LAS VEGAS—VICI Properties Inc. recently revealed that it has entered into a definitive agreement with an affiliate of Caesars Entertainment Corp. to acquire and lease back the land and real property improvements associated with the iconic Harrah's Las Vegas Hotel and Casino, located in Las Vegas.

The deal is valued at approximately $1.14 billion. Simultaneously, VICI Properties entered into a definitive agreement with Caesars to sell approximately 18.4 acres of undeveloped land located behind the LINQ Hotel & Casino and Harrah's Las Vegas for $73.6 million.

According to a release, the transactions are conditional on each other and are expected to be immediately accretive for VICI Properties.

Harrah's Las Vegas is a marquee property centrally located on the Las Vegas Strip, the release says. The property comprises 4.1 million square feet and contains 90,600 square feet of casino space and 2,530 hotel rooms. The property features a Mardi Gras and carnival theme, with 16 restaurants and bars, retail shopping, spa services, a parking garage, and 24,000 square feet of meeting space.

After closing, a subsidiary of Caesars will lease from VICI Properties the real estate associated with Harrah's Las Vegas under a 15-year triple-net lease agreement that will have four subsequent five-year renewal periods at the tenant's option. The tenant's obligations under the Harrah's Las Vegas lease would be guaranteed by Caesars Resort Collection LLC.

For the twelve month period ended September 30, 2017, Harrah's Las Vegas' unaudited property EBITDA was $132 million and the tenant's initial annual lease payment will be $87.4 million in the first year after the close, with contractual annual increases thereafter. Given the triple-net lease structure and the capital expenditure requirements of the tenant (which include a minimum of $171 million to be spent from 2017 to 2021), combined with VICI Properties not having to incur any incremental property management fees, substantially all of the lease payment is expected to represent the Company's annual Net Operating Income from the property, the release states.

The approximate 18.4 acres of undeveloped land is located adjacent to Harrah's Las Vegas behind the LINQ Hotel & Casino and is part of the approximately 46 acres of undeveloped land on the east side of Las Vegas Boulevard that is owned by VICI Properties. It is expected that Caesars will use the 18.4 acres together with certain other land to construct a convention center adjacent to Harrah's Las Vegas.

Ed Pitoniak, Chief Executive Officer of VICI Properties, says in the statement that “These transactions illustrate the growth potential provided by our partnership with Caesars. By acquiring the Harrah's Las Vegas real estate, we improve our portfolio with an iconic Las Vegas center strip asset at a very attractive cap rate on in-place NOI, while also increasing our overall portfolio exposure to Las Vegas. Caesars has done a great job investing in and operating the property, and we are excited about their vision for the property's continuing growth and improvement. We are also monetizing a portion of our Las Vegas undeveloped land portfolio in a way that potentially enables us to add high-value rent income in the future. Once the financing of these transactions is executed, we will be in a position to demonstrate the net effect on our leverage, accretion and overall cost of capital.”

Also as part of the transactions, VICI Properties and Caesars will enter into a put/call agreement at closing that would be exercisable at a specified time after the opening of the planned convention center, providing the Company a potential opportunity for future NOI growth. Additional information regarding the put/call agreement, among other things, will be set forth in the Form 8-K filed with the Securities and Exchange Commission.

The transactions are subject to closing conditions and are currently expected to close in December 2017.

VICI Properties has secured debt financing commitments from Goldman Sachs Bank USA and Morgan Stanley Senior Funding, Inc., subject to customary conditions. The Company also may pursue certain equity and debt financing transactions to enhance its cost of capital in connection with, or separate from, such financing.

Stifel is acting as Lead Strategic Advisor, Millstein & Co., Goldman Sachs & Co. LLC, and Morgan Stanley & Co. LLC are acting as financial advisors, Kramer Levin Naftalis & Frankel LLP is acting as legal advisor and ICR, LLC is acting as communications advisor, to VICI Properties for the transactions described herein.

GlobeSt.com will follow this story and post as we learn more.

According to a release, the transactions are conditional on each other and are expected to be immediately accretive for VICI Properties.

The transactions are subject to closing conditions and are currently expected to close in December 2017.

GlobeSt.com will follow this story and post as we learn more.

Instant Insights /

VICI Properties To Pay $1.14B for Assets of Harrah's Las Vegas

Related Stories

Recommended For You