Caesars Entertainment said it agreed to sell the Rio All-Suite Hotel & Casino to a company controlled by a principal of Imperial Companies for $516.3 million, in a deal that will allow it to focus on its Las Vegas Strip properties.
Under the terms of the agreement, Caesars will continue to operate the property under a lease for a minimum of two years and pay annualized rent of $45 million. The buyer has the option to pay Caesars $7 million to extend the lease under similar terms for a third year. At the end of the lease term and at the request of the buyer, Caesars may continue to manage Rio or may provide transition services to the buyer.
“This deal allows Caesars Entertainment to focus our resources on strengthening our attractive portfolio of recently renovated Strip properties and is expected to result in incremental EBITDA at those properties,” said Tony Rodio, CEO of Caesars Entertainment. “The retention of the World Series of Poker and retention of Caesars Rewards customers are all factors that make this a valuable transaction for Caesars.”
The agreement allows for co-ownership of Rio-specific guest data and places no restrictions on Caesars’ marketing activities. The World Series of Poker will be hosted at the Rio in 2020 and hosting rights will remain with Caesars Entertainment thereafter.
Deutsche Bank analysts said the deal is a positive for Caesars.
“We view the transaction as a distinct positive for ERI / CZR, as it provides for healthy de-leverage, while the net transaction multiple, in our view, is very strong. We would also note that the transaction eliminates the need for ERI / CZR to invest capital into the asset, a capital allocation we believe would have been considerable.”