VICI Properties Completes First Family Entertainment Sale-Leaseback

VICI Properties, a 2017 spin-off from Caesars Entertainment and an S&P 500 REIT that holds major gaming, hospitality, and entertainment destinations, including several Las Vegas Strip properties announced its first family entertainment sale-leaseback.

VICI acquired 38 bowling centers across 17 states — 11 of them new to VICI — from Bowlero Corp. in a $432.9 million sale leaseback. Bowlero is the largest operator of North American bowling centers, according to the company.

“The lease will have an initial total annual rent of $31.6 million, representing an acquisition cap rate of 7.3%, and an initial term of 25 years, with six 5-year tenant renewal options,” the company announced.

In addition, VICI has a right to first offer to acquire current or future Bowlero real estate properties should the latter decide on a sale-leaseback arrangement.

VICI pointed to various strategic merits of the arrangement: • The Bowlero model currently meets VICI investment criteria, including lower than average cyclicality, low secular threat, proven durability, and favorable supply/demand dynamics. VICI says that Bowlero is a best-in-class, growth-minded experiential operator with a demonstrated track record. • Guaranteeing the arrangement is publicly traded Bowlero, which has 350 operating centers attracting nearly 30 million guests a year. • The deal expands VICI’s operations to 11 new states, seven of which don’t currently have commercial casino gaming operations, and so opening doors for potential expansion. Based on annualized rents of October 1, 2023, the Bowlero properties will be 1% of VICI’s rent roll. • The right to future sale-leasebacks provides a promise of future potential growth and the current properties are expected by VICI to immediately increase adjusted funds from operators.

At the same time, a sale-leaseback potentially offers advantages to the property seller. Typically, it can act as a form of financing, achieving a higher value per property than might otherwise be available through a mortgage or refinancing. With the near future unknown in terms of valuations, the deal gives Bowlero greater certainty while it still maintains control of the majority of its operating centers.

“At VICI, we seek to invest in non-commodity real estate centered on experiences benefiting from long-term secular tailwinds, and Bowlero’s track record of growth and innovation in a resilient experiential sector aligns well with our investment framework,” John Payne, President & COO of VICI Properties, said in prepared remarks.