VICI Properties - Q4 2023

Transcript

Operator (participant)

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the VICI Properties' fourth quarter and full-year 2023 earnings conference call. At this time, all participants are in listen-only mode. Please note that this conference call is being recorded today, February 23rd, 2024. I will now turn the call over to Samantha Gallagher, General Counsel with VICI Properties.

Samantha Gallagher (Executive VP, General Counsel and Secretary)

Thank you, Operator, and good morning. Everyone should have access to the company's fourth quarter and full-year 2023 earnings release and supplemental information. The release and supplemental information can be found in the Investors section of the VICI Properties website at www.viciproperties.com. Some of our comments today will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements, which are usually identified by the use of words such as will, believe, expect, should, guidance, intends, outlook, projects, or other similar phrases, are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. I refer you to the company's SEC filings for a more detailed discussion of the risks that could impact future operating results and financial conditions.

During the call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available on our website in our fourth quarter and full-year 2023 earnings release, our supplemental information, and our filings with the SEC. For additional information with respect to non-GAAP measures a certain tenants and/or counterparties discuss on this call, please refer to the respective companies' public filings with the SEC. Hosting the call today, we have Ed Pitoniak, Chief Executive Officer, John Payne, President and Chief Operating Officer, David Kieske, Chief Financial Officer, Gabe Wasserman, Chief Accounting Officer, and Miriam Roklowski, Senior Vice President of Capital Markets.

Ed and team will provide some opening remarks, and then we will open the call to questions. With that, I'll turn the call over to Ed.

Edward Pitoniak (CEO)

Thank you, Samantha, and good morning, everyone. I'll start this morning with a few words about 2023 VICI accomplishments and the way forward. John Payne will share our 2024 growth approach, and David Kieske will discuss our 2023 financial results and our 2024 guidance. Last night, we announced final 2023 AFFO per share of $2.15, representing year-over-year per share growth of 11.8%. VICI's 2023 AFFO growth will likely make VICI one of the 2023 income growth leaders among the 29 S&P 500 REITs that report AFFO per share. There are 30 S&P 500 REITs overall, representing approximately 90% of the U.S. REIT equity market capitalization at year-end. VICI's 2023 growth is largely the result of work we did in 2022, forging new relationships and new investments in both gaining and non-gaining both property acquisitions and property credit investments.

I'm proud of our 2023 AFFO per share growth, but I'm also proud of what the VICI team did in 2023 to continue to produce growth for 2024 and beyond. Our investment activities in 2023 produce growth in our portfolio quality, geographic diversity, tenant diversity, and income. Indeed, when it comes to 2024 income growth, as David will discuss in a moment regarding our 2024 guidance, we expect our projected 2024 AFFO per share growth should put VICI well into the top half of the S&P 500 REIT 2024 AFFO per share growth table. It wasn't easy to produce future growth in 2023. It was tough to navigate in 2023.

Most days in 2023, and frankly, most days in 2024 so far, remind me of my days living and working in Whistler, British Columbia, where our very challenging coastal mountain environment could result in days so foggy and whited out that we'd describe such days as skiing inside a milk bottle. But even amidst this low visibility, the VICI team kept pioneering in 2023. We invested in new geographies, including three new countries, and through our Bowlero acquisition in U.S. non-commercial gaming states such as Texas, California, and North Carolina. We invested in new categories such as family recreation and youth sports. We expanded our partnerships with pilgrimage brands like Cabot and Canyon Ranch. We acquired the primary leasehold interest in New York's incomparable Chelsea Piers.

Through our position as the leading owner of real estate on the Las Vegas Strip, we continue to work with our Las Vegas partners to capitalize on Las Vegas's leadership position in global entertainment and hospitality. I strongly believe VICI's investment in Las Vegas is one of the most compelling investments in the current global commercial real estate investing landscape. As we set out in our earnings release last night, in 2023, we announced and closed $1.8 billion of capital acquisitions and investments within the year. Note that these figures do not include the $2.8 billion closing of our Mandalay Bay MGM Grand joint venture in early January 2023, which we announced in early December 2022, including our assumption of the remaining $1.5 billion of CMBS debt. Of fundamental importance, our 2023 investing in gaming and non-gaming was accretive.

Our announced 2023 capital investments were made at a blended initial unlevered investment yield of 7.7%. Our 2023 investing was also balance sheet enhancing. We funded this $1.8 billion of investment with approximately $1.6 billion of cash and equity and only about $200 billion of incremental debt, achieving an equity-to-debt funding ratio on that investment activity of 8:1, demonstrating our commitment to our long-range net leverage target of 5.0-5.5 times net debt to adjusted EBITDA. As we look ahead within 2024, despite the continued cloudy macroeconomic conditions and outlook, we begin 2024 with approximately $1.2 billion of cash and forward equity resources to deploy into continuing accretive growth. Needless to say, in a macro environment of constrained capital conditions, we believe our capital resources can and will be attractive to gaming and experiential operators who want to grow and/or need liquidity.

Finally, in 2024, we will continue to build a portfolio of quality. You've heard me say before that I believe VICI is the pioneer in bringing Class A real estate to net lease. By Class A, we mean real estate of great scale, great quality, and high mission criticality. And VICI enables investors to own Class A real estate within the strong economic transparency and integrity of the net lease model. What we can, must, and will do is continue to enable existing and potential VICI investors to understand fully the scale, quality, and mission criticality of our Class A real estate. To that end, we are proud to announce that we're launching today the VICI Properties Photo Book, a digital coffee table-style book that brings to life the magnificence of the real estate owned by VICI. You can view this book online at our website, www.viciproperties.com.

