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Harrah's To Split Real Estate, Operations

LAS VEGAS-The casino operator says in a regulatory filing that as part of its acquisition by two private equity firms, it plans to split off its real estate holdings into one or more subsidiaries.

By Brian K. Miller | Updated on February 12, 2007

LAS VEGAS-Harrah’s Entertainment said in a regulatory filing last week that it plans to split its real estate holdings from its operations by the time its acquisition by private-equity firms Apollo and Texas Pacific Group is completed. The transaction is expected to be completed before the end of the year, pending how quickly the buyers can obtain casino licenses from each state in which Harrah’s operates.

Dividing real estate from operations began in the hotel industry a decade ago. For casino operators, the separation is decidedly more complex in part due to their strict regulation. One possible benefit of the division is that owners of the real estate might no longer have to endure the state’s lengthy licensing process because they would not also be operating the casino. If that turned out to be the case, it would allow Harrah’s to sell off its real estate while retaining long-term operating contracts.

Harrah’s initial consideration of splitting real estate from operations occurred during the first quarter of 2006, according to the regulatory filing. The company “met and had various exploratory discussions with representatives of [Texas Pacific Group] regarding the feasibility and potential value of separating the company’s real estate assets and business operations into separate businesses.”

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