The property assets of two gaming establishments in Indiana that are presently owned and run by Caesars Entertainment (NASDAQ: CZR) will not be acquired by VICI Properties (NYSE: VICI).

CEO Edward Pitoniak informed analysts during the company's late-Wednesday second-quarter results conference call that Harrah's Hoosier Park and Horseshoe Indianapolis, formerly known as Indiana Grand, will not be acquired by a real estate investment trust (REIT).

"Our conviction that we can continue to identify and invest in experiential properties that are accretive against multiple quality factors is a key reason that we have decided that we will not be exercising our call right to acquire Harrah’s Hoosier Park and Horseshoe, Indianapolis,” said Pitoniak on the call. “We can and are making this decision because of our confidence and conviction that we are actively identifying and pursuing investment opportunities that enable us to generate future AFFO growth and accretion.”

The call option that VICI has on the two casinos in Indiana is a result of the 2020 merger that produced the "new Caesars." A deal was reached with VICI when Eldorado Resorts launched its $17.3 billion buyout offer for the "old Caesars" in June 2019. Under the terms of the agreement, the gaming business could sell the properties or the REIT could buy them between January 1, 2022, and December 31, 2024.

VICI Seek to Expand Its Tenant Pool

VICI and Caesars have a lengthy history together, having split apart in 2017. The casino operator is currently one of the REIT's biggest customers.

But tenant diversity is crucial in commercial real estate, and Pitoniak said that's one of the reasons VICI passed on Horseshoe Indianapolis and Harrah's Hoosier Park. VICI is the owner of the real estate holdings of eighteen Caesars-run venues, including Caesars Palace on the Las Vegas Strip. When you take into account the REIT's affiliation with MGM Resorts International (NYSE: MGM), those two operators account for a considerable portion of its gaming tenant list.

VICI's decision to turn down the opportunity to purchase Harrah's Hoosier Park and Horseshoe Indianapolis may have been influenced by regional factors. The real estate of Caesars Southern Indiana and Horseshoe Hammond is already owned by the landlord. The Eastern Band of Cherokee Indians runs the former.

“At this time, we believe that we have the opportunity to create greater portfolio value by allocating VICI’s capital to other gaming and nongaming opportunities the team is actively pursuing,” added Pitoniak.

Caesars Is Not Likely to Add Casinos in Indiana to VICI

Caesars obtained the ability to transfer the two Indiana casinos to the REIT in the previously mentioned 2019 deal; but, CEO Tom Reeg of Caesars has repeatedly stated that the gaming firm is not likely to utilize that option, as emphasized by VICI President and COO John Payne on the conference call.

Additionally, Reeg has stated that it would be willing to sell Caesars casinos that it deems to be "non-core," though the business hasn't made it known in the open whether it thinks Harrah's Hoosier Park and Horseshoe Indianapolis meet that criteria.

Caesars said on Thursday that investment firm NSUS Group Inc. would purchase the World Series of Poker (WSOP) for $500 million. The massive casino operator will still be able to hold WSOP tournaments at its land-based casinos in accordance with the conditions of that agreement.