I thank Hays Honey of our team for her great work in producing and publishing this book. I strongly encourage you to give this book a good viewing. If you're a VICI shareholder, I believe the book will give you great pride in what you own. And with that, I'll now turn the call over to John.

John Payne (President and COO)

Thanks, Ed. Good morning to everyone. In 2023, VICI was able to navigate a volatile broader market backdrop, particularly for REITs, and consistently deployed capital in accretive manners throughout the year. Over the course of 2023, we deployed $1.8 billion at a blended yield of approximately 7.7% across investments that expanded our geographic reach domestically and internationally, broadened our investable universe across gaming, hospitality, and family entertainment, and deepened our ability to invest creatively through property-related credit investments. Our ability to transact successfully last year was due in part to the multi-year effort I've mentioned before on our earnings calls. Every day at VICI, our team shows up for work and focuses on developing and maintaining relationships with best-in-class, growth-oriented operators.

While some REITs describe themselves simply as a landlord and position themselves to extract value from their tenants, we view ourselves as a long-term capital partner collaborating with our tenants to create value. This philosophy of serving as a capital partner and prioritizing relationships with operators who pursue growth energetically serves as our compass as we assess and underwrite opportunities in the current environment, an environment that is characterized by low visibility and fluctuating cost of capital. To that end, many of you have heard me speak over the years about our focus on growth, and it's also important to understand that there have been numerous situations in which we elect to not pursue opportunities. VICI is in the very fortunate position to have created significant shareholder value over the years.

For example, we've grown our AFFO per share at an 8.5% CAGR from 2018 through 2023, while our dividend has grown at a comparable high single-digit rate, and we do not believe we need to pursue growth purely for the sake of growing. For those of you who may be newer to our story, I would like to touch on a few elements of our growth pillars that have allowed us to successfully complete $36 billion of accretive transaction volume in a little over six years. Number one, we work collaboratively with operating partners, investing in growth opportunities and funding high ROI capital projects in order to achieve mutually beneficial outcomes.

Number 2, as the only S&P 500 REIT predominantly invested in the gaming industry, given 90% of our rent roll is derived from gaming investments, our team travels far and wide, visiting properties, studying new markets, assessing the landscape, and meeting with operators across regional, Las Vegas, and even international locations. Number 3, we're supplementing our gaming investments with opportunities in experiential sectors that we believe are positioned to benefit from secular tailwinds. We focus on sourcing transactions with operators who are positioning themselves for growth, including through roll-up in an industry, much as you saw with our Cabot and Bowlero transactions announced in October of last year.

Finally, number four, we constantly keep our eyes open for opportunities where VICI can get better by getting bigger, as demonstrated through the acquisition of MGM Growth Properties in 2022, which significantly expanded our footprint in Las Vegas, added Class A market-leading regional assets to our portfolio, improved our balance sheet to investment grade, and has positioned us for a long-term partnership with MGM Resorts, a world-class gaming, hospitality, and leisure operator. As we dive further into 2024, we hold firm to the criteria that has driven much of our track record to date while executing across our strategic pillars. In particular, we are adhering to prudent underwriting standards, ensuring your capital is appropriately compensated as we assess risk and pursue opportunities across different properties, markets, and asset classes.

And as I said earlier, we maintain a preference for growth-focused operators with our entire team evaluating a partner's track record and, importantly, their use of proceeds, which typically explains intentions behind pursuing a transaction. We ultimately believe the right partnerships lead to the right opportunities, which feeds the flywheel of value creation through collaboration. We believe our commitment to developing and deepening relationships with great operators of all shapes and sizes, combined with our strong balance sheet and liquidity position, will afford us the ability to continue executing accretive deals during a time when other REITs may be stuck "skiing inside a milk bottle." Now I'll turn the call over to David, who will discuss our financial results and guidance. David.

David Kieske (Executive VP and CFO)

Thank you, John. It's great to speak with everyone today, and we appreciate your time. I want to start with our balance sheet. 2023 exemplifies the continued discipline we have maintained over our 6+ years of existence by ensuring that we allocate capital accretively, have a balance sheet and liquidity profile designed to weather all cycles, and provide the safety and protection our equity and credit partners deserve. During the year, we raised over $1.6 billion in forward equity. In January of 2023, we raised approximately $1 billion in gross forward equity proceeds at a $33 price per share. Those proceeds were used throughout the year to accretively fund our transactions. We utilized our ATM program throughout 2023, raising $643 million in gross forward proceeds. That amount includes $390 million, which was raised in Q4 through the sale of 13.2 million shares via the forward and remains outstanding today.

Subsequent to year-end, in Q1 2024, we sold 9.7 million shares, raising $306 million in gross proceeds under our ATM via the forward. This brings our total outstanding forward equity to just under $700 million, bolstering our overall liquidity. Currently, we have approximately $3.5 billion in total liquidity, comprised of $523 million in cash, cash equivalents, and short-term investments as of December 31, 2023, $696 million of proceeds under our outstanding forwards, and $2.3 billion of availability under the revolving credit facility. In addition, our revolving credit facility has an accordion option, allowing us to request additional lender commitments of up to $1 billion. As we begin 2024, we believe we are extremely well-positioned to navigate the current environment and do not need to raise any incremental capital as we sit here today. In terms of leverage, our total debt is currently $17.1 billion.

