Q1 2024 VICI Properties Inc Earnings Call
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Operator: Good day everyone, and thank you for standing by. Welcome to the VICI Properties first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. Please note that this conference call is being recorded today, May 2nd, 2024. I will now turn the call over to Samantha Gallagher, General Counsel with VICI Properties.
Good day, everyone and thank you for standing by welcome to the Vinci Properties' first quarter 2024 earnings conference call. At this time, all participants are in listen only mode.
Operator: Please note that this conference call is being recorded today may 2nd 2024, I will now turn the call over to Samantha Gallagher General counsel with Vg properties.
Samantha Sacks Gallagher: Thank you, operator, and good morning. Everyone should have access to the company's first quarter 2024 earnings release and supplemental information. The release and supplemental information can be found in the investor section of the VICI Properties website at www.viciproperties.com. Additionally, some of our comments today will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements, which are usually identified by the use of words such as will, believe, expect, should, guidance, intends, outlook, projects, or other similar phrases, are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them.
Samantha Sacks Gallagher: Thank you operator, and good morning, everyone should have access to the company's first quarter 2024 earnings release and supplemental information there.
Samantha Sacks Gallagher: The release and supplemental information can be found in the investors section of the Vg properties website at Www Dot Vg properties Dot com some of our comments today will be forward looking statements within the meaning of the federal Securities laws forward looking statements, which are usually identified by the use of words, such as will believe expect should.
Samantha Sacks Gallagher: Guidance intend outlook projects or other similar phrases are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect therefore, you should exercise caution in interpreting and relying on them I refer you to the company's SEC filings for a more detailed discussion of the risks that could impact future operating results.
Samantha Sacks Gallagher: I refer you to the company's SEC filings for a more detailed discussion of the risks that could impact future operating results and financial conditions. During the call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available on our website, in our first quarter 2024 earnings release, our supplemental information, and our filings with the SEC.
Samantha Sacks Gallagher: And financial condition.
Samantha Sacks Gallagher: During the call we will discuss certain non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available on our website in our first quarter 2024 earnings release or something.
Samantha Sacks Gallagher: Rental 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.
Samantha Sacks Gallagher: For additional information with respect to non-gap measures of certain tenants and or counterparties discussed on this call, please refer to the respective company's public filings with the SBA. Hosting the call today are Ed Pitoniak, Chief Executive Officer, John Payne, President and Chief Operating Officer, David Kieske, Chief Financial Officer, Gabe Wasserman, Chief Accounting Officer, and Moira McCluskey, Senior Vice President of Capital Markets. Ed and his 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.
Samantha Sacks Gallagher: Hosting the call today, we have Ed <unk>.
Samantha Sacks Gallagher: Tony Yang Chief Executive Officer, John Payne, President and Chief Operating Officer, David <unk>, Chief Financial Officer, Gabe Wasserman, Chief Accounting Officer, and Moira Mccluskey Senior Vice President of capital markets 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: Thank you, Samantha, and good morning everyone. The first quarter of 2024 was, shall we say, an interesting quarter in the American equity marketplace. A fair part of the S&P 500 packed into a house and held a magnificent party. One Wall Street shop went so far as to say the party reached a rarefied state of euphoria. Euphoria. That sounds kind of fun. But to be clear, American wreaths were not invited to this party.
Ed: Thank you Samantha and good morning, everyone.
Edward Baltazar Pitoniak: The first quarter of 2024 was shall we say an interesting quarter in the American equity marketplace.
Edward Baltazar Pitoniak: Part of the S&P 500 packed into a house and held in magnificent Party.
Edward Baltazar Pitoniak: One wall Street shop went so far as to say the party reached the Rarified state of Euphoria.
Edward Baltazar Pitoniak: Before you that that sounds kind of fun, but to be clear American rights were not invited to this party those.
Edward Baltazar Pitoniak: Those of us who work within REITs are out on the curb outside that parking lot. From the outside, one could wonder if this was a party in which new monarchs were being coronated for perpetual rule or the kind of party that eventually ends with ambulances and or cops being called and a few of the partygoers fleeing naked down the street out of their minds like Will Ferrell and Old. The first quarter of 2024 is now over. The ambulances or cops haven't necessarily shown up yet, but the party inside that magnificent house seems to be running out of space.
Edward Baltazar Pitoniak: Those of US who work within rates, we are out on the curve outside that party house.
Edward Baltazar Pitoniak: From the outside one could wonder if this was a party in which new monarchs were being coordinated for perpetual rule.
Edward Baltazar Pitoniak: Or the kind of party that eventually ends with ambulances <unk> cops being called and a few of the party goers sleep naked down the street out of their mines like will Ferrell and old school.
Edward Baltazar Pitoniak: The first quarter 2024 is now over the ambulances or comps haven't necessarily showed up yet, but the party inside that magnificent house seems to be running out of steam.
Edward Baltazar Pitoniak: The MOVE Index, which measures U.S. Treasury market volatility, was relatively high but relatively steady through much of the first quarter and even fell a bit in late March in a flight to safety. But in early April, it started acting rowdy again. And it's much the same for the VIX Equity Volatility Index, which, having slept through much of the Magnificent Party, recently spiked almost 50 percent since the start of the year before settling back down.
Edward Baltazar Pitoniak: The move index, which measures U S treasury market volatility was relatively high but relatively steady through much of the first quarter and even sell event in late March and a flight to safety, but in early April started asking rowdy yet and it's much the same to the VIX equity volatility index, which having slept through much of the magnificent party.
Edward Baltazar Pitoniak: Recently spiked almost 50% since we started the year before settling back down a bit.
Edward Baltazar Pitoniak: Amidst all this noise, the general investment marketplace is having a hard time focusing on the income and capital appreciation dynamics of good retail. At VICI, we can deal with all of this. We don't spend a lot of time standing on curves, wondering, or complaining about parties we're not invited to.
Edward Baltazar Pitoniak: All of this noise the general investment marketplace is having a hard time, focusing on the income and capital appreciation dynamics of good reasons.
Edward Baltazar Pitoniak: At <unk>, we can deal with all of this we don't spend a lot of time standing on curves wondering are complaining about parties were not invited to.
Edward Baltazar Pitoniak: We just keep doing what we do at VICI, and that's working within our resources and capabilities to keep improving and growing our company for the long-term benefit of our stakeholders. That's what we did in Q1 2024. The first quarter of 2024 was a quarter in which we produced 6.1% growth in AFFO per share over Q1 2023 and continued to flow our revenue growth through to the EBITDA line at what we believe is one of the higher rates among S&P 500 retailers.
Edward Baltazar Pitoniak: We just keep doing what we do at VT and Thats working within our resources and capabilities to keep improving and growing our company for the long term benefit of our stakeholders.
Edward Baltazar Pitoniak: That's what we did in Q1 2020 for the first quarter of 2024 was a quarter in which we produced six 1% growth in <unk> per share over Q1, 2023 and continued to flow our revenue growth through to the EBITDA line and what we believe is one of the higher rate among S&P 500 Reits.
Edward Baltazar Pitoniak: The first quarter of 2024 was also a quarter in which we focused on three key strategic imperatives. Imperative number one, expanding our scope and TAM as an investor, with our investment in Homefield, Kansas City, a market-leading sports training complex that will also soon feature a Margaritaville resort. This is an investment that builds on our initial entry into the sports and recreation sector with the late 2023 acquisition of the primary leasehold interest in Chelsea Piers, an investment that validates the use of our lending platform to ultimately acquire a real estate interest, in this case, 780,000 square feet of New York recreational and entertainment space on the Hudson River.
Edward Baltazar Pitoniak: The first quarter of 2024 was also a quarter in which we focused on three key strategic imperatives imperative number one expanding our scope and Tam as an investment with our investment in Homefield, Kansas City, a market leading sports training complex. It will also share soon feature of Margaritaville.
Edward Baltazar Pitoniak: <unk>. This is an investment that builds on our initial entry into the sports and recreation sector with a late 2023 acquisition of the primary leasehold interest in Chelsea piers and investment that validates the use of our lending platform to ultimately acquire a real estate interest in this case 780000 magnificent SKU.
Edward Baltazar Pitoniak: We're feet of New York, recreational and entertainment space on the Hudson River.
Edward Baltazar Pitoniak: Imperative number two, being ready to refinance our maturing 2024 debt at an opportune time, debt that would have come due on May 1st, yesterday, in other words. During Q1, May 1st seemed a fair way off, but given the volatility of market conditions, we didn't want to wait too long. We went to market on March 7th and did so at what turned out to be the second lowest point in March for U.S. 10-year yields. Yes, our timing was fortunate, but our good fortune relied on us being ready to go.
Edward Baltazar Pitoniak: Imperative number two being ready to refinance our maturing 2024 debt at an opportune time that that would've come due on May one yesterday in other words during Q1 may 1st seemed a fair way off but given the volatility of market conditions, we didnt want to wait too long, we went to market on March 7th and did.
Edward Baltazar Pitoniak: So in what turned out to be the second lowest point in March for U S 10 year yields yes, our timing was fortunate, but our good fortune relied on us being ready to go in.
Edward Baltazar Pitoniak: Imperative number three, which we've just announced, capitalizing on the scale and rarity of our existing assets by working throughout Q1 with our partners at Apollo to develop a property enhancement plan for the Venetian, which gives VICI the opportunity to invest up to $700 million of capital into this magnificent Las Vegas strip asset. In a moment, John and David will give you more color on each of these three Q1 2024 imperatives. I'll close out my opening remarks by saying the obvious.
Edward Baltazar Pitoniak: Comparative number three which we've just announced capitalizing on the scale and rarity of our existing assets by working throughout Q1 with our partners at Apollo to develop a property enhancement plan for the Venetian which gives <unk> the opportunity to invest up to $700 million capital into this magnificent.
Edward Baltazar Pitoniak: Las Vegas strip asset.
Edward Baltazar Pitoniak: In a moment, John and David will give you more color on each of these three Q1 2024 imperatives.
Edward Baltazar Pitoniak: I'll close out my opening remarks by saying the obvious the first 16 or so weeks of 2024 haven't been a lot of funds for REIT investors.
Edward Baltazar Pitoniak: The first 16 or so weeks of 2024 haven't been a lot of fun for REIT investors. It's not clear at this point when the marketplace will recognize what we believe to be the total return value that REITs can and do represent at this point. Most, not all, but most REIT categories currently offer dividend yields that are materially in excess of the current inflation rates. And REIT dividends, unlike money market or bond interest payments, have the potential to grow over time, as VICI's has, with VICI posting a dividend growth CAGR of 7.9% since the first quarter of 2018 following its IPO.
Edward Baltazar Pitoniak: Not clear at this point when the marketplace will recognize what we believe to be the total return value that <unk> can and do represent at this point most not all but most REIT categories. Currently offer dividend yields that are materially in excess of the current inflation rates and REIT dividends. Unlike.
Edward Baltazar Pitoniak: Money market or bond interest payments have the potential to grow over time as <unk> has with vg posting a dividend growth CAGR of seven 9% since the first quarter of 2018, following our IPO, we have been living through a period in the equity marketplace in which the power of compounding has been some.
