Q2 2024 Earnings Summary
- VICI's assets in Las Vegas are benefiting from record visitation and diversification into sports and entertainment, driving strong performance and growth. For example, Harry Reid International Airport had back-to-back record months, with 5.1 million passengers in June, the third best month ever. ,
- The company practices disciplined capital allocation and strategic focus, choosing to invest in opportunities that improve the quality and intrinsic value of their portfolio, and not just growth for growth's sake. Their decision not to exercise the call right to acquire certain assets demonstrates their commitment to allocating capital effectively. ,
- VICI's focus on high-quality experiential assets with strong operators provides resilience amid consumer weakness and economic uncertainty. They are not significantly impacted by pockets of consumer weakness, as they focus on middle to higher-end experiential categories. ,
- High concentration risk with 45% of rent collected from Las Vegas assets, which could impact revenues if the Las Vegas market faces downturns.
- Exposure to potential weakness in lower-end consumer spending, as noted by executives regarding softness in some businesses and hearing about consumer weakness, particularly in the lower-end segment, which could affect tenant performance.
- Elevated leverage with a net debt to adjusted EBITDA ratio of 5.4x, at the high end of their target range, which may pose risks in a rising interest rate environment.
-
Decision on Centaur Assets
Q: Why not exercise the option on Centaur now?
A: We decided not to exercise the call option on the Indiana assets because strategic factors influencing our decision won't change this year. To be fair to our partners and efficiently manage our time, we announced it now instead of waiting until year-end. The cap rate was acceptable, but we have more compelling opportunities to allocate our capital elsewhere ** , **. -
Capital Allocation Strategy
Q: What are your alternative investment opportunities?
A: We have compelling investment opportunities that we believe will drive stronger continuous improvement in our access to and cost of capital. These investments focus on fee interests in gaming assets and are less heavily weighted to a single deal, promoting a sustained and sustainable capital allocation and funding cadence . -
Caesars Lease Variable Component
Q: How will the upcoming variable component affect the Caesars lease?
A: Starting November 1, we'll enter lease year eight with Caesars, introducing a variable rent component. Based on current data, we expect it to be relatively neutral with no significant impact on our escalations . -
Refinancing Upcoming Debt Maturities
Q: How are you addressing the $2 billion in notes due next year?
A: We feel very good about our ability to refinance the upcoming maturities in the first half of next year. Our strong investment-grade rating and deep, liquid credit profile support our confidence in extending and laddering our maturity profile . -
Underwriting Gaming Assets
Q: How are you approaching gaming asset investments now?
A: We're refining our capital allocation strategy, focusing on factors like tenant diversity, geographic diversity, tenant credit quality, and rent coverage. We aim to invest our capital where it will achieve the highest and best use, ensuring sustainable growth and a cost of capital advantage . -
International Expansion Opportunities
Q: What international opportunities are you exploring?
A: We're actively studying and traveling in countries like Australia, New Zealand, the U.K., and parts of Europe. We see opportunities to grow and diversify not only in location but also with new tenants in both gaming and experiential sectors ** , **. -
Guidance Increase Drivers
Q: What led to the increase in guidance?
A: The increase is due to finalized funding and recent investments, including the Great Wolf transaction. We've also continued funding through our loan book, giving us confidence in achieving our updated guidance . -
Lease Protections Amid Operator M&A
Q: How protected are leases if operators merge?
A: Our leases have strong protections addressing change-of-control scenarios. We've previously navigated a tenant merger successfully, and we're confident in our lease structures to handle any future operator M&A . -
Consumer Weakness Impact on Pipeline
Q: Has consumer softness changed your acquisition plans?
A: While there is some softness among lower-end consumers, it hasn't caused concern yet. We're focused on middle to higher-end experiential categories and remain confident in our acquisition pipeline ** , **. -
Las Vegas Investment and Development
Q: Any plans for your Las Vegas strip land and development?
A: We believe strongly in the Las Vegas ecosystem and are comfortable investing additional capital there. Our vacant land offers long-term potential to invest and expand our exposure in this unique global destination ** , **. -
Experiential Credit Investments
Q: How large will your credit solutions strategy become?
A: Our credit portfolio is approximately $2.2 billion, about 4%–5% of total assets. We feel comfortable at this level, using it to develop relationships and learn about new segments, which could lead to future real estate ownership opportunities . -
Potential Live Entertainment Investments
Q: Will you invest in live entertainment venues?
A: We're studying the live entertainment sector to understand the economics and see if it supports our investment model. While we love the growth in sports and entertainment in Las Vegas, any investment would require durable cash flows and strong operator partnerships .
Research analysts covering VICI PROPERTIES.