Give VICI Properties all A’s for its third quarter: acquisitions, assets, accretion, and maybe a satisfying cry of “all right!”
The real estate investment trust completed $3.7 billion of acquisition and investments and posted revenue and adjusted cash flow that topped Wall Street forecasts.
In the quarter, that ended Sept. 30, VICI completed a $3.2 billion transaction with Caesars, for three Harrah’s hotel-casinos — Harrah’s New Orleans, Harrah’s Laughlin, and Harrah’s Atlantic City — from Eldorado Resorts. The deal, announced in June 2019, was part of Eldorado’s $17.3 billion merger with Caesars Entertainment.
VICI also closed a $400 million mortgage on Caesars Forum Convention Center, and an $80 million mortgage loan on Chelsea Piers, New York, the REIT’s first beyond-gaming investment.
“The largest overhang for the business has passed with the Caesars deal closing, although the company remains in pursuit of more growth, with the announcement of a non-gaming investment that is consistent with prior commentary,” Jefferies gaming analyst David Katz told investors.
VICI was also a seller in the quarter. On Sept. 3, VICI and Caesars agreed to sell Harrah’s Louisiana Downs Casino to Rubico Acquisition Corp. for $22 million. The company will receive $5.5 million in sale proceeds.
On Sept. 30, the REIT and Caesars Entertainment said they closed the previously announced deal to sell Harrah’s Reno to a CAI Investments affiliate for $41.5 million. VICI received about $31.1 million in sale proceeds.
In a statement Wednesday, New York-based VICI, spun off from Caesars in October 2017, said its adjusted funds from operation, a cash flow measure excluding one-time expenses, of $227.9 million, or 43 cents per share, for the three months ended Sept. 30, up from $164.6 million, or 35 cents per share, a year earlier.
The latest result topped the 35-cents-per-share average estimate of analysts polled by Seeking Alpha. Funds from operation are a closely watched fiscal yardstick for real estate investment trusts that take net income and add back depreciation and amortization.
Net income was $398.3 million for the quarter, or 74 cents per share, up from $144.4 million, or 31 cents per share, a year earlier.
Quarterly rose 56.7% to $339.7 million from $222.5 million and topped the average $308.1 million estimate of Seeking Alpha-polled analysts.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure excluding one-time costs, rose 41.9 percent to $300,356 from $211,669.
In the third-quarter earnings statement, VICI CEO Edward Pitoniak said investors were reaping the rewards of six quarters of smart acquisitions. (The company declared a 33-cents-per share dividend, a 10.9% increase from a year earlier. Pitoniak also expressed optimism over the Chelsea Piers deal, which he said, might lead to a future longer-term financing partnership.
“Over the last 25 years the Chelsea Piers team … has made Chelsea Piers the leading New York gathering space for recreation, entertainment and film production,” Potoniak said.
On a less jubilant note, VICI acknowledged the persisting coronavirus pandemic, saying that although all of its tenant properties and golf courses had reopened from their infection curve-flattening shutdowns, all were operating under health department-mandated reduced capacity. VICI said it couldn’t predict what further restrictions or shutdowns may come.
VICI added that it has granted short-term non-rent-related relief because of the pandemic but didn’t specify what.
“We continue to monitor the impact of the COVID-19 pandemic on our tenant’s businesses,” the company said, “including with respect to their respective financial and operating situations, liquidity needs, and contingency planning.”
Analysts have been mostly bullish about VICI. Citigroup rated the REIT “buy” on Sept. 21, which followed a reissued “buy” rating from Jeffries Financial Group on July 8 and an “outperform” rating from Scotiabank on July 1.
VICI Properties shares closed at $23.25 on the New York Stock Exchange Thursday, up 71 cents or 3.15%.
Follow Matthew Crowley on Twitter @copyjockey
