– Acquiring $253 million of Rent at an
Attractive 7.9% Capitalization Rate –
– Transaction Expected to be Immediately
Accretive at Closing –
– Refuels Embedded Growth Pipeline and
Strengthens Existing Lease Terms–
VICI Properties Inc. (NYSE: VICI) (“VICI Properties” or the
“Company”), an experiential real estate investment trust, today
announced it has entered into a definitive agreement (the “Master
Transaction Agreement”) with Eldorado Resorts, Inc. (NASDAQ: ERI)
(“Eldorado”) in connection with Eldorado’s proposed business
combination with Caesars Entertainment Corporation (NASDAQ: CZR)
(“Caesars”). Per the terms of the Master Transaction Agreement,
VICI Properties will acquire the land and real estate assets
associated with Harrah’s New Orleans, Harrah’s Laughlin, and
Harrah’s Atlantic City and modify certain provisions of the
existing Caesars lease agreements for total consideration of
approximately $3.2 billion in cash. These transactions will result
in aggregate incremental annual rent of $252.5 million, for an
implied capitalization rate of 7.9%. Eldorado will use the proceeds
to partially finance its combination with Caesars, which will
create one of the world’s leading and preeminent casino and
entertainment companies. A summary of the key transactions
contemplated by the Master Transaction Agreement are as
follows:
- VICI Properties will acquire all of the land and real estate
assets associated with Harrah’s New Orleans, Harrah’s Laughlin, and
Harrah’s Atlantic City (collectively, the “Properties”) for an
aggregate purchase price of approximately $1.8 billion.
Simultaneous with the closing of the acquisition of each Property,
each applicable Property will be added to the Non-CPLV Master Lease
Agreement. The Non-CPLV annual rent will increase at closing of the
Property acquisitions by $154.0 million, for an implied
capitalization rate of 8.5%;
- In consideration of approximately $1.190 billion and $214.0
million, the rent under the CPLV Lease Agreement and the HLV Lease
Agreement will increase by $83.5 million and $15.0 million,
respectively. The CPLV Lease Agreement and HLV Lease Agreement will
be amended and combined into a single master lease agreement (the
“Las Vegas Master Lease”). The Las Vegas Master Lease will operate
under the existing CPLV Lease Agreement terms, subject to the
additional lease modifications described below;
- All rent coverage floors under the existing Caesars leases (as
amended to reflect the inclusion of the Properties into the
Non-CPLV Master Lease Agreement and the creation of the Las Vegas
Master Lease) will be eliminated;
- All existing Caesars leases will be modified to reflect a
uniform parent guarantee from the newly combined entity;
- All existing Caesars leases will be extended such that, upon
the closing of the merger, a full 15-year initial lease term will
remain prior to expiration of the initial lease term;
- VICI Properties and Eldorado will enter into a put-call
agreement, whereby the Company has a call right to acquire, and
Eldorado has a put right to require that the Company acquire, the
land and real estate assets associated with Harrah’s Hoosier Park
and Indiana Grand (together, the “Centaur Assets”). The purchase
price related to the put option from Eldorado would be an 8.0%
capitalization rate (or 12.5x the initial annual rent). The
purchase price related to the call option would be a 7.7%
capitalization rate (or 13.0x the initial annual rent). The initial
annual rent for the Centaur Assets would be the amount that causes
the ratio of EBITDAR of the property to the initial property lease
rent to equal 1.3x. The put-call agreement may be exercised by
either party between January 1, 2022 and December 31, 2024;
- VICI Properties will be granted rights of first refusal for
whole asset sale or sale-leaseback transactions on two Las Vegas
Strip properties, and a right of first refusal for a sale-leaseback
transaction on Horseshoe Casino Baltimore. The first Las Vegas
property will be selected among the following: Flamingo Las Vegas,
Bally’s Las Vegas, Paris Las Vegas and Planet Hollywood Resort
& Casino, with the second property to be one of the previous
four plus the LINQ Hotel & Casino.
Ed Pitoniak, Chief Executive Officer of VICI Properties, said,
“Upon closing, this transformative transaction will deliver
significant and immediate value to our shareholders, along with
replenishing our pipeline of growth opportunities for years to
come. Most fundamentally, we are buying high-quality real estate at
a very attractive cap rate, yielding our shareholders immediate
accretion at closing. We are significantly enhancing the quality,
security and term of our leases with our main tenant. Longer term,
we are restocking a pipeline of growth opportunities that will
allow us to continue to grow well into the future. We are doing all
this with a great new partner in Eldorado. We took a holistic,
partnership approach with Eldorado to building the strongest
combination of operating and real estate excellence in American
gaming. The reason we believe in the transformative nature of this
transaction is quite simple – it will increase the value of our
real estate now and over the long term.”
