Q3 2024 VICI Properties Inc Earnings Call
Good day, ladies and gentlemen, thank you for standing by welcome to the BG properties third quarter 2024 earnings Conference call. At this time, all participants are in listen only mode.
This conference call is being recorded today November <unk> 2024.
Speaker Change: Now I'll turn the call MPT, Samantha Gallagher General counsel with BG properties.
Samantha Gallagher: Thank you operator, and good morning, everyone should have access to the company's third quarter 2024 earnings release and supplemental information.
Samantha Gallagher: The release and supplemental information can be found in the investors section of the BG properties website at Www Dot BG property dotcom.
Samantha Gallagher: 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 well.
We expect should guidance intend outlook.
Samantha Gallagher: 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 more detailed discussion of the risks that could impact future operating results and financial condition.
Samantha 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.
Samantha Gallagher: A reconciliation of these measures to the most directly comparable GAAP measure is available on our website and our third quarter 2024 earnings release, our supplemental information in our filings with the SEC for additional information with respect to non-GAAP measures of certain tenants and our Counterparties discussed on this call. Please refer to the respective companies public filings with the SEC.
Hosting the call today, we are at the Tony <unk>, Chief Executive Officer, John Payne, President and Chief Operating Officer, David <unk>, Chief Financial Officer, Gabe Wasserman, Chief Accounting Officer and Laurie.
Speaker Change: <unk> senior Vice President of capital markets, Ed and team will provide some opening remarks, and then we will open the call to questions with that I'll turn the call over to Ed.
Ed: Thank you Samantha and good morning, everyone.
Interesting world, where currently living and isn't it.
Ed: I wish this was a video call. So that it can ask for a show of hands on how many of you predicted that the fed with lower the fed funds rate MTB in mid September and over the next six weeks. The U S 10 year yield would rise 70 days.
Ed: If you work in a hedge fund that that prediction.
Ed: We know if you need help spending all the money just made.
We never tire of trying to make sense of the times, we're living through because we can be situationally ready for the future that may arise out of the present.
Ed: To tell you about one of the means we use to make sense of the times we're living through.
Ed: You need you to please grab that old fashion thing called the pen or pencil in that old fashioned thing called the piece of paper.
Ed: Draw a horizontal or the latitude line on the paper this axis will represent consumer economic condition.
Ed: Left and there's a latitude line, but lousy and if they're right on that line, but great.
Ed: Now through the middle of the horizontal line draw of vertical or longitude line.
Ed: This access will represent REIT capital market condition.
Ed: At the top end of the longitude lines put great and at the bottom end is in line putting lousy.
You now have one of the key maps, we use a beachy determined at any given time, where we are located latitudinarian longitudinally in relation to consumer economic conditions and weak capital market conditions.
Where we might be headed.
Ed: Or did you seven years of existence, we have operated in every quadrant on this grid and we have successfully generated earnings growth and dividend growth during our journey to all these quadrant.
Ed: Given 'twenty 'twenty four is volatility we have operated in her verged on almost all of these quadrants here to date.
Ed: Where will you currently are in a good position to fund the opportunities that we're working on but there's always a beachy, we remain situationally ready for whatever the lat long position, we maybe in or headed towards.
Ed: We've worked hard to develop a philosophy strategy and practice of capital allocation.
Ed: It enables V G to allocate capital no matter, which quarter, we find ourselves in at any given time.
Ed: We achieved this sustained and sustainable capital allocation through two key me.
Ed: Internal funding capability through all cycles and investments that fund over time.
Ed: When access to a cost of capital is in a negative quadrant, we want to be capable of what we've come to call capital markets independent.
Ed: Meaning that we have internal capital resources available to us that we can use to generate accretive external growth.
Ed: At <unk> capital markets Independents is funded through both retained cash flow and what we call regained cash flow, meaning repayments of loans, we've made through a beachy experiential credit solutions.
Ed: Depending on the loan repayments received in a given year, our annual internal cash resources available for allocation can be anywhere from 350 million to $500 million when levered with that this can give us 500 million to nearly $1 billion of investing power, even when again overall capital market conditions are not positive.
Ed: We have the ability to fund external growth no matter, what quadrant, where it builds off our foundation of same store NOI growth that thanks to our leases rent escalation rates and 100% occupancy is far superior to conventional net lease Reits as documented by Green Street.
Ed: We capitalized on the sustained funding capability by developing investment opportunities that enable us to put capital out the door in a regular sustained cadence with Q3 2024 being an example of a quarter in which we announced no new transactions, but nonetheless put nearly $250 million of incremental capital to work.
Ed: Through our property partner growth fund and lending initiatives.
Ed: Sustained sustainable capital allocation is integral to a subject that we are religious about.
A beachy, we're religious about the power of compounding.
Ed: Pounding of earnings growth, the compounding of dividend growth.
Ed: Rounding of total return.
Ed: One of the keys of compounding is not go backwards not an earnings not in dividends not in total return are key to sustain forward momentum is the ability to generate earnings and value growth through all cycles.
Ed: All quadrants of a retreat conditions map.
Speaker Change: We don't know what the coming quarters will bring and REIT capital market conditions or consumer economic conditions, but we work every day to be ready for what may come with that I'll now turn the call over to John and David who will talk about our growth outlook and current performance John.
John: Thanks, Ed Good morning to all of you on the call today, we're often asked where we spend most of our time and energy and while we've built a team that can assess the wide range of opportunities across experiential sectors in various geographies in tandem I have said many times that casino gaming will continue to be a major.
John: The driver of our growth.
John: Size and scale of gaming assets is one element contributing to this focus and we also like gaming because of how experiences at these assets continue to evolve specifically in Las Vegas, We believe the tailwind around gaming in Las Vegas, We will continue to create investment opportunities for BG similar too.
John: The Venetian partner property growth fund investment, we announced during the second quarter.
