Casinos' Vegas Bet

Other Beneficiaries

The joint venture structure would have worked well for Boyd Gaming's(BYD) ambitious Echelon Place development, which the company is building at the site of the former Stardust in Vegas. Boyd is in fact using joint ventures to build the hotel and retail portions of the project, but wanted to keep full control of the gaming operations, says company spokesman Rob Stillwell.

Wynn Resorts could also pursue the structure with its ambitious Wynn Encore development on the Vegas Strip, but Steve Wynn doesn't like giving up control, industry watchers say.

Harrah's new private equity owners could also reap benefits from pursuing property-level joint ventures. Harrah's and Wynn did not return a call seeking comment.

The exploration of the structure comes at a time when private equity is becoming ever more interested in the gaming sector, as evidenced by the Morgans deal and the buyout of Harrah's by Apollo Management and TPG.

"We've always been very comfortable in investing in gaming. It tends to have asymmetrical returns," says Neal Pomroy, managing director with DLJ Merchant Banking, which partnered with Morgans on the Hard Rock deal. "Volatility on the downside is limited and the upside is fueled by continued secular growth."

In short, gaming is being perceived as an investment that offers steadier yields. As new investors continue to look for ways to enter the space, property-level joint ventures could be the perfect way to satisfy these appetites. The deals will start in Vegas, but may eventually spread to Atlantic City and other casino hotbeds.

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