The top four executives of gaming-centric real estate investment trust VICI Properties acquired a combined $1.47 million of their company’s stock recently after the price was hammered by the investment community’s reaction to coronavirus.
In filings Tuesday morning with the Securities and Exchange Commission, CEO Edward Pitonack, President John Payne, Chief Financial Officer David Kieske and General Counsel Samantha Gallagher revealed stock acquisitions at prices ranging from $24.60 per share to $25.56 per share.
Pitonack had the largest purchase; 23,710 shares at $24.60 per share for a total value of $583,266. Payne acquired 17,853 shares at $25.23 for a total value of $271,901.
The stock purchases came after shares of New York-based VICI declined 12% since Feb. 21. Last week, the markets experienced their largest setback in more than a decade as fears over CORVID-19 gripped the U.S.
On Tuesday, after the SEC filings became public, VICI rose 6 cents or 0.24% to close at $24.72 on the New York Stock Exchange.
“In a sea of volatility within the gaming segment, VICI executives have stepped up and added to existing holdings,” Deutsche Bank gaming analyst Carlo Santarelli said a research note Tuesday.
Santarelli said the acquisitions “equate to increases in each of the individual holdings of at least 8%.”
The analyst believes the three gaming REITs – VICI, MGM Growth Properties, and Gaming and Leisure Properties, have been unfairly treated in the market downturn, being packaged with regional casino operators that have collectively seen share prices decline of roughly 26%.
“We see little to no reason for concern around VICI’s tenants’ ability to make their rental payments, and would further note that given the lease agreements, escalators are also likely on the majority of the rental streams,” Santarelli noted.
VICI owns the land and buildings for more than two dozen gaming properties currently managed by five casino operators: Caesars Entertainment, Century Casinos Inc., Seminole Hard Rock International, Jack Entertainment, and Penn National Gaming.
VICI raised more than $2.5 billion in new debt in January because of the REIT’s involvement in the $17.3 billion merger between Eldorado Resorts and Caesars.
As part of the merger, three Caesars properties under the Harrah’s brand in Atlantic City, Laughlin, Nevada, and New Orleans were sold to VICI for a combined $1.8 billion. VICI will lease the operations back to Eldorado for a total annual rent of $154 million.
VICI, which was created out of Caesars bankruptcy reorganization in 2017, owns the real estate associated with more than a dozen other Caesars properties that will become part of Eldorado after the merger.
Santarelli estimated that when the merger closes in the first half of the year, roughly 83% of VICI’s rental stream will come Eldorado managed properties. He told investors that Eldorado’s cash flow would have to fall by more than 50% for rental payments to be negatively impacted.
“Despite (the) limited risk to future rental streams, given the aforementioned coverage, and as further enforced with insider buying, we believe the curbed valuation created from the recent equity volatility serves as an opportunity,” Santarelli said.
VICI said $2 billion of the debt raise will be used to complete its part in the Eldorado-Caesars deal. The remaining proceeds will be used to pay off in full $498.5 million in debt due in 2023.
In January, VICI completed an $843.3 million acquisition of Jack Cleveland Casino and Jack Thistledown racetrack casino. The two Ohio properties were leased to the former owner, Detroit based Jack Entertainment.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