Edward Baltazar Pitoniak: We've been living through a period in the equity marketplace in which the power of compounding has been somewhat ignored or forgotten. REITs can be powerful compounding tools. As a VICI shareholder, I haven't forgotten or ignored that compounding dynamic and benefit. I look forward to answering your questions, but first, a few words from John and David.
John: What ignored or forgot.
Edward Baltazar Pitoniak: Right can be powerful compounding tools as a <unk> shareholder I haven't forgotten or ignored that compounding dynamic and benefit.
Speaker Change: I look forward to answering your questions, but first a few words from John and David John.
John W. R. Payne: Thanks, Ed, and good morning to everyone. Relationships are at the core of what we do at VICI, and the quality of the relationships we have sets us apart. Our team works hard to strengthen existing ones and develop new ones so that we are best positioned for future growth opportunities, whether or not we are invited to what Ed has called the party. Our focus on trust in finding mutually beneficial solutions with our partners multiplies the beneficial impact of each relationship, and we believe it lays the groundwork for future growth through both good and bad market environments. One of the best examples of this is our relationship with Apollo and the team at the Vici.
John: Thanks, Ed and good morning to everyone.
John W. R. Payne: Relationships are at the core of what we do with BG and the quality of the relationships we have sets us apart.
John W. R. Payne: <unk> worked hard to strengthen existing ones and develop new ones. So that we are best positioned for future growth opportunities, whether or not we are invited to what Ed. It's called the party our focus on trust in finding mutually beneficial solutions with our partners multiplies the beneficial impact of each relationship and we believe lays.
John W. R. Payne: The groundwork for future growth through both good and bad market environment.
John W. R. Payne: One of the best examples of this is our relationship with Apollo and the team at the.
John W. R. Payne: The opportunity to acquire the Venetian originated during the COVID pandemic, another period of uncertainty with a challenging market backdrop. Since that time, the team at the Venetian has outperformed all expectations, as Las Vegas has continued to position itself as the entertainment center of the world. We are thrilled to further expand our close relationship with Apollo and announce our opportunity to invest up to $700 million in The Venetian through VICI's Partner Property Growth Fund.
John W. R. Payne: The opportunity to acquire the Venetian originated during the Covid pandemic another period of uncertainty with a challenging market backdrop since that time the team at the Venetian has outperformed all expectation as Las Vegas is continue solidify itself as the entertainment center of the World.
John W. R. Payne: We are thrilled to further expand our close relationship with Apollo and announced our opportunity to invest up to $700 million at the Venetian through Vg's partner property growth Fund. This capital investment will fund several projects that seek to improve the overall guest experience.
John W. R. Payne: This capital investment will fund several projects that seek to improve the overall guest experience and enhance the value of the property. The impact of our increasingly dynamic Las Vegas has continued to accrue to the benefit of the Venetian since we acquired the property together with Apollo in 2022, particularly with the neighboring sphere, events like F1 and the Super Bowl, and an active convention. The Venetian is set to celebrate its 25th anniversary this Saturday, and we're thrilled to partner with Apollo once again in their efforts to maximize the economic potential of this amazing, iconic strip asset.
John W. R. Payne: And enhance the value of the property the impact of our increasingly dynamic Las Vegas has continued to accrue to the benefit of the Venetian since we acquired the property together with Apollo in 2022, particularly with the neighboring sphere.
John W. R. Payne: <unk> like F, one and Super Bowl and an active convention schedule.
John W. R. Payne: <unk> is set to celebrate its 25th anniversary this Saturday and we're thrilled to partner with Apollo once again and their efforts to maximize the economic potential of this amazing iconic script asset.
John W. R. Payne: Gaming remains at Vici's core, with over 98% of rent coming from our gaming partners, and the sector remains broadly healthy from a tenant credit perspective. Las Vegas continues to enjoy healthy growth with GGR up below single digits following the Super Bowl this quarter, and that is on top of an already impressive baseline, given gaming revenue increased 12% in the first quarter of 2023 over 2022. Since the market emerged from the pandemic, there have been 12 straight quarters of growth.
John W. R. Payne: Gaming remains at Bt's core with over 98% of rent coming from our gaming partners. In this sector remains broadly healthy from a tenant credit perspective, Las Vegas continues to enjoy a healthy growth with <unk> up low single digits. Following the Super Bowl this quarter and that is on top of an already impressive.
John W. R. Payne: Slide given gaming revenue increased 12% in the first quarter of 2023 over 2022 since.
John W. R. Payne: I'm going to repeat that. There have been 12 straight quarters of GGR growth in Las Vegas. Additionally, Las Vegas visitation numbers were up 4.2% in the first quarter, demonstrating the continued diversity of the revenue streams and the vast array of consumers enjoying this amazing city. In fact, based on a recent study from the University of Toronto that evaluated North American cities pre and post-pandemic, Las Vegas is the only city that has surpassed pre-pandemic unique visitation numbers.
John W. R. Payne: Since the market emerge from the pandemic there has been 12 straight quarters I'm going to repeat that there has been 12 straight quarters of <unk> growth in Las Vegas.
John W. R. Payne: Additionally, Las Vegas visitation numbers were up four 2% in the first quarter demonstrating the continued diversity of the revenue streams and the vast array of consumers enjoying this amazing city in fact based on a recent study from the University of Toronto that evaluated North American cities pre and postpaid.
John W. R. Payne: Las Vegas is the only city that has surpassed pre pandemic unique visitation numbers.
John W. R. Payne: In the regional gaming markets, while we recognize idiosyncratic weather headwinds this winter, we believe fundamentals remain sound, and we see sturdy consumer discretionary spend driven by middle and high-end consumers on the casino floor. Although interest rate volatility has impacted transaction volume in the gaming market, we are active in dialogue around real estate opportunities in the gaming sector. Outside of our embedded growth pipeline, our relationships and gaming focus put us in a strong position when transactions or opportunities to invest in our existing properties arise.
John W. R. Payne: In the regional gaming markets, while we recognize idiosyncratic weather headwinds. This winter, we believe fundamentals remain sound and we see sturdy consumer discretionary spend driven by the middle and high end consumers on the casino floor.
John W. R. Payne: Although interest rate volatility has impacted transaction volume in the gaming market. We are active in dialogue around real estate opportunities in the gaming sector outside of our embedded growth pipeline our relationships in gaming focus put us in a strong position when transactions or opportunities to invest in our existing properties arrived we.
John W. R. Payne: We continue to monitor the performance of Harris Hoosier Park and Horseshoe Indianapolis, for which we have a call right to acquire the real estate and buildings of these unique assets. This call right expires at the end of 2024, and we continue to work through the process with the appropriate Indiana regulatory agency to gain the necessary gaming approvals should we elect to execute this option.
John W. R. Payne: To monitor the performance of Harris.
John W. R. Payne: Harriss quarters, Hoosier Park, and Horseshoe Indianapolis for which we have a call right to acquire the real estate and buildings of these unique assets.
John W. R. Payne: This call right expires at the end of 2024, and we continue to work through the process with the appropriate Indiana regulatory agencies to gain the necessary gaming approvals should we elect to execute this option.
John W. R. Payne: Vici is also well positioned for incremental opportunities outside the gaming space as we continue to expand our scope and our TAM of investment. We are committed to ensuring that each experiential sector and potential partner meets our investment criteria of low cyclicality, low secular threat, improving track record of growth, and favorable supply and demand dynamics. In January of this year, VICI expanded investment in the youth sports sector with the announcement of an up to $105 million construction loan agreement with affiliates of Home Field Kansas City to fund the development of a Margaritaville resort that will be embedded within Home Field's broader youth sports complex.
John W. R. Payne: <unk> is also well positioned for incremental opportunities outside the gaming space as we've continued to expand our scope and our Tam of investments we are committed to ensuring that each experiential sector and potential partner meets our investment criteria of low cyclicality low secular threat and proven track record of growth and.
John W. R. Payne: Favorable supply and demand dynamics in.
John W. R. Payne: In January of this year <unk> expanded investment in the youth sports sector with the announcement of the up to $105 million construction loan agreement with affiliates of Homefield, Kansas City to fund the development of a more of a return.
John W. R. Payne: Our greeneville resort that will be embedded within homefield broader youth sports complex. The youth Sports training Center hosted 115 teams. This last weekend for basketball tournament and the baseball facilities open and use the Margaritaville resort is expected to be completed in 2025, having visited.
John W. R. Payne: The Youth Sports Training Center hosted 115 teams this last weekend for a basketball tournament, and the baseball facility is open and in use. The Margaritaville Resort is expected to be completed in 2025. Having visited the area a few weeks ago, I can tell you all the facilities are truly amazing.
John W. R. Payne: Area, a few weeks ago I can tell you all the facilities are truly amazing.
John W. R. Payne: The Home Field Partnership adds to our youth sports investment, as Ed said, which we initiated with our 2020 mortgage loan to Chelsea Piers in New York City. And at the end of 2023, we acquired the leasehold interest in the property and converted the initial loan into real estate ownership. While REITs were broadly excluded from, as Ed put it, the party that took place in the first quarter of 2024, the effects of the transactions and relationships announced at the end of last year and the beginning of this year contributed to our 6.1% growth in AFFO per share.
John W. R. Payne: Homefield partnership adds to our to use sports investment as Ed said, which we initiated with our 2020 mortgage loan to Chelsea Piers and New York City and at the end of 2023, we acquired the leasehold interest in the property and converted the initial loan into real estate ownership.
John W. R. Payne: While reach we're broadly excluded from as Ed put at the party that took place in the first quarter of 2020 for the effects of the transactions and relationships announced at the end of last year and the beginning of this year contributed to our six 1% growth in <unk> per share as I stated earlier, our relationships are at the.
John W. R. Payne: As I stated earlier, our relationships are at the foundation of our business and drive our growth. Our standard for prudent underwriting gives us confidence in our roster of existing partners with whom we believe we have many growth opportunities. We look forward to developing new relationships with best-in-class operators so that VICI can continue to grow its quality, experiential real estate portfolio. Now, I will turn the call over to David, who will discuss our financial results and guidance. David
David: Foundation of our business and drive our growth our standard for prudent underwriting gives us confidence in our roster of existing partners with whom we believe we have many growth opportunities. We look forward to developing new relationships with best in class operators. So the beach you can continue to grow its quality experiential real estate portfolio.
John W. R. Payne: Now I will turn the call over to David who will discuss our financial results and guidance David.
David Andrew Kieske: Thanks, John. It's great to speak with everyone today, and we greatly appreciate your time. Starting with our balance sheet, as Ed mentioned, in the first quarter, we successfully, well, I'll say very successfully, executed our first refinancing of the $1,050,000,000 May 2024 notes that would have come due yesterday. On March 7th, we launched a bond offering, and at its peak, we were 12 times oversubscribed. We ultimately issued $550 million of 10-year notes at a coupon of 5.75% and $500 million of 30-year notes at a coupon of 6.125% for a blended yield of 5.9% before the impact of our forward interest rate swaps.
