Caesars Entertainment - Earnings Call - Q4 2018
March 1, 2019
Transcript
Speaker 0
Verano Resorts twenty eighteen Fourth Quarter Conference Call. Joining us today from the company are Chief Executive Officer, Tom Reeg and President and Chief Operating Officer, Anthony Carano. On today's call, we'll review the company's fourth quarter financial results and the ongoing success and progress against the company's key strategic priorities. We will then open the call to participants for questions. This afternoon, Eldorado Resorts issued a press release announcing its fourth quarter financial results for the period ended December 3138.
The release is now available in the Investor Relations section of the company's website at ww.eldoradoresorts.com. Before we get started, I'd like to remind everyone that today's call is being recorded and a webcast replay will be available for ninety 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 materially from those expressed.
For additional information concerning factors that could cause actual results to differ from those discussed in our forward looking statements, you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the company's 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 certain non GAAP financial measures as defined by SEC 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 in the comparable GAAP financial measure can be found on the company's website at www.eldoradoresorts.com by selecting the press release regarding the company's twenty eighteen fourth 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?
Speaker 1
Thanks, Joe. Good afternoon, everybody. Thanks for joining us on our call. I'm going to start with some overview remarks, turn it over to Anthony for property level detail, and then I'll come back with a little more detail and whatever I forget the first time around. So we're pleased to be reporting.
This is our best quarter we've ever reported to you. Our EBITDA on a same store basis was up 21% or 22% to $161,000,000 EBITDA margin expanded by four fifty basis points during the quarter. It was really just a spectacular quarter all around, broad based strength across virtually the entire portfolio. I'd start by making a particular note about Atlantic City, which has been a subject of a lot of conversation with investors and analysts since we announced the Trop deal and certainly since we closed it. In the quarter, Atlantic City EBITDA almost doubled versus the prior year.
And through the since the openings of Hard Rock and Ocean on June 28, Tropicana EBITDA through the January is up almost 7%. So I know there's been a lot of concern about this is the latest market where what we're doing won't work, but I think that the early results show you that we are doing something different. And if you think about what else happened in the fourth quarter, we closed Trop on October 1. We announced $40,000,000 of synergies when we announced that deal. As we sit here today, we're pushing $30,000,000 of run rate realized synergies.
We still expect to hit our synergy target in the Trop acquisition in the middle of this year and that will significantly exceed the target as we move forward. Elgin, we closed that acquisition in August, so this was our first full quarter of operation of Elgin. It had a very strong quarter. We really didn't start touching the operations until November. Again, as we sit here today, we announced $15,000,000 of synergies there.
We're just about at $10,000,000 run rate as we sit here today. Also expect we'll meet our synergy target there by the middle of the year and we'll grow well beyond that. Also in the fourth quarter, we signed our second skin agreement with the Stars Group market access agreement where we get a revenue share off of licenses they use as well as shares in the Stars Group parent company. We opened our temporary sports book at the Trop in October. Our permanent book is set to open in the next couple of weeks before the NCAA tournament starts, so we're excited about that.
And then finally, after the fourth quarter ended, we announced that Brett Junker will be joining us as CFO. I'm particularly excited that Brett is joining us. We worked together a very, very long time ago at Bank of America. Brett has been involved in every financing that Eldorado has done going back to hell, going back a long way, but going back at least to when we were a public company and even the 2011 notes when we were still private. He has a wealth of industry contacts, experience, deal experience, a couple of decades as a senior banker in the gaming space and grew the JP Morgan platform to the market leader in the space.
We're excited that he'll join us in May. So that was a big deal for us as well. And with that, I'll turn the specifics over to Anthony and come back afterwards.
Speaker 2
Thank you, Tom, and good afternoon to everyone on the call. I'd like to take a few minutes to provide you with some high level operating perspective before Tom takes over to review the fourth quarter results in more detail. Looking at our operating segments, I'll start with the West, where adjusted EBITDA was up 19.8%, including a 21.2% same store increase for our legacy properties against a 22.7% comparison in 2017. The property level adjusted EBITDA margin rose four forty basis points to 25.2%. EBITDA for The Row properties in Reno was up more than 30% and Blackhawk continues to be a strong performer with an EBITDA margin of nearly 38% for the quarter.
