08/04/2021 | by Sarah Borchersen-Keto

VICI Properties Inc . (NYSE: VICI) said Aug. 4 that it will acquire MGM Growth Properties LLC (NYSE: MGP) for $17.2 billion, including debt.

Ed Pitoniak, CEO of VICI Properties, said the transaction, which is expected to close in the first half of 2022, would create “the premier gaming, entertainment, and leisure REIT in America.”

Upon completion of the merger, VICI Properties will have an estimated enterprise value of $45 billion. The REIT will add 15 class-A entertainment resort properties spread across nine regions to its portfolio as well as hundreds of food, beverage, and entertainment venues at an estimated 30% to 40% discount to replacement cost.

In addition, approximately 55% of VICI Properties’ rent base will be generated by market-leading regional properties while the remaining 45% will come from properties on the Las Vegas Strip.

David Katz, managing director at Jefferies LLC, said VICI Properties has remained active through the pandemic, showing a continued appetite for growth. “This transaction would make VICI Properties not just the largest gaming REIT but also the largest triple net lease REIT company in the U.S.”

VICI Properties will also enter into an amended triple-net master lease with MGM Resorts International (NYSE: MGM), the controlling shareholder in MGM Growth Properties. The lease will have an initial total annual rent of $860 million, inclusive of MGM Growth Properties’ pending acquisition of MGM Springfield, and an initial term of 25 years, with three 10-year tenant renewal options.

During a conference call, Pitoniak noted that both VICI Properties and MGM Growth Properties collected 100% of rent on time from tenants through the pandemic. “Our investors continue to benefit from a COVID-proven dividend stream,” while the income stream is likely to be supported going forward by increasing consumer demand, he said.

Pitoniak described Las Vegas as “the world’s premier adult experiential theme park.” He added that VICI Properties “could not be more excited to be giving our investors more exposure to Las Vegas.”

Under the terms of the deal, MGM Growth Properties shareholders will receive 1.366 shares of VICI Properties stock in exchange for each class A share. The fixed exchange ratio represents an agreed upon price of $43 per share of MGM Growth Properties class A shares and represents a 15.9% premium to MGM Growth Properties’ closing stock price on Aug. 3.

Meanwhile, MGM Resorts will receive $43.00 per unit for the redemption of the majority of its MGM Growth Properties operating partnership units for approximately $4.4 billion and will also retain approximately 12 million units in a newly formed operating partnership of VICI Properties.