Penn National Gaming and VICI Properties announced on Wednesday that they have agreed to acquire the operations and real property of the Greektown Casino-Hotel in Detroit, Michigan for about $1 billion in cash. The transaction is expected to close in the middle of next year.
Two-Pronged Financial Deal
Penn National bought the operations part of Greektown for $300 million, while VICI Properties grabbed the land and real estate for $700 million. As has frequently been the case with VICI in recent years, there is also a lease agreement involved. VICI is turning around and entering into a triple-net lease agreement with Penn National where Penn will pay rent on the property for $55.6 million per year for 15 years with options to renew four times at five years a pop.
In a triple-net lease agreement, the tenant – Penn National – not only pays rent, but also takes care of the property taxes, maintenance, and building insurance (hence triple-net). This is obviously good for VICI, as VICI now has a more predictable stream of income, not having to worry about the up-and-down expenses that Penn National is taking over. Plus, the long term of the agreement adds to the certainty. For Penn National, a triple-net agreement works because the added expenses are baked into the rent, making said rent lower.
In a press release, Timothy J. Wilmott, Penn National’s Chief Executive Officer, said:
Detroit is undergoing an exciting renaissance as a result of billions of dollars of new investments in the city’s residential, commercial, entertainment and cultural center, all of which are driving new residents, businesses, tourists and employment to the downtown area. Greektown is the only casino in the heart of downtown, and we look forward to welcoming patrons from the many nearby attractions, such as Comerica Park, Ford Field, Little Caesars Arena, the city’s theater district, GM’s Renaissance Center and the Cobo Conference Center. We also look forward to working with JACK Entertainment and VICI to ensure a seamless transition for all of our constituents including customers, employees, vendors, local government and Michigan regulators.
Greektown is one of three casinos in Detroit, along with MGM Grand Detroit and MotorCity Casino Hotel.
Penn National Keeps Growing
Penn National has been active on the acquisition front, completing its purchase of Pinnacle Entertainment in October. The company now has 41 properties in 19 states. Some of its casinos in Nevada are names that should be familiar to many: Tropicana Las Vegas, The M Resort, and Cactus Petes. Elsewhere, it owns the Hollywood Casino chain, the L’Auberge properties, the Boomtown Casino brand, and both the Argosy and Ameristar brands.
JACK Properties, the company selling Greektown Casino to Penn National and VICI, is chaired by Dan Gilbert, the majority owner and executive face of the Cleveland Cavaliers basketball team. He is also the co-founder of Quicken Loans.