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Caesars Sells off its UK & African Assets to Metropolitan Gaming
By Jeff Osienya Aug 11, 2021 IndustryMetropolitan Gaming acquires the UK and African casinos of Caesars Entertainment Inc as part of the latter’s divestment plan following the William Hill buyout. VICI has also agreed to buy out MGM’s real estate assets in a $17.2 billion transaction.Mid-last week, Metropolitan Gaming Limited revealed that it has officially completed the purchase of Caesars’ European and African businesses. While the announcement came on August 4th, the transaction was actually completed on July 16th, 2021. Caesars Entertainment Inc sold off a total of 11 casinos which were located across the United Kingdom, Egypt, and South Africa. The iconic Empire Casino in Leicester Square is also part of this sale.
Now that the deal is sealed, Silver Point Capital and its affiliates, the parent company of Metropolitan Gaming, is now the owner and operator of the 11 brick and mortar gaming facilities. Edward Mulé, the Founding Partner of Silver Point, welcomed the purchase in a few words saying:
Quote“We are very excited about the opportunity to acquire a number of historic and high-end casinos in the United Kingdom. The acquisition fits well with Silver Point’s focus on investing in high-quality businesses at opportune times.”
As part of the announcement, Silver Point said that it plans to provide the needed investment and strategic support to Metropolitan Gaming and work hand in hand with the latter’s management to transform it into “a leading brand in the luxury and premium gaming sectors.”
The newly appointed Chief Executive Officer of Metropolitan Gaming, Michael Silberling, also shared a few sentiments as follows:
Quote“I am excited to join the amazing team at Metropolitan Gaming. The world, the global economy, and the hospitality industry have been rocked by the COVID-19 pandemic, but I believe that this team is well-positioned to lead a strong rebound of this business, benefitting from their experience and expertise, and a partner that is committed to invest. We intend to focus on job creation and investment in this historic business as we partner with our employees, regulators, and the communities in which we operate to create a safe, fun, and memorable experience for our customers that is second to none.”
More Caesars Divestments Around the Corner
Reno-based Caesars is one of the largest gaming companies globally, worth over $19 billion in market capitalization. After finalizing the £2.9 billion acquisition of William Hill in April, Casers has been working to refresh its image and divest part of its assets. Early this month, the Reno-based gaming juggernaut completed a rebranding effort to integrate US-facing William Hill Sportsbooks under the Caesars brand seamlessly.
So, the sale of UK and African casinos to Metropolitan Gaming is just the first of many divestments expected in the coming future. A handful of other prominent gaming operators, including Ireland’s Boyle Sports, Germany-based Tipico, and Malta-based 888 Holdings, have already shown interest in William Hill’s European assets that Caesars plans to divest.
VICI Properties Stakes a $17.2 Billion Wager on MGM Growth Properties
Meanwhile, VICI Properties is moving full steam ahead with its portfolio enhancement and diversification strategy. VICI, along with MGM Growth Properties (GP) and MGM Resorts International – the controlling shareholder of MGP, has signed a definitive agreement to sell MGP to VICI in a $17.2 billion transaction. The price tag for this consideration includes about $5.7 billion worth of MGP debt that VICI will inherit from the acquisition.
VICI Properties Inc is a real estate investment trust (REIT) spun-off from Caesars Entertainment Corp in 2017, long before its merger of the century with Eldorado Resorts. Based on the terms of the penned agreement, MGP Class A stock shareholders will receive reissued VICI stock in exchange for their MGP equity. The exchange will be carried out at a fixed rate of $43.00 apiece for MGP equity and $31.47 per VICI share. The figure was reached upon based on a 5-day volume-weighted trailing average at the end of the trading day on July 30th, 2021. Effectively, the value reflects a 15.9% boost on MGP’s stock price at the close of markets on August 3rd, 2021.
The units of MGP Operating Partnership, currently in the hands of MGM Resorts, will be transferred at an agreed value of $43.00 in cash for each unit, with the total consideration standing at $4.4 billion. Further, MGM will then retain about 12 million units in a newly forged agreement with VICI. On the flip side, the Class B stock that MGM Resorts holds in MGP will cease to exist after being canceled in the transaction. As a result, when the entire transaction is completed, VICI will cement its position as the biggest experiential net lease REIT with an estimated valuation of $45 billion.
A Triple-Net Master Lease Agreement Between VICI and MGM Resorts
Upon closing the acquisition, VICI and MGM Resorts will commit to a triple-net master lease deal with $860 million in initial annual rent. The lease agreement is a 25-year contract that has three 10-year options of tenant renewal, where the rent will increase at a rate of 2% per annum for the first 10 years. Afterward, the rent will increase by more than the 2% rate or consumer price index (CPI), whichever is higher, with a 3% cap in the increase. The pending sale of MGM Springfield to MGP is part of this lease agreement.
MGP will maintain its 50.1% stake in its joint venture with the Blackstone Real Estate Income Trust (BREIT JV and the terms of the lease will now be similar to that of the triple-net master lease. The only difference will be that the 2% increase rate per annum will last for the first 15 years before any adjustment beyond the 2%. Overall, VICI projects that the two lease agreements will generate roughly $1 billion in annual rental income.
However, the lease of the joint operation that holds ownership of the real estate assets of Mandalay Bay and MGM Grand Last Vegas shall remain unchanged – a 30-year contract with about $298 million in annual base rent, with two 10-year tenant renewal options.
The VICI-MGM deal is expected to close by the end of H1 2022, subject to customary closing conditions and approval from regulators and stockholders. VICI’s Board of Directors will remain as it is.
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