Vici Properties, a real estate investment trust (REIT) focused on gaming real estate, holds ownership of 54 gaming establishments, including notable venues on the Las Vegas Strip such as Caesars Palace, MGM Grand, and The Venetian. The company also boasts a strong collection of regional gaming properties, such as the Borgata in Atlantic City and MGM National Harbor in Washington, D.C., alongside a smaller assortment of non-gaming properties.
Vici’s holdings encompass more than 60,000 hotel rooms, 4.2 million square feet of gaming area, 6.7 million square feet of meeting space, over 1,000 outlets for food, beverage, and retail, and upwards of 50 entertainment venues. Despite a high-interest rate climate that has been challenging for REIT growth, Vici Properties has adeptly implemented its business strategy. The company’s 5.4% dividend-yielding stock presents a promising long-term investment potential.
After its spinoff from Caesars Entertainment in 2018, Vici emerged as a top player in gaming real estate. Despite the cyclical nature of the casino industry, Vici has established a robust business foundation. The average lease in its portfolio extends 41 years, with 90% of leases safeguarded against inflation by tying rent increases to Consumer Price Index (CPI) growth.
While Vici primarily functions as a casino REIT, it sees substantial opportunities to expand into other experiential real estate sectors. The company made a significant non-gaming acquisition in 2023 with a portfolio of Bowlero bowling centers and is considering ventures into non-gaming hotels and resorts, shopping centers, sports arenas, and entertainment venues. In gaming, Vici retains first-refusal rights to acquire additional Las Vegas Strip properties and regional assets if Caesars opts to sell.
Vici has shown proficiency in enhancing value through acquisitions, having acquired its largest competitor (MGM Growth Properties), The Venetian, and additional assets. These actions have bolstered its per-share funds from operations (FFO), indicative of earnings in the real estate sector. Thanks to effective capital allocation, Vici has consistently increased its dividend annually since its initial public offering (IPO), with no signs of this trend declining.
Despite challenging circumstances, Vici has discovered growth avenues. While higher interest rates have slowed property acquisitions, the company has capitalized on these elevated rates by engaging in financing investments. Vici’s financial strength enables access to relatively low-cost capital, exemplified by recent debt issuance at a 4.75% interest rate. By providing financing to partners at higher rates, Vici profits from the interest rate spread.
In 2024, Vici financed the construction of a new Margaritaville resort and multiple Great Wolf Lodge properties. Additionally, it agreed to fund renovations at The Venetian with a 7.25% yield, structured as a rent increase. These strategies not only stimulate profit growth in challenging economic conditions but also position Vici to eventually acquire the properties it finances, creating a growth pipeline once capital costs become more favorable.
Overall, Vici Properties maintains a portfolio of high-quality assets, a strong balance sheet, and a management team with a proven history of smart capital management. Vici is poised for growth and may benefit significantly from declining interest rates. In the meantime, shareholders benefit from a 5.4% dividend yield, well-supported by the company’s earnings.
