VICI Properties ended 2022 with a bang, saying it would spend $1.27 billion and assume $3 billion in debt to take full ownership of the MGM Grand Las Vegas-Mandalay Bay joint venture by buying the half-stake it didn’t already own from Blackstone Real Estate Income Trust. The crackle continues into the new year; the real estate investment trust enumerated a long list of activity as it announced fourth-quarter earnings and revenue that topped Wall Street forecasts.
In a statement, New York-based VICI said it had $614.1 million, or 64 cents per share, in funds from operation for the three months ended Dec. 31, up from $281.5 million, or 44 cents per share, a year earlier. The latest result topped the 59-cent-per-share consensus 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.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash-flow measure that excludes one-time costs, nearly doubled to $653.6 million from $329.3 million. Revenue did double, rising to $769.9 million from $383.2 million to blow past the $752.3 million forecast of Seeking Alpha-polled analysts.
VICI Chief Executive Officer Edward Pitoniak took a historical view during Friday’s conference call with analysts and journalists, noting that the REIT had just celebrated the fifth anniversary of its initial public offering, having been spun off by Caesars Entertainment. VICI, he said, became the first REIT to go from IPO to inclusion in the S&P 500 in less than five years.
“Over that … period since our IPO, VICI produced for its shareholders a cumulative total return of 109.7%,” Pitoniak said. “This cumulative total return by VICI beat the S&P by more than two times and beat the (RMZ) REIT index by nearly four times. Over that five-year period, no other REIT in the S&P 500 produced cumulative total return superior to VICI. Zip. Zero. None.”
The year-ending deal with Blackstone followed the closing of deals for MGM Growth Properties and the Venetian earlier in the year, which made the REIT the Strip’s leading owner of real estate. In January, VICI ventured into the Canadian market, acquiring four casinos — Pure Casino Edmonton, Pure Casino Yellowhead, Pure Casino Calgary, and Pure Casino Lethbridge — in a US$200.8 million deal.
Pure will continue to operate the casinos, entering a triple-net master-lease agreement with VICI at US$16.1 million initial annual rent. The 25-year lease term will increase by 1.25% in the second and third years; afterward, rent will increase based on the Canadian Consumer Price Index or 1.5%, whichever is greater.
Also in December, VICI acquired the real estate assets of the Fitz Hotel-Casino in Tunica, Mississippi, and the WaterView Hotel-Casino in Vicksburg, Mississippi, for $293.4 million from Foundation Gaming & Entertainment LLC. Foundation Gaming subsidiaries entered a triple-net-lease deal with $24.25 million in initial annual rent.
VICI will also finance several deals. On October, the REIT agreed to provide a delayed-draw term-loan facility for up to $200 million to fund development of Canyon Ranch Austin, in Austin, Texas, which is expected to open in 2025. VICI also received a call right to acquire Canyon Ranch Austin’s real estate and a purchase option for the real estate of Canyon Ranch Tucson in Arizona and Canyon Ranch Lenox in Massachusetts.
Pitoniak expected the deals, and VICI’s massive momentum headwind, to keep paying off for investors.
“With consensus estimates of S&P 500 2023 earnings-per-share growth running at 1% and the current S&P 500 dividend yield running around 1.6%, the combination of current estimated earnings growth and dividend yield would be 2.6% for the S&P 500,” Pitoniak said. “The combination of VICI’s midpoint (adjusted funds from operation) growth and our current dividend yield would be over 14%.”
For the 12 months ended Dec. 31, VICI had $1.14 billion, or $1.30 per share, in funds from operation, compared with $1.01 billion, or $1.76 per share, a year earlier. VICI said an increase in the current expected credit-losses allowance for the year prompted the per-share dip. Twelve-month revenue rose 72.3% to $2.6 billion from $1.5 billion, helped by incremental revenue from the MGM Growth Properties transactions and The Venetian acquisition.
VICI Properties shares fell 19 cents, or 0.57%, Friday to close at $33.29 on the New York Stock Exchange. The shares rebounded after hours, rising 18 cents, or 0.54%, to settle at $33.47.