Vici Properties, the owner of Caesars Entertainment Corp. casinos and golf courses, plans an initial public offering of its stock to help pay down more than $4 billion of debt and finance future acquisitions.
The real estate investment trust, created from Caesars’ bankruptcy reorganization, will trade on the New York Stock Exchange under the symbol VICI, according to documents filed Dec. 11 with the Securities and Exchange Commission. The documents did not give a time frame or offering size.
Vici needs to raise money to meet debt obligations and buy more properties from Caesars in the coming years, including Harrah’s Atlantic City, Harrah’s New Orleans and Harrah’s Laughlin.
Last week Vici completed the purchase of Harrah’s Las Vegas from Caesars for $1.14 billion. The casino operator will lease it back from Vici for an annual fee of $87.4 million. VICI now owns 19 Caesars properties and several golf courses.
Caesars created Vici and gave shares in the newly formed property company to debtholders as part of its bankruptcy settlement. Officially formed Oct. 6, Vici owns properties in nine states with a total of 12,000 hotel rooms.
Soros and Pimco
This month Vici announced it had raised $1 billion in a private placement of equity to help finance the purchase of Harrah’s Las Vegas from Caesars. The company sold 54 million new shares at a price of $18.50 each.
The real estate investment trust now has 300 million shares outstanding, valuing it at around $6 billion. Shares currently trade on the over-the-counter market.
Vici’s largest shareholders include Soros Fund Management, Pacific Investment Management Co. (better known as Pimco), Canyon Capital Advisors and Elliott Associates. All own more than 5 percent.
The company’s rental income on its existing properties is $630 million a year and will increase to $670 million in seven years, according to the SEC filing.
The properties each have a 15-year lease that can be extended for another 20 years in five-year increments. Each lease has a fixed base rent for seven years, with some offering a yearly increase tied to inflation.
Vici Chief Executive Officer Edward Pitoniak will receive a base salary of $725,000 with an annual cash bonus as high as $1.45 millon and stock compensation of as much as $2.5 million, according to the SEC filing.
U.S. casinos operators are selling their properties to real estate investment trusts and leasing them back in order to lower debt, boost dividends and acquire more assets.
Vici will become the third REIT focusing on the gaming industry. Penn National spun off its real estate assets into Gaming and Leisure Properties, which trades under the ticker GLPI. Gaming and Leisure Properties currently owns 38 gaming facilities.
MGM Resorts International spun properties off into MGM Growth Properties, which sold shares in an IPO last year. MGM Growth Properties owns 12 casinos and may buy more from MGM Resorts.
Caesars to build world’s largest ball rooms
Caesars last month agreed to sell Harrah’s Las Vegas to VICI for $1.14 billion to help finance its growth plans. Caesars in return will purchase 18.4 acres of undeveloped land behind The Linq Hotel and Harrah’s for $73.6 million.
Caesars plans to build a $375 million convention center with 300,000 square feet of meeting space on that parcel of land, including two 108,000-square-feet ballrooms. Caesars claims they will be the two largest ballrooms in the world.
Construction is set to begin in the second quarter of 2018 and take two years to complete. The project will also include a 100,000-square-foot plaza and a pedestrian bridge to The Linq Promenade.
Caesars will have the right to require VICI to purchase the convention center and lease it back to the casino operator.