John: A recent financial times article exemplifies our view of the future opportunities in Las Vegas in.
John: In the article Barry Diller Chairman of IAC shared his thoughts on his company's stake in MGM resorts. He said you can't just intermediate at physical experience, which is why we are betting on Las Vegas.
John: He then goes on to say the amount of entertainment sports live performances and every possible variety in combination in Las Vegas is unequaled anywhere in the world.
Speaker Change: This quote underlies the merits of Beachy is experiential real estate strategy as well as our significant ownership of Las Vegas real estate.
Speaker Change: The key is positioned to be a prime partner of our operators as they seek to invest further in this wonderful kind city.
Speaker Change: An example, we have often cited is the opportunity presented by the sports triangle at the South end of the Las Vegas strip with our ownership of all six MGM assets contained within an alongside Allegiant Stadium T Mobile arena and the potential as stadium on the.
Former Tropicana site.
Speaker Change: Given the increased densification in foot traffic in the area are partners at MGM may seek to reinvest in those assets over the coming years.
Speaker Change: Scale of investment opportunity within assets Vg already owns provides us with a very unique advantage.
Speaker Change: We have also utilized our partner property growth fund with regional tenants, including century, who this week is hosting the grand opening of their land based casino in Carruthers rooms, Zuhri in 2022, <unk> announced an investment of $52 million to fund development of this new casino resort.
Speaker Change: Century Carruthers Bill to replace the last remaining riverboat casino on open water in Missouri.
Speaker Change: We've taken great care in the selection of our partners and investments to ensure not only a best in class portfolio with quality income, but a portfolio of investments and partners. We can grow with this ethos is foundational to our capital allocation strategy.
Speaker Change: Sets up well for future pipeline opportunities and consistent capital deployment in the third quarter, we deployed $230 million of capital through various loans and partner property growth Fund agreements. This has been our 13th quarter of consecutive capital deployment VTS.
Speaker Change: She has built a legacy is getting better as we grow bigger and we believe our disciplined strategy will allow us to be situationally ready to continue to deliver consistent and sustainable growth now I will turn the call over to David who will discuss our financial results and guidance David.
David: Great. Thanks, John Thanks, everybody for joining us I'll touch on our balance sheet liquidity results and our updated full year guidance.
David: Subsequent to quarter end, we settled 7 million shares and received approximately 201 million under our forward sale agreements.
David: These proceeds contributed to funding the Venetian capital investment we announced in Q2.
David: We currently have approximately $2 9 billion and total liquidity comprised of approximately $160 million in cash and cash equivalents $430 million of estimated proceeds available under our outstanding forwards.
David: And $2 3 billion of availability under our revolving credit facility.
David: In addition, our revolving credit facility has an accordion option, allowing us to request additional lender commitments of up to $1 billion.
David: In terms of leverage our total debt is currently $17 1 billion, our net debt to annualized third 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: We have a weighted average interest rate of 436% taking into account our hedge portfolio and a weighted average six three years to maturity.
David: Touching on the income statement <unk> per share was <unk> 57 for the quarter, an increase of four 9% compared to 54 for the quarter ended September 32023.
David: 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.
David: Our margins continue to run strong in the high 90% range when eliminating noncash items.
David: Our G&A was $16 5 million for the quarter and as a percentage of total revenues was only one 7% which continues to be one of the lowest ratios in not only the triple net sector, but across all rights.
David: Turning to guidance, we are updating our <unk> guidance for 2024 in both absolute dollars as well as on a per share basis.
David: <unk> for the year ending December 31, 2024. It is expected to now be between $2 $3 6 billion and $2 $3 7 billion or between $2 25, and $2.26 per diluted common share.
David: And just as a reminder, our guidance does not include the impact on operating results from any transactions that have not closed interest income from any loans that do not yet have final draws structures possible future acquisitions or dispositions or capital markets activity or other nonrecurring transactions or items.
Adam Please open the line for questions.
Adam: As a reminder, if you would like to ask a question today. Please press star followed by one on the telephone keypad now to enter the queue.
Speaker Change: Just two questions. Please ensure your mute locally.
Speaker Change: Phillip like Bob.
Speaker Change: And our first question comes from Barry Jonas from True Securities. Larry. Your line is open. Please go ahead.
Barry Jonas: Hey, guys. Good good morning wanted to start with travel gaming see if you had any updated views. There maybe you could spell out any parameters you would look forward to execute any loans or sale leasebacks. Thank you.
Yes, good morning, Barry.
I think the starting point for us to be G is it over seven years led.
Barry Jonas: Led by John and the team we have developed very positive powerful relationship.
Barry Jonas: <unk> chips with American travel Nations. We currently have four travel relationships as you know Barry they all obviously involve partnering with tribes in <unk>.
Barry Jonas: Commercial gaming opportunities off of tribal land.
Barry Jonas: And when it comes again to doing business with tribes.
Barry Jonas: Love doing business with them in their commercial they are collaborative.
Barry Jonas: Great to do business with when it comes to doing business on tribal land. It is again not about tribes being idiosyncratic.
Barry Jonas: About the structure.
Barry Jonas: Wise to tribal gaming on tribal land.
Oh synchronic.
Barry Jonas: And when you have an idiosyncratic situation, it's sometimes useful to create a counter factual.
It enables you to better understand the idiosyncrasy risks associated with the anchors idiosyncrasy in perhaps a better understanding of how to price the risk that any of the secrecy. So to create a counterfactual I'm going to ask you Barry to imagine a scenario in which we announced and we've done a deal with it.
Commercial gaming operator.
Barry Jonas: Freehold commercial land.
Barry Jonas: That deal we tell you that.
Barry Jonas: That commercial gaming operator is the only party in the world entitled to operate the gaming floor at the center of the asset and likely the economic engine of the asset and Moreover that same operator owns the land underneath everything and thus would be the ground lessor to us.
Barry Jonas: The ground lessee.
