VICI Properties Inc.

Good day, everyone, and thank you for standing by. Welcome to the Vici Properties first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. Please note that this conference call is being recorded today, May 2nd, 2024. I will now turn the call over to Samantha Gallagher, General Counsel with Vici Properties.

Thank you, Operator, and good morning. Everyone should have access to the company's first quarter 2024 earnings release and supplemental information. The release and supplemental information can be found in the investor section of the VG Properties website at www.vgproperties.com. Some of our comments today will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements, which are usually identified by the use of words such as will, believe, expect, should, guidance, intends, outlook, projects, or other similar phrases, are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. I refer you to the company's SEC filings for a more detailed discussion of the risks that could impact future operating results and financial conditions. During the call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available on our website in our first quarter 2024 earnings release, our supplemental information, and our filings with the SEC. For additional information with respect to non-GAAP measures of certain tenants and our counterparties discussed on this call, please refer to the respective companies' public filings with the SEC. Hosting the call today, we have Ed Petoniak, Chief Executive Officer, John Payne, President and Chief Operating Officer, David Kieske, Chief Financial Officer, Gabe Wasserman, Chief Accounting Officer, and Moira McCluskey, Senior Vice President of Capital Markets. Ed and team will provide some opening remarks, and then we'll open the call to questions. With that, I'll turn the call over to Ed.

Thank you, Samantha, and good morning, everyone. The first quarter of 2024 was, shall we say, an interesting quarter in the American equity marketplace. A fair part of the S&P 500 packed into a house and held a magnificent party. One Wall Street shop went so far as to say the party reached the rarefied state of euphoria. Euphoria, that sounds kind of fun. But to be clear, American wreaths were not invited to this party. Those of us who work within wreaths were out on the curb outside that party house. From the outside, one could wonder if this was a party in which new monarchs were being coronated for perpetual rule or the kind of party that eventually ends with ambulances and or cops being called and a few of the partygoers fleeing naked down the street out of their minds like Will Ferrell in old school. The first quarter of 2024 is now over. The ambulances or cops haven't necessarily showed up yet, but the party inside that magnificent house seems to be running out of steam. The move index, which measures U.S. Treasury market volatility, was relatively high but relatively steady through much of the first quarter and even fell a bit in late March in a flight to safety. But in early April, it started acting rowdy again. And it's much the same to the VIX equity volatility index, which, having slept through much of the magnificent party, recently spiked almost 50% since the start of the year before settling back down. Amidst all this noise, the general investment marketplace is having a hard time focusing on the income and capital appreciation dynamics of Goodreads. At Vici, we can deal with all of this. We don't spend a lot of time standing on curves, wondering or complaining about parties we're not invited to. We just keep doing what we do at Vici. And that's working within our resources and capabilities to keep improving and growing our company for the long-term benefit of our stakeholders. That's what we did in Q1 2024. The first quarter of 2024 was a quarter in which we produced 6.1% growth in AFFO per share over Q1 2023 and continued to flow our revenue growth through to the EBITDA line at what we believe is one of the higher rates among S&P 500 REITs. The first quarter of 2024 was also a quarter in which we focused on three key strategic imperatives. Imperative number one, expanding our scope and TAM of investment with our investment in Home Field Kansas City, a market-leading sports training complex that will also soon feature a Margaritaville resort. This is an investment that builds on our initial entry into the sports and recreation sector with the late 2023 acquisition of the primary leasehold interest in Chelsea Piers. An investment that validates the use of our lending platform to ultimately acquire a real estate interest. In this case, 780,000 magnificent square feet of New York recreational and entertainment space on the Hudson River. Imperative number two, being ready to refinance our maturing 2024 debt at an opportune time. Debt that would have come due on May 1st, yesterday, in other words. During Q1, May 1st seemed a fair way off, but given the volatility of market conditions, we didn't want to wait too long. We went to market on March 7th and did so in what turned out to be the second lowest point in March for U.S. 10-year yields. Yes, our timing was fortunate, but our good fortune relied on us being ready to go. Imperative number three, which we've just announced, capitalizing on the scale and rarity of our existing assets by working throughout Q1 with our partners at Apollo to develop a property enhancement plan for the Venetian, which gives Vici the opportunity to invest up to $700 million of capital into this magnificent Las Vegas Strip asset. In a moment, John and David will give you more color on each of these three Q1 2024 imperatives. I'll close out my opening remarks by saying the obvious. The first 16 or so weeks of 2024 haven't been a lot of fun for REIT investors. It's not clear at this point when the marketplace will recognize what we believe to be the total return value that REITs can and do represent at this point. Most, not all, but most REIT categories currently offer dividend yields that are materially in excess of the current inflation rates. And REIT dividends, unlike money market or bond interest payments, have the potential to grow over time, as Vici's has, with Vici posting a dividend growth CAGR of 7.9% since the first quarter of 2018 following our IPO. We've been living through a period in the equity marketplace in which the power of compounding has been somewhat ignored or forgotten. REITs can be powerful compounding tools. As a Vici shareholder, I haven't forgotten or ignored that compounding dynamic and benefit. I look forward to answering your questions, but first, a few words from John and David. John?

