SL Green Realty Corp . (NYSE: SLG) and Caesars Entertainment said they are partnering to obtain a casino license and redevelop the REIT’s property at 1515 Broadway, a 54-story office tower, into a premiere entertainment and gaming destination in Times Square.
In a third quarter earnings call on Oct. 20, Marc Holliday, chairman and CEO of SL Green, noted that further details of the plan will be released in response to a casino license RFP (request for proposal) from New York State, that the companies expect could be issued in December.
Holliday said SL Green and Caesars “wouldn’t do anything less than a world-class facility laid out in a way that we think will be extremely successful and desirable and additive to Times Square—which I think could really use a boost right now.”
Holliday added that the project would not only be “a big opportunity for the state and city, but it’s a rallying point for Times Square to have a catalyst of something very positive to help redirect some of the degradation we’ve seen in that area.”
Because the project involves a renovation of 1515 Broadway, SL Green noted that once a license is issued, it could open quicker than other facilities that would require entirely new construction, changes in law, and that would be disruptive to their local communities.
The proposed new casino, Caesars Palace Times Square, would provide billions of dollars in tax revenue to New York City and State, but would also accelerate New York's economic recovery through strategic partnerships with area businesses utilizing Caesar’s loyalty program Caesars Rewards, the companies said. It would also be designed to include a Broadway Theater for The Lion King.
SL Green and Caesars are also proposing significant security and traffic improvements as part of their proposal. Tom Reeg, CEO of Caesars, said the project would immediately enhance New York City's tourism engine, while “elevating this one-of-a-kind global destination to new heights.”
Analyst reaction was cautiously optimistic.
Vikram Malhotra, managing director, real estate equities at Mizuho, stressed that the process is still very much in the initial stages, given that the RFP has not even been released, but noted that adding a casino “would be a way for SL Green to diversify, a little bit at least.”
Malhotra added that the process to obtain the license is likely to be very competitive. “Everybody understands that a casino in New York City will draw a lot of domestic and foreign tourism…it could certainly take away from a lot of the surrounding casinos in Atlantic City and the Poconos,” he said.
Meanwhile, Green Street said the announcement can be viewed “as an option on a potentially attractive redevelopment opportunity, particularly when considering the differences in private market expected returns and public market pricing for gaming assets relative to office.”
However, “adding a casino to the portfolio may complicate SLG’s story and add a distraction factor amid a turbulent time for office landlords,” Green Street added. More details regarding the economics of the project, which are likely be released in the coming quarters, are needed to judge the project’s merits, Green Street said.
Alexander Goldfarb, senior research analyst at Piper Sandler, said the casino proposal is "compelling" with regard to addressing two key issues facing New York City: reviving the Midtown economy and addressing street safety.
"Whether the SLG Caesars joint venture wins a license or not, we believe SLG's plan to redevelop
1515 Broadway is still attractive to city and state's leaders, especially by offering a private
solution to address safety on the streets, critical to the city's health," Goldfarb said.
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