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Eldorado Resorts Inc  (NASDAQ:ERI)
Q4 2018 Earnings Conference Call
Feb. 27, 2019, 4:30 p.m. ET

Contents:

Prepared Remarks:

Operator

Good day, everyone, welcome to the Eldorado Resorts Fourth Quarter Financial Results Conference. Today's program is being recorded.

At this time, I'd like to turn the conference over to Joe Jaffoni of JCIR. Please go ahead, sir.

Joseph N. Jaffoni -- Investor Relations

Thank you, Kelly, and good afternoon, everyone, and welcome to Eldorado Resorts 2018 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 31, 2018. The release is now available in the Investor Relations section of the company's website at www.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 90 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 differ 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 2018 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?

Thomas Robert Reeg -- Chief Executive Officer

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 report -- this is our best quarter we've ever reported to you, our EBITDA on a same-store basis was up 22% to a $161 million, EBITDA margin expanded by 450 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 28th, Tropicana EBITDA through the end of January is up almost 7%. So I know there has been a lot of concern about, this is the latest market where what we are 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 1st, we announced $40 million of synergies, when we announced that deal. As we sit here today, we're pushing $30 million 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 million of synergies there. We're just about at $10 million run rate as we sit here today. Also expect we'll meet our synergy target there by the middle of the year and will 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 sportsbook at the Trop. In October, our permanent book is set to open in the next couple of weeks before the MCA tournament starts. So we're excited about that.

And then finally, after the fourth quarter ended, we announced that Bret Yunker will be joining us as CFO. I'm particularly excited that Bret is joining us. We work together a very, very long time ago at Bank of America. Bret has been involved in every financing that Eldorado has done going back to -- 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 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 to over to Anthony and come back afterward.

Anthony L. Carano -- President and Chief Operating Officer

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 the 22.7% comparison in 2017. The property level adjusted EBITDA margin rose 440 basis points to 25.2%. EBITDA for the road properties in Reno was up more than 30% and Black Hawk continues to be strong performer with an EBITDA margin of nearly 38% for the quarter. In Black Hawk, we expect to complete our room ad 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 Black Hawk market and the upgrades to our properties will help us capture our fair share of the market growth. We also expect that Reno properties to continue to ramp as we are 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 Eldorado suites in 2018, in addition to the opening of the spa the Silver Legacy and Ruth Chris Steak House. In 2019, we will 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 660 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 16th consecutive quarter with the last seven in a row at greater than 10% growth. Mountaineer also had some strong tailwinds now with the lifting of the smoking ban as well as the opening of the sportsbook at 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 370 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 fill the impact of the smoking ban that was implemented in the second quarter of 2018 and in Lake Charles the high 10 construction hurt our visitation in the quarter. To the construction shifts 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 Elgin and Lumiere.

In summary, our continued execution on analytical cost cutting, synergies, margins, monetizing access assets and the expansion of sports wagering gives 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 to bring a daily commitment to get hospitality and operating efficiency that is the foundation of Eldorado 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&A. Tom?

Thomas Robert Reeg -- Chief Executive Officer

So we -- in the fourth quarter, we ended with our revolver draws around $245 million 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 so -- and that -- 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 million shares at a little over $40 a share. Word on share repurchase, we've got $150 million authorization that we've used a little less than $10 million. 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 were sub four times, lease -- growth lease adjusted leverage which puts us into some point in the middle of 2020.

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 it used 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 20-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 a weather -- hasn't had weather impact, the business has been very strong. And I -- 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 have read in the paper about us recently. We get the same newspaper you do, so we read those articles as well. We're not going to comment about any discussions we're having in the M&A universe. What I would tell you is where -- we've created a great stand-alone path for us. 2019 -- 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, beyond sports, you've got The Stars Group beyond 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 will exceed our synergy targets. We still feel like we can get this portfolio in excess of 30% EBITDA margin. So we have a very good stand-alone path. That said, we think we're pretty good at this buying assets that other people are running and changing the way they are 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 -- so that covers MTR by itself with some left over. We sold Presque Isle another piece of MTR for just under $200 million in January and we still on 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 that acquisition was made for sub four times what we generate in EBITDA at the property. So that's been a very good acquisition for us.

2018 was the first full year that we operate at the Isle properties. If you recall, when we took over Isle, they were doing about $200 million of EBITDA. Those same properties are doing in excess of $270 million of EBITDA now and we're still going. We expect to reach at least $100 million 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.