Thanks, Ed, and good morning to everyone. Relationships are at the core of what we do at Vici, and the quality of the relationships we have sets us apart. Our team works hard to strengthen existing ones and develop new ones so that we are best positioned for future growth opportunities. Whether or not we are invited to what Ed has called the party, our focus on trust and finding mutually beneficial solutions with our partners multiplies the beneficial impact of each relationship, and we believe lays the groundwork for future growth through both good and bad market environments. One of the best examples of this is our relationship with Apollo and the team at the Venetian. The opportunity to acquire the Venetian originated during the COVID pandemic. another period of uncertainty with a challenging market backdrop. Since that time, the team at the Venetian has outperformed all expectations as Las Vegas has continued to solidify itself as the entertainment center of the world. We are thrilled to further expand our close relationship with Apollo and announced our opportunity to invest up to $700 million at the Venetian through Vici's Partner Property Growth Fund. This capital investment will fund several projects that seek to improve the overall guest experience and enhance the value of the property. The impact of our increasingly dynamic Las Vegas has continued to accrue to the benefit of the Venetian since we acquired the property together with Apollo in 2022, particularly with the neighboring sphere, events like F1 and Super Bowl, and an active convention schedule. The Venetian is set to celebrate its 25th anniversary this Saturday, and we're thrilled to partner with Apollo once again in their efforts to maximize the economic potential of this amazing, iconic strip asset. Gaming remains at Vici's core with over 98% of rent coming from our gaming partners, and the sector remains broadly healthy from a tenant credit perspective. Las Vegas continues to enjoy healthy growth with GGR up below single digits following the Super Bowl this quarter. And that is on top of an already impressive baseline, given gaming revenue increased 12% in the first quarter of 2023 over 2022. Since the market emerged from the pandemic, there has been 12 straight quarters. I'm going to repeat that. There has been 12 straight quarters of GGR growth in Las Vegas. Additionally, Las Vegas visitation numbers were up 4.2% in the first quarter, demonstrating the continued diversity of the revenue streams and the vast array of consumers enjoying this amazing city. In fact, based on a recent study from the University of Toronto that evaluated North American cities pre and post pandemic, Las Vegas is the only city that has surpassed pre-pandemic unique visitation numbers. In the regional gaming markets, while we recognize idiosyncratic weather headwinds this winter, we believe fundamentals remain sound and we see sturdy consumer discretionary spend driven by the middle and high-end consumers on the casino floor. Although interest rate volatility has impacted transaction volume in the gaming market, we are active in dialogue around real estate opportunities in the gaming sector. Outside of our embedded growth pipeline, our relationships and gaming focus put us in a strong position when transactions or opportunities to invest in our existing properties arise. We continue to monitor the performance of Harrah's Hoosier Park and Horseshoe Indianapolis, for which we have a call right to acquire the real estate and buildings of these unique assets. This call right expires at the end of 2024, and we continue to work through the process with the appropriate Indiana regulatory agencies to gain the necessary gaming approvals should we elect to execute this option. Vici is also well positioned for incremental opportunities outside the gaming space as we continue to expand our scope and our TAM of investments. We are committed to ensuring that each experiential sector and potential partner meets our investment criteria of low cyclicality, low secular threat, a proven track record of growth, and favorable supply and demand dynamics. In January of this year, VEACHE expanded investment in the youth sports sector with the announcement of the up to $105 million construction loan agreement with affiliates of Home Field Kansas City to fund the development of a Margaritaville Resort that will be embedded within Home Field's broader youth sports complex. The Youth Sports Training Center hosted 115 teams this last weekend for a basketball tournament, and the baseball facility is open and in use. The Margaritaville Resort is expected to be completed in 2025. Having visited the area a few weeks ago, I can tell you all the facilities are truly amazing. The home field partnership adds to our youth sports investment, as Ed said, which we initiated with our 2020 mortgage loan to Chelsea Piers in New York City. And at the end of 2023, we acquired the leasehold interest in the property and converted the initial loan into real estate ownership. While REITs were broadly excluded from, as Ed put it, the party that took place in the first quarter of 2024, the effects of the transactions and relationships announced at the end of last year and the beginning of this year contributed to our 6.1% growth in AFFO per share. As I stated earlier, our relationships are at the foundation of our business and drive our growth. Our standard for prudent underwriting gives us confidence in our roster of existing partners with whom we believe we have many growth opportunities. We look forward to developing new relationships with best-in-class operators so that Vici can continue to grow its quality experiential real estate portfolio. Now I will turn the call over to David, who will discuss our financial results and guidance.

