VICI Declines Option to Buy Caesars Indiana Casinos

Posted on: August 2, 2024, 03:38h. 

Last updated on: August 2, 2024, 03:38h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

VICI Properties (NYSE: VICI) won’t exercise its rights to acquire the property assets of two Indiana gaming venues currently owned and operated by Caesars Entertainment (NASDAQ: CZR).

Hoosier Park in Indiana. VICI Properties is declining rights to acquire that venue and Harrah’s Indianapolis. (Image: The Herald Bulletin)

On the company’s second-quarter earnings conference call late Wednesday, CEO Edward Pitoniak told analysts the real estate investment trust (REIT) won’t be purchasing Harrah’s Hoosier Park and Horseshoe Indianapolis, formerly known as Indiana Grand.

Our conviction that we can continue to identify and invest in experiential properties that are accretive against multiple quality factors is a key reason that we have decided that we will not be exercising our call right to acquire Harrah’s Hoosier Park and Horseshoe, Indianapolis,” said Pitoniak on the call. “We can and are making this decision because of our confidence and conviction that we are actively identifying and pursuing investment opportunities that enable us to generate future AFFO growth and accretion.”

VICI’s call option on the pair of Indiana casinos stems from the 2020 merger that created “new Caesars.” When Eldorado Resorts announced its $17.3 billion takeover offer for the “old Caesars” in June 2019, it struck an agreement with VICI whereby the gaming company could sell or the REIT could acquire those assets between Jan. 1, 2022, and Dec. 31, 2024.

VICI Looking to Diversify Its Tenant Base

Caesars and VICI have a long-standing as the latter was spun-off from the former in 2017. Today, the REIT counts the casino operator as among its largest clients.

However, tenant diversification is pivotal in commercial real estate and Pitoniak indicated that’s one reason why VICI passed on Harrah’s Hoosier Park and Horseshoe Indianapolis. Including Caesars Palace on the Las Vegas Strip, VICI owns the property assets of 18 Caesars-operated venues. Add in the REIT’s relationship with MGM Resorts International (NYSE: MGM) and its gaming tenant roster is largely dominated by those two operators.

Regional considerations may have played a part in VICI declining the rights to buy Harrah’s Hoosier Park and Horseshoe Indianapolis. The landlord already owns the real estate of Caesars Southern Indiana and Horseshoe Hammond. The former is operated by the Eastern Band of Cherokee Indians.

“At this time, we believe that we have the opportunity to create greater portfolio value by allocating VICI’s capital to other gaming and nongaming opportunities the team is actively pursuing,” added Pitoniak.

Caesars Unlikely to Put Indiana Casinos to VICI

In the aforementioned 2019 agreement, Caesars gained the right to put the two Indiana gaming venues to the REIT, but as VICI President and COO John Payne noted on the conference call, Caesars CEO Tom Reeg has consistently said the gaming company is unlikely to exercise that option.

Reeg has also expressed a willingness to sell casinos that Caesars considers “non-core”, but the company hasn’t said publicly if it believes Harrah’s Hoosier Park and Horseshoe Indianapolis fit that bill.

On Thursday, Caesars announced the sale of the World Series of Poker (WSOP) to investment firm NSUS Group Inc. for $500 million. Under the terms of that deal, the casino giant will retain rights to host WSOP tournaments at its land-based gaming venues.