In an announcement that fell on the 25th birthday of the Venetian Resort Las Vegas, VICI Properties declared it will supply an impressive $700 million towards enhancement efforts. As the largest owner of gaming real estate in Las Vegas and the United States, VICI is providing this capital through its Partner Property Growth Fund strategy. Meanwhile, another significant contributor, Apollo Global Management, celebrated the occasion by revealing it has invested $1.5 billion to enhance the prominent Las Vegas Strip integrated resort.
The financial plan laid out by VICI is as follows: the firm will furnish up to $700 million via the Venetian Capital Investment. This sum comprises an initial $400 million to be disbursed in 2024 and an extra $300 million which the Venetian Resort will have the option — not the obligation — to withdraw in full or part until November 1, 2026. The initial investment of $400 million will be divided into three quarterly payments: $100 million in the second quarter, followed by $150 million in both the third and fourth quarters of 2024.
The partnership between Apollo and VICI has been fruitful for the Venetian since the duo acquired it and its neighboring ’The Palazzo’, along with the venue formerly named the Sands Expo and Convention Center, for an astounding $6.25 billion in March 2021. The private equity titan Apollo paid $2.25 billion for the operating rights to these venues while VICI provided $4 billion for the real estate.
Furthermore, under triple-net leases, a common arrangement in the casino industry, tenants undertake financial responsibility for additions and upgrades to the properties, a commitment Apollo has undoubtedly honored at the Venetian. Anticipating the debut of a brand-new poker room this summer, the Venetian resort will introduce fresh gaming features such as The Palazzo High Limit Lounge, a fully redesigned sportsbook complete with a multi-year naming rights partnership with Yahoo, and the Yahoo Sportsbook powered by William Hill.
Recently, VICI and other Real Estate Investment Trusts (REITs) have been demonstrating a readiness to lend more money to their tenants in efforts to upgrade gaming venues. It functions as a means to diversify the revenue streams of REITs, with the added bonus of increasing property values, a directly beneficial situation for landlords.
Another adjustment ensuing from the financing agreement will see an increased rent for Apollo. Under the current rental contract, the rent will rise “on the first day of the quarter immediately following each capital funding at a 7.25% yield.” From March 1, 2029, the rent attributable to the Venetian will increase annually by 2.0% and from March 1, 2031, the hike will correspond to the greater of 2.0% or the Consumer Price Index (CPI), however, it will not exceed 3.0%.
The funds needed for the Venetian’s improvements will come from VICI’s available cash and partial settlement of forward equity sales. With backing from these substantial financiers, the Venetian promises to deliver a revitalized, enhanced gaming experience to its patrons in the coming years.
