VICI Properties Inc., an experiential real estate investment trust, has closed on the previously announced acquisition of MGM Growth Properties LLC. Upon completion of the merger, VICI will have an estimated enterprise value of approximately $44 billion.
Simultaneous with the closing of the MGP acquisition, VICI entered into an amended and restated triple-net master lease with MGM Resorts International. The MGM master lease has an initial term of 25 years, with three 10-year tenant renewal options and an initial total annual rent of $860.0 million. Rent under the MGM master lease escalates at a rate of 2.0% per annum for the first 10 years and thereafter at the greater of 2.0% per annum or the annual increase in the consumer price index, subject to a 3.0% cap. Additionally, the company retained MGP’s 50.1% ownership stake in the joint venture between MGP and Blackstone Real Estate Income Trust Inc. (BREIT), which owns the real estate assets of MGM Grand Las Vegas and Mandalay Bay. The BREIT JV lease remained unchanged and provides for current annual base rent of approximately $303.8 million, of which approximately $152.2 million is attributable to VICI’s investment in the BREIT JV, and an initial term of 30 years, with two 10-year tenant renewal options. Rent under the BREIT JV lease escalates at a rate of 2.0% per annum for the first 15 years and thereafter at the greater of 2.0% per annum or the annual increase in CPI, subject to a 3.0% cap. On a combined basis, the MGM master lease and BREIT JV lease will deliver initial attributable annual rent to VICI of approximately $1,012.2 million. The tenant’s obligations under the MGM master lease and BREIT JV lease continue to be guaranteed by MGM.
“The addition of the MGP portfolio, together with the recent closing of our Venetian acquisition, elevates VICI to the top ranks of American four-wall REITs, making VICI a top-5 REIT by EBITDA and a top-10 REIT by enterprise value,” said Edward Pitoniak, CEO, VICI. “We also become the largest owner of hotel and conference real estate in America, within what we believe is the superior transparency and integrity of the Triple Net Lease model. Moreover, among top 10 American four-wall REITs, VICI stands out for the Class A quality of our real estate. The VICI team has accomplished a total of $21 billion in closings in the last two months with the lowest G&A cost structure of any of the top 10 REITS by enterprise value. The productivity of the VICI team is unmatched.”
Bill Hornbuckle, CEO/president, MGM Resorts International, said, “The team at VICI has worked collaboratively with MGM to help us unlock significant value from the underlying real estate of our assets. We look forward to continuing our long-term partnership with VICI.”
John Payne, president/COO, VICI said, “We are excited to grow our portfolio with the acquisition of 15 of the highest quality Las Vegas and regional assets in American gaming, as well as continue to diversify our tenant base with one of the foremost gaming and entertainment companies in the world, MGM Resorts. VICI now owns 10 premier resorts on the Las Vegas Strip, consisting of 1.2 million sq, ft. of gaming space, approximately 40,775 hotel rooms and 5.9 million sq. ft. of meeting and convention space. We continue to believe in the strength of the Las Vegas market, bolstered by a strong post-COVID recovery and robust operator outlook and continued institutionalization of this real estate asset class.”
Morgan Stanley & Co LLC served as lead strategic and financial advisor to VICI Properties on the transaction, while Citigroup Global Markets Inc. also acted as financial advisor and Hogan Lovells US LLP and Kramer Levin Naftalis & Frankel LLP served as legal advisors.