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Las Vegas Sands: Unlocking Value Could Be a REIT Idea

LVS gets the majority of profits and cash flow from its properties in Asia, especially Macau, the only place where millions of Chinese gamblers legally place bets on games of chance. No new casinos will open in Macao for at least two or three years -- a wide moat gamer!

Unlocking the Value of LVS

Las Vegas Sands is trading at $43.65 per share -- around a 50% discount to net asset value. Should the legendary gaming brand convert to a REIT?

Clearly, many other companies are aiming their sites on REIT-dom. Who wouldn't? With REIT multiples two times the size LVS.

LVS is known for its exceptional gaming and lodging brand, but the company's value proposition is centered on three integrated business models: malls, lodging and gaming. Collectively, the three platforms provide tremendous value, and individually, the pieces appear to be worth more than the whole (or $43.65 per share of LVS).

Jonathan Litt, Founder and CEO of hedge fund Land and Buildings (and investor in LVS) explains, "Las Vegas Sands integrated resort developments would be ideally suited and financed through the separate mall, lodging and casino companies as each entity will have the most cheapest cost of capital for their respective property types as investors interested in each individually would bid the shares to the private market value or beyond."

Las Vegas Sands: Malls

Malls: LVS Mall REIT would be the highest quality, most productive public portfolio of mall assets in the world with sales of approximately $1,600 per square foot (double that of its peer group) and revenue growing at 15% annually. LVS malls enjoy a list of some of the most enviable retailers including HERMES, CANALI, BOSS, De Beers, kate spade, Dior, GUCCI, Lacoste, Tumi, Cartier, Calvin Klein, Louis Vuitton, Coach, Burberry, and Bvlgari.

$11 Mall Value per Share: Private and public market comps support that these assets should be valued at 4% to 4.5% cap rates; using the current share price, the implied cap rate is 10% to 50% discount. Sands Mall REIT would have no leverage post spin-out, which would allow for substantially accretive external development and acquisition activities.
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