Our net debt to fourth quarter adjusted EBITDA, annualized for a full year of activity from our recent acquisitions and excluding the impact of unsettled forward equity, is approximately 5.5 times within our target leverage range. We have a weighted average interest rate of 4.35%, taking into account our hedge portfolio that we utilized in connection with our April 2022 inaugural investment grade offering, and a weighted average 5.9 years to maturity. As of December 31st, we have entered into a series of forward-starting interest rate swap agreements ahead of our May 1st $1.05 billion bond maturity, which has an aggregate notional amount of $500 million. This portfolio has an effective treasury rate of 4.04%. Just touching on the income statements, AFFO per share was $0.55 for the quarter, an increase of 8.8% compared to $0.51 for the quarter ended December 31, 2022.

For the full year 2023, AFFO per share was $2.15, an increase of 11.8% compared to $1.93 for the full year 2022, and as Ed mentioned, making VICI one of the leaders across the S&P 500 REITs. Our results once again highlight our highly efficient triple net model, given the increase in adjusted EBITDA as a proportion of the corresponding increase in revenue, and our margins continue to run strong in the high 90% range when eliminating non-cash items. Our G&A was $15.3 million for the quarter, and as a percentage of total revenues, was only 1.6%. This continues to be one of the lowest ratios in not only the triple net sector but across all REITs. Turning to our guidance, and as you saw in our release last night, we are initiating AFFO guidance for 2024 in both absolute dollars as well as on a per-share basis.

AFFO for the year ending December 31, 2024, is expected to be between $2.32 billion-$2.355 billion, or between $2.22-$2.25 per share. Based on the midpoint of our 2024 guidance, VICI expects to deliver year-over-year AFFO per share growth of 4%, a very attractive starting point as we begin 2024. Just as a reminder, our guidance does not include the impact on operating results from any announced but unclosed transactions, interest income from any loans that do not yet have final draw structures, possible future acquisitions or dispositions, capital markets activity, or other non-recurring transactions or items. As we've mentioned previously, we record a non-cash CECL allowance on a quarterly basis, which, due to its inherent unpredictability, leaves us unable to forecast net income and FFO with accuracy.

Accordingly, our guidance is AFFO-focused, as we believe AFFO represents the best way of measuring the productivity of our equity investments and evaluating our financial performance and ability to pay dividends. With that, operator, please open the line for questions.

Operator (participant)

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Anthony Paolone with J.P. Morgan. Your line is open. Please go ahead.

Anthony Paolone (Executive Director)

Yeah, thank you. Good morning. I guess my first question is just whether or not you could put some dimensions around your deal pipeline right now, either whether it's skewed somewhere geographically, size, and maybe yields?

Edward Pitoniak (CEO)

I'll start, Tony, and good morning. Good to speak with you, and then John and David can kick in. I would say that in the spirit of our opening remarks, we're obviously sober, as you've heard from other REITs in recent weeks like Agree Realty and Realty Income. We're sober about the marketplace. We're sober about the capital markets, and we're pretty sober about what kind of activity may be available to us. And yet, having said that, John and the team continue to work the trap lines in such a way that we have a number of conversations going on, both in gaming and non-gaming, that have us very excited, and John can talk about that in a moment.

The other point I want to emphasize, Tony, is that the magnitude of what we own brings with it opportunities you wouldn't necessarily find in other REITs, given the nature of the property they own, especially when we look at Las Vegas, where we've got, I think, John, 40,000-odd hotel rooms. If you look just at an asset like the Venetian, which, including parking, is 17 million sq ft, given what's going on there, given the impact of this Sphere, the opportunity of Patrick Nichols and the team to continue to asset manage, maximize the productivity of that asset is so, so strong.

I mean, it's a magnitude of building, and again, this goes back to my opening remarks, that we are going to continue to help the investment marketplace understand a magnitude of building such that there are 300,000 sq ft inside the 17 million sq ft that have never gone past the concrete stage: concrete floors, concrete walls, concrete ceiling, 300,000 sq ft unfinished. And with the job that the team at the Venetian is doing to maximize that asset, especially taking advantage of this sphere, that represents incremental investment opportunity or growth opportunity for us that you wouldn't likely find in most other REITs generally and certainly not in triple net lease REITs generally, which tend to have assets of 10,000 sq ft, not 17 million sq ft. But John, you want to add to this?

John Payne (President and COO)

Tony, you can hear from Ed's comments. He spent some time in Las Vegas recently, which I have as well. You asked a question about what sectors and I also think what locations. We obviously have been spending a lot of time in Las Vegas. We're very proud of our partner's success there, and it looks like 2024 is going to be a great year as well. As you heard from my remarks, we continue to look at different target sectors, whether in wellness and indoor water parks, pilgrimage, golf, family entertainment center. We made our first investment in youth sports, which we like the mixed use of youth sports. I continue to spend my time with my team and really the whole company looking at a variety of these and checking the boxes of which ones could make for long-term investments.

There are some sectors that we don't talk about that we've kind of checked off the list that says this is not right for our capital at this time. But we shouldn't confuse that the casino business continues to be a real focus of our company and one that we just can't be more proud of the operators and what they've done in 2023 and what we see in 2024.

Anthony Paolone (Executive Director)

Okay. Thanks. And then just I have one kind of detail follow-up maybe for David because I was asked this a couple of times overnight. Just in your guidance, just remind us how you're treating the forward equity in the guidance share count, what goes in there or not.

David Kieske (Executive VP and CFO)

Yeah, Tony, there's no implied use of proceeds or drawdown. There's a little bit of impact from treasury stock dilution in the ultimate share count, but that's the only impact.

Anthony Paolone (Executive Director)

Okay.

Edward Pitoniak (CEO)

Another way of putting it, Tony, is we're not assuming any credit or horsepower from the funding, and we're taking actually a marginal penalty by virtue of having it on our books. Well, technically, we don't have it on our balance sheet, but given the treasury stock method.

