VICI-PROPERTIES Earningcall Transcript Of Q2 of 2024

executive  officer;  John  Payne,  president  and  chief  operating  officer;  David  Kieske,  chief  financial

officer; Gabe Wasserman, chief accounting officer; and Laurie McCluskey, senior vice president of

capital markets.

Ed and team will provide some opening remarks, and then we'll open the call to questions. With that,

I'll turn the call over to Ed. 

Edward Baltazar Pitoniak -- Chief Executive Officer

Thank  you,  Samantha.  Good  morning,  everyone.  As  you  may  have  figured  out  by  now,  I  enjoyed

putting my thoughts together for VICI's earnings call. I try to hear through these opening remarks,

not only what we've done, but what we're observing and learning from the marketplace.

I may not always succeed in sharing anything genuinely fresh, but at the very least, I don't want my

opening remarks to become repetitive. When I began putting these thoughts together in early July,

the risk of repetitive remarks was high given that, until a couple of weeks ago, for REITs generally

and  net  lease  REIT  specifically,  not  a  lot  had  changed  since  last  quarter's  earnings  call  when  I

spoke of the big tech investing party that we REITs hadn't been invited to. In Bank of America's most

recent  fund  manager  survey,  Michael  Hartnett  showed  that  fund  managers  were  underweight  real

estate at a level equal to and not being since the great -- the depth of the great financial crisis. Then

came a welcome CPI print and REITs have begun to come back that we believe can endure.

Before you hear from John and David, and before we field your questions, let me say a few words

about the principles that guide us in a REIT marketplace like the ones we've been living through for

a  while  now.  We  start  by  asking  ourselves  is  what  we're  going  through,  whether  for  all  REITs

generally  or  net  lease  REIT  specifically,  cyclical  or  secular  in  nature.  There  are  REIT  sectors  that

have secular issues right now. Office is an obvious example of a sector with negative secular trends.

Data centers is the obvious sector with positive secular trends. We strong believe that experiential

real  estate  is  another  real  estate  category  with  positive  secular  trends  as  evidenced  by  research

recently  published  by  McKinsey  showing  that  indexed  back  to  1959,  the  share  of  consumer

discretionary  income  spent  on  experiences  has  grown  to  an  index  level  of  nearly  160,  while  the

share of consumer discretionary income spent on things has shrunk to less than 75. Capitalizing on

positive secular trends is fun, addressing negative secular trends, not so much. Positive cycles for

REITs are fun, negative cycles for our specific REIT sector not so much.

But it's always key to remember that cycles begin and cycles end, almost always driven by factors

that  are  beyond  the  control  of  a  REIT  management  team  and  board.  In  a  period  of  lagging  stock

performance, driven by cyclical factors, it can be tempting for REIT management teams and boards

to  start  deviating  from  the  REIT's  long-term  goals  and  strategies  in  hopes  that  the  deviation  can

somehow  overcome  the  cycle.  At  VICI,  we  strive  very  hard  not  to  deviate.  Here's  the  strategic

principle we strive to stay true to in all cycles.

We  dedicate  ourselves  to  investing  in  experiential  buildings  that  meet  these  three  fundamental

quality factors. Location quality, in other words, well located in markets that have sound fundamental

demographics and economics. Asset quality, meaning designed and built to serve the distinct needs

of  experiential  businesses  that  have  high  economic  dynamism  and  economic  durability.  Operator

quality, meaning occupied by an experiential operator that has high economic energy, ingenuity, and

expertise, and a strong balance sheet and credit profile.

With every investment we make, we, of course, seek accretion as measured in AFFO per share. But

that is not the only accretion we seek and measure. With every investment opportunity we evaluate,

in addition to AFFO accretion, we ask, is a given investment opportunity accretive to asset quality?

Is  a  given  investment  accretive  to  tenant  diversity  and  tenant  quality?  Is  a  given  investment

accretive  to  geographic  and  potentially  categorical  diversity  and  quality?  Finally,  can  it  give  an

investment  be  accretive  to  balance  sheet  quality  and,  potentially,  our  credit  ratings?  We  have  not

and  will  not  grow  for  growth's  sake,  if  that  growth  doesn't  continuously  improve  the  quality  and

intrinsic value of our portfolio and balance sheet. We will not, as some of our net lease peers do, tell

you we spend x hundreds of millions of dollars and y percentage cap rate to generate z dollars of

new rent, but then never tell you into what we invested that amount of money.

We will tell you what we invest in so that you can know what you own. The very good news is that

our business development team, led by John Payne, is identifying and developing opportunities to

meet our broader accretion criteria. And with that, I'll turn the call over to John. John?

John W. R. Payne -- President and Chief Operating Officer

Thanks,  Ed,  and  good  morning  to  everyone.  We  acted  on  the  investment  criteria  Ed  just  spoke  of

when,  in  the  second  quarter,  we  made  capital  commitments  of  up  to  $950  million  in  the  highly

differentiated  experiential  buildings  that  have  indispensable  value  to  their  occupants,  namely  the

Venetian and a collection of Great Wolf Resorts. These are investments that live up to our quality

criteria. And at the same time, the $650 million firmly committed to those investments will generate a

blended investment yield of 7.9%.

Our conviction that we can continue to identify and invest in experiential process that are accretive

against multiple quality factors is a key reason that we have decided that we will not be exercising

our call right to acquire [Inaudible] Leisure Park in Horseshoe, Indianapolis. We can and are making

this decision because of our confidence and conviction that we are actively identifying and pursuing

investment  opportunities  that  enable  us  to  generate  future  AFFO  growth  and  accretion,  while

furthering the strength and diversity of our portfolio and tenant roster. At this time, we believe that

we have the opportunity to create greater portfolio value by allocating VICI's capital to other gaming

and nongaming opportunities the team is actively pursuing. This is an approach that we believe will

produce 2024 AFFO [Technical Difficulty], bit higher in our net lease category.

