Q2 2023 VICI Properties Inc Earnings Call
Our financial results prepared in accordance.
A reconciliation of these measures to the most directly comparable GAAP measure is available on our website and our second quarter 2023 earnings release, our supplemental information in our filings with the SEC for additional information with respect to non-GAAP measures of certain tenants and our Counterparties discussed on this call. Please refer to the respective companies public filings with the SEC.
Hosting the call today, we have Ed Bottone, Chief Executive Officer, John Payne, President and Chief Operating Officer, David <unk>, Chief Financial Officer, Gabe Wasserman, Chief Accounting Officer, and Laurie on Mccloskey Senior Vice President of capital markets and team will provide some opening remarks, and then we will open the call to questions with that I'll turn the call over to Ed.
Thank you Samantha and good morning, everyone. We're excited to talk this morning about our Q2 2023 results featuring a year over year <unk> per share growth of 11, 9%, which we believe will be among the higher growth rates for S&P 500, Reits for Q2, 2023 and yet at one.
The lowest price to earnings growth ratios pegged or peg plus yield ratios among the S&P 500 Reits over.
Over the course of the call John will share with you what we're doing strategically to continue our growth and David will give you details on our liquidity position. Our Q2 2023 results and our updated earnings outlook to year end I will now spend a few minutes on the exciting news we shared last night with the announcement of our significantly.
<unk> growth partnership with Canyon ranch legendary and leading brand in the place based wellness sector. Indeed, I'm excited to say that the <unk> team is conducting this call from Canyon Ranch, Linux and the beautiful Berkshares in Massachusetts.
The key elements of our expanded Canyon ranch partnership our Vg, making an up to $150 million preferred equity investment in the Canyon Ranch operating company to support the expansion of the Canyon Ranch operating in digital platforms as well as enhancements to the Tucson and Lenox assets.
She also intends to provide approximately $150 million of mortgage financing secured by Canyon Ranch, Tucson, and Canyon Ranch Lennox to refinance Canyon ranch's existing <unk> debt with this refinancing serving as a bridge to enhancing <unk> embedded growth pipeline by specifically, allowing.
For <unk> conversion of its existing purchase options on Canyon Ranch, Tucson, and Canyon Ranch Olympics, which are converting to call rights, whereby beachy can elect to acquire the real estate assets of Canyon Ranch, Tucson, and Canyon Ranch Atlantic in the coming years subject to certain conditions with Canyon ranch continuing to.
Operator assets under long term triple net leases.
This also includes Vg's previously announced commitment to provide up to $200 million of development funding for Canyon Ranch, Austin, which is scheduled to open between 2025 and 2026 with a call right to own the real estate upon stabilization and finally, the joint development of a strategy of identifying and potentially <unk>.
Wiring conventional resorts that have conversion potential new Canyon Ranch resorts, We Canyon ranch operating the resorts and Vg owning the resort real estate under a long term triple net lease.
Canyon Ranch has nearly 45 years of operating history. It serves a highly affluent clientele that invest vigorously through all cycles in medical and holistic life enhancement experiences and services with only two established destination resort locations. We believe Canyon ranch is positioned to significantly expand its.
Clientele in its geography domestically and internationally, we are investing in Canyon ranch to help fund an energized that expansion gaining through our partnership the opportunity to fund the acquisition and integration of New Canyon Ranch resorts.
Under the leadership of CEO , Jeff Kuster, The Canyon Ranch team is poised to grow as brand reach and network breadth, both programmatically and geographically and have all the elements of our expanded partnership with Canyon Ranch, John Goff Canyon Ranch's owner and I are most excited about network expansion in the years ahead.
Both John Goff and I believe that the conventional resort sector could see elements of distress in the next few years less to do with operating performance and more to do with refinancing constriction as we have pointed out in our transaction deck, which can be found at www dot Vg properties dot com more than 37 billion.
A resort in hotel <unk> MBS financing will come due from 2024 through 2028, and I should point out that that's only a fraction of the overall mortgage financing on U S hotels and resorts. During this period, we believe that within those billions of dollars our resorts that could meet canyon ranch's conversion criteria.
The conversion of a conventional resort to a canyon ranch resort has the potential to be transformative. Thanks to the capital and operating dynamics of the Canyon Ranch economic model. The Canyon Ranch model centers on maximizing the guest experience space indoors and out and maximizing the guest experience.
Of time through Canyon, ranch's holistic wellness and life enhancement offerings. This maximization of experiences leads to a revenue intensity within the Canyon ranch model that surpasses the economic intensity of a conventional resort potentially giving canyon ranch and BG competitive advantage in <unk>.