In Blackhawk, we expect to complete our room and casino renovations in the second quarter, which will position us to continue our strong performance as the Monarch Casino expansion is completed later this year. We continue to expect the Monarch expansion to grow the overall Blackhawk market and the upgrades to our properties will help us capture our fair share of the market growth. We also expect the Reno properties to continue to ramp as we're benefiting from the significant upgrades we've made across the three properties and improving convention and conference calendar and the tremendous overall economic growth taking place in Reno. We completed the renovation of the Circus Sky Tower and the Eldorado Suites in 2018, in addition to the opening of the spa of the Silver Legacy and Ruth Chris Steakhouse. In 2019, we'll focus on remodeling all the Silver Legacy hotel rooms.
Turning to the East segment, adjusted EBITDA was up 46% year over year as the adjusted EBITDA margin rose six sixty basis points to 21.7%. Tom touched on the spectacular Atlantic City performance, but the rest of the segment was strong as well. Adjusted EBITDA at Scioto rose for the sixteenth consecutive quarter with the last seven in a row at greater than 10% growth. Mountain Europe also has some strong tailwinds now with the lifting of the smoking ban as well as the opening of the sports book of the property, helping to drive adjusted EBITDA growth of over 50% of the property for the fourth quarter. In the Midwest Region, adjusted EBITDA rose 19.7% and the property level adjusted EBITDA margin rose three seventy basis points to 35% with all six properties generating year over year adjusted EBITDA growth, including double digit growth at Bettendorf, Cape Girardeau and Caruthersville, as we continue to implement our operating initiatives.
Adjusted EBITDA for the South Region was down 0.9% on a 5.7% decline in net revenue. In Baton Rouge, we continue to feel the impact of the smoking ban that was implemented in the second quarter of twenty eighteen and in Lake Charles, the high-ten construction hurt our visitation in the quarter. This construction shift in April with traffic patterns becoming more favorable for us, so we expect we'll get back on track shortly there. 2018 was our first full year operating Lake Charles after the canceled sale and even with the fourth quarter softness, EBITDA was up nearly 50%. Finally, for our Central segment, adjusted EBITDA rose 16.8 with the property level margin increasing 300 basis points to 27.1%.
All three properties grew adjusted EBITDA including double digit growth at Elgin and Lumiere. In summary, our continued execution on analytical cost cutting, synergies, margins, monetizing excess assets and the expansion of sports wagering leaves us confident that 2019 will be another period of growth and record results for Eldorado. I'd like to take a moment to acknowledge our team members across the entire company who bring a daily commitment to guest hospitality and operating efficiency that is the foundation of Eldorado's success. With that, I'll now turn the call over to Tom for detailed insights on the fourth quarter financial performance and additional details on our balance sheet and capital structure before we open up the call to Q
Speaker 1
and A. Tom? So we in the fourth quarter, we ended with a revolver draw of around $245,000,000 Since the quarter ended, we closed on the Presque Isle sale in January. Those proceeds were used to pay down the revolver. The Nemacolin sale is expected to close within this quarter, and those proceeds will come back for general corporate purposes as well.
We got started on our share repurchase program in the fourth quarter. We bought a little less than 10,000,000 shares at a little over $40 a share. Word on share repurchase, we've got $150,000,000 authorization that we've used a little less than 10,000,000 You should expect us to be a steady, modest buyer of our stock, and you shouldn't expect us to exhaust that share repurchase authorization until we're sub four times gross lease adjusted leverage, which puts us into some point in the middle of twenty twenty. If you look at this year so far, January was very, very strong for us, continuation of the fourth quarter. February, we've run into the same weather that everybody else has run into, but January was strong enough to overcome that.
And keep in mind that March is typically about 45% of the quarter, so a lot of the quarter is to come, but we feel good about the first quarter, we feel very good about the full year. The economic backdrop with unemployment rates low, job switching at twenty year highs, gas prices low, wages rising, real estate prices not increasing as quickly as they were but still increasing, rates at absolute low levels, not at the lowest ever, but still very low consumer confidence high. That's a pretty good backdrop for regional gaming. We all should be doing well now and I think you can see that we are and we'd expect that to continue. Every moment of this quarter that hasn't had weather impact, the business has been very strong and if March comes in in a normal fashion, I wouldn't expect to be talking about weather on our first quarter call at all.
And so I know there's going to be a lot of people that want to ask questions about articles they've read in the paper about us recently. We get the same newspapers you do, so we read those articles as well. We're not going to comment about any discussions we're having in the M and A universe. You know, what I would tell you is we've created a great standalone path for us. 2018 was about establishing a number of building blocks that will allow us to build value over a number of years.
You've obviously got the two acquisitions that we closed late in the year, You've got the William Hill deal on sports, you've got the Stars Group deal on sports, you've got the Pompano JV that we entered into with Cordish, all of which should drive significant results for the current portfolio. As I said, we expect we'll exceed our synergy targets. We still feel like we can get this portfolio in excess of 30% EBITDA margins. So we have a very good standalone path. That said, we think we're pretty good at this buying assets that other people are running and changing the way they're operated and driving EBITDA growth.
And I hope you agree based on the results that we posted, but just to refresh people on what has happened over the last several years, we bought MTR in 2014, that was the deal that brought us public. If you look at Scioto Downs on a current basis, the value of Scioto Downs alone is significantly in excess of what we paid for all of MTR. EBITDA at that property has grown over 70% since we took it over. And so that covers MTR by itself with some leftover. We sold Presque Isle, another piece of MTR for just under $200,000,000 in January and we still own Mountaineer.
So that acquisition has been a home run for us. The next deal that we did was the Reno transaction. We bought Silver Legacy, the other half of Silver Legacy and Circus Circus. If you run that forward today to today, that acquisition was made for sub four times what we generate in EBITDA at the properties. So that's been a very good acquisition for us.
2018 was the first full year that we operated the Isle properties. If you recall when we took over Isle, they were doing about $200,000,000 of EBITDA. Those same properties are doing in excess of $270,000,000 of EBITDA now and we're still going. We expect to reach at least $100,000,000 in synergies in that deal. So you should as you look at the landscape and you see assets or properties or companies where you think we can do a better job, you should assume we're analyzing the same things and we're looking to add as many as we can.
I don't want to talk about specific acquisitions, but we are going to remain active and you should expect us to remain active. And with that, I'll turn it back to the operator for questions.
Speaker 3
Thank you. We'll hear first today from Carlo Santarelli with Deutsche Bank.
Speaker 4
Great, thanks And everybody, great quarter. Congratulations. Tom, fully appreciating your commentary on not speculating or commenting on M and A or rumored M and A. Could I just kind of ask a bigger picture question, some of which I think you just addressed. But when you think holistically about how you evaluate an acquisition, what you obviously can target in synergies and then the underwriting from there, How does your math or risk tolerance change when you're looking at an OpCo situation versus a real estate entity, real estate inclusive entity?
Speaker 1
So Carlo, it obviously goes how you finance the transaction certainly goes into the calculation. The driving force in all of our acquisitions and all of our analysis of acquisitions is what we can do with the assets. If you can drive the cash flow improvements that we've been able to drive through properties that we've acquired, you're going to make a lot of money whether you finance them with lease financing or you finance them wholly owned on your balance sheet. And we're going to be as we look at acquisitions, we're going look at where the capital markets are most favorable to us and we don't want to be a wholly opco, but we will look at opco or REIT financing or real estate financing as a component of future deals. You shouldn't expect us to be doing anything that's outside of a deal specific trade with our real estate.
Speaker 4
Understood. Thank you. That's helpful. And then just quickly on your obviously, overall margins were tremendous. One of the stronger points within the departmental margins was obviously the casino segment, I think, up over three twenty basis points year over year.
Roughly how much of that was kind of mix of the new acquisitions relative to just changes that you've made at the existing portfolio and some of the synergies that you're seeing on the casino floor from some of the stuff that you acquired previously?
Speaker 1
Yes, I would say in the fourth quarter, we really hadn't touched the new properties significantly. Elgin, really didn't get into until November. The trough as you know, we typically observe for a little while before we make significant changes where we're always making some changes. So it's a nice combination of both contributions from existing properties that we've owned for a while and the new stuff. When drive increases like this, it's got to be broad based.
