Caesars Entertainment turned to one of its tribal gaming partners in meeting with this summer’s request by Indiana gaming regulators to reduce the company’s holding in the state.
In a deal announced Thursday morning, Caesars said it would sell the operations of the Caesars Southern Indiana in Elizabeth to the Eastern Band of Cherokee Indians for $250 million.
The North Carolina-based tribe will enter into a lease agreement with real estate investment trust VICI Properties, which owns the land the building associated with the property, for annual rent payments of $32.5 million.
The transaction is expected to close in the third quarter of 2021.
Caesars operates two casinos in North Carolina for the tribe – Harrah’s Cherokee Valley River in Murphy and Harrah’s Cherokee in the Smokey Mountains. The deal is the first for the tribe outside of its home state. The business relationship between Caesars and the Eastern Band of Cherokee Indians has been in place since 1996.
The property will retain the Caesars name and the tribe will sign a long-term agreement for the use of the brand and the Caesars Rewards loyalty program.
“The purchase of Caesars Southern Indiana operating company marks the beginning of an exciting new future for the Eastern Band of Cherokee Indians, “Principal Chief Richard Sneed said in a statement. “We are pleased to build upon our long-standing partnership with Caesars as we look to advance our interests in commercial gaming in the coming years.”
Union Gaming Group analyst John DeCree told investors the deal is the first time Caesars has monetized its customer loyalty program.
“We believe this will be just the first of many licensing and branding agreements that will evolve into a lucrative, high-margin, fee stream for the company,” DeCree wrote in a note to investors.
The announcement marks the second Indiana property sold by Caesars, which agreed to reduce its holdings in the state as part of an agreement with the Indiana Gaming Control Board when the regulators approved the $17.3 billion merger with Eldorado Resorts.
In October, Caesars agreed to sell Tropicana Evansville to Bally’s Corp. and Gaming and Leisure Properties for a combined $480 million. The deal is expected to closed next year.
Caesars still owns three gaming properties in Indiana – Harrah’s Hoosier Park Racing & Casino in Anderson, Indiana Grand Racing & Casino in Shelby, and Horseshoe Casino in Hammond.
When the transaction closes, Caesars’ annual rent payments to VICI under the company’s Regional Master Lease will decline by $32.5 million.
Macquarie Securities gaming analyst Jordan Bender noted the Eastern Band of Cherokee Indians becomes the sixth operator in VICI’s list of tenants.
“VICI has demonstrated its ability to grow over the last several years through gaming and non-gaming transactions in an accretive manner,” Bender told investors.
In a statement, Caesars CEO Tom Reeg said the agreement allows the Caesars brand and customer loyalty program to remain in southern Indiana.
“Since our partnership began, we have admired their growth and the success of their properties,” Reeg said. “We look forward to increasing our relationship.”
Caesars Southern Indiana is located along the Ohio River and draws customers from Indianapolis and Evansville. It is also the closest casino to Louisville. The property has a 500-room hotel and a total gaming space of 110,000 square feet. It opened as Horseshoe Southern Indiana in 1998 and was acquired by Caesars in the early 2000s when the company purchased Horseshoe Gaming.
The property underwent a $90 million expansion in 2019 and moved its gaming off a riverboat to a land-based facility. The name was changed to Caesars Southern Indiana. The property now has a sportsbook operated by William Hill US and a golf course.
Shares of Caesars, traded on the Nasdaq, closed at $75.84 on Thursday, down 84 cents or 1.10%. VICI shares, traded on the New York Stock Exchange, were down 3 cents or 0.12% to close at $25.88.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
