Frustration brews like a storm as higher interest rates lash the real estate industry, particularly commercial real estate. The relentless surge in the cost of capital gnaws at margins and inflates cap rates. But amidst this tempest, there emerges a glimmer of hope. An opportunity to feast on the untamed riches of VICI Properties (NYSE:VICI).
Infused with values of quality and wisdom, one discerning investor is bellowing at the winds and scooping up a plethora of real estate treasures. VICI Properties is just one of the many gems in this investor’s trove. It stands tall, offering a bounty of superior real estate assets, with a flawless record of 100% rent collection. The delicious allure of a stock trading at a compelling AFFO yield of 7.3% and a 5.6% dividend yield, promises not just a feast, but a banquet of growth. A growth that could see investors merrily skipping down a path strewn with double-digit returns per annum over the next 3-5 years, as VICI amasses cash flows and dividends, while the promise of potential rate cuts beckons an increase in valuation.
VICI Properties reigns as a triple-net REIT, crowned with premier gaming, hospitality, and entertainment real estate locations, including the illustrious Caesars Palace Las Vegas, MGM Grand, and the Venetian Resort. With a kingdom comprising 92 experiential assets, 54 of which are gaming properties and 38 non-gaming properties sprawling across the United States and Canada. The empire, encompassing approximately 125 million square feet and adorned with approximately 60,300 hotel rooms, nearly 500 dining establishments, bars, nightclubs, and sportsbooks, is graced with the presence of eminent operators under triple-net lease agreements. VICI has also expanded into non-gaming experiential partnerships, forging alliances with Bowlero, Great Wolf Resorts, Cabot, Canyon Ranch, and Chelsea Piers. With 81% of the rent roll sourced from SEC reporting operators, VICI exudes a transparency unmatched in its domain.
Furthermore, VICI’s properties enjoy a robust 100% occupancy rate due to the challenging regulatory environment in the gaming industry, which conjures insurmountable barriers to entry and curbs tenants’ mobility. The opulent average rent per asset stands firmly at $32,560,000, with a remaining lease term of 42 years, casting a long shadow over the competition. To add to its splendor, VICI’s efficiency shines through with G&A as a percentage of revenue at an astonishingly low 2% in Q3 2023.
The saga of VICI’s triumph continues as it raises its annualized cash dividend per share at a commendable 7.6% CAGR, currently basking in the glow of a $1.66 dividend per share. The allure lies in the diversity of revenue streams, encompassing restaurants, entertainment venues, golf courses, and convention spaces. Its dominion over the Las Vegas strip is absolute, ruling over 10 premier trophy assets, 660 acres of prime land, 41,400 opulent hotel rooms, and 5.9MM square feet of conference, convention, and trade show space. VICI extends its reign over 26 adjacent acres strategically situated behind Planet Hollywood and LINQ, presiding over the inevitable growth of Las Vegas as a burgeoning sports hub, hosting a multitude of prestigious events, from the Super Bowl to the NCAA Final Four.
VICI’s benevolence extends beyond mere acquisitions, as it aids existing tenants in capital improvements. The company also becomes a beacon of hope, providing debt capital to partners, paving the way to potential future real estate ownership. With rights of first refusal and put/call agreements inked in history, VICI offers a tantalizing vision of future growth, while venturing further into the gaming space through astute sale-leasebacks. Add to this, the recent acquisition of the real estate assets of 38 bowling entertainment centers from Bowlero Corp for an aggregate purchase price of $432.9MM, and VICI’s realm continues to expand.
The grandeur of VICI’s investment grade BBB- S&P credit rating bestows it with the unparalleled ability to access capital at reasonable rates in a challenging environment for commercial real estate. It has raised approximately $1.3B of equity capital, gifting VICI the means to make accretive investments. The only clouds casting a shadow over this resplendent realm are the risks posed by unforeseen inflation spikes and economic downturns. Yet, the unwavering belief in VICI’s management offers respite and assurance in these uncertain times. VICI emerges as a beacon of hope to investors, offering a dividend yield nearly 1% higher than the 10-year Treasury, well-covered by AFFO. With solid embedded growth channels within the portfolio, VICI blossoms into an attractive option, promising a triumphant dance of double-digit returns.