Dan Gilbert, who owns the three Jack Casinos in Ohio and one casino in Detroit, is reportedly mulling selling them, possibly so he can acquire a baseball club, which casinos owners are prevented from owning. According to some estimates, he could make as much as $2.7 billion if he sells.
Gilbert led the campaign nine years ago that amended the Buckeye constitution and made possible the four Las Vegas-style casinos that now operate in the state’s four largest cities. It was risky and very expensive: Gilbert and Penn National Gaming together spent $47 million, but the campaign was successful.
He was able to profit from that investment when he and his partners developed two of the casinos.
The founder of Quicken Loans Inc. now could be ready to reap the rewards of that gaming investment, while buying a baseball team to add to the NBA team, the Cleveland Cavaliers, he already owns. Bloomberg reported recently that his company, Jack Entertainment, has retained Deutsche Bank and Credit Suisse to help him with a possible sale.
Besides the Ohio casinos, Jack Entertainment also owns Greektown Casino-Hotel in Detroit. The 56-year-old Gilbert is also a partner at Turfway Park in Florence, Kentucky, and Horseshoe Casino in Baltimore, Maryland.
Jack Entertainment has so far declined to comment to any inquiries.
When Gilbert was the prime mover in the 2009 campaign to amend the state constitution to allow casino gaming, voters had turned down similar proposals in 1990, 1996, 2006 and 2008. Part of his successful strategy was to sell downtown casinos as a way to boost the economy of financially depressed cities.
The casinos that Gilbert and other investors built generated about half the profits that were originally projected, partially because few foresaw that the state’s seven racetracks would become serious competitors when they were allowed to add video lottery terminals and become, in essence slot parlors.
But Gilbert has made a lot of money on his investment, about $3.1 billion in gross gaming revenue so far. Gilbert’s first, and the state’s first casino, in Cleveland, which opened in 2013, has so far generated $1.4 billion after paying out winnings. The next to open, in Cincinnati, in 2013, has made $1.1 billion so far. Jack Thistledown (one of the racinos) has raked in $632 million since its 2013 opening.
That’s not pure profit for Gilbert, since the state collected more than $1 billion in taxes from the $3.1 billion—and of course he has to pay thousands of employees. The exact figures are unknown because Jack Entertainment is privately owned. However, David Schwartz, director of the Center for Gaming Research at the University of Nevada at Las Vegas told the Cleveland Plain Dealer, “These casinos have expenses that equal nearly half of their gross gaming revenues with payroll and complimentaries being the biggest expenses. If promotional costs get too high, these casinos can become unprofitable fairly quickly.”
The cost to build and equip the three casinos is about $1 billion according to research of public records and announcements by Gilbert’s company.
Despite being profitable, the Jack casinos are not the highest grossing in the state. They rank third and fourth. That’s true in spite of Jack’s efforts to attract a younger demographic with things like electronic table game arenas.
Initially Gilbert partnered with Caesars, but he bought out the 20 percent Caesars owned in 2015, at which time he branded his casinos under the Jack name (It was previously known as Rock Gaming.) Caesars is considered a very possible buyer for Gilbert’s gaming interests since it is familiar with the Ohio casinos it once managed (and is still partners with him at the Baltimore Horseshoe casino).
Another way Gilbert could make a tidy sum, and keep his casinos, is to sell the property on which the casinos operate. According to gaming industry analyst Chad Beynon, who was contacted by WCPO in Cincinnati, Gilbert could profit by $1.5 billion by selling the real estate. Real estate investment trusts are increasingly a big part of the gaming industry, including Vici Properties, a spinoff of Caesars Entertainment, which owns many of that company’s properties. Caesars recently acquired two Indiana racinos for $1.7 billion, which will be owned by Vici.
The MGM spinoff REIT, MGM Growth Properties, recently bought the Hard Rock Rocksino Northfield Park, a close neighbor of the Cleveland casino, for $1.06 billion
The Ohio Casino Control Commission said it has not heard about any sale, but a spokesman commented, “Should any of Ohio’s casinos be sold in the future, once an agreement in principal has been reached the affected company will appear before the commission at a public meeting to provide an update. Given the nature of the discussions, however, most of that update will likely take place in an executive session.”
Banyon said Gilbert’s properties are very attractive for Las Vegas-based companies: “Ohio and Michigan are attractive markets,” he said. “There is not additional competition in the near term. They’re very stable or growth markets and they don’t really have any destination property to send your best guest.”
He added, “Ohio’s had one of the best gaming growth rates in the country over the past couple years. It still looks like it’s a growing market, certainly not mature.”
Besides Caesars, other possible buyers include Boyd Gaming, Eldorado Resorts or Churchill Downs Inc.
There is considerable speculation that Gilbert may want to divest himself of his gaming interests so that he could purchase a ballclub such as the Detroit Tigers. Unlike the NBA, Major League Baseball does not allow owners to have any interest in gaming.
However the Tigers may not be for sale. At least that’s the current position of the owners, the Ilitch family who are building the $2.1 billion District Detroit project around Little Caesars Arena, where the Tigers play home games. When asked about the team they confirmed their commitment to “long-term ownership.”
The family owns the Little Caesars pizza chain and bought the Tigers in 1992 for $85 million. The family has reaffirmed over the years its interest in keeping the team, although they sometimes show more interested in their hockey team, the Detroit Red Wings, which is technically owned by family matriarch Marian Illitch, who also owns Motor City Casino in Detroit. Forbes recently valued the Tigers at $1.225 billion, although the team lost $46 million last year, although the family has heavily leveraged the team as collateral for various business ventures.
Gilbert’s net worth has been calculated at $7.6 billion by Forbes. In 2004 he unsuccessfully bid on the Milwaukee Brewers.