David: Thanks, John Great to speak with everyone today, and we greatly appreciate your time.
David Andrew Kieske: Starting with our balance sheet as Ed mentioned in the first quarter, we successfully well say very successfully executed our first refinancing of the 1 billion 50 May 2024 notes that came that would've come due yesterday on March 7th we launched a bond offering and at its peak. We are 12 times oversubscribed, we ultimately issued.
David Andrew Kieske: $550 million of 10 year notes at a coupon of 575% and $500 million of 30 year notes at a coupon of 612, 5% for a blended yield of five 9% before the impact of our forward interest rate swaps when compared to the coupon of 565% that we refinanced we feel real.
David Andrew Kieske: When compared to the coupon of 5.625% that we refinanced, we feel really good about the all-in coupon we were able to achieve and, at the same time, extend the duration of our maturity profile. During the quarter, we also bolstered our liquidity and sold 9.7 million shares, raising $305 million in gross proceeds under our ATM via the forward. Currently, we have approximately $3.5 billion in total liquidity comprised of $515 million in cash, cash equivalents, and short-term investments as of March 31st, $683 million of estimated proceeds available under our outstanding forwards, and $2.3 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.
David Andrew Kieske: Good about the all in coupon and we were able to achieve and at the same time extend the duration of our maturity profile during.
David Andrew Kieske: During the quarter, we also bolster our liquidity and sold $9 7 million shares raising $305 million in gross proceeds under our ATM via the forward.
David Andrew Kieske: Currently we have approximately $3 $5 billion in total liquidity comprised of $515 million in cash cash equivalents and short term investments as of March 31 $683 million.
David Andrew Kieske: <unk> proceeds available under our outstanding forwards and.
David Andrew Kieske: And $2 $3 billion of availability under our revolving credit facility.
David Andrew Kieske: In addition, our revolving credit facility has an accordion option, allowing us to request additional lender commitments of up to $1 billion.
David Andrew Kieske: As we sit here today, we believe we are well positioned to navigate the current macro environment and do not need to raise any incremental capital. In terms of leverage, our total debt is currently $17.1 billion. Our net debt to annualized first quarter adjusted EBITDA, excluding the impact of unsettled forward equity, is approximately 5.4 times, which is within our target leverage range of 5 to 5.5 times. We have a weighted average interest rate of 4.36%, taking into account our hedge portfolio, and a weighted average of 6.8 years to maturity.
David Andrew Kieske: As we sit here today, we believe we are well positioned to navigate the current macro environment and do not need to raise any incremental capital in terms of leverage our total debt as the curve is currently $17 1 billion our.
David Andrew Kieske: Our net debt to annualized first quarter adjusted EBITDA, excluding the impact of unsettled forward equity is approximately five four times within our target leverage range of five to five five times.
David Andrew Kieske: We have a weighted weighted average interest rate of 436% taking into account our hedge portfolio.
David Andrew Kieske: Weighted average six eight years to maturity.
David Andrew Kieske: Touchy on the income statement. AFFO per share was $0.56 for the quarter, an increase of 6.1% compared to the $0.53 for the quarter ended March 31, 2023. 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, and our margins continue to run strong in the high 90% range when eliminating non-cash items. Our GNA was $16.2 million for the quarter, and as a percentage of total revenues, it was only 1.7%, and continues to be one of the lowest ratios in not only the triple net sector but across all REITs.
David Andrew Kieske: On the income statement.
David Andrew Kieske: <unk> per share was <unk> 56 for the quarter, an increase of six 1% compared to the 50 <unk> for the quarter ended March 31, 2023, 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 and our margins.
David Andrew Kieske: To run strong in the high 90% range when eliminating noncash items.
David Andrew Kieske: Our G&A was $16 2 million for the quarter and as a percentage of total revenues was only one 7% and continues to be one of the lowest ratios in not only the triple net sector, but across all rights.
David Andrew Kieske: Turning to guidance, we are reaffirming AFFO guidance for 2024 in both absolute dollars as well as on a per share basis. As we originally highlighted on our Q4 earnings call, AFFO for the year ending December 31, 2024 is expected to be between $2.32 billion and $2.355 billion, or between $2.22 and $2.25 per diluted common share. As a reminder, our guidance does not include the impact on operating results from any transactions that have not yet closed, interest income from any loans that do not have final draw structures, possible future acquisitions or dispositions, capital markets activity, or other non-recurring transactions or items.
David Andrew Kieske: Turning to guidance, we are reaffirming <unk> guidance for 2024 in both absolute dollars as well as on a per share basis.
David Andrew Kieske: We originally highlighted on our Q4 earnings call <unk> for the year ending December 31, 2024 is expected to be between $2 $3 2 billion and $2 $3 $5 5 billion or between $2 22, and $2 25 per diluted common share.
David Andrew Kieske: As a reminder, our guidance does not include the impact on operating results from any transactions that have not yet closed interest income from any loans that do not have final draw structures possible future acquisitions or dispositions capital markets activity or other nonrecurring transactions or items and as we have previously mentioned we.
David Andrew Kieske: And, as we have previously mentioned, we record a non-cash CECO allowance on a quarterly basis, which, due to its inherent unpredictability, leaves us unable to forecast net income and FFO with accuracy. Accordingly, our guidance is AFFO focused, and we believe AFFO represents the best way of measuring the productivity of our equity investments in evaluating our financial performance and ability to pay dividends. With that, Operator, please open the line for questions.
David Andrew Kieske: Recorded noncash sito allowance on a quarterly basis, which due to its inherent unpredictability leaves us unable to forecast net income and <unk> with accuracy Accordingly, our guidance as <unk> focused and we believe <unk> represents the best way of measuring the productivity of our equity investments in evaluating our financial performance.
David Andrew Kieske: <unk> ability to pay dividends with that operator, please open the line for questions.
Speaker Change: Thank you if you'd like to ask a question. Please press star one on your telephone Keypad will press star two if you'd like to withdraw your question. The first question comes from Caitlin Burrows Goldman Sachs. Please go ahead.
Operator: Thank you. If you'd like to ask a question, please press Star 1 on your telephone keypad or press Star 2 if you'd like to withdraw your question. The first question comes from Caitlin Burrows at Goldman Sachs. Please go ahead. Hi, good morning, everyone.
Caitlin Burrows: Hi, good morning, everyone. I guess one of the ways for Vici to identify and complete deals is when your partners are growing and expanding. So can you give some color on how your partners are doing and to what extent they're in the position to be expanding right now? I guess we can see the opportunity with the Venetian, but what else should we do?
Caitlin Burrows: Hi, good morning, everyone.
Caitlin Burrows: One of the ways for <unk> to identify and complete deals is when your partners are growing and expanding so can you give some color on how your partners are doing and to what extent they are in the position to be extending right. Now I guess, we can see the opportunity with the Venetian but what else should we consider.
Caitlin Burrows: John do you want to start.
John W. R. Payne: I will start, and I'll start first in our portfolio in Las Vegas because I think that's been a real center of where we've grown our company. And we have great operators there. We obviously announced the Venetian today, and you heard in my opening remarks that I believe, and maybe I'm a little bit biased, but this is the fastest growing or the best city for hospitality in the world as it continues to attract a wide variety of consumers.
Speaker Change: I will start and I'll start first in.
John W. R. Payne: Our portfolio in Las Vegas, because I think thats.
John W. R. Payne: Been a real center of where we've grown our company and we have great operators. There we are.
John W. R. Payne: Obviously announced the Venetian today and you heard in my opening remarks.
John W. R. Payne: I believe and maybe I'm, a little bit biased, but this is.
John W. R. Payne: Fastest growing are the best city in hospitality in the world as it continues to attract a wide variety of consumers. So that provides opportunities for our partners, whether that's MGM Caesars, we announced with Venetian we've got a partner in hard rock.
John W. R. Payne: So that provides opportunities for our partners, whether that's MGM, Feesers, we announced with Venetian, we've got a partner in Hard Rock that owns Mirage, who are all studying ways to continue to reinvent their business and add additional amenities to these amazing assets. The beauty of the assets in Las Vegas is the magnitude of opportunities that they have and the magnitude of square footage that they have in these assets to continue to not only remodel, but there are large parts of these assets that are unused at this time that could be brought either back to life or have never been brought to life with new concepts.
John W. R. Payne: Raj.
John W. R. Payne: Our all studying ways to continue to reinvent their business and add additional amenities to these amazing assets. The beauty of the assets in Las Vegas, the magnitude of opportunities that they have in the magnitude of square footage that they have in these assets to continue to not only remodel but there are.
John W. R. Payne: Large parts of these assets that are unused at this time that could be brought either back to life or have never been in life with new concepts. So can't give you any details that we haven't announced but our operators have all talked about the.
John W. R. Payne: So I can't give you any details that we haven't announced, but our operators have all talked about the development of their Las Vegas assets. Outside of Las Vegas, there are some regional markets, www.viciproperties.com. Go ahead; I'll start with that. If you want to add anything to that answer,
John W. R. Payne: The development of <unk>.
John W. R. Payne: Las Vegas assets outside Las Vegas, there are some regional markets that.
Speaker Change: Continued to grow.
John W. R. Payne: <unk> owned some of the best assets out there and we continue to talk to our partners about how we could potentially use our capital to grow their businesses and we've announced previously.
John W. R. Payne: Some opportunities with century, and I think there'll be some opportunities with some of our larger and our smaller operators.
Speaker Change: And I'll start with that if you want to add anything to that answer.
John W. R. Payne: Yeah.
John W. R. Payne: I would only add, John and Caitlin, good to hear from you, that obviously, depending on the outcome of the New York gaming licensing process, were the MGM asset in Yonkers, which we own the real estate of, to gain one of the full licenses, that would obviously be an opportunity for us to invest substantial capital in the recreation of that asset.
Speaker Change: I would only add Jon and Kate and good to hear from you that.
John W. R. Payne: Obviously, depending on the outcome of the New York gaming licensing process.
John W. R. Payne: Sure.
John W. R. Payne: <unk> asset in Yonkers, which we own the real estate that to gain one of the full licenses that would obviously be an opportunity for us to invest substantial capital.
John W. R. Payne: In the recreation of that asset.
David Andrew Kieske: Got it. And then you guys were talking about the home field partnership. I was wondering if you could just maybe remind us the status of your current construction loan there, which I don't think is itself a huge exposure for Vici. But as we think about the potential growth and scope of that relationship, what it could be like. David?
Speaker Change: Got it.
David Andrew Kieske: And then you guys were talking about the Homefield partnership I was wondering if you could just maybe remind us the status of your current construction loan there, which I don't think itself is a huge exposure for VT, but as we think about the potential.
David: Growth and scope of that relationship.
David: It could be like.
David Andrew Kieske: David? Yeah, Caitlin, we started funding that upon announcement, and so that's an 18-odd-month development build. It's really the proceeds are going into the Margaritaville Hotel to be used to build the Margaritaville Hotel. As John mentioned, the team was out there a week or so ago and saw the sports facilities that are ultimately part of our real estate that we do have the option to call in the future once everything is up and running and stabilized, but they are a best-in-class youth sports operator, and while there are no immediate intentions to grow, they are realizing the benefits of what they're creating and may have opportunities in the future to expand what they are successfully building in
David: David Yes.
