The real estate investment trust born out of the Caesars Entertainment bankruptcy reorganization said Wednesday it will acquire two more of the company’s properties, including the Octavius Hotel Tower at Caesars Palace.
VICI Properties is purchasing the newest tower at the Las Vegas Strip resorts and Harrah’s Philadelphia Racetrack and Casino for a net price of $590 million. The figure reflects the actual purchase price of $749 million reduced by $159 million through lease modifications.
Caesars will continue to operate both properties under the terms of long-term leases.
“Octavius Tower will strengthen our footprint on the Las Vegas Strip, Harrah’s Philadelphia will bolster our presence on the East Coast by establishing a foothold in a top gaming market,” VICI CEO Edward Pitoniak said in a statement. “As a REIT, we look to enhance our organic growth in the near-term, protect against volatility in our rental income over the long-term, and incentivize our tenant to invest capital into the real estate to grow and strengthen their own business.”
On a conference call with analysts after the deal was announced, Pitoniak said the company needs to be licensed in Pennsylvania, but he wasn’t concerned since the state is familiar with Gaming and Leisure Properties, the casino industry’s largest REIT.
VICI, which was created out of the bankruptcy reorganization, owns 20 casinos under Caesars, Horseshoe, Harrah’s and Bally’s brands. VICI also owns four golf courses and 34 acres of undeveloped land adjacent to the Las Vegas Strip.
The 23-story Octavius Tower was built in 2012 and has 668 hotel rooms located on the Flamingo Avenue side of Caesars Palace. Caesars annual lease payment related to Octavius Tower will be $35 million. VICI said Caesars would have more flexibility in developing additional land on the east side of Strip.
Harrah’s Philadelphia was built in 2006 and is located along the waterfront in Chester, Pa. The property has 2,450 slot machines and live table games. Caesars initial annual lease payment related to Harrah’s Philadelphia will be $21 million in the first year and will be subject to contractual annual increase thereafter.
Macquarie Securities gaming analyst Chad Beynon told investors the deal adds to Caesars’ ability to grow its Las Vegas portfolio in its available cash, which includes a recently announced $500 million share repurchase plan.
“Caesars remains a company with several catalysts, and we view this financial engineering announcement as a positive for equity holders,” Beynon said.
Neither of the properties were from the call options VICI has with Caesars through October 2022. Those properties are Harrah’s Laughlin, Harrah’s New Orleans and Harrah’s Atlantic City.
