Market Overview

VICI Properties Inc. Announces Second Quarter 2018 Results

Share:

– Reports Second Quarter Net Income of $0.38 per Diluted Share –

– Increases Guidance for Full-Year 2018 –

– Announces Plan to Increase Targeted Annualized Dividend Rate by
9.5% to $1.15 per Share –

VICI Properties Inc. (NYSE:VICI) ("VICI Properties" or the "Company"),
an experiential real estate investment trust, today reported results for
the quarter ended June 30, 2018.

Second Quarter 2018 Financial Results

  • Revenues were $221.0 million and included $213.5 million of real
    property revenues.
  • Net income attributable to common stockholders was $139.0 million, or
    $0.38 per diluted share.
  • NAREIT-defined Funds From Operations ("FFO") attributable to common
    stockholders was $139.0 million, or $0.38 per diluted share.
  • Adjusted Funds From Operations ("AFFO") attributable to common
    stockholders was $128.8 million, or $0.35 per diluted share.

Capital Markets Activity

On April 24, 2018, a subsidiary of the Company entered into interest
rate swap transactions with several global financial institutions as
counterparties. The effective date of each transaction was May 22, 2018,
with a termination date of April 22, 2023. The transactions have an
aggregate notional amount of $1.5 billion and effectively fix the LIBOR
component of the interest rate on a portion of the outstanding debt
under the Company's existing credit facility at 2.8297%. Taking into
account the impact of the interest rate swap transactions, 86% of the
Company's outstanding indebtedness is at fixed rates, with the remaining
14% at variable rates.

Acquisitions and Portfolio Activity

On May 9, 2018, the Company announced that it entered into a non-binding
letter of intent ("LOI") with Caesars Entertainment Corporation
regarding various strategic transactions. On July 11, 2018, subsequent
to the end of the quarter, the Company and Caesars completed one of the
transactions contemplated under the LOI and entered into a definitive
agreement regarding the remaining transactions.

  • On July 11, 2018, the Company completed the transaction with Caesars
    to acquire, and lease back, all of the land and real estate assets
    associated with Octavius Tower for $507.5 million. The purchase was
    funded with cash.
  • On July 11, 2018, the Company entered into a definitive agreement with
    Caesars to acquire all of the land and real estate assets associated
    with Harrah's Philadelphia for $241.5 million. Further, the Company
    and Caesars agreed to amend the lease agreements for Caesars Palace
    Las Vegas (the "CPLV Lease"), the existing regional property portfolio
    (the "Non-CPLV Lease"), and the facilities in Joliet, Illinois (the
    "Joliet Lease", and together with the CPLV Lease and the Non-CPLV
    Lease, the "Leases"), and certain ancillary agreements to the Leases,
    to realign certain of the lease terms (collectively the "Lease
    Modifications"). The purchase price for Harrah's Philadelphia will be
    reduced by $159.0 million to reflect the aggregate net present value
    of the Lease Modifications, resulting in net cash consideration of
    $82.5 million.

    In connection with the closing of the
    purchase of the Harrah's Philadelphia property, the Non-CPLV Lease and
    the CPLV Lease will be amended to include the Harrah's Philadelphia
    property and Octavius Tower, respectively, each of which will be
    leased back to Caesars. The acquisition of Harrah's Philadelphia and
    the entry into the contemplated Lease Modifications are expected to
    close during the fourth quarter of 2018 and are subject to certain
    customary closing conditions, including obtaining certain regulatory
    approvals and requisite lender and holder consents under the documents
    governing certain of the Company's outstanding debt obligations.
  • On June 19, 2018, the Company announced that it entered into
    definitive agreements pursuant to which VICI Properties will acquire
    the land and real estate assets of the Margaritaville Resort Casino,
    located in Bossier City, Louisiana, for $261.1 million in cash, and
    Penn National Gaming, Inc. ("Penn National") will acquire the
    operating assets of the Margaritaville Resort Casino for $114.9
    million in cash. The transaction is subject to regulatory approvals
    and customary closing conditions and is expected to close in the
    second half of 2018, upon which date Penn National will enter into a
    triple-net lease agreement with the Company. The lease will have an
    initial total annual rent of $23.2 million and an initial term of 15
    years, with four 5-year renewal options. The rent coverage ratio in
    the first year after closing is expected to be 1.9x and the tenant's
    obligations under the lease will be guaranteed by Penn National.

