Renowned global casino resort developer Caesars Entertainment Corporation recently announced their intention sell their real estate assets associated with Harrah’s Las Vegas. The proceeds of this sale are to be used to finance the corporation’s purchase of two casino properties in Indiana both of which are estimated to cost about $1.7 billion – these are, Centaur Holdings and both of its Indiana horse racetrack casinos, Indiana Grand and Hoosier Park. This should be more of a sweet deal for Caesars Entertainment as last year, the two horse racetracks collectively brought in $480 million in gross revenue.
The gaming company reportedly said that it had established definitive agreements to either lease back or sell back the Harrah’s Las Vegas-related real estate assets to VICI Properties which is also its real estate investment trust formed through bankruptcy. The land for the newly planned convention center that is estimated to be over 300,000 square feet is also to be acquired from VICI properties. According to the sale agreement, Caesars Entertainment is to receive a cash payment amounting to $1.14 billion for the all the assets that will be sold.
In a statement released by Mark Frissora, Caesars Entertainment President and Chief Executive, the corporation outline the details of the sale as follows;
“The transactions we are announcing today demonstrate our commitment to pursuing growth opportunities while maintaining balance-sheet discipline. We expect the sale and leaseback of Harrah’s Las Vegas will allow us to acquire Centaur and develop the convention center without increasing leverage. The sale and leaseback transaction is our first post-emergence transaction with VICI and maintains Harrah’s Las Vegas’ connectivity to our network, which will create value and provide benefits to our guests. The acquisition of the adjacent land and development of the convention center allows us to develop another important destination right in the middle of our Center-Strip footprint.”
Part of the leaseback agreement still gives Caesars Entertainment Corporation administrative rights on all amenities including hotel and gaming operations for the entire duration of the lease. The property remains to be part Caesars Entertainment’s network and will still benefit from Harrah’s brand, have access to the corporation’s centralized services as well as the Total Rewards loyalty network. Also, in accordance with the sale and leaseback transaction, VICI and Caesars Entertainment are to enter a 15-year lease for which Caesars will pay an initial annual rent of $87.4 million for Harrah’s Las Vegas – this amount is to increase contractually in the following years and Caesars Entertainment will further be allowed the option of extending the lease for 20 more years – four times for five-year durations.
VICI’s willingness to dish out over $1 billion to have Harrah’s Las Vegas as part of its growing portfolio is an indication of the faith and confidence that the stakeholders have in the long-term outlook of Caesars Entertainment. Even though there were mixed reactions from Caesars Entertainment’s investors, the REIT approved of the corporation’s plans including the investment in the Indiana horse racetrack casinos.