VICI Properties Inc. Completes Acquisition of Harrah’s Philadelphia and Lease Modifications

VICI Properties Inc. (NYSE: VICI) ("VICI Properties” or the "Company”), an experiential real estate investment trust, today announced it has completed the previously disclosed transactions with Caesars Entertainment Corporation (NASDAQ:CZR) ("Caesars”) to acquire, and lease back, all of the land and real estate assets associated with Harrah’s Philadelphia and to modify the Company’s Formation Leases and the HLV Lease, each as defined below (collectively, the modifications of the lease agreements described herein are referred to herein as the "Lease Modifications”).

Harrah’s Philadelphia was acquired for a purchase price of $241.5 million, which was reduced by $159.0 million to reflect the aggregate net present value of the Lease Modifications, resulting in a net cash consideration of $82.5 million, excluding transaction costs. The Company funded the net purchase price using available cash. The Harrah’s Philadelphia property provides for initial annual rent of $21.0 million, which is included in the Non-CPLV Lease (as defined below) pursuant to the Lease Modifications. Additionally, the Non-CPLV Lease and Joliet Lease were amended to provide annual rent escalators of 1.5% for lease years two through five, which will commence retroactive to November 1, 2018.

In connection with the Lease Modifications, the CPLV Lease was modified to include Octavius Tower at Caesars Palace, which is owned by the Company and leased back to a subsidiary of Caesars. The Company previously acquired Octavius Tower on July 11, 2018 for $507.5 million, whereupon VICI Properties began receiving $35.0 million in annual rent pursuant to a separate ground lease.

Edward Pitoniak, Chief Executive Officer of VICI Properties said, "The VICI and Caesars teams worked very productively together to complete this important and value-creating transaction for both companies. Adding Harrah’s Philadelphia to our growing portfolio of best in-class gaming real estate strengthens our presence in the attractive Mid-Atlantic gaming market. In addition, guided by a deep understanding of the needs and goals of our tenants, we amended the original lease agreements to be better aligned with the strategic interests of both parties. For VICI shareholders, these changes significantly improve our same-store rent growth in the near-term, protect against future volatility in our rental income over the long-term and, most importantly, incentivize our tenant to invest capital into the real estate to grow and strengthen their own business.”

Mr. Pitoniak continued, "In addition to the $35.0 million of annual rent we began receiving in July from the acquisition of Octavius Tower, this transaction adds an additional $21.0 million in initial annual rent from Harrah’s Philadelphia and an additional $7.1 million in the form of incremental annual rent escalators for the first twelve months post the Lease Modifications. Thus, for a net cash payment of $590.0 million, we are adding $63.1 million in annual rent at a very attractive net cap rate and position VICI Properties with an attractive 2019 embedded growth profile.”

Harrah’s Philadelphia

Harrah’s Philadelphia was built in 2006 and is benefiting from significant property enhancements completed in 2017. Harrah’s Philadelphia is located along the waterfront in Chester, Pennsylvania. The property comprises 2.0 million square feet of space featuring approximately 2,450 slot machines, 110 table games, several bars and restaurants and parking garages. Caesars will lease from VICI Properties the real estate associated with Harrah’s Philadelphia under the Non-CPLV Lease. Caesars’ initial annual lease payment related to Harrah’s Philadelphia will be $21.0 million in the first year and will be subject to contractual annual increases thereafter in accordance with the Non-CPLV Lease.

Lease Modifications

As previously disclosed, Caesars and VICI Properties, in support of both companies’ strategies, amended the lease agreements for Caesars Palace Las Vegas (as amended, the "CPLV Lease”), the Company’s existing regional properties other than the property in Joliet, Illinois (as amended, the "Non-CPLV Lease”), the property in Joliet, Illinois (as amended, the "Joliet Lease” and, collectively with the CPLV Lease and Non-CPLV Lease, the "Formation Leases”) and Harrah’s Las Vegas (as amended, the "HLV Lease”). The Lease Modifications add base rent escalation of 1.5% per year for lease years two through five of each of the Non-CPLV Lease and Joliet Lease which will commence retroactive to November 1, 2018, add minimum rent coverage ratios commencing in lease year 8 of each of the Formation Leases that would impact the base rent increases paid by Caesars to VICI Properties, and reduce variable rent adjustments under the Formation Leases from 13.0% and 19.5%, as applicable, to 4.0% of revenue growth over the relevant periods. The CPLV Lease was also amended to include Octavius Tower at Caesars Palace, which is owned by the Company and leased back to a subsidiary of Caesars. The Company previously acquired Octavius Tower on July 11, 2018 and had been leasing that property back to a subsidiary of Caesars subject to a separate ground lease prior to the effectiveness of the Lease Modifications.

The Lease Modifications are intended to bring the Company’s lease agreements with Caesars into alignment with other market precedents and to facilitate the long-term performance of the properties subject to these lease agreements. The Lease Modifications will result in near-term increases in rent for VICI Properties, as well as provide for the addition of Octavius Tower and Harrah’s Philadelphia to the CPLV Lease and Non-CPLV Lease, respectively, while moderating changes to Caesars’ long-term rent payments and potential significant volatility in Caesars’ rent payments to VICI Properties. The Lease Modifications are also expected to create additional flexibility to facilitate Caesars’ development ambitions on the East Side of the Las Vegas Strip.

Octavius Tower

Octavius Tower, built in 2012, is a 23-story complex that comprises 1.2 million square feet of space containing 668 hotel rooms located on the Flamingo Road side of Caesars Palace Las Vegas. Caesars will lease from VICI Properties the real estate associated with Octavius Tower under the CPLV Lease, as amended by the Lease Modifications. Caesars’ annual lease payment related to Octavius Tower is $35.0 million.

About VICI Properties

VICI Properties is an experiential real estate investment trust that owns one of the largest portfolios of market-leading gaming, hospitality and entertainment destinations, including the world-renowned Caesars Palace. VICI Properties’ national, geographically diverse portfolio consists of 21 gaming facilities comprising over 39 million square feet and features approximately 15,000 hotel rooms and more than 150 restaurants, bars and nightclubs. Its properties are leased to leading brands such as Caesars, Horseshoe, Harrah’s and Bally’s, which prioritize customer loyalty and value through great service, superior products and constant innovation. VICI Properties also owns four championship golf courses and 34 acres of undeveloped land adjacent to the Las Vegas Strip. VICI Properties’ strategy is to create the nation’s highest quality and most productive experiential real estate portfolio. For additional information, please visit www.viciproperties.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. You can identify these statements by our use of the words "assumes,” "believes,” "estimates,” "expects,” "guidance,” "intends,” "plans,” "projects,” and similar expressions that do not relate to historical matters. All statements other than statements of historical fact are forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors which are, in some cases, beyond the Company’s control and could materially affect actual results, performance, or achievements. Among those risks, uncertainties and other factors are risks that the Company may not achieve the benefits contemplated by the acquisitions of the real estate assets; and risks that not all potential risks and liabilities have been identified in the Company’s due diligence. Although the Company believes that in making such forward-looking statements its expectations are based upon reasonable assumptions, such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. The Company cannot assure you that the assumptions upon which these statements are based will prove to have been correct. Additional important factors that may affect the Company’s business, results of operations and financial position are described from time to time in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, Quarterly Reports on Form 10-Q and the Company’s other filings with the Securities and Exchange Commission. The Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as may be required by applicable law.

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