VICI Properties rode into its second-quarter earnings report on a blast of transactions and a 9 percent increase in leasing revenue.
The real estate investment trust also saw increases in both a key cash flow measure and revenue, which topped Wall Street forecasts.
In a statement issued Wednesday, Las Vegas-based VICI said its adjusted funds from operations were $156.8 million, or 38 cents per diluted share, for the quarter ended June 30, up from $128.8 million, or 35 cents per diluted share, a year earlier.
The latest funds from operations figure topped the 37 cents per share forecast of analysts polled by Zacks Investment Research. Funds from operation, a key profitability measure for REITs, takes into account net income and add-back items, such as depreciation and amortization.
Net income for the quarter was $152 million, or 37 per diluted share, up from $139 million, or 38 cents per diluted share.
Revenue for VICI fell 0.1 percent to $220.7 million from $221 million. The effect of $18.9 million linked to tenant reimbursement of property taxes, dampened the result. The most recent revenue result topped the $216.9 million estimate of Zacks-polled analysts.
Leasing revenue in the quarter was $212.5 million, a 9.2 percent increase from $194.5 million a year earlier.
VICI was spun off from Caesars Entertainment in October 2017 as part of the company’s two-year bankruptcy reorganization.
Expansion
VICI spent the second quarter much as it spent the first quarter, striking property deals.
On June 17, VICI agreed to acquire the land and real estate assets of Mountaineer Casino in New Cumberland, West Virginia, the Lady Luck Casino Caruthersville in Caruthersville, Missouri and Isle Casino Cape Girardeau in Cape Girardeau, Missouri for $277.8 million from Century Casinos.
Century, which acquired the operations of the three casinos from Eldorado Resorts for about $107 million, entered a triple-net lease with VICI for the land. The master lease will have an initial 15-year term and four five-year tenant renewal options. Initial annual rent will be $25 million.
VICI said it expects the transaction, which is subject to regulatory approvals, to close in early 2020.
On June 24, VICI entered a master transaction agreement with Eldorado Resorts related to the company’s $17.3 billion merger with Caesars. Per the agreement, VICI will acquire the land and real estate of Harrah’s New Orleans, Harrah’s Laughlin in Nevada, and Harrah’s Atlantic City for $1.8 billion.
VICI will then collect rent on those properties; first-year rent is expected to yield $154 million.
Motley Fool writer Dan Caplinger said the deals boosted VICI’s position.
“With solid performance in the casino industry across the U.S., (VICI) now finds itself with an even more diverse portfolio of real estate,” he said. “As long as the Eldorado/Caesars merger goes through as planned, VICI is in position to enjoy substantial growth.”
In April, VICI agreed to buy the land and real estate of the Jack Cincinnati hotel-casino for $558 million, and a Hard Rock International subsidiary will acquire the operating assets for $187 million. VICI entered a 15-year triple-net lease with Hard Rock with an initial total annual rent of $42.75 million. The deal is expected to close later this year.
Under VICI’s triple-net lease agreements, casino operator tenants maintain the properties and pay real estate taxes and building insurance. REITs must pay at least 90 percent of their taxable income to shareholders.
Continued growth
In a statement accompanying the results, VICI Properties CEO Edward Pitoniak touted his REIT’s second quarter deal making.
“On a combined basis, upon closing, the transactions we announced in the quarter will grow our run-rate annual rent nearly 40 percent and double our number of tenants,” he said. “Additionally, the nearly $2.5 billion of equity we raised through our follow-on and forward equity offering solidifies our balance sheet, eliminating equity market risk.
“We believe we remain well positioned with significant liquidity and access to capital to keep growing our portfolio and driving shareholder value.”
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