Eldorado Resorts’ $17.3 billion acquisition of Caesars Entertainment isn’t finalized but that hasn’t stopped the Reno-based casino operator from acting as if the transaction is a done deal.
Eldorado announced several financial transactions Monday after the stock markets closed that are intended to strengthen its balance sheet as it moves toward closing the Caesars acquisition, possibly by the end of June.
Eldorado struck deals with two gaming-centric real estate investment trusts involving several of its current casinos and the recently opened Caesars Forum Convention Center, which it is acquiring as part of the merger.
Eldorado will enter into a $400 million, five-year mortgage with VICI Properties for the 500,000 square-foot Caesars Forum on the Strip behind the Linq Promenade and High Roller Observation Wheel. Caesars Entertainment built for the project for $375 million.
The five-year mortgage will have an interest rate of 7.7% subject to a 2% annual escalation and will be pre-payable beginning in year three, subject to certain conditions.
VICI will also pay Eldorado $103.5 million to acquire 23 acres of undeveloped land parcels adjacent to the Caesars Forum and behind Harrah’s Las Vegas, Linq Resort, and Flamingo Las Vegas. The transaction – an average price of $4.5 million per acre – won’t be finalized until after the Eldorado-Caesars merger.
The acquisition, which was announced almost a year ago, still requires the approval of the Federal Trade Commission and gaming regulators in Nevada, New Jersey, and Indiana. The merger will give the combined company – which will be controlled by Eldorado management – control of some 60 properties in 16 states.
Eldorado expects to receive total proceeds of $503.5 million from both transactions with VICI.
Eldorado also announced plans to sell 18 million shares of stock with the net proceeds to be used for general corporate purposes.
“We are pleased to further our relationship with VICI through these transactions,” said Eldorado CEO Tom Reeg. “The combination of these two transactions will serve to strengthen our balance sheet and provide added liquidity.”
VICI also announced its own stock offering of some 22 million shares. The company, which has 28 gaming properties leased to five casino operators, is acquiring three Harrah’s branded casinos in Atlantic City, Laughlin in Nevada, and New Orleans for a combined $1.8 billion. VICI will lease the operations back to Eldorado for a total annual rent of $154 million once the deal closes.
Meanwhile, Eldorado and Gaming and Leisure Properties announced a deal to amend the master lease agreement that covers several casinos acquired in the 2018 buyout of Tropicana Entertainment.
Under the transaction, GLPI agreed to not raise the rent on the Eldorado-managed properties in 2020 and 2021 due to the COVID-19 pandemic. Rents will increase by 1.25% in 2022 and 2023, 1.75% over the next two years, and 2% each year after. The master was extended 20 years through 2038 with renewal options of up to 20 additional years.
“We believe the proposed modifications will further enhance our long-term cash flow visibility and more closely align our interests with the Eldorado team as they move towards completion of their transformative Caesars transaction,” GLPI CEO Peter Carlino said in a statement.
Shares of Eldorado closed at $38.44 on the Nasdaq, up $1.66 or 4.51% on Monday. VICI closed at $22.83 on the New York Stock Exchange, up 54 cents or 2.42%. GLPI closed at $38.53 on the Nasdaq, up 25 cents or 0.65%.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
