VICI Properties CEO Edward Potoniak seemed to enjoy a whiff of “we showed you” triumph.
If market watchers were waiting for 2020’s coronavirus pandemic-triggered economic fallout to upend casino-related real estate investment trusts, they could stop.
Potoniak had the numbers, from a year of full rent collection and booming revenue, to prove it didn’t happen.
New York-based VICI, which serves as landlord to 28 gaming properties that are managed by five different casino operators, said its fourth-quarter revenue rose 57% from a year earlier to roar past Wall Street forecasts, although a key cash flow measure missed.
The company announced results late Thursday, held a conference call with analysts on Friday.
“Thanks to our tenants’ operating excellence and liquidity, thanks to the intense loyalty gaming customers have to the gaming experience, and thanks to the mission-criticality of our assets, VICI’s business model has proven itself,” Potoniak said in a statement.
The company’s gaming rent portfolio is 69% regional markets and 31% from Las Vegas.
VICI, which spun off from Caesars Entertainment in 2017, said adjusted funds from operation, a key cash flow measure that excludes one-time costs, were $251.7 million, or 46 cents per share for the three months ended Dec. 31, a 42.5% jump from $176.6 million, or 37 cents per share, a year earlier.
Analysts surveyed by Seeking Alpha had, on average, expected 48 cents per share in quarterly adjusted funds from operation.
Funds from operation are a closely watched fiscal yardstick for real estate investment trusts that take net income and add back depreciation and amortization.
“VICI keeps pushing ahead, diversifying and growing its tenant base, entering the non-gaming space, all while positioning the balance sheet in a favorable position,” Macquarie Securities gaming analyst Jordan Bender said in a research note Friday. “VICI ended 2020 with an in-line quarter and 100% rent collection across its diverse tenant base.”
Quarterly revenue rose 57% to $373 million from $237.5 million. The latest result includes $35.1 million in non-cash items — $28 million in noncash leasing and financing adjustments and $7.1 million of other income.
Seeking Alpha-polled analysts had expected VICI to report $350 million in fourth-quarter revenue.
VICI ticked off its positives for the quarter, including closing its $25 million sale of Bally’s Atlantic City to Bally’s Corp. VICI got 75% of the transaction and Caesars collected 25%. In December, VICI struck a deal to have North Carolina’s Eastern Band of Cherokee Indians become the new tenant at Caesars Southern Indiana.
VICI also listed 2020 accomplishments, led by $4.6 billion in acquisitions and investments and the REIT’s first investment outside of gaming, an $80 million mortgage loan to Chelsea Piers in New York City. VICI also boosted its quarterly dividend by 10.9 percent, raised $662.3 million by selling 29.9 million shares in a forward-sale agreement.
Deutsche Bank gaming analyst Carlo Santarelli said VICI ended 2020 with $336 million in cash on its balance sheet, which he said remained in “relatively strong shape.” He noted any future acquisitions by the company, would see cash “playing a major role.”
Potoniak later trained his optimism on legalized gambling.
“As 2020 unfolded, it became clear that our tenants will increasingly benefit from the technology-driven tailwind that legalized sports betting represents, giving our tenants a powerful new paradigm for developing their next generation of customers, further ensuring the durability of their business models and of our real estate,” Potoniak said.
For the 12 months ended Dec. 31, VICI had $835.8 million, or $1.64 per share, in adjusted funds from operation, up from $649.6 million, or $1.48 per share, a year earlier. Twelve-month revenue was $1.2 billion up 34.2% from $894.8 million a year earlier.
VICI estimated adjusted funds from the operation will be $1.01 billion to $1.04 billion, or $1.82 to $1.87 per diluted share.
Shares of VICI, traded on the New York Stock Exchange, closed Friday at $27.96, up 84 cents or 3.10%.
Follow Matthew Crowley on Twitter @copyjockey.