Wiring and realizing value out of resort locations meeting our criteria.
I believe our growth opportunity with Canyon ranch is a generational opportunity in multiple senses of generational wellness as a secular growth trend that has multi generational and its consumer profile and generational in terms of its secular outlook and growth opportunity and Canyon ranch resorts are.
Real estate built to last for generations.
At <unk>, we invest in partnerships and real estate assets that we will preserve and grow value for many generations to come as you look across the spectrum of S&P 500, Reits ask yourself is the real estate of high quality and generational durability.
And does the real estate enjoy the benefit of cultural and demographic tailwind that will sustain and grow the value of the real estate for generations to come.
<unk> I believe you get high quality enduring real estate occupied by operators, serving multiple generations of customers for generations to come.
We believe our expanded partnership with Canyon Ranch.
Herb example of this value proposition with that over to you John Payne.
Thanks, Ed Good morning, everyone and makes an excellent point on the quality enduring aspects of Bg's portfolio, our tenants continue to prove their operational excellence and their ability to innovate and evolve their business and importantly for BG their assets as well.
The results that continue to come out of Las Vegas speak to our tenants' operational quality and the operating credit, which we believe accrues to the value of our real estate I will touch on Las Vegas in the gaming sector, shortly but I wanted to emphasize the type of the type of portfolio, we have built and that the team continues.
To build that between these characteristics are a core focus of our strategy as we meet potential partners in gaming and non gaming experiential sectors, both domestically and internationally to.
To recap our second quarter and subsequent activity <unk> continued its international expansion into Canada with our announcement of the acquisition of board gaming assets from century casino in Alberta.
We also closed on the acquisition of the Rocky Gap Casino resort in Maryland. This week again with century casinos are partnership with century is a great example of the type of operators. We look for as the relationship is a win win for both businesses as we grow together Canyon Ranch also exemplifies the type of growth minded.
Partner with operational excellence and played place based wellness as as described earlier were very excited to deepen and expand the relationship into the future growing with our partners as they look to enhance and expand their business as a core component of our strategy as we develop and deepen our relationships.
<unk> gaming and the non gaming sectors. This approach helped <unk> continue to grow a more visible pipeline into our future with operators, we value and we trust. It also allows <unk> to build a portfolio of assets with each partner that we believe can meaningfully impact bg's growth overtime in the gaming.
We continue to be impressed by our tenants they exemplified the operational excellence, we seek to find as we expand into other sectors and what other sector right. Now can you find a headline that reads quote.
Another all time record result, but in line with consensus and to quote Las Vegas has remained at or near all time highs in terms of margins and results and is continuing to see record traffic.
Casinos are performing well as the high value consumer segment remains quite healthy we continue to see many domestic real estate opportunities in gaming, including in markets, where we do not currently own assets and as the industry expands it.
Footprint into new areas of the United States. We also remain focused on international opportunities with the team traveling the globe. This year meeting new potential partners as Bts brand has ascended the funnel of opportunities has expanded in both gaming and non gaming we've added resources to meet the <unk>.
<unk> funnel of opportunities and as always we work closely with our advisors and those in the BT network to help force multiply our ability to create and evaluate opportunities for non gaming. We are intensely studying various sectors at a category level and operating level.
And at an asset level, notably in the family Entertainment and sports categories, We're moving past the evaluation stage and into constructive discussions on how bt's capital can fit best with our growing relationships as you know our relationship led <unk> are at the heart of our success and they take time.
The cultivate as we aim to find the best solutions that meet the goals of both sides, especially in an ever evolving economic and capital markets environment. We're excited about how these relationships are developing.
The <unk> team has been hard at work this year building relationships and opportunities for our pipeline of growth across multiple sectors and geographies in the years to come we are focused on partnering with best in class growth minded operators with whom we can continue to grow our high quality and generational real estate portfolio, we work tirelessly to.
To deliver results to our shareholders evidenced by the last five and half years now I will turn the call over to David who will discuss our financial results David.
Thanks, John I will keep my remarks brief because we want to leave as much time for everyone's questions, but I do want to touch on our liquidity and our updated full year guidance, we're constantly focusing and at times obsessing on the balance sheet as we work to bring our leverage back down to our target range of five to five five times, while ensuring we have the dry powder to continue to fund accretive.
For our shareholders. We are diligently been working with the agencies to improve our credit ratings over time, lower our cost of capital while balancing the right leverage for the company.
At quarter end, we had approximately $4 billion in total liquidity comprised of approximately $740 million in cash $870 million of net proceeds available under our forward sale agreements and $2 4 billion of availability under the revolving credit facility.
