The downtown Reno gambling hall that launched the Harrah’s empire is being sold for conversion into a mixed-use development that might include a hotel, but not a casino.
VICI Properties, the Caesars Entertainment REIT that owns Harrah’s Reno Hotel and Casino, said it’s getting $50 million for the Virginia Street landmark. The buyer, an investment group fronted by an entity called Reno City Center LLC, will maintain it as a casino under a short-term lease with Caesars that will terminate later this year.
The 82-year-old casino and its 940-room hotel then will close, although a hotel may reopen at the site at a future date, according to news reports.
VICI and Caesars will split the $50 million 75-25.
“We recognize the long legacy of Harrah’s in Reno, where the brand began, and our role in the community,” the two said in a joint statement. “We are pleased the buyer is committed to the community and supports the redevelopment of this wonderful asset.”
It’s reported that the sale was prompted by Caesars’ pending $17.3 billion merger with Eldorado Resorts, which similarly was founded in the Northern Nevada city, is headquartered there, still owns three downtown casinos, and might have faced an antitrust issue.
It also aligns with Eldorado’s desire, when the merger closes, to sell off the portions of the combined portfolio it considers non-core to pay down debt from the merger and cut around $500 million in costs.
Eldorado is engaged currently in separate transactions to unload six of its own casinos in four states and is expected to reach a deal in the weeks ahead to sell a resort in South Lake Tahoe. More sales are expected to follow.
Caesars, meanwhile, is busily transferring casinos to VICI under a number of previously agreed deals. VICI, which was spun off as a separately traded REIT in the Caesars bankruptcy reorganization in 2017, already owns more than half the casino giant’s 38-property U.S. portfolio.
Harrah’s Reno dates back to 1937, when California businessman William Fisk “Bill” Harrah expanded his Virginia Street bingo operation into a casino. He steadily grew it over the decades, with purchases of adjacent land and casinos and the first of two high-rise hotels.
After his death in 1978, his company, which by then included casino hotels in Las Vegas and Lake Tahoe, came under the ownership of the Memphis-based Holiday Inn Corp., which expanded into gaming in Atlantic City in the ’80s and plunged into the industry’s rapid cross-country expansion in the early ‘90s. Holiday Inn later spun off the casino portfolio, and Harrah’s Entertainment, one of the largest and most successful publicly traded corporations in casino history, was born.
Things began to change in the new century, however, as jurisdictional expansion largely played itself out and same-store growth got harder to come by in increasingly crowded markets. M&A became the name of the game. In 2005, Harrah’s spent $9 billion to acquire an amalgam of operators that included Bally’s and Caesars, retaining the Harrah’s brand with Caesars Entertainment as the new holding company and with the addition of a major presence on the Las Vegas Strip. Three years later, on the eve of the Great Recession, the holding company was acquired by private equity giants Apollo Global Management and TPC Capital in a $30 billion leveraged buyout that buried it under a mountain of debt from which it was ultimately forced to seek the shelter of Chapter 11.
Restructuring the behemoth’s finances took two and a half years, and no sooner was it accomplished, late in 2017, than the company came into the sights of corporate raider Carl Icahn. Icahn began buying up stock in 2018, and by the following spring, he’d amassed a controlling stake. He immediately pushed for a sale. By June, the merger with Eldorado was concluded, a new giant with $15.5 billion of combined debt was created, and Icahn pocketed a reported 50 percent profit on his holding.
As for the employees of Harrah’s Reno, they’re looking at something rather less pleasant, although Caesars fixed a cheery face on it in a statement attributed to CEO Tony Rodio and released simultaneously with the announcement of the sale.
“We have worked closely with the buyer to provide a reasonable closure plan that allows our great staff in Reno ample time to secure their next jobs,” he said, “including priority consideration for relevant openings at our other properties in Nevada, including Lake Tahoe and Las Vegas.”