Barry Jonas: So that is by definition, a sandwich lease and from everything we've been able to learn that is what applies to the to the transaction here implicitly referring to they've got announced last week by merit peers and colleagues at G. L. P. I.
Barry Jonas: We get full credit to G. L P I for.
Barry Jonas: For announcing this we're doing the work that went behind it but I would say we are still coming up the learning curve when it understand when it comes to understanding.
Barry Jonas: The risks associated with that structure and how to best price the risk.
Barry Jonas: We spend a lot of time, focusing on tail risk and in fact, there may be moments when some people available externally and internally, maybe we spend a little too much time focused on tail risk.
But in this particular case.
Barry Jonas: The tail risk again, it's so idiosyncratic and so unique to this situation.
Barry Jonas: We're not at a point, where we can say with any confidence okay. The code has been cracked and idiosyncratic risks.
Barry Jonas: Have always applied here have either been eliminated or have been minimized to a degree where we can confidently price the risk.
Barry Jonas: Great.
Speaker Change: Really appreciate that maybe just for a follow up wanted to touch on Vegas.
Speaker Change: Curious if you looked at.
Cesar cell of the link I believe correct me if I'm wrong you've.
Speaker Change: You've got a roker there and then with that sale wondering if we could see anything happen with those 26 adjacent acres that <unk>. Thank you.
Speaker Change: Yes, just to be clear Barry we did not have a roper on the linq promenade.
Speaker Change: The assets, we have a roper on casino assets and not the problem it out which is a distinct property unto itself.
Speaker Change: There is an idiosyncrasy boy I shouldn't call it idiosyncrasy the linq promenade.
Its not technically a net lease property.
But we're very glad to see TPG and especially our friends at Acadia led by Ken Bernstein go in there I think there is a lot of potential to continue to make that a corridor exactly to your point. It can become a very powerful corridor to the land that we own in back of the promenade in the area.
And around Caesars Forum Convention Center.
Speaker Change: Great. Thank you Ed.
Barry Jonas: Thanks Barry.
The next question comes from Anthony <unk> from J P. Morgan Anthony Your line is open. Please go ahead.
Anthony: Hi, Thanks, good morning.
John You mentioned in your comments, just a lot of opportunities for things like.
Anthony: Reinvestment into properties and such so and then can you just talk about just as you look at the pipeline how much of it is now really focused on those types of investments versus new acquisitions and whether thats.
Anthony: Change much in the last quarter or two.
Speaker Change: Yeah, Toni good morning, very good question.
Speaker Change: I don't think it's changed what I like about what we've done is created these pillars of growth. We've got opportunities to continue to have real estate acquisitions as you referred to in my comments.
Speaker Change: The ability to grow with our property partner growth funds with assets that we already own, particularly in Las Vegas, Although as I mentioned in my opening remarks, we are doing some up we do have some opportunities in our regional assets, because they're large as well.
Speaker Change: And then we have this opportunity as Ed mentioned in his remarks with BG experiential credit solutions, our credit book.
Speaker Change: It's opened doors for us to come in and provide a credit solution and then over time, hopefully flip it into real estate ownership, so Tony I Wouldnt say were focused.
Speaker Change: More today on the property partner growth funds than the other two I like the fact that we're spending time and I've got a team now that are spending time.
Speaker Change: On all three of these which will provide growth for us for the long term.
Speaker Change: Okay. Thanks, and then just the follow up there maybe for you John and also.
Speaker Change: Ed you commented about the 70 basis point move in the 10 year over a pretty short period of time.
Speaker Change: You think thats had any effect on on just the propensity of your counterparts to want to transact or on just where pricing might need to be.
Speaker Change: Yes, Tony it's.
I wouldn't say that move over the last.
Speaker Change: Over the last month.
Speaker Change: <unk> has necessarily by itself been highly impactful, but it's all been part of a of a period of volatility that has just been well frankly, it's been kind of nauseating and I do think it's led to a level of indecision and inaction.
Speaker Change: It is reflected.
Speaker Change: Certainly for us and what we've been able to come forward and tell you about and needless to say, we very much hope that this period of volatility will soon start to pass.
Speaker Change: Just a just a.
Speaker Change: Dramatize that volatility Tony.
Speaker Change: Back in 2018.
Speaker Change: The number of days in the trading here.
Speaker Change: When the U S 10 year moved 10 basis points or more with three.
Speaker Change: In 2019, it was seven.
Speaker Change: In 2020 was <unk> 16 in 2021, it was eight and 2022. It was 46 days. It was 39 days last year and given the volatility we've seen crikey. Even this week I think we are in the Twenty's now and this is really just an example of how a lot of people.
Speaker Change: And really a lot of a lot of people on both sides of the transaction table have just been trying to figure out.
Speaker Change: Where am I today.
Speaker Change: Hello am I going to be next week.
Speaker Change: And.
Needless to say we are among those many in both America and globally, who hope things really kind of calmed down next week and that the kind of volatility we've actually seen in the move index starts to quiet down.
Because it is definitely lead to all kinds of different behaviors by investors.
Speaker Change: NFL ratings are down over the last months and that's attributed to the election. It's like man people are just so distracted and stressed out Ken.
Speaker Change: Can't even.
Speaker Change: Some of that time and focus to watch NFL games are cranky sake.
Speaker Change: Alright, thank you for the color.
Speaker Change: The next question comes from Christopher <unk> from Green Street, Chris. Your line is open. Please go ahead.
Thanks, Good morning.
Christopher Green: Maybe for Ed can you talk about the potential opportunity to acquire gaming assets and off strip Vegas locations and to the extent there is opportunity and interest on your part in pursuing that would be helpful. If you could elaborate maybe on what you look for in terms of yields coverage, but also.
Christopher Green: How you think about partnering with the right operator in that sort of scenario.
Christopher Green: And just to be clear, Chris when you're saying when you say off strip, you're referring to the locals and downtown markets in Las Vegas.