David Andrew Kieske: Started funding that.
David Andrew Kieske: Upon announcement and so Thats, a 18 month development.
David Andrew Kieske: <unk>, it's really the proceeds are going into the Margaritaville hotel to use to build the Margaritaville mill Margarita Bill Hotel excuse me as John mentioned the team is out there a week or so ago and saw the sports facilities are ultimately part of our.
David Andrew Kieske: Real estate that we do have the option to call in the future once everything is up and running and stabilized.
David Andrew Kieske: But they are a best in class youth sports, operator, and while there is no immediate intentions to grow they are realizing the benefits of what they're creating and may have opportunities in the future to expand what they are successfully building in Kansas City.
Speaker Change: Got it thanks.
Anthony Paolone: That next question comes from Anthony Paolone from J.P. Morgan. Please go ahead.
David Andrew Kieske: Next question comes from Anthony <unk> from J P. Morgan. Please go ahead.
Edward Baltazar Pitoniak: Great, thank you. I guess my first question is, can you talk a bit about how you're thinking about return requirements and your cost of capital and any sort of spread? Because when I look at Venetian, it's obviously a tremendous asset and a strong relationship, and you talked about the importance of that. Then the flip is, I guess you got some flat terms for a little bit, and it's also more of a CapEx investment as opposed to new assets. So maybe just help us with putting some dimensions around how you're thinking about the right levels of return and your own cost of capital.
Anthony Paolone: Great. Thank you.
Edward Baltazar Pitoniak: Yes. My first question is can you talk a bit about how youre thinking about return requirements and your cost of capital and any sort of spread.
Edward Baltazar Pitoniak: Phoenician, it's obviously, a tremendous asset and a strong relationship and you talked about the importance of that then the flip is I guess you got some flat term for a little bit and it's also more of a capex investment as opposed to new assets. So maybe just help us with putting some dimensions around how youre thinking about the right levels of return on your own.
Edward Baltazar Pitoniak: Cost of capital.
Edward Baltazar Pitoniak: Yeah, Tony, good to hear from you. Um, the starting point is that over time, we are obviously solving for blended yield on our investment. When we have the opportunity to put capital into an asset as rarefied as the Venetian and still maintain an accretive spread to the point of your note, not a vast accretive spread and not our targeted blended rate of return, but if we can match an investment like the Venetian with investments, whether acquisitions of property or lending investments that give us more substantial yields, more substantial spreads, we feel on a net-net basis we're creating a lot of value for shareholders.
Speaker Change: Yes, Tony good to hear from you.
Edward Baltazar Pitoniak: The starting point is it over time.
Edward Baltazar Pitoniak: We're obviously solving for blended yield on our investments.
Anthony Paolone: Okay, thanks. And then just my second one, John, you mentioned the sensor assets are going through some regulatory process right now. Does that mean that if you do exercise the option, the close would be pretty immediate?
Anthony Paolone: When we have the opportunity to put capital into an asset as rarefied as the Venetian and still maintain.
Anthony Paolone: <unk> spread to the point of year, no not not a vast accretive spread and not our targeted.
Anthony Paolone: Blended rate of return, but if we can match and investment like the Venetian with investments whether acquisitions of property or lending investments that give us more substantial yields more substantial spreads we feel on a net net basis, we're creating a lot of value for shareholders.
Speaker Change: Okay. Thanks, and then just my second one John you mentioned on the Centaur assets.
Anthony Paolone: Going through some regulatory process right now does that mean that if you do exercise the option to close would be pretty immediate does that what to read there just wondering what that meant.
Anthony Paolone: Is that what you should read there? Or are you just wondering what that meant? Tony, I don't...
John W. R. Payne: Tony, I don't I don't think that's necessary. It's funny. First of all, it's funny. We still call them the Centaur assets. It is Harris, Hoosier Park, and Horseshoe, Indianapolis.
Speaker Change: Tony I don't I don't think Thats necessarily first of all it's funny, we still column.
John W. R. Payne: Centaur assets at Harrah's, Hoosier Park, and Horseshoe Indianapolis, we do the same.
John W. R. Payne: Same thing.
John W. R. Payne: We do the same thing. But no, Tony, I mean, we're going through the process with the appropriate India, Indiana regulatory agency. And, you know, should we elect to execute this option, we will make sure that we follow all the rules and the regulations. But to your question about timing, really, we have no position on that other than we're going through and spending the appropriate time with those agencies.
Speaker Change: But no Tony.
John W. R. Payne: We're going through the process.
John W. R. Payne: Within the appropriate India, Indiana regulatory agencies.
John W. R. Payne: And should we elect to execute this option, we will make sure that we follow all the rules and the regulations, but to your question about timing.
John W. R. Payne: No position on that other than we're going through and spending the appropriate time with those agencies.
Speaker Change: Okay. Thank you.
Barry Jonathan Jonas: Our next question is from Barry Jonas from Turist. Please go ahead.
John W. R. Payne: Our next question is from Barry Jonas from tourist please go ahead.
John W. R. Payne: Hey guys, good morning. I was curious how deep the pipeline is for additional partner property growth on investments. And then, I guess, as we think about those investments like Venetian, how should we think about the potential for those ROI improvements converting to salaries back at some point? Thanks.
Barry Jonathan Jonas: Hey, guys good morning.
John W. R. Payne: I was curious how deep is the pipeline for additional partner property growth investments and then I guess as we think about those investments like Venetian.
John W. R. Payne: How should we think about the potential for those ROI improvements converting to sell leaseback at some point. Thanks.
Edward Baltazar Pitoniak: Yeah. So, you know, I think it's a starting point, Barry. It's valuable to remember that, from what we can determine, we are the largest owner of hotel room real estate in America, we're the largest private sector owner of convention space in America, one of the largest owners of restaurants, theaters, other kinds of entertainment spaces.
Speaker Change: Yeah, So I think as a starting point Barry.
Edward Baltazar Pitoniak: Okay.
Edward Baltazar Pitoniak: As valuable to remember that from what we can determine we are the largest owner of <unk>.
Edward Baltazar Pitoniak: Tell room real estate in America, with the largest private sector owner of convention space in America, one of the largest owners of restaurants.
Edward Baltazar Pitoniak: <unk> other kinds of entertainment spaces.
David Andrew Kieske: What are we right now, David, about 130 million square feet? Just under that. That's right. Yeah.
Edward Baltazar Pitoniak: What are we right now David about 130 million square feet, just under that that's right. Yeah. So very when you think about having a 130 square feet of existing property.
Edward Baltazar Pitoniak: So, Barry, when you think about having 130 square feet of existing property, you know, one in 2% of that number as potential reinvestment opportunities is a pretty compelling opportunity unto itself. As John mentioned, the strip obviously represents a very compelling opportunity. We're particularly excited about the opportunities that could be at the south end of the strip, where, in partnership with MGM, we own five assets, I believe it is. And that is an end of the strip that, as you know, Barry, has taken on a vitality in recent years that it didn't have before.
Edward Baltazar Pitoniak: One and 2% of that number as potential reinvestment opportunities is a pretty compelling opportunity unto itself as John mentioned the strip, obviously represents a very compelling opportunity, we're particularly excited about the opportunity.
Edward Baltazar Pitoniak: It could be at the south end of the strip.
Edward Baltazar Pitoniak: Gartner ship with MGM, we own five assets I believe it is.
Edward Baltazar Pitoniak: That is an end of the strip that as you know Barry has taken on a vitality in recent years.
Edward Baltazar Pitoniak: We didn't have before that T. Mobile obviously added to the vitality that ended the strip Allegiant definitely excuse me out of it a lot and the stadium could potentially add a lot of vitality and so when you look at assets like MGM Grand New York, New York, Excalibur, Luxor of Mandalay Bay and Park MGM.
Edward Baltazar Pitoniak: The T-Mobile obviously added to the vitality of that end of the strip, Allegiant definitely added a lot, and the A-Stadium could potentially add a lot of vitality. And so when you look at assets like MGM Grand, New York, New York Excalibur, Luxor, Mandalay Bay, and Park MGM, we, with our partners MGM, who obviously reported a very good quarter last night, are excited about what the densification opportunities could be over the coming years.
Edward Baltazar Pitoniak: We with our partners MGM, who obviously reported a very good quarter last night.
Edward Baltazar Pitoniak: Are excited about what the densification opportunities could be over the coming years.
John W. R. Payne: Barry, can I add just one thing to that? Not only do I agree 100% with Ed on the asset, but it's also the operators that run these assets. That they are constantly looking for ways to attract more consumers and to generate more business. So you can have a great, But if the operator doesn't want to change it, wants to sit on their hands, the gaming operators, particularly in Las Vegas, are the best in the world in the hospitality space.
Speaker Change: Very good.
John W. R. Payne: And just one thing to that not only do I agree 100% with add on the asset. It's also the operators that run these assets.
John W. R. Payne: That they are constantly looking at ways to attract more consumers and to generate more business. So you can have a great asset.
John W. R. Payne: If the operator doesn't want to change it wants to sit on their hands the gaming operators, particularly in Las Vegas are the best in the world in the hospitality space and they are constantly looking at ways to build reinvent their business and so those two things combined that all of the assets are incredible, but having operators that want to change and grow.
John W. R. Payne: And they are constantly looking at ways to build and reinvent their business. And so those two things combined, not only are the assets incredible, but having operators that want to change, grow, and innovate is a formula for us to be able to continue to grow with the Property Growth Fund.
John W. R. Payne: And innovate.
John W. R. Payne: <unk> is a formula for us to be able to continue to grow with the property growth fund.
Samantha Sacks Gallagher: And Barry, before you move to your second question, Barry, before you move to your second question, Samantha wants to clarify an assumption that you made in your question that, in fact, isn't quite right. Yeah, thanks Barry.
Speaker Change: And Barry can move to your second question Barry before you move to your second question, Samantha and wants to clarify and.
Samantha: An assumption that you made in your question that in fact isn't quite right. Yes. Thanks, Barry. So you asked if we will have the opportunity to convert that via sale leaseback and we actually don't need to do that because we own the capital improvement and that reverts to us via rent. So it's not something that we need to then in the future convert via sale leaseback and Thats one of the benefits, we think of the property growth fund.
Samantha Sacks Gallagher: Yeah, thanks, Barry. So you asked if we would have the opportunity to convert that via sale-leaseback. And we actually don't need to do that because we own the capital improvement, and that reverts to us via rent. So it's not something that we need to then in the future convert via sale-leaseback. And that's one of the benefits we think of the Property Growth Fund.
Barry Jonathan Jonas: But if you have a chance, I guess to, to, you know, I think, like, if you look at the predecessor, MGP, there were instances where they acquired additional improvements, and that drove increased rent. Does that opportunity exist?
Speaker Change: But do you have a chance I guess too I.
