VICI Properties: Growth Through Strong Fundamentals

Revenue Growth and Financial Performance

VICI Properties has demonstrated strong revenue growth and financial performance, driven by impressive property performance, an efficient triple net model, and significant growth in gaming revenue. The company reported a 6.1% increase in AFFO per share and maintained high EBITDA margins, showcasing its robust financial health and strategic capital deployment.

"Since we acquired this marquee Las Vegas asset alongside funds managed by Apollo Global Management, Inc. in 2022, The Venetian Resort operating team has driven impressive performance at the property, and we are excited to be a partner in their innovative efforts to maximize the economic productivity of this iconic asset. David Kieske, Chief Financial Officer of VICI Properties, said, 'We continue to believe that our Partner Property Growth Fund strategy can provide us with attractive capital deployment opportunities given the scale and quality of our real estate assets, and the operating dynamism that exists within each of our properties.'" --- (VICI, press release, 2024/05/01)

"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 our margins continue to run strong in the high 90% range when eliminating non-cash items." --- (VICI, earning call, 2024/Q1)

"Las Vegas continues to enjoy healthy growth with GGR up low single digits following the Super Bowl this quarter, and that is on top of an already impressive baseline, given gaming revenue increased 12% in the first quarter of 2023 over 2022." --- (VICI, earning call, 2024/Q1)

"As of March 31, 2024, we have $17.1 billion of debt obligations outstanding of which $750.0 million matures on February 15, 2025, $500.0 million matures on May 15, 2025 and $800.0 million matures on June 15, 2025." --- (VICI, sec filing, 2024/Q1)

"That's what we did in Q1 2024. The first quarter of 2024 was a quarter in which we produced 6.1% growth in AFFO per share over Q1 2023 and continue to flow our revenue growth through to the EBITDA line and what we believe is one of the higher rates among S&P 500 REITs." --- (VICI, earning call, 2024/Q1)

Strategic Acquisitions and Investments

VICI Properties strategically invests in real estate debt with potential ownership conversion, matches high-yield acquisitions like the Venetian with other investments, and focuses on creating substantial shareholder value through these strategic acquisitions and investments.

"Our portfolio also includes certain real estate debt investments that we have originated for strategic reasons, primarily in connection with transactions that either do or may provide the potential to convert our investment into the ownership of certain of the underlying real estate in the future." --- (VICI, sec filing, 2024/Q1)

"We seek to accomplish this growth through the following: ● attracting and retaining high quality tenants and utilizing economies of scale to reduce operating expenses, ● expanding and re-tenanting existing highly productive locations at competitive rental rates, ● selectively acquiring or increasing our interests in high quality real estate assets or portfolios of assets, ● generating consumer traffic in our retail properties through marketing initiatives and strategic corporate alliances, including creating mixed-use destinations, and ● selling selective non-core assets." --- (SPG, sec filing, 2024/Q1)

"And it's now very much part and parcel of every decision we are making. Be it acquisitions, be it disposition, the hold decisions and also, this tool is now being used to dictate the highest and best use for potential vacancies, which may or may not be the old use of that particular asset." --- (O, earning call, 2024/Q1)

"To help meet this goal, we regularly (i) monitor our investment allocation by geographic market and product type, (ii) develop, redevelop and acquire interests in apartment communities in our selected markets, (iii) efficiently operate our communities to maximize resident satisfaction and shareholder return, (iv) selectively sell apartment communities that no longer meet our long term strategy or when opportunities are presented to realize a portion of the value created through our investment and redeploy the proceeds from those sales and (v) maintain a capital structure that we believe is aligned with our business risks and allows us to maintain continuous access to cost-effective capital." --- (AVB, sec filing, 2024/Q1)

"But if we can match an investment like the Venetian with investments, whether acquisitions or property or lending investments that give us more substantial yields, more substantial spreads we feel, on a net-net basis, we're creating a lot of value for shareholders." --- (VICI, earning call, 2024/Q1)

Tenant Relationships and Lease Agreements

VICI Properties' lease agreements ensure tenants cover all property-related costs, including capital expenditures, insurance, and taxes. These agreements, with terms of 15-32 years and renewal options, provide a reliable revenue stream. Additionally, VICI may fund future property improvements, enhancing tenant relationships and long-term growth.

"The lease agreements require our tenants to cover all costs associated with such ground and use sub-leases and provide for their direct payment to the primary landlord." --- (VICI, sec filing, 2024/Q1)

"All of our lease agreements call for an initial term of between fifteen and thirty-two years with additional tenant renewal options and, along with our loans, are designed to provide us with a reliable and predictable long-term revenue stream." --- (VICI, sec filing, 2024/Q1)

"Additional Funding Requirements In addition to the contractual obligations and commitments set forth in the table above, we have and may enter into additional agreements that commit us to potentially acquire properties in the future, fund future property improvements or otherwise provide capital to our tenants, borrowers and other counterparties, including through our put-call agreements and Partner Property Growth Fund." --- (VICI, sec filing, 2024/Q1)

"Pursuant to our lease agreements, capital expenditures, insurance and taxes for our properties are the responsibility of the tenants." --- (VICI, sec filing, 2024/Q1)

"As a triple-net lessor, increased operational expenses at our leased properties are borne by our tenants and do not directly impact their rent obligations (other than with respect to underlying inflation as applied to the CPI-based escalators) or other obligations under our lease agreements." --- (VICI, sec filing, 2024/Q1)

Market Positioning and Competitive Advantage

VICI Properties leverages efficient marketing strategies and invests in irreplaceable real estate at attractive cap rates, even amid higher interest rates. This strategic positioning in the triple net lease market underscores its competitive advantage, allowing it to navigate market challenges effectively and maintain a robust activity pipeline.

"I think that really depends on the operator as the operator pulling back incentives to those consumers and they've elected not to come because they find more ways to spend their marketing dollars in a more efficient way." --- (VICI Properties, earning call, 2024/Q1)

"Despite higher interest rates, there's just nowhere else in today's triple net lease market where you can put that amount of money, $700 million up to, to work into that kind of irreplaceable real estate at a 7.25% cap rate then in parenthesis, delusional sellers are still looking for sub-seven cap rates on their poorly located Red Lobsters." --- (VICI, earning call, 2024/Q1)

"Just first, just looking for some qualitative comments, starting with the annual letter about sort of higher rates and the impact of activity just as you've seen sort of this recent spate of movements on the rate front, just quality of comments on what that's doing to the pipeline, where the decisions are taking longer and so on and so forth, or anything falling out?" --- (VICI, earning call, 2024/Q1)