VICI Properties Stock: Bullish High-Yielder Announces Epic Acquisitions
February 16, 2023
VICI Stock’s Dividend Increases by 8.3%
It wasn’t all that long ago that I last wrote about VICI Properties Inc (NYSE:VICI), but at Income Investors, we’re all about highlighting burgeoning high-yield growth opportunities, so it’s worth looking at VICI Properties stock again. Over the last two months, the company has announced a raft of great acquisitions that should further juice its financials, share price, and high-yield dividends.
VICI Properties is one of the largest owners of gaming, hospitality, and entertainment destinations in the U.S. It also recently acquired a few gaming properties in Canada.
As of November 2022, the company’s national footprint included 43 gaming facilities, approximately 58,700 hotel rooms, more than 450 food and beverage outlets, about 500 retail outlets, and four championship golf courses. The company’s properties include Caesars Atlantic City, Caesars Palace Las Vegas, Luxor, Mandalay Bay, and the Venetian Resort Las Vegas. (Source: “Investor Presentation,” VICI Properties Inc, November 15, 2022.)
The company still has plenty of room to grow; it owns a whopping 34 acres of undeveloped land in Las Vegas.
For the third quarter ended September 30, 2022, VICI Properties announced that its total revenues increased by 100% year-over-year to $751.5 million. Its net income went up by 104% year-over-year to $330.9 million, or $0.34 per share. (Source: “VICI Properties Inc. Announces Third Quarter 2022 Results,” VICI Properties Inc, October 27, 2022.)
The company’s funds from operations (FFO) in the quarter were $340.6 million, or $0.35 per share, compared to $161.9 million, or $0.28 per share, in the same period of 2021. Its adjusted FFO (AFFO) climbed in the third quarter by 82.8% to $470.7 million, or $0.49 per share.
VICI Properties has raised its dividend every year since it went public in early 2018.
Even during the COVID-19 pandemic, which decimated tourism-related companies, the company was able to provide VICI stockholders with raises. In December 2022, VICI Properties declared a cash dividend of $0.39 per share, for a current yield of 4.6%. This represents an 8.3% increase over the $0.36 per share it declared in December 2021.
VICI Properties Inc Expanding Via Acquisitions
Just before the end of 2022, VICI Properties announced that it had acquired the real estate assets of the Fitz Casino & Hotel (Tunica, Mississippi) and the WaterView Casino & Hotel (Vicksburg, Mississippi) from Foundation Gaming, LLC for an aggregate purchase price of $293.4 million. VICI financed the transaction with cash on hand. (Source: “VICI Properties Inc. and Foundation Gaming Announce Sale Leaseback Transaction,” VICI Properties Inc, December 22, 2022.)
Simultaneous with this acquisition, VICI entered a triple-net master lease agreement with subsidiaries of Foundation Gaming. The master lease has an initial total annual rent of almost $24.3 million and an initial term of 15 years, with four five-year tenant renewal options.
On January 9 of this year, VICI Properties announced it had acquired the real estate assets of PURE Casino Edmonton in Edmonton, Alberta; PURE Casino Yellowhead in Edmonton; PURE Casino Calgary in Calgary, Alberta; and PURE Casino Lethbridge in Lethbridge, Alberta for $200.8 million. (Source: “VICI Properties Inc. Acquires Four Canadian Gaming Properties in Sale Leaseback Transaction With Pure Canadian Gaming Corp.” VICI Properties Inc, January 9, 2023.)
The seller of those four properties, PURE Canadian Gaming, is a leading gaming operator in Canada and the largest commercial gaming operator in Alberta, with assets in the two largest cities in the province. Because of the highly regulated nature of the gaming industry in Canada, there are minimal competitive threats. There have been no significant changes to the business model in the last 30+ years.
VICI Properties Inc also announced that it had entered a triple-net master lease agreement covering PURE Canadian Gaming’s properties. The master lease has an initial total annual rent of approximately $16.1 million and an initial term of 25 years (with four five-year tenant renewal options).
This acquisition is expected to be immediately accretive to VICI Properties’ AFFO. Moreover, VICI says the deal has an attractive spread to its cost of capital.
John Payne, VICI Properties Inc’s president and chief operating officer, said, “Today’s announcement marks another momentous first for VICI as we expand our footprint internationally into Canada with the acquisition of the PURE Portfolio.” (Source: Ibid.)
He continued, “This transaction highlights our ability to source, structure, and fund cross-border transactions, widening our opportunity set as we continue along our growth trajectory. We are pleased to add PURE as our eleventh tenant and look forward to a mutually beneficial partnership.”
VICI Properties also announced on January 9 that it had closed on its previously announced acquisition of the remaining 49.9% interest in the joint venture that owns MGM Grand Las Vegas and Mandalay Bay Resort from Blackstone Real Estate Income Trust, Inc. for cash consideration of approximately $1.3 billion. (Source: “VICI Properties Inc. Completes Acquisition of Remaining 49.9% Interest in MGM Grand Las Vegas and Mandalay Bay Joint Venture,” VICI Properties Inc, January 9, 2023.)
These properties are subject to an existing triple-net lease agreement between the joint venture and MGM Resorts International (NYSE:MGM). The lease remains unchanged and will generate annual rent of approximately $310.0 million.
The MGM Grand Las Vegas and Mandalay Bay lease term expires in 2050, and the agreement includes two 10-year tenant renewal options. Under the lease, the rent will escalate annually by two percent through 2035 (year 15 of the initial lease term), and thereafter at the greater of two percent or the consumer price index (with a ceiling of three percent).
VICI Properties Stock Up 5% Year-Over-Year
VICI stock’s price has been ripping higher since the stock market cratered in March 2020. As of this writing, shares of VICI Properties Inc are up by:
- Nine percent over the last three months
- Seven percent year-to-date
- Five percent year-over-year
- 310% over its March 2020 low
- 47% over its pre-pandemic record high
Chart courtesy of StockCharts.com
VICI Properties stock is just $1.00 below its August 2022 record high of $35.69. Wall Street analysts think the stock will surpass that level over the coming quarters. They’ve provided a 12-month share-price forecast for VICI stock in the range of $36.53 to $40.00, which points to potential gains in the range of 5.6% to 15.5%.
The Lowdown on VICI Properties Inc
Vici Properties owns one of the world’s most dynamic gaming and entertainment property portfolios, and thanks to a number of strategic acquisitions over the last two years, it has doubled its total revenue on a year-over-year basis.
The company’s recent acquisitions, including its first non-U.S. acquisitions, position VICI Properties Inc for additional revenue and earnings growth. That should help juice VICI Properties stock’s already bullish share price and reliable, safe, high-yield dividends.
