star key followed by the one key on your Touchtone phone now.
Questions will be taken in which the order. They are received if at any time you need to remove yourself from the question in queue. That's starting up again that is star one to ask an audio question.
Our first question will come from Carlo Santarelli with Deutsche Bank.
Hey, Tom Anthony Brett. Thank you for your remarks, Tom just if I could touch on kind of the the statement you just made in terms of the one timers in the Two Q1 9.
Extrapolating kind of the eight to 10 or adding that back kind of implies a seven ish percent.
Adjusted EBITDAR growth rate inclusive of corporate is that more or less based on what you're seeing in July trends and kind of trends that non disrupted and or non weather impacted properties is that more or less what you see as kind of the cadence of the business as we move towards the back half or through the back half of 2019.
Hi, as you know Carlo we don't provide guidance, what I would say is.
The only thing that you are missing if you look at two Q1 9, as we're now.
We now have an easier comp and Atlantic city, certainly easier than it was last quarter, but not necessarily.
Easy so other than that I would say, there's there's no reason to believe that you'd be.
Your dramatically different from what we've been doing recently in the end markets where.
We were not impacted by weather.
See our experience in terms of.
Customer engagement customer visitation spend was all consistent.
So our our belief is that.
Most of the variance or if not all of the variance was due to the items that we.
We raised so the absence of them would suggest that we can continue on that trajectory.
Understood Great. Thank you and then just in terms of the process now and kind of from the last time, you guys addressed the investment community, which is little over a month ago now or as you think about the <unk> the things you've learned in in in the in the last call a month or so.
Including kind of seizures results last night.
Has there been anything incremental that you guys have foreseen or or kind of acknowledged in in that process that has made you any more or less bullish in terms of your targets.
Well I mean, I think I'm looking at a different.
Las Vegas market and the market is that spend.
Yeah, that's been the number one trepidation from.
Investors is what about the Las Vegas strip I, just saw Caesars last night pose.
97.5% occupancy, which I would have told you is virtually impossible for.
90 day period across over 20000 rooms.
I guess cash.
Room revenue ever.
And they've got.
Convention Center coming you've got Convention center expansion here, you've got a better group calendar.
Yeah, I would say as we've gotten.
It more into the weeds in Las Vegas, we feel very very good about coming into this market at this moment.
And in terms of the rest of what we've been finding its as we as we would've expected there was a lot of.
Detailed analysis done prior to the transaction is.
In terms of functionally how it came together.
We had a lot more intelligence.
Synergies than we typically do at the time of deal announcement and everything that we have learned since as reinforce that.
Great. Thank you very much.
Thank you. Our next question will be from David Katz with Jefferies.
Oh, hi, good morning, everyone.
Tom can you elaborate just a little bit more and I you know I I I think we understand.
Where you know you're taking the business for the next nine to 12 months.
But in terms of what we might.
Fairly ask about over the next two to four quarters.
With respect to you know property sales I just want to be clear that a strip asset sale are we talking about closing or announced or is it something that's just not going to come up until after you close again, what can we reasonably expect I think you sort of see the <unk> brought area that I'm trying to get out.
I Kinda affirmatively tell you that.
Our expectation is you will not see a strip asset sale announcement until post closing of the larger transaction.
Got it, but we might see other smaller ones.
Yeah, you could see some smaller assets there are.
You know the Caesars is operating as it should as if they're going to remain a stand alone company there are assets in that portfolio.
That they might consider pruning their assets and those assets would likely.
All in line with what we would consider pruning pruning post transaction. So if an opportunity comes up.
In this pre closing period to act on one of those you should expect us to do that.
There's the possibility that we will.
So were agreed to sell assets for assets for anti trust purposes.
The the the pro forma leverage that was discussed around the deal announcement.
That that should be a relatively kind of firm level.
Between now and and closing in other words the prospects of that.
Coming down ahead of time.
Our low.
No you should.
There are assets that.
Are likely to be required to be sold for.
And I trust purposes.
And.
Hi.
Be very disappointed that was worth deleveraging transactions given where.
Levered less than six times I would expect.
Pro forma for the transactions.
That we would expect to.
Hi enter into pre closing.
That.
Pro forma leverage at closing on a gross.
That are.
Lease adjusted debt to EBITDA basis would be in the mid fives.
Which is what we've said.
Great deal, it's what we've said post deal and that's where we are today, none of that has changed.
Got it.
Okay. Thank you very much.
Thanks, Dan.
