(Reuters) - An investment arm of Quicken Loans founder and billionaire Dan Gilbert said on Wednesday it agreed to sell the Greektown Casino-Hotel in Detroit to a real estate investment trust and a partner for $1 billion, in a sign of industry consolidation.
VICI Properties Inc, which owns Caesars Palace in Las Vegas and other gaming sites, will acquire the land and real estate assets of Greektown for about $700 million, said JACK Entertainment LLC, an affiliate of Athens Acquisition LLC, whose majority shareholder is Gilbert.
Penn National Gaming Inc, a partner with VICI in the deal, will acquire the operating assets of the casino and the 30-story hotel for about $300 million, JACK Entertainment said in a statement.
Gilbert, who owns the Cleveland Cavaliers of the National Basketball Association and other sports franchises, plans to invest proceeds from the sale in Detroit real estate and business development through Rock Ventures, an umbrella company for his interests, the statement said.
Shares of VICI fell 0.14 percent to $21.44, near its initial public offering price of $20 in February, while shares of Penn National rose 7.89 percent to close at $21.32.
The transaction requires regulatory approval both at the state and federal levels.
When the transaction closes, VICI will lease Greektown to Penn National for an initial annual rent of $55.6 million in a 15-year lease with four renewal options every five years.
The transaction is the latest sign of consolidation in the casino industry, to which investors have recently given a cold shoulder despite historically outstanding cash flows, Shawn Kravetz, founder of hedge fund Esplanade Capital, told the Reuters Global Investment 2019 Outlook Summit in New York.
Despite the bounce from the deal, Penn National’s shares are down about 30 percent year-to-date and traded at an 18-month low on Monday.
Kravetz said investor concerns about Penn National and other casino operators were unfounded. There are a fixed number of licenses and when the right properties, locations and management teams come together, their business can do well, he added.
“We really like the industry,” he said. “We’ll see more M&A as the leaders start to get bigger and try to consolidate some of their power.”
Reporting by Herbert Lash; Editing by Peter Cooney