Christopher Green: Yes, exactly or are you speaking about regional gaming.
Christopher Green: It could be either honestly, but I'm more so referring to within the Vegas Metro area itself just Australia.
Speaker Change: I see yeah, good John John and team are doing a lot of work in that area John.
Speaker Change: Yeah.
John John: Chris Nice to talk to you this morning.
Speaker Change: If you've been following us as you have for the past couple of years, you've heard us talk about our our love of Las Vegas, and obviously, we've got great assets on the strip, but we've been spending.
Speaker Change: Years meeting with operators not only in the local downtown market, but as you said in the regional market.
Speaker Change: Are there just some fabulous assets.
Speaker Change: And you ask what we do we obviously spend time to understand the operator's quality the asset quality the credit quality, what is structural or at least could look like how we could potentially help an operator, who has assets in the local downtown or regional market grow.
Speaker Change: Not only in the current ounce, but if they have.
Speaker Change: Our plan to grow the number of assets. How we are kind of put it could help them grow so it's definitely been a focus of <unk>.
Speaker Change: My team not only recently, but also over the past couple of years and there really are some.
Speaker Change: Places that we would love to be partners with great operators there.
Alright helpful thoughts and then maybe just one more and this is more so focused on the regional side outside of Vegas.
Just wondering if you felt you need to be a little bit more conservative from an underwriting standpoint.
Speaker Change: Lately, given some of the competitive pressures seemingly a slower growth backdrop that we're in today, so any thoughts around that would be helpful to hear.
Speaker Change: I'll have John talk about the market in a moment, Chris but.
Speaker Change: What I would just like to talk about just for a moment is a book that was really influential to me when I read it a few years ago was given to me by a guy somebody known they make Semenov ski founder converse and it's a book by Edward Chancellor.
Speaker Change: He collects the essays that sorry, not the S. A is the investment memos.
Speaker Change: Asset management shop out of London called Marathon and one of a marathon main investment thesis is to identify categories.
Speaker Change: At lower risk of excess capital being invested in the category and creating excess capacity.
Speaker Change: I think one of the things we are mindful of right now in American Regional gaming is is making sure we understand market by market the degree to which given regulatory regime is at risk of authorizing the creation of more capacity than the market really should be able to sustain and I think there are areas and I would say in particular.
Speaker Change: Other areas like Illinois, and Indiana, where I think we all have to be mindful of okay.
Speaker Change: There is enough enough.
Speaker Change: But in terms of the current tone of the market regional market I'll turn it over to John.
John John: Yes, Chris.
John John: <unk> hit on it it's very well just about as you underwrite regional gaming you should you should understand some of the history of it places like Pennsylvania that added new licenses or Illinois, but added DLP.
John John: Chart to see new states.
John John: Historical horse racing machine that now look very similar to slot machine. So to your point as we look at regional assets.
John John: In her lifetime, we will continue to buy real estate and buildings and regional assets, but we're very thoughtful in understanding the best we can at the time the competition that is in the market that could impact the asset that we're buying and then potential new markets that could open up.
Speaker Change: Cause if someone who's been in the business I don't like to date myself, but I'm almost going on 30 years I don't think there is belief that states like Nebraska.
Speaker Change: Junior.
Speaker Change: Kentucky, which as a judge or machines would really have gaming at the moment that they do know the magnitude that they do now so to answer your question, we are being thoughtful and disciplined in our underwriting as we look at regional assets.
Speaker Change: I appreciate the thoughts that's all from me.
Speaker Change: Thanks, Chris.
Speaker Change: The next question comes from Smith as rooms from Citi. Your line or somebody from please go ahead.
Hi, Thank you.
Speaker Change: On your last call you talked a little bit about some of your tenants, we're seeing weakness, especially on the lower end kind of the consumer.
Speaker Change: Spectrum I'm wondering if you continue to hear.
That kind of feedback and if you think that might be.
Speaker Change: Impact their propensity to kind of reinvest or to participate in your in your in your funds that you've talked about previously.
John.
John John: Yes, maybe it's good to talk to you this morning.
John John: Probably the first part is a better question for our great operators that have extensive details on their databases and where they're seeing positive growth in where they're seeing some weakness.
John John: I think you've seen the earnings that have come out and some have talked particularly in the regional markets that they are seeing a little bit of slowness in the lower segments.
John John: Their business.
But we continue to this is the beauty of having great partners and having quite a few of them. We continue to meet with them talk about how they are thinking about growth and is there a way that are different pillars of capital that I talked about earlier could help them grow.
John John: And whether that's where the property partner growth fund, whether they are a credit opportunity whether they are building, we'd like to build a new hotel, whether we'd like to build a casino on land instead of on a boat. Those are all type of conversations we'd like to have and are having with our partners and we hope that leads to growth for us with all different.
John John: Types of.
Of all of our partners.
Speaker Change: Thanks Lynn.
Speaker Change: Just kind of bigger picture.
Speaker Change: I used to think about you know coming into 2025, I mean would you be.
Speaker Change: Do you think it sort of reasonable on the external growth side to think about maybe you do more frequent deals of smaller scope or are you guys still may be chasing kind of like.
Speaker Change: The big deal maybe in the non gaming space that what kind of.
Speaker Change: More meaningfully drive your earnings growth next year, I guess I'm sort of touch on think about.
Speaker Change:
Speaker Change: The opportunity set now that you've had more time I got to think about kind of non gaming and gaming.
Speaker Change: Investment opportunities.
Speaker Change: And how it might play out here.
Yes smedes.
Speaker Change: It's something we think about every day.
Speaker Change: We.
Speaker Change: We have set forth goals and strategies and Fiji.
Speaker Change: Like any goals and strategies have trade offs and anyone who thinks their strategy doesn't involve trade offs either doesn't have a strategy doesn't understand it or is it is not truly a differentiated strategy and in our focus on experiential.