Sequencers at quarter end, we settled approximately $190 million in shares under our forward sale agreements to fund the closing of Rocky gap.
In terms of leverage net debt to annualized Q2, adjusted EBITDA is approximately five six times, we have a weighted average interest rate of 434% taking into account our hedge portfolio and a weighted average six four years to maturity.
Turning to the income statement <unk> per share was <unk> 54 for the quarter, an increase of nearly 12% compared to 48 for the quarter ended June 32020 to.
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, our G&A was $50 million for the quarter and as a percentage of total revenues was only one 7% in.
Your line with our full year expectations and one of the lowest ratios in the triple net sector.
Turning to guidance, we are updating <unk> guidance for 2023 in both absolute dollars as well as on a per share basis.
<unk> for the year ending December 31, 2023 is now expected to be between $2 3 billion and $2 $1 6 billion or between $2 11, and $2 14 per diluted common share just to reiterate based on the midpoint of our updated guidance, which we expect to deliver year over year <unk> per share growth.
10%, one of the highest growth rates across <unk> and.
And as a reminder, our guidance does not include the impact on operating results for many any announced but unclosed transactions interest income from any loans that do not yet have final draws structures possible future acquisitions or dispositions capital markets activity or other nonrecurring transactions or items and as we've discussed with you in the past we reported.
Noncash seasonal seasonal allowance on a quarterly basis, which due to its inherent unpredictability with us unable to forecast net income and <unk> with accuracy Accordingly, our guidance as <unk> focused.
We believe <unk> represents the best way of measuring the productivity.
Productivity of our equity investments excuse me in evaluating our financial performance and ability to pay dividends.
With that operator, please open the line for questions.
Yeah.
Thank you if you would like to ask a question. Please press star followed by one telephone keypad. If you would like to withdraw your question. Please press thoughtful about.
When preparing to ask your questions. Please ensure your devices are muted.
First question comes from Anthony <unk> with Jpmorgan. Your line is open.
Thank you.
And congratulations on Canyon Ranch, but my first question is actually on Borachio and news around that that was out around the quarter.
Can you just maybe give us your view on how you would think about a transaction like that or the appetite.
To do something of that nature.
Yes, Tony I'll start and John and David can chime in as they wish.
I want to answer that question is the level of general principles.
We we take great care.
And how we acquire and that care manifest itself in us not attempting to buy what we can accretively pay for.
And so we evaluate every situation on the basis of can we create value for our investors straight out of the gate are net lease model is a model in which the yield we get at the outset is the yield we're going to live with I mean, we will obviously, we can obviously get rent escalation over time in <unk>.
Increasing yields based on that but we are not a category, where we can go in and accepted dilutive yield going in on the basis of having an underwriting thesis of asset management that somehow going to magically transform a dilutive yield into an accretive yield so we.
Our very careful and very humble.
And understanding what we can and can't do and that guides our investment decision making.
Okay. Thanks, and then.
Just one question on Canyon Ranch and the prep into the operating platform is that something that.
As currently going to make money either from a cash flow basis or even from an earnings.
Point of view and then just also how you thought about making an investment into one of your partners operating platform.
As we think about.
Could that happen going forward and more frequency.
Yes, so I'll take the second part of your question and then first and then David can answer the first part of your question in terms of.
<unk>.
Will we be doing a lot more of this I would say generally no I wouldn't rule it out, but I think there's idiosyncrasies beneficial idiosyncrasies to the Canyon ranch situation Tony.
<unk> gave us.
High conviction. This was the right thing to do in this situation investing in the Canyon Ranch operating platform insofar as as we look across experiential sectors, we're particularly intrigued with the degree to which wellness is a globally.
Magnificent business in terms of its economics and at scale as we pointed out in our transaction deck Mckinsey estimates that wellness.
As manifested in the Canyon Ranch model is a $1 five trillion dollar global industry and yet we think it's one of the least consolidated.
Experiential sectors, especially in relation to its magnitude globally and so we believe canyon ranch has a growth opportunity.
<unk> growth opportunity that deserved a unique solution in terms of beachy, providing growth capital into the operating platform. In this particular situation and then David do you want to take the first part yeah, Tony I mean, it's it goes to ed's comments around it's a holistic solution, where we've obviously provided the prep.
We will fund the loan here in the not too distant future, but it all goes to the opportunity that Ed and John talked about on CNBC last night that this is a much greater opportunity than just the prep. The prep itself is accretive to us it doesn't make money.
We funded $90 million yesterday, and we will not have a delayed draw of funding schedule that will happen over the next three or four quarters. So it is a phenomenal tool to be partners with the organization and grow together.
Okay. Thank you.
Thank you Tony.