Anthony Paolone (Executive Director)

Okay. Understand. Thank you.

Operator (participant)

Renata and Barry Jonas with Truist Securities. Your line is open. Please go ahead.

Barry Jonas (Managing Director)

Hey, guys. Good morning. I wanted to start with the Caesars Center call option. Can you maybe just walk through different considerations as you're thinking about exercising it and specifically timing of that? Thanks.

Edward Pitoniak (CEO)

Well, clearly, Barry, we want to be as opportunistic as we can be within our timing, given the inherent nature of a call option. Obviously, that timing will be predicated on what our cost of funding is. I don't think it would come as any surprise to anybody that we certainly would not choose to exercise our call option if, in doing so, we were creating dilution, which we don't ever want to do. So going back to the theme of skiing inside a milk bottle, the visibility through 2024, given its current state, is such that it's hard to predict with any kind of exactitude exactly when the right time would be.

Barry Jonas (Managing Director)

Got it. Got it. And then, Ed, maybe just more a higher-level question. You've done deals with Native American tribes on commercial land before, but I was hoping you could talk more about the puts and takes with doing some type of deal structure on tribal land. There's clear risks there, but it's something banks and debt investors have been able to overcome, and I think it's a sizable market with clear financing needs. Thanks.

Edward Pitoniak (CEO)

Yeah. I'll start, and I'll turn it over to John. Barry, I read the notes from that recent session that you had, which were really interesting to read. I know one of the participants in your session sounded rather, I won't say bullish, but seemed to say that there may be means to do it. I will tell you with complete candor, we haven't exactly figured out how that would work yet, John, right?

John Payne (President and COO)

But Barry, you touched on, we've been really excited to build relationships with three tribes in the commercial sector, and it's something that we can continue to talk with them and other tribal partners that we've gotten to know to see, could there be an opportunity to help them grow on their nation's land? But we have primarily been focused with our partners on the commercial sector, and we'll continue to study that opportunity because, as Ed said, we saw the study or the report that came out as well.

Barry Jonas (Managing Director)

Great. Thank you so much.

Operator (participant)

Our next question comes from Caitlin Burrows with Goldman Sachs. Your line is open. Please go ahead.

Caitlin Burrows (VP)

Hi. Good morning, everyone. I guess you guys have made it clear that a significant part of your business could be repeat business. So can you talk about maybe the pipeline and if we should see some repeat business in 2024 and/or continue to see new operator partners pop up?

John Payne (President and COO)

Yeah. Good morning, Caitlin. Very good question you ask. No question that we continue to meet with our 13 partners currently in gaming and non-gaming and talk about how our capital can help them grow over the coming years. And as Ed alluded to, the boxes that are in, I shouldn't even call them boxes, in Las Vegas. The amazing resorts we own with partners in Las Vegas could provide with a lot of opportunity in the relatively near future and in the coming years as those partners look to grow, whether that's in hotel rooms, new restaurants, new attractions. Ed mentioned, obviously, the sphere that sits on our land. We weren't involved in the building, or they're not necessarily our direct tenant.

But we see that as a pillar of growth for our company over the coming years, not only in Las Vegas but in our regional assets because there are large regional assets, whether that's the MGM assets in National Harbor or in Detroit. There are opportunities to grow as well. And then I think your second part of the question is, are we looking to continue to expand our tenant roster? And the answer is absolutely. Me, my team, Ed, David, Sam, anyone else in the company is out forging new relationships to see if there's new sectors or new companies that we can use our capital to help them grow. So I wouldn't be surprised if you see some new operators or new tenants in our roster over the coming year.

Edward Pitoniak (CEO)

Caitlin, let me just add on to that a little bit. Obviously, there have been questions, understandably, as to, "Geez, VICI, why don't you just why don't you just do gaming and only gaming?" As we have emphasized on many, many occasions, we are still, for all the time remaining, going to be intensely focused on gaming, given what a great business it is within VICI's real estate. But one of the real benefits of investing in other experiential categories is, well, first of all, comes with the fact that it's just fundamentally great real estate occupied by operators who offer very rich and profitable experiences to their end customers. So that's the fundamental reason to invest in other experiential. It's fundamentally good real estate. The second dimension to that is that it gives us a chance to grow when growth may not be available for gaming.

Related to that, and this goes back to your initial question, Caitlin, one of the advantages we see in experiential operators like a Cabot, like a Canyon Ranch, like a Bowlero, like a Great Wolf, is they have network growth opportunities that are not as readily available to our gaming operators. The nature of growth in new stores and gaming is such that it is always subject to very strict regulatory control. For a Cabot, as an example, on the other hand, they have a global growth opportunity that can be seized with great energy and does not suffer the restrictions or the slowing down of cadence that tends to apply to gaming operators attempting to grow their network other than through M&A.

Caitlin Burrows (VP)

Got it. No, that makes a lot of sense. And then maybe just back to the pipeline a bit. You guys were active with both sale-leasebacks and lending over the past 12 or so months despite a quiet CRE transaction market. And I know you mentioned how you're sober to the current situation, but you guys continue to invest in 2023. So I was wondering if you could give some more detail on the pipeline today, maybe size, mix, and how that makes you think more specifically, maybe the first half of 2024 activity could end up being or what that could be like.

David Kieske (Executive VP and CFO)

Yeah. Caitlin, it's David. Great to hear from you. Thanks for joining today. Look, the nature of our capital is relationship capital, and that's where we've been active, both, as you just mentioned, on the loan side as well as the sale lease back side. And as John talked about in his comments, solving our partners' objectives and being a source of growth capital. And sometimes that growth capital comes in the door day one, like you saw with our Homefield opportunity where they're building a facility and going to construct a very, very, very attractive experiential, both sports and hotel asset, which will lead to a sale lease back. So we're always out talking about ways that we can help our partners grow and to kind of put it in a percentage basket of X amount in loans and X amount in sale lease backs.