Dividends

On June 14, 2018, the Company declared a cash dividend of $0.2625 per
share of common stock for the period from April 1, 2018 to June 30,
2018, based on an annual distribution rate of $1.05 per share. The
dividend was paid on July 13, 2018 to stockholders of record as of the
close of business on June 28, 2018.

With the closing of the acquisition of Octavius Tower, the Company
currently intends to increase its targeted annualized dividend to $1.15
per share (implies an anticipated quarterly dividend of $0.2875), which
would represent a 9.5% increase from the current annualized dividend
rate of $1.05 per share. The proposed increased dividend is subject to
declaration by the Company's Board of Directors, and is expected to
begin in connection with the Company's third quarter 2018 dividend.

Edward Pitoniak, Chief Executive Officer of VICI Properties, said, "Our
second quarter of 2018 represented our next big step in becoming a
best-in-class institutional-quality REIT. In Q1 2018 we created our
sector's most robust capital pool by executing the fourth largest REIT
IPO ever, and in Q2 2018 we put that capital to work by announcing
several accretive acquisitions. We expanded our exposure to Las Vegas
through the acquisition of Octavius Tower, which closed on July 11; we
announced our intention to enter into the Philadelphia market, the 7th
largest gaming market in the U.S., through Harrah's Philadelphia; we
entered into agreements to improve our foundational leases with Caesars,
which we believe will enhance our organic growth in the near term, while
protecting against volatility in our rental income over the long term;
and we announced a transaction whereby we will add a new tenant to our
roster, Penn Gaming, and expand our presence in the Shreveport market
with the upcoming acquisition of Margaritaville."

Financial Results – Quarter Ended June 30, 2018

Revenue for the quarter ended June 30, 2018 was $221.0 million and
included $213.5 million from the real property business and $7.5 million
from the golf course business. Real property business revenue of $213.5
million was comprised of (i) $182.3 million of income from direct
financing leases; (ii) $12.2 million of income from operating lease; and
(iii) $19.0 million of property taxes paid by the Company's tenants on
the leased properties. Golf course business revenue of $7.5 million
included $2.5 million pursuant to the Use Agreement with Caesars
Entertainment.

General and administrative expenses during the quarter ended June 30,
2018 were $7.2 million. During the quarter, general and administrative
expenses contained certain non-recurring costs, including (i) $0.3
million of costs primarily related to the transition and relocation of
our corporate headquarters to New York from Las Vegas; and (ii) $0.7
million of legal and professional fees related to the filing of a resale
registration statement on Form S-11 in May 2018, which registration
statement was filed pursuant to a registration rights agreement entered
into by the Company in connection with its private placement completed
in December 2017.

Interest expense during the quarter ended June 30, 2018, was $51.4
million based on a weighted average interest rate of 4.70%.

Net income attributable to common stockholders was $139.0 million, or
$0.38 per diluted share, for the quarter ended June 30, 2018.

FFO attributable to common stockholders was $139.0 million, or $0.38 per
diluted share, for the quarter ended June 30, 2018.

AFFO attributable to common stockholders was $128.8 million, or $0.35
per diluted share, for the quarter ended June 30, 2018.

Balance Sheet

As of June 30, 2018, the Company had $4.1 billion in total debt and
$940.7 million in cash and cash equivalents, excluding restricted cash
of $13.8 million. The Company's outstanding indebtedness as of June 30,
2018 was as follows:

($ in millions)       June 30, 2018
Revolving Credit Facility $ -
Term Loan B Facility 2,100.0
CPLV CMBS Debt 1,550.0
Second Lien Notes   498.5
Total debt outstanding, face value $ 4,148.5
Cash and cash equivalents $ 940.7
 

2018 Guidance

The Company is increasing its estimated net income and AFFO per share
guidance for the full year 2018 to reflect the completion of the
Octavius Tower acquisition. The Company estimates that net income
attributable to common stockholders will be between $1.48 and $1.49 per
diluted share, and that AFFO per share will be between $1.43 and $1.44
per diluted share, for the year ending December 31, 2018. The following
is a summary of the assumptions that the Company used in arriving at its
guidance:

