Jack Ohio Casino Sale
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Change of ownership
JACK Entertainment has closed the sale of its JACK Casino in Cincinnati to Hard Rock International and VICI Properties. The news was announced only a couple of days after Hard Rock got approval as a new casino operator in the state, which was issued by the Ohio Casino Control Commission during its monthly meeting.
Hard Rock got approval as a new casino operator in the state
As part of the deal worth $745m, VICI Properties acquires the subsidiary of JACK, which is the owner of the casino property. This part of the agreement is in itself worth $558m. VICI Properties is a real estate investment trust which is an offshoot of Caesars Entertainment.
Leasing agreement
VICI Properties has a leasing agreement in place with Hard Rock International, which will be the casino operator and the owner of all of the gaming assets. The gaming assets deal was worth $187m.
The leasing agreement will see Hard Rock lease the property for $42.75m annually. This is a 15-year lease agreement initially, with options to extend it for four five-year periods.
What the future holds
The CEO of JACK Entertainment, Mark Dunkeson, spoke about the winding up of this sale. He said he is confident Hard Rock International will take the casino to the next level. This comes after JACK Entertainment spent “10 years and hundreds of millions of dollars of investment developing JACK Cincinnati Casino from the ground up.”
Turfway sale not closed
The deal to sell the Cincinnati Casino was originally agreed upon in April. The Kentucky racetrack Turfway Park, situated about twenty minutes away from Cincinnati, was supposed to be included in the package.
However, the Turfway sale is still in the works and will take another few months to complete. This is mainly because the Kentucky Horse Racing Commission still needs to give the deal the green light. The price of the Turfway sale is in the region of $35m.
Potential competition
There is a potential spanner in the works for the Turfway deal, due to the fact that the Churchill Downs racing facility in Kentucky is getting a $200m investment.
This would see thoroughbred racing at the track, as well as the installation of historical horse racing machines. The races held here would begin in 2020 and fall on the same dates as the Turfway events.
JACK and Hard Rock International are working as a team to try and stop these race clashes from happening. Hard Rock is willing to invest as much as $100m at Turfway for extensive renovations and the installation of historical horse racing machines.
It will be down to the Kentucky Horse Racing Commission to finalize the racing calendar for 2020. The Commission has been critical of the way JACK Entertainment managed the Turfway track in the past.
Downsizing of JACK Entertainment
The selling of the Cincinnati Casino is just one of a number of downsizing moves by JACK Entertainment. It already sold its Greektown Casino and Hotel in Detroit at the beginning of 2019. Penn National Gaming bought it for about $1bn.
one of a number of downsizing moves by JACK Entertainment
With the closing of the Cincinnati Casino sale and the pending sale of the Turfway racetrack, JACK will only have two properties left in its portfolio. These are the JACK Cleveland Casino and a racino called JACK Thistledown, which is near to Cleveland. JACK also has a stake in the Horseshoe Casino in Baltimore, but the company is also looking at leaving this market.
Due to the Greektown sale, 92 employees lost their jobs. The executive structure of the company has also been rearranged. Former CEO Matt Cullen was replaced by Dunkeson at the start of September. Cullen is still the chairman of the board at JACK Entertainment.
Online gambling deals
Jack Ohio Casino Sales
Despite liquidating a lot of its casino positions, JACK Entertainment is making some moves in the sports betting and online gambling markets.
It has signed a deal with the Kambi Group to power its online and retail sportsbooks. It also recently entered into a similar agreement with GAN for its online gambling operations.
Sports betting is not yet legal in Ohio, but JACK is looking to be well-positioned in case legislation gets approval on the matter.
JACK Entertainment announced on Friday that it has completed the sale of its JACK Cincinnati Casino for $745 million. It is a two-part sale: VICI Properties acquired a JACK subsidiary that owns the land and real estate assets of the casino and Hard Rock International will take over the operations of the property.
Buy and rent
The portion of the sale price that VICI Properties shelled out was $558 million cash. VICI then entered into a triple-net lease with Hard Rock in which Hard Rock will pay $42.75 million rent per year for 15 years. After the initial lease term is up, Hard Rock can up to renew for five years as many as four times. In a triple net lease, the tenant (Hard Rock), takes care of building maintenance, real estate taxes, and insurance in addition to paying rent.
It may sound like a weird deal for Hard Rock, but by taking on those expenses, the total costs per year when combined with rent are likely less than what VICI would have charged for rent without the expenses. And Hard Rock will operate the property, therefore making money off of it like it would if it owned it. VICI, while maybe not getting as much as it could in rent if it took on the added expenses, gets a stable revenue stream for as much as a quarter of a century.
Hard Rock acquired the gaming assets of the casino for $187 million, bringing the total payment to JACK Entertainment to the aforementioned $745 million.
Executives gush
“We are pleased to officially welcome Hard Rock International and its world-renowned brand to the Queen City,” said Mark Dunkeson, Chief Executive Officer of JACK Entertainment, in a press release. “After ten years and hundreds of millions of dollars of investment developing JACK Cincinnati Casino from the ground up, we are confident that the property’s success will continue into the future as Hard Rock International takes it to the next level of growth.”
Dunkeson also thanked the casino staff for their hard work, adding, “We know they will continue to thrive under Hard Rock International’s leadership as they are known for their excellent culture.”
In addition to years of cash flow, VICI President and COO John Payne was thrilled with the deal, saying the company is “diversifying our geographic exposure by acquiring one of only four full-scale casino properties in the limited license state of Ohio, which continues to be one of the healthiest and fastest growing regional gaming markets across the country.”
JACK and VICI have a history
This is the second transaction between JACK Entertainment and VICI Properties to close this year as JACK Entertainment reduces its presence in the gaming industry. In May, it completed the sale of the Greektown Casino-Hotel, one of three casinos in Detroit. The deal was announced in November 2018.
Jack Ohio Casino Salem
In that sale, VICI Properties bought the land and real estate for $700 million, while Penn National Gaming acquired the operations of Greektown Casino-Hotel for $300 million, bringing the total deal to $1 billion.
Jack Ohio Casino Sales Tax
Like with the JACK Cincinnati acquisition, VICI entered into a triple-net lease agreement with Penn National. The lease timeframe and renewal options are the same with annual rent of $55.6 million.