While strolling through Central Park on a brisk fall morning in 2020, Apollo’s global managing partner, David Sambur, received a call from a financial representative charged by Las Vegas Sands Corp. to sell the company’s properties on the Strip.
Sambur, who oversees Apollo’s private equity strategy and has played a major role in several gaming industry acquisitions and investments for the New York-based company, was intrigued by the initial phone conversation and discussions of subsequent follow-up.
“I thought it was really interesting, but I wondered how they could make it happen,” Sambur said. The Nevada Independent in an interview last week. “We set to work trying to figure out how we could buy this iconic property in the midst of the COVID pandemic with financial markets essentially closed.”
Sambur said Apollo officials approached his friend and former Caesars colleague John Payne, chairman of real estate investment trust VICI Properties.
Almost six months later, the joint transaction was finalized.
VICI will pay Sands $4 billion for 63 acres of Strip real estate covering the Venetian, Palazzo and Venetian Expo Center, plus an additional 19 adjacent acres off Koval Drive where the $1.8 billion MSG Sphere dollars is under development.
Apollo will pay Sands $2.25 billion for the operating company that manages the combined 7,100 hotel rooms, 225,000 square feet of casino space and 2.3 million square feet of convention space. Madison Square Garden will continue to develop the Sphere and operate the no-game entertainment attraction when it opens in 2023.
Eleven months after the transaction was announced and more than a year after the death of Las Vegas Sands founder Sheldon Adelson, the Nevada Gaming Control Board will consider the sale of one of the most prominent Strip properties in the United States. gambling industry at a licensing hearing Wednesday in Las Vegas.
This won’t be a simple discussion, given Apollo’s controversial ownership of Caesars Entertainment for 11 years.
The partnership began in 2008 as a $30 billion leveraged buyout of Caesars Entertainment in partnership with fellow private equity firm TPG Capital. Apollo’s association with Caesars ended in 2019, two years after the completion of a complicated two-year Chapter 11 restructuring that changed Caesars’ ownership structure and wiped $16 billion from the debt of $25.6 billion before the company’s bankruptcy.
Longtime game watchers, who would only speak on the merits, said Caesars’ bankruptcy and Apollo management could dominate the conversation at Wednesday’s hearing. Other insiders believe the Caesars events will be a topic, but not the focal point given Apollo’s other investments and financial position in the gaming industry. The company, which is listed on the New York Stock Exchange, has a market cap of nearly $16 billion.
Apollo founder, chairman and chief executive Leon Black resigned from the company last March after reports emerged detailing his dealings and alleged payments to disgraced financier and convicted sex offender Jeffrey Epstein. An outside Apollo spokesperson told the Nevada Current last month that Black was not trying to return to Apollo.
Apollo said last year it plans to retain the operations team that oversees the Venetian Complex, Palazzo and Venetian Expo, including Venetian CEO George Markantonis.
Payne, who was CEO of Caesars Entertainment Operating Co. and oversaw many of the company’s casino operations, joined VICI when the REIT was created following the bankruptcy. VICI took ownership of 20 Caesars resorts and leased the operations to Caesars.
He offered an unqualified endorsement of Apollo in a November interview with The Nevada Independent, citing his more than decade-long business relationship with the company and his support of the company’s plans for the station.
“We went to this deal with Apollo,” Payne said. “We believe in Apollo and what they are going to do with the management team. Vici is a real estate investment trust and in this format we have no operational contribution. Capital requirements are those of Apollo. The direction and how they run it belongs to Apollo. I may be a recovery operator, but the decisions are made by Apollo.
The Sands deal, along with VICI’s $17.2 billion purchase of rival MGM Growth Properties, will reshape Strip ownership. Apollo will be one of eight tenants tied to VICI.
Sambur, who is on the Board of Control’s agenda for Wednesday and is listed as a director of the operating company, expects questions about Caesars but said the transactions – separated by 14 years and a very different business climate – are very different in scale and scope.
Unlike Caesars, Sambur noted that the Venetian (Palazzo is basically an extension of the Venetian) is a single asset with much less leverage.
