VICI Properties Selling Stock to Fund Venetian Purchase, Reduce Debt

Posted on: September 9, 2021, 07:53h. 

Last updated on: September 9, 2021, 02:54h.

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

VICI Properties (NYSE:VICI) stock is sliding in early trading Thursday after the gaming real estate investment trust (REIT) said it’s selling up to 115 million shares to raise capital.

VICI stock
Caesars Palace owner VICI is selling stock, seen above. The company said proceeds will be used to reduce debt and finance an acquisition. (Image: AP News)

The owner of Caesars Palace revealed the offer late Wednesday, sparking a sell-off in the stock that’s carrying over today. In early trading, shares of the real estate company are off almost three percent. That’s a typical reaction to news of a share sale, because those offerings dilute current investors. Additionally, while VICI didn’t mention pricing for the transaction, secondary equity sales usually occur at prices below market value.

VICI is issuing 50 million shares of stock to underwriters Morgan Stanley, Citigroup, J.P. Morgan, and Goldman Sachs, and that those banks will purchase another 50 million shares through a series of forward sale agreements. The consortium of banks also has a 30-day window in which it can buy another 15 million shares of the casino landlord.

Shares of VICI are up 24.55 percent year-to-date, trailing the MSCI US Investable Market Real Estate 25/50 Index by about 520 basis points.

VICI Raising Cash for Good Causes

Of the initial 100 million shares being sold, VICI is receiving proceeds on half that amount. Assuming a sale price of $30 per share – not far from where the stock currently resides — the REIT would raise $1.5 billion in gross proceeds, and it has good uses for that capital.

VICI expects to use the net proceeds from the sale of shares of our common stock and expected cash proceeds received upon full physical settlement of the forward sale agreements to pay down current indebtedness and for a portion of the purchase price of the previously announced acquisition of the Venetian,” said the company in a statement.

In March, the real estate company partnered with private equity firm Apollo Global Management (NYSE:APO) to acquire Venetian, Palazzo and Sands Expo and Convention Center from Las Vegas Sands (NYSE:LVS) for $6.25 billion. VICI is shelling out $4 billion for the property assets.

At the end of the second quarter, the REIT had $7.07 billion in debt and liabilities of $7.48 billion, according to Dow Jones data.

VICI Stock Still Has Catalysts

While VICI is predictably sagging on news of the share sale, it’s still a catalyst-rich name among real estate equities.

Last month, the gaming landlord said it’s acquiring rival MGM Growth Properties for $17.2 billion in stock. The transaction created the largest owner of Las Vegas Strip casino real estate. VICI is taking on $5.7 billion in MGP debt in that deal. When the acquisition is completed, the buyer will have an enterprise value of $45 billion.

VICI currently owns the property assets of 28 gaming venues with its tenant roster, including Caesars Entertainment, Century Casinos, and Penn National Gaming, among others.