VICI Properties (NYSE: VICI) has decided not to exercise its rights to acquire the property assets of two Indiana gaming venues currently owned and operated by Caesars Entertainment (NASDAQ: CZR). On a recent second-quarter earnings conference call, CEO Edward Pitoniak announced that the real estate investment trust (REIT) will not be purchasing Harrah’s Hoosier Park and Horseshoe Indianapolis, formerly known as Indiana Grand.
Pitoniak stated, “Our conviction that we can continue to identify and invest in experiential properties that are accretive against multiple quality factors is a key reason that we have decided that we will not be exercising our call right to acquire Harrah’s Hoosier Park and Horseshoe Indianapolis. We can and are making this decision because of our confidence and conviction that we are actively identifying and pursuing investment opportunities that enable us to generate future AFFO growth and accretion.”
This call option on the Indiana casinos emerged from the 2020 merger that resulted in the “new Caesars.” When Eldorado Resorts announced its $17.3 billion takeover offer for the “old Caesars” in June 2019, it forged an agreement with VICI allowing the gaming company to sell or the REIT to acquire those assets between January 1, 2022, and December 31, 2024.
Caesars and VICI have a long-standing relationship, with the latter spun off from the former in 2017. Today, VICI counts Caesars as one of its largest clients. However, tenant diversification is crucial in commercial real estate, and Pitoniak indicated that this is one reason VICI passed on acquiring Harrah’s Hoosier Park and Horseshoe Indianapolis. Currently, VICI owns the property assets of 18 Caesars-operated venues, including Caesars Palace on the Las Vegas Strip. Additionally, VICI’s gaming tenant list is significantly influenced by its relationship with MGM Resorts International (NYSE: MGM).
Regional considerations might have also influenced VICI’s decision not to buy the Indiana casinos. The REIT already owns the real estate of Caesars Southern Indiana and Horseshoe Hammond, the former operated by the Eastern Band of Cherokee Indians. Pitoniak further explained, “At this time, we believe that we have the opportunity to create greater portfolio value by allocating VICI’s capital to other gaming and nongaming opportunities the team is actively pursuing.”
In the 2019 agreement, Caesars retained the right to put the two Indiana gaming properties to VICI. However, VICI President and COO John Payne noted during the conference call that Caesars CEO Tom Reeg has consistently stated the gaming company is unlikely to exercise that option. Reeg has also shown a willingness to sell casinos that Caesars deems “non-core,” but the company has not publicly declared whether Harrah’s Hoosier Park and Horseshoe Indianapolis fall into that category.
In a related development, Caesars announced on Thursday the sale of the World Series of Poker (WSOP) to investment firm NSUS Group Inc. for $500 million. Under this agreement, Caesars will retain the rights to host WSOP tournaments at its land-based gaming venues.