So 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.

Questions and Answers:

Operator

Thank you. (Operator Instructions) We'll hear first today from Carlo Santarelli with Deutsche Bank.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great, thanks. And everybody great quarter, congratulations. Just Tom, fully appreciating your commentary, I'm not speculating or commenting on M&A, rumor M&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?

Thomas Robert Reeg -- Chief Executive Officer

So Carlo, it go -- obviously go -- how you finance the transaction certainly goes in to 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 these -- through these 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 -- we're going to be -- as we look at acquisitions, we're going to 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 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.

Carlo Santarelli -- Deutsche Bank -- Analyst

Understood. Thank you. That's helpful. And then just quickly on -- obviously, your overall margins were tremendous one of the stronger points within the departmental margins was obviously the Casino segment, I think up over 320 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?

Thomas Robert Reeg -- Chief Executive Officer

Yes, I would say in the fourth quarter, we really hadn't touch the new properties significantly. Elgin we really didn't get into until November. the Trop as -- 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 you 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%, it's a little better than what we have typically paced.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great. Tom, thank you very much.

Operator

We hear next from Barry Jonas with SunTrust.

Barry Jonas -- SunTrust Robinson Humphrey -- Analyst

Hey guys. Couple of questions. First, I would 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 disciplined might not work the way some of your other successful deals have. Maybe just any color there would be helpful?

Thomas Robert Reeg -- Chief Executive Officer

I think that we inherited a strong team in Atlantic City, Steve Callender has done a great job there. We -- if you look back at the prior owner, Tropicana invested $200 million 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 we're getting most of their wall and it's all coming together, very nicely there. I will tell you if Atlantic City has outperformed our wildest expectations, we were expecting a gift from the new entrants and its been gratifying to see early on what we've been able to do with that asset.

Barry Jonas -- SunTrust Robinson Humphrey -- Analyst

Great. And then would like to touch on the two Louisiana properties that you cited Lake Charles and Baton Rouge, clearly some near-term issues there. But curious how you see that resolving as the year goes on? And you've also have the opportunity to convert from riverboat to land. So just curious what's the thinking there for both those properties is right now?

Thomas Robert Reeg -- Chief Executive Officer

So Lake Charles is -- 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 sales fell through. So that one has been going very well, we would expect to be moving on a land based conversion project there. And starting in the second half of this year. And in Baton Rouge -- I'm sorry -- Lake Charles that project should be $75 million to $100 million and we think we can get well in excess of 15% cash-on-cash return. Baton Rouge is tougher, that's a tough location, if the smoking ban we felt the smoking ban in West Virginia starting -- '15 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 is certainly some advantages to that in terms of efficiency and customer friendliness and we're analyzing that as we speak.

Barry Jonas -- SunTrust Robinson Humphrey -- Analyst

Great. 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.

Thomas Robert Reeg -- Chief Executive Officer

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.

Barry Jonas -- SunTrust Robinson Humphrey -- Analyst

Understood. Thanks so much guys.

Thomas Robert Reeg -- Chief Executive Officer

Thanks, Barry.

Operator

And from JP Morgan will move to Dan Politzer.

Daniel B. Politzer -- JPMorgan -- Analyst

Hey, everyone, good afternoon, and congrats on a great quarter. Could there have been a lot of management changes over the past six months with you guys. And while -- no doubt have an impressive track record of M&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 transactions? And similarly, should we expect corporate expense maybe takes a bit higher than your recent levels, just given the date changes in suites? Thanks.

Thomas Robert Reeg -- Chief Executive Officer

Yes. 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 don't -- we're not a highly centralized organization, we run these individual properties as individual P&Ls. We provide a framework for how we want them to run and we do quite a bit of analysis of how and who are 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 in the past. But again, when we closed MTR excluding stock-based comp, we were running $25 million of corporate expense to run seven properties -- $26 million will be somewhere in the $40 million. So we're not empire builders, we're not looking to -- I don't -- we don't need a lot of guys to say good morning, sir, on the way in. 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 -- our corporate division are driving value for the firm. And we look at that very, very, very closely.

Daniel B. Politzer -- JPMorgan -- Analyst

All right. Thanks, that's helpful. And then also turning to Florida. I was hoping for an update in terms of Pompano and do you guys still expect construction activity in 2019 and with potentially some parts of the development to open this year or how should we kind of think about the timeline there and a separate note in Florida is if there is any update on decoupling or what your lobbyist are saying recently that'd be helpful as well?