That's just how we look at it or how we kind of parse our pipeline. It's about finding the great partners that we've talked about on this call.

Caitlin Burrows (VP)

Okay. Thank you.

Operator (participant)

Renata and Haendel St. Juste with Mizuho. Your line is open. Please go ahead.

Robert Yawger (Managing Director)

Hi. Good morning. This is Robbie Yawger on the line for Haendel. Hope you all are doing well. I just noticed that the MEZ lending and construction financing is becoming a larger proportion of your capital deployment strategy. How should we think about the sizing of that relative to your broader acquisition pipeline, and how are you underwriting those return requirements, and how that's changed over the last 6-12 months? Thanks. Hey, Robbie. It's David. Good to hear from you. I caught your question. It's how we think about kind of the spread on those MEZ loans, especially around development. Look, there's a couple of ways that we look at it, and it's a little bit more art than science at the end of the day. But what's the cost of the senior? Is there a senior lender ahead of us?

David Kieske (Executive VP and CFO)

Are we achieving the right risk-adjusted spread to the senior? Obviously, what's the duration of our capital? What's the funding cadence of our capital? And then ultimately, what every lender looks at, who's the equity sponsor, and how much equity is in the transaction and ensuring that we are protected from a credit standpoint at the end of the day and feel good about the project?

Edward Pitoniak (CEO)

And then to go back to the first part of your question, it will always be a minor percentage of our assets under management, and we will use it to forge relationships. We have an example, obviously, right in front of us of using lending to establish a relationship with Chelsea Piers that led to the acquisition of the primary leasehold interest in December. So we will use it both as a strategic tool to develop relationships and a strategic tool to create a steadier cadence to our capital allocation. We're very proud of the fact that we got capital out the door every single month in 2023.

I can tell you, in our early years, there were whole quarters that went by where we did not get capital out the door, given what was true back then, which was that the nature of our capital allocation was big and lumpy, tied to big, lumpy gaming acquisitions. So it is a tool that can generate growth and return on a very steady basis. It is a strategic tool to forge relationships. And again, given some of the spreads we've been able to achieve in recent years, it is very lucrative, very accretive in driving earnings growth. And again, we're about creating earnings growth that others may not be able to achieve if they're not as energetic and pioneering as we have been, both in terms of how we grow the business, in terms of asset classes, and through the use of our balance sheet.

Robert Yawger (Managing Director)

Got it. That's very helpful. Just one more here. Can you please discuss the opportunity with the Indiana assets? In your view, how attractive is the 7.7 call in the current market, and how would you theoretically fund something like that? Thanks.

Edward Pitoniak (CEO)

Yeah. Well, as I said in response to Barry, obviously, 7.7 is not as attractive as when it was struck a few years back, when the call agreement was struck a few years back. It'll be a call opportunity we will be excited about executing if it's an accretive opportunity, and if it's not an accretive opportunity, if, in fact, it would be a dilutive opportunity at 7.7, we would not do it.

Robert Yawger (Managing Director)

Got it. Thank you.

Operator (participant)

Our next question comes from Chris Darling with Green Street. Your line is open. Please go ahead.

Thanks. Good morning, everybody. Just going back to the Caesars call options again, let's just, for argument's sake, assume that you do exercise those options. I'm just curious, how would you think about the deal structure from a rent coverage standpoint? So I'm wondering, would you possibly structure tighter rent coverage on a standalone basis if it made sense within kind of the larger master lease?

Edward Pitoniak (CEO)

Well, yeah, Chris. So the rent coverage, by virtue of the current call agreement, is set. But it is a subject of discussion and one we have and would like to continue to explore with Caesars such that, on an overall basis, they and we are at rent coverages that everybody feels really good about for decades to come.

All right. Fair enough. One more for you, just touching on the Homefield agreement. Just hoping you can elaborate on the scope of the project, potential future expansion. So I'm wondering what the total estimated investment is for the current development, how the team's thinking about scaling to additional locations over time, and just trying to wrap my arms around what the scope of investment might look like for VICI over time.

John Payne (President and COO)

Yeah, Chris. It's John. When we made the announcement a few months ago, we talked about spending a couple of years studying the youth sports business, and we learned a lot in that process. We've also found an amazing partner in Homefield. We announced our first opportunity with them in the Kansas City area, and they're building not only the youth sports facility but connected to a Margaritaville resort. So that's one of the things I think you'll continue to see is if we place other investments into the youth sports space is having numerous cash registers, not just having the fields to rent or the stadiums to rent, but also having connected to one operator who controls the restaurants, who controls the hotel rooms, and controls the sports fields. So this is a $110 million-ish initial investment with Homefield.

We've not announced any further development, not only on that site, which does have opportunity to expand over time, but also other sites around the Midwest or the United States. But with any partner that we've talked about, whether that's with casino partners or with Cabot or Canyon Ranch and now Homefield, we hope that it's not just our only investment with them, and we purposely took so much time to study the business to find the right partner to grow.

Chris Darling (Senior Associate)

I appreciate the thoughts. Thank you.

Operator (participant)

Renata and Greg McGinniss with Scotiabank. Your line is open. Please go ahead.

Greg McGinnis (Managing Director)

Hey. Good morning. As you continue to invest in non-gaming assets, how should investors get comfortable with more opaque tenant financials there, and what sort of premium are you receiving from an investment yield standpoint as it compares to a potential gaming investment?

