JACK Entertainment in Detroit says it has entered into a contract to sell the Greektown Casino-Hotel in the central business district for $1 billion in cash to Pennsylvania’s Penn National Gaming and New York’s VICI Properties, pending regulatory approval. The sale is expected to be finalized in 2019.
Under the terms of the agreements, Penn National will acquire the operating assets of Greektown for about $300 million, and VICI Properties will acquire the land and real estate assets of Greektown for about $700 million. Dan Gilbert, founder and chairman of JACK Entertainment, and his family of companies are targeting the capital proceeds from the sale for investment in Detroit real estate and business development.
Gilbert will retain ownership of the failed jail site at I-375 and Gratiot Avenue adjacent to the Greektown.
Simultaneous with the closing of the transaction, Penn National will enter into a triple net lease agreement with VICI Properties Inc. for the Greektown facility. The lease will have an initial annual rent of about $55.6 million 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 1.8x.
The transaction will be financed with a combination of cash on hand and debt. The company expects to be at its target debt levels within 12-18 months.
“We purchased Greektown Casino-Hotel as a part of our overall economic development strategy in Detroit,” says Matt Cullen, CEO of JACK Entertainment. “After investing hundreds of millions of dollars of capital into redesigning and remodeling the property, as well as working with our outstanding team members and their unions to dramatically improve operations and customer service levels, Greektown Casino-Hotel is positioned for further future success.
“We are confident that Penn National is the ideal steward to take Greektown to the next level of growth. We chose to sell to Penn National in large part due to its strong culture and the quality of its leadership and team. They are a professional operator that Greektown team members will enjoy working with as they continue to deliver excellent service to our guests.”
The transaction requires regulatory approval at both the federal and state levels.
“Our purchase of Greektown Casino-Hotel 5.5 years ago, soon after its bankruptcy, allowed us to work with the great team at the property to create a winning culture and a vibrant business,” says Gilbert, who is also founder and chairman of Rock Ventures. “The sale to Penn National and VICI Properties will allow that strong trajectory to continue and provide additional capital to continue our strategic investments in our Detroit real estate and business initiatives.”
JACK Entertainment plans to work with Penn National to ensure a smooth transition for all guests and team members. The property will remain open for business during the transition.
At closing, Greektown team members will transition with compensation and benefit packages at least as favorable as their current packages. All unions will be recognized, and all collective bargaining agreements will be assumed by Penn National.
JACK Entertainment is continuing a strategic assessment for its remaining gaming properties.
Greektown Casino-Hotel opened in 2000 and features 100,000 square feet of casino space, about 2,700 gaming machines and 60 table games, a poker room, three restaurants, seven fast casual foot outlets, four bars, and a coffee shop. Its high-rise hotel features 14,000 square feet of event and catering space. The property employs about 1,700 workers.
Upon closing, Penn National’s portfolio of regional gaming facilities will increase to 41 properties in 19 jurisdictions, including Las Vegas.