VICI Properties Inc. — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022; filed February 23, 2023. This is an annual report, not a standalone fourth-quarter report. Figures below are in U.S. dollars unless noted.
Business context
VICI is a REIT that owns gaming, hospitality, entertainment and leisure real estate, principally leased on a long-term triple-net basis. At year-end, its portfolio included 45 U.S. gaming facilities; the four-property PURE Canadian portfolio was acquired in January 2023, bringing the portfolio to 49 facilities in the United States and Canada. Caesars and MGM were the largest tenants, representing 43% and 36% of annualized rent, respectively. Las Vegas Strip properties generated approximately 45% of 2022 revenue.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Total revenue | $2.601 billion | $1.510 billion | Up 72.3%, primarily reflecting the MGP and Venetian acquisitions and new leases. |
| Net income attributable to common stockholders | $1.118 billion | $1.014 billion | Up 10.2%. |
| Diluted EPS | $1.27 | $1.76 | Down 27.7%, with the filing citing the CECL allowance and higher weighted-average share count. |
| AFFO attributable to common stockholders | $1.694 billion | $1.047 billion | Up 61.7%; diluted AFFO per share rose 6.1% to $1.93 from $1.82. |
| Cash provided by operating activities | $1.943 billion | $896 million | Up $1.047 billion, principally due to rent and loan income growth. |
| Interest expense | $540 million | $392 million | Up $148 million, mainly from debt assumed or issued in connection with MGP. |
| Change in allowance for credit losses | $834 million expense | $20 million benefit | Primarily non-cash; $574 million related to initial allowances on 2022 acquisitions and new commitments. |
Contractual leasing revenue was $2.124 billion, versus $1.291 billion in 2021. Because reported leasing income includes non-cash effective-interest adjustments, it does not equal cash rent. A conventional operating margin is not particularly informative for this lease-focused REIT; reported net income was materially affected by the non-cash credit-loss charge.
At December 31, 2022, cash and cash equivalents were $209 million and short-term investments were $217 million. The company reported $2.5 billion of undrawn revolving-credit capacity at year-end. Its liquidity table totaled $4.199 billion, including $1.272 billion of forward equity-sale proceeds settled after year-end; that total is therefore not solely cash on hand at December 31. Management stated it believed liquidity was sufficient for material requirements over the next 12 months and noted no debt maturities in that period.
Debt at year-end included $13.95 billion face value of senior unsecured notes and VICI’s $1.5 billion pro-rata share of the MGM Grand/Mandalay Bay joint-venture debt, for approximately $15.45 billion of total debt exposure. All debt was fixed-rate at year-end; the unsecured notes’ weighted-average rate was 4.496% after hedging effects. Senior unsecured principal maturities included $1.05 billion in 2024 and $2.05 billion in 2025. The company was in compliance with debt covenants.
Material changes and transactions
- Closed the MGP transaction in April 2022, adding 15 casino-resort properties and approximately $1.012 billion of annualized rent. The transaction involved $11.6 billion of consideration and assumption of approximately $5.7 billion of debt.
- Acquired the Venetian Resort real estate for $4.0 billion in February 2022 and entered a lease with initial annual rent of $250 million. The tenant’s 2022 EBITDAR exceeded the $550 million threshold, ending the seller’s contingent lease support.
- Acquired the Fitz and WaterView real estate for $293.4 million in December 2022, with initial annual rent of $24.3 million.
- In January 2023, acquired the remaining 49.9% of the MGM Grand/Mandalay Bay JV for $1.262 billion cash and assumed approximately $1.497 billion of additional pro-rata property debt. VICI then owned 100% of the JV; the full $3.0 billion JV debt is to be consolidated. Also in January 2023, VICI acquired the PURE Canadian properties for approximately $200.8 million and began a lease with approximately $16.1 million of initial annual rent.
- Completed a $5.0 billion senior-note offering in April 2022. It also issued substantial equity, including MGP merger shares and forward-sale offerings; shares outstanding rose to 963.1 million at year-end from 628.9 million a year earlier. Subsequent forward-sale settlements generated approximately $1.272 billion in January 2023.
Outlook, risks and unusual items
The filing provides no quantified company-wide earnings or revenue guidance. Management described long-term leases and contractual rent escalators as supporting predictable revenue and said inflation may increase rent under CPI-linked provisions, subject to caps and timing. Management also cautioned that inflation above applicable caps may not be fully offset, while higher interest rates and market volatility can raise financing costs and constrain acquisitions.
Key risks include tenant and industry concentration, especially reliance on Caesars and MGM and the Las Vegas market; tenant credit deterioration or nonpayment; gaming regulation and transaction-approval delays; refinancing and capital-market access; and the substantial debt burden. Long-term leases may not reset to market rents, and some escalators are capped. Climate-related water, heat and flooding risks, particularly in Las Vegas and other exposed regions, are also discussed. Tax-protection agreements related to MGP and the MGM Grand/Mandalay Bay properties may restrict dispositions and create potentially significant indemnity obligations.
The most notable unusual 2022 item was the $834.5 million increase in the CECL allowance, which weighed on GAAP earnings but was added back in AFFO. The allowance model relies on estimates of tenant default probability and loss severity; management reported no payment delinquencies or investments on non-accrual status at year-end. Deloitte issued unqualified opinions on the financial statements and internal controls; management reported effective controls. The company disclosed no litigation expected to have a material adverse effect.
Important facts for investors to verify
- Review tenant credit and rent coverage, particularly Caesars and MGM, which together accounted for approximately 79% of annualized rent.
- Track the CECL allowance assumptions, the $1.324 billion allowance against funded investments, and the separate $45 million allowance for unfunded commitments.
- Reconcile post-year-end financing and acquisition effects: consolidation of the $3.0 billion MGM Grand/Mandalay Bay debt, the PURE acquisition, and forward-sale proceeds and share dilution.
- Check debt maturities, covenant headroom, interest costs, and access to refinancing and equity markets as rates and capital conditions change.
- Assess whether lease escalators, tenant capital-spending obligations, and projected rent growth adequately address inflation and property investment needs; confirm the timing and economics of pending investments, including Rocky Gap and tenant growth-fund commitments.