Our next question comes from Jim Collins with Evercore. Your line is open.
Hi, Good morning. Thank you small technical question, David what is implicit CPI in your guidance for the balance of the year. What are you assuming on lease Escalations I guess on a blended basis.
Yes, Jim we just assume the base rates we don't.
We had a crystal ball, we would predict CPI.
Also for teasers, it's 2% some of the regional obviously, one 5%, but it's just the base rates.
And guidance.
Great.
Would you do that thank you and then perhaps just for John quickly. You mentioned, obviously you are adding resources, you said to studying new verticals.
Could you just elaborate a little further on that is that people are.
New.
What does that mean, I guess and then what's the cost of that potentially.
Yes, we've been at it it's a great question, we've been adding I think we brought on a new chief investment officer, a little over a year ago, and we've been adding staff under David and Aaron's team did.
We did a little deeper into the segments.
We've been studying.
And it's important to do that there is only so many places I could be and so many things that are.
Few of US could study, we realized we needed to bring on some resources to be more more productive.
Terrific. Thank you.
Thank you Jim.
Our next question comes from David Katz with Jefferies. Your line is open.
Hi, Good morning, everyone. Thanks for taking my question.
Okay.
Think about this growth beyond gaming.
Vehicles that are.
Not the.
The same kind of lease structures, you have write loans et cetera.
Obviously, the risk profile on those a bit different but youre getting paid for that risk. If you could just update us or talk through how you think about that.
And that risk and the payment for that risk would be helpful.
Yes, so I think when it comes to.
Vg's credit activities.
We do as you suggest that David we take great care in the underwriting I think one of the key elements of our underwriting is that when it comes to absolute bottom line risk. It would be an asset we would be very happy to own. If we ended up needing to own. It. Okay. We don't want to lend against up we would never want to own.
And that for us is absolutely existential.
And obviously, we want to make sure we're putting money behind not only really good asset, but a really good operator and whose credit.
We can be confident whether they are developing or operating.
So in this particular time I would also say that it is very accretive deployment of our capital insofar as the overall real estate transaction market continues to be really depressed in terms of activity I believe in the last month that was reported on it was down about 60% 70% year over year.
So.
<unk> does give us an opportunity to deploy capital accretively in a period in which the transaction market is still somewhat stalled, especially based upon.
Would be sellers and would be buyers not having high conviction around what assets how assets should be valued.
Ed can I add something to that too David.
Because we've been talking a lot about non game and I think we will probably continue.
Shouldnt be lost that we continue to travel the world and studying gaming asset you Shouldnt take that there are a lot of the conversation.
About these great new partnerships that we form in the experiential sectors that somehow.
Lost sight of how great casino businesses, we are continuing to do that and put resources to studying unique opportunities all over the United States and the world.
Perfect. Thank you.
We now turn to Smedes rose with Citi. Your line is open.
Alright. Thanks.
Just wanted to ask you it looks like the Venetian Palazzo its going to unionize and I'm just wondering I know it probably it's a controls your rents, but do you think it meaningfully changes the tenant's coverage ratios move.
Move to that.
More structured workforce.
Okay.
Look it's hard for us to quantitate that that sounds.
That's probably a question for the operator, but I will remind you and you know this well and you've heard me say this many at a time.
Whether the business is up 5%, 10% of the business is down 5%.
And it's five and half years, it's collected 100% of its rent from all.
All of its operators. So this is an operator decision that.
Paula team made and I think they feel very good about about the workforce there.
And Smedes, let me just add while generally we do not for very good reasons disclose asset level, four wall rent coverage or EBITDAR EBITDA before rent.
The Venetian did go before the Nevada Gaming Board back in November and did disclose at that time, what they expected to achieve for 2022 EBITDAR at the resort and they disclosed they are on track for $650 million of EBITDA before rent and you know that in our first year, we were collecting $250 million of rent.
So there is a lot of coverage at the Venetian.
Yes, Okay fair enough and then you just mentioned that the.
It sounds like there's a little more clarity on the family Entertainment and sports area that Youre exploring I mean is that something where you would be you would hope to have an announcement.
In that arena sometime over the course of this year or.
Just wondering if you could just follow up a little bit on the comments.
John .
Yes.
Clearly I can't predict when we're going to make an announcement and I think it's two sectors that we're kind of past are we interested in and that we're in the evaluation stage and then how can we.
Structured or be constructive and using our capital to help.
Family Entertainment companies, our sports category companies grow their business.
I really can't tell you exactly when there will be a deal or if there'll be a deal just wanted to reiterate that we are digging a little bit deeper in those two sectors right now.
Alright, thank you.
Our next question comes from Todd Thomas with Keybanc capital markets. Your line is open.