       
For the Year Ending December 31, 2018: Low High
Estimated net income attributable to common stockholders per diluted
share
$ 1.48 $ 1.49
Estimated real estate depreciation per diluted share   -     -  
Estimated Funds From Operations (FFO) per diluted share $ 1.48   $ 1.49  

Estimated direct financing lease adjustments per diluted share

(0.14

)

(0.14

)

Estimated loss on extinguishment of debt, acquisition and
transaction costs, non-cash stock based compensation, amortization
of debt issuance costs and OID, other depreciation and capital
expenditures per diluted share

 

0.09

   

0.09

 

Estimated Adjusted Funds From Operations (AFFO) 1
per diluted share

$ 1.43   $ 1.44  
 

The estimates set forth above reflect management's view of current and
future market conditions, including assumptions with respect to the
earnings impact of the events referenced in this release and otherwise
to be referenced during the conference call referred to below. These
estimates do not include the impact on operating results from possible
future acquisitions or dispositions, capital markets activity, or other
non-recurring transactions. The estimates set forth above may be subject
to fluctuations as a result of several factors and there can be no
assurance that the Company's actual results will not differ materially
from the estimates set forth above.

____________________________

1  

See Non-GAAP Financial Measures and Reconciliation of Net
Income to FFO, FFO per Share, AFFO, AFFO per Share and Adjusted
EBITDA.

 

Conference Call and Webcast

The Company will host a conference call and audio webcast on Friday,
August 3, 2018 at 10:00 a.m. Eastern Time (ET).

The conference call can be accessed by dialing 866-393-4306 (domestic)
or 734-385-2616 (international). An audio replay of the conference call
will be available from 1:00 p.m. ET on August 3, 2018 until midnight ET
on August 10, 2018 and can be accessed by dialing 855-859-2056
(domestic) or 404-537-3406 (international) and entering the passcode
6687699.

A live audio webcast of the conference call will be available through
the "Investors" section of the Company's website, www.viciproperties.com,
on August 3, 2018, beginning at 10:00 a.m. ET. A replay of the webcast
will be available shortly after the call on the Company's website and
will continue for one year.

About VICI Properties

VICI Properties is an experiential real estate investment trust that
owns one of the largest portfolios of market-leading gaming, hospitality
and entertainment destinations, including the world-renowned Caesars
Palace. VICI Properties' national, geographically diverse portfolio
consists of 20 gaming facilities comprising over 36 million square feet
and features approximately 14,500 hotel rooms and more than 150
restaurants, bars and nightclubs. Its properties are leased to leading
brands such as Caesars, Horseshoe, Harrah's and Bally's, which
prioritize customer loyalty and value through great service, superior
products and constant innovation. VICI Properties also owns four
championship golf courses and 34 acres of undeveloped land adjacent to
the Las Vegas Strip. VICI Properties' strategy is to create the nation's
highest quality and most productive experiential real estate portfolio.
For additional information, please visit www.viciproperties.com.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of the federal securities laws. You can identify these
statements by our use of the words "assumes," "believes," "estimates,"
"expects," "guidance," "intends," "plans," "projects," and similar
expressions that do not relate to historical matters. All statements
other than statements of historical fact are forward-looking statements.
You should exercise caution in interpreting and relying on
forward-looking statements because they involve known and unknown risks,
uncertainties, and other factors which are, in some cases, beyond the
Company's control and could materially affect actual results,
performance, or achievements. Important risk factors that may affect the
Company's business, results of operations and financial position are
detailed from time to time in the Company's filings with the Securities
and Exchange Commission. Actual operating results may differ materially
from what is expressed or forecast in this press release. Among those
risks, uncertainties and other factors are risks that the acquisition of
each of the Harrah's Philadelphia property and the Margaritaville Resort
Casino may not be consummated on the terms or timeframe described
herein, or at all; the ability of the parties to satisfy the conditions
set forth in the definitive transaction documents, including the ability
to receive, or delays in obtaining, regulatory approvals and the
consents required to consummate the acquisitions of the Harrah's
Philadelphia property and the Margaritaville Resort Casino (including,
with respect to Harrah's Philadelphia, required lender and holder
consents); the risk that Caesars may exercise its call right to
reacquire the Octavius Tower property in the event that the Harrah's
Philadelphia purchase agreement is terminated; the terms on which the
Company finances the acquisition of the Harrah's Philadelphia property
and the Margaritaville Resort Casino, including the source of funds used
to finance such transaction; disruptions to the real property and
operations of the acquisition of the Harrah's Philadelphia property and
the Margaritaville Resort Casino during the pendency of the closings;
risks that the Company may not achieve the benefits contemplated by the
acquisitions of the real estate assets (including any expected accretion
or the amount of any future rent payments); and risks that not all
potential risks and liabilities have been identified in the Company's
due diligence. The Company does not undertake any obligation to update
or revise any forward-looking statement, whether as a result of new
information, future events, or otherwise, except as may be required by
applicable law.

