Gilbert selling Greektown casino for $1 billion
Entrepreneur Dan Gilbert is selling his Greektown Casino to Penn National Gaming Inc. and a real estate investment trust for $1 billion, a deal that could signal the unwinding of the mortgage mogul's gaming holdings in the Midwest.
Gilbert's Detroit-based Jack Entertainment LLC operates six properties in Ohio, Kentucky, Maryland and Michigan. Under the new owner, the Greektown site — the smallest of Detroit's three casinos — would continue operations under the new owner and continue generating tax revenue for the city budget.
Penn National will pay $300 million to become the operator of Greektown Casino. New York-based VICI Properties Inc. will pay $700 million to own the property and will receive what could be termed "first rights" to cash flow generated by Greektown, said Matthew Cullen, CEO of Jack Entertainment and principal of the Gilbert-affiliated Rock Ventures LLC.
The transaction, confirmed early Wednesday, follows months of speculation the chairman of Quicken Loans Inc., owner of the NBA's Cleveland Cavaliers and serial developer of downtown Detroit property was shopping some or all of his gaming properties to would-be investors. He was.
Gilbert's acquired majority control of Greektown at the end of 2012. Its sale is likely to be the first in a series of transactions that could culminate in a Gilbert company exiting the gaming business altogether. The move would enable him and his team to refocus on the capital on higher-margin plays in technology businesses and real estate development.
"We plan on deploying that capital right into the city," Gilbert said in an interview. "I've got nowhere else to invest except for real estate business and technology businesses and start-up businesses in the city of Detroit. We plan on taking that capital and hopefully doing great things with it downtown."
In fact, Gilbert is poised to move ahead with some of his biggest-ticket real estate plays yet in Detroit — the multibillion-dollar projects known locally as the Monroe Block and the Hudson's site on Woodward. Coupled with Ford Motor Co.'s planned renovation of the dilapidated Michigan Central Depot, those projects will be the largest, highest-profile moves since Henry Ford II spearheaded construction of the Renaissance Center in the 1970s.
The sale is being touted as "redirection" of Gilbert resources, chiefly into major redevelopment projects promising to reshape both the landscape and skyline of downtown Detroit. Gilbert and ranking officials familiar with his strategic thinking say the sale is recognition of a mission accomplished in Greektown: to acquire its post-bankruptcy assets, improve the property located near other Gilbert properties and look for the right time — and price — to sell.
A key question: would selling the Greektown property enable Gilbert to vie for ownership of a Major League Baseball franchise — starting with the Detroit Tigers? The club's controlling Ilitch family insists on the record that the franchise is not for sale, despite the latest disappointing season. And if there's not a willing seller, there is no buyer.
Penn National, based in Wyomissing, Pennsylvania, operates 40 casinos and horse-racing tracks in the United States and Canada under the Hollywood Casino brand. Its holdings include the Hollywood Casino on the west side of I-75 south of Toledo, a second casino in Columbus and two so-called "racinos" — slot machines at horse tracks in Dayton and the Youngstown area.
In a transaction nearly a year ago valued at $2.8 billion, Penn National acquired Pinnacle Entertainment Inc., a hospitality and casino-gaming rival. The company said the addition of Pinnacle properties would "enhance" Penn National's "position as the leading U.S. regional gaming operator" and increase "geographic diversification with highly complementary properties."
Adding Gilbert's Greektown to the Penn National portfolio would give the company a figurative front-row seat to the revitalization of downtown, powered most directly by Gilbert's prodigious wallet and his eye for game-changing projects like the Monroe Block, Hudson's site and his plans for Wayne County's "Fail Jail" site on Gratiot next to Greektown.
Casino gaming has been an integral component of Gilbert's strategy to revive urban cores where his most critical assets operate — downtown Detroit, where he moved his Quicken and affiliated companies starting in 2010 and Cleveland, where his beloved Cavaliers play. He backed an Ohio ballot measure in 2009 to legalize casinos in Ohio, opening his Cleveland casino three years later on Public Square downtown.
"We think that these urban cities represent a great opportunity for us to give back to those communities and also for us to invest and do well," Cullen of Rock Ventures and Jack Entertainment told the Cleveland Plain Dealer in 2013. "We really like the connectivity of the Greektown property. It's right in the heart of downtown. It's surrounded by an entertainment district."
All that still holds true. What's different today is that the revival of downtown is five years further along; the city's historic Chapter 9 bankruptcy is four years in the rear-view mirror; Gilbert's roll up of downtown real estate is driving a wave of enthusiasm that's drawing more residents and follow-on business investment.
Greektown Casino generates the least gaming-tax revenue of the three casinos operating in the city. Altogether, the casino pay roughly $180 million in gaming taxes to the city, making gaming almost as large source of revenue as property taxes.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.