Hi, Thanks first question Ed.
Comments in response to a previous question.
The company is very focused on <unk> growth and investing on an accretive basis relative to your cost of capital, but how do you weigh.
Asset quality relative to the initial yield and <unk> accretion that investment may generate and is there a situation.
Where you could justify making an investment that come.
Commands a lower initial yield but maybe.
It may be meaningfully improved portfolio quality and it's relatively <unk>.
Neutral, but again may weigh on the company's <unk> growth initially.
Yes.
Really good question to ask Todd and the way we the way we think about it is that we absolutely do recognize the value of quality.
And we we can find ourselves in situations, where we're willing to accept a lower yield on the highest quality real estate, we still wanted to be an accretive yield we can't accept a dilutive yield in the name of quality.
But at the end of the day, we're solving for a blended yield across our investment activity and so if we can buy great real estate at a thinner but still accretive yield.
And match that with an investment in good real estate.
At higher yields and end up with a blended yield that creates real value for our shareholders. That's how we are and that's how we will run the business.
Okay.
And then are you able to I apologize if I missed this but are you able to disclose a little bit of detail around the pricing for the preferred equity investment in the mortgage financing.
Announced with regards to the Canyon ranch.
Yes, David good to talk to you we haven't given out specific deals similar to how we are going to operate in the past around just the competitive nature of capital out there and the relationship nature of this capital.
As I just talked about it's our guiding towards a blended yield that's accretive to our cost of capital. So we feel good about the investments we do and Todd. This is a great way of elaborating on the first question you asked I mean, we are sitting here in a mansion and the berkshares.
It is the definition of high quality real estate.
Last for generations.
And you can be confident that when you put all this together we are.
Achieving accretion for our shareholders.
Okay alright, thank you.
Our next question comes from Barry Jonas with Truest. Your line is open.
Okay.
Hey, guys. Congrats on the deal with Canyon Ranch, maybe this is for Ed but longer term what would you like to see the mix of rent between gaming and non gaming tenants.
Yes, Barry.
I wish we had a really well actually I don't know if I wish that we had a really exact answer the truth is we don't have a highly exact answer it will very much obviously depend on what we're able to source globally in gaming and non gaming I do think the math is such that you can be confident gaming will still be the lion's share.
Share of our rent roll.
Given the magnitude of economics to come out of gaming assets domestically and internationally.
And we would not put an arbitrary.
Mine cross our rent roll to say, okay. This much needs to be gaming this much needs to be non gaming.
We were not going to manage in terms of those kinds of numbers, we are going to manage in terms of achieving accretion and value and quality growth.
Understood and then just as a follow up.
We think about the pipeline of gaming opportunities you could kind of put it in two buckets are probably more but.
One there are operators that you've worked with out there and have good relationships and.
Opportunities for follow up deals.
There's also a number of large operators, who really haven't done much.
Al lease back or any I'm curious to get your thoughts from a path or the catalysts from here to get some of those players over the fence.
John .
Yes.
We are following the same plans that we have since we started the company is continuing to build relationships like you said with our existing operators and meeting the operators that we've not been fortunate yet to do business with educating them on how our capital can work how we can help them grow once we're partners how we can use.
Our property growth fund to help them grow traveling not only domestically as we started the company, but now as you can see we've been in Canada and.
Acquired some real estate.
In Canada, and we're traveling the world defined other unique opportunities.
That are out there so.
It's just about building relationships and letting them know that should there be a time they want to monetize their real estate or they wanted to acquire.
Another company or an asset that we are there to be a good partner.
Great. Thanks, so much guys.
Thank you Barry.
We now turn to Wes Golladay with Baird. Your line is open.
Hey, good morning, everyone I just want to go back to the Canyon ranch opportunity.
You did mentioned that a lot of room for growth both domestically and internationally.
I guess, maybe looking at maybe the next five to 10 years, how big can this get and what do you think of the average acquisition volume prices would $100 million a unit.
Okay.
I don't think it would be far off west.
You'd be you'd be in the ballpark there, there's an optimal size for canyon ranch's.
Generally I think John Goff, and Jeff, Chris and the team would tell you generally between 100 150 rooms.
And obviously the room count is only part of the equation, obviously, the facility's ago around the rooms are what really differentiates Canyon ranch, but you did hear John Goff on CNBC last night expressing his ambition that this be a $2 billion relationship.
Within the coming years and.
We were very happy to hear him say that.
And I do think when you look at this as a $1 five trillion dollar global industry that Mckinsey SMA. So it's going to grow at a compound rate of 5% to 10% a year for the years to come we do think again that the Canyon Ranch brand has.
