Caesars Asks Kansas City for Harrah’s Rent Break, Gets Chilly Reception from City Council

Posted on: October 11, 2020, 10:00h. 

Last updated on: October 11, 2020, 12:33h.

Caesars Entertainment is asking the city council of North Kansas City, Mo. for a break on rent for the Harrah’s Hotel & Casino there. But local policymakers aren’t enthusiastic about the idea.

Harrah's Rent
Harrah’s Kansas City North, seen here, is seeking rent abatement. But local lawmakers aren’t keen on the idea. (Image: Kansas City Star)

Julie Sola, general manager of the gaming venue, approached the city council last week, seeking up to $410,000 in rent abatement. Sola cited the financial strain caused by the coronavirus pandemic.

We were closed for 75 days. And clearly that was very, very hard for us,” she said before the council, reports The Kansas City Star. During this time due to closure, we did not have any revenues. Yet we still had a significant amount of expense.”

The financial break the gaming company seeks is related to a land lease. The land on which Harrah’s North Kansas City operates is owned by gaming real estate investment trust (REIT) VICI Properties, but the municipality owns the building on which the hotel/casino resides.

By market share, the casino is the second-largest in the Show-Me State.

Vicious Circle

The debate between Caesars and the North Kansas City city council underscores a scenario gaming companies and the areas in which they operate became all too familiar with during the COVID-19 pandemic.

Casinos need to be open to make money, and municipalities need the gaming venues to be conducting business to generate much-needed tax revenue. Regional properties, including those operated by Caesars, are performing better than those in destination markets such as Las Vegas and New Orleans following nationwide openings. But many of these venues are operating at limited capacity and traffic levels remain below pre-coronavirus levels.

In North Kansas City, the city council appears to be in a bind, because it needs the $410,000 owed by Harrah’s, prompting several members to float the idea of extending rent payments rather than erasing the obligation outright.

Domestic casinos shut down in mid-March. As a result, Harrah’s North Kansas City notched revenue of just $7 million, down from $18 million a year earlier, according to the Star. Like rival properties throughout the country, it generated no revenue in April and May. The Missouri Gaming Commission (MGC) allowed casinos to reopen in early June.

Slippery Slope

Councilman Richard Stewart detailed the bind the city is in with the request from Harrah’s, stating that other businesses affected by the pandemic, such as restaurants, aren’t asking for tax breaks. He added that if the council obliges the gaming operator’s request for rent forgiveness, it would be difficult to explain such a move to other business owners.

Data confirms COVID-19 is weighing on Show-Me State gaming properties. As of August, fiscal 2021 year-to-date admissions to all casinos in the state are lower, including a nine percent decline for Harrah’s.

As of the end of August, adjust gross slot revenue at the Caesars venue is higher by 2.3 percent, making it the only casino in the Kansas City market that can make that claim. But adjusted gross table revenue is lower by eight percent, according to MGC data.