Speaker Change: Our dedication to experiential both gaming and non gaming.
Speaker Change: Have to accept the tradeoff is not a category of real estate transaction that has endless an endless stream of marketed processes. So we've got to do a lot of work every day and John and the team and David and the team to work every single day, and Samantha and the team.
Speaker Change: Two to identify and chase down opportunities that usually are not marketed or if they are marketed at all it's quite quite quietly.
As we look ahead to next year.
John and David and Samantha and the teams are working on some very exciting very exciting stuff, including bigger assets and gaming and only time is going to tell if we can bring these to full fruition.
Speaker Change: We wish again, there are times when we wish geez it would be nice to have one of these stamping machines, where we just stamp out every week a few deals where maybe we bought car washes or dry cleaners or convenience stores or whatever but that's not.
Speaker Change: That's not what we focus on thats not when we invest in and we have to accept the trade off in our deal flow will be more sporadic, but as we look at 2025 and given what we're working on and we remain confident that we are going to be bringing to the table, both gaming and non gaming deals big and small and we will continue the growth profile, we've had over seven years.
Speaker Change: Yes.
Speaker Change: Thank you I appreciate it.
Speaker Change: Thank you Smedes.
Speaker Change: The next question comes from John <unk> from CBRE Jones. Your line is open. Please go ahead.
Speaker Change: Yes.
Speaker Change: Good morning, everyone and thanks for taking everybody's questions.
Speaker Change: Ed John and I wanted to go back to your response to an earlier question because it's something I've been I've been thinking about a lot and I apologize. If your answer is going to be the same but I wanted to talk about the regional gaming landscape and the trend, where we're seeing maybe some new openings and some areas, where there's been a lot more unit growth some some cannibalization.
Speaker Change: <unk> same store sales declines and so.
Speaker Change: You mentioned, you're being very cognizant of that and I was curious if you could go into a little bit more detail about.
Speaker Change: Investments in some of the things that you would consider an underwriting is it higher.
Speaker Change: Higher rent coverage is it unique or certain operators that perhaps have a have a competitive scale advantage.
Speaker Change: You may.
Speaker Change: Maybe only consider larger assets.
Speaker Change: Have a couple of larger barriers to entry. So I'm just kind of curious how you think about it.
Speaker Change: Deploying capital in regional gaming, where maybe the infill markets the regulatory environment I think it's a bit more predictable, giving given history, but John you pointed out to markets that have kind of have casinos today that we weren't thinking about before so just curious how you kind of underwrite some of the criteria you might look at.
Speaker Change: Yes, I'll turn it over to John in just a moment, John but I would say as a starting point. If you really have to look at every situation and market by market to know understand what the competitive marketplaces and for a given asset and for given operator, what is their opportunity to carve out.
Speaker Change: Profitable.
Speaker Change: Position in that marketplace, it won't necessarily always be the big assets it could be small assets in the hands of the right smaller asset operator, who knows how to compete and make money with smaller assets in a given market those can still be very attractive to us, but it really comes down so much too.
Speaker Change: The degree to which a given operator.
Speaker Change: A really really healthy competitive response function and.
Speaker Change: And that's something obviously, we've always valued but I think to your implicit point John at a time like this.
Speaker Change: You really want to understand a given operator.
Speaker Change: We need to compete profitably for market share.
Speaker Change: John you want to add to that John Payne.
John Payne: Yeah, I will John.
John Payne: When I started back in 2017, one of the things I asked myself as I left my operating career was wood with the views from an operator make a difference inside of REIT and the way, we underwrite our real estate and to your question. This is ware.
John Payne: My old job actually has some value in underwriting the business. So we can dig into the business and the beauty of our operators as they have great detail on the consumer and where the consumer is coming so if we're looking at an asset.
John Payne: Potentially gets their guests from hundreds of miles away the chance of impact from new casino is probably greater than an asset.
Their consumers from 15 miles away. That's just one example of how we are going to be disciplined as we go into regional markets of course will weigh asset quality, operator quality credit quality structural bleach quality those type of things, but we can also with our operations background and go into better understand could get disrupted should be.
John Payne: The landscape changed because remember.
John Payne: About being disciplined we're not investing just for the near term I think anyone can invest for the near term and look good.
John Payne: Our mission is for the long term and I think you need to be disciplined in the environment, we're in and understand what could ultimately impact the business, maybe it's not this year or next year, but over the next decade.
John Payne: Yeah.
Speaker Change: Thanks, guys I appreciate it.
Speaker Change: Incremental color there that's helpful and maybe a quick one.
Talk a little bit earlier also about maybe some some gaming investments and opportunities in the Las Vegas locals market.
Speaker Change: The strip, but the city is just kind of a thriving and all in all ways and curious if.
Speaker Change: Non gaming.
Speaker Change: Stuff outside of the Las Vegas strip, but in Las Vegas Metro area is something thats on the radar.
Speaker Change: Opportunities.
Speaker Change: They're starting to bubble up I mean, it's becoming a massive sports town and so thinking about some of the other assets in your portfolio youth sports et cetera is that is that an area of focus non gaming in Las Vegas off the strength that you're that you are paying attention to we're looking at in a meaningful way right now.
John Payne: Now I'll turn it over to John I would say.
Speaker Change: Okay.
John: Yes, I was just going to say, it's interesting you bring that up we've gotten to know Jose about teach that.
John: Joey batches you May remember, who is now the owners of Las Vegas lights, the soccer team in the U S. L. A.
John: And as he looks at how he gives his team are really good at home in Las Vegas Basin.
John: All of the things we've talked about is the degree to which projects like the Homefield project, we've invested in in Kansas City.
John: It makes so much sense in an environment like that in terms of.
Speaker Change: The demand for those kind of youth sports facilities, John decree, but John Payne go ahead. Please.