And  with  our  newly  [Inaudible]  to  2024  growth  2%  at  the  midpoint  is  nearly  three  times  the  2024

AFFO per growth rate guided into last week by our one gaming REIT peer. The factor that continues

to accrue to our overall portfolio quality and structured tenant credit is the success of the dynamic

city of Las Vegas, where VICI collects 55% of our rent from assets that we own. Over the years, I've

cited  on  record-breaking  [Technical  Difficulty]  in  the  first  half  of  2024.  Harry  Read  International

Airport  had  back-to-back  record  months  reporting  5.1  million  passengers  arriving  and  parting  in

June.

June was the third best month ever. Trailing May, the second best month ever. And October of 2023

was the best month ever. In May, international visitation of Vegas also jumped 23% year-over-year.

And  in  June,  it  was  reported  that  city  officials  are  contemplating  adding  a  second  airport  to  Las

Vegas, with executives from Southwest Airlines stating and I quote, "It feels like any flight we add in

a Vegas gets filled. It's almost this insatiable appetite for people wanting to come and see Vegas."

Our  Las  Vegas  tenants  continue  to  benefit  from  this  momentum  as  evidenced  by  our  up  to  $700

million  capital  investment  to  extensive  reinvestment  projects  at  the  Venetian  in  exchange  for

increased rent. The size and the success of our gaming properties allows us a unique opportunity to

put large dollars to work into assets we already own. There continues to be a variety of opportunities

on the [Technical Difficulty] to the growth of our portfolio.

Casino  gaming  assets  continue  to  present  the  largest  opportunity,  both  domestically  and

internationally,  inclusive  of  investment  opportunities  into  the  casino  resort  properties  we  already

own. The magnitude and consistency of gaming cash flows and the creativity of our gaming tenants

continue to drive conviction in this section, and have set the blueprint REIT to extend our TAM and

other experiential centers. I now will turn the call over to David, who will discuss our financial results

and guidance. David?

David Kieske -- Executive Vice President, Chief Financial Officer

Thanks, John. Balance sheet liquidity results and our updated full year guidance, which we are very

excited  about.  As  we  work  on  the  right  side  of  the  balance  sheet,  we  are  constantly  focusing  on

VICI's balance sheet quality, bringing our leverage further down within our range of five to five and a

half  times  diligently  working  with  the  rating  agencies  to  improve  our  credit  ratings  over  time  and

ultimately  lowering  our  cost  of  capital,  balancing  the  right  long-term  leverage  for  the  company,  all

while ensuring we have the dry powder to continue to fund accretive growth for our owners. In terms

of dry powder, as of today, we have approximately $3.2 billion in total liquidity, comprised of $347

million  in  cash  and  cash  equivalents,  $566  million  of  estimated  proceeds  available  under  our

outstanding forwards and $2.2 billion of availability under our revolving credit facility.

In  addition,  our  revolving  credit  facility  has  an  accordion  option,  allowing  us  to  request  additional

lender  commitments  of  up  to  $1  billion.  Subsequent  to  quarter  end,  we  sold  4  million  shares  and

received approximately $115 million under our forward sale agreements. These proceeds were used

to  partially  fund  the  Venetian  capital  investment  John  mentioned  earlier.  In  terms  of  leverage,  our

total debt is currently $17.1 billion.

Our  net  debt  to  annualized  second  quarter  adjusted  EBITDA,  excluding  the  impact  of  unsettled

foreign equity is approximately 4.4 times-- excuse me, 5.4 times, within our target leverage range of

five to five and a half times. We have a weighted average interest rate of 4.36%, taking into account

our hedge portfolio at a weighted average 6.6 years to maturity. Touching on the income statement,

AFFO per share was $0.57 for the quarter, an increase of 5.9% compared to $0.54 for the quarter

ended June 30, 2023. We are very proud to deliver this continued consistent growth to our owners.

Our results once again highlight our highly efficient triple-net model given the increase in adjusted

EBITDA  as  a  proportion  of  the  corresponding  increase  in  revenue.  Our  margins  continue  to  run

strong  in  the  high  90%  range  --  when  eliminating  noncash  items.  And  we  have  the  highest  net

income margin in the S&P 500 as noted in an article published by Barron's during the month of July.

Our G&A was $15.8 million for the quarter, and as a percentage of total revenues, it was only 1.6%.

This continues to be one of the lowest ratios in not only the triple-net sector, but across all REITs.

Turning to guidance. We are raising our AFFO guidance for 2024 in both absolute dollars as well as

on a per share basis. AFFO for the year ending December 31, 2024, is expected to now be between

$2.35 billion and $2.37 billion, or between $2.24 and $2.26 per diluted common share.

Based on the midpoint of our updated guidance range, VICI expects to deliver year-over-year AFFO

per  share  growth  of  4.7%.  As  a  reminder,  our  guidance  does  not  include  the  impact  on  operating

results from any transactions that have not closed, interest from any loans that do not yet have final

draw  schedules,  possible  future  acquisitions  or  dispositions,  capital  markets  activity,  or  other

nonrecurring  transactions  or  items.  And  as  we  have  mentioned  in  the  past,  we  reported  noncash

CECL  allowance  on  a  quarterly  basis  which  was  its  inherent  unpredictability  leaves  us  enable

forecast  net  income  and  AFFO  with  accuracy.  Accordingly,  our  guidance  is  AFFO  focused  as  we

believe AFFO represents the best way of productivity on our equity investments and evaluating our

financial performance and ability to pay dividends.

With that, operator, please open the line for questions.

Operator

Questions & Answers: