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Las Vegas Sands: Unlocking Value Could Be a REIT Idea

Tickers in this article: LVS

Winning Hand: Three-of-a-Kind

Las Vegas Sands should pursue a REIT spin-off strategy that will, in turn, provide maximum value (around $85 per share) for the spin-out of all (and integrated) businesses. Accordingly, investors will be able to tap into the Chinese growth engine and decide how to gain exposure to all or part of the Sands' differentiated high-quality real estate platforms.

As summarized by Land and Building's Founder and CEO, Jonathan Litt: "Having three public companies each focused on its own business, malls, hotels and casino will create the most value for shareholders as each company will be able to drive growth well beyond that of the individual assets they could otherwise sell."

Furthermore Litt explains, "Las Vegas Sands will generate over $3 billion in free cash flow annually likely growing 15% or more a year. This ordinary dividend combined with the special dividend puts the yield in excess of 8%. Like Wynn we suspect the special dividend will be recurring driving further return for investors."

LVS Lodging REIT and LVS Mall REIT would be Singapore-listed REITs owning the mall assets in Macao and Singapore, while the lodging REIT would own the hotels in Macao, Singapore and Las Vegas.

The Singapore REIT market is the most active and mature in Asia, comps have good valuations in the mall and lodging space and the Sing government would likely be favorable toward a transaction relating to Marina Bay Sands, Las Vegas Sands Singapore Asset if they got the listing on Two REITs with market caps totaling over $30 billion.

LVS would spin out to existing shareholders shares in the mall and lodging company and those shareholders would then have the option to buy more or sell. Ideally, the management team of LVS would not sell any shares in these entities.

Both the mall and lodging REITs would be the fastest growing in their respective property space, the largest, and likely the most sought after by institutional investors that are dedicated to real estate or want a way to participate in the growth of the Asian consumer.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.