John Payne: Yeah, John it's an it's an excellent question and when you spend as much time as we have not only on the strip, but in the locals market downtown in the regional market.
Many of the operators are entrepreneurs. They are involved in things not only casino, which we loved casinos, but other experiential.
John Payne: Assets and so youre right on point and that's right on point with not only are we studying the opportunity is.
Great real estate.
John Payne: Casino real estate in these local regional market of Las Vegas.
John Payne: Other opportunities.
John Payne: Opened up and we'll study them and see if there is there is something that we can get involved in in the near term or even in the long term great question.
Speaker Change: Awesome, Thanks, guys take care.
Speaker Change: Mhm.
Speaker Change: The next question comes from Jim comment from ethical Jim. Your line is open. Please go ahead.
Speaker Change: Good morning, Thank you.
Speaker Change: And reflecting on your earlier comments, you know the rates backing up and.
Jim: A lot of volatility I would've thought naively does that not particularly potentially healthier experiential credit solutions book, given your ability to close or D and scale available capital.
Speaker Change: It it does Jim.
Speaker Change: It does and I would say where.
Speaker Change: We've got a lot of lines in the water right now.
Speaker Change: On the lending side, but.
Speaker Change: The uncertainty on a week by week basis can cause us and and any potential borrower to just wonder what is market. This week right.
Speaker Change: My spread this week, but if I commit to this spread that's spread is going to look like next week.
Speaker Change: So again I think it's all part and parcel.
Speaker Change: Of capital markets consumer markets in just about every other market having been here in a state of flux.
Speaker Change: Flux and volatility that is made decision, making more challenging Jim I'll just share with you that we began preparation of our annual long term goals and strategic plan.
Speaker Change: On July one we ended up presenting it to our board of Canyon Ranch and Lenox in mid September over that 70 day period.
Speaker Change: Our stock went from a point that was in two percentage points of our 52 week low and then went to a new 52 week high and over that period that U S. 10 year went from 45 down to I think as low as three six so again now we're talking about a period of four months July August September and October.
Speaker Change: We've just been really tumultuous and I think it's affected.
I think it definitely has affected deal flow and has affected how we and everybody else underwrite but.
Speaker Change: I think we all have to hope and believe that things will come down to a degree where everybody feels a bit more conviction.
Speaker Change: In the visibility and certainty of what what they can commit to.
Speaker Change: Fair enough. Good good comments and then back to your opening comments regarding the quadrant analysis I would imagine VT presumes are in the top above the horizontal line in terms of real estate and REIT capital markets.
Speaker Change: Where are you thinking in terms of the consumer sentiment et cetera, and how does that potentially influencing how you're thinking about investing going into 'twenty five.
Speaker Change: Yeah, I was hoping somebody would ask that question, Jim where where do we think we are right now.
Speaker Change: I would say yeah, we are.
Speaker Change: We're in the upper right quadrant, obviously, the consumer generally it looks good.
Speaker Change: But I think it was smedes you asked a little bit earlier, what what is going on across the entire consumer spectrum and are we seeing signs of potential weakness, whether it being credit card delinquency current loan delinquency.
Speaker Change: Footfalls into retail and other metrics and it's it's a bit of a mixed picture, but I think overall consumer economic conditions are quite good and I would say REIT capital market conditions have been generally good since mid July.
Speaker Change: But they've certainly been volatile in the last few weeks so.
Speaker Change: I would say upper right, but what we always focus on as I alluded to Jim is not only where we are but what do we think the trajectory is.
In terms of where we might be going given the amount of time it takes us to pull a deal together.
Speaker Change: We we need to know where we're likely to be.
Speaker Change: In a period in the future as much as we need to know where we are today.
Speaker Change: Great I appreciate your comments thank you.
Thank you Tim.
The next question comes from John Kolakowski from Wells Fargo. John Your line is open. Please go ahead.
John Kolakowski: Alright, thank you.
John Kolakowski: Last quarter, we spent a lot of time talking about the Harrah's Hoosier Park.
Speaker Change: Call option.
John Kolakowski: And remind me if we've spoken about this before but when I think about that.
Speaker Change: For.
Speaker Change: Theres also put options attached to that that expire December of this year.
Speaker Change: How are you thinking about those put options is it likely or have you made any sort of commentary or have they made commentary to you about the likelihood of them exercising those put option does that keep capital sidelined as you wait to see what's going to happen there.
Speaker Change: Yes, actually Caesars as stated very explicitly at a number of occasions. They have no intention of putting the Indiana asset to us.
Speaker Change: So no that has not affected how we think about our capital and our funding capabilities.
Speaker Change: Okay understood and then maybe on just on the election here anything on the ballot as it pertains to regional gaming that we should be thinking about.
Speaker Change: Not that I'm aware of John Payne or you.
John Payne: Yeah, there's a couple of things I mean, there's there's Missouri, Arkansas and Virginia.
New Casino, Virginia, Arkansas, Polk County, and then in Missouri. They are talking about online sports betting as well as in a new casino in Ozark. So.
Actually quite quiet for.
John Payne: Gaming.
John Payne: Particularly when you compare it to other other years.
Speaker Change: Okay, and then maybe last one for me the capital that you put to work in the quarter. There was a 150 million that went to the Venetian but the other 80 you'd mentioned alone and I don't know if I caught the terms of that loan or what that was and could you give us a little more color on that capital.
Speaker Change: David.
David: Yeah, John it's David good to talk to it those are the incremental 80 odd million is incremental draws primarily under the great Wolf.
David: Loans of the Buzzwords, and then the whole field development as well as some.
David: Smaller fundings for Cabot and Canyon Ranch. So previously announced loan fundings were previously announced loans that have continued continued draw schedules.
John: Got it understood. Thank you.
Speaker Change: The next question comes from Don Guglielmo from capital One Dunn. Your line is open. Please go ahead.
Speaker Change: Hi, everyone. Thank you for taking my questions.