Thank you. Our next question will be from Barry Jonas with Suntrust.
Hi, guys I'm, Tom in the past you've given some parameters about what the existing Eldorado portfolio could achieve I think youve generally talked about maybe 750 million of EBITDAR. This year sort of rising up to 900 million plus.
I guess, excluding divestitures has anything changed in your view there.
Also excluding some of the onetime whether another heads we've seen this year. Thanks.
No nothing has changed there still see the existing portfolio adds.
Our 900 million and $900 million to a billion dollar.
EBITDAR enterprise.
Oh, it's just our post the opening of.
But now the expansion in Lake Charles and our continued work on.
Executing synergies and I should have touched on synergies in my remarks, we announced 40 in trop.
And 15 and Allergan.
And.
We're.
On the verge of surpassing balls as we sit here.
Today, so certainly.
Within a very short period of time, we would have realized the 55 million.
That we announced.
And we continue to expect the 902 billion is the right range.
Again with your coffee out of.
Obviously, there are some assets out there that are selling.
Great and then last night, Tony Rodeo on the Caesars call talked about potentially adding some non gaming amenities to some projects you talked about strategic deployment of marketing dollars as he put it and they also mentioned they will continue to evaluate the Courier project I'd love to just get your perspective on how this would fit into your post close strategy.
I've had the the idea of adding non gaming amenities is consistent with what we've been doing across the portfolio you know that we've spent.
Probably approaching $200 million in Reno at this point over the last several years all of that on non gaming investment Weve added.
A significant pieces to say Oh, we just added another smoking patio that opened toward the end of <unk>.
The second quarter, we added the hotel there Weve added brew brothers across the portfolio, we're talking about the Lake Charles.
It was to land base, we're looking at Elgin.
In terms of.
That portfolio I'm sure that property with the.
With that legislation, we have the ability to.
Well positions off of the boat and into the land base pavilion, and potentially add more which could be an opportunity in that period of time.
Between now and when competitive product would open.
We're in the middle of design, there as well so what Tony articulated is exactly what we've been doing on our side.
We'd expect to be looking at.
Similar opportunities in their portfolio.
Strategically moving marketing dollars, that's a big piece of what we do across our portfolio. So certainly we'd expect to be.
Good to be doing the same thing post transaction.
Keep in mind that.
Yeah them running 97.5% occupancy on the strip.
You know rising revpar.
And.
Cash room revenue record, we're going to introduce.
An additional 20% a demand increase into that pipeline as we plug our properties into total rewards and it's heartening for us to look at.
What's happening with Sentara since that property was plugged into total rewards nuts.
Giving us a lot of optimism about the impact from us.
As we execute a sale of a strip asset that route so would be an increasing demand will be reducing supply within our network.
Which should be very powerful from a yielding perspective.
In the combined portfolio.
Now you asked about Korea I'll.
Yes, let the remarks of their management teams and from yesterday.
You know that we are.
We've.
Historically focused our efforts here and we have a lot of work to do here to get the combined portfolio on the flooding.
That we wanted to be on.
Great. Thanks, so much.
Thank you and once again that is star one to ask an audio question. Our next question will come from Jared Shojaian with Wolfe research.
Hi, Good morning, everyone. Thanks for taking my question.
Tom can you just talk about the interest level in the transaction market right now we've heard from a couple of your peers, you sort of indicated a rather benign appetite of their own. So what are you seeing as youve been marketing some of your assets here in the last month or two.
I, obviously, we've executed five.
Five separate casino sales.
In the last quarter, so it was robust.
For Us I think this is.
Depending on where you're selling this is a good time to be a seller of assets capital is.
Yeah, notwithstanding the last couple of days in the markets capital is.
Pretty cheap.
There is.
Hey, there's operators or smaller operators that want to get bigger.
Theres operators that are not on the Vegas strip that want to get on the Vegas strip.
Ah so we feel like.
Oh in terms of.
Selling individual asset this asset this is a good time to be looking at that.
Great. Thank you and then can you talk about black Hawk, how much of the $8 million to $10 million was associated to Black Hawk and how has blackhawk perform.
Since you've completed the renovations maybe in the days and weeks post renovation, how much as revenue and EBITDA up and then separately are you expecting any disruption from the lake Charles moved quite a bit.
Ah so the.
The on the Black Hawk question.
Rather than parsing, where that eight to 10 million comes from I tell you Blackhawk EBITDA.
It was down about 20% in the first half of the year.
On more than a 10%.
Revenue decline.
Since weve reopened.