Edward Pitoniak (CEO)

Yeah. So you are right, Greg. If we're partnering with an experiential operator that's not public, the tenant financials are not crystal clear. In the same way, they're not crystal clear across a whole lot of net lease portfolios. And at the end of the day, we obviously have to exercise our fiduciary responsibility to the greatest degree possible in ensuring that the fundamental business is very, very supportive of the rent, and the way in which our operating partners manage their balance sheets and liquidity is also of a strength that ensures that they won't be in positions where they're unable to meet the rent. We've got a very rigorous underwriting practice. We obviously can take advantage of history in many of the experiential categories that we're investing in.

Again, at the end of the day, it's up to us to make sure that they are of a strength that's going to enable them to weather whatever should come their way. But I will also emphasize that our key criteria, our first of four criteria in evaluating all investments, gaming and experiential widely, is that the businesses be of lower-than-average cyclicality versus consumer discretionary at large, which we think is another risk mitigant when it comes to ensuring that they can cover the rent through thick and thin.

Greg McGinnis (Managing Director)

Just to follow up on that, in the cases where you're providing construction loans, where there's not kind of in-place cash flows to be underwriting or evaluating, what's the process look like there when you're trying to get comfortable in terms of lending that money and the ability to recollect in the case that maybe cash flows don't hit quite the targets that were expected?

Edward Pitoniak (CEO)

Well, last-dollar exposure is obviously one of the key criteria, and ensuring that our last-dollar exposure is at a level whereby if we did end up owning the asset, that the operating economics are such that at the last-dollar exposure level that we would be lending at, we're still in good shape.

David Kieske (Executive VP and CFO)

Yeah, Greg. And then it comes down, as I mentioned, to the quality of the sponsors, the amount of equity, so the overall loan-to-cost or loan-to-value, and then the protections that are obviously ultimately documented in our agreements. But a lot of the sectors, and like our sale-leaseback investments, we study the sectors. Indoor water parks, we studied for 18-odd months, led by certain members of our team, and went deep into that sector before we did anything. And so it's gaining conviction, whether it be through direct real estate ownership or the lending platform that we have, of who the operator is, the durability of the sector, and then the ultimate protections that we can put in place.

Greg McGinnis (Managing Director)

Okay. Thanks. And just a final one from me. Now, I'd like to preface this question by acknowledging the great work that John and his team have done so far. And we know that you've added some great members to the investment team as well. But given your sector-low G&A, how do you balance that shareholder-friendly expense line versus investing in a larger acquisitions team that could maybe help source and underwrite more investment opportunities?

Edward Pitoniak (CEO)

No, it's a very fair strategic question, Greg. It's a question we regularly wrestle with. I would say one of the ways in which we deal with, if you will, the underinvestment risk in G&A is by, I think, having forged some of the strongest partnership relationships of anybody out there. From day one, we have treated our advisors as best as we possibly can. This means the investment banks, the other parties, the real estate advisory firms, such that we are always the first they call when they think there's a compelling opportunity. They are a force multiplier for us. We have great respect for them. We engage with them intensely, and we reward them when they do great work for us.

In the event, we end up saving on G&A, which in an inflationary period has really two benefits: overall low G&A to begin with and less inflationary impact on our G&A load. If it ever gets to the point where we feel we're shortchanging shareholders by running too thin, we will certainly add resources in the way we've obviously added resources here in the last couple of years. Thank you, Greg. We'll move on to the next question, Elliot.

Operator (participant)

Our next question comes from Nick Joseph with Citi. Your line is open. Please go ahead.

Nick Joseph (Managing Director)

Thanks. I wanted to get your kind of commentary or thoughts on performance thus far of the Fontainebleau. It seems like mainstream media's been favorable on it, but there's also been local articles on some management changes there. Just wondering how performance has been?

John Payne (President and COO)

Nick, I won't necessarily talk about the financial performance, but what I will make a comment about is what a beautiful asset that was built by the team there, the Koch Industries, the Fontainebleau team, the operating team there. I haven't met anyone that walks through the place and says, "Oh, this is a miss." I think most people walk through the place and say, "Wow, what an amazing place." And I think for those of us who have spent time operating in Las Vegas over the years, it takes time. It takes time to build up a database, and it takes time, but they sure do have a facility that I think everyone is proud of, and we sure are proud of.

Edward Pitoniak (CEO)

Yeah. And Nick, you've given me the opportunity to vent a little bit about how utterly weary I am around the negativity of so much of the media coverage, which regularly gets proven to be way overly negative. "Oh my God, the Sphere is going to be a disaster." I was in the U.K. earlier this week. I was struck by how many people wanted to talk about the Sphere because they'd either already been or they're determined to go. And again, media coverage around that, "Oh my God. Oh, F1's going to be a disaster." Well, guess what? It wasn't. The drivers loved it. The teams loved it. It was an amazing weekend of business for our operating partners. "Oh, Super Bowl." Again, just a phenomenal event for Las Vegas and for the NFL. So I absolutely agree with you.

Some of the press coverage has been quite negative, but we know the people involved. We know how hard they're working. We know how challenging what it is that they've set forth for themselves to open an unaffiliated property on the Strip. And yet, again, that asset is utterly magnificent, and they're doing the right things to bring business to it over time. And with the backing of Koch, you can be sure that the backing is strong enough that they have the patience but, moreover, the firepower to make this work and, of course.

Nick Joseph (Managing Director)

Thanks. That's very helpful. And then just I know we've talked a lot on the pipeline and investment opportunities, kind of the more sober environment out there. But if I just think about kind of the stickiness of cap rates, I mean, where are you seeing the most, at least pricing power expansion, where it probably makes a little more sense in today's environment versus, I would imagine, some others where it's a bit stickier?

