Real Estate Transactions

9 Months Ended

Sep. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Real Estate Transactions

Real Estate Transactions

2024 Activity

Property Acquisitions and Investments

Venetian Capital Investment

On May 1, 2024, we entered into agreements to fund up to $700.0 million of capital investment into the Venetian Resort for extensive reinvestment projects through our Partner Property Growth Fund strategy (the “Venetian Capital Investment”). The Venetian Capital Investment will fund several projects, including hotel room product renovations, gaming floor optimization and entertainment and convention center enhancements, among others, seeking to improve the overall guest experience and enhance the value of the property. The invested capital will earn a return through the addition of incremental rent to the lease agreement for the Venetian Resort (as amended in connection with the Venetian Capital Investment, the “Venetian Lease”).

The up to $700.0 million of funding through the Venetian Capital Investment is comprised of $400.0 million that has already been funded and an incremental $300.0 million that the Venetian Resort will have the option, but not the obligation, to draw in whole or in part until November 1, 2026. The initial $400.0 million investment was funded based on a fixed schedule: $100.0 million was funded in the second quarter of 2024, $150.0 million was funded in the third quarter of 2024 and $150.0 million was funded on October 1, 2024. The previous Property Growth Fund Agreement entered into with the tenant in connection with the Venetian Resort acquisition in 2021 providing for up to $1.0 billion of future development and construction project funding was terminated on May 1, 2024 concurrently with the entry into the agreement to fund the Venetian Capital Investment.

In connection with the Venetian Capital Investment, annual rent under the Venetian Lease will increase commencing on the first day of the quarter immediately following each capital funding at a 7.25% yield (the “Incremental Venetian Rent”). In addition to any increase pursuant to the Incremental Venetian Rent, annual rent under the Venetian Lease will begin escalating annually at 2.0% on March 1, 2029 and, commencing on March 1, 2031, will begin escalating on the same terms as the rest of the rent payable under the Venetian Lease with annual escalation equal to the greater of 2.0% or CPI, capped at 3.0%. On July 1, 2024, the aggregate annual rent under the Venetian Lease increased by $7.3 million as a result of the first $100.0 million funding. Subsequent to quarter end, on October 1, 2024, the aggregate annual rent under the Venetian Lease increased by $10.9 million as a result of the additional $150.0 million funding that occurred during the third quarter.

We determined that the amendment to the Venetian Lease in connection with the Venetian Capital Investment represented a lease modification under ASC 842 pursuant to which we were required to reassess the lease classification. Upon reassessment, we determined that the Venetian Lease continues to meet the definition of a sales-type lease. Accordingly, since the classification remains unchanged, we modified the future minimum lease cash flows to reflect the amendment and prospectively adjusted the discount rate used to recognize income, incorporating the impact of the additional funding and related incremental rent in connection with the Venetian Capital Investment.

Real Estate Debt Originations

The following table summarizes our 2024 real estate debt origination activity to date:

(In thousands)
Investment Name	Maximum Principal Amount		Investment Type	Collateral
Great Wolf Mezzanine Loan (1)	$	250,000	Mezzanine	Portfolio of nine Great Wolf Lodge resorts across the United States
Chelsea Piers One Madison Loan	10,000		Senior Secured Loan	Certain equipment of the fitness club at the One Madison building in New York, New York, under development
Homefield Margaritaville Loan (2)	105,000		Senior Secured Loan	Margaritaville Resort in Kansas City, Kansas, under development
Total	$	365,000

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(1) In connection with the Great Wolf Mezzanine Loan, the $79.5 million mezzanine loan for Great Wolf Lodge Maryland was repaid in full.

(2) Simultaneous with entering into the loan agreement, we entered into a call right agreement that provides us with a call option on (i) the Margaritaville Resort, (ii) the new Homefield Kansas City youth sports training facility (“Homefield”), (iii) the new Homefield baseball center, and (iv) the existing Homefield youth sports complex in Olathe, Kansas. We also received a right of first refusal to acquire the real estate of any future Homefield property, should Homefield elect to monetize such assets in a sale-leaseback transaction. If the call option is exercised, all of the properties, including the Margaritaville Resort, will be subject to a single long-term triple-net master lease with us.