Rio Owner Dreamscape Lands $850M in Financing, Eyes More Casino Deals

Posted on: February 15, 2023, 03:05h. 

Last updated on: February 15, 2023, 04:14h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Dreamscape Companies, which owns the property assets of the Rio Hotel & Casino Las Vegas, has raised $850 million in capital. That paves the way for the real estate developer to broaden its footprint in the gaming industry.

Dreamscape
The Rio Hotel & Casino Las Vegas, seen from above. Owner Dreamscape raised capital to enhance the venue. (Image: Points Miles & Martinis)

The New York-based real estate firm said the cash will be used to create Dreamscape Entertainment Properties, Inc. and Dreamscape Entertainment Integrated Resorts, Inc. The former will be an experiential real estate investment trust (REIT) owning gaming, hospitality, and entertainment assets, while the latter will be an operator of such venues.

These new, independent Dreamscape platforms will focus on investing and operating in strategically located, high-barrier-to-entry markets with asymmetric growth potential,” according to a statement.

Dreamscape didn’t mention specific markets, but Las Vegas fits the bill as “high-barrier-to-entry.” With an established footprint and reputation in New York, Dreamscape could also be a player in that city’s nascent casino-gaming industry. Still, the company didn’t mention that as a possibility.

Rio Renovations Are Coming

Dreamscape is the owner of the property assets of the Rio. Caesars Entertainment (NASDAQ: CZR) continues to operate the venue following a $516.3 million sale-leaseback deal struck between the two companies in December 2019.

The real estate developer said a portion of the $850 million raised will be directed to refurbishing the Rio, which is more than three decades old. Such an effort is needed because visitors aren’t overly enthusiastic about the venue. Rio’s average score on Priceline and Zen Hotels is 6.7 out of 10, and its rating on Google Reviews is 3.9 stars out of a possible five.

“With the intent to preserve the property’s bones and honor its legacy, Dreamscape will use the financing to reimagine the two-tower structure, restoring it into a premiere resort and casino experience with modernized amenities and an array of offerings that speak to today’s gaming and hospitality consumer. The property will remain open throughout the renovation, with the company slated to officially take over and manage operations at the resort in 2023,” according to the statement.

What’s interesting about Dreamscape shoring up the Rio is that such a move isn’t a standard operating procedure in gaming industry sale-leasebacks. Typically, the operator of the venue — not the landlord — is responsible for enhancements, maintenance, and upkeep.

Dreamscape Entering Competitive Field

Dreamscape Entertainment Properties, the planned experiential REIT, is entering an ultra-competitive — though small field — in the gaming space. Currently, there are just two dedicated casino landlords – Gaming and Leisure Properties (NASDAQ: GLPI) and VICI Properties (NYSE: VICI).

Still, there’s room for more competition in the space. For example, last year, Wynn Resorts (NASDAQ: WYNN) sold the property assets of Encore Boston Harbor to Realty Income (NYSE: O), which previously wasn’t engaged in casino real estate. Additionally, the battle for a New York City casino permit includes multiple REITs that previously weren’t major players in the gaming arena.

The potentially good news for Dreamscape Entertainment Properties is that casino sale-leasebacks are increasing in frequency. There’s still a massive amount of gaming real estate currently owned by operators that could be sold as those companies looking to raise capital.