VICI Hungry for Casino Real Estate, Eyes Caesars, Downtown Vegas Assets

Posted on: February 25, 2022, 11:03h. 

Last updated on: February 25, 2022, 01:01h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Fresh off its $4 billion purchase of the real estate of Venetian, Palazzo and Venetian Expo, VICI Properties (NYSE:VICI) is eyeing more gaming property assets.

VICI Properties
Caesars Palace Las Vegas. Owner VICI Properties is looking for more deals on the Strip and in downtown Las Vegas. (Image: CNBC)

The gaming real estate investment trust (REIT) is in the midst of acquiring MGM Growth Properties (NYSE:MGP) for $17.2 billion in equity — a deal that will make the buyer the largest landlord on the Las Vegas Strip.

That transaction, which is slated to close in the first half of this year, will bump VICI’s rental income attributable to Las Vegas to 45% from a third prior to acquisition. Following the purchase, Caesars Entertainment (NASDAQ:CZR) and MGM Resorts International (NYSE:MGM) will be VICI’s largest tenants. But even with that, the REIT isn’t saying “no” to adding to its Strip portfolio.

On a conference call with analysts yesterday discussing the company’s fourth-quarter results, VICI CEO Ed Pitoniak said the REIT will exercise its rights to get the first crack at a Las Vegas property Caesars is planning to sell.

“We will take advantage of the opportunity we have to get that very full first look to see what possible advantages the addition of another asset could have,” he told analysts.

Caesars is looking to divest one of its Sin City venues early this year.

Caesars/VICI Partnership

VICI already owns the real estate of Caesars Palace, and the gaming company hasn’t said which of its other Strip assets it’s looking to sell.

By way of an agreement struck in 2019 when Eldorado Resorts revealed its takeover bid for “old Caesars,” the REIT has rights of first refusal to acquire one of Flamingo Las Vegas, Bally’s Las Vegas, Paris Las Vegas, and Planet Hollywood Resort & Casino. Should Caesars opt to sell another Sin City asset, VICI has rights of first refusal to buy one of the remainder of the first group and The LINQ Hotel & Casino.

Should Caesars opt to sell one of those properties to VICI, it implies a sale-leaseback deal could be in the cards, under which the gaming company would maintain operational control of the venue and pay rent to the REIT.

Based on the prices of recent Strip asset sales, analysts are forecasting Caesars commanding $2 billion to $3 billion in the divestment of one of its Las Vegas properties.

Downtown, Regional Markets, Too

VICI also has its eyes on downtown Las Vegas.

We don’t own any real estate in downtown Las Vegas. If you see how Circa has changed that market and the way people think about that market, (Golden Nugget owner) Tillman (Fertitta) and his team have done a great job there for years,” said President and COO John Payne on the call. “So if there’s an opportunity on real estate in the downtown Las Vegas market, which is a big market.”

Boyd Gaming (NYSE:BYD) is the largest operator in downtown Las Vegas, and the company owns its real estate in that area.

Payne also pointed out that VICI doesn’t own real estate in regional gaming markets such as Colorado, Lake Charles, La., Pittsburgh, Reno, and Rhode Island. That could be a sign the REIT is looking to bolster its regional portfolio at some point in the future.