A real estate investment trust can buy Harrah’s New Orleans Casino but Louisiana lawmakers seem to be unaware of a potential transaction at a time when they are considering a bill that would extend the venue’s license for 30 years, local media outlet The Advocate reports.
VICI Properties spun off from Caesars Entertainment Operating Company (CEOC) last October as the latter was preparing to emerge from bankruptcy. The real estate company took over 19 gaming properties previously operated by Caesars, including the flagship Caesars Palace, and leased them back to the Las Vegas gaming and hospitality giant.
According to an October agreement filed to the US Securities and Exchange Commission, VICI has the right to buy the Harrah’s New Orleans casino complex, including its 450-room hotel. Under the terms of the deal, VICI would lease the property back to Caesars to operate it.
Harrah’s is currently seeking a 30-year extension of its license to operate New Orleans’ only land-based casino. Its current license is valid through 2024. To cement its bid for license extension, Caesars has promised to invest $350 million to expand the casino complex by adding a second hotel and new food and beverage and entertainment facilities.
House Bill 553
Last month, the Louisiana House Criminal Justice Committee and then the state’s full House floor passed House Bill 553. Sponsored by House Speaker Taylor Barras, the piece of legislation authorizes the extension of Harrah’s license to 2054.
The bill must now pass the Louisiana Senate to come into effect as a law. The Senate Judiciary Committee is set to consider the legislation on Tuesday, May 1.
Under the terms of its current license, Harrah’s annually pays $60 million to the state. That payment is set to remain under HB 553. The gambling venue would also pay an additional $7 million per year with a 2% increase to that amount every five years, if the legislation passes.
The Advocate said in an extensive report from Saturday that it has reached out to a number of state legislators and that it appeared they were not informed about a potential transaction and change of the owner of the New Orleans-based casino.
The Chairman of the state’s Gaming Control Board, Ronnie Jones, was too contacted by the media outlet. The gaming official first said that he had no knowledge about VICI’s option to buy Harrah’s New Orleans but was then reminded that the regulator had approved the potential transaction last October as part of Caesars’ reorganization plan.
”Bad Deal for the Public”
According to real estate lawyer Mike Sherman, HB 553 is a bad deal for the public. He told The Advocate that if Harrah’s receives a license extension, its value will be inflated significantly. However, if its license expires in 2024 with no further renewal, the property would lose much of its value.
Mr. Sherman explained that Harrah’s currently earns about $70 million per year, which translates into a total value of around $700 million. The 30-year license extension and the promised $350-million expansion would raise Harrah’s total worth to over $1 billion.
Mr. Sherman has worked for New Orleans hotel owner Joseph Jaeger, who has been staunchly criticizing HB 553. According to Mr. Jaeger, the state could generate more funds at a time it is looking for new revenue sources by allowing other developers to bid for the casino license and thus forcing Harrah’s to face competition.