Last year was a transformational period for VICI Properties (VICI 0.23%). The real estate investment trust (REIT) went on a high-stakes shopping spree to significantly expand and diversify its portfolio.
That wager is paying big dividends this year. The experiential property REIT is delivering eye-popping growth. That's enhancing its ability to sustain and grow its attractive 4.6%-yielding dividend.
NYSE: VICI
Key Data Points
Going on an epic shopping spree
VICI Properties delivered impressive growth in the first quarter:
|
Metric |
First-Quarter Result |
% Year-over-Year Change |
|---|---|---|
|
Total revenues |
$877.6 million |
110.7% |
|
Adjusted funds from operations (FFO) |
$528.6 million |
73% |
|
Adjusted FFO per share |
$0.53 |
18.6% |
Data source: VICI Properties.
The REIT's revenue more than doubled, driven by a significant expansion of its portfolio, highlighted by the following deals:
- MGM Growth Properties: VICI closed its $17.2 billion merger with fellow gaming REIT MGM Growth Properties in April 2022.
- Venetian Resort Las Vegas: It bought the land and real estate assets of Venetian Resort Las Vegas for $4 billion in February 2022.
- MGM Grand/Mandalay Bay JV: In January of this year, VICI acquired the remaining 49.9% interest in the MGM Grand/Mandalay Bay joint venture from its partner Blackstone. It paid $1.3 billion in cash and assumed the remaining share of the JV's $3 billion of property-level debt.
Those deals drove robust adjusted funds from operations (FFO) growth, including on a per-share basis despite a 45% increase in its outstanding shares from those issued to finance its acquisitions.
In commenting on the quarter, CEO Edward Pitoniak stated in the earnings report that "the first quarter of 2023 continued the momentum VICI generated in 2022: expanding our platform, cultivating new and expanding existing partner relationships, and accessing liquidity opportunistically."
The REIT has continued its shopping spree this year. In addition to buying out Blackstone's stake in their Las Vegas casino joint venture, VICI Properties made several other investments:
- Great Wolf Resorts: The REIT expanded its partnership with Great Wolf by providing the indoor waterpark resort company with up to $287.9 million in construction financing to develop a Great Wolf Lodge in Connecticut.
- PURE Canadian Gaming: VICI made its first international acquisition. It acquired four real estate assets from PURE Canadian Gaming in Canada for about $200 million.
- Hard Rock Ottawa Casino Notes: The REIT also purchased $85 million of senior notes issued by the company that owns and operates the Hard Rock Ottawa Casino to redevelop that property.
These investments continued the REIT's diversification and expansion strategy. It's growing internationally and beyond the gaming industry.
Can the shopping spree continue?
VICI Properties has quickly become the world's leading gaming and experiential REIT. It owns 50 properties leased to 11 tenants across 15 states and Canada. It already owns most of the best properties on the Las Vegas Strip. However, the REIT believes it can continue growing in the future.
One factor driving that view is its embedded-growth pipeline. VICI Properties has agreements with several gaming and non-gaming partners, giving it the right to acquire properties in the future. For example, it has the right to purchase Harrah's Hoosier Park, Horseshoe Indianapolis, and Caesars Forum Convention Center from Caesars. Meanwhile, it has the right of first refusal on several more casino properties. It has similar agreements to acquire several non-gaming properties, including a BigShots Golf facility and some Canyon Ranch wellness properties.
Meanwhile, many current partners still own gaming and non-gaming properties the company could acquire. In addition, it can continue forming new partner relationships in the U.S. and abroad. The company sees tremendous potential to purchase leisure and experiential properties from operators and developers.
VICI Properties has ample financial flexibility to continue making deals. It has an investment-grade balance sheet. Meanwhile, unlike many REITs, its share price has held up over the past year, enabling it to sell stock to fund accretive deals.
More growth is ahead for VICI and its dividend
While acquisitions can be risky, VICI Properties' shopping spree is driving robust growth. The company has plenty of room to continue expanding. Those future deals will enable the REIT to continue growing its already attractive dividend, which it has done in all five years since its formation. That makes it an enticing option for investors seeking a generous and growing passive income stream.