David. Thanks, John. It's great to speak with everyone today, and we greatly appreciate your time. Starting with our balance sheet, as Ed mentioned, in the first quarter, we successfully, well, I'll say very successfully, executed our first refinancing of the $1,050,000,000 May 2024 notes that would have come due yesterday. On March 7th, we launched a bond offering, and at its peak, we were 12 times oversubscribed. We ultimately issued $550 million of 10-year notes at a coupon of 5.75% and $500 million of 30-year notes at a coupon of 6.125%. for a blended yield of 5.9% before the impact of our forward interest rate swaps. When compared to the coupon of 5.625% that we refinanced, we feel really good about the all-on coupon we were able to achieve and at the same time extend the duration of our maturity profile. During the quarter, we also bolstered our liquidity and sold 9.7 million shares, raising $305 million in gross proceeds under our ATM via the forward. Currently, we have approximately $3.5 billion in total liquidity comprised of $515 million in cash, cash equivalents, and short-term investments as of March 31st, $683 million of estimated proceeds available under our outstanding forwards, and $2.3 billion of availability under our revolving credit facility. In addition, our revolving credit facility has an accordion option allowing us to request additional lender commitments of up to $1 billion. As we sit here today, we believe we are well positioned to navigate the current macro environment and do not need to raise any incremental capital. In terms of leverage, our total debt is currently $17.1 billion. Our net debt to annualized first quarter adjusted EBITDA, excluding the impact of unsettled forward equity, is approximately 5.4 times within our target leverage range of 5 to 5.5 times. We have a weighted average interest rate of 4.33. 6% taking into account our hedge portfolio and a weighted average 6.8 years to maturity. Touching on the income statement, AFFO per share was 56 cents for the quarter, an increase of 6.1% compared to the 53 cents for the quarter ended March 31, 2023. Our results once again highlight our highly efficient triple net model given the increase in adjusted EBITDA as a proportion of the corresponding increase in revenue and our margins continue to run strong in the high 90% range when eliminating non-cash items. Our GNA was $16.2 million for the quarter and as a percentage of total revenues was only 1.7% and continues to be one of the lowest ratios in not only the triple net sector, but across all REITs. Turning to guidance, we are reaffirming AFFO guidance for 2024 in both absolute dollars as well as on a per share basis. As we originally highlighted on our Q4 earnings call, AFFO for the year ending December 31, 2024 is expected to be between $2.32 billion and $2.355 billion, or between $2.22 and $2.25 per diluted common share. As a reminder, our guidance does not include the impact on operating results from any transactions that have not yet closed, interest income from any loans that do not have final draw structures, possible future acquisitions or dispositions, capital markets activity, or other non-recurring transactions or items. And as we have previously mentioned, we record a non-cash CTO allowance on a quarterly basis, which due to its inherent unpredictability, leaves us unable to forecast net income and FFO with accuracy. Accordingly, our guidance is AFFO focused and we believe AFFO represents the best way of measuring the productivity of our equity investments and evaluating our financial performance and ability to pay dividends. With that, operator, please open the line for questions.

Thank you. If you'd like to ask a question, please press star one on your telephone keypad or press star two if you'd like to withdraw your question. The first question comes from Caitlin Burrows at Goldman Sachs. Please go ahead.

Hi, good morning, everyone. I guess one of the ways for Vici to identify and complete deals is when your partners are growing and expanding. So can you give some color on how your partners are doing and to what extent they're in the position to be expanding right now? I guess we can see the opportunity with the Venetian, but what else should we consider?

John, you want to start?

I will start and I'll start first in our portfolio in Las Vegas, because I think that's been a real center of where we've grown our company. And we have great operators there. We obviously announced the Venetian today. And you heard in my opening remarks that I believe, and maybe I'm a little bit biased, but this is the fastest growing or the best city in hospitality in the world as it continues to attract a wide variety of consumers. So that provides opportunities for our partners, whether that's MGM or These are, as we announced with Venetian, we've got a partner in Hard Rock that owns the Mirage that are all studying ways to continue to reinvent their business and add additional amenities to these amazing assets. The beauty of the assets in Las Vegas is the magnitude of opportunities that they have and the magnitude of square footage that they have in these assets to continue to not only remodel, But there are large parts of these assets that are unused at this time that could be brought either back to life or have never been in life with new concepts. So can't give you any details that we haven't announced, but our operators have all talked about the development of their Las Vegas assets. Outside Las Vegas, there are some regional markets Um, that continue to grow when we own some of the best assets out there, and we continue to talk to our partners about how we could potentially use our capital to grow their businesses. And we've announced previously. Some opportunities with century, and I think there'll be some opportunities with some of our larger and our smaller operators. Go ahead, I'll start with that if you want to add anything to that answer.