It can't be just a handful of properties. And to give you an idea, we talked about our customer acquisition spend number last quarter that we said has historically been going down about 10% on an annual basis, but as you know that rolls up from bottoms up programs that we're implementing at the individual property levels. But if you look back over fourth quarter, our customer acquisition spend was actually down about 12%, so a little better than what we have typically paced.
Speaker 4
Great. Tom, thank you very much.
Speaker 3
We'll hear next from Barry Jonas with SunTrust.
Speaker 5
Hey, guys. A couple of questions. First, I'd like to delve more into your success in Atlantic City. I think the initial concern from some investors was that given this is more of a destination market, that cost and marketing discipline might not work the way some of your other successful deals have. Maybe just any color there would be helpful.
Speaker 1
I think that we inherited a strong team in Atlantic City. Steve Callender has done a great job there. If you look back at the prior owner, Tropicana invested $200,000,000 into that asset over the last three years versus where we versus the market segment where we compete, you haven't seen that level of investment. The new entrants seem to target the high end of the business, basically targeting Borgata. We operate as kind of a mass market property in the market and we've got kind of an island down at the South end of the Boardwalk where we've got over 2,000 rooms filled with people that where we're getting most of their wallet and it's all coming together very nicely there.
I will tell you, Atlantic City has outperformed our wildest expectations. We were expecting a hit from the new entrance and it's been gratifying to see early on what we've been able to do with that asset.
Speaker 5
Great. And then I would like to touch on the two Louisiana properties that you cited, Lake Charles and Baton Rouge. Clearly, near term issues there, but curious how you see that resolving as the year goes on. And you've also had the opportunity to convert from a riverboat to land. So just curious what the thinking there for both those properties is right now.
Speaker 1
So Lake Charles was a temporary impact from access issues due to road construction. As Anthony said, we're up almost 50% from when we took that back after the sale fell through. So that one has been going very well. We would expect to be moving on a land based conversion project there starting in the second half of this year. And in Baton Rouge I'm sorry, in Lake Charles, that project should be 75,000,000 to $100,000,000 and we think we can get well in excess of a 15% cash on cash return.
Baton Rouge is tougher, that's a tough location. Smoking ban, we felt the smoking ban in West Virginia in 'fifteen and have seen what's happened there as it was removed. Smoking bans are difficult, so we're working through we've got another four months till we anniversary that. We think we can do a better job on the cost side and we're analyzing whether or not we will move off of the boat and into the atrium there. There's certainly some advantages to that in terms of efficiency and customer friendliness, and we're analyzing that as we speak.
Speaker 5
Great. And then just a quick one. You gave a list of macro tailwinds that you're seeing this year. Curious about tax returns. Refunds appear to be coming out below expectations.
Just curious if you're seeing anything there. Thanks.
Speaker 1
I don't really have anything intelligent to say there. It's nothing that's impacting our businesses as we sit here today, positive or negative.
Speaker 5
Understood. Thanks so much, guys.
Speaker 1
Thanks, Barry.
Speaker 3
And from JPMorgan, we'll move to Dan Politzer.
Speaker 6
Hey, everyone. Good afternoon and congrats on a great quarter.
Speaker 1
Thanks, Dan.
Speaker 6
So there have been a lot of management changes over the past six months with you guys. While you no doubt have an impressive track record of M and A, is it reasonable to think that the fortified management team should increase Eldorado's capabilities or ability for a larger and potentially more complex transaction? And similarly, should we expect corporate expense maybe takes a higher than your recent levels just given the changes in the C suite? Thanks.
Speaker 1
Dan, the answer is yes to both. I mean, we feel very good about having our arms around our existing business and ability to tackle the next one as it comes online. As you know, we're not a highly centralized organization. We run these individual properties as individual P and Ls and we provide a framework for how we want them to run and we do quite a bit of analysis of how and who we're trying to bring into the properties, but a lot of it's done at the local level and I think you've seen that our approach is scalable. We had it was when we closed on MTR five years ago, we had seven properties and we have 26 now and I can certainly tell you we run a hell of a lot better now than we did then.
And so we feel good about the ability to keep adding to this. And in terms of corporate expense, yes, corporate expense will run higher than it has run the past. But again, when we closed MTR, excluding stock based comp, were running $25,000,000 of corporate expense to run seven properties at 26 will be somewhere in the 40s. So we're not empire builders. We're not looking to we don't need a lot of guys to say good morning, sir, on the way We're really if you're not in the properties driving value, we really think about do we need you?