That those declines have disappeared, we're now getting the word out.
The work is complete and we'd expect to be posting year over year gains as we move forward.
And in Lake Charles.
The answer is yes, there will be construction disruption there where we're.
The footprint of where we're putting the asset is effectively connecting the existing hotel with the existing parking garage, which sits on where the existing portico share is if you were.
Valet parking your car if you're coming in through the garage or you should be see relatively little impact since you can exit the garage and walk to the boat without walking through.
That area, but we would expect.
Some significant disruption in lake Charles as we begin.
Okay. Thank you very much.
Thank you.
Our next question will be from.
John decree with Union gaming.
Good morning, everyone. Thanks for taking the questions.
Two for me Tom I know you know for everyone, who is who has been following eldorado for while knows that your program on on marketing and promotional activities and doesn't isn't contingent upon what your competitors are doing but you know we have heard over the last several months a little bit of heightened promotional activity and in various markets and was wondering if you could comment on that and if you've seen that in your markets. If its had any impact.
And then as a follow up as we kind of track. The Caesars results going forward. You know is there is there anything that you guys can do ahead of time to share best practices or.
Have any influence in how some of their operations go I guess, you know directly if we see cedars operating results is there any eldorado's best practices.
They can be incorporated before closing.
I think you heard Tony in his remarks yesterday in terms of.
Some of their cost cutting initiatives, and where where he expects to go and you.
I certainly heard some similarities there in terms of what.
We would target, but there is no we cannot.
Direct them to do anything between now and closing were too.
Independent companies operating independently, but as you know Tony has only been there.
A couple of months now so he is.
He is making changes as the new guy and see that.
In some cases wouldn't be too dissimilar to what we'd be doing where we in the seat. So we're.
We're watching that and you know we're in discussions with them about.
Oh, they operate making making yeah, well remark on what we see.
And will form a formulate our own plan, but we do see some.
Progress in terms of where we would had post closing.
Yeah. What was your first question, John Sorry, I blanked, yeah, sorry to put them put them all together a broadly speaking the promotional environment Oh, yeah, It's mark yeah, So maybe uptick.
You know we see.
What I would characterize is.
No abnormal.
Promotional market on balance there are pockets, where you see.
People, making decisions that seem to be irrational or Atlantic city is it.
The Chief example of that but there's nothing that's impacting.
The decisions that we're making on the marketing side.
Thanks for the additional color Tom.
Thank you. Our next question will be from Brian like Gill with Telsey.
Hello, Brian Your line is live.
Oh I'm sorry, you hear me now.
Got it about right, let's go get sorry, [laughter] has done or what happened there.
I want to go on Pompano, I guess with the documents that are out there now it seems like it's a bigger project, possibly with.
Thousand hotel rooms are almost in 4100 residential units and also said I read a 2029 completions I guess I'm wondering what's the cost and as I'm, assuming it opens in phases. So maybe any color there.
So what I'd say is the zoning process for us has taken.
A bit longer than we anticipated just in terms of.
How fast its movie there's no issues we.
For a bit more optimistic in terms of when we could combine.
The entire property for zoning purposes, you've seen.
Some of the plants started to leak you know you should be expecting that.
<unk> construction begins.
Late this year early next year.
You should be thinking about.
A typical lives.
Entertainment District, that's got some of the pieces that.
Have been announced or have been rumored.
And that that opens next year.
And in a later next year early 21 and.
That would include an initial residential tower and the National Office tower.
The bulk of the add on.
You know in terms of out to 2029 is additional residential and office tower has demand builds that this is.
Your your kind of building.
A town center for those of you that live near the town Center. So it's it's quite in.
Ambitious development you know the interest from third parties has been.
Significantly in excess of what our partners were expecting coming in which is heartening to us.
Hi exceed it we continue to believe that.
We'll be able to fund.
The bulk of the development either on the JV balance sheet or with third party money.
The only.
On balance sheet.
Investment you should expect from US is an expansion of the <unk>.
The casino and the addition of a parking garage since a fair amount of what's built is our existing surface parking.
But as though as those plants come into focus will have more detail there.
Thanks, and then I wanted to ask on Illinois with the expansion would you bid on any of the potential new casino licenses there.
I would say, it's unlikely or the timing of.
Their expansion is it's difficult for us from that perspective since our number one focus is.
Getting the Caesars transaction close.
So that.
You know anything.
External to that then.
Takes focus away from that is its unlikely that we would pursue.
Okay, and then last one from me on the theme of the conference calls so far has really been that the.
