Vici Properties (NYSE: VICI) is a real estate investment trust, or REIT, specializing in gaming actual property. It owns 54 gaming properties, together with a few of the most iconic properties on the Las Vegas Strip, comparable to Caesars Palace, MGM Grand, and The Venetian. It owns a wonderful portfolio of regional gaming property, such because the Borgata in Atlantic Metropolis and MGM Nationwide Harbor in Washington, D.C., and a smaller portfolio of non-gaming properties.
In all, Vici’s portfolio incorporates greater than 60,000 lodge rooms; 4.2 million sq. ft of gaming house; 6.7 million sq. ft of assembly house; over 1,000 meals, beverage, and shops; and greater than 50 leisure venues.
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Though the comparatively high-interest setting hasn’t precisely been nice for REIT progress, Vici Properties continues to do a wonderful job of executing its technique. Here is why this 5.4%-yielding dividend inventory might be a wonderful long-term funding so as to add to your portfolio proper now.
An excellent enterprise with room to increase
Vici is the clear chief in gaming actual property, having spun off from Caesars Leisure (NASDAQ: CZR) in 2018. Though the on line casino business can be somewhat cyclical, you may be stunned at how stable Vici’s enterprise is.
For one factor, Vici’s lease high quality is unbelievable. The common lease in Vici’s portfolio has 41 years left on it, and 90% of its leases are protected long run from inflation (which means that hire progress is tied to Shopper Worth Index [CPI] progress).
Whereas Vici is primarily a casino REIT right now, it sees a large alternative to develop in different varieties of experiential actual property. It made its first main non-gaming acquisition in 2023 (a portfolio of Bowlero bowling facilities) and will doubtlessly pursue non-gaming lodges and resorts, procuring facilities, sports activities arenas, leisure venues, and rather more.
There’s additionally room to develop in gaming. Vici has the suitable of first refusal to amass a number of different Las Vegas Strip properties and several other regional property ought to Caesars determine to promote.
The corporate has already established a wonderful document of including worth by means of acquisitions. In its comparatively brief historical past, Vici has already acquired its largest rival (MGM Progress Properties), The Venetian, and several other different property and elevated per-share funds from operations (FFO — the actual property equal of earnings) consequently.
Due to its wonderful capital allocation, Vici has been in a position to elevate its dividend yearly since its preliminary public providing (IPO), and there is not any motive to imagine the streak is in jeopardy anytime quickly.
Nonetheless rising in a troublesome setting
Even in a tough setting, Vici has discovered methods to proceed to develop. To make sure, larger rates of interest have made it much less enticing to boost capital to purchase extra properties, so this kind of exercise has been notably gradual just lately. Nevertheless, Vici has been utilizing elevated rates of interest to its benefit, making a number of financing investments (basically appearing because the lender).
Consider it this manner: Vici’s measurement and stability sheet give it entry to comparatively low cost capital. It simply issued debt at a 4.75% rate of interest, for instance. If the corporate can lend cash to companions to finance the development of latest properties at larger charges, it may possibly revenue from the unfold.
For instance, in 2024, Vici loaned cash to finance the development of a brand new Margaritaville resort and several other properties for Nice Wolf Lodge. The corporate additionally agreed to finance renovations at The Venetian at a 7.25% yield (structured as an incremental hire enhance).
Not solely is that this a artistic method to develop income throughout a tough progress setting, however most of Vici’s offers additionally give the corporate the suitable to finally purchase the property being financed, which creates a built-in progress pipeline for when prices of capital change into extra enticing.
The underside line
Vici Properties has a portfolio of top-quality property, a wonderful stability sheet, and a administration crew that has already established a observe document of sensible capital allocation. Not solely might Vici have a ton of room to develop from right here, but it surely may be an enormous beneficiary of falling rates of interest. And within the meantime, you will get a 5.4% dividend yield that’s properly lined by the corporate’s income.
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Matt Frankel has positions in Vici Properties. The Motley Idiot recommends Vici Properties. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.