Barry Jonathan Jonas: I think like if you look at the predecessor GP there are instances, where they acquired additional improvements and that drove increased rent does that opportunity exist.
Barry: Sure I understand.
Speaker Change: Yes, I mean, that's in essence, what we're doing into but yes, we are investing incremental capital in return for incremental capital, we get incremental rent.
Speaker Change: Okay. Okay.
Speaker Change: Understood and then just just quickly as a follow up curious.
Barry Jonathan Jonas: As you are looking at deals if the competitive environment is.
Barry Jonathan Jonas: Is it the same or if youre seeing kind of any new spaces.
Barry Jonathan Jonas: Was part installed.
Barry Jonathan Jonas: It continues to remain the.
Barry Jonathan Jonas: Barry.
Speaker Change: Got it.
Speaker Change: Okay. Thanks, so much guys appreciate it.
Speaker Change: Yes, Thank you Barry.
John W. R. Payne: Just just so I'm sure I understand.
Barry Jonathan Jonas: Our next question comes from John Decree from CBRE. Please go ahead.
John W. R. Payne: Yes, I mean, it's in essence what we're doing at the Venetian. We're investing incremental capital in return for incremental capital. We get incremental rent.
Speaker Change: Hi, good morning, everyone. Thanks for taking my questions.
Barry Jonathan Jonas: Okay, okay, understood. And then just, just quickly, as a follow-up, curious, you know, as you're looking at deals, if the competitive environment is, is, is the same, or if you're seeing kind of any new faces at those parties? It continues to remain the same, Barry.
John W. R. Payne: Maybe wanted to start on Las Vegas, John I think in your prepared remarks, you have mentioned, what a great hospitality market Las Vegas is and we certainly agree.
Barry Jonathan Jonas: Curious how you guys think about your net exposure to the market following the Venetian investment.
Barry Jonathan Jonas: In the context of.
Barry Jonathan Jonas: If you can remind us if you have officially committed to anything at the Mirage, Yes, obviously hard rock is considering a pretty big rebrand there and you've mentioned a number of partners, possibly considering activating space.
Barry Jonathan Jonas: So when you think about all potential opportunities.
Barry Jonathan Jonas: You kind of comfortable with that you kind of kind of a.
Barry Jonathan Jonas: The ceiling at which you'd like to go to and how much capital you deploy to Las Vegas, how do you kind of think about your exposure to that market.
Barry Jonathan Jonas: Over the near to medium term.
Speaker Change: Ed do you want me to take that.
Speaker Change: Yes, yes, he was asking you John.
John G. DeCree: Our next question comes from John DeCree from CBRE. Please go ahead.
Barry: Yes, John.
John G. DeCree: Nice to talk to you.
John G. DeCree: Let's talk a little bit about all the different areas of Las Vegas. So today.
John G. DeCree: Have an incredible amount of assets on.
John G. DeCree: On the strip, we have 10 assets on the Las Vegas strip.
John G. DeCree: We're very excited about where we do not have any investments yet where we see potential for growth is in the regional market of Las Vegas and in the downtown market of Las Vegas.
John G. DeCree: So you could see Vg continue to grow in the Las Vegas market and it could be on the strip, but it also could be in these other areas and those are our.
John G. DeCree: Our great segments of the business that we simply don't have real estate or partners yet.
John G. DeCree: Hi, good morning, everyone. Thank you for taking my questions. Maybe one to start on Las Vegas, John. I think in your prepared remarks, you mentioned what a great hospitality market Las Vegas is, and we certainly agree. Curious how you guys think about your net exposure to the market following the Venetian investment, and in the context of, could you remind us if you have officially committed to anything at the Mirage, yet obviously, Hard Rock is considering a pretty big rebrand there, and you've mentioned a number of partners possibly considering activating space.
John G. DeCree: Long way so.
John G. DeCree: And then I think you also ask about the Mirage and our work with how do we continue to speak with.
John G. DeCree: The hard rock team, who is running the Mirage on ways that we can help them growth grow, but we have not made any announcement on that yet John.
John G. DeCree: So when you think about all the potential opportunities, are you kind of comfortable with that? Do you kind of have a ceiling on how much capital you'd like to go to and how much capital you'd deploy to Las Vegas? How do you think about your exposure to that market over the near to medium term?
John G. DeCree: Got it thanks, maybe a high level follow up for whoever wants to take it it's kind of an observation first that lot of the casino industry Your partners and others.
Speaker Change: <unk> for development or a project Capex right now, we see that with the Venetian.
John G. DeCree: Rate volatility is probably part of the answer to the question, but why do you think we've seen more capital deployed in existing properties or new development relative to M&A, assuming you're kind of cost of capital.
John G. DeCree: Is it financing source for <unk>.
John G. DeCree: Senior industry participants is still pretty competitive so we think M&A could still be logical option, yet we've seen kind of all all development. So just curious if you guys have a view.
John G. DeCree: Why that why that might be other than maybe just interest rates.
John G. DeCree: And just so we're clear John decree.
John G. DeCree: As we think about M&A.
John G. DeCree: Among the gaming operators themselves are you speaking more narrowly about the trading of assets.
Speaker Change: Yes, I guess I guess, it's probably more amongst the strategic buyers of your partner's buying and selling which would maybe pull you in as a financing source. So.
John G. DeCree: Casino industry.
John G. DeCree: Developing and investing in properties rather than acquiring it seems like a different part of the cycle.
John G. DeCree: Presumably if we saw more M&A amongst the amongst your partners that would create more opportunities for you as well.
Speaker Change: Yes, Yes, you are right and.
Speaker Change: Honestly, you'd probably have you'd have to ask the operators as to why.
John G. DeCree: They believe there isn't more M&A right now.
Speaker Change: I could speculate and that's all I'm doing obviously the operators. So many of them are trading so cheaply right now.
John G. DeCree: Bafflingly Bafflingly cell.
John G. DeCree: However, you want to measure the evaluation, including obviously free cash flow yield and so it could be a time when people say I'm not I'm not going to sell not at this point.
John G. DeCree: But again, you really have to ask them.
John G. DeCree: It could also be the fact that.
John G. DeCree: Economic performance of the operators has been so strong coming out of Covid I think one open question can obviously be okay.
John G. DeCree: Are these peak earnings or are we going to sustain them.
John G. DeCree: We believe the earnings power of our operating partners is going to continue but one could reasonably ask okay.
John G. DeCree: Want to be the guy who buys of what turned out to be a peak only to see.
John G. DeCree: Economic performance normalized.
John G. DeCree: The COVID-19 effect wears away.
Speaker Change: That's fair enough I appreciate your comments on that I think we've probably heard similar as well around the industry. So thank you for that.
Speaker Change: Welcome John.
John W. R. Payne: Ed, do you want me to take this?
John G. DeCree: Our next question comes from David Katz from Jefferies. Please go ahead.
Ed: Hello, David.
John W. R. Payne: Thanks.
John W. R. Payne: Yeah, yeah, he was just asking you, John.
John W. R. Payne: Awesome.
John W. R. Payne: Ed.
Speaker Change: Good to hear.
Ed: From you as always and I wanted to just get your.
Speaker Change: Take on some of the non gaming initiatives and pursuits.
John W. R. Payne: Yeah, John, nice to talk to you. So let's talk a little bit about all the different areas of Las Vegas. So today we have an incredible number of assets on the Strip. We have 10 assets on the Las Vegas Strip that we're very excited about. Where we do not have any investments yet, and where we see potential for growth, is in the regional market of Las Vegas and in the downtown market of Las Vegas.
John W. R. Payne: Obviously, they're exciting in terms of Tam, but can you just talk about the.
John W. R. Payne: So you could see VICI continue to grow in the Las Vegas market. And it could be on the strip, but it also could be in these other areas. And those are great segments of the business that we simply don't have real estate or partners yet for. So, and then I think you also asked about the Mirage and our work with Hard Rock. We continue to speak with the Hard Rock team who's running the Mirage on ways that we can help them grow, but we have not made any announcement on that yet, John.
John W. R. Payne: How you view the durability of the long term durability.
John W. R. Payne: Durability.
John W. R. Payne: Those asset classes, such as Bolero Canyon ranch et cetera.
John W. R. Payne: How that compares with.
John W. R. Payne: Your initial core.
John W. R. Payne: In Las Vegas.
John G. DeCree: Got it. Thanks. Maybe a high level follow up for whoever wants to take it. It's kind of an observation first that a lot of the casino industry, your partners, and others, yet we've seen kind of all development. So just curious if you guys have a view and why that might be other than maybe just interest rates.
John W. R. Payne: Yes.
Speaker Change: It's a very good question, David and it is in the Central question, we're continually asking ourselves as we investigate new experiential categories and you've heard us talk in the past about our four key criteria.
John G. DeCree: Healthy supply demand balance low to no secular threat.
John G. DeCree: The ability of the end user experience and lower than average cyclicality I would add to that that we're looking for businesses that have an economic dynamism to them, which tends to really center on.
John G. DeCree: Certain amount of revenue complexity or is as we've kind of like to say cash register intensity.
John G. DeCree: And we want that to be coupled with an operator, who knows how to make the most of.
John G. DeCree: That economic dynamism energetic operators and theyre very economically astute operators.
John G. DeCree: And I would say that one of the key key criteria. Among those is the durability question is an asset class that has been around for decades has it proven itself through every economic cycle and through all the different demographics cycles and I will give you an example.
John G. DeCree: Right now the category that we would be nervous about.
John G. DeCree: And that is the.
John G. DeCree: If you want to call it a category unto itself that would be pickle ball right.
Speaker Change: It's <unk>.
John G. DeCree: Credibly popular sport right now.
John G. DeCree: It hasn't been around long.
John G. DeCree: And the health.
John G. DeCree: The supply demand balance question is very much an open one because it's not hard to put pickle ball courts, just about anywhere public parks parking lots you name it and I am old enough to remember a sport I'll racquetball, which was a very popular sport in the seventies and the eighties.
Speaker Change: And I don't know about you David I don't see a lot of racquetball courts around anymore I have no idea why theyre not around.
John G. DeCree: It was a fun game you didn't have to be chambly highly skilled to play it and have fun, but it's kind of gone.
John G. DeCree: So we take very very seriously is the question of durability and there is really no better evidence of durability than durability than it has been around a while and it has succeeded through all cycles.
Speaker Change: Perfect. Thank you very much I appreciate it.
Speaker Change: Thank you David.
John G. DeCree: Our next question comes from Smedes Rose from Citi. Please go ahead.
John G. DeCree: And just so we're clear, John DeCree, are you speaking about M&A among the gaming operators themselves, or are you speaking more narrowly about the trading of assets?
Speaker Change: Hi, Thanks.
Speaker Change: John I wanted to follow up Hi, I wanted to follow up with something John said and I think you said in your opening remarks that in the regional market.
John G. DeCree: Revenues are being driven by the middle and the high end of the market.
John G. DeCree: Is that kind of always the case or are your operators are starting to see some weakness with a lower end consumer.
Speaker Change: Do you have any concerns about that I guess as you sort of.
John G. DeCree: Overall.