Edward Pitoniak (CEO)

Nick, excuse me. Are you talking about cap rate variability across various experiential asset classes?

Nick Joseph (Managing Director)

Exactly.

Edward Pitoniak (CEO)

Yeah. I don't know, John and David. I don't know that we've seen a tremendous amount of variability across asset classes. We're obviously not seeing a tremendous amount of trading. And yet, you obviously saw with our unlevered 7.7% yield for the $1.8 billion we put out the door in 2023 that we have obviously been able to acquire income at higher yields. I would have a tough time generalizing, but David and John, I don't know if you want to add.

David Kieske (Executive VP and CFO)

Yeah. I think you covered it well. But Nick, I mean, it's no different than any other asset class that you're in kind of the broader net lease. You have bid-ask spreads and buyers, obviously, willing or sorry, sellers' willingness to transact around in a backdrop where there's the volatility and variability that we've talked about. And so there's opportunity out there, but it's no different than the broader CRE market. It's somewhat of a bit of a quieter environment and just an air of cautiousness on both sides until we kind of figure out where the 10-year is going or where the broader economy's going. Makes sense. Thank you.

Operator (participant)

Renata and then to Jim Kammert with Evercore ISI. Your line is open. Please go ahead.

James Kammert (Managing Director)

Good morning. Thank you. Obviously, VICI is going to remain very much a gaming-focused investing and operating company. But you mentioned that you vetted thoroughly some sort of other verticals. Didn't pan out, which is all logical. But could you quantify do you think that your total addressable market or investment opportunity set for new potential verticals continues to expand? I'm just trying to figure out if your overall catch basin is sort of winnowing or widening. Thank you.

Edward Pitoniak (CEO)

Oh, it's definitely widening.

John Payne (President and COO)

Definitely widening. As there are a few that were saying, "Hey, we ultimately not right for us today," there's other opportunities that come about that we study. We learn who the operators are. We learn where their locations are. We spend time with them. So no question, the funnel is getting wider.

Edward Pitoniak (CEO)

Yeah. I'll give you an example of that, Jim. When you really begin to know a category, as David has spoken of, as you get to know, if you will, the water experience category, which we personally invested in through Great Wolf, what's really been remarkable over the last few years is the way in which really creative, innovative operators are taking water experiences and continuing to innovate around them, not simply for kids losing their minds and spending their parents' money at Great Wolf, but also water experiences that are more focused on an adult crowd. That's really exciting to witness because of the growth opportunities it represents within the category and across multiple geographies.

James Kammert (Managing Director)

Great. Thank you. One small item. It's been in the press that there is some tax dispute underway at MGM National Harbor. It's obviously an important asset for VICI. But would that have any details around that, and would it have any implications for you as landlord? Thank you.

David Kieske (Executive VP and CFO)

Yeah. That would be a tenant matter, so we wouldn't comment on that.

James Kammert (Managing Director)

Okay. Yeah. Thank you.

Edward Pitoniak (CEO)

Thank you, Jim.

Operator (participant)

Our next question comes from Wes Golladay with Baird. Your line is open. Please go ahead.

Wesley Golladay (Senior Research Analyst)

Hey. Good morning, everyone. Just looking at the photobook you sent out to everyone. More specifically, we're looking at the Mirage in Las Vegas. Is there anything that's going to go on over the next years on this asset? And if so, what would be the scope and time to build?

John Payne (President and COO)

Yeah. Wes, it's John. It's nice to talk to you. And probably a question for our great partner in Hard Rock on timing. But I think they've, as you've probably been following the story, they acquired the operations of the Mirage a little over a year ago from MGM and have been operating, but have also been out getting approvals and designing the opportunity to change the facility from the Mirage to the Hard Rock Las Vegas. As it pertains to timing and budget and construction and that, it's probably something that they'll lead that charge. But we, of course, as the owner of the property, are excited to watch that asset get repositioned over time. It's obviously an amazing asset for a long period of time. But I think everyone would think a Hard Rock Las Vegas would do great on that site.

Wesley Golladay (Senior Research Analyst)

Okay. Thanks for that. And then maybe just one on the financing front. You do have the $1 billion maturing this year. You have the $500 million of swaps. Are you looking at doing an unsecured to take those out, or are you going to maybe a mix of term loans and unsecured? How are you thinking about that?

David Kieske (Executive VP and CFO)

Yeah. Wes, it's David. We will focus on continuing to access the unsecured market and extend our maturity tenor and increase the overall size of our investment-grade basket. Those are legacy MGP high-yield notes. So moving those to unsecured investment-grade notes benefits our overall credit complex for the long run.

Chris Darling (Senior Associate)

Thank you.

Operator (participant)

Renata and then to Daniel Payne with Capital One Securities. Your line is open. Please go ahead.

Daniel Guglielmo (Equity Research Analyst)

Hi, everyone. Thanks for taking my questions. Just thinking about the credit opportunities and experiential, you all have been on the journey for some time now. Thinking about the opportunities and the process for closing on the partnerships, what type of competition is in the other room these days? High level, how has that changed over the last few years?

Edward Pitoniak (CEO)

Daniel, you're talking about how has the competitive landscape of lending evolved over the last few years?

Daniel Guglielmo (Equity Research Analyst)

Yes. The funding. Yeah.