Below the terms of the transaction, which was announced on March 3, Las Vegas Sands is funding $1.2 billion of the deal through vendor financing in the form of a term loan and collateral agreement. Apollo pays the remaining $1.05 billion. Under a 30-year lease, Apollo will pay VICI $250 million a year to run the stations. The lease contains escalators that come into effect after 2023.
By partnering with VICI, the companies agreed to purchase the assets and property for $6.25 billion at a time of great uncertainty.
“(We) bring significant value to Las Vegas Sands while structuring strong downside protection to continue to weather the pandemic recovery,” Sambur said.
Apollo and the Game
Caesars is one of Apollo’s many investments and acquisitions in the video game industry. Apollo is the largest shareholder in Las Vegas-based gaming equipment supplier AGS, has invested in International Game Technology’s Lottomatica business and last year acquired Canadian casino operator Great Canadian.
Apollo made an unsuccessful bid to acquire the operations of sports betting giant William Hill, losing on the US side to Caesars and European businesses to 888 Holdings.
Sambur said Caesars’ bankruptcy was “highly publicized” and “a rare example” where an Apollo investment in gambling was not successful.
“Everything else we’ve done in the game has been really great. And the Venetian is going to be great too,” Sambur said.
The complicated bankruptcy was detailed in The Caesars Palace Coup by Max Frumes and Sunjeet Indap. The authors, both financial journalists, spent four years investigating and recapping the legal maneuvers.
In an interview with The Nevada Independent, the writers said Apollo never soured on the game, even after the Caesars’ ownership collapsed.
Frumes said Apollo had always “believed and loved” the vision Caesars management had for the company’s growth.
“The deals (that Apollo is doing) right now are more like regular private equity, places where they can be innovative and where they can add value,” Frumes said. “That’s kind of where they’re focusing right now.”
Indap said one of the themes of the book was how Apollo stuck with Caesars for a long time because of their belief in the business model.
“The Caesars experience ended badly,” Indap said. “I wouldn’t say they are chastised by what happened. I think they feel like they were victims of bad luck.
Even during the bankruptcy, the authors said Apollo did not abandon Caesars.
“They never stopped believing that Caesars was going to go back,” Indap said. “They thought they could turn things around and believed in fundamentals. The problem was that they were overpaying at the wrong time. I don’t think they ever got tired of the opportunity in Las Vegas.
Sambur said the Venetian and the Palazzo have been “well maintained” and provide Apollo with “pent-up opportunities for growth”. Las Vegas Sands’ investment focused on its resorts in Macau and Singapore, which the company will retain.
Both Las Vegas resorts have seen reinvestment, and Sambur noted the unfinished St. Regis Tower along the Strip that “has been draped” since 2011, three years after construction of the planned 600-meter condominium project halted. millions of dollars.
“When you buy a business from a larger parent company, there’s usually a lot of good capital and investment opportunities, just because there’s more competition for capital,” Sambur said.
He said the Venetian could decide to complete the tower through his own capital expenditure budget, finance the construction or enter into a financing agreement with VICI. Venetian will retain the license to operate, as with all other sale-leaseback agreements.
Sambur said that shortly after the Caesars acquisition closed, the recession and financial market crash of the mid-2000s set in.
“Lehman Brothers went bankrupt and the world started falling apart,” Sambur said. “We did everything we could to support the business.”
Caesars wasn’t the only game company to fail during this time. Station Casinos filed for Chapter 11 in 2009 and emerged in 2011. Additionally, former MGM Resorts International CEO Jim recognized in interviews, the company would have gone bankrupt if CityCenter had not been completed. Same Las Vegas Sands went bankrupt in 2008 until Adelson personally funded $1 billion into the company to shore up the balance sheet.
During Apollo’s ownership of Caesars, the company invested $2.4 billion in Las Vegas operations, including renovations to Caesars Palace, acquisition of Planet Hollywood, transformation of Imperial Palace into Linq Hotel and the renaming of the Barbary Coast as The Cromwell which included the development of Drai’s nightclub and day club on the roof of the property.
“Everything was done during our period of ownership,” Sambur said. “We were investing in Vegas and we knew the only way to solve our capital structure issues was to grow the business. But unfortunately, we just ran out of time.