Edward Baltazar Pitoniak: Yeah, I guess it's probably more amongst the strategic buyers of your partners buying and selling, which would maybe pull you in as a financing source. So, you know, the casino industry is developing and investing in properties rather than acquiring, it seems like a different part of the cycle. Presumably, if we saw more M&A amongst your partners, that would create more opportunities for you as well.
Speaker Change: Yes, smedes good good to talk to you probably a better question.
Edward Baltazar Pitoniak: The operating side.
Edward Baltazar Pitoniak: Our business or the operators, but.
Speaker Change: I'll give it.
Speaker Change: Go here a little bit.
Edward Baltazar Pitoniak: And my comments were about in.
Edward Baltazar Pitoniak: In the regional markets like you said, the middle and the high end consumers are still coming in their frequency based on information from our tenants.
Edward Baltazar Pitoniak: I think you're asking do we believe that those lower segments will come back I think that really depends on the operator as the operator pulling back incentives.
Edward Baltazar Pitoniak: To those consumers and they've elected not to come because they find more ways to spend their marketing dollars and more in a more efficient way so again more of an operator.
Edward Baltazar Pitoniak: Yes.
Edward Baltazar Pitoniak: Conversation, but smedes again, youre, asking how does that affect phe as I always like to say and you know this well even with every casino closed in the world during the pandemic.
Edward Baltazar Pitoniak: We collected 100% of our rent on time and cash.
Edward Baltazar Pitoniak: So if segments of the business.
Edward Baltazar Pitoniak: A little bit of a downturn not even negative.
Edward Baltazar Pitoniak: She is going to collect.
Edward Baltazar Pitoniak: Our rent or historically collect our rent. So we monitor these things stay on top of it because.
Edward Baltazar Pitoniak: I'm, a recovering operator, but in the core business of what we do those downturns upturns don't have a huge change.
Edward Baltazar Pitoniak: The business, we look much more big picture longer term years out.
Speaker Change: That makes sense.
Edward Baltazar Pitoniak: Okay.
Edward Baltazar Pitoniak: Yeah, yeah, you're right. And honestly, you'd probably have to ask the operators as to why they believe there isn't more M&A right now. I, you know, I could speculate, and that's all I'm doing. Obviously, the operators, so many of them are trading so cheaply right now, bafflingly, bafflingly so. However you want to measure the valuation, including obviously free cash flow yield, it could be a time when people say, I'm not, I'm not going to sell, not at this point. But again, you really have to ask them.
Edward Baltazar Pitoniak: Yeah, no absolutely I just it sounds like maybe it's more of a strategic.
Edward Baltazar Pitoniak: Yeah.
Edward Baltazar Pitoniak: And it could also be the fact that, you know, the economic performance of the operators has been so strong coming out of COVID. I think one open question could obviously be, okay, you know, are these peak earnings? Are we going to sustain them? We believe that the earning power of our operating partners is going to continue. But one could reasonably ask, okay, you know, I don't want to be the guy who buys at what turned out to be a peak only to see, you know, economic performance normalized as the COVID effect wears away.
Edward Baltazar Pitoniak: Our goal from the operator side of just we're just hearing on other calls.
John G. DeCree: That's fair. I appreciate your comments on that. I think we've probably heard similar things as well around the industry.
Edward Baltazar Pitoniak: There just seems to be a sense that maybe consumers are starting to pull back a little bit there is some weakness.
John G. DeCree: Leisure segments I, just kind of curious if you guys had insight there I wanted to ask you as well there has been press reports that MGM resorts.
John G. DeCree: I guess, so the operating rates at MGM, Springfield, and whether or not they do or not I don't know probably can't comment on that but I'm. Just could you talk about sort of what <unk> would be in the process and help you.
John G. DeCree: As we're thinking about it from your perspective, if that were to move forward.
John G. DeCree: So thank you for that. Welcome, John. Thank you. Thank you.
Speaker Change: John when you take that you want Samantha to take that.
John G. DeCree: Samantha.
John: Yes, yes.
John G. DeCree: Yes.
Speaker Change: Obviously, we wouldnt comment on any of our operators sales transactions, but to the extent they were to sell an operating business. We obviously retain the asset and would enter into a lease with any transfer of that asset.
John G. DeCree: Okay.
John: And you've seen that happen in.
John: In a few.
John: Yes, Smedes I'll, just add that <unk> seen that in a few instances with our asset southern Indiana being one.
John G. DeCree: Goldstrike.
John: Being another so.
John: We have we have definitely figured out how to work through those processes with existing tenants and new.
John G. DeCree: Okay.
John G. DeCree: Okay.
David Brian Katz: Welcome, John. Thank you. Our next question comes from David Katz from Jeffreys; please go ahead.
John G. DeCree: Our next question is from Daniel Guglielmo from capital one. Please go ahead.
Edward Baltazar Pitoniak: Ed, good to hear from you as always, and I wanted to just get your take on some of the non-gaming initiatives and pursuits. Obviously, they're exciting in terms of TAM, but can you just talk about how you view the durability, the long-term durability of those asset classes such as Bolero, Canyon Ranch, etc., and how that compares with your initial core in Las Vegas? Thanks.
David Brian Katz: Hello, everyone. Thank you for taking my question you all have a diverse group of partners and tenants both large and small this earning season there have been some questions around the health of the U S and Canadian consumers from a risk perspective, and just acknowledging that you are well fortified at the lease level, but are there certain areas of the <unk>.
Edward Baltazar Pitoniak: Portfolio, you're thinking about more trying to understand better in this environment.
Edward Baltazar Pitoniak: Okay.
Speaker Change: I wouldn't say Daniel it's so much about.
Ed: About particular assets or even particular geographies, but I do think it goes back to the question Smedes asked a moment ago, which is what kind of behavior, you're seeing per consumer segment and their income and their spending power and I do think one of the more.
Edward Baltazar Pitoniak: One of the elements of cognitive dissonance right. Now is is this disparity between lower income consumers and higher income consumers and the degree to which you are seeing some degree of stress and or at least less liquidity.
Edward Baltazar Pitoniak: For these.
Edward Baltazar Pitoniak: Lowering consumers that you might have a year or two ago. When we're seeing the benefits of so many of the stimulus plans that came out of Covid. So we obviously, we monitor it closely we monitor it for the impact can obviously have on our partners, but we also monitor it as part of our overall monitoring.
Edward Baltazar Pitoniak: Of the economy, and the credit markets and the degree to which the remarks that Jerome Powell made yesterday when he was kind of nice.
Edward Baltazar Pitoniak: Jerome as opposed scary Jerome I think there's a recognition even at the fed that despite a lot of our macro measures appearing to be very robust. There are there are some tensions in the economy right now.
Speaker Change: Great I appreciate the detailed response and that makes sense.
Edward Baltazar Pitoniak: And then just real quick around some of the development financing and the loans and securities bucket I'm sure you all talk with those teams on a regular basis can you just give us an idea if there been any recent headwind or tailwind you are hearing about from them.
Edward Baltazar Pitoniak: Yeah, no, it's a very good question, David, and it is an essential question we're continually asking ourselves as we investigate new experiential categories. And you've heard us talk in the past about our four key criteria of a healthy supply-demand balance, low to no secular threat, the durability of the end-user experience, and lower than average cyclicality. I would add to that that we're looking for businesses that have economic dynamism. And we want that to be coupled with an operator who knows how to make the most of that economic dynamism.
Edward Baltazar Pitoniak: They're energetic operators, and they're very economically astute operators. And I would say that one of the key criteria among those is the durability question. Is it an asset class that has been around for decades? Has it proven itself through every economic cycle and through all the different demographic cycles?
Edward Baltazar Pitoniak: Hey, Dan it's David Good to hear from you know we have a very thorough asset management load administration process as we monitor.
David Brian Katz: And I will give you an example right now of a category that we would be nervous about. And that is the, if you want to call it a category unto itself, that would be pickleball, right? It's an incredibly popular sport right now, but it hasn't been around long. And the supply and demand balance question is very much an open one because it's not hard to put pickleball courts just about anywhere, public parks, parking lots, you name it.
Edward Baltazar Pitoniak: Both our tenants and our loan investments very closely and we.
David Brian Katz: And I am old enough to remember a sport called racquetball, which was a very popular sport in the 70s and the 80s. And I don't know about you, David, but I don't see a lot of racquetball courts around anymore. I have no idea why they're not around. It was a fun game. You didn't have to be terribly highly skilled to play it and have fun, but it's kind of gone. So we take very, very seriously the question of durability, and there's really no better evidence of durability than that it has been around a while and it has succeeded through all cycles.
Smedes Rose: Perfect. Thank you very much. I appreciate it.
David Brian Katz: Talk to as John mentioned at the start to the operators and we also talked to our borrowers.
Smedes Rose: And they are not seeing any headwinds in terms of development completion or asset performance, where we've where we do have these loan investments.
Speaker Change: Great. Thank you.
John W. R. Payne: Our next question comes from Smedes Rose from Citi. Please go ahead.
Smedes Rose: The next question is from Michael Herring from Green Street. Please go ahead.
Smedes Rose: Thank you for taking my question.
Smedes Rose: Just looking at the Venetian deal and obviously it looks like a win win from our perspective at least just an incentive apollo's cost of financing.
Smedes Rose: That would be tickets to investing.
Smedes Rose: On the strip in Vegas.
Smedes Rose: I was wondering could you guys walk through maybe how those negotiations kind of transpired and how you came to that final yield numbers given that it is favorable it looks favorable on both sides.
Smedes Rose: That might look for the future.
Smedes Rose: Similar investments on the strip with other partners that you guys have.
Smedes Rose: Hi, thanks. Um, John, I wanted to follow up. Hi. I wanted to follow up on something John said, and you said in your opening remarks that in the regional market, revenues are being driven by the middle and the high end of the market, and my question is, you know, is that kind of always the case, or are your operators starting to see some weakness with a lower end consumer, and do you have any concerns about that, I guess, you know, as you sort of think about the portfolio overall?
Smedes Rose: Sure, Yes, Michael Good question John.
John W. R. Payne: Yes, Smedes, good, good to talk to you. Probably a better question for the operating side of our business or the operators, but I'll, I'll give it a go here a little bit. In my comments, about in the regional markets, like you said, the middle and the high end consumers are still coming in their frequency based on the information from our tenants. I think you're asking, or do we believe the lower segments will come back?
Speaker Change: And Michael it's nice to talk to you. This morning, and we agree that this is a win win for both companies. You're initially ask when did these discussions started they actually started.
John W. R. Payne: When we initially did the lease back in.
John W. R. Payne: During the pandemic and when we bought the real estate with Apollo we bought the real estate and they bought the operation of the <unk>. We knew that they were going to grow the business. We didn't know they were going to grow it as fast as they hadn't been so successful there and we're very very proud of them, but we talked about the property growth fund.
John W. R. Payne: Where there could be opportunities for us to grow so the discussions started and we do this often when we're doing deals to not only think about the deal that's in front of us, but where there are opportunities for us to grow, particularly with great assets like condition.
