Gambling real estate investment trust Vici Properties is buying MGM Growth Properties in a $17.2 billion deal that's expected to create the biggest owner of gaming, entertainment and leisure real estate in the United States.

The deal, from which New York-based Vici will be the surviving entity, will have a total value of about $45 billion and Vici’s CEO said the combined company could grow even bigger. The transaction, which includes assumption of $5.7 billion of debt, adds MGM Growth's 15 entertainment resort properties spread across nine regions comprising 33,000 hotel rooms and 3.6 million square feet of convention space to Vici’s portfolio.

The move comes as MGM has been selling off other properties as it diversifies its business. This is the second major Las Vegas deal this year for Vici, which said it would buy the Venetian Resort’s real estate for $4 billion in cash.

While involving two major Las Vegas casino and hotel owners, the Vici-MGM deal also represents an important diversification for Vici. After the transaction, roughly 55% of Vici’s rent base will be generated from areas away from properties on the Las Vegas Strip. The deal also reduces Vici’s top tenant concentration from 84% of its rent roll to about 41%.

“We’ve diversified our tenants faster than any other gaming group,” David Kieske, Vici’s chief financial officer, said on a conference call discussing the transaction. “We’re the first to expand outside of gaming to nongaming partners.”

Part of that diversification includes a strategic arrangement with Great Wolf Resorts, a company controlled by Blackstone Group, to help finance the development of water parks across the country.

The Vici-MGM deal restructures MGM Growth Properties’ relationship with MGM Resorts.

MGM Resorts agreed to sell its majority stake in MGM Growth Properties' operating partnership for $4.4 billion of the total cost of the deal and retain ownership of 12 million shares of a newly formed Vici operating partnership.

“This transaction unlocks the significant real estate value of our assets, enhances our financial flexibility and strengthens our ability to execute key growth initiatives,” Bill Hornbuckle, president and CEO of MGM Resorts, said in a statement.

The deal calls for Vici to enter into an amended and restated triple-net master lease with MGM Resorts. The lease will have an initial total annual rent of $860 million, inclusive of MGM Growth Properties’ pending acquisition of the MGM Springfield resort in Springfield, Massachusetts, and an initial term of 25 years.

Under the terms, Vici will retain MGM Growth Properties’ existing 50% ownership stake in a joint venture with Blackstone Real Estate Income Trust, which owns the real estate assets of the MGM Grand Las Vegas and Mandalay Bay. The BREIT joint venture lease will remain unchanged and provides a current annual base rent of about $298 million and an initial term of 30 years.

On a combined basis, the MGM Resorts master lease and BREIT joint-venture lease will deliver initial attributable rent to Vici of about $1 billion.

The deal also opens up the window for other potential transactions, Vici CEO Ed Pitoniak said on the conference call.

“We fundamentally believe this will improve our cost of capital and once cost capital is improved [that] funnels growth opportunities,” Pitoniak said. “The larger size does enable larger transactions going forward.”

After the deal is completed, Vici is expected to retain about $500 million of annualized free cash flow, which may be deployed toward growth opportunities across gaming and other nongaming sectors, the company said.

Vici has secured a $9.3 billion financing commitment from Morgan Stanley, JPMorgan Chase and Citibank.

The parties expect the transaction to close in the first half of 2022, subject to customary closing conditions, regulatory approvals and a nod from Vici stockholders.