I would only add, John and Caitlin, good to hear from you, that obviously depending on the outcome of the New York gaming licensing process, were the MGM asset in Yonkers, which we own the real estate of, to gain one of the full licenses, that would obviously be an opportunity for us to invest substantial capital in the recreation of that asset.

TAB, got it and then you guys were talking about the home field partnership, I was wondering if you could just maybe remind us the status of your current construction loan there, which I don't think itself is a huge exposure for VT but, as we think about the potential growth and scope of that relationship, what it could be like.

TAB, David yeah caitlin we started. funding that upon announcement. And so that's a 18-odd-month development build. It's really the proceeds are going into the Margaritaville Hotel to use to build the Margaritaville Hotel. As John mentioned, the team was out there a week or so ago and saw the sports facilities that are ultimately part of our real estate that we do have the option to call in the future once everything is up and running and stabilized. But they are a best-in-class youth sports operator and While there's no immediate intentions to grow, they are realizing the benefits of what they're creating and may have opportunities in the future to expand what they are successfully building in Kansas City.

Got it. Thanks.

Next question comes from Anthony Paolone from J.P. Morgan. Please go ahead.

Great. Thank you. I guess my first question is, can you talk a bit about how you're thinking about return requirements and your cost of capital and any sort of spread? Because when I look at Venetian, it's obviously a tremendous asset and a strong relationship, and you talked about the importance of that. Then the flip is, I guess you got some flat term for a little bit, and it's also more of a CapEx investment as opposed to a new asset. So maybe just help us with putting some dimensions around how you're thinking about the right levels of return in your own cost capital?

Yeah, Tony, good to hear from you. The starting point is that over time, we are obviously solving for blended yield on our investments. When we have the opportunity to put capital into an asset as rarefied as the Venetian and still maintain an accretive spread to the point of your note, not a vast accretive spread and not our targeted blended rate of return. But if we can match an investment like the Venetian with investments, whether acquisitions of property or lending investments that give us more substantial yields, more substantial spreads, we feel on a net-net basis we're creating a lot of value for shareholders.

Okay, thanks. And then just my second one. John, you mentioned on the Centaur assets going through some regulatory process right now. Does that mean that if you do exercise the option, the close would be pretty immediate? Is that what to read there or just wondering what that meant?

Tony, I don't think that's necessary. First of all, it's funny we still call them the Centaur assets. Harris Hoosier Park in Horseshoe, Indianapolis, we do the same thing. But no, Tony, I mean, we're going through the process with the appropriate Indiana regulatory agency. And should we elect to execute this option, we will make sure that we follow all the rules and the regulations. But to your question about timing, really no position on that other than we're going through and spending the appropriate time with those agencies.

Okay. Thank you.

Our next question is from Barry Jonas from Tourist. Please go ahead.

Hey, guys. Good morning. I was curious, how deep is the pipeline for additional partner property growth investments? And then I guess as we think about those investments like Venetian, how should we think about the potential for those ROI improvements converting to salaries back at some point? Thanks.

Yeah. So, you know, I think as a starting point, Barry, it's valuable to remember that from what we can determine, we are the largest owner of hotel room real estate in America. We're the largest private sector owner of convention space in America. One of the largest owners of restaurants, theaters, other kinds of entertainment spaces. What are we right now, David? About 130 million square feet?

Just under that. That's right.

Yeah. So, Barry, when you think about having 130 square feet of existing property, you know, one in two percent of that number as potential reinvestment opportunities is a pretty compelling opportunity unto itself. As John mentioned, the Strip obviously represents a very compelling opportunity. We're particularly excited about the opportunities that could be at the south end of the Strip. We're in partnership with MGM. We own five assets, I believe it is. And that is an end of the Strip that, as you know, Barry, has taken on a vitality in recent years that it didn't have before. T-Mobile obviously added to the vitality of that end of the Strip. Allegiant, definitely a excuse me, added a lot, and the A stadium could potentially add a lot of vitality. And so when you look at assets like MGM Grand, New York, New York Excalibur, Luxor, Mandalay Bay, and Park MGM, we with our partners MGM, who obviously reported a very good quarter last night, are excited about what the densification opportunities could be over the coming years.

Barry, can I add just one thing to that? Not only do I agree 100% with Ed on the asset, it's also the operators that run these assets, that they are constantly looking at ways to attract more consumers and to generate more business. So you can have a great asset, but if the operator doesn't want to change it, wants to sit on their hands, the gaming operators, particularly in Las Vegas, are the best in the world in the hospitality space. And they are constantly looking at ways to build, reinvent their business. And so those two things combined, not only the assets are incredible, but having operators that want to change and grow and innovate is a formula for us to be able to continue to grow with the property growth fund.

