Portfolio enhancement and diversification at VICI Properties continue as the real estate investment trust (REIT) announced it would acquire MGM Growth Properties.

Payment Consideration

VICI Properties, MGM Growth Properties (MGP), and MGP’s controlling shareholder, MGM Resorts International, signed a definitive agreement for the acquisition of MGP by VICI for total consideration of $17.2 billion, inclusive the amount of MGP’s debt VICI will assume, around $5.7 billion.

Under the terms of the definitive agreement, holders of MGP Class A stock will have their holdings exchanged for newly issued VICI stock, based on a fixed exchange ratio of the agreed price of $43.00 per MGP share and $31.47 VICI price, a trailing 5-day volume-weighted average as of July 30, 2021, which is at a 15.9% premium to MGP’s August 3, 2021 closing stock price.

MGP Operating Partnership units held by MGM Resorts will be redeemed at the agreed price of $43.00 per unit in cash for total consideration of approximately $4.4 billion, while around 12 million units will be retained by MGM in a newly formed partnership with VICI.

MGM Resorts’ Class B stock in MGP will be canceled and will cease to exist in the transaction that will solidify VICI’s position as the largest experiential net lease REIT with an estimated value of $45 billion upon closing.

Lease Agreements

Upon transaction close, VICI and MGM Resorts will enter into a triple-net master lease with an initial annual rent of $860 million, inclusive of the pending acquisition of MGM Springfield by MGP.

The 25-year lease with 3 tenant renewal options for 10 years each, will have its rent rate escalate at 2% annually for the first 10 years, and from then on for the greater of the 2% rate and the consumer price index (CPI), but not higher than 3%.

MGP’s 50.1% ownership in the joint venture with Blackstone Real Estate Income Trust (BREIT JV), will be retained, while the lease of the joint venture which owns the real estate assets of MGM Grand Las Vegas and Mandalay Bay will remain unchanged at the current annual base rent of approximately $298 million, spanning over 30 years and having 2 tenant renewal options for 10 years each.

Similar to the triple-net master lease, the joint venture lease will escalate at 2% per annum, but for the first 15 years and thereafter for the greater of the agreed fixed rate of 2% and the CPI, capped at 3%. VICI expects both lease agreements to deliver rent of approximately $1.0 billion initially.

All parties in the agreement expect the transaction to close in the first half of 2022 subject to customary closing conditions, regulators’ approvals, and VICI stockholders’ approval. There will be no change to the Board of Directors at VICI Properties.