Growth opportunities not only in North America, but internationally as well.
The other thing I, just wanted to say where is that.
And it goes back to the question Barry asked the second question Barry asked John answered and that is the way in which we.
Do we initiated partnerships, we don't initiate transaction so much as we initiated partnerships.
No question that a canyon ranch had wanted to sell the real estate to a conventional hotel REIT, they would've gotten amazing pricing.
<unk> low cap rates for real estate of this prestige and quality, but the reason we're doing the deal we did it because we took a holistic approach from day, one at understanding Canyon ranch's business and its overall capital needs and ended up coming up with solutions that go way beyond your standard real estate.
<unk>.
Got it and then maybe one for the balance sheet Didnt noticed you've settled some shares and just carrying the cash balance what are you thinking there.
No as we said of 6 million shares by $190 million to fund the Rocky gap transaction that closed two days ago.
Okay, but you still have about 700 million I guess, you want to carry a larger cash balance maybe over the near term.
Oh, the cash balances.
That's a result remember we got repaid on the Caesars Forum convention mortgage back on April 1st so that elevated cash balance a little bit.
It obviously gives us additional liquidity and dry powder to continue to grow.
Got it thanks a lot.
Okay.
Our next question comes from Ronald Camden with Morgan Stanley . Your line is open.
Hey, just quick ones.
The leverage at the end of the quarter at $5 six came.
Came down nicely, where does that trend too at the end of the year.
And sort of the corollary to that is maybe what's the updated thoughts on that.
Who is your park and horseshoe in Indianapolis.
What are some of the things Youre looking at.
Potentially move on that.
David will take the first part Ron and John will take the second Yeah. Ron I appreciate you noticing that.
Continue to trend down to the 555 and a half range, maybe slightly north of that but as I stated in my remarks, we're very focused on getting sub five and a half and continuing to improve our improve our credit profile.
John .
As it pertains to the two wonderful assets in Indianapolis.
The owner of the assets and the operators Caesars continues to do a fabulous job, adding capital.
Two the facilities implementing the table games that the law passed a couple of years ago in growing that business. We continue to monitor that those two assets with them, we do have a.
Put call agreement.
With Caesars that lasts until the end of December 24, and we continue to evaluate that opportunity.
Great.
My second one is just.
I think with 26 $27 million.
<unk> of our student loans payments, starting when you talk to the operators and so forth is that something that they're thinking about as a potential headwind or.
And so forth.
Roger.
Yes.
You start John Dunn added point I wanted to make.
No go ahead go ahead, and then I'll jump in.
Yes, Ron.
Moira and I were talking yesterday or the day before about the magnitude of interest for infrastructure spend that's going on right now in the U S. More I don't know if you have that figure handy, but there is so much economic growth and so much job growth really good job growth associated with the Mag.
Initiated a infrastructure investment that's going on in the U S. Right now that I would definitely look at the impact of student loan repayments being perhaps even more than offset by the economic vitality, that's coming out of the infrastructure spending that's going on right now and especially among a workforce that does have a higher propensity to game.
So I think on a net net basis, we'd be pretty optimistic as to what the economic vitality in the U S over the coming year, two or more could mean for experiential broadly in gaming in particular, John as you wanted to add to that no.
Ronald and Ed I was just going to add about Las Vegas, I mean, we continue to get a large percentage of our rent coming out of the operators in the buildings in Las Vegas.
Every day I seem to open up an article and read this morning, I don't know if you saw this ronald but all time record June at the airport in Las Vegas, 48% growth in international business.
So the industry.
In Las Vegas, and the regionals continues to see.
Solid consumer acceptance and growth.
And many of these locations.
Great. Thanks, so much.
Our next question comes from John Decree with CBRE. Your line is open.
Good morning, everyone and thanks for taking my questions.
Maybe big picture.
Dan or John .
You kind of addressed part of this little earlier in some of the talent that we've hired recently, but.
As you push into new verticals.
Expand your tenant base new categories Wonder if some of the challenges that you have.
Base or are facing.
As you grow and its direction I'm kind of asking the context of some of the early data challenges <unk> had in the casino space.
Educating investors or even just educating operators into into using your source of financing. So I'm curious kind of what you're facing now is as you keep pushing.
John .
Yes, John Nice to talk to you I actually wouldn't describe them as challenges.
Scott has been quite fund, particularly in the experiential sector, where there hasnt been a lot of companies like ours, taking the time to explain how our capital can help these experiential companies grow and it is for me having resources and focus around me that were out again traveling the world and spending.
Time with these very.
Unique and interesting operators, whether thats in health and fitness, whether thats in the events business or the.