And the people that we have in our corporate division are driving value for the firm. And we look at that very, very, very closely.
Speaker 6
All right. Thanks. That's helpful. And then also turning to Florida, I was hoping for an update in terms of Pompano. Do you guys still expect construction activity in 2019 and would present potentially some parts of the development to open this year?
Or how should we kind of think about the timeline there? And on a separate note in Florida, if there's any update on decoupling or what your lobbyists are saying recently, that would be helpful as well.
Speaker 1
We do feel good about significant construction activity in 'nineteen. Pieces opening in 'nineteen, that's debatable at this point. I just sat with Courtish yesterday and went through the master plan, and it's going to be spectacular. And we're waiting on the resolution of this current legislative session. There's potential for decoupling legislation in Florida that we're monitoring.
We should know the answer to that by April. And at that point, we'll have a firmer sense of how much land can go into development immediately and we should be back with much more detail on what's going to happen there.
Speaker 6
All right, thanks so much. Appreciate it.
Speaker 1
Thanks, Dan.
Speaker 3
We'll hear now from David Katz with Jefferies.
Speaker 7
Hi, good afternoon, sir. Hi, David. Wanted to just go back to Pompano for a minute and maybe focus on a couple of words that were in the release with respect to capital allocation. Do you expect that you'll be investing meaningful capital in that project and where are the boundaries around that?
Speaker 1
I would expect the from a capital from our balance sheet perspective, I would expect it to be a capital light model. I'm not expecting that there will be material significant contributions beyond the land that we've contributed to date. There could be some additional equity that would be kicked in, but there's the opportunity to do a lot of this with third party capital or at worst borrowing at the JV level. And there's a high degree of interest from heavyweights in residential office development, retail, entertainment. And we feel very good about what we're putting together there.
And you're really building kind of a town center that surrounds the casino and you've seen it, it's basically a casino in the middle of a desert right now. So we think it will drive significant incremental play through our casino. And to the extent we're investing significant dollars on balance sheet there, should expect it to be earmarked toward expansions of the casino asset versus contributions to the real estate project.
Speaker 7
Right. And if I can ask one other capital allocation question. You talked about stock repurchases, which are always a topic of debate. But if the goal is to get down under four times, why not sort of do that first and then buy back stock? Or what is the philosophy around balancing those two avenues?
Speaker 1
That's a good question. The number one priority outside of growth through continued M and A is debt repayment. So as I said, you should expect us to be a modest steady buyer of our stock. I think I proved again in the fourth quarter I'm a poor short term trader of stock. What if we bought at 40 and it went as low as 33.
So we're really not trying to make a call on the stock or defend the stock, But we do think a balanced approach where the bulk of our free cash flow is going to pay down debt with some return of capital in the absence of M and A is the right strategy for us today.
Speaker 7
Got it. And if I can sneak one more in there. I know that there is some new supply coming on in Reno over the next, whatever it is, term, intermediate term. How are you thinking about those properties and any perspective impact on Rio? And that's it for me.
Thank you.
Speaker 1
So the last entrance in Northern California really just drew from Indian country and didn't impact, you
Speaker 8
know,
Speaker 1
Grayton opened with Station or Red Rock and I want to say did north of $600,000,000 of gaming revenue and had zero impact on Reno, and that was really before Reno had taken off. So we're certainly watching what's going on there. We're not anticipating significant impact on the Reno market.
Speaker 7
Got it. Thank you very much. Nice quarter.
Speaker 1
Thanks, Dave.
Speaker 3
We'll hear next from Chad Beynon with Macquarie.
Speaker 8
Hi, good afternoon. Thanks for taking my questions. Going back to M and A, I feel like during the past half dozen years, your success, particularly recently, has been on the cost synergy side. And now that you're generating a little short of $3,000,000,000 of revenues, I'm assuming that you have somewhere between 6,000,000 customers in your database. So now when you think about acquisitions, do you think about revenue benefits there?
And does that make you think about destination markets like Las Vegas any differently? Or are you just focused on kind of the similar type of markets that you've looked at historically? Thanks.
