- Vici’s Q3 FFO attributable to common stockholders fell 55.1% to $342 million from $762 million, while revenue rose 5.8% to $1.07 billion and beat estimates.
- The REIT booked $458 million of expected credit losses, $331 million of it tied to its Caesars lease, which runs through 2055, as Fertitta Entertainment seeks to buy Caesars.
- Vici announced a $2 billion buyback through 2029 and says it is weighing how best to structure income from the Caesars regional lease.
Vici Properties’ FFO fell 55.1% in the third quarter as higher capital costs and uncertainty around its Caesars lease hit the casino REIT, Commercial Observer reports.
Common-stockholder FFO landed at $342 million, versus $762 million in the year-ago quarter.
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The Caesars Question
Fertitta Entertainment is seeking to acquire Caesars, Vici’s largest tenant. Caesars holds a regional master lease with the REIT in Las Vegas.
Meanwhile, Vici recorded a $458 million CECL charge for the quarter. Of that amount, $331 million relates to the Caesars lease, which runs through 2055.
CEO Edward Pitoniak told analysts that Vici is reviewing the income from those properties. The company is using several valuation methods. It is also weighing which structure would deliver the most value to shareholders.
Revenue Held Up
Total revenue rose 5.8% to $1.07 billion. That figure topped analysts’ estimate of $1.06 billion. However, the credit-loss charge comes alongside that revenue growth.
Vici’s stock had already faced pressure. Commercial Observer reported that rising capital costs for net-lease REITs and uncertainty around Caesars weighed heavily on shares.
Pitoniak also cited broader concerns about net-lease REITs amid high interest rates. In addition, inflation has pushed consumers to cut discretionary spending. High capital costs have also made it harder for Vici to find accretive growth opportunities.
Capital Plans
Vici plans to maintain its 5.5x leverage target. The company also has other ways to finance growth. These include repayments of outstanding loans in the coming years and potential asset sales.
Just before reporting earnings, Vici announced a new $2 billion buyback authorization. The program runs through Sept. 30, 2029. Pitoniak said the company may repurchase shares if that proves to be the best use of excess capital.
Why It Matters
Vici owns more commercial land on the Las Vegas Strip than any other company. Therefore, changes to the Caesars lease could affect much more than one tenant.
CRE Daily’s August brief on Vici’s NBA arena idea highlighted its Strip holdings. These include Caesars Palace and land behind Planet Hollywood, Paris and Horseshoe.
During a January appearance on the No Cap episode, Pitoniak described Vici as a company born from Caesars’ bankruptcy. Since then, it has become the dominant owner of experiential real estate. Now, however, the tenant relationship has become the key variable.
What’s Next
Investors will watch how Vici structures any changes to the Caesars lease. They will also follow the progress of the Fertitta bid. Ultimately, both developments could shape how the market values Vici’s largest income stream.
