Truist Securities analyst Barry Jonas applauded Vici Properties’s purchase of two Canadian casinos and two hotels. His views were expressed in a March 30 investor note.
Vici paid $114.4 million for Great Northern Casino and Deerfoot Inn & Casino in Alberta, along with a pair of non-gaming hotels. The deal is anticipated to close in midsummer.
Jonas called the rent coverage on the purchase “healthy” and noted that it will add $11.6 million to Vici’s revenue per year, before escalator clauses. The initial terms of Pure Canadian Gaming’s leaseback arrangement are good for 25 years, plus a quartet of five-year options to extend the lease, potentially through 2071.
The acquisition brings Vici’s number of wholly owned, Pure-branded properties to eight. It described the Canadian gaming market as “attractive,” generating $15 billion in revenue per year.
“We view the deal as unique to the operator and not necessarily indicative of any change to the current pipeline,” Jonas wrote. Vici anticipates funding the purchase partly through cash on hand and partly by drawing down on its existing credit facilities.
Turning to other Vici-related topics, Jonas wrote that the real estate investment trust wouldn’t have any input into a probable sale of Caesars Entertainment, but “They do have a say in any potential changes to the leases.” Even so, he discerned no potential impact on Vici’s existing Caesars leases.
“While there has been much speculation around a Caesars transaction and related implications for Vici, there is nothing concrete at the moment. As we think through various potential deal structures/sensitivities, we don’t see much incremental risk,” Jonas continued.
Citing the leverage and complexity inherent in a Caesars buyout, Jonas wrote that “we could even see some scenarios where Vici sees additional rent … or additional tenant diversification to help fund a Caesars transaction or facilitate any required divestitures.”
Jonas maintained a Buy rating on Vici and restated a $38-per-share price target for its stock.
