VICI | Q2 2024
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Link to Transcript
Link to 10-Q
Overview
FFO of $0.71 beats by $0.05.
Revenue of $957M (+6.6% Y/Y) beats by $3.32M.
Takeaways
In Q2 2024, VICI Properties definitely delivered, with AFFO per share rising to $0.57, a 5.9% increase from $0.54 in the same quarter last year. The company raised its AFFO guidance for 2024, now expecting between $2.35 billion and $2.37 billion, or $2.24 to $2.26 per share, projecting a year-over-year growth of 4.7%.
This positive news set the stage for an insightful earnings call, where VICI's CEO, Ed Pitoniak, outlined the company's principles and strategic direction.
Pitoniak kicked off the call by emphasizing the importance of differentiating between cyclical and secular trends in the REIT marketplace. He noted that while some sectors, like office spaces, face negative secular trends, experiential real estate is thriving.
He referenced McKinsey research showing a long-term increase in consumer spending on experiences, which supports VICI's focus on experiential properties. This perspective shapes VICI’s strategy: staying true to long-term goals and avoiding deviations in principle even during market fluctuations.
During Q2, VICI committed up to $950 million to improving assets in their portfolio including the Venetian and Great Wolf Resorts. These investments are expected to yield a blended return of 7.9% and align perfectly with VICI's criteria of location, asset, and operator quality.
A significant portion of VICI's success is popularly tied to Las Vegas, which contributes 45% of their total rent. The city just doesn’t stop booming, with record passenger numbers at Harry Reid International Airport and a 23% year-over-year increase in international visitors. The talk of potentially building a second airport underscores the growing demand.
Pitoniak also expressed unwavering confidence in the Las Vegas ecosystem, highlighting its unique innovation and expanding experiences (sports and entertainment instead of just gambling and dining). VICI is comfortable continuing to invest in Las Vegas, seeing it as a one-of-a-kind destination with substantial growth potential. This includes further investments in existing assets and undeveloped land.
David Kieske, VICI's CFO, highlighted the company's focus on maintaining a strong balance sheet. With leverage currently at 5.4x and a weighted average interest rate of 4.36%, VICI is working to further reduce leverage and improve credit ratings, ensuring they have the flexibility to fund growth.
Looking ahead, VICI is exploring international expansion. President and COO John Payne mentioned ongoing studies and visits to markets like Australia, New Zealand, Europe, and the U.K. While there were no specific announcements, VICI is interested in diversifying both geographically and in terms of tenant base.
On consumer spending, Pitoniak reassured investors by focusing on VICI's strategic position as a net lease asset owner, which better insulates them from short-term spending changes. Kieske echoed this, pointing out the resilience of Great Wolf Resorts, which have performed strongly even in challenging economic environments.
Finally and importantly, Pitoniak highlighted the value of dividend-paying stocks in reducing equity volatility during economic uncertainty. He emphasized VICI's commitment to investing in high-quality, durable real estate to ensure steady and growing dividends, ideally outpacing inflation.