John W. R. Payne: And then as it comes to the pricing like anything we since we started the company we try to create beneficial deals for both sides.
John W. R. Payne: <unk> side kind of when it's not great for a long term relationship. So I opened up my <unk>.
John W. R. Payne: <unk> today.
John W. R. Payne: Someone rolled their eyes about that this is about relationships, but it really is about relationships and when you can look across the table from a good partner.
John W. R. Payne: You get to a price that they feel good about we feel good about and the transaction happens.
John W. R. Payne: And as you said, it's been a win win and we're just excited to help them add these great new amenities and upgrade the amenities that play out.
Speaker Change: Got it thank you.
John W. R. Payne: And just sticking with the Venetian deal obviously, you laid out the terms are.
John W. R. Payne: Just initial disbursements in the $400 million.
John W. R. Payne: It can be up to $700 million is the entire scope of the projects that Apollo is looking to take on is that included in the initial 40 million or will they eventually need that.
John W. R. Payne: $300 million.
John W. R. Payne: Essentially it's just whether or not they want to use that option.
John W. R. Payne: I think that really depends on the operator. Is the operator pulling back incentives for those consumers, and they've elected not to come because they find more ways to spend their marketing dollars and more in a more efficient way. So again, more of an operator conversation. But Smedes, again, you're asking how does that affect VICI?
John W. R. Payne: Hey, Michael It's David Good to hear from you what are the things you should look at as the Venetian press release that they put out yesterday, where they are ahead of our 25th anniversary of the asset this Saturday actually where they have laid out extensive value enhancement plans well in excess of <unk>.
John W. R. Payne: $700 million actually so it's just a little bit of timing on their side as they worked through the initial 400. This year they've got a lot of things in the hopper and things that they have already done and then just a bit of.
John W. R. Payne: Is that all comes together, what they are what their pace of potentially drawing that incremental $300 million.
John W. R. Payne: What does that falls and falls in and how they use that capital going forward and Michael just to add to that I believe you'll see the press release.
John W. R. Payne: <unk> about a total of about 1 billion and a half of total investment into the Venetian.
John W. R. Payne: Of which we may end up being about half of that but I want to stress the point that.
Smedes Rose: I don't know of another REIT category, where tenants put more capital into the REIT asset than ours. If you look across our portfolio, both our Las Vegas portfolio and our regional portfolio.
John W. R. Payne: As I always like to say, and you know this well, even with every casino closed in the world during the pandemic, VICI collected 100% of our rent on time and in cash. So if segments of the business have a little bit of a downturn, not even negative, VICI is going to collect our rent or historically collect our rent. So we monitor these things. I stay on top of it because I'm a...
John W. R. Payne: I'm a recovering operator, but in the core business of what we do, those downturns and upturns don't have a huge change in our view of the business. We look much more at the big picture, longer term, years out. Does that make sense?
John W. R. Payne: Any given year, our tenants are putting hundreds of millions of dollars if not billions of dollars into our assets, making our assets more valuable that obviously doesn't get captured in the models per se given that obviously the transparency around the exact capital that are.
John W. R. Payne: Tenants put into each one of our assets is not necessarily there, but we can tell you based on what we know of their investment activities that.
John W. R. Payne: No other REIT that we know enjoys greater benefit from tenant reinvestment into our properties.
Speaker Change: Okay, great. Thanks, that's all very helpful. I appreciate it.
Speaker Change: Thanks, Michael.
Smedes Rose: Yeah, no, absolutely. I just think it sounds like maybe it's more of a strategic goal from the operator side. I just, you know, we're just hearing on other calls that there just seems to be a sense that maybe consumers are starting to cool back a little bit. There's some weakness in different leisure segments. I was just kind of curious if you guys had any insight there. I wanted to ask you as well, there's been press reports that MGM Resorts is looking to sell the operating rights of MGM Springfield.
John W. R. Payne: The next question comes from Greg Mcginniss from Scotia Bank. Please go ahead.
Smedes Rose: And whether or not they do or not, I don't know, you probably can't comment on that. But I'm just, could you talk about sort of what VICI's role would be in that process and how you guys are thinking about it from your perspective if that were to move forward?
Smedes Rose: Yeah.
John W. R. Payne: John, do I take that, or do you want Samantha to take it?
Speaker Change: Hey, good morning, Greg.
Samantha: So given that the Venetian deal originally had potentially be up to $1 billion does that mean, there remains potential for another 300 million here down the line or does this exhaust that initial agreement and in general for the partner property growth fund is there.
John W. R. Payne: Could there potentially be more concrete agreements ahead of time like in the case of Venetian or for situations. Like you were talking about in terms of the south side of the strip and MGM, where there might be something.
John W. R. Payne: Is it more likely to just have an actual investment be announced as opposed to again the potential for one.
John W. R. Payne: Yeah, thanks. Yeah, as you know, obviously, we wouldn't comment.
John W. R. Payne: Yeah.
John: David or John.
Smedes Rose: And you've seen that happen in a few... Yeah, and Smedes, I'll just...
Samantha: I can start and John Smith to chime in yeah, potentially there could be more than $700 million.
Smedes Rose: Okay, thank you.
Speaker Change: That comes out of our agreement here the original $1 billion announcement back in 2022, we modify that as the team worked through and got in under the Hood, So to speak of the asset and realize what they wanted to do or what they wanted to undertake so theres some tweaks to the original agreement on our side.
Daniel Edward Guglielmo: Our next question is from Daniel Guglielmo from Capital One. Please go ahead.
Edward Baltazar Pitoniak: Hello, everyone. Thank you for taking my question. Y'all have a diverse group of partners and tenants, both large and small. This earnings season, there have been some questions around the health of the U.S. and Canadian consumers from a risk perspective, and just acknowledging that you are well fortified at the lease level. But are there certain areas of the portfolio you're thinking about more, trying to understand better in this environment?
Edward Baltazar Pitoniak: I wouldn't say Daniel is so much about, um..., particular assets or even particular geographies, but I do think it goes back to the question Smedes asked a moment ago, which is what kind of behaviors you're seeing per consumer segment and their income and their spending power. And I do think one of the more, one of the elements of cognitive dissonance right now is this disparity between lower income consumers and higher income consumers and the degree to which you are seeing some degree of stress and or at least less liquidity for these lower end consumers than you might have a year or two ago when we were seeing the benefits of so many of the stimulus plans that came out of COVID.
Edward Baltazar Pitoniak: So obviously, we monitor it closely. We monitor it for the impact it can obviously have on our partners, but we also monitor it as part of our overall monitoring of the economy and the credit markets and the degree to which the remarks that Jerome Powell made yesterday when he was kind of nice Jerome, as opposed to scary Jerome, I think there's a recognition even at the Fed that despite a lot of our macro measures appearing to be very robust, there are some tensions in the economy right now
Daniel Edward Guglielmo: Great. Yeah, I appreciate the detailed response. And that makes sense. And then, just real quick, around some of the development financing in the loans and securities bucket.
David Andrew Kieske: I'm sure you all talk with those teams on a regular basis. Can you just give us an idea if there have been any recent headwinds or tailwinds that you're hearing about from them? Yeah, David. Good to hear from you.
David Andrew Kieske: Yeah, David, good to hear from you. Now we have a very thorough asset management loan administration process, and we monitor, you know, both our tenants and our loan investments very closely. And we talked to, as John mentioned, he talked to the operators, and we also talked to our borrowers to make sure that they are not seeing any headwinds in terms of development completion or asset performance where we do have these loan investments.
David Andrew Kieske: The next question is from Michael Herring from Green Street. Please go ahead.
David Andrew Kieske: And is that just laid out that the announcement the Venetian put out yesterday has up to 1 billion five are there plans to invest 1 billion five into the asset.
David Andrew Kieske: So there could be incremental capital, but what we've documented and announce with our great partners at Apollo and Patrick and team and Rob at the Venetian is incremental $700 million investment today.
Michael Herring: Thank you for taking my question. You know, just looking at the Venetian deal, it obviously looks like a win-win from our perspective, at least in the sense of Apollo's cost of finance and then the yield that Vici gets to invest in on the strip in Vegas. I was wondering, could you guys walk through maybe how those negotiations kind of transpired and how you came to that final yield number, given that it is favorable or it looks favorable on both sides, and how that might look for future similar investments on the strip with other partners that you guys have.
John W. R. Payne: Sure, yeah, Michael, good question. John?
John W. R. Payne: And Michael, it's nice to talk to you this morning, and we agree that this is a win-win for both companies. You initially asked when these discussions started. They actually started when we initially did the lease back in during the pandemic. And when we bought the real estate with Apollo, we bought the real estate, and they bought the operation of Anish. And we knew that they were going to grow the business. We didn't know they were going to grow it as fast if they hadn't been so successful there. And we're very, very proud of them.
John W. R. Payne: And then the second part of your question there could be incremental dollars that we put in across the portfolio is because of the uniqueness of our assets versus any other REIT out there.
John W. R. Payne: But we talked about the property growth fund and where there could be opportunities for us to grow. So the discussion started, and we do this often when we're doing deals to not only think about the deal that's in front of us, but where there are opportunities for us to grow, particularly with great assets like Venetian. And then as it comes to pricing, like anything, we have tried to create beneficial deals for both sides.
Speaker Change: Yes, Greg I think you should hear that.
John W. R. Payne: Like these opportunities and as Ed just pointed out a few minutes ago. There arent. Many reits that have this unique lever to pull to grow.
John W. R. Payne: There arent many Reits that are going to say, hey, we're going to put $700 million into an asset there's some rates at getting down about $700 million into my whore portfolio were talking to one of our 93 assets. So we like this.
John W. R. Payne: If one side kind of wins, it's not great for a long-term relationship. So I opened up my remarks today, and someone may have rolled their eyes at the fact that this is about relationships, but it really is about, When you can look across the table from a good partner, you get to a price that they feel good about, we feel good about, and the transaction happens. And as you said, it's been a win-win, and we're just excited to help them add these great new amenities and upgrade the amenities that they already have.
John W. R. Payne: Opportunity.
John W. R. Payne: Partners grow and Thats one of the uniqueness.
John W. R. Payne: DTE has that we add them and we were talking earlier, we can go do M&A, we can help by.
John W. R. Payne: By other assets, but we also have this lever that we've been talking about for years that is coming to life today, what the Venetian.
Speaker Change: Okay. Thanks for the color there.
John W. R. Payne: And then David just on the maintained guidance real quick was there no additional drawdown on loans without final draw structure in Q1 or was it just had an immaterial level. They have no impact on the full year guide.
Speaker Change: No sorry, the first part of your run of the draw schedules to Greg.
John W. R. Payne: Well, we still feel really good about our guidance.
Speaker Change: Sorry go ahead.
John W. R. Payne: Yeah, so I understand that for loans without.
John W. R. Payne: Draw schedules, that's not included in future guidance.
John W. R. Payne: And I am not exactly sure what was drawn if anything I've got you guys, sometimes if they're one okay. Thank you.
John W. R. Payne: Yeah. Its immaterial if there were it and so we still feel really good about our guidance range, where we sit here today.
