How Las Vegas’ biggest real estate deals result in no transfer taxes

The $4.2 billion cash sale of the Bellagio was, by all appearances, the most expensive purchase ever of a Las Vegas casino, and it could have generated a $21 million-plus windfall in real estate sales taxes.

But when the famed megaresort traded from one powerhouse company to another in fall 2019, the tax bill didn’t amount to a dime.

It is far from alone.

Numerous high-priced deals in Southern Nevada — worth hundreds of millions or more than a billion dollars apiece — have been structured in ways that allowed the buyers and sellers to avoid paying real estate transfer taxes that support schools and low-income housing in Nevada, a Review-Journal investigation has found.

The complex deals, which frequently cite an exemption allowed under state law when property owners transfer real estate to a subsidiary, spare large companies from paying a tax routinely slapped on sales of homes, apartment buildings, warehouses and other sites in the Las Vegas Valley, and the result is untold millions of dollars a year in lost tax collections for governments.

Overall, at least $27.5 billion worth of transactions in the Las Vegas area — comprising roughly two dozen sales that involved hotel-casinos, malls and other properties mostly on or near the Strip — have closed since 2007 without any publicly reported real estate transfer taxes, the Review-Journal found.

In such deals, buyers often acquire a limited liability company or other entity that holds ownership of the real estate, instead of purchasing the property directly.

“It’s absolutely one way of getting around transfer taxes,” said Mike Mixer, chairman of commercial real estate brokerage Colliers International’s Las Vegas office.

Mixer said that certain risks come with this approach, as the buyers take on an entity’s assets and liabilities and might be signing up for something they don’t know about. He also figured a lot of factors go into structuring deals this way, as opposed to only wanting to avoid transfer taxes.

But, he pointed out, that can be a “big savings.”

Casino giant MGM Resorts International, which sold the Bellagio’s real estate and several other properties tracked for this report, said in a statement that this deal structure “is typical among real estate transactions involving businesses of all sizes, across a wide variety of industries.”

It added: “Every transaction we conduct follows the letter of the law and is in accordance with all regulatory requirements.”

New York financial conglomerate Blackstone, which bought the Bellagio and other properties tracked for this story, said: “We do not have a comment to provide here.”

One recent major deal without transfer taxes, property records show, was casino operator Las Vegas Sands Corp.’s sale of The Venetian, Palazzo and The Venetian Expo for $6.25 billion.

As part of the sale, which closed in February, casino landlord Vici Properties acquired the real estate from Sands for $4 billion in cash.

Sands declined to comment for this story.

Vici also completed its $17.2 billion acquisition of MGM Resorts’ real estate spinoff on April 29, giving the buyer several more big hotel properties on the Strip, including Mandalay Bay, the MGM Grand, The Mirage, Park MGM, New York-New York, Luxor and Excalibur. MGM is leasing those resorts from the new landlord, just as it’s leasing the Bellagio from Blackstone.

The huge dollar value of Vici’s latest deal was not included in the sum tallied for this report, as the buyer did not announce a breakdown of what each resort was worth, and the acquisition included several casino properties outside Nevada.

Still, as of early May, Clark County property records did not show any deeds recording Vici’s new Strip acquisitions from the MGM spinoff, and as a result, no transfer taxes were publicly reported.

Vici did not respond to requests for comment.

Not using ‘every loophole’

In Clark County, transfer taxes make up a fraction of a property’s purchase price, amounting to a tax rate of 0.51 percent. Selling a $300,000 house, for instance, generates a transfer-tax bill of $1,530.

Nevada law doesn’t mandate who pays the tax, as this can be negotiated between the buyer and seller, and the amount owed is listed on the deed that records the sale with the county.

Nonetheless, multiple sales in Las Vegas that could have each resulted in upward of millions of dollars in transfer-tax payments were structured in ways that resulted in $0 owed, property records show.

“Personally, that’s never been my style,” said developer Lorenzo Doumani, who added that he doesn’t “take advantage of every loophole that there is.”

Doumani sold a 5-acre plot on the north Strip years ago and later bought the nearby Clarion hotel, which he imploded. Both sales involved transfer-tax payments, property records show.

Buying or selling a big Las Vegas resort is complex and expensive to conduct. Contracts and other obligations change hands, and legal fees can soar, so saving money on transfer taxes is probably “just one piece of the pie,” Doumani noted.

UNLV law professor Francine Lipman, a tax expert, doesn’t believe that these deals are structured solely to avoid the transfer tax, but she said it is a factor.

“My sense is they do so many of these, that’s kind of the way they do their deals,” she said.

State Sen. Dina Neal, chair of the Legislature’s interim revenue committee, wasn’t aware of the lucrative sales that result in no transfer taxes.