Sports betting spend helping drive regional traffic, which is certainly a positive.
We've also had a number of partnerships announced recently around online sports betting and casino and probably going to see more at it going forward I mean does that change at all how you view sports betting going forward.
I would say that.
You know the.
Development of sports betting.
As Ben.
As we've expected in terms of driving incremental visitation.
The change for us is.
Caesars has a robust developed sports betting business already including sports partnerships.
They've got.
Hi, and Internet casino business that are material businesses that I think.
Really get little to no value.
We've gotten a little bit of value in their share price when they were independent company we bring.
Our own sports business our partnerships.
I I am starting to think about is there a way to.
Is there a way to structurally put something together that shines a light on that business.
The more of a pure play fashion that wouldn't be recognized by the market and you know it's.
Early days in terms of thoughts but.
I think there is.
Yeah, there is a big business there, it's growing very very quickly.
And it's it's.
How is within a much larger business.
It typically trades that.
Lower EBITDA multiples, if I can find a way to.
Spotlight that value you should expect that we're going to have some sort of sort sort of spin off or something like that potentially one day, yeah. I mean, it just is there a way to.
The point people to look at this value that's very high growth business.
And.
On a combined basis real critical mass.
That's just lost in.
A much larger story as we sit here today.
Okay. Thank you.
Thank you. Our next question will be from Daniel Politzer with JP Morgan.
Daniel Your line is live.
Hi can you hear me.
[noise], we actually do.
All right good morning, everybody and thanks for taking my questions.
So the first one is on 2020 and the West segment, which I think is a little bit its a little theres a lot more moving pieces I guess there.
With respect to that headwinds in 2019, thus far that potentially become tailwinds in 2020. So if you can get just kind of bridge us or walk us through some of the impact is felt so far this year and what you know.
You should potentially be a benefit next year and the things that come to my mind would be Reno, the weather impact housing deal bowling, returning Blackhawk construction and how you're kind of thinking through all these moving pieces with respect to how your revenue and EBITDA growth more broadly have been growing for your entire company.
Yeah, I would say.
We talked about.
Impact of weather on the first quarter call Weve talked about whats happened to.
Black Hawk in the first six months of the year. If you look at it. So it's a black Hawk, we you should be thinking about.
What it was doing before plus a return on a $30 million investment, where we would expect again.
15% plus cash on cash returns.
In Reno.
I think we should be.
With particularly with the deal with the University I think we should be testing the all time high for Reno and 2020.
Given that you've got Safari club in January you got.
The Big Bowling group in the second quarter, which was 40000 room nights.
The last time they were there plus this university deal.
No the.
Plus the the renovation of legacy that's coming online that finishes our legacy rooms that finishes our.
Capex cycle.
You know the prior record.
Reno EBITDA was about a $110 million across the three properties.
Yeah, I would expect that to be in jeopardy in 20 Twond.
All right. Thanks for that and then just a follow up on last night's Caesars caught on they mentioned they were looking to reduce corporate costs by $50 million, but I think the first quarter of 2020, I guess how does that.
How does that integrate with your anticipated $500 million in targeted synergies for that is that included or would that be an addition, or is it kind of something you are still looking at.
It's something that we're still looking at I would expect that there would be.
A fair amount of overlap.
ER versus what we would be tar.
Okay and then one last quick one I think you said you were mentioning you were looking to drive leverage down three times.
Once all said and done with the transaction.
I just want to clarify is that on a lease adjusted basis or just looking at a traditional debt.
That's on a gross lease adjusted basis.
All right guys. Thanks, so much.
At this time there are no further questions.
I'm sorry, we do have another question from David Katz.
Hi, one one quick one if you don't mind and apologies. If you discussed this already but can you just talk about corporate expense a little bit it was.
And I guess understandably a bit elevated in the quarter and has been jumping around quite a bit.
What's in there and how could we potentially think about that for the rest of the year and next year.
Hi, you've got some of the.
You've got sports betting roll through corporate and other now.
So theres a little bit of noise in our corporate number you should be expecting.
Our pure corporate number to stick around $40 million Subodh.
10 million a quarter and the difference would be.
What rolls through four.
Sports betting, which I believe this quarter it was around 9.5 dollars.
[noise] around 40 million.
Perfect Yes.
Alright, thanks very much.
Yeah.
Thank you there are no further questions at this time I'd like to turn the call back over to Tom Reeg.
Thanks, everybody, we'll talk to you next quarter.
Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.