Many of the other things that we continue to explore it has been really <unk>.
<unk> to explain how our company and our capital and help them grow and so I wouldn't necessarily describe it as a challenge just describe it as a way of.
We're helping them understand the different ways.
Can can become partners.
Okay. Thanks, Thanks, John and maybe.
A little easier of a question going.
Just back to the Bellagio potential opportunity as an example.
How do you consider owning.
Whole or part of an asset I think there was some.
Discussion to me that maybe it would only be a partial sale of our minority stake because that would that be a consideration and how does that factor into.
A decision from investments from D C, whether it's <unk> or any any asset.
Did you make in the future.
Well, John one of the strategic motivators for doing the deal we did back in late November early December .
<unk> to consolidate what had been a joint venture.
With MGM Grand Mandalay Bay.
So generally speaking, while we do not rule out joint ventures generally speaking, we are obviously going to prefer.
Complete ownership of our assets.
In gaming and non gaming again, we're not absolutely dogmatic, but it is our preference and I think.
There is significant and meaning in the fact that our most recent deal in Las Vegas was the consolidation of what had been a joint venture not the creation of a new joint venture.
Yes.
Makes sense. Thanks, Ed Thanks, Chuck I appreciate you guys, taking my questions.
Okay.
Our next question comes from Greg Mcginniss with Scotiabank. Your line is open.
Hey, good morning.
Okay, Great John I appreciate your.
Commentary on exactly what you're kind of globetrotting here trying to educate and find new investment opportunities are you able to provide any context in terms of.
Now maybe with the Investable global gaming market has some meaning like you.
The total number of assets that you'd be willing to buy globally, because I know you've talked specifically about certain countries you are willing to invest in.
But just curious in terms of.
Potential.
Investable dollars.
John .
Yeah, I don't have the specific numbers right now Greg we continue to work on that and look across.
As you as you mentioned all the different countries, where we potentially could place investments but.
But I don't have a specific number for you right.
Right now.
Greg I'll just.
And given your representative of Scotiabank I'll give you I'll give you a little Canadian data and that is that.
The absolute size is not always as important and meaningful as the per cap size and so as an example, the <unk> in Canada. The commercial <unk> in Canada is about $12 billion a year.
And that compares to combine Las Vegas and.
Regional commercial <unk> in the U S. If I believe $70 million to $80 million. So on a per capita basis with Canada, having about a 10th of the population of the U S. Obviously Canadian show a higher propensity to game and so that's one of the three real characteristics that we look at as we evaluate gaming globally is not only the absolute.
What size of the market, but the propensity to game.
Degree to which gaming is woven into that.
The consumer economy in those countries.
Okay, Thanks and.
And then I guess just on your own.
Domestically.
What are your thoughts on downtown Las Vegas, our owners, there just thus far and resistant to sales.
Sale leaseback financing or is there just no need there.
I wouldn't say that Greg I wouldn't say that at all I would say that.
As you've heard me say a couple of times on this call. We're continuing to build relationships, we're continuing to educate our capital to work I think you're asking about is that a market that we would have interest in owning real estate theres. Some theres some fabulous operators in the downtown.
Market of Las Vegas that we are not currently partners with that we'd love to be partners with not only on the assets. They have in downtown Las Vegas, but also is there a way that we could grow with them all over the United States or even even the world. We're also not in the regional market of Las Vegas.
We'd like to own our real estate over time, so some of these.
As you've seen our first five years. Some of these have been quickly some of these deals move fast and others.
We take the long game here, we get to know the owners, we got to know the operators and hopefully over time a deal will work.
We will come our way.
Thanks, and just a final one for me just given the house view on the health and wellness sector should we expect to see investments with other operators outside of Canyon Ranch.
I would say that we're very much focused on canyon ranch given their market leadership in their growth opportunity Greg.
Obviously, you wouldn't rule out other investments along the broader wellness spectrum.
In a way.
What see that already with great Wolf.
As John as I think John you put it.
Great Wolf is kind of like Canyon ranch for kids.
Yeah.
Yes.
Okay well. Thank you. Thank you.
Thanks, Greg.
Yes.
And I'll turn to Nate Crossett with BNP.
Your line is open.
Hey, Thanks for taking my question.
This slide in the deck that showed the <unk> maturities over the next few years.
The potential to partner with Canyon ranch to reposition.
How many locations have you kind of identified that are real candidates have you guys gone through that process already just trying to get a sense of the sizing.
Yeah. So Nate we've really just begun that process, but I would point out that for John Goff.
He is he.
He feels like he is getting to do again, what he did so successfully with Richard rainwater in the early ninety's when they build crescent real estate.
