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Owner of Empire City Casino in Yonkers to be Acquired in $17.2 Billion Deal
NEW YORK—The ownership of Empire City Casino in Yonkers is being acquired by New York City-based gaming, hospitality and entertainment REIT VICI Properties Inc. in a deal valued at $17.2 billion.
VICI Properties reported that it had entered into a definitive agreement (Master Transaction Agreement) with MGM Growth Properties LLC and MGM Resorts International (MGM Growth Properties controlling shareholder) whereby VICI Properties will acquire MGP for total consideration of $17.2 billion, inclusive of the assumption of approximately $5.7 billion of debt. Upon completion of the merger, which is expected in the first half of 2022, VICI will have an estimated enterprise value of $45 billion.
Among MGM Properties holdings that will change hands when the deal closes includes Empire City Casino in Yonkers and Yonkers Raceway, which it acquired from the Rooney family in January 2019 for $850 million.
Earlier this year, Empire City Casino and a host of area business and civic organizations lobbied the Cuomo Administration to speed up the approval process to award full casino gaming licenses to downstate New York. Representatives of MGM Resorts promised significant capital investment in the property valued at approximately $400 million if it secured the full gaming license from New York State.
Under the terms of the Master Transaction Agreement, MGP Class A shareholders will receive 1.366 shares of newly issued VICI stock in exchange for each Class A share of MGP. The fixed exchange ratio represents an agreed upon price of $43.00 per share of MGP Class A shares based on VICI’s trailing five-day volume weighted average price of $31.47 as of July 30, 2021 and represents a 15.9% premium to MGP’s closing stock price on Aug. 3, 2021. MGM Resorts will receive $43.00 per unit in cash for the redemption of the majority of its MGP Operating Partnership units that it holds for total cash consideration of approximately $4.4 billion and will also retain approximately 12 million units in a newly formed operating partnership of VICI Properties. The MGP Class B share that is held by MGM Resorts will be cancelled and cease to exist, the company stated.
VICI Properties will also enter into an amended and restated triple-net master lease with MGM Resorts. The lease will have an initial total annual rent of $860.0 million, inclusive of MGP’s pending acquisition of MGM Springfield, and an initial term of 25 years, with three 10-year tenant renewal options. Rent under the amended and restated master lease will escalate 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 consumer price index, subject to a 3.0% cap.
Additionally, VICI will retain MGP’s existing 50.1% ownership stake in the joint venture with Blackstone Real Estate Income Trust, Inc., which owns the real estate assets of MGM Grand Las Vegas and Mandalay Bay. The BREIT JV lease will remain unchanged and provides for current annual base rent of approximately $298 million 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 CPI, subject to a 3.0% cap. On a combined basis, the MGM master lease and BREIT JV lease will deliver initial attributable rent to VICI of approximately $1.0 billion.
VICI Properties secured a $9.3 billion financing commitment from Morgan Stanley, J.P. Morgan and Citibank in connection with the deal. The transaction was approved by the Board of Directors of each of MGM Resorts, MGM Growth Properties and VICI Properties (and, in the case of MGP, the Conflicts Committee).
VICI Properties’ current portfolio consists of 28 gaming facilities comprising more than 47 million square feet and features approximately 17,800 hotel rooms and more than 200 restaurants, bars, nightclubs and sportsbooks. Its properties are leased to industry leading gaming and hospitality operators, including Caesars Entertainment, Inc., Century Casinos, Inc., Hard Rock International Inc., JACK Entertainment LLC and Penn National Gaming, Inc. VICI Properties also has an investment in the Chelsea Piers, New York facility and owns four championship golf courses and 34 acres of undeveloped land adjacent to the Las Vegas Strip.
MGM Growth Properties, together with its joint venture, currently owns a portfolio of 12 properties, consisting of premier destination resorts in Las Vegas and elsewhere across the United States, MGM Northfield Park in Northfield, OH, Empire Resort Casino in Yonkers, as well as a retail and entertainment district, The Park in Las Vegas. As of Dec. 31, 2020, MGP’s portfolio of destination resorts, the Park, Empire Resort Casino, and MGM Northfield Park collectively comprised approximately 32,400 hotel rooms, 1.5 million casino square footage, and 3.6 million convention square footage. The MGM Resorts portfolio encompasses 31 unique hotel and gaming destinations globally, including some of the most recognizable resort brands in the industry.
“Through this transformative strategic acquisition, we are merging MGP’s best-in-class portfolio into VICI’s best-in-class management and governance platform, creating the premier gaming, entertainment and leisure REIT in America,” said Ed Pitoniak, CEO of VICI Properties.
“After many years of growing both of our portfolios, combining them into one company will generate the best results for the shareholders of both companies,” said James Stewart, CEO of MGP. “The combined company will create a superior platform for delivering exceptional returns to MGP’s existing shareholders, by improving diversification, increasing scale, lowering cost of capital and benefiting from future growth.”
Bill Hornbuckle, CEO and president of MGM Resorts, added, “This transaction unlocks the significant real estate value of our assets, enhances our financial flexibility and strengthens our ability to execute key growth initiatives. We look forward to our long-term partnership with VICI.”
Among some of the benefits of the deal cited by VICI Properties include: enhancing its portfolio quality, size, and scale at significant discount to replacement cost. VICI Properties will add 15 Class A entertainment resort properties spread across nine regions comprising 33,000 hotel rooms, 3.6 million square feet of meeting and convention space and hundreds of food, beverage and entertainment venues to its portfolio at an estimated 30% to 40% discount to replacement cost. Following the transaction, approximately 55% of VICI’s rent base will be generated by market-leading Regional properties while the remaining 45% will come from properties on the Las Vegas Strip
The firm also said the deal will significantly diversify its tenant base: Upon closing, VICI Properties’ top tenant concentration will be reduced to ~41% (from 84% currently) while 84% of VICI Properties’ rent roll will be derived from S&P 500 tenants with a track record of having paid 100% of rent, on time and in cash throughout the COVID-19 pandemic.