Speaker 1
We're always thinking of revenue. We just think about revenue different than the analytical community. We're looking to drive more revenue from our customers' pockets. We cannot be driving the improvements that we're driving unless our customer is spending more of their money and less of ours. So if you look at what we're actually doing, we are growing actual revenue, not what's reported in the way gaming companies report their statistics, that's got to be the fastest pace of anybody in the space.
Has to be. We couldn't be driving. We're not cutting. We're not making dramatic cuts in labor or service levels. I mean, this is, in my opinion, this is an ancillary business that is unnecessary, this subsidization.
You work for Macquarie, I assume you know, the head office once in a while has a town hall meeting and they ask for your comments. You know, the next time they do, why don't you tell them you think you should turn one of the floors in New York into a giant kitchen and just give away as much of the food as you can to anybody that's walking by in front of your offices. And when you get the feedback from your peers about the brilliance of that idea, you don't even have to give credit to me. You take all the credit for that idea. The difference in our business is when I got here, that restaurant was already there And everybody in the business said, well, you can't touch that restaurant or that giveaway or the free play that you're giving away.
It is unnecessary. And there is probably some level that is necessary to drive some visitation, but I don't think even we are close to the end of this and we're miles ahead of where everybody else is in that area.
Speaker 8
Gotcha. Thanks, Tom. And I think our kitchen subsidy actually comes out of my paycheck, but I'll check it out for the call. So just to kind of follow-up on that, maybe I asked that poorly, but just to ask again, does the opportunity for a Vegas destination because of your database look any differently now versus when you had 10 or less properties just because of the opportunity to send people there?
Speaker 1
Yeah, and I'm sorry I didn't come back to that one. There's value in the hub and spoke model. I think where you've seen operators struggle as they've tried to develop that, it's where they have a single Vegas asset. If you have a single Vegas asset, you've got some percentage of your database doesn't want to go there, whether it's very nice middle of the road or not very nice. Some piece of your database wants to stay somewhere else when they go to Vegas.
So the reason you purchased that asset is to drive your play there and what we've seen is it's not easy if you have a single asset. If you can cover multiple strata in your customer database, it starts to make more sense. And that's really our thoughts on Vegas. We don't have any burning desire to be in Vegas or in any market, but we think that we see things in that market and in other markets that where we can drive value, especially given our scale at this point.
Speaker 8
Okay, perfect. And then for 2019, any commentary on cash tax estimates? I know this will change when you get some more NOLs after disposing of Nemacolin, but just any kind of rough view to help us think about free cash flow for 2019?
Speaker 1
Yeah, we don't have a lot of ability to shield remaining. So we should be pretty close to statutory numbers, and then we've still got $45,000,000 tax payment that we collected in the closing of the Tropicana sale that covers state taxes that we have to pay. It's not it's basically money we've held for that purpose.
Speaker 8
Okay. Thank you very much, and congrats on the phenomenal fourth quarter.
Speaker 1
Thanks, John.
Speaker 3
We'll hear next from John DeCree with Union Gaming.
Speaker 6
Just to build on that last question on free cash flow, can you remind us how you're thinking about CapEx for 2019? And I think you've mentioned in your prepared remarks the room renovos in Blackhawk would be done, I think, 2Q. Any kind of meaningful projects that are underway this year that kind of build into that CapEx number would be helpful.
Speaker 1
Our budget is $200,000,000 for this year. That's about $120 ish of maintenance. Significant projects that we've got ongoing are Reno, we're touching Silver Legacy rooms. We're doing a Topgolf swing suite this year. Those are kind of the major Reno projects.
Blackhawk, we've got a room remodel and a casino refresh that should be done before the summer and before Monarch's competitive opening. And then the balance of the growth will be the beginning of the Lake Charles project. There's some smaller stuff in there, but that's the bulk of it.
Speaker 6
And then beyond that, as you look across the portfolio, looking a little further ahead, would you expect consistent kind of growth or ROI CapEx in subsequent years? Are there other parts of the portfolio that you'd like to get to in due time or revert kind of closer back to just the maintenance number going forward?