Don Guglielmo: It's been a tough earnings for some operators in Vegas softness seems to be on investor minds.
Don Guglielmo: Your experience to Vegas trends like this impact cap rates for the casino real estate, there or is it too short term and just kind of the nature of owning those assets.
Speaker Change: Yeah, Dan good to talk to you I'm going to have John Payne, just remind everybody what mgm's occupancy was on the strip in Q3, but.
Speaker Change: When it comes to cap rates I would say cap rates are probably much more dependent on.
Speaker Change: Our real estate investment capital market conditions.
Speaker Change: General valuation trends and they are an operator performance quarter to quarter. John you want to just talk a little bit about.
Speaker Change: I don't really understand.
John: Well I am sure.
John: I'm a recovering operator, Dan as you know so.
John: So all of that.
John: I've seen the comments about the performance of.
Speaker Change: Our two largest tenants MGM in Caesars and you look at some of the numbers and they ran as Ted was saying MGM around 94% occupancy in quarter three ADR was up.
Single digits so.
Speaker Change: I know as you dig in and they talk about what's coming up you'd see some.
Speaker Change: Critical comments about.
Speaker Change: <unk> F one which again.
Speaker Change: Long term F. One is great for the city in short term, it's great for the city, it's driving a weekend that was very slow down a tiny bit from last year. It looks like we'll have to wait and see.
Speaker Change: But and I talk about I'm not sure if a hotel company reported that they had 94% occupancy in quarter three that there'd probably be a huge party thrown for them. So it's interesting it's hard to measure. These large assets on an every 90 day period.
Speaker Change: And these are the best operators in the World every time something is thrown at them. They figure out how to continue to grow the business. Whenever you casino were shut down during COVID-19. They came back and ran a more profitable even the type of run them before.
Speaker Change: Again, it's a tough 90 days they'll figure it out over the next 90 to 180 next couple of years. So we feel really good about Las Vegas and the teams that are running their businesses there.
Speaker Change: Thank you appreciate all that color and then that makes sense and just just around the experiential partners.
Speaker Change: Tough from kind of our seat to get a view of how the great moves cabot's in candy branches of the world They are doing.
Speaker Change: Kind of this complex time, so high level when you all talk with those partners what are some of the tailwind and headwind sit there thinking about.
Speaker Change: David you want to take that.
David: Yes, sure happy to Dan good to speak with you.
Speaker Change: Yes.
David: When you drill into each of the partners. They have they have an offering that's very unique and part of the reason we partnered with them in the first place and so great Wolf.
Speaker Change: As a casino without gaming performance continues to be solid maybe a little bit of a falloff in the weaker consumer or the lower end consumer similar to gaming.
Speaker Change: But the drive to destination of that offering the affordability that offering you can go per day can go for five days.
Speaker Change: And you don't take vacations away from your kids and so their business continues to be strong with opened four assets three assets. This year with another one opening early next year up in Foxwoods, and so the pipeline and the performance of those assets are great.
And then we've talked about with with pilgrimage golf and Cabot the entire end consumer the golfer is very very avid going out and trying new courses Cabot does a phenomenal job of bringing in new guests in the marketing that they do for their assets and highlighted the quality of the golf experiences are providing.
Speaker Change: And then we've talked about with you in the past around wellness and mindfulness and People's desire for longevity and better living into the kidney branches of the world. There are performing well and continue to attract customers and provide a level of service that is second to none.
Speaker Change: Great. Thank you I appreciate that update.
Speaker Change: The next question comes from Caitlin Burrows from Goldman Sachs, killing your line is open. Please go ahead.
Speaker Change: Hi, This is Jeremy Q on for Caitlin.
Speaker Change: I know you guys mentioned that this was the startup property growth agreement with the Venetian are there any other specific.
Speaker Change: Our partner property growth opportunities in our pipeline, you're considering or.
Speaker Change: <unk> been approached by thanks.
Speaker Change: John.
Speaker Change: We continuously look for opportunities to invest in our current assets, particularly the ones in Las Vegas.
Speaker Change: We don't have anything to announce but as I said in my opening remarks.
Speaker Change: The sports triangle, where we own six assets around an area of the town that is growing.
Speaker Change: Growing and becoming more dense we hope over the coming years there'll be an opportunity.
Speaker Change: For us to invest there, but nothing to announce at this time.
Speaker Change: I would just add to that.
Speaker Change: Oh go ahead.
Yeah, Jerry I was just going to add for those of you who don't follow a M. G. M. I would encourage you to go look at their Q3 earnings deck.
Speaker Change: Which does have a few pages talking about exactly what John Payne, just talked about which is the opportunity to intensify densify the assets that MGM operates and that we own in the area defined by Allegiant T Mobile arena and in the forthcoming a stadium.
Speaker Change: We stand to be together with MGM. The biggest beneficiaries as did the intensification of that area of Las Vegas and in fact, there's a credit analyst out there who speculated that MTM will actually be the greatest beneficiary when the stadium comes into operation.
Speaker Change: Got it that's helpful.
Speaker Change: And then I guess one more question.
Speaker Change #100: <unk> continues to build relationships and explore opportunities to get recurring transactions and growth would you say the majority of these new relationships are in the non gaming space.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change #101: John or David you want to take that.
Speaker Change #102: I'll take that I wouldnt necessarily.
Speaker Change #103: Say it it's more non gaming at all there is still opportunities on the gaming side as we said before the non gaming or experiential transactions, most likely will be a smaller scale then the gaming side.
Speaker Change #103: So we may have more frequent smaller and.
Speaker Change #103: It may lead to more non gaming partners.
But there still are many opportunities with new partners in the casino space not only in the United States, but all over the world.
Speaker Change #104: Yeah, and let me just add that and because nobody's asked about it in a little while and that of course has to do with the New York gaming license approval process, but.
Speaker Change #104: Hum when well I should say, yes.