And Barry, before you move to your second question, Barry, before you move to your second question, Samantha wants to clarify an assumption that you made in your question that, in fact, isn't quite right.

Yeah, thanks, Barry. So you asked if we will have the opportunity to convert that via sale-leaseback. And we actually don't need to do that because we own the capital improvement and that reverts to us via rent. So it's not something that we need to then in the future convert via sale-leaseback. And that's one of the benefits we think of the property growth fund.

But do you have a chance, I guess, to... I think if you look at the predecessor MGP, there were instances where they acquired additional improvements and that drove increased rent. Does that opportunity exist? Just so I'm sure I understand.

Yes. I mean, it's in essence what we're doing at the Venetian. We're investing incremental capital and in return for incremental capital, we get incremental rent.

Okay. Understood. And then just look at it as a follow-up. Curious, you know, as you're looking at yields, if the competitive environment is the same or if you're seeing kind of any new faces at those parties, call them.

It continues to remain the same, Barry. Got it.

Okay. Thanks so much, guys. Appreciate it. Yep, thank you, Barry.

Our next question comes from John Decree from CBRE. Please go ahead.

Hi, good morning, everyone. Thank you for taking my questions. Maybe one to start on Las Vegas. John, I think in your prepared remarks, you've mentioned what a great hospitality market Las Vegas is, and we certainly agree. Curious how you guys think about your net exposure to the market following the Venetian investment And in the context of, if you could remind us if you have officially committed to anything at the Mirage yet, obviously Hard Rock is considering a pretty big rebrand there. And you've mentioned a number of partners possibly considering activating space. So when you think about all the potential opportunities, are you kind of comfortable with that? Do you kind of have a ceiling in which you'd like to go to and how much capital you deploy to Las Vegas? How do you kind of think about your exposure to that market? over the near to medium term.

Ed, you want me to take that? Yeah, yeah, he was asking you, John. Yeah, John, nice to talk to you. So let's talk a little bit about all the different areas of Las Vegas. So today, we have an incredible amount of assets on the Strip. We have 10 assets on the Las Vegas Strip that We're very excited about where we do not have any investments yet, where we see potential for growth is in the regional market of Las Vegas and in the downtown market of Las Vegas. So you could see Vici continue to grow in the Las Vegas market and it could be on the strip, but it also could be in these other areas. And those are our great segments of the business that we simply don't have real estate or partners yet. along the way. So and then I think you also ask about the Mirage and our work with what we continue to speak with the Hard Rock team who's running the Mirage on ways that we can help them grow, but we've not made any announcement on that yet, John.

Got it. Thanks. Maybe a high level follow up for whoever wants to take it. It's kind of an observation first that a lot of the casino industry, your partners and others preference for development or project capex right now. We see that with the Venetian interest rate volatility is probably a part of the answer to the question, but why do you think we've seen, you know, more capital deployed in existing properties or new development relative to M&A, assuming your kind of cost of capital as a financing source for casino industry participants is still pretty competitive. So we'd think, you know, M&A could still be

logical option yet we've seen kind of all all developments so just curious if you guys have a view um and why that why that might be other than maybe just interest rates and just so we're clear john decree um you're speaking about m a uh among the gaming operators themselves are you speaking more narrowly about the trading of assets

Yeah, I guess it's probably more amongst the strategic buyers of your partners buying and selling, which would maybe pull you in as a financing source. So, you know, the casino industry developing and investing in properties rather than acquiring. It seems like a different part of the cycle. Presumably, if we saw more M&A amongst your partners, that would create more opportunities for you as well.

Yeah, you're right. And honestly, you'd probably have to ask the operators as to why they believe there isn't more M&A right now. I could speculate, and that's all I'm doing. Obviously, the operators, so many of them are trading so cheaply right now, bafflingly, bafflingly so. However you want to measure the valuation, including obviously free cash flow yields, And so it could be a time when people say, I'm not going to sell, not at this point. But again, you really have to ask them. And it could also be the fact that the economic performance of the operators has been so strong coming out of COVID. I think one open question could obviously be, OK, are these peak earnings? Are we going to sustain them? We believe that the earning power of our operating partners is going to continue, but one could reasonably ask, okay, you know, I don't want to be the guy who buys at what turned out to be a peak only to see, you know, economic performance normalized as the COVID effect wears away.

That's fair. I appreciate your comments on that. I think we've probably heard similar as well around the industry. So thank you for that.

Welcome, John.

Our next question comes from David Katz from Jefferies. Please go ahead.

Hello, David. Thanks for the question. You know, Ed, good to hear from you as always. And I wanted to just get your take on some of the non-gaming initiatives and pursuits. You know, obviously they're exciting in terms of TAM. But can you just talk about how you view the durability, the long-term durability of those asset classes such as Bolero, Canyon Ranch, et cetera, and how that compares with your initial core in Las Vegas? Thanks.