Speaker 1
So in terms of what we can see, we've divided the Silver Legacy renovation into two years, so you'll see CapEx in 'nineteen and 'twenty around that. You've got the Lake Charles land based move. If we were to decide to do something in Baton Rouge, you would have that move. Beyond that, there's really nothing on the horizon project wise. In particular, in Reno, we're constantly analyzing the dollars that we've spent and they've generated such high returns.
We're constantly thinking about is there something else we should be doing, but there is nothing planned beyond completing the Silver Legacy room.
Speaker 6
Got it. Thank you. And one more to kind of pile into all the M and A questions, maybe kind of seek parameters a little differently. I think in the past, you've kind of talked about assets that might be a little too small given your size and scale now. I think in the context of maybe divesting something at the right price that you can see a path to a certain level of EBITDA.
So two questions. One, is there still stuff in the portfolio that you'd consider moving at the right price? And then given what you can do with assets, are there still a group of assets that are probably just too small for you to consider at this point?
Speaker 1
Yeah, on the first question, I'd say I'll consider good offers on anything we own up to and including the entire company. In terms of what we're actively looking to sell, we're looking at assets like you said that just don't generate EBITDA to get enough attention from us should naturally be owned by somebody else. As you might imagine with Tropicana and Elgin added to our portfolio, that bar to clear got a little bit higher. And seems to be a market where we might be able to get some stuff like that off.
Speaker 6
Great, helpful. Thanks for all the color, Tom.
Speaker 1
Thanks, Sean.
Speaker 3
And from Telsey Group, we'll move to Brian McGill.
Speaker 9
Good afternoon. Good quarter, guys. I was just wondering, for the results in Atlantic City you spoke of and the outlook there for improving operations going forward, Would you give any examples of what you've done so far and some of the things you see as opportunities given there has been so much debate on that market?
Speaker 1
What we do in large properties where your customers stay multiple nights, so what we've got in Atlantic City and Reno, is we're looking to optimize who is in the property when you know you're going to be full. And in our experience, most of the operations that we bought have not done a good job of that. And then when you know you're not going to be full, you need to optimize your cost structure and not chase business for the sake of activity. So that's really the overarching philosophy in markets where your customer is going to stay for a couple nights. And that's what we've started in Atlantic City, but we've really just started.
Speaker 9
Helpful. And then how about I know you're fairly recently down there with the sports book, but I guess maybe what are you seeing in terms of who that's bringing to the casino thus far in there West Virginia? Are you seeing more cash players? Are you able to see a way to monetize that longer term? Thanks.
Speaker 1
Yeah, we're seeing new visitation, younger visitation, players that were not going to come to our property just as you and I have talked for a long time about this. This is an amenity that the ability to offer it dropped in our lap where a customer will show up because something's on TV. That's pretty good for us. They're going to go to your restaurants and your bars and your gaming tables, and that's what we're seeing in Atlantic City and New Jersey and what we expect to see as additional states legalize. Sports betting is working exactly as we expected so far.
Speaker 9
That helps if you have the TVs in the casino so people can
Speaker 1
Give it try. And the beer.
Speaker 9
Yeah. Apparently. Alright. Thanks a lot. Good results, guys.
Speaker 3
And we'll move next to Daniel Adam with Instinet.
Speaker 10
Hey, guys. Good afternoon.
Speaker 1
Hey, Dan.
Speaker 10
Just one quick question. We noticed that transaction costs in the quarter were a little elevated relative to where they've been trending. So about $10,000,000 versus I think 3,000,000 to $4,000,000 in Q2 and Q3. I guess, what do you expect for 2019? And what is the true corporate expense?
Because I noticed in the adjusted EBITDA number, you add back that transaction costs. So what would you consider the true corporate expense? Thanks.
Speaker 1
I think the true corporate expense number is excluding stock comp in the mid-40s. In terms of transaction costs in the fourth quarter, we closed a trough during the fourth quarter. So you should expect the bulk of the transaction costs to be captured in the quarter that you closed. I think you should be thinking about for the remainder of or for 'nineteen, you should be thinking of single digit millions of dollars in terms of transaction expenses.
Speaker 10
Perfect. Thanks, guys.
Speaker 3
And at this time, I'd like to turn things back to Tom Reek for closing remarks.
Speaker 1
Thanks for joining us everybody and we'll talk to you again at the close of first quarter.
Speaker 3
And that does conclude today's conference. Again, thank you all for joining us.