VICI Properties Inc. (NYSE: VICI) is a real estate investment trust (REIT). It engages primarily within the enterprise of proudly owning playing, hospitality, and leisure locations. Its geographically various portfolio consists of 43 properties throughout roughly 62 million sq. ft.
Like most REITs, VICI Properties affords a gorgeous dividend yield of 4.58%. The corporate’s dividend per share has elevated at a compound annual development price (CAGR) of 11.4% between FY 2018 and 2021. The corporate additionally not too long ago accomplished the $17.2 billion acquisition of MGM Progress Properties LLC and the $4 billion acquisition of the belongings held by The Venetian Resort Las Vegas.
The Bull Case for VICI Properties Inc.
Whereas this firm is only some years previous, it has wasted no time increasing. Full-year income between 2018 and 2021 has elevated 68%, or a CAGR of 18.9%. Over the identical interval, internet revenue elevated 94%, or a CAGR of 24.6%. These are distinctive development charges for an organization that invests in bodily belongings. So the actual query is, how did they develop that shortly?
Since its formation, the corporate has made $29 billion value of investments. Most of that is engaged in shopping for properties already in use, affording VICI Properties prompt returns. 96% of the corporate’s leases are topic to inflation-linked escalators (will increase). These escalators defend the corporate’s rents from inflation, making it enticing for traders in search of to make use of it as a hedge. The typical lease time period on its properties is 43 years. The lengthy lease offers the corporate loads of time to search out new lessees and generate earnings with out the recurring prices of discovering new tenants.
In contrast to most REITs, there’s low cyclicality with VICI Properties’ investments. That is as a result of robustness of the playing trade and the geographic unfold of the corporate’s properties. This could permit VICI to proceed to develop ought to the US financial system expertise a downturn.
The Bear Case for VICI Properties Inc.
VICI Properties has a comparatively poor credit standing, although that is progressively bettering. Consequently, traders demand excessive bond yields for lending the corporate cash. The corporate has been paying comparatively high-interest charges on its debt regardless of a low-interest price interval. Because the Fed continues its price hikes, VICI should spend extra on its debt repayments, decreasing earnings and returns.
The corporate depends on just a few lessees to pay the majority of its owed lease. VICI Properties estimates that Caesars will characterize 42% of whole annualized money lease, whereas MGM will characterize roughly 36% of whole annualized lease by 2022. The playing trade may be very aggressive, and with rising rates of interest, these main lessees might battle to pay the lease. A default by considered one of these lessees will considerably damage VICI’s income and skill to repay its excellent money owed.
So, Ought to I Purchase VICI Properties Inc. Inventory?
The corporate’s immense funding expenditure and stable revenue and dividend development charges point out that it may probably ship steady returns to shareholders over the approaching years. It could show an appropriate inflation hedge as a result of inflation-linked will increase constructed into its lease agreements. VICI Properties does depend on two corporations for almost all of its rental revenue, which is a significant danger. Nevertheless, the corporate has already confirmed that it goals to proceed increasing, which ought to decrease its reliance on the 2 largest tenants. Ought to considered one of these lessees fail, VICI would seemingly appeal to a brand new tenant comparatively shortly as a result of worth and high quality of its properties.
Quickfire spherical:
Does VICI Personal Caesar’s Palace?
Sure, the corporate owns Caesar’s Palace.
What’s a REIT?
An actual property funding belief is an organization that owns, operates, or funds income-producing actual property whereas paying 90% of taxable revenue out as dividends.
What’s a Triple Web Lease?
A lease settlement whereby the lessee agrees to pay lease, utilities, and all of the property bills.
