VICI Properties Inc. has reached an agreement to acquire JACK Cleveland Casino and JACK Thistledown Racino.
The sale leaseback transaction includes an aggregate purchase price of $843.3 million in cash. 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.
“JACK Entertainment looks forward to continuing to operate JACK Cleveland Casino and JACK Thistledown Racino,” JACK Entertainment CEO Mark Dunkeson said in a statement. “We have invested more than $700 million 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.”
Simultaneous with the closing of the transaction, VICI 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 $65.9 million, for an implied capitalization rate of 7.8%, and an initial term of 15 years with four 5-year tenant renewal options. The rent coverage ratio at closing is expected to be approximately 1.72x and the tenant’s obligations under the lease will be guaranteed by Rock Ohio Ventures LLC.
Additionally, VICI will provide a $50 million loan secured by certain non-gaming real estate assets of Rock Ohio Ventures LLC, which will bear interest at 9.0% for a period of five years with two 1-year extension options.
VICI President and COO John Payne added: “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.”
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.