Thomas Robert Reeg -- Chief Executive Officer

We do feel good about significant construction activity in '19. Pieces opening in '19 that's debatable at this point. I just sat with Cordish 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 the development immediately and we should be back with much more detail on what's going to happen there.

Daniel B. Politzer -- JPMorgan -- Analyst

Right. Thanks so much. Appreciate it.

Thomas Robert Reeg -- Chief Executive Officer

Thanks, Dan.

Operator

We'll hear now from David Katz with Jefferies.

David Katz -- Jefferies LLC -- Analyst

Hi, good afternoon, sir.

Thomas Robert Reeg -- Chief Executive Officer

Hi, David.

David Katz -- Jefferies LLC -- Analyst

I 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 will be investing meaningful capital in that project and where are the boundaries around that?

Thomas Robert Reeg -- Chief Executive Officer

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 have contributed to date, there could be some additional equity that would be kicked in, but there is -- there is 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 and 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 the desert right now. So we think it will drive significant incremental play to our -- through our casino and to the extent we're investing significant dollars on balance sheet there, you should expect it to be mark toward expansions of the casino assets versus contributions to the real estate project.

David Katz -- Jefferies LLC -- Analyst

Right. And if I can ask one other capital allocation question. You talked about the stock repurchases, which are always a topic of debate. But yes, 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?

Thomas Robert Reeg -- Chief Executive Officer

That's a good question I -- the number one priority outside of growth through continued M&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 on that poor short term trader of stock, where we bought it $40 million (ph) and it went as low as $33 million (ph). So we're really not trying to make a call on the stock or defend the stock but we do think balanced approach where we're the bulk of our free cash flow is going to pay down debt with some return of capital in the absence of M&A is the right strategy for us today.

David Katz -- Jefferies LLC -- Analyst

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 near term -- intermediate term. How are you thinking about those properties and any prospective impact on Reno? And that's it from me. Thank you.

Thomas Robert Reeg -- Chief Executive Officer

So the last entrance in Northern California, really just drew from Indian Country and didn't impact open with station Red Rock and I want to say did north of $600 million 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.

David Katz -- Jefferies LLC -- Analyst

Got it. Thank you very much. Nice quarter.

Thomas Robert Reeg -- Chief Executive Officer

Thank you.

Operator

We'll hear next from Chad Beynon with Macquarie.

Chad Beynon -- Macquarie -- Analyst

Hi, good afternoon, and thanks for taking my questions. Going back to M&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 billion of revenues, I'm assuming that you have somewhere between 2 million and 4 million 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.

Thomas Robert Reeg -- Chief Executive Officer

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 the subsidization. You work for Macquarie, I assume the head office once in a while has a town hall meeting and they ask for your comments. The next time they do, why don't you tell them, you think you should turn their one of the floors in New York into a giant kitchen and just give away as much of the food as you can, say 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 give away, 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.

Chad Beynon -- Macquarie -- Analyst

Got you. Thanks, Tom. And I think our kitchen subsidy actually comes out of my paycheck, but I'll -- so just to kind of follow up on that, maybe I asked that poorly, but just ask again, does the opportunity for Vegas destination because of your database look any differently now versus when you had 10 or less properties, just because of the -- opposrtunities and people there?

Thomas Robert Reeg -- Chief Executive Officer

Yes, I'm sorry, didn't come back to that one. The hub is there, the value in the hub and spoke model, I think we've seen operator struggled as they've tried to develop that it's where they have 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 easier database wants to say somewhere else when they go to Vegas. So the reason you purchase 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 the 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 can -- 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.

Chad Beynon -- Macquarie -- Analyst

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, you to help us think about free cash flow for 2019?

Thomas Robert Reeg -- Chief Executive Officer

Yes, 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 million tax payment that we collected in the closing of the Tropicana sale that cover state taxes that we have to pay it's not -- it's basically money we've held for that purpose.

Chad Beynon -- Macquarie -- Analyst

Okay, thank you very much and congrats on the phenomenal fourth quarter.

Thomas Robert Reeg -- Chief Executive Officer

Thanks, Chad.

Operator

(Operator Instructions) We'll hear next from John DeCree with Union Gaming.

John DeCree -- Union Gaming -- Analyst

Hi, Tom, 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 renovations in Black Hawk will be done I think 2Q, any kind of meaningful projects that are under way this year, that kind of build into that CapEx number would be helpful?

