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Rio Las Vegas Lands $176.5 Million CPACE Loan

There was some discussion regarding the Rio Hotel & Casino's financial stability after Dreamscape Companies, the venue's operator, obtained a $176.5 million Commercial Property Assessed Clean Energy (CPACE) loan from Peachtree Group.

The transaction, which was organized in less than two months, is the biggest CPACE fundraising in US history and the largest in Peachtree's history.  Because it enables Dreamscape to settle a senior term debt, the financing is retroactive.  According to the lender, Dreamscape benefited by "allowing 100% of the proceeds to be reimbursed for completed project costs" by using CPACE financing for the Rio.

"This deal highlights an inflection point for CPACE, with some of the nation’s largest financial institutions consenting to its use because they see the clear benefit to the capital stack,” said Jared Schlosser, head of originations and CPACE for Peachtree. “By closing quickly on a marquee hospitality asset, we were able to strengthen the position of both the owner and its lenders.”

At the end of 2024, Rio, an off-Strip casino hotel, completed a $340 million refurbishment.  The casino floor and convention area were spruced up, new restaurants were added, and the rooms in the Ipanema Tower were improved.

Dreamscape Has Significantly Improved  Rio Investments

The Rio's real estate holdings belong to Dreamscape.  Before the two businesses reached a $516.3 million sale-leaseback agreement in December 2019, Caesars Entertainment (NASDAQ: CZR) ran the arena.

The New York-based real estate company reported in February 2023 that it had raised $850 million, with some of that money going toward strengthening the Rio.  Dreamscape made a significant investment in a property that had been struggling for years prior to the 2019 sale.

Rio has made some improvements, including as updating its gaming rewards program and joining the World of Hyatt guest loyalty program, however there have been concerns raised over the venue's financial stability.

“Rio (owned by Dreamscape) is rumored to be in talks with lenders—sounds like haircut time or possible sale. NBA arena deal falling through with Oak View was a major blow,” said Vital Vegas in an August 16 tweet.

Rio is currently on a hiring freeze and hasn't renovated its other hotel tower, according to social media discussion.

The CPACE Market Is Growing

It's unclear how the loans would affect the gaming sector, but statistics show that demand for CPACE financing is rising.  According to the C-PACE Alliance, these financings have exceeded $10 billion in the last ten years, and as more seasoned lenders and investors adopt this lending model, growth is anticipated.

“Peachtree is one of the most active CPACE lenders in the country, with more than $1.5 billion in originations. The firm’s credit platform spans CPACE, bridge, mezzanine, and construction lending, providing creative capital solutions across market cycles,” according to the Atlanta-based firm.