Caesars sells Rio to New York real estate group for $516.3M | Las Vegas Review-Journal
Caesars Entertainment Corp.’s off-Strip Rio property has been sold to a New York-based real estate company for $516.3 million.
Imperial Companies acquired the 2,500-suite hotel and casino that opened in 1990 in a deal announced in a Securities and Exchange Commission filing early Monday.
The deal, subject to regulatory approvals, is expected to close by the first quarter of 2020.
The SEC filing indicates Imperial deposited $5 million into an escrow account Friday as an initial deposit.
According to terms of the deal, Caesars will continue to operate the property for at least two years in a lease-back arrangement and pay rent of $45 million a year. Imperial has the option to pay Caesars $7 million to extend the lease under similar terms for a third year and, at the request of the buyer, Caesars may continue to manage the Rio or provide transition services to Imperial.
On its website, Imperial describes itself as “a vertically integrated real estate investment, development and management platform focused primarily on mixed-use, residential, hospitality assets across all major U.S. markets” led by founding partners Eric Birnbaum and Michael Fascitelli.
The sale of the property was expected. Caesars is in the process of being purchased by Reno-based Eldorado Resorts Inc. for $17.3 billion. In an earnings call in June, Eldorado CEO Thomas Reeg said one or two of Caesars’ nine Las Vegas properties would likely be sold as part of their deal. Reeg indicated he hopes the transaction would close by the first quarter of 2020.
“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 (cash flow) at those properties,” Tony Rodio, CEO of Caesars Entertainment, said in a statement announcing the deal.
“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,” he said.
The World Series of Poker, a staple at the Rio since 2005, is expected to move into Caesars new $375 million, 550,000-square-foot Caesars Forum conference center near The Linq Hotel when it opens next year.
“We view the transaction as a distinct positive for Eldorado-Caesars as it provides for healthy de-leverage, while the net transaction multiple, in our view, is very strong,” Deutsche Bank gaming analyst Carlo Santarelli said in a note to investors.
It’s been clear for years that Rio eventually would be sold.
When Caesars announced $600 million in upgrades to several properties, Rio was left out of the program.
Rumors circulated for a decade and prospective buyers, including Treasure Island owner Phil Ruffin, came in to kick the tires.
Ruffin, who told the Review-Journal earlier this year that he had looked into acquiring Rio “many years ago,” said much of the success of the property could be tied to Caesars’ loyalty program, Caesars Rewards, formerly Total Rewards. Ruffin suspected cash flow from the property would fall if the Caesars Rewards database wasn’t a part of a deal.
One of the most recent reports that was never substantiated was that a buyer was looking to acquire Rio, demolish it and build a Major League Baseball stadium in its place.
Still, Rio was groundbreaking and developed trends adopted by Strip properties.
Built by longtime Las Vegas entrepreneur Tony Marnell, Rio was the first Las Vegas resort to put the buffet kitchen in the dining area, open a large-scale nightclub and enhance its pool with white sand and parties, which brought the crowds to the off-Strip Brazilian-themed property, he said.
It was also the first all-suite resort in Las Vegas and first with floor-to-ceiling glass in all rooms.
Marnell sold Rio to what was then Harrah’s Entertainment Corp. in 1998 for $880 million.
In early trading on Wall Street, Caesars shares were up 8 cents, 0.6 percent, to $11.98 a share.
This is a developing story. Check back here for updates.
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