Wells Fargo Upgrades VICI After Acquisitions In Eldorado-Caesars Deal

VICI Properties, Inc. VICI’s acquisition of three casino properties from Harrah’s and lease changes as part of a casino industry megadeal makes the real estate investment trust company a good play, Wells Fargo said Monday.

The Analyst

Wells Fargo’s Jeffrey Donnelly upgraded VICI from Market Perform to Outperform and raised the price target from $23 to $24.50.

The Thesis

VICI’s acquisition of the real estate assets of Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City and changes to the casinos’ leases increases is positive for VICI, given its 6% earnings accretion, and because it boosts VICI’s rent base by more than $250 million and comes with several options for more purchases, Donnelly wrote in the note.

VICI, which was spun off from Caesars Entertainment Corp. CZR in 2017, is purchasing the real estate assets of the three casino properties from Eldorado Resorts, Inc. ERI, as part of Eldorado’s $17.3 billion merger with Caesars that creates the world’s largest gaming company.

In addition to getting the three new properties, VICI will also extend all leases of property to Caesars by 15 years under the $3.2 billion deal. It will also acquire several new put-call options and right-of-first refusal assets involving Harrah’s properties in Indiana, on the Las Vegas strip and in Maryland.

The deal has an implied 7.9% cap rate, Donnelly said.

Price Action

VICI shares were down 0.66% at $21.88 Monday afternoon.

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