Yeah, no, it's a very good question, David, and it is an essential question we're continually asking ourselves as we investigate new experiential categories. And you've heard us talk in the past about our four key criteria of, you know, healthy supply-demand balance, low to no secular threat, the durability of the end-user experience, and lower than average cyclicality. I would add to that that we're looking for businesses that have an economic dynamism to them. which tends to really center on a certain amount of revenue complexity or, as we've come to like to say, cash register intensity. And we want that to be coupled with an operator who knows how to make the most of that economic dynamism. They're energetic operators, and they're very economically astute operators. And I would say that one of the key, key criteria among those is the durability question. Is it an asset class that has been around for decades? Has it proven itself through every economic cycle and through all the different demographic cycles? And I will give you an example right now of a category that we would be nervous about. And that is the, if you want to call it a category unto itself, that would be pickleball, right? It's an incredibly popular sport right now. It hasn't been around long. And the supply-demand balance question is very much an open one because it's not hard to put pickleball courts just about anywhere, public parks, parking lots, you name it. And I am old enough to remember a sport called racquetball, which was a very popular sport in the 70s and the 80s. And I don't know about you, David, I don't see a lot of racquetball courts around anymore. I have no idea why they're not around. It was a fun game. You didn't have to be terribly highly skilled to play it and have fun, but it's kind of gone. So we take very, very seriously the question of durability, and there's really no better evidence of durability than durability, that it has been around a while and it has succeeded through all cycles.

Perfect. Thank you very much. Appreciate it.

Thank you, David.

Our next question comes from Smead Rose from Citi. Please go ahead.

Hi, thanks. Hi, Smead. John, I wanted to follow up. Hi. I wanted to follow up with something John said, and I think you said in your opening remarks that in the regional market, revenues are being driven by the middle and the high end of the market. And my question is, you know, is that kind of always the case, or are your operators starting to see some weakness with a a lower end consumer. And do you have any concerns about that? I guess, you know, as you sort of think about the portfolio overall?

Yes, it's good to talk to you. Probably a better question for the operating side of our business or the operators, but I'll give it a go here a little bit. And my comments were about in the regional markets, like you said, the middle and the high end consumers are still coming in their frequency based on the information from our tenants. I think you're asking, or do we believe that those lower segments will come back? I think that really depends on the operator. Is the operator pulling back incentives to those consumers? And they've elected not to come because they find more ways to spend their marketing dollars in a more efficient way. So again, more an operator. conversation, but Smeeds, again, you're asking how does that affect Vici? As I always like to say, and you know this well, even with every casino closed in the world during the pandemic, Vici collected 100% of our rent on time and in cash. So if segments of the business be a little bit of a downturn, not even negative, Vici is going to collect our rent or historically collect our rent. We monitor these things. I stay on top of it because I'm a recovering operator. But in the core business of what we do, those downturns, upturns don't have a huge change in our look at the business. We look much more big picture, longer term, years out. Does that make sense, Mitch?

Yeah, no, absolutely. It sounds like maybe it's more of a strategic a goal from the operator side. We're just hearing on other calls, there just seems to be a sense that maybe consumers are starting to pull back a little bit. There's some weakness in different leisure segments. I'm just kind of curious if you guys had insight there. I wanted to ask you as well, there's been press reports that MGM Resorts is looking to I guess, sell the operating rights at MGM Springfield. And whether or not they do or not, I don't know, you probably can't comment on that. But could you talk about sort of what VG's role would be in that process and how you guys are thinking about it from your perspective, if that were to move forward?

John, do I take that or do you want Samantha to take that?

Samantha. Yeah, thanks.

Yeah, as you know, obviously, we wouldn't comment on any of our operators' sale transactions, but to the extent they were to sell an operating business, we obviously retain the asset and would enter into a lease with any transferee of that asset.

And you've seen that happen in a few, yeah, and to me, I'll just add that you've seen that in a few instances with our assets, Southern Indiana being one, Gold Strike, So we have definitely figured out how to work through those processes with existing tenants and new.

Okay.

Thank you.

Our next question is from Daniel Guglielmo from Capital One. Please go ahead.

Hello, everyone. Thank you for taking my question. You all have a diverse group of partners and tenants, both large and small. This earnings season, there have been some questions around the health of the U.S. and Canadian consumers from a risk perspective and just acknowledging that you all are well fortified at the least level. But are there certain areas of the portfolio you're thinking about more or trying to understand better in this environment?

