Hi there,

Today, we are going to review a deal in which a casino operator sells its properties to a real estate investor and then leases them back. The transaction involves one of Nevada's lesser-known gaming operators, Golden Entertainment (“Golden”), and VICI Properties (“VICI”), one of the largest gaming REITs in the United States.

Golden had been under pressure for some time. As a small public operator, it carried significant debt, faced larger and better-capitalized competitors, and attracted limited attention from public markets.

At the core of the deal is a sale-leaseback, which we explain in detail, along with the rationale companies use them for. We then introduce the two principal parties to the transaction, examine the factors that led Golden to consider this option, and outline the deal mechanics and the expected next steps.

Let's get started.

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Before moving into the transaction itself, it's worth taking a look at the underlying financing structure.

In a sale-leaseback, a company sells its real estate to an investor and simultaneously signs a lease to continue operating from the same premises. The seller receives a cash payment upfront, retires any related debt, and continues operating its business as before. The only material change here is that it now pays rent to occupy the property rather than owning the asset outright.

Sale-leasebacks offer certain straightforward benefits to the seller. For instance, a company with valuable property on its balance sheet has capital tied up in real estate that could otherwise be deployed in investment or operations. A sale-leaseback converts that illiquid asset into immediate liquidity.

For the buyer, the key appeal is the predictability of the income stream. The tenant is usually a creditworthy operating business with a strong incentive to operate from the same location. This is because relocating would disrupt operations and, in some industries, jeopardize regulatory licenses and customer relationships tied to that specific location.

The transaction pairs an operationally pressured small-cap operator with a specialized buyer built to underwrite gaming risk.

Golden Entertainment was assembled through a series of acquisitions led by Blake Sartini, who previously held a senior role at Station Casinos before founding Golden Gaming.

The current public company took shape in 2015 through the merger with Lakes Entertainment, followed by the acquisition of several properties including the famous hotel The Stratosphere (“STRAT”) in a transaction valued at $815 million.

By late 2025, Golden was still generating cash, but the broader picture was becoming less convincing for public market investors. Adjusted EBITDA fell to $140.0 million, the stock remained thinly traded, and the company received limited analyst attention despite owning valuable real estate.

Pressure was concentrated in the Nevada Casino Resorts segment, especially at The STRAT, where management pointed to lower occupancy and visitation. That left Golden with a familiar problem: strong underlying assets, but a weaker operating story.

VICI Properties is a real estate investment trust formed in 2017 through the restructuring of Caesars Entertainment. It owns experiential real estate, with a portfolio heavily weighted toward gaming properties leased to operators on long-duration terms.

As of year-end 2025, VICI owned 93 properties across the United States and Canada. Caesars and MGM remained its two largest tenants, accounting for 39% and 35% of annualized rent, respectively. The company also held investment-grade credit ratings and reported full portfolio occupancy.

For VICI, the deal was a way to add exposure to the local market. Unlike the Las Vegas Strip, which depends on more volatile tourism flows, Golden’s suburban assets serve a resident customer base with more recurring gaming demand.

VICI was buying properties backed by 1.9x property-level rent coverage (meaning the properties were generating nearly twice the cash flow needed to cover rent), while also bringing in a new tenant, Sartini, with strong incentives to ensure the economics held up.

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Now the key question is why this transaction made sense for Golden in the first place. The answer lies less in the sale-leaseback itself and more in the limits of Golden’s position as a listed company.

A public company with mixed earnings profiles

By 2025, Golden owned two fundamentally different businesses. Its Nevada locals and tavern operations were steady while the resort segment - anchored by The STRAT - was cyclical, capital-intensive, and exposed to tourism swings.

Golden’s filings show that resort performance was under pressure from lower visitation, lower hotel occupancy, and higher labor costs at The STRAT, while locals were more resilient.

As they were packaged together in a single stock, neither business got a fair valuation. Locals investors didn't want resort risk. And, resort investors wanted scale that Golden didn't have. The result was a discount on both.

