VICI Properties Reports Strong Q1 Earnings Growth and Explores International Expansion Opportunities
2023-07-30
VICI Properties, a real estate company, held its first-quarter 2023 earnings conference call to discuss its financial performance and future plans. The meeting covered various topics, including the Mirage project, international development funding, market outlook, key drivers of the business, competitive landscape, capital spending plans, and participants' insights.
One of the most important topics discussed during the meeting was the Mirage project. This project involves the construction of a guitar tower and the refurbishment of the company's properties. The executives provided updates on the progress and highlighted its significance for the company's growth.
Another interesting topic discussed was the company's approach to funding international development. CEO Ed Pitoniak emphasized the importance of aligning their confidence in funding international projects with their confidence in funding domestic projects. He mentioned that international development requires additional compensating factors to mitigate risks associated with currency and tax. The company primarily focuses on underwriting the credibility and credit of the developer/operating partner when considering international projects, with a particular emphasis on rigorous underwriting for projects in Europe, Japan, or other jurisdictions.
Despite the uncertain market outlook and low visibility, VICI Properties reported strong earnings growth in Q1 2023. The company's Adjusted Funds from Operations (AFFO) grew by 18.6% per share compared to the previous year. This growth rate is expected to be one of the highest among real estate investment trusts (REITs) and S&P 500 REITs. VICI Properties also allocated $1.6 billion of capital to experiential property and lending investments in Q1 2023. With significant financial resources, including equity dry powder, cash, and undrawn revolver capacity, the company is well-positioned to capitalize on further opportunities in the market.
The key drivers of VICI Properties' business include the strong growth in the gaming sector, driven by pent-up demand from COVID-19 restrictions and demographic trends of aging baby boomers and millennials seeking leisure activities. Additionally, the company's non-gaming operators are experiencing strong demand, fueled by pent-up demand and demographic shifts. The stability and growth of the regional markets where the company operates also contribute to its success.
The competitive landscape in the gaming and non-gaming sectors is evolving positively for VICI Properties. The company's partners in businesses like Cabot, Canyon Ranch, and Great Wolf are experiencing strong demand, driven by factors such as pent-up demand from the COVID-19 pandemic and favorable demographic trends. Las Vegas operators, including MGM, are reporting significant increases in earnings. Regional markets also demonstrate stability and growth across various sectors. While no information was provided about the competitive landscape in the commercial real estate lending sector, the company's tenants are actively innovating and investing, leading to favorable returns.
VICI Properties' capital spending plans involve deploying capital on a risk-adjusted basis to generate spread investing over time. The company aims to achieve a blended spread to its cost of capital and is partnering with a large financial institution to invest capital at an 11% rate. They are also considering sale-leaseback structures to refinance debt or finance expansion for good operators. Additionally, the company is exploring international expansion opportunities in REIT-friendly jurisdictions with favorable tax regimes, political regimes, currency, and funding markets. The goal is to generate significant spreads to the cost of capital while minimizing tax leakage and managing risks associated with international deals.
The participants of the VICI Properties first-quarter 2023 earnings conference call included Samantha Gallagher, Ed Pitoniak, John Payne, David Kieske, Gabe Wasserman, and Moira McCloskey. Samantha Gallagher, the general counsel, opened the call, followed by insights from CEO Ed Pitoniak. The call also discussed non-GAAP measures and their relevance to evaluating the company's performance. The participants provided valuable information about VICI Properties' first-quarter earnings and addressed potential risks and uncertainties.
In conclusion, VICI Properties showcased strong earnings growth in the first quarter of 2023, driven by the gaming sector's expansion and the company's non-gaming operators' success. The company's approach to funding international development and its capital spending plans demonstrate a strategic focus on generating favorable returns and managing risks. With a positive market outlook and significant financial resources, VICI Properties is well-positioned for further growth and expansion in the real estate market.