Less than two months after the death of Chairman and CEO Sheldon Adelson, Las Vegas Sands Corp. is set to sell all of the land and real estate assets associated with the Venetian Resort Las Vegas and the Sands Expo and Convention Center in Las Vegas for $4 billion in cash to Vici Properties, representing a 6.25 percent cap rate.
An affiliate of certain funds managed by affiliates of Apollo Global Management has agreed to acquire the operating company of the Venetian Resort for a further $2.25 billion, subject to customary closing conditions, of which $1.2 billion is in the form of a secured term loan from LVS and the remainder is payable in cash.
In a statement, Sands executives said that while selling The Venetian will be “bittersweet,” the opportunities for the company to pursue new growth prospects are “robust.”
“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,” said Las Vegas Sands Chairman and CEO Robert Goldstein. This company, he added, is “focused on growth," and the team sees “meaningful opportunities" on a variety of fronts—particularly in Asia, which he said remains the “backbone" of the company.
“Our developments in Macao and Singapore are the center of our attention. We will always look for ways to reinvest in our properties and those communities. There are also potential development opportunities domestically, where we believe significant capital investment will provide a substantial benefit to those jurisdictions while also producing very strong returns for the company."
“Our long-held strategy of reinvesting in our Asian operations and returning capital to our shareholders will be enhanced through this transaction. Additionally, as our industry continues to evolve, particularly as it relates to the digital marketplace, we are committed to exploring those possibilities," President and COO Patrick Dumont added.
The Details of the Deals
Simultaneous with the closing of the transaction, the company will enter into a triple-net lease agreement for the Venetian Resort with an affiliate of the Apollo funds. The lease will have an initial total annual rent of $250 million and an initial term of 30 years, with two 10-year tenant renewal options. LVS has agreed to provide lease payment support designed to guarantee the Venetian Resort’s rent obligations under the lease through 2023, with early termination of such lease payment support if the Venetian Resort achieves a certain financial milestone or a tenant change of control occurs. Rent under the lease will escalate at the greater of 2 percent or consumer price index (subject to a 3 percent ceiling), beginning the earlier of lease year three or when the Venetian Resort achieves certain financial milestones.
Related: Las Vegas Sands Chairman, CEO Sheldon Adelson dies
The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to be completed by year-end 2021. Vici Properties intends to fund the transaction through a combination of cash on hand, equity and long-term debt financing.
“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 COO of Vici Properties. “Additionally, we are confident Apollo’s vision will greatly benefit the property’s operations for years to come.”
Apollo partner Alex van Hoek said the resort has “an unmatched set of amenities” across hospitality, meeting events, gaming and entertainment—“categories that we believe are well positioned for strong post-COVID recovery and long-term growth. We see significant opportunity to invest in and accelerate the growth of the Venetian Resort and are excited to strengthen and support the talented team there to execute this vision.”
The Venetian Resort and Madison Square Garden Entertainment Corp. are working to bring a 400,000-square-foot venue built specifically for music and entertainment to Las Vegas. MSG is currently building the MSG Sphere at The Venetian, an 18,000-seat venue that will be located near, with connectivity to, the Venetian Resort and is expected to open in 2023.