The Las Vegas Sands Corporation announced this morning it will sell off the real estate and operations of its two Las Vegas properties for approximately $6.25 billion.
The company has entered into definitive agreements with Vici Properties, a real estate investment trust spinoff of Caesars Entertainment, and Apollo Global Management, a global investment manager, according to a news release. Vici will buy the real estate of The Venetian Resort Las Vegas and Sands Expo and Convention Center for about $4 billion in cash. An affiliate of funds managed by affiliates of Apollo will acquire the subsidiaries that hold the operating assets and liabilities of these properties for $1.05 billion in cash and $1.2 billion in seller financing.
The blockbuster transaction comes as institutional ownership moves into entertainment hospitality, property that has had lower demand during the pandemic, while the economy begins to bounce back from the disruption caused by the coronavirus outbreak.
The Venetian Resort has three hotel towers comprising 7,092 suites along with 1.4 million square feet of gaming and retail space as well as more than 2 million square feet of meeting space. The Sands Expo Center has 23 meeting rooms and more than 2 million square feet of meeting space.
The deal is expected to close in the fourth quarter of 2021. When the deal closes, Sands will still have its five properties in Macau and one resort in Singapore.
In the statement, Sands executives noted the bittersweet nature of the deal, as The Venetian is what helped establish Sheldon Adelson and his company as a leader in the gaming industry. Adelson died Jan. 11 at age 87.
"The Venetian changed the face of future casino development and cemented Sheldon Adelson's legacy as one of the most influential people in the history of the gaming and hospitality industry,” said Las Vegas Sands Chairman and Chief Executive Officer Robert Goldstein in the release. “As we announce the sale of The Venetian Resort, we pay tribute to Mr. Adelson's legacy while starting a new chapter in this company's history."
Sands is focused on growth, and the company’s executives see meaningful opportunities in a variety of locations, Goldstein said. Asia remains the backbone of the company, and its developments in Macau and Singapore “are the center of our attention.”
He also said there remains potential development opportunities domestically where significant capital investments will provide “a substantial benefit to those jurisdictions while also producing very strong returns for the company."
When the deal closes, Vici will enter into a triple-net lease agreement for both properties with Apollo’s affiliates, according to a news release from the REIT. The initial annual rent will be $250 million with an initial term of 30 years with two 10-year tenant renewal options. Rent under the lease will escalate at the greater of 2% or the consumer price index capped at 3%.
Sands has agreed to provide lease payment support to guarantee rent obligations through 2023. The agreement allows for early termination of the lease payment support if the properties achieve a certain financial milestone or there is a change in tenant.
“We have long admired the incomparable size, scale and quality of the Venetian Resort and are proud to opportunistically acquire the asset at an attractive, accretive cap rate for shareholders,” said John Payne, president and chief operating officer at Vici, in the release. “Additionally, we are confident Apollo’s vision will greatly benefit the property’s operations for years to come.”
In the news release from Apollo, the company stated the investment was “conservatively structured and includes no third-party debt, long-dated and attractively priced seller financing,” also noting the lease support agreement with Sands.
“The Venetian is America’s premier integrated resort, with an unrivaled set of amenities to serve guests across hospitality, meeting events, gaming, and entertainment — categories that we believe are well-positioned for strong recovery and long-term growth,” Apollo Partner Alex van Hoek said in the release.
Apollo has investments across numerous industries, including hospitality, travel, gaming and leisure. It’s currently in the process of acquiring Great Canadian, a leading gaming and entertainment provider in Canada. Last year, it invested in Expedia, Swissport and Aeromexico. Prior investments include PlayAGS, Gala Coral Group, Sun Country Airlines, Norwegian Cruise Lines, Vail Resorts, Aliante Casino and Hotel, Bally’s Corporation and Great Wolf Resorts.
Madison Square Garden Entertainment is working to bring a 400,000-square-foot venue built specifically for music and entertainment at the Venetian resort. The MSG Sphere has an expected capacity of 18,000 seats and is slated to open in 2023.
Other U.S. casino operators are gearing up for visitors to return. Las Vegas’ Mandalay Bay, bought for $4.6 billion along with the MGM Grand prior to the pandemic by Blackstone Real Estate Income Trust, was allowed this week to return to operating 24 hours a day, seven days a week.
Fertitta Entertainment, the Houston-based owner of Landry’s restaurants and Golden Nugget casinos, struck a deal last month to merge with a special-purpose acquisition company called FAST Acquisition. The move will take a hospitality empire consisting of five casinos, 500 restaurants and more than $2 billion in owned real estate to the public markets.