I wouldn't say, Daniel, it's so much about – about particular assets or even particular geographies, but I do think it goes back to the question Smead's asked a moment ago, which is what kind of behaviors you're seeing per consumer segment and their income and their spending power. And I do think one of the elements of cognitive dissonance right now is this disparity between lower income consumers and higher income consumers. consumers and the degree to which you are seeing some degree of stress and or at least less liquidity for these lowering consumers than you might have a year or two ago when we were seeing the benefits of so many of the stimulus plans that came out of COVID. So we obviously, we monitor it closely. We monitor it for the impact it can obviously have on our partners, but we also monitor it as part of our overall monitoring of of the economy and the credit markets and the degree to which the remarks that Jerome Powell made yesterday when he was kind of nice Jerome as opposed to scary Jerome, I think there's a recognition even at the Fed that despite a lot of our macro measures appearing to be very robust, there are some tensions in the economy right now.

Justin Cappos, Great yeah I appreciate the detailed response and that makes sense, and then just real quick around some of the development financing in the loans and securities bucket. Justin Cappos, i'm sure you all talk with those teams on a regular basis, can you just give us an idea if there's been any recent headwinds or tailwind you're hearing about from them.

Yeah, Dan, it's David. Good to hear from you. Now, we have a very thorough asset management loan administration process, and we monitor both our tenants and our loan investments very closely. And we talk to, as John mentioned, we talk to the operators, and we also talk to our borrowers, and they are not seeing any headwinds in terms of development completion or asset performance where we do have these loan investments.

Great. Thank you.

The next question is from Michael Herring from Green Street. Please go ahead.

Thank you for taking my question. You know, just looking at the Venetian deal, it obviously looks like a win-win from our perspective, at least, just in the sense of Apollo's cost of finance and then the yield that Vici gets to invest in on the strip in Vegas. I was wondering, could you guys walk through maybe how those negotiations kind of transpired and you came to that final yield number given that it is favorable or it looks favorable on both sides and how that might look for a future uh similar investments on the strip with other partners that you guys have sure yeah michael good question uh john and michael it's nice to talk to you this morning and we agree that this is a win-win for both companies you you initially asked when did these discussions started they actually started

uh when we initially did the lease back in um during the pandemic and when we bought the real estate with apollo we bought the real estate and they bought the operation of venetian we we knew that they were going to grow the business we didn't know they were going to grow it as fast if they hadn't been so successful there and we're very very proud of them but we talked about the property growth fund and where there could be opportunities for us to grow so the discussion started and we do this often when we're doing deals to not only think about the deal that's in front of us, but where there are opportunities for us to grow, particularly with great assets like Venetian. And then as it comes to the pricing, like anything, since we started the company, we try to create beneficial deals for both sides. If one side kind of wins, it's not great for a long term relationship. So I opened up my remarks today and I Someone may have rolled their eyes about that this is about relationships, but it really is about relationships. And when you can look across the table from a good partner, you get to a price that they feel good about, we feel good about, and the transaction happens. And as you said, it's been a win-win, and we're just excited to help them add these great new amenities and upgrade the amenities that they have.

Thank you. And just sticking with the Venetian deal, Obviously, you laid out the terms of the initial disbursements and the $400 million can be up to $700 million. Is the entire scope of the project that Apollo is looking to take on, is that included in the initial $400 million? Or will they eventually need that $300 million eventually? It's just whether or not they want to use that option.

Michael, it's David. Good to hear from you. You know, one of the things you should look at is the Venetian press release that they put out yesterday where they, ahead of a 25th anniversary of the asset this Saturday, actually, where they have laid out extensive value enhancement plans, well in excess of $700 million, actually. So it's just a little bit of timing on their side as they work through the initial 400 this year. They've got a lot of things in the hopper and things that they've already done. And then just a bit of information is that all comes together, what their pace of potentially drawing that incremental $300 million, what that falls in and how they use that capital going forward.

And Michael, just to add to that, I believe you'll see the press release talks about a total of about a billion and a half of total investment into the Venetian, of which we may end up being about half of that. But I want to stress the point that I don't know of another REIT category where tenants put more capital into the REITs asset than ours. If you look across our portfolio, both our Las Vegas portfolio and our regional portfolio, any given year, our tenants are putting hundreds of millions of dollars, if not billions of dollars into our assets, making our assets more valuable. That obviously doesn't get captured in the models per se, given that obviously the transparency around the exact capital that our tenants put into each one of our assets is not necessarily there. But we can tell you based on what we know of their investment activities that no other REIT that we know of enjoys greater benefit from tenant reinvestment into our properties.

Great. Thanks. That's all very helpful. Appreciate it.

Thanks, Michael.

The next question comes from Greg McGinnis from Scotiabank. Please go ahead.

Morning, Greg. So, given that the Venetian deal originally had potential to be up to a billion, does that mean there remains potential for another 300 million here down the line, or does this exhaust that initial agreement? And in general, for the partner property growth fund, is there, you know, could there potentially be more concrete agreements ahead of time, like in the case of Venetian, or for situations like you were talking about in terms of the south side of the Strip and MGM, where there might be something Is it more likely to just have an actual investment be announced as opposed to, again, the potential for one?