Edward Pitoniak (CEO)

Yeah. Well, obviously, we're looking at a period over the last couple of years in which conventional bank financing has definitely diminished as a source of funding for experiential placemakers and operators. At the same time, obviously, you've seen the upsurge of private credit, of which we are part. I would say that in many cases, we are being invited into the funding opportunity because of our track record and experiential and the endorsement that our underwriting process brings to a project that we choose to be involved in. We obviously look at them really rigorously. Again, I would say we get invited in a lot to processes as opposed to having to scour the landscape and throw our hats in the ring.

Daniel Guglielmo (Equity Research Analyst)

Great. Thank you. And then you all have had such tremendous growth with some pretty big deals over the last few years. And thinking about kind of similar risk-adjusted opportunities, are there areas that you see kind of, I would say, big-hitter opportunities or transactions out there? Not just thinking next year, but maybe down the line five years from now, that horizon.

John Payne (President and COO)

Dan, nice to talk to you this morning. I'll just go back to our assets in Las Vegas. I don't know how you're describing big-hitter, but if there are opportunities for us to continue to invest in assets that we already own and help the operator grow with accretive new projects, I'll consider that being a big hitting because I'm not sure there's a better place in the world to invest in right now than Las Vegas. Obviously, we've got a portfolio there, but there are some amazing assets. Ed referred to the Venetian that has a lot of footprint to continue to be developed. So if you.

Edward Pitoniak (CEO)

And then I think, John, we can add in, obviously, the MGM property in Yonkers. Should they be granted a full gaming license, that's property we already own, Daniel. That would obviously represent a significant incremental investment opportunity, but contingent, of course, on how the license award process plays out.

Daniel Guglielmo (Equity Research Analyst)

Great. Thank you.

Operator (participant)

Renata and then to Jay Kornreich with Wedbush Securities. Your line is open. Please go ahead.

Jay Kornreich (VP)

Hey. Thanks so much. Good morning. As you look to expand the non-gaming segment, should we continue to expect loans on the relatively smaller side for you as a way to step into longer-term relationships? Or would you be willing to take kind of a larger bite into either the real estate or debt and a new asset type in a much bigger way, say, over $1 billion?

Edward Pitoniak (CEO)

Ooh boy. That would be a pretty big number, Jay. But the check sizes you're referring to, they may look small in relation to our overall scale. But I would tell you, in returns, they're pretty big checks. These are not small assets, and they're certainly not small in economic productivity. And so if we can do $50 million-$100 million and up loans on assets that we either have a direct path to ownership on or a potential path to ownership on, you add those up, and you can get to $1 billion in aggregate. But obviously, by not having it all in one single investment, we are obviously spreading out our risk and amplifying our opportunities to develop new relationships.

Jay Kornreich (VP)

Okay. I appreciate that. And then just a quick follow-up on, I guess, the leverage. You're now at 5.5x, which is in your 5.5x range. So should we expect new transactions to be funded, I guess, with incrementally more debt capital at this point? Or do you intend to continue to over-equitize new deals and get that leverage further down?

David Kieske (Executive VP and CFO)

Yeah. David, sorry. We will continue to migrate our leverage down. We're obviously within our target range. And just to recap everybody, post-MGP, we take the leverage up to 5.8x. And worked very hard to get that back down to 5.5x at the end of the last year. So that'll continue to drift downward both from over-equitization of transactions and then, depending on the size, leverage-neutral transactions.

Jay Kornreich (VP)

Okay. All right. Thanks very much.

Operator (participant)

Our next question comes from John DeCree with CBRE. Your line is open. Please go ahead.

John Decree (Analyst)

Good morning, everyone. We got through almost an hour here, and I think only one mention of F1. So Ed, to kind of go back to your sports triangle, in Las Vegas, and you guys have some land, the F1 paddock. And you talk about this every once in a while, but curious your thoughts on professional sports, stadiums, that type of investment, and maybe specifically in the context of Las Vegas, given all the development around professional sports that we're seeing there and your land and partners.

Edward Pitoniak (CEO)

Yeah. I would say, John, it's professional sports. It's obviously the emergence of this Sphere. It's the overall growth of Las Vegas. And we obviously have the vacant land. But probably even more valuable is the land we already own. You referred to the triangle formed by A's Stadium, T-Mobile, and Allegiant. We own everything inside that triangle. MGM operates everything inside that triangle. If you think about where the A's Stadium is going to go, we own three of those four corners in MGM Grand, Excalibur, and New York, New York. I know MGM is very excited about the repositioning opportunities at those four corners. And it applies to so many of the other assets that we own up and down the strip, as well as, you say, that vacant land.

I just can't, again, emphasize enough how incredibly valuable it is to have the position we have in Las Vegas because Las Vegas is reaching a global critical mass that really no other place on Earth right now rivals, not Orlando, not Macau, the way things have evolved there. Las Vegas is a category of one, and we are very happy to be the leading owner of real estate in a place that is a global category of one.

John Decree (Analyst)

Very good. Thanks. Ed, maybe just one, since a lot of people are asking me, is the photobook going to be available in hard copy?

Edward Pitoniak (CEO)

We actually have printed a few. If anybody really, really wants one, they should give me a call at their earliest convenience.

John Decree (Analyst)

Thanks, Ed. Fantastic.

Edward Pitoniak (CEO)

Thanks, John. Elliot, I think we're probably about wrapped up, right?

Operator (participant)

Yes. This concludes our Q&A. I'll now hand back to Edward Pitoniak, CEO, for final remarks.

Edward Pitoniak (CEO)

Thank you, Elliot. Thanks, everyone, for your time today. Please, please do go to www.viciproperties.com under our portfolio heading to view our brand new VICI Properties photobook. It's a magnificent book about your magnificent properties. Bye for now.

Operator (participant)

Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.