After hearing the operators of CityCenter sold two acres on the Las Vegas Strip for $80 million – $40 million an acre – VICI Properties President John Payne said he wanted to dash off a thank-you note to the parties involved in the deal.
VICI, a real estate investment trust, owns 27 acres of undeveloped land behind Bally’s Las Vegas, Paris Las Vegas, and Planet Hollywood, and is still interested in acquiring 23 undeveloped acres of land behind Harrah’s Las Vegas, the Linq Resort, and Flamingo Las Vegas from Caesars Entertainment.
“I’m not sure if we’re going to be buyers or sellers,” Payne said Friday during the company’s first-quarter conference call. “We continue to look for opportunities.”
CityCenter, which is a 50-50 joint venture between MGM Resorts International and Dubai World, said it was selling the two acres within the 76-acre Strip complex to two developers who plan to build a multi-level retail complex comprising specialty retail offerings, and casual and fine dining locations.
It was the value of the deal that caught the attention of VICI, which also owns the Strip land underneath Caesars Palace and Harrah’s Las Vegas. The CityCenter deal far above the more than $33 million an acre an Israeli development group paid billionaire Phil Ruffin for the 36-acre site of the since-demolished New Frontier 2007.
New York-based VICI acted on an opportunity in March in agreeing to acquire 63 acres on the Las Vegas Strip from Las Vegas Sands that encompass the Venetian, Palazzo, Sands Expo, and additional land associated with the MSG Sphere development. VICI is paying $4 billion for the site while Apollo Global Management is $2.25 billion to operate the properties.
VICI CEO Edward Pitoniak pointed out that Strip land, whether used for gaming or non-gaming, shows the value of the market. Apollo will pay rent of $250 million a year under a 30-year lease.
“We are very pleased with recent reporting on the continuing resurgence in visitation and spending within gaming jurisdictions across the U.S.,” Pitoniak said. “We believe U.S. gaming, after showing its resilience as a consumer leisure sector throughout the worst periods of the COVID-19 pandemic, will demonstrate continuing leadership as America fully reopens from the crisis.”
VICI currently owns 28 gaming properties in 12 states, with its regional casinos outside of Las Vegas providing 69% of the company’s overall rent revenues. Apollo will become VICI’s sixth casino operations tenant, joining Caesars Entertainment, Century Casinos, Hard Rock Gaming, Penn National Gaming, and Jack Entertainment.
In the quarter that ended March 31, VICI said its net revenues grew 46.8% to $374.3 million, with net income of $269.8 million reversing a net loss of $24 million last year. VICI’s adjusted funds from operations (AFFO), a key REIT metric, increased 41.7% to $255 million.
Pitoniak told investors that VICI had the highest AFFO percentage increase in 2020 of any triple-net REIT in the U.S. He said the company posted a 23.7% growth in AFFO per share in the quarter.
During the quarter VICI raised $2 billion through a stock sale that will help pay for the deal with Las Vegas Sands, which is expected to close by the end of the year. In addition, Las Vegas Sands has agreed to a $1.2 billion seller financing deal with Apollo that is designed to guarantee the tenant’s rent obligations through 2023.
Pitpniak said there hasn’t been any discussion on any additional management deals with Apollo.
VICI’s reliance on Caesars Entertainment – its largest tenant with more than 20 gaming properties – will be reduced from 83% of all rent to 70% once the Sands deal closes.
Deutsche Bank gaming analyst Carlo Santarelli, in looking at all three gaming REITs – VICI, MGM Growth Properties, and Gaming and Leisure Properties, said the is growth in the sector, with a “slew of brick & mortar expansion opportunities” in Illinois, Virginia, and, potentially, Nebraska and
Alabama. He said those states represent future potential partnerships for the REITs.
“We continue to see the gaming triple-net REIT space as attractive, on a relative basis within the triple net space, a yield basis relative to US equity market yields, and relative to operator trading levels,” Santarelli told investors.
Shares of VICI, traded on the New York Stock Exchange, closed at $31.70 on Friday, down 6 cents or 0.19%.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
