During Apollo Global Management’s 90-minute appearance before the Nevada Gaming Control Board, board members questioned the wisdom of returning such a dividend so quickly and whether Apollo was taking steps to prepare itself for a potential recession. In the end, however, the three-member board recommended the Nevada Gaming Commission approve the distribution to Apollo’s shareholders, primarily pension funds and other institutional investors.

Apollo closed its purchase of the Venetian and Palazzo from Las Vegas Sands late last February following Commission approval. LVS sold the resorts, convention center, and adjacent land where the MSG Sphere is being built for $6.25 billion. VICI Properties bought the land, while Apollo acquired the operations and leases the property from VICI starting at $250 million a year.

Sonya Vermeys, a partner and gaming attorney at Brownstein Hyatt Farber and Schreck, told the Board that the acquisition was funded from Apollo equity capital and $50 million was allocated to the Venetian’s balance sheets to ensure the business was well capitalized after the transaction. Affiliates of Apollo also provided a first-lien revolving-credit facility to finance the ongoing capital needs of the Venetian, Vermeys said. It now plans to recapitalize the Venetian and distribute cash to equity holders and Venetian employees.

“This recapitalization plan is supported by the Venetian’s very strong financial position and the pending favorable financial transactions with J.P. Morgan Chase Bank,” Vermeys said.

Robert Brimmer, CFO of the Venetian, told the Board that the property has had an “exceptional start” over the first eight months of ownership, is “well above our expectations,” and is performing sooner than expected. The proposal for dividends “is a reasonable financial transaction to undertake,” he added.

“We’re run-rating north of $600 million of (adjusted earnings) for the business relative to 2019,” Brimmer said. “We’re up 27%. This is a very broad-based recovery across our business. You’re aware of the strength in the gaming numbers, but the hotel, food and beverage, and most importantly our meeting and convention business is recovering very nicely. To us, it appears to be a very durable recovery and our most recent numbers for October were the best numbers we’ve had in the last 10 years.” Brimmer said they’ve made a number of improvements to drive the business, such as using their bars and four theaters more and investing in gaming capacity (adding slot machines) to capture demand. The hotel has one of the smallest gaming floors per room and Brimmer said they’re trying to expand that.

“There have been market tailwinds,” Brimmer said. “Everyone in the marketplace has seen tremendous growth. I think what we’re doing is differentiated and we’re gaining revenue and profit share.”

By Buck Wargo