To a great degree out of the whole resolution Trust windup and created an incredibly compelling resort portfolio within Crescent real estate.
Capitalizing on the distress in the market at that time.
We've.
David has done some really good work already are beginning to develop inventories I would say, though that the filtering process, which we're going to really starts with what regions of North America is canyon ranch not in that it could really benefit from being in and then from there we look.
For resource it would meet the criteria of Canyon ranch within those geographies regional geographies.
Okay. That's helpful and I know you mentioned it's accretive.
Sure.
What can you say like how accretive is it in line with your average spread that you've been doing over the cost of capital historically.
I mean, I know that but is there any guidance there.
Yeah.
Good to talk to I mean, directionally, that's accurate again, it's $150 million, we funded a little bit $90 million this week and to draw scheduled it will.
Alright.
Future funding.
They will pull down as they invest in the organization. So it's directionally that's in line.
And what I will tell you.
Nate is that our blended yield for real estate of this quality is.
Very compelling.
Okay. That's helpful.
I mean is there anything other than the $300 million that you disclosed that we should kind of mix back in terms of capital deployment from this partnership this year like I know, there's a lot of puts and takes but.
I'm, just trying to get a sense.
Yes.
Right.
Last October we announced the $200 million with Canyon ranch to help them build Austin, So thats thats getting going into the mentioned in his comments that opened in 'twenty five 'twenty six at some point and so.
I mean, we had dinner with the keen interest.
Extremely excited to embark on this journey mapping and finding these assets so nothing specific at this moment, but.
Pretty much hope theres more to come in the near term.
Okay. That's it for me thank you.
Thank you Nate.
We now turn to Chris <unk> with Green Street. Your line is open.
Thank you and good morning.
<unk> Canyon Ranch can you give us a sense of the historic cyclicality of the business there maybe relative to traditional resorts or maybe the overall hospitality business and then assuming you do exercise some of the call options. There over time, what do you think is the right level of rent coverage relative to maybe your gaming portfolio.
Yes, so Chris.
Canyon Ranch has been in operation for just about 45 years and what they have shown.
Through all cycles is a resilience that is far stronger than conventional luxury resorts and so much of that has to do with canyon ranch being for so much of its clientele a ritual not even just necessarily an annual ritual, but in some cases a quarterly ritual.
So the commitment to the Canyon ranch on the part of the consumer is stronger than the purely discretionary commit.
Commitment that you get in most luxury resorts, which I know you cover.
And so based on that we do not feel we need inordinately high coverage and yet what is very.
Very comforting is the fact that the economic intensity of these properties does create economic headroom above the rent that gives us very very great comfort in the level of coverage.
That's really helpful color I appreciate it and then maybe switching gears for my second question, when you announced Rocky gap last year rent coverage was pretty skinny at the time I think it was about one seven times right.
<unk> that property has been folded into the broader master lease with century, now, but would still be curious to understand what current coverage levels look like I'm, assuming youre willing to share.
Yes, Chris it's David good to talk to you.
Good.
Did set the coverage lower on Rocky gap, because it was going into a very healthy a master lease century is a phenomenal operator and that goes into these assets and then improves coverage from where they were.
They did on the three pack that we originally bought with them back in.
2019.
We can't give out as a little coverage because they don't give that asset level coverage, but it's.
A very very healthy coverage coming out of those assets are excited.
As well as the Alberta assets into that Master lease.
Okay fair enough. Thanks for the time.
Thank you Chris.
Our final question today comes from Tom <unk> with capital One Securities. Your line is open.
Hi, everyone. Thanks for taking my question.
One for me Ed in February you mentioned that the debt environment back then could result in the greatest advantages to some of the biggest Reits with access to capital.
A lot has happened since then but is that advantage advantage playing out the way that you thought and do you still see that as an advantage continuing for the next few years.
Yes, I very much think so Dan I think things that could be true in both gaming and non gaming as I think I might've mentioned on that call Dan.
On a weekly basis, and what the yields to westar on on.
On gaming and other leisure credits and Youre still seeing yields to worst even with the recent tightening of spreads.
That make sale lease backs, a very compelling alternative when it comes to refinancing the debt will come due in the coming years in both gaming and non gaming.
Okay. Thank you.
Yeah.
Thanks, Dan.
It's all Q&A.
But at the Tony actually young for closing remarks.
Yes, I just wanted to thank everybody on the call today, both the analysts who asked very good questions and all of you. Our investors who are also on the line. We thank you for your time and we're excited to talk to you again in a few months bye for now.
Ladies and gentlemen, today's call is now concluded. Thank you for your participation you may now disconnect your lines.
Again in a few months bye for now.