Non-GAAP Financial Measures

This press release presents Funds From Operations ("FFO"), FFO per
diluted share, Adjusted Funds From Operations ("AFFO"), AFFO per diluted
share and Adjusted EBITDA, which are not required by, or presented in
accordance with, generally accepted accounting principles in the United
States ("GAAP"). These are non-GAAP financial measures and should not be
construed as alternatives to net income or as an indicator of operating
performance (as determined in accordance with GAAP). We believe FFO, FFO
per diluted share, AFFO, AFFO per diluted share and Adjusted EBITDA
provide a meaningful perspective of the underlying operating performance
of our business.

FFO is a non-GAAP financial measure that is considered a supplemental
measure for the real estate industry and a supplement to GAAP measures.
Consistent with the definition used by The National Association of Real
Estate Investment Trusts ("NAREIT"), we define FFO as net income (or
loss) (computed in accordance with GAAP) excluding gains (or losses)
from sales of property plus real estate depreciation.

AFFO is a non-GAAP measure that is used as a supplemental operating
measure to evaluate our performance. We calculate AFFO by adding or
subtracting from FFO direct financing lease adjustments, transaction
costs incurred in connection with the acquisition of real estate
investments, non-cash stock-based compensation expense, amortization of
debt issuance costs and original issue discount, non-cash interest
expense, non-real estate depreciation (which is comprised of the
depreciation related to our golf course operations), capital
expenditures (which are comprised of additions to property, plant and
equipment related to our golf course operations), non-impairment charges
on non-real estate assets, amortization of capitalized leasing costs and
gains (or losses) on debt extinguishment.

We define Adjusted EBITDA as net income as adjusted for gains (or
losses) from sales of property, real estate depreciation, direct
financing lease adjustments, transaction costs incurred in connection
with the acquisition of real estate investments, non-cash stock-based
compensation expense, amortization of debt issuance costs and original
issue discount, other non-cash interest expense, non-real estate
depreciation (which is comprised of the depreciation related to our golf
course operations), capital expenditures (which are comprised of
additions to property, plant and equipment related to our golf course
operations), impairment charges on non-real estate assets, amortization
of capitalized leasing costs, gains (or losses) on debt extinguishment,
interest expense, net and income tax expense.

These non-GAAP financial measures (i) do not represent cash flow from
operations as defined by GAAP; (ii) should not be considered as an
alternative to net income as a measure of operating performance or to
cash flows from operating, investing and financing activities; and (iii)
are not alternatives to cash flow as a measure of liquidity. In
addition, these measures should not be viewed as measures of liquidity,
our ability to make cash distributions, or our ability to make interest
payments on our indebtedness. Investors are also cautioned that FFO, FFO
per diluted share, AFFO, AFFO per diluted share and Adjusted EBITDA, as
presented, may not be comparable to similarly titled measures reported
by other REITs due to the fact that not all real estate companies use
the same definitions. Our presentation of these measures does not
replace the presentation of our financial results in accordance with
GAAP.

Reconciliations of net income to FFO, FFO per diluted share, AFFO, AFFO
per diluted share and Adjusted EBITDA are included in this release.

