Bowlero Corp., the overseer of nearly 350 bowling centers including Lucky Strike, AMF, and Bowl America, experienced a significant increase in its share value on Friday, following a $432.9 million sale-leaseback agreement with VICI Properties (NYSE:VICI) Inc. This deal involved 38 centers across 17 states and is expected to support new builds, debt clearance, corporate functions, and capital outlays for acquisitions and conversions. The long-term lease obligation carries no EBITDA impact and includes a 25-year initial term with a $31.6 million annual rent.
VICI Properties Inc., an experiential real estate investment trust headed by John Payne and David Kieske, purchased the real estate assets of these 38 bowling entertainment centers from Bowlero Corp., under the leadership of Thomas Shannon. This agreement has extended VICI's presence into 11 new states, propelling the company into a $15+ billion experiential category and contributing 1% to its rent roll from Bowlero. This move aligns with the InvestingPro Tip that VICI is a prominent player in the Specialized REITs industry.
The deal includes a 25-year triple-net master lease with Bowlero, boasting an acquisition cap rate of 7.3%, an initial annual rent of $31.6 million, and six 5-year tenant renewal options secured by Bowlero Corp. Additionally, VICI obtains first rights to acquire current or future Bowlero properties for eight years if Bowlero undertakes another sale-leaseback transaction.
This strategic acquisition diversifies VICI's tenant base and geographic reach while enhancing its growth pipeline. J.P. Morgan served as VICI's financial advisor in the transaction, leaving the company with $431 million in cash and cash equivalents and $2.3 billion of availability under its revolving credit facility. As per InvestingPro data, VICI has a robust market cap of $28.31 billion USD and a P/E ratio of 12.72, indicating that it's trading at a low earnings multiple, another InvestingPro Tip.
Despite a 24% share depreciation over the year for Bowlero Corp., it maintains a Strong Buy rating with an impressive potential upside of 66.4% at a price target of $18.14. This surge in shares occurred in a challenging macro environment, demonstrating the resilience of the company. VICI, known for owning properties like Caesars (NASDAQ:CZR) Palace Las Vegas, continues to grow its presence in the experiential real estate sector through this deal with Bowlero. The company's growth prospects are further highlighted by its revenue growth of 80.4% as per InvestingPro data.
VICI's strong financial performance is reflected in its gross profit of $3314.12 million USD and operating income of $2909.31 million USD, according to InvestingPro data. The company's dividend yield stands at 5.91%, which is significant considering that VICI has raised its dividend for five consecutive years, a fact highlighted in the InvestingPro Tips.
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