VICI-Hard Rock Partnership to Acquire JACK Cincinnati Casino for $745M

CINCINNATI—VICI Properties Inc. and a subsidiary of Hard Rock International have entered into definitive agreements to acquire the Jack Cincinnati Casino and Turfway Park here for approximately $745 million.

The agreements with JACK Entertainment LLC call for VICI Properties to acquire 100% of the membership interests of a subsidiary of JACK Cincinnati that owns the land and real estate assets of JACK Cincinnati for $558 million, and Hard Rock will acquire the operating assets of JACK Cincinnati for $187 million.

Simultaneous with the closing of this transaction, which is expected in late 2019, VICI Properties will enter into a triple-net lease agreement with Hard Rock related to JACK Cincinnati. The lease will have an initial total annual rent of $42.75 million, for an implied capitalization rate of 7.7%, and an initial term of 15 years, with four, five-year renewal options. The rent coverage ratio in the first year after closing is expected to be approximately 1.74x and the tenant’s obligations under the lease will be guaranteed by Seminole Hard Rock Entertainment, Inc.

Goldman Sachs & Co. LLC is acting as financial advisor and Kramer Levin Naftalis & Frankel LLP is acting as legal advisor to VICI Properties for the transactions. Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. are acting as financial advisors and Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Jack Ohio LLC and certain of its affiliates in connection with the transactions.

“We are proud to partner with Hard Rock, further diversifying our tenant roster with an international leader in gaming, entertainment and hospitality experiences, and a renowned global platform of 245 hospitality venues across 75 countries,” said John Payne, president and chief operating officer of New York City-based VICI Properties. “This transaction expands our geographic footprint into one of the fastest growing regional markets. As one of only four full-scale casinos permitted in Ohio, the property is poised to benefit from the introduction of Hard Rock, a dynamic and proven operator in the Ohio market.”

Opened in March 2013, JACK Cincinnati is situated on 22 acres in the Broadway Commons area of downtown Cincinnati. The property features 100,000 square feet of gaming space with approximately 1,800 gaming machines and 100 table games. Additionally, the property contains 33,000 square feet of meeting space, six high-quality restaurants, and two bars.

“Hard Rock has been the number one operator in Ohio since opening in the greater Cleveland market in 2013,” said Jim Allen, chairman and CEO of Hard Rock International. “And now, we look forward to introducing our unique brand of casino entertainment to Cincinnati.”

The decision to sell the Jack Cincinnati Casino was undertaken after a strategic assessment of JACK Entertainment’s portfolio.

“We viewed the gaming industry as a catalyst for economic development in our local communities. After ten years, hundreds of millions of dollars of investment developing JACK Cincinnati Casino from the ground up, and establishing a strong customer focused culture, we have successfully positioned JACK Cincinnati Casino for further future success,” says Matt Cullen, CEO of JACK Entertainment. “We are confident that Hard Rock and its world-renowned brand will be a great addition to the Queen City and the right choice to take JACK Cincinnati Casino and Turfway Park to the next level of growth.”

JACK Entertainment’s JACK Cleveland Casino and JACK Thistledown Racino will not be impacted by the transaction.

In January, VICI Properties announced it had acquired the land and real estate assets of the Margaritaville Resort Casino, located in Bossier City, LA for approximately $261 million in cash, with Penn National Gaming, Inc. acquiring the operating assets of the Margaritaville Resort Casino for approximately $115 million in cash.

Simultaneous with the closing of this transaction, Penn National entered into a triple-net lease agreement with the company. The lease has an initial total annual rent of approximately $23.2 million and an initial term of 15 years, with four-year renewal options.

In December, 2018, VICI Properties completed previously disclosed transactions with Caesars Entertainment Corp. to acquire, and lease back, all of the land and real estate assets associated with Harrah’s Philadelphia. The company also modified leases with Caesar’s in connection with the transaction

Harrah’s Philadelphia was acquired for a purchase price of $241.5 million, which was reduced by $159 million to reflect the aggregate net present value of the lease modifications, resulting in a net cash consideration of $82.5 million, excluding transaction costs. The company funded the net purchase price using available cash. The Harrah’s Philadelphia property provides for initial annual rent of $21 million.