Vici Properties Says All May Rent Paid, Provides Some Relief to Former Parent Caesars

Posted on: June 1, 2020, 05:23h. 

Last updated on: June 1, 2020, 05:58h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Vici Properties (NYSE:VICI) said Monday all of its tenants paid rent last month, no small feat when many domestic casinos were closed for more than half of May and all of April.

Vici Says May Rent paid
Caesars Palace owner Vici is working with a couple of operators on financial relief. (Image: Reuters)

The gaming real estate investment trust (REIT) also said it reached an agreement with Caesars Entertainment (NASDAQ:CZR) to provide the operator with some financial flexibility. Caesars is the company Vici was spun off from in 2017 and is the real estate firm’s largest tenant. When Vici last provided an update in mid-April, it said it was working with five tenants on financing issues, but it didn’t identify the relevant properties or operators.

Vici said that with the combination of prior capital raises and $2 billion set aside earlier this year, it has the cash needed to pay Caesars buyer Eldorado Resorts (NASDAQ:ERI) $3.2 billion for the property assets of Harrah’s New Orleans, Harrah’s Laughlin, and Harrah’s Atlantic City.

As a result of this activity, we expect to have approximately $1.7 billion in unrestricted cash and cash equivalents, $2.0 billion in restricted cash, $1.0 billion of availability under our undrawn revolving credit facility, and no debt maturities until December 2024,” according to the real estate company.

Vici owns the property assets of 28 casinos and gets 71 percent of its rental revenue from regional venues, with 29 percent coming from those on the Las Vegas Strip.

Caesars Deals

Today, Caesars and Vici struck an omnibus amendment that provides the operator some relief on capital expenditures under the lease agreements governing Caesars Palace Las Vegas (CPLV), non-CPLV venues, and Harrah’s Joliet in Illinois.

Under most lease agreements between operators and REITs such as Vici, the gaming company is responsible for property enhancement and maintenance. That’s because it’s deriving the most benefit from gambling profits and cash generated from other amenities. Conversely, the REIT enjoys long-term rental contracts and steady cash flow.

With the new accord, Caesars gains relief for “(i) funding of certain minimum capital expenditures in fiscal year 2020 (which represent a reduction of the minimum capital expenditure amounts currently set forth in the Caesars Leases), (ii) making timely payment of rent obligations under the Caesars Leases during the compliance period set forth in the Omnibus Amendment and (iii) no tenant event of default occurring under any of the Caesars Leases during the compliance period set forth in the Omnibus Amendment,” according to Vici.

In addition to Caesars and Eldorado, Vici’s other tenants include Century Casinos Inc., Hard Rock International, JACK Entertainment, and Penn National Gaming.

More Benevolence

Vici reached a similar financial flexibility arrangement with Century. Last year, the companies partnered in acquiring the Mountaineer Casino Racetrack and Resort in West Virginia, and the Isle Casino Cape Girardeau and Lady Luck Casino – both in Missouri – from ERI. But the COVID-19 pandemic made it impossible for Century to wring profits out of those properties for more than two months this year.

“As a result of the casino closures in connection with the COVID-19 pandemic, the Company has agreed to waive Century’s capital expenditure requirements for 2020 and defer to not later than December 31, 2021 certain other expenditures contemplated in connection with the underwriting of the acquired casino properties,” said Vici.