Tom Reeg, Chief Executive Officer of Eldorado, said, “In
partnering with VICI Properties, we can unlock embedded real estate
value allowing both companies to advance their respective growth
strategies. As we considered pursuing this strategic and
transformative transaction, we were delighted to establish this
important and meaningful partnership with VICI as it will be a
critical factor in our ability to drive near- and long-term value
from the proposed extraordinary combination with Caesars
Entertainment.”
John Payne, President and Chief Operating Officer of VICI
Properties, said, “Eldorado has a long history as a preeminent
operator of U.S. gaming assets. Beyond that, they also have a
proven track record that is unmatched in the industry today in
integrating and improving results at acquired properties. We
believe their vision and approach combined with the strengths of
the Caesars platform, including the Caesars Rewards loyalty
program, will bring a paradigm shift to the combined company,
dramatically improving the long-term outlook of our largest tenant.
The new company, to be known as Caesars, will be the largest
domestic gaming operator in America, with an unrivaled national
footprint, with what we believe is by far the best hub and spoke
system in American gaming, and the best opportunity to capitalize
on the popularization of sports betting.”
The foregoing transactions are subject to the closing of the
Eldorado/Caesars combination, and such transactions and the
Eldorado/Caesars combination are both subject to regulatory
approvals and customary closing conditions. Eldorado has publicly
disclosed that it expects the merger to close in the first half of
2020.
The VICI transactions described above are expected to be
accretive immediately upon closing and the Company intends to fund
the transactions through a combination of cash on hand, equity and
long-term debt financing.
In addition to this release, the Company has furnished a
Transaction Overview presentation, which is available on our
website in the "Investors" section, under the menu heading "Events
& Presentations."
Deutsche Bank Securities Inc. is acting as financial advisor,
Stifel provided a fairness opinion and Kramer Levin Naftalis &
Frankel LLP and Hogan Lovells US LLP are acting as legal advisors
to VICI Properties in connection with the transaction. VICI
Properties has obtained committed financing, subject to customary
conditions, from Deutsche Bank AG.
About VICI Properties
VICI Properties is an experiential real estate investment trust
that owns one of the largest portfolios of market-leading gaming,
hospitality and entertainment destinations, including the
world-renowned Caesars Palace. VICI Properties’ national,
geographically diverse portfolio consists of 23 gaming facilities
comprising over 40 million square feet and features approximately
15,200 hotel rooms and more than 150 restaurants, bars and
nightclubs. Its properties are leased to industry leading gaming
and hospitality operators, including Caesars Entertainment
Corporation and Penn National Gaming, Inc. VICI Properties also
owns four championship golf courses and 34 acres of undeveloped
land adjacent to the Las Vegas Strip. VICI Properties’ strategy is
to create the nation’s highest quality and most productive
experiential real estate portfolio. For additional information,
please visit www.viciproperties.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. You can identify these
statements by our use of the words “assumes,” “believes,”
“estimates,” “expects,” “guidance,” “intends,” “plans,” “projects,”
and similar expressions that do not relate to historical matters.
All statements other than statements of historical fact are
forward-looking statements. You should exercise caution in
interpreting and relying on forward-looking statements because they
involve known and unknown risks, uncertainties, and other factors
which are, in some cases, beyond the Company’s control and could
materially affect actual results, performance, or achievements.
Among those risks, uncertainties and other factors are risks that
the Eldorado/Caesars strategic combination may not be consummated
in timeframe described herein, or at all; risks that the
acquisition of the Properties may not be consummated on the terms
or timeframe described herein, or at all; risks that the lease
amendments and modifications may not be consummated on the terms or
timeframe described herein, or at all; the ability of the parties
to satisfy the conditions set forth in the definitive transaction
documents, including the ability to receive, or delays in
obtaining, the regulatory approvals required to consummate the
transactions; the terms on which the Company intends to finance the
transaction, including the source of funds used to finance such
transaction; disruptions to the real property and operations of the
Properties during the pendency of the closing; and risks that the
Company may not achieve the benefits contemplated by the
transactions (including any expected accretion or the amount of any
future rent payments). Important factors that may affect the
Company’s business, results of operations and financial position
are detailed from time to time in the Company’s filings with the
Securities and Exchange Commission. The Company does not undertake
any obligation to update or revise any forward-looking statement,
whether as a result of new information, future events, or
otherwise, except as may be required by applicable law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190624005280/en/
Investor Contacts: Investors@viciproperties.com (646) 949-4631 Or
David Kieske EVP, Chief Financial Officer DKieske@viciproperties.com
Danny Valoy Vice President, Finance DValoy@viciproperties.com
Media Contacts: PR@viciproperties.com (646) 949-4631 Or ICR Phil Denning and Jason
Chudoba Phil.Denning@icrinc.com, (646) 277-1258
Jason.Chudoba@icrinc.com, (646) 277-1249
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