Thomas Robert Reeg -- Chief Executive Officer

Our budget is $200 million for this year, that's about $120-ish million of maintenance, significant projects that we've got ongoing are Reno we're touching, Silver Legacy rooms we're doing a top golf swing sweep this year, those are kind of the major Reno projects. Black Hawk, 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 is some smaller stuff in there, but that's the bulk of it.

John DeCree -- Union Gaming -- Analyst

And then beyond that, if you look across the portfolio, looking 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?

Thomas Robert Reeg -- Chief Executive Officer

So in terms of what we can see, we have divided the Silver Legacy renovation in two years, so you'll see CapEx in '19 and '20 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 then so -- they've generated such high returns. We're constantly thinking about is there something else we should be doing, but there is nothing plan beyond completing the Silver Legacy room.

John DeCree -- Union Gaming -- Analyst

Got it. Thank you. And one more kind of pile into all the M&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 group of assets that are probably just too small for you to consider at this point?

Thomas Robert Reeg -- Chief Executive Officer

Yes. On the first question, I'd say, I'll consider good offers on anything we own up to and including the entire company. The -- 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 own 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 there seems to be -- it seems to be a market where we might be able to get some stuff like that off.

John DeCree -- Union Gaming -- Analyst

Great, helpful. Thanks for all the color, Tom.

Thomas Robert Reeg -- Chief Executive Officer

Thanks, John.

Operator

And from Telsey Group will move to Brian McGill.

Brian McGill -- Telsey Advisory Group -- Analyst

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?

Thomas Robert Reeg -- Chief Executive Officer

What we do in large properties where your customers stay multiple night. 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 are 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 customers are going to stay for a couple of nights and that's what we've started in Atlantic City, but we've really just started.

Brian McGill -- Telsey Advisory Group -- Analyst

Helpful. And then how about, I know you're fairly recently down there with the sportsbook, but I guess maybe what are you seeing in terms of who that's bringing to the casino thus far in there and West Virginian are you seeing more cash players, are you able to see a way to monetize that longer term? Thanks.

Thomas Robert Reeg -- Chief Executive Officer

Yes, we are seeing new visitation, younger visitation, players that were not going to come to our property. Just as you and I talk for a long time about this. This is an amenity that's choppy, the ability to offer it dropped in our lap where customer will show up because somethings 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.

Brian McGill -- Telsey Advisory Group -- Analyst

That helps that you have the TVs in the Casino for people...

Thomas Robert Reeg -- Chief Executive Officer

And the beer.

Brian McGill -- Telsey Advisory Group -- Analyst

Yes, apparently. All right. Thanks a lot, good results guys.

Operator

And we'll move next to Daniel Adam with Instinet.

Daniel Adam -- Instinet -- Analyst

Hey guys, good afternoon.

Thomas Robert Reeg -- Chief Executive Officer

Hey, Dan.

Daniel Adam -- Instinet -- Analyst

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 million versus I think $3 million to $4 million 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 sale? Thanks.

Thomas Robert Reeg -- Chief Executive Officer

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 Trop during the fourth quarter. So you should expect the bulk of the fourth quarter. The transaction costs to be captured in the quarter that you closed. I think you should be thinking about for the remainder of -- for '19, you should be thinking of single-digit millions of dollars in terms of transaction expenses.

Daniel Adam -- Instinet -- Analyst

Perfect. Thanks, guys.

Operator

And at this time, I'd like to turn things back to Tom Reeg for closing remarks.

Thomas Robert Reeg -- Chief Executive Officer

Thanks for joining us, everybody, and we'll talk to you again at the close of first quarter.

Operator

And that does conclude today's conference. Again, thank you all for joining us.

Duration: 50 minutes

Call participants:

Joseph N. Jaffoni -- Investor Relations

Thomas Robert Reeg -- Chief Executive Officer

Anthony L. Carano -- President and Chief Operating Officer

Carlo Santarelli -- Deutsche Bank -- Analyst

Barry Jonas -- SunTrust Robinson Humphrey -- Analyst

Daniel B. Politzer -- JPMorgan -- Analyst

David Katz -- Jefferies LLC -- Analyst

Chad Beynon -- Macquarie -- Analyst

John DeCree -- Union Gaming -- Analyst

Brian McGill -- Telsey Advisory Group -- Analyst

Daniel Adam -- Instinet -- Analyst

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