Speaker Change #104: And when that day comes we hope.
Speaker Change #104: That MGM has granted a full gaming license for the property that we own the real estate up in Yonkers that will be a major property partner Roseland opportunity for Vinci.
Speaker Change #105: Got it thank you.
Speaker Change #106: Next question comes from David Katz from Jefferies. Your line is open. Please go ahead.
David Katz: Thank you for taking my question I think you may have answered this in part.
Speaker Change #106: But.
David Katz: I do want to just double back on the non gaming opportunities.
David Katz: Opportunities, which today are small.
Speaker Change #108: John I think you've touched on the fact that they.
Speaker Change #108: Perhaps remain small.
We look out a little longer term and start thinking three to five years Ken.
Speaker Change #108: Can they become.
Speaker Change #108: Something that is more or less.
Speaker Change #108: Then, 10% or 15% or no I don't expect you to necessarily put a number on it but.
Speaker Change #108: Give us a vision for how those could become much larger.
Longer term please.
Yeah, I think David the way the way, we think about it is really.
Speaker Change #108: In the context of how do we build our rent base on a year by year basis.
Speaker Change #108: With you know with an ambition to grow the rent base.
Speaker Change #108: Excuse me.
Speaker Change #108: No.
Speaker Change #108: By at a base level about maybe three odd percent of year right and so that would represent at our current rent base run rate of about 90 odd million Bucks Rand every year and so we evaluate every opportunity, including non gaming opportunities on the degree to which they can contribute.
To tip to growing rent by a percentage point or two or three and so when we speak about these smaller deal non gaming deals. They are small by the standards of BG deals they are actually.
Really large by the standards.
Speaker Change #108: Conventional net lease deals, which tend to involve buying stores it might have between two and $400000 in rent per box versus us doing deals generally youre going to have.
Rents are many millions of dollars of rent per box.
Speaker Change #110: Okay. Thank you perfect.
Speaker Change #111: Welcome David.
Speaker Change #112: Our final question today comes from Ronald Camden from Morgan Stanley. Your line is open. Please go ahead.
Speaker Change #113: Hey, good morning, it's Jenny on for Ron and Thank you for taking my question.
Speaker Change #114: I wanted to dig a little deeper on youth sports are recreational sports sector and can you talk a little bit on more on the outlook of the sector and not only us but national why do you see more opportunities for growth do you look to do more of a strategic investment in this area in the next three to five years. Thanks.
Yeah, Jenny we definitely do.
Speaker Change #114: And I think you can see how this is manifesting itself in certain private equity firm investments in youth sports.
Speaker Change #114: Harris Blitzer, it's obviously a very good example, our data.
Speaker Change #114: I should say, David Blitzer family office.
Speaker Change #114: <unk> is a great example of a company that's really focused on youth sport and you see that in a number of shops and they're all capitalizing on the way in which you sport has grown as a key key component of youth and family culture.
And.
Speaker Change #114: It's a little hard to tell exactly right now given the data you know what what they use population you're going to look like over the coming years.
Speaker Change #114: But I can tell you anecdotally.
Speaker Change #114: There are a lot of little kids out there right now again, I'm I'm not sure the data totally picks it up.
Speaker Change #114: But [laughter].
Speaker Change #114: We were comparing notes on Halloween trick or treating.
Speaker Change #114: Participation rates last night, and I know, it's an asset.
Speaker Change #114: Just blown away by how many kids were roaming the streets at Westport, Connecticut, and Theres a lot of kids out there and a lot of them are going to play sports and a high level and we think that the need for facilities it only going to grow.
Speaker Change #115: Yeah, I agree with Dave outside as long as I try to keep it got for them where your sport.
Speaker Change #116: My second question is I wanted to know if you want to discuss more on the polymer diversification strategy.
Speaker Change #117: Knowledge and <unk> already have a pretty diversified kind of a base, but is there any specific sector that you think you want a broad at the current time.
Speaker Change #117: And if they take effect or do you prefer going forward.
You'll have more exposure.
Speaker Change #118: John or David.
Speaker Change #119: I'll talk to you.
Speaker Change #120: I think the question was about.
Speaker Change #121: No go ahead right.
Speaker Change #122: Yes, I think the question Gerry just make sure I heard it was about Canada.
Speaker Change #123: But we look at Canada, we look at the globe internationally and John touched on this in his comments about gaming operators earlier that there's both gaming and non gaming opportunities across the globe.
Speaker Change #123: <unk> spoken with a lot of you about how our team has really masked the globe and tried to focus on where where we can buy real estate and that's a function of currency markets rule of law tax regime, you know certain things, we've got very very high for impact your taxes on real estate ownership, so that negates some of the competitive.
Speaker Change #123: Opportunity.
Speaker Change #123: But specifically in Canada, we've obviously made our first foreign investment in Canada. Since then we've gone into Scotland St Lucia.
Speaker Change #123: Do both more gaming and non gaming north of the border.
Speaker Change #123: Great operators up there great economies upward moving parts of the.
Speaker Change #123: The experiential spectrum that we'd like to go into and so we don't have anything immediately as John would say, but hopefully there's more to come up there.
Speaker Change #124: Okay makes sense. Thanks.
Speaker Change #124: You want to call them.
Speaker Change #126: I'll now hand, the call back to I believe for some closing remarks.
Speaker Change #127: Yeah. Thank you Adam Thanks to everybody for joining us today, and Hey guess, what yes were at NAREIT is this November in I guess, it's just a couple of weeks. It is in Las Vegas, We hope we see many of you. There is that a lot of great events, they're gonna help showcase what's going on in Las Vegas and reach out to some of our respective banking.
Speaker Change #127: ZIP your Barry if you're interested in those events.
Speaker Change #127: We've done with that by a pronounced.
This concludes today's call. Thank you very much for your attendance you may now disconnect your lines.
Speaker Change #127: [music].