Buoyed by acquisitions closed and in progress, officials from real estate investment trust VICI Properties touted success during their first-quarter conference call. And though a cash flow measure rose from a year earlier and matched Wall Street forecasts, revenue dropped and fell short.
In a statement Thursday, VICI, spun off from Caesars Entertainment Corp. in 2017, said funds from operation, a cash flow measure that filters out nonrecurring costs, was $151.5 million, or 37 cents per diluted share, for the three months ended March 31, matching the average estimate of analysts polled by Zacks Investment Research.
A year earlier, VICI’s funds from operation were $124.7 million, or 36 cents per diluted share, a year earlier.
Net income for the quarter was $150.8 million, or 37 cents per diluted share, for the quarter ended March 31, up from $112.1 million, or 33 cents per diluted share, a year earlier.
Revenue fell 2 percent to $214 million from $218.3 million. Zacks-polled analysts had expected revenue of $223.1 million.
VICI said it incurred $889,000 of transaction expenses in the quarter, primarily related to legal and accounting costs associated with documenting its $745 million deal to buy the Jack Cincinnati casino in downtown Cincinnati. The property has 100,000 square feet of gambling space accommodating about 100 table games and 1,800 gaming machines.
During the call, VICI officials highlighted the Jack Cincinnati deal, under which the REIT will acquire the land and real estate for $558 million, and a Hard Rock International subsidiary will acquire the operating assets for $187 million.
VICI will then enter 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 in late 2019.
SunTrust gaming analyst Barry Jonas told investors Thursday VICI remains active in the acquisitions market.
“Given they were relatively new to the space, VICI spent considerable time building relationships in 2018 which they hope to leverage for potential transactions in 2019,” Jonas said. “We believe VICI’s recent JACK Cincinnati transaction shows VICI remains acquisitive, whether with their natural partner, Caesars, or with third party operators.”
Later this month, VICI plans to close on a $700 million cash deal to buy the land and real estate assets of Greektown, a downtown Detroit hotel-casino. Penn National Gaming acquired Greektown’s operating assets for $300 million in cash. The deal was announced in November.
The deals followed the January closing of a $261 million cash deal to buy the Margaritaville Resort Casino, in Bossier City, Louisiana. Penn National bought the Margaritaville casino’s operating assets for $115 million.
Under the deal, Penn National and Margaritaville entered a 15-year triple-net lease with VICI, yielding the REIT $23 million in annual rent.
“We feel great about this — our start to the year and how we continue to progress on our strategy based on the three key drivers of value creation to our business model,” CEO Edward Potoniak said during the call. “Namely number one, ability to deliver portfolio income of the highest character and quality. Number two, a best-in-class and fully internalize governance and management structure and three, one of the best embedded flash internal and external growth profiles across the REIT sector.”
As it did during the MGM Growth Properties call earlier this week, question-and-answer period queries alluded to The Cosmopolitan of Las Vegas, which may eventually be up for sale.
Sources told The Wall Street Journal this month that Cosmopolitan owner Blackstone Group retained Deutsche Bank AG and PJT Partners to explore the property’s options, including a sale.
VICI Chief Operating Officer John Payne said the company is exploring all options.
“We would love to have more Las Vegas real estate, whether that’s on the Strip, where we continue to believe there is a limited amount of supply of invaluable real estate on the Strip,” Payne said. “But we’ve also said that there are some great assets and some great real estate in downtown and also in the locals market that they should ever come for sale and there is an opportunity to do a transaction, we looked at that as well.
“It doesn’t mean that that is our sole focus as we continue to look at opportunities outside Las Vegas, where we, as you’ve seen as we love the urban real estate that many of these casinos have,” Payne added.
VICI Properties shares were unchanged Thursday, closing at $22.83. The shares have risen 28.1 percent in the past 12 months.
Follow Matthew Crowley on Twitter @copyjockey
