Worldwide casino resort developer Caesars Entertainment Corporation have announced their intention to sell real estate assets associated with Harrah’s Las Vegas in order to finance its $1.7bn purchase of two casino properties in Indiana.
Harrah’s Las Vegas will be sold to real estate developers VICI properties for a total consideration of $1.14bn, with Caesars leasing back the property for a 15-year period at an initial annual rent of $87.4m. Caesars will have the option to extend the lease for an additional 20 years via four five-year extensions.
As part of the leaseback arrangement, all Harrah’s operations will continue to be administered by Caesars Entertainment Corporation for the duration of the lease.
Earlier this month Caesars agreed a $1.7bn deal to purchase the Hoosier Park casino in Anderson and the Indiana Grand casino in Shelbyville from Centaur Holdings. The casinos which include horse racing tracks generated over $480m in combined casino revenue during the last financial year alone.
In a statement announcing the deal, Caesars Entertainment CEO and President Mark Frissora, said: "The transactions we are announcing today demonstrate our commitment to pursuing growth opportunities while maintaining balance-sheet discipline.”
Under the terms of the deal Caesars will acquire 18.4 acres of land adjacent to the Harrah’s property from VICI Properties with the intention of developing it into a 300,000 square foot convention centre. The proposed new convention centre facility will feature the largest column-free ballroom in the continental US.
An additional clause inserted into the deal gives VICI the option to acquire the newly developed convention centre and lease it back to Caesars; in the event that they do not do so, Caesars has the additional ability to make the purchase and leaseback mandatory.
Frissora added: "We expect the sale and leaseback of Harrah's Las Vegas will allow us to acquire Centaur and develop the convention centre 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 centre allows us to develop another important destination right in the middle of our centre-Strip footprint."