She noted this revenue is distributed to “many places,” including the Clark County School District.

Neal, a Democrat, said she is willing to discuss whether there is a “loophole we’re not aware of” and to look at the “real-life implications of losing that level of money.”

State Assemblywoman Heidi Kasama, a Republican and longtime Las Vegas real estate broker, also wasn’t aware of the deals without transfer taxes.

Kasama said she would be open to seeing what other states are doing in response to such deals. But coming out of the pandemic, she said, “we don’t want to slow down our commerce in our city, either.”

‘We don’t sit down and negotiate’

State law provides several exemptions to the transfer tax, including when a property is shifted from a business entity to its subsidiary or between former spouses as part of a divorce.

Under state law, county recorder’s offices compute and collect transfer taxes before they record a deed and “shall refuse” to record it if the tax is owed but hasn’t been paid.

Recorder’s offices can also conduct audits and issue subpoenas for documents to determine how much is owed.

Under state law, anyone who “willfully falsely declares the value” of transferred real estate is “guilty of a misdemeanor” and must pay the “amount of any additional tax required on account of the falsification.”

None of the businesses or individuals named in this report have been accused of wrongdoing by any government entity, as far as the Review-Journal can determine, and sales documents reviewed for this story claimed exemptions to the transfer tax that are allowed under state law.

To analyze sales for this report, the Review-Journal examined deeds filed with the Clark County recorder’s office, corporate filings with the Securities and Exchange Commission, and business-entity records from the Nevada secretary of state’s office.

Clark County Recorder Debbie Conway, in an interview with the Review-Journal, likened her office to “bill collectors” who gather payments and submit them to the county treasurer’s office, which then sends the money to the state.

Carlos Goodin, an auditor in the recorder’s office, said the staff receives supporting documentation for claimed exemptions.

According to Conway, the office does not come into contact with resort representatives.

“We don’t sit down and negotiate with them or have conversations with them about what it is they’re submitting,” Conway said.

Asked whether her office examines companies’ filings with the Securities and Exchange Commission, in which they often explain in detail how sales are structured, Conway said that is “outside the parameters of what our office is authorized to do.”

“We’re only there to record the document,” she said.

The Nevada Department of Taxation essentially coordinates collection of the tax, said spokeswoman Eden Collings, who wasn’t aware that lucrative sales in Las Vegas were structured in ways that resulted in nothing owed.

“I personally have not ever heard about it,” Collings said.

Paper trail

Additional deals tracked for this report include MGM’s nearly $3.9 billion sale of Aria and Vdara to Blackstone, which leased the resorts back to the casino chain, and Blackstone’s acquisition of The Cosmopolitan of Las Vegas for more than $1.7 billion.

Others include MGM’s $825 million sale of Circus Circus and adjacent land to casino boss Phil Ruffin; Blackstone’s $347 million purchase of the Hughes Center office park; and Wynn Resorts’ $336 million acquisition of land near Fashion Show mall.

Corporate news releases for such transactions frequently say who is selling, who is buying, and the sales price. Moreover, publicly traded companies such as MGM have described in securities filings how these deals are structured, outlining multiple limited liability companies or other entities and how property ownership was transferred from one to another.

Nonetheless, deeds filed with Clark County routinely list a sales price of $0 or $N/A, and the same for the transfer tax due, and often declare the property was transferred from the owner to a subsidiary.

In at least one case, when Malaysia’s Genting Group bought the unfinished Echelon resort site for $350 million from Boyd Gaming Corp., “None” was handwritten in the designated lines for sales price, transfer tax value and transfer tax due. Genting built Resorts World Las Vegas on the site.

In MGM’s sale of the Bellagio, the deed shows the sales price, the transfer tax value and the transfer tax due all as $N/A. The seller listed on the deed is Bellagio LLC, the buyer is BCore Paradise LLC, and the stated reason for the tax exemption is, “Transfer from an entity to its wholly-owned subsidiary.”

To conduct the sale, MGM subsidiary Bellagio LLC formed the BCore entity and then transferred the Bellagio’s real estate into it, according to securities filings.

Ownership in the new BCore entity was then transferred to a newly formed subsidiary of Blackstone, giving that company the Bellagio.

A 3,933-room casino resort, the Bellagio boasts popular water fountain shows, restaurants such as Spago and Le Cirque, and a lavish botanical garden.

In 2018, the year before it sold, the Bellagio generated more than $405 million in operating income — by far the most that year among MGM Resorts’ properties on the Strip, a securities filing shows.

For several other lucrative transactions, Clark County records do not show any deed recorded at all.