     
VICI Properties Inc.
Consolidated Balance Sheets
(Unaudited)

(In thousands, except share and per share data)

 

 

June 30, 2018

December 31, 2017

Assets
Real estate portfolio:
Investment in direct financing leases, net $ 8,294,753 $ 8,268,643
Investments in operating leases 1,110,400 1,110,400
Land 73,600 73,600
Property and equipment used in operations, net 73,029 74,300
Cash and cash equivalents 940,740 183,646
Restricted cash 13,808 13,760
Short-term investments 39,906 -
Other assets 18,467 15,363
Total assets $ 10,564,703 $ 9,739,712
 
Liabilities
Debt, net $ 4,120,141 $ 4,785,756
Accrued interest 14,254 21,595
Deferred financing liability 73,600 73,600
Deferred revenue 71,961 68,117
Dividends payable 97,107 -
Other liabilities 10,979 10,562
Deferred income taxes 3,718 3,718
Total liabilities 4,391,760 4,963,348
 
Stockholders' equity
Common stock, $0.01 par value, 700,000,000 shares authorized and
370,149,921 and 300,278,938 shares issued and outstanding at June
30, 2018 and December 31, 2017, respectively
3,701 3,003
Additional paid in capital 5,953,104 4,645,824
Accumulated other comprehensive income (4,640 ) -
Retained earnings 137,444 42,662
Total VICI stockholders' equity 6,089,609 4,691,489
Non-controlling interests 83,334 84,875
Total stockholders' equity 6,172,943 4,776,364
Total liabilities and stockholders' equity $ 10,564,703 $ 9,739,712
 
       
VICI Properties Inc.
Consolidated Statement of Operations
(Unaudited)

(In thousands, except share and per share data)

 

 

Three Months Ended

Six Months Ended

 

June 30, 2018

June 30, 2018
Revenues

 

Income from direct financing leases $ 182,319 $ 364,355
Income from operating leases 12,209 24,418
Tenant reimbursement of property taxes 18,932 36,175
Golf operations   7,515     14,303  
Revenues   220,975     439,251  
 
Operating expenses
General and administrative 7,160 14,468
Depreciation 922 1,828
Property taxes 18,932 36,175
Golf operations     4,513     8,608  
Total operating expenses     31,527     61,079  
Operating income 189,448 378,172
 
Interest expense (51,440 ) (104,314 )
Interest income 3,799 5,477
Loss from extinguishment of debt   -     (23,040 )
Income before taxes 141,807 256,295
Income tax expense   (448 )   (832 )
Net income $ 141,359 $ 255,463
Less: Net income attributable to noncontrolling interests   (2,315 )   (4,297 )
Net income attributable to common stockholders $ 139,044   $ 251,166  
 
Net income per common share
Basic $ 0.38 $ 0.70
Diluted $ 0.38 $ 0.70
 
Weighted average number of common shares outstanding
Basic 369,932,843 356,454,441
Diluted 369,991,738 356,491,047
 
       
VICI Properties Inc.
Reconciliation of Net Income to FFO, FFO per Share, AFFO, AFFO
per Share and Adjusted EBITDA

(In thousands, except share and per share data)

 

 

Three Months Ended

Six Months Ended

 

June 30, 2018

June 30, 2018
Net income attributable to common stockholders $ 139,044 $ $251,166
Real estate depreciation   -     -  
Funds From Operations (FFO) 139,044 251,166
Direct financing lease adjustments attributable to common
stockholders
(12,863 ) (25,767 )
Loss on extinguishment of debt - 23,040
Non-cash stock-based compensation 468 859
Amortization of debt issuance costs and original issue discount 1,489 2,982
Other depreciation 919 1,825
Capital expenditures   (211 )   (557 )
Adjusted Funds From Operations (AFFO)   128,846     253,539  
Interest expense, net 46,152 95,855
Income tax expense   448     832  
Adjusted EBITDA $ 175,446   $ 350,227  
 
Net income per common share
Basic and diluted $ 0.38 $ 0.70
FFO per common share
Basic and diluted $ 0.38 $ 0.70
AFFO per common share
Basic and diluted $ 0.35 $ 0.71
 
Weighted average number of common shares outstanding
Basic 369,932,843 356,454,441
Diluted 369,991,738 356,491,047

View Comments and Join the Discussion!