Caesars Entertainment, one of the largest casino companies in the United States, has just announced that’s officially sold the Rio Hotel & Casino in Las Vegas. It’s huge news for this company, which is set to merge with Eldorado Resorts sometime in the near future. Many predicted that Caesars would begin selling properties before this merger was finalized.
There’s a lot happening in Las Vegas right now. Several companies are actively working to put some of their properties for sale in this city. Let’s look at why Caesars Entertainment sold the Rio, and what this means for the company moving forward.
Caesars-Eldorado Merger is Still in the Works
Back in June, Caesars Entertainment and Eldorado Resorts announced that they had agreed to merge. Eldorado purchased Caesars for an astounding $17 billion, taking control over the company’s different properties. Hope was that the deal could be secured within just a few days. Unfortunately, this merger is taking longer than expected to complete.
Many steps still need to be taken before this merge will become official. The two companies must receive approval from several US gambling regulatory bodies. Eldorado must also decide whether or not to sell properties to help make up for the $17 billion they spent acquiring Caesars.
In July, Eldorado Resorts CEO Tom Reeg stated in a conference call that the merger is expected to be completed by January of 2020. Eldorado has been failing to meet revenue projections thus far into 2019. Reeg believes that once the merger is completed, the company will begin to meet revenue forecasts set by analysts.
Officials at Caesars have been talking about selling some Las Vegas properties for years. Many believed that Caesars would put some of its Strip hotel-casinos up for sale. This week, reports have come out that show Caesars has sold the Rio Hotel & Casino.
Rio Hotel & Casino is Being Sold to New York Real Estate Group
Caesars Entertainment owns and operates many different casinos around the country. Several of these gambling venues are located in Las Vegas. As we just mentioned, many believed that this company would sell one of its Las Vegas Strip properties before the merger with Eldorado Resorts was completed.
Interestingly, Caesars has decided to sell the Rio Hotel & Casino, located off the Las Vegas Strip. The Rio is one of the most popular hotel-casinos not located on the Strip. It offers a huge gambling space and a wide variety of different hotel suites and amenities.
Caesars Entertainment has confirmed that it’s sold the Rio to Imperial Companies for $516.3 million. The New York-based real estate firm self describes itself as a “a vertically integrated real estate investment, development and management platform focused primarily on mixed-use, residential, hospitality assets across all major U.S. markets.” The deal is expected to finalize in the first quarter of 2020.
Interestingly, Caesars will continue to operate the Rio Hotel & Casino for the next two years. The company will pay back $45 million a year in a lease-back program. Caesars has also retained the rights to host the famous World Series of Poker tournament.
The Rio has hosted the WSOP since 2005. Last year was the highest-attended tournament in history. Now, the World Series of Poker will be moving to The Linq hotel & casino when it opens next year.
How Will This Sale Impact Caesars Entertainment?
To some, it wasn’t a major surprise to see Caesars sell the Rio. Not long ago, the company announced a new $600 million expansion plan for several different casinos. The Rio was not included in this new plan.
Carlo Santarelli, a gaming analyst for Deutsche Bank, commented on the sale to the media this week.
“We view the transaction as a distinct positive for Eldorado-Caesars as it provides for healthy de-leverage, while the net transaction multiple, in our view, is very strong,” he said.
Caesars will continue to operate the Rio for two years. After this leasing period, Caesars can choose whether to continue operating the hotel-casino or hand over the operations to Imperial Companies. It’s a great deal for both parties.
Many believe this is a smart move for Caesars before the merger with Eldorado Resorts. The company needs money right now. We’ll need to wait and see whether or not Caesars chooses to hold onto the Rio after the two year lease period concludes.
More details of this sale will soon be released. Make sure to stay tuned for updates!