These include pension fund TIAA’s purchase of a 50 percent stake in Fashion Show mall for $1.25 billion; Penn National Gaming’s purchase of the Tropicana for $360 million; and Station Casinos’ purchase of the Palms for $312.5 million and its sale of the resort years later for $650 million.

Efforts to get comments from companies and others involved in the two dozen deals reported here were largely unsuccessful.

Some, including Boyd, did not respond to requests for comment, and some, including Ruffin, were unavailable, according to representatives.

Station Casinos said it had “no comment to add to the story.” Wynn said it doesn’t have “any comment to offer” on its 38-acre land acquisition, and Dreamscape Companies, which acquired the Rio for $516.3 million and leased it back to Caesars Entertainment, said it “does not have a comment at this time.”

Virgin Hotels Las Vegas’ ownership, which acquired the former Hard Rock Hotel for around $500 million, declined to comment, as did Invesco Real Estate, which teamed up to buy luxury mall Shops at Crystals for $1.1 billion; TIAA; and Deutsche Bank, which sold The Cosmopolitan to Blackstone.

OYO Hotels & Homes, which acquired the former Hooters Hotel in 2019, said in a statement that while it does not “divulge details of our transactions, we want to assure you that OYO is a management led and board governed, public ready company built on a culture of strong governance and accountability.”

It added: “We are proud of our marquee board and the role it plays in guiding us on the journey towards growth and profitability.”

OYO partnered with hotel firm Highgate to buy the off-Strip property for a reported $135 million. No real estate transfer taxes were generated from the sale, county records show.

Meanwhile, efforts to speak with outside attorneys who have worked on high-profile casino sales were unsuccessful.

Rebecca Miltenberger, a shareholder with Brownstein Hyatt Farber Schreck, represented Wynn in its $336 million land acquisition and Caesars in the sale-leaseback of the Rio, her law firm bio says.

Miltenberger said she was “not able to comment on this story.”

Angela Otto, another shareholder at Brownstein, closes more than $1 billion in real estate and hospitality transactions annually, according to her law firm bio.

Among other deals outlined in her bio, she worked with MGM Resorts on multiple transactions, including its sale-leaseback of the Bellagio; its sale-leaseback of Aria and Vdara; and its sale of Circus Circus.

“If there is a marquee project happening in Las Vegas, the odds are high that Angela Otto has a substantial role in it,” her bio says. “Few lawyers in Nevada, or across the country, have more experience managing the real estate components of large-scale hospitality and gaming transactions.”

Otto, through a Brownstein representative, declined to comment for this story.

Dollar amounts

It’s unclear how much tax revenue could have been generated from the deals tracked for this report, as several involved the purchase of a hotel-casino’s business operations as well as its real estate.

Real estate, however, typically comprises the majority of a hotel’s value.

On average, it accounts for around 70 percent of a hotel’s sales price, said Bernice Dowell, owner of Cynsur, a real estate tax firm in Virginia that focuses on the hospitality industry.

Additionally, deals that were not included for this report include corporate buyouts involving multiple hotel-casinos in Las Vegas; resort acquisitions that came through buying debt on a property; and spinoffs in which casino chains transferred their real estate holdings into separate companies.

Overall, Nevada generated $248.6 million in transfer taxes in the fiscal year ended June 30, 2021, with $185 million coming from Clark County, according to the Department of Taxation.

Among the funds collected statewide, nearly $134 million went to Nevada’s general fund, $43.5 million went to the Clark County School District and $10.4 million was allocated for low-income housing, state data shows.

Meanwhile, there have been several real estate deals on or near the Strip over the past several years that resulted in transfer taxes paid.

These include developer Steve Witkoff’s $600 million purchase of the unfinished Fontainebleau hotel-casino project, which generated a transfer-tax bill of more than $3 million, and the Raiders’ $77.5 million purchase of their then-vacant stadium site, which produced more than $395,000 in transfer taxes, property records show.

Dowell, the real estate tax adviser, said transfer taxes can be “onerous” in some areas of the country, reaching 4 percent to 6 percent of the sales price, compared with 1 percent to 2 percent elsewhere.

If a deal falls through, the seller loses out on a pile of money, and the buyer loses out on a new source of revenue.

Dowell, for one, figures that in a hotel deal, if they can’t avoid paying transfer taxes, that alone wouldn’t kill the sale.

Instead, she said, “They’ll just pay it.”

The Review-Journal is owned by the Adelson family, including Dr. Miriam Adelson, majority shareholder of Las Vegas Sands Corp., and Las Vegas Sands President and Chief Operating Officer Patrick Dumont.

Contact Eli Segall at esegall@reviewjournal.com or 702-383-0342. Follow @eli_segall on Twitter.