Real estate investment trust VICI Properties Inc has entered into a definitive agreement with an affiliate of JACK Entertainment LLC. It will acquire 100% of the membership interests of its affiliates that own casino-entitled land and real estate and related assets associated with JACK Cleveland Casino and JACK Thistledown Racino for an aggregate purchase price of approximately $843.3m in cash.
On closure of the transaction, the company will enter into a master triple-net lease agreement with JACK Entertainment related to the assets. The master lease will have an initial total annual rent of $65.9m, for an implied capitalization rate of 7.8%, and an initial term of 15 years with four five-year tenant renewal options.
John Payne, President and Chief Operating Officer of VICI Properties said: “We are excited to partner with the team at JACK Entertainment as they focus on investing and operating in the Cleveland market. Ohio continues to be one of the healthiest and fastest growing regional gaming markets and we are thrilled to add high-quality, urban real estate to our portfolio at an attractive capitalization rate.
“This transaction represents another great example of VICI’s ability to creatively source and execute accretive deals that bring value to our shareholders, while furthering our strategic goal to diversify our roster of best-in-class gaming operators.”
Mark Dunkeson, Chief Executive Officer of JACK Entertainment, stated: “JACK Entertainment looks forward to continuing to operate JACK Cleveland Casino and JACK Thistledown Racino. The combined efforts of our gaming properties together with the other Cleveland assets operated by our sister companies including the Cleveland Cavaliers, Avenue Shops at Tower City and the May Company Building, have created a strong connection to the city and allows us to remain heavily committed to the Cleveland area.
“We have invested more than $700m into JACK Cleveland Casino and JACK Thistledown Racino since the properties opened in 2012 and we will continue to invest significant capital into these properties which will have a lasting positive impact on the city and Cuyahoga County.”
David Kieske, EVP, Chief Financial Officer of VICI Properties, added: “The acquisition of JACK Cleveland Casino and JACK Thistledown Racino will add an additional $65.9m of rent to our portfolio upon closing. Importantly, we will not issue additional equity to finance the transaction as we prudently secured our equity funding requirements through our successful June 2019 equity offering.
“Accordingly, we anticipate closing our remaining pending transactions, including our previously announced transactions with Century Casinos Inc and Eldorado Resorts Inc, on a leverage-neutral basis.”
JACK Cleveland Casino opened in May 2012 in the historic Higbee Building in downtown Cleveland, Ohio. The property features approximately 96,000 square feet of gaming space, 1,300 gaming machines, over 120 table games and eight food and beverage outlets. The property is connected to the 205-key Ritz-Carlton and 440-key Renaissance hotels in downtown Cleveland.
JACK Thistledown Racino opened in April 2013 in North Randall, Ohio and is the leading thoroughbred racino in the Cleveland MSA. The property is situated on 129 acres and features approximately 57,000 square feet of gaming space, 1,459 gaming machines and six food and beverage outlets.
The transaction is subject to regulatory approvals and customary closing conditions and is expected to close in early 2020. The acquisition is expected to be accretive immediately upon closing.