VICI to Provide up to $700M for Venetian Las Vegas Enhancements

Posted on: May 1, 2024, 05:32h. 

Last updated on: May 2, 2024, 09:43h.

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

VICI Properties (NYSE: VICI) said late Wednesday it will provide up to $700 million in financing for enhancements at the Venetian Resort Las Vegas.

Venetian remodel
The Venetian Las Vegas. Owner VICI Properties is providing financing to enhance the venue. (Image: Vegas Means Business)

That capital will be provided through VICI’s Partner Property Growth Fund strategy and was announced on the day of Venetian’s 25th birthday. Operator Apollo Global Management (NYSE: APO) touted the occasion by noting it’s spent $1.5 billion sprucing up the Las Vegas Strip integrated resort.

VICI has agreed to provide up to $700 million of financing through the Venetian Capital Investment, comprised of $400 million to be drawn in 2024 and an incremental $300 million that The Venetian Resort will have the option, but not the obligation, to draw in whole or in part until November 1, 2026,” according to a statement issued by the New York-based real estate investment trust (REIT). “The initial $400 million investment will be funded in three quarterly draws based on a fixed funding schedule: $100 million in Q2 2024, $150 million in Q3 2024 and $150 million in Q4 2024.”

VICI is the largest owner of gaming real estate in Las Vegas and the US.

Apollo, VICI Make for Strong Team at Venetian

In March 2021, Apollo and VICI acquired the Venetian and the accompanying Palazzo along with the venue then known as the Sands Expo and Convention Center for $6.25 billion. The private equity firm paid $2.25 billion for the operating rights to the venues, while VICI shelled out $4 billion for the real estate.

Typically under triple-net leases — the common lease structure in the casino industry — tenants are financially responsible for additions and enhancements to the properties. Apollo has held up that end of the bargain at Venetian.

“Redevelopment presents new gaming offerings including The Palazzo High Limit Lounge, the fully redesigned sportsbook complete with a multi-year naming rights partnership with Yahoo, the Yahoo Sportsbook powered by William Hill, and a brand-new poker room that will be debut this summer,” according to a statement issued Wednesday by the Venetian.

More recently, VICI and other REITs have shown a willingness to extend financing to tenants to improve gaming venues. Not only does that diversify REITs’ revenue streams, but such transactions serve the aim of boosting property values, which is beneficial to landlords.

Venetian Rent Going Up, Too

As part of the financing accord, VICI will increase Apollo’s lease obligations at Venetian. Under the existing rental agreement, rent will rise “on the first day of the quarter immediately following each capital funding at a 7.25% yield.”

The Incremental Venetian Rent will begin escalating annually at 2.0% on March 1, 2029, and commencing on March 1, 2031, will begin escalating on the same terms as the rest of the rent payable under the Venetian Resort Lease with annual escalation equal to the greater of 2.0% or Consumer Price Index (CPI), capped at 3.0%,” said the REIT in the press release.

VICI will use cash on hand and partial settlement of forward equity sales to fund the Venetian improvements.