Why the issue went beyond The STRAT

The STRAT made things worse, but didn't create the problem. The real damage was to Golden’s public market position rather than its results alone. Golden was no longer a clean local operator, but it was also not large enough to trade like a major diversified gaming company.

Once the resort started dragging on reported numbers, it became the lens through which the whole company was viewed. The stronger parts of the portfolio were no longer enough to support the valuation.

The board had already been reviewing strategic alternatives in light of industry conditions and operating performance. That suggests the transaction was the endpoint of a broader strategic review rather than a sudden response to one underperforming asset.

Why the standalone OpCo route fell short

The obvious alternative was to sell the real estate and keep the operating company public. But the proxy shows that the independent committee did not view that route as attractive.

The issue was broader than rent. A smaller listed gaming operator would still have faced weak trading comparables, limited stock liquidity, reduced operating flexibility, continuing capex needs, debt service, and the cost of remaining public.

A standalone public OpCo after a REIT sale was unlikely to attract investors. The deal was driven not only by the appeal of VICI's offer, but equally by the weakness of the main alternative.

Once it became clear that Golden’s public structure was no longer working, the focus shifted to whether any transaction could actually solve it.

Why structure is rather relevant in this deal

Structure was a major part of the answer, especially from a tax standpoint. Golden’s board recognized early that a straight cash sale of the real estate could create significant tax leakage for both the company and its shareholders. The proxy is clear that preserving value requires a counterparty that could support a more tax-efficient structure.

That helps explain why the final transaction was more complex than a simple asset sale. The goal was to separate the real estate from the operations while deferring a meaningful portion of the tax cost that a cash transaction could have triggered, making the structure a key driver of value preservation.

A process with few credible alternatives

Another important point was the lack of credible alternatives. The market check and the go-shop did not produce a wider field of serious buyers. Macquarie contacted 20 parties, and after excluding those already involved, 15 declined, and 3 did not engage.

The process suggests the transaction was difficult to replicate. A buyer of the full company would have had to underwrite mixed operating assets, gaming regulation, real estate separation, and a lease-backed structure. A real estate buyer, by contrast, could address the property value but not the future ownership of the operating company.

That is why the VICI and Sartini combination appears less like one option among many and more like the clearest structure available to address the real estate value, manage the tax issue, and place the operating business in private hands.

Why VICI and Sartini made sense together

The final driver was sponsor fit. VICI was built to own gaming real estate under long term triple-net leases and had both the balance sheet and underwriting framework to do that. Sartini, in turn, was positioned to take back control of the operating business in a private setting. VICI’s own disclosure states that the lease obligations would be guaranteed by a holding company owned and controlled by him.

That allocation made the logic of the transaction fairly clear. VICI got the real estate. Sartini kept the operating platform. Public shareholders were taken out of a structure that had stopped working well as a listed company.

The key issue is simple: were shareholders paid a fair price for Golden’s assets and earnings power at the time of the sale, or were they cashed out before the structure could be improved and revalued in private hands?

The board had a credible case. Shareholders were offered a 41% premium to the unaffected share price. The special committee ran a formal process, obtained a fairness opinion, and no higher bid emerged during the go shop. On that view, the transaction provided a clean exit from a company whose public market position had weakened.

On the other side, the criticism was also easy to follow. Everbay Capital (shareholder) argued that the operating business was being sold too cheaply and that the bundled structure left shareholders with no way to support the real estate sale while rejecting Sartini’s acquisition of the OpCo.

Critics could also point out that the transaction came when Golden’s share price was already under pressure. That made the premium look more compelling, even if the underlying valuation remained open to debate.

Now that shareholders have approved the transaction, the process itself is largely resolved. The harder issue is valuation: did the price reflect Golden as it stood in public markets, or Golden after a private owner had the chance to reposition it?

The board concluded that the offer was fair given the company’s limited alternatives. Critics took the opposite view and saw future upside passing to the buyer at the point of exit. The answer will depend on what Sartini is able to do with the business once it is private.

That’s the newsletter for today!

As always, feel free to share feedback or suggestions on future topics you’d like covered.

Until next time,
PE Bro

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