Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- VICI Properties Inc (VICI, Financial) reported a strong blended investment yield of 7.9% from recent capital commitments.
- The company has a robust liquidity position with approximately $3.2 billion in total liquidity.
- VICI Properties Inc (VICI) raised its AFFO guidance for 2024, expecting year-over-year AFFO per share growth of 4.7%.
- The company continues to benefit from the strong performance of its Las Vegas assets, with record-breaking passenger numbers at Harry Reid International Airport.
- VICI Properties Inc (VICI) maintains a highly efficient triple net model with strong margins in the high 90% range and the highest net income margin in the S&P 500.
Negative Points
- The decision not to exercise the call right to acquire certain assets may raise questions about future growth opportunities.
- There are concerns about potential consumer weakness, particularly at the lower end, which could impact some of VICI Properties Inc (VICI)'s tenants.
- The company faces significant debt maturities in the first half of 2025, which will require effective refinancing.
- There is uncertainty regarding the impact of potential legislative changes on regional gaming markets.
- The company's exposure to Las Vegas, while beneficial, also poses a risk due to the concentration of assets in one market.
Q & A Highlights
Q: As you think bigger picture on deals you might do going forward and the options that you might create, does the way this one ended up working out impact how you structure options in the future?
A: John Payne, President, Chief Operating Officer: It is important to understand that this was a strategic decision based on capital allocation and portfolio management. We have great conviction with the opportunities in front of us that will further our tenant and geographic diversity. We will continue to think about the length and timing of options as we negotiate future deals.
Q: Can you comment further on what sort of international opportunities you think could come up over the medium term?
A: John Payne, President, Chief Operating Officer: We have spent time in Australia, New Zealand, Europe, and the UK. We see opportunities to diversify not only in location but with new tenants as well. The greatest opportunity we see is still in casino gaming, both domestically and internationally.
Q: How are you thinking about your strip land and development these days?
A: Edward Pitoniak, Chief Executive Officer: We are great believers in the Las Vegas ecosystem. We are comfortable continuing to invest incremental capital in Las Vegas because it is a one-of-a-kind destination. This includes putting money into assets we already own and considering future potential investments in our vacant land.
Q: Does the current consumer weakness lead you to change how you're looking at the current acquisition pipeline?
A: Edward Pitoniak, Chief Executive Officer: We are focusing on categories of experiences that generally target the middle to higher end of the market. The current consumer weakness has not caused concern for us yet, especially since we, as a net lease asset owner, are not exposed to the variability in consumer spending.
Q: How should we think about the variable component of the Caesars lease coming up in November?
A: David Kieske, Chief Financial Officer: We are entering lease year eight with Caesars, which includes a variable component. Based on the data we are collecting, it should be relatively neutral to no impact on our escalation in November 2024.
Q: Why make an announcement today about not moving forward with the Indiana assets when you had until the end of the year to decide?
A: Edward Pitoniak, Chief Executive Officer: The strategic factors that went into our decision are not going to change over the next five months. In fairness to our partners at Caesars and to be efficient with management time, we decided to announce it today.
Q: How do you think about underwriting gaming assets today, particularly in terms of four-wall coverage and cap rates?
A: Edward Pitoniak, Chief Executive Officer: We want our capital investments to pass the test of being the highest and best use of our capital. We continue to refine our thinking on what will drive the strongest continuous improvement in our actions and cost of capital, including tenant diversity, geographic diversity, tenant credit quality, and rent coverage.
Q: Are there any legislative issues on the horizon that could impact regional gaming?
A: John Payne, President, Chief Operating Officer: We continue to monitor opportunities in the United States and around the world. This includes potential changes in gaming legislation and the emergence of new supply in regional gaming markets.
Q: How large do you forecast the experiential credit solutions strategy to become?
A: David Kieske, Chief Financial Officer: Our credit book today is $2.2 billion, about 4% to 5% of total assets. It allows us to develop new partnerships and relationships, and we will continue to use it as a tool to expand both domestically and internationally.
Q: How important is Great Wolf as a defensive entertainment option in a recessionary environment?
A: David Kieske, Chief Financial Officer: Great Wolf and the broader indoor waterpark sector have shown economic vitality. They have multiple cash registers, including waterparks, entertainment centers, food and beverage, and lodging. They seem to open quickly and produce a lot of cash flows, making them a resilient investment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
