Real estate investment trust VICI Properties has provided a five-year $400 million mortgage loan to Caesars Entertainment that is secured by the Caesars Forum Convention Center on the Strip.
The deal, which was originally announced in June, is for a five-year loan at 7.7%, and is pre-payable in year three, VICI said in a filing with the Securities and Exchange Commission last Friday. VICI said it funded the mortgage loan with cash on hand.
The 500,000 square-foot Caesars Forum is behind the Linq Promenade and High Roller Observation Wheel. Caesars Entertainment built the project for $375 million.
In the same statement, VICI said the REIT and Caesars will “continue to evaluate” a second deal in which VICI will pay $103.5 million to acquire 23 acres of undeveloped land parcels adjacent to the Caesars Forum and behind Harrah’s Las Vegas, Linq Resort, and Flamingo Las Vegas. The transaction has an average price of $4.5 million per acre.
Both deals were announced ahead of Eldorado Resorts completing its $17.3 billion merger with Caesars. Eldorado, the acquiring company, made the deal with VICI in an effort to strengthen the combined companies’ balance sheet following the merger, which was finalized on July 20. Eldorado management remained in control of the combined operation, which took on the Caesars’ name.
The 23-acre land acquisition, when paired with an additional 27 acres of undeveloped land behind Bally’s Las Vegas, Paris Las Vegas, and Planet Hollywood that VICI already owns, gives the REIT a clean 50-acre slate for potential development.
At the end of July, VICI CEO Ed Pitoniak told analysts the 50 acres covers “the only large-scale opportunity to deepen the Las Vegas Strip at its center and to participate in the potential for long-term growth that this land represents.”
In Friday’s announcement, VICI said the mortgage loan is no longer dependent on the potential sale by Caesars.
“We see this as a way of capitalizing on what we still very strongly believe to be the long-term growth of Las Vegas,” Pitoniak said on VICI’s second-quarter earnings conference call in July. “We see that land as giving us a chance to participate, not only in the growth of Las Vegas tourism but in the growth of Las Vegas as a place where people choose to work and live as well as to play.”
VICI was a factor early in the Eldorado-Caesars merger. The REIT paid $1.8 billion to acquire three Harrah’s branded casinos in Atlantic City, New Orleans, and Laughlin, Nevada, and is leasing the resorts’ operations back to the new combined Caesars for $154 million in total annual rent.
Prior to the Eldorado-Caesars merger, VICI owned the land and buildings associated with Caesars Palace and Harrah’s Las Vegas, two center-Strip landmarks.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
