VICI Properties Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. The filing combines VICI Properties Inc. and VICI Properties L.P.; figures below are consolidated unless stated otherwise. The April 29, 2022 MGP acquisition closed after quarter-end and is not reflected in Q1 operating results or March 31 balances.
Business context and material developments
VICI owns gaming, hospitality and entertainment real estate, primarily leased under long-term triple-net agreements, and operates four golf courses. At March 31, its portfolio included 28 properties. Following the MGP transaction, the portfolio expanded to 43 properties.
- VICI closed the $4.0 billion Venetian real estate acquisition on February 23 and entered a 30-year lease with initial annual rent of $250 million. The tenant may receive up to $1.0 billion in property-growth funding, subject to agreement terms.
- On April 29, VICI acquired MGP for approximately $17.2 billion, including assumption of about $5.7 billion of debt. The transaction added 15 properties and approximately $1.012 billion in annualized rent. The MGM Master Lease began at $860 million annual rent; that amount is expected to fall by $90 million when the Mirage sale and related lease are completed.
- As of May 3, VICI reported 963.0 million common shares outstanding, following the MGP transaction.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Total revenue | $416.6 million | $374.3 million; up 11.3% |
| Net income attributable to common stockholders | $240.4 million | $269.8 million |
| Diluted EPS | $0.35 | $0.50 |
| AFFO | $305.5 million; $0.44 diluted per share | $255.0 million; $0.47 diluted per share |
| Adjusted EBITDA | $358.0 million | $325.8 million |
| Cash from operations | $298.2 million | $155.7 million |
| Cash and cash equivalents, March 31 | $568.7 million | $739.6 million at December 31, 2021 |
| Debt, March 31 | $5.35 billion face value; $5.30 billion carrying value | $4.75 billion face value at December 31, 2021 |
Lease revenue rose $39.7 million, mainly from the Venetian lease and contractual escalators. The $80.8 million increase in credit-loss allowance—versus a $4.4 million allowance reduction in Q1 2021—was the principal unusual operating item and weighed on GAAP earnings. The charge included initial reserves related to the Venetian transaction and increased near-term default assumptions amid market volatility. VICI reported no investments on non-accrual status.
Operating cash flow improved, while investing cash outflow was $4.03 billion, primarily reflecting the Venetian acquisition. Financing cash flow was $3.56 billion, including $3.22 billion of net proceeds from settled forward equity sales and a $600 million revolving-credit draw. The company declared a quarterly dividend of $0.36 per share, up from $0.33.
At March 31, reported available liquidity was $3.47 billion, comprising cash, $1.9 billion of revolving-credit capacity and $1.0 billion of delayed-draw term-loan capacity. VICI said it expected liquidity to cover material requirements for the next 12 months and noted no debt maturities before 2025. It was in compliance with debt covenants at quarter-end.
Outlook, risks and contingencies
- No specific earnings or revenue guidance is provided. Management described long-term leases as a predictable revenue source and said it would continue evaluating acquisitions and investments with disciplined capital allocation.
- All tenants had paid rent through April 2022. Management cautioned that COVID-19, variants, operating restrictions, staffing challenges and economic effects could still weaken tenant performance and rent-paying capacity.
- Tenant and market concentration remain important: Caesars leases generated 76% of lease revenue in Q1 2022, while Las Vegas Strip properties generated approximately 38%. MGM becomes a significant tenant following the post-quarter MGP closing.
- Other stated risks include rising interest rates, refinancing and capital-market access, substantial debt, gaming regulation, tenant credit and execution of the MGP integration. The MGM tax-protection agreement includes a 15-year period and potential indemnity obligations under specified circumstances.
- The Mirage sale and severance lease were expected in the second half of 2022, subject to customary conditions and regulatory approvals. VICI may fund up to $1.5 billion of Mirage redevelopment, subject to conditions and final documentation.
- VICI recognized $11.5 million of MGP bridge-facility fees in Q1 interest expense. After quarter-end, new April notes and assumed/exchanged MGP debt were expected to add approximately $456.3 million in annual interest expense.
- Merger-related disclosure lawsuits had been dismissed; the filing said additional lawsuits could still arise. VICI reported no litigation it believed would have a material adverse effect.
Key facts for investors to verify
- How the MGP acquisition, assumed debt and new lease income affect pro forma leverage, interest expense, AFFO per share and future cash distributions.
- Whether tenant operating performance supports rent obligations, particularly given Caesars’ Q1 revenue concentration and the Venetian tenant’s limited rent support through 2023.
- The drivers and future sensitivity of the $80.8 million quarterly credit-loss provision, including the effect of market volatility and the Venetian funding commitment.
- Progress and final terms for the Mirage transaction, redevelopment funding and the Venetian property-growth commitment.
- Reconcile GAAP earnings and per-share results with AFFO: total AFFO grew, but diluted AFFO per share declined to $0.44 from $0.47, amid substantial share issuance.