VICI Properties eyed expansion in its core gambling and entertainment business and looked to widen its wellness businesses foothold as it announced second-quarter earnings. The real estate investment trust broadcast its quarterly conference call from the Berkshires in Massachusetts, announcing an up to $150 million preferred equity investment into the controlling entity of Canyon Ranch, a wellness retreat there.
The quarterly numbers issued Wednesday were positive for VICI. The REIT’s funds from operation and revenue both topped Wall Street forecasts.
Funds from operation were $690.7 million, or 69 cents per share, reversing a loss of $50.4 million, or 6 cents per share. The latest result topped the 62 cents per share average forecast of analysts surveyed by Seeking Alpha. Funds from operation, a closely watched fiscal yardstick for real estate investment trusts, takes net income and adds back depreciation and amortization.
Net income was $690.7 million, or 69 cents per share, reversing a loss of $57.7 million, or 6 cents per share. Adjusted earnings before interest, taxes, depreciation, and amortization rose 28.2% to $723.4 million from $564.5 million.
Revenue rose 35.5% to $898.2 million from $662.6 million. The latest result included $129.5 million in noncash leasing and financing adjustments and $18.5 million of other income. The latest result topped the $874.9 million average forecast of Seeking Alpha-polled analysts.
On May 16, New York-based VICI agreed to buy the real estate for about $164.7 million U.S. for four Alberta, Canada, casino properties from Century Casinos: Century Casino & Hotel Edmonton, Century Casino St. Albert, and Century Mile Racetrack and Casino, all in Edmonton; and Calgary’s Century Downs Racetrack and Casino.
The property collection, which VICI calls Century Canadian Portfolio, will be added to the existing triple-net master-lease agreement between the VICI and Century. Annual rent will increase by about $12.8 million U.S. The companies expect the deal to close in 2023’s second half. (Under a triple-net lease, lessees pay rent and utilities along with insurance, taxes and maintenance.)
On July 25, VICI closed the acquisition of the leasehold interest in the land and buildings associated with Rocky Gap Casino Resort in Flintstone, Maryland, for $203.9 million in cash. Century acquired Rocky Gap’s operating assets for $56.1 million. Rocky Gap was added to the Century master lease and annual rent increased by $15.5 million.
VICI Properties CEO Ed Pitoniak led the conference call by discussing the Canyon Ranch partnership. He said the REIT’s 10-year preferred equity investment in Canyon Ranch’s operating company will support the expansion of the Canyon Ranch operating and digital platforms and enhancements to Canyon Ranch health resorts in Tucson, Arizona, and Lenox, Massachusetts.
Besides those holdings, Canyon Ranch also has a health resort in Woodside, California, and a forthcoming one in Austin, Texas, and aims to open new resorts in Florida, the Pacific Northwest, and the southeast Atlantic by 2030.
VICI entered into a call-right agreement with Canyon Ranch, whereby the REIT will have the option to call Canyon Ranch Tucson and Canyon Ranch Lenox’s real estate. If the rights are exercised, Canyon Ranch would keep operating the resorts, subject to a long-term triple-net master lease with VICI.
VICI had previously committed to provide up to $200 million of development funding for Canyon Ranch Austin, which is scheduled to open between 2025 and 2026. Once the Austin resort stabilizes, VICI will have a call right to own the real estate.
“I believe our growth opportunity with Canyon Ranch is a generational opportunity in multiple senses of generational,” Pitoniak said. “Wellness is a secular growth trend that is multigenerational in its consumer profile and generational in terms of its secular outlook and growth opportunity. And Canyon Ranch Resorts are real estate built to last for generations.”
Beyond the conference call, Pitoniak and Canyon Ranch principal owner and chairman John Goff discussed their companies’ partnership Wednesday on CNBC’s “Last Call.”
VICI increased its funds from operation guidance for 2023 to between $2.13 billion and $2.16 billion, or between $2.11 and $2.14 per diluted share.