Speaker Change: Okay. Thanks, Thanks, Greg.
John W. R. Payne: Our next question is from Ronald Camden from Morgan Stanley. Please go ahead.
John W. R. Payne: Hey, just two quick ones just first just looking for some qualitative comments starting with the annual letter about sort of higher rates and the impact of activity just as you've seen sort of this recent spate of movements on the rate fraud, just qualitative comments on what that's doing to the pipeline where the decisions are taking longer.
John W. R. Payne: So on and so forth or if anything is falling out.
John W. R. Payne: Yes.
John W. R. Payne: Is that timely question, Ron I mean, it's definitely having a fairly chilling effect on trading activity really across most all asset classes.
John W. R. Payne: And Thats, why we really value having <unk>.
John W. R. Payne: Leverage to pull or tools in our toolbox, where we can generate growth.
John W. R. Payne: During periods when it would otherwise be difficult to do through conventional asset trading activity. Those obviously include things like our property partners fund the Venetian being an example through our credit book through our.
John W. R. Payne: Expansion of existing relationships, and then again to having the tool in the toolbox of non gaming and being able to do things with partners like Chelsea piers Homefield Cabot and Canyon ranch when again, the trading of assets would otherwise be difficult.
John W. R. Payne: And it is difficult frankly.
Speaker Change: Alright, and then just the second question just staying on the pipeline.
John W. R. Payne: Is there a sort of more activity on the gaming side non gaming side all of the above just any sort of color there would be helpful. Thanks.
John W. R. Payne: We continue to spend time, yes, we continue to spend time and a lot of different sectors on the non gaming side, whether that's wellness indoor waterpark pilgrimage golf sports you've heard us make an investment.
Michael Herring: Thank you. And just sticking with the Venetian deal, obviously, you laid out the terms of the initial disbursement, and the $400 million can be up to $700 million. Is the entire scope of the project that Apollo is looking to take on, is that included in the initial $400 million? Or will they eventually need that $300 million eventually? It's just whether or not they want to use that option.
David Andrew Kieske: Hey Michael, it's David. Good to hear from you.
John W. R. Payne: But at the same time, let's remember as I said in my opening remarks, we get 98% of our our rent from our gaming assets and we continue to spend time with our current partners and others to grow so for us. It I know, we did a fair amount about our non gaming, but it shouldnt be.
David: We have forgotten that we're also spending a lot of time in gaming.
David: So the answer is both the spending time in both.
Speaker Change: Great. Thank you.
David Andrew Kieske: Okay. We have thanks for the questions on the call. So I'll hand, the floor back to Ed for the final closing remarks.
Speaker Change: Alright, thanks, everybody.
David: To close out the call by just reiterating.
David Andrew Kieske: You know, one of the things you should look at is the Venetian press release that they put out yesterday, where they, ahead of the 25th anniversary of the asset, this Saturday, actually, have laid out extensive value enhancement plans, well in excess of $700 million, actually. So it's just a little bit of timing on their side as they work through the initial $400 million this year. They've got a lot of things in the hopper and things that they've already done. And then just a bit of, as that all comes together, their pace of potentially drawing that incremental $300 million, where that falls in, and how they will use that capital going forward.
David: How much value, we believe we are creating with the.
Speaker Change: The announcement, we made yesterday afternoon of our investment in the Venetian with our partner Apollo and I'm going to I'm actually read from Somebody's note because frankly. This note expression is it better than I ever could.
Edward Baltazar Pitoniak: And Michael, just to add to that, I believe you'll see the press release talks about a total of about a billion and a half of total investment into Venetian, of which we may end up being about half of that. But I want to stress the point that...
Edward Baltazar Pitoniak: And in this note.
Edward Baltazar Pitoniak: The author says we view the Venetian cap rate spread is attractive, especially considering how tight spreads are elsewhere in net lease bigger picture. We view this as vinci capitalizing on its relationships to double down on a winning hand in parenthesis Venetian maybe bt's best acquisition to date.
Edward Baltazar Pitoniak: Closed parenthesis, despite higher interest rates, there's just nowhere else in todays triple net lease market, where you can put that amount of money $700 million up to two work into that kind of your price irreplaceable real estate at a 725% cap rate.
Speaker Change: And then in parenthesis delusional sellers are still looking for sub seven cap rates on their poorly located red lobster's.
Speaker Change: I could not have said it better myself.
Edward Baltazar Pitoniak: I don't know of another REIT category where tenants put more capital into the REIT's assets than ours. If you look across our portfolio, both our Las Vegas portfolio and our regional portfolio, any given year, our tenants are putting hundreds of millions of dollars, if not billions of dollars, into our assets, making our assets more valuable. That obviously doesn't get captured in the models, per se, given that the transparency around the exact capital that our tenants put into each one of our assets is not necessarily there, but we can tell you, based on what we know of their investment activities, that no other REIT that we know of enjoys greater benefit from tenant reinvestment into our properties.
Michael Herring: Great. Thanks. Thanks. That's all very helpful. I appreciate it.
Speaker Change: And again, we just want to thank you for your time today and reemphasize that as noisy as it is out there and confusing at times in the marketplace.
Michael Herring: Thanks, Michael.
Greg Michael McGinniss: The next question comes from Greg McGinniss from Scotiabank. Please go ahead.
Greg Michael McGinniss: Morning, Greg. Given that the Venetian deal originally had the potential to be up to a billion dollars, does that mean there remains potential for another $300 million here down the line, or does this exhaust that initial agreement? And in general, for the Kartner Property Growth Fund, could there potentially be more concrete agreements ahead of time, like in the case of Venetian, or for situations like you were talking about in terms of the south side of the strip and MGM where there might be something? Is it more likely to just have an actual investment be announced as opposed to, again, the potential?
David Andrew Kieske: Yeah, I... David or John?
David Andrew Kieske: Greg, I can start, and John and Smedes can chime in. Yeah, potentially, it could be more than $700 million that comes out of our agreement here. The original billion-dollar announcement back in 2022, we modified that as the team worked through and got under the hood, so to speak, of the asset and realized what they wanted to do or what they wanted to undertake, so there were some tweaks to the original agreement on our side.
David Andrew Kieske: And as Ed just laid out, the announcement that Svanetian put out yesterday has up to $1.5 billion, or they're planning to invest $1.5 billion into the asset, so there could be incremental capital. But what we've documented and announced with our great partners at Apollo and Patrick and his team and Rob at Svanetian is this incremental $700 million investment today. And then the second part of your question, there could be incremental dollars that we put in across the portfolio because of the uniqueness of our assets versus any other reach out there.
Edward Baltazar Pitoniak: And again, we just want to thank you for your time today and reemphasize that as noisy as it is out there and confusing at times in the marketplace, the VICI team is a team that continues to get good things done. Again, thanks for your time today, and we'll see you again.
John W. R. Payne: Yeah, Greg, I think you should hear that we like these opportunities, and as Ed just pointed out a few minutes ago, there aren't many REITs that have this unique lever to pull to grow. I mean, there aren't many REITs that are gonna say, hey, we're gonna put $700 million into an asset. There are some REITs that can't even say, I wanna put $700 million into my whole portfolio. We're talking about one of our 93 assets.
John W. R. Payne: So we like this opportunity to help our partners grow, and that's one of the uniquenesses that VICI has. We can do M&A, we can help buy other assets, but we also have this lever that we've been talking about for years that is coming to life today with the Venetian.
Greg Michael McGinniss: Great, thanks for the color there. And David, just on the maintained guidance real quick, was there no additional drawdown on loans without a final draw structure in Q1? Or was it just at an immaterial level to have no impact on the full year guidance?
John W. R. Payne: The <unk> team is a team that continues to get good things done.
David Andrew Kieske: There's no, sorry, the first party around the draw schedule, Greg. I mean that, well, we still have.
David Andrew Kieske: Yeah, so I understand that for loans without, you know, draw schedules, that's not included in future guidance. And I'm not exactly sure what was drawn, if anything.
Greg Michael McGinniss: I got you. Yeah. If there was, it would be okay.
David Andrew Kieske: Yeah, it's immaterial if there were any, and so we feel really good about our guidance range where we sit here today.
Ronald Kamdem: Our next question is from Ronald Kamdem from Morgan Stanley. Please go ahead.
Speaker Change: Again, thanks for your time today, and we'll see you again.
Edward Baltazar Pitoniak: Hey, just two quick ones. First, just looking for some qualitative comments, starting with the annual letter about sort of higher rates and the impact of activity. Just as you've seen sort of this recent spate of movements on the rate front, just qualitative comments on what that's doing to the pipeline, whether decisions are taking longer and so on and so forth, or if anything's falling out.
Edward Baltazar Pitoniak: Yeah, it's a timely question, Ron. I mean, it's definitely having a fairly chilling effect on trading activity across most asset classes. And that's why we really value having levers to pull or tools in our toolbox where we can generate growth during periods when it would otherwise be difficult to do through conventional asset trading activity. Those obviously include things like our property partner growth fund, the Venetian being an example, through our credit book, through our expansion of existing relationships, and then again, too, having the non-gaming tool in the toolbox and being able to do things with partners like Chelsea It is difficult, Frankly.
John W. R. Payne: Great. And then just the second question, just staying on the pipeline, is there sort of more activity on the gaming side, the non-gaming side, all of the above? Just any sort of color there would be helpful.
Edward Baltazar Pitoniak: In the next quarter.
John W. R. Payne: We continue to spend time in a lot of different sectors on the non-gaming side, whether that's wellness, indoor water parks, pilgrimage golf, these sports you've heard us make an investment in. But at the same time, let's remember, as I said in my opening remarks, we get 98% of our rent from our gaming assets, and we continue to spend time with our current partners and others to grow. For us, I know we get asked a fair amount about our non-gaming, but it shouldn't be forgotten that we're also spending a lot of time gaming. So the answer is both; spending time on both.
Operator: Okay, we have no further questions on the call, so I'll hand the floor back to Ed for the final closing remarks. All right.
Edward Baltazar Pitoniak: All right, thanks everybody. So I want to close out the call by just reiterating how much value we believe we're creating with the announcement we made yesterday afternoon of our investment in the Venetian with our partner Apollo. And I'm going to actually read from somebody's note because, frankly, this note expresses it better than I ever could. And in this note, the author says that they view the Venetian cap rate spread as attractive, especially considering how tight spreads are elsewhere in net lease.
Edward Baltazar Pitoniak: Bigger picture, we view this as Vici capitalizing on its relationships to double down on a winning hand. In parenthesis, the Venetian may be Vici's best acquisition to date. Despite higher interest rates, there's just nowhere else in today's triple net lease market where you can put that amount of money, $700 million, up to, to work into that kind of irreplaceable real estate at a 7.25% cap rate. Then, in parenthesis, delusional sellers are still looking for sub-7 cap rates on their poorly located red, I could not have said it better myself.
Operator: This concludes today's conference call. Thank you all very much for joining us.
Ed: This concludes today's conference call. Thank you all very much for joining.
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Operator: Yes.
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