VICI Inks $843M Cleveland Casino Deal

The agreement with Jack Entertainment encompasses gaming properties in downtown Cleveland as well as suburban North Randall.
JACK Cleveland Casino. Image via Google Street View

VICI Properties Inc. and an affiliate of JACK Entertainment LLC have agreed that VICI will acquire JACK Cleveland Casino, in downtown Cleveland, and JACK Thistledown Racino, in nearby North Randall, Ohio, for about $843.3 million in cash. The announcement comes barely a month after VICI closed its $558 million acquisition of JACK Cincinnati Casino.

At the same time, VICI will enter into a master triple-net lease agreement with JACK Entertainment related to the Cleveland and North Randall assets. The master lease will have an initial total annual rent of $65.9 million, for an implied cap rate of 7.8 percent, and an initial term of 15 years, with four five-year tenant renewal options. VICI will also provide a $50 million loan secured by certain non-gaming real estate assets of Rock Ohio Ventures LLC, JACK Entertainment’s parent entity.

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In a prepared statement, JACK Entertainment CEO Mark Dunkeson noted that other Cleveland assets operated by JACK sister companies include the Cleveland Cavaliers, Avenue Shops at Tower City and the May Co. Building. He added that JACK has invested more than $700 million into the casino and racino since the properties opened.

JACK Cleveland Casino opened in May 2012 in the historic Higbee Building in Cleveland. The property features about 96,000 square feet of gaming space, 1,300 gaming machines, more than 120 table games and eight food and beverage outlets. The property is connected to the 205-key Ritz-Carlton and 440-key Renaissance hotels.

JACK Thistledown Racino opened in April 2013 and reportedly is the leading thoroughbred racino in metro Cleveland. The property is sited on 129 acres and features about 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. Goldman Sachs & Co. LLC is the financial advisor and Kramer Levin Naftalis & Frankel LLP is the legal advisor to VICI Properties in the agreement.

Multiple competitors

In 2018, total commercial casino gaming revenue in Ohio rose nearly 5 percent from the prior year, to a record $1.9 billion, according to the State of the States 2019 survey from the American Gaming Association. The associated gaming tax revenue to the state, from Ohio’s four casinos and seven racinos, was $622.6 million.

Despite these healthy numbers, Ohio’s casinos face substantial competition from neighboring states, the survey notes. Both West Virginia racinos and Indiana riverboat casinos draw Ohio customers, Pennsylvania recently allowed expansion of gaming at truck stops, and Cincinnati gaming properties would become vulnerable if Kentucky should ever approve commercial gaming.