VICI Properties Pumps Brakes on Caesars Strip Real Estate Purchase
Posted on: October 30, 2020, 01:45h.
Last updated on: October 30, 2020, 03:05h.
VICI Properties (NYSE:VICI) is halting a $103.5 million transaction in which it was to acquire 23 acres of undeveloped land on the Las Vegas Strip from Caesars Entertainment (NASDAQ:CZR). But it’s possible the deal will be revisited in the future.
In June, the gaming real estate investment trust (REIT) and the company reached an agreement whereby the landlord would purchase the unused land near Caesars Forum for $4.5 million an acre. In a separate transaction, VICI provided Eldorado with a five-year, $400 million mortgage on the Caesars Forum Convention Center at Caesars Palace. Cash from those pacts was to be used to help finalize the acquisition forming the largest US gaming company by the number of venues.
Various permitting issues arose, creating roadblocks to getting the land purchase finalized.
What we discovered is that there are various, if you will, entitlement and permitting issues surrounding that land that especially relate to Caesars’ parking obligations,” said VICI CEO Ed Pitoniak on the company’s earnings conference call. “And it was not going to be easy to unwind those quickly.”
One of three publicly traded gaming REITs in the US owns the property of Caesars Palace on the Strip and nearly 30 other casino properties across the country.
In its current form, “new Caesars” is still just months removed from finalizing a $17.3 billion marriage bringing together more than 50 venues, tens of thousands of employees, and more than 65 million loyalty members under one umbrella.
As such, the operator has a lot on its plate, including asset sales, an effort to win approval for a new venue in Virginia, and the all-important quest of realizing at least $500 million in cost savings that were promised before the merger. That’s a full “to-do” list, and one likely standing in the way of the aforementioned Strip land sale.
“And given the magnitude of activity that Caesars is currently engaged in, in terms of integrating after the merger and undertaking the various activities, we agreed that it was best for both of us,” said VICI’s Pitoniak.
The REIT chief executive added it’s best to simply set the deal aside for now and perhaps give it another look “when the dust has settled a bit, post-merger.”
Although it owns the real estate of Caesars Palace, the Strip accounts for just 31 percent of VICI’s rental income, with the other 69 percent from regional venues, according to company data.
The REIT, however, remains interested in Las Vegas, which could be the appropriate view to take at a time when there’s plenty for sale in the region.
“Would we do a transaction here in the short-term? I think the operators are more likely to get some more of the operations under their belt after COVID and better understand what the true run rate of earnings before interest, taxes, depreciation and amortization (EBITDA) is going to be,” said CFO John Payne. “But if you’re asking do we still believe in Las Vegas, I think the answer is a resounding yes.”
Related News Articles
Related News Articles
September 30, 2021 — 7 Comments—
October 4, 2021 — 6 Comments—
October 7, 2021 — 5 Comments—
September 18, 2021 — 4 Comments—