Yeah. David or John?

Greg, I can start and John and Samantha chime in. Yeah, potentially there could be more than $700 million that comes out of our agreement here. The original billion dollar announcement back in 2022. We modified that as the team worked through and got in under the hood, so to speak, of the asset and realized what they wanted to do or what they wanted to undertake. So there's some tweaks to the original agreement on our side. And as Ed just laid out, the announcement that Venetian put out yesterday has up to a billion five or their plans to invest a billion five into the asset. So there could be incremental capital, but what we've documented and announced with our great partners at Apollo and Patrick and team and Rob at the Venetian is this incremental $700 million investment today. And then the second part of your question, there could be incremental dollars that we put in across the portfolio is because of the uniqueness of our assets versus any other reach out there.

Yeah, Greg, I think you should hear that we like these opportunities. And as Ed just pointed out a few minutes ago, there aren't many REITs that have this unique lever to pull to grow. I mean, there aren't many REITs that are going to say, hey, we're going to put $700 million into an asset. There's some REITs that can't even say, I want to put $700 million into my whole portfolio. We're talking one of our 93 assets. So we like this opportunity to help our partners grow. And that's one of the uniquenesses Uh, that VG has that we have the, and we were talking earlier, we can go do M and a, we can help our by other assets. But we also have this lever that we've been talking about for years that is coming to life today with definition.

Okay, thanks for the color there. And David, just on the maintained guidance real quick, was there no additional drawdown on loans without final draw structure in Q1, or was it just at an immaterial level to have no impact on the full year guide?

Sorry, the first part of your – around the draw schedules, Greg? I mean, we still feel really good about our guidance. Sorry, go ahead.

Yeah, so I understand that for loans without – Uh, you know, draw schedules that's not included in future guidance. Um, and I'm not exactly sure what was drawn, if anything. I got you right. Yeah, yeah. Okay. Thank you.

Yeah, it's immaterial if there were any, and so we still feel really good about our guidance range where we sit here today.

Okay. Thanks.

Thanks, Greg.

Our next question is from Ronald Camden from Morgan Stanley. Please go ahead.

Hey, just two quick ones. Just first, just looking for some qualitative comments, starting with the annual letter about sort of higher rates and the impact of activity. Just as you've seen sort of this recent spate of movements on the rate front, just qualitative comments on what that's doing to the pipeline, whether decisions are taking longer and so on and so forth, or if anything's falling out.

It's a timely question, Ron. I mean, it's definitely having a fairly chilling effect on trading activity, really across most all asset classes. And that's why we really value having levers to pull or tools in our toolbox where we can generate growth during periods when it would otherwise be difficult to do through conventional asset trading activity. Those obviously include things like our property partner growth fund, the Venetian being an example, through our credit book, through our expansion of existing relationships, and then again, too, having the tool in the toolbox of non-gaming and being able to do things with partners like Chelsea Piers, Home Field, Cabot, and Canyon Ranch when, again, the trading of assets would otherwise be difficult and is difficult, frankly. Okay.

Justin Cappos- Right, and then the just the second question just staying on the pipeline is, is there sort of more activity on the gaming side non gaming side all the above just any sort of color therapy helpful.

Justin Cappos- We continue to spend time yeah we continue to spend time and and a lot of different sectors on the non gaming side, whether that's wellness indoor water parks pilgrimage golf sports you've heard us make an investment. But at the same time, let's remember, as I said in my opening remarks, we get 98% of our rent from our gaming assets, and we continue to spend time with our current partners and others to grow. So for us, I know we get asked a fair amount about our non-gaming, but it shouldn't be forgotten that we're also spending a lot of time in gaming. So the answer is both, spending time in both.

Great. Thank you.

Okay, we have no further questions on the call, so I'll hand the floor back to Ed for the final closing remarks.

All right, thanks, everybody. So I want to close out the call by just reiterating how much value we believe we're creating with the announcement we made yesterday afternoon of our investment in the Venetian with our partner, Apollo. And I'm going to actually read from somebody's note because, frankly, this note expresses it better than I ever could. And in this note, the author says, we view the Venetian cap rate spread as attractive, especially considering how tight spreads are elsewhere in net lease. Bigger picture, we view this as Vici capitalizing on its relationships to double down on a winning hand. In parenthesis, the Venetian may be Vici's best acquisition to date. Close parenthesis. Despite higher interest rates, there's just nowhere else in today's triple net lease market where you can put that amount of money, $700 million up to, to work into that kind of irreplaceable real estate at a 7.25% cap rate. Then in parentheses, delusional sellers are still looking for sub-seven cap rates on their poorly located red lobsters. I could not have said it better myself. And, again, we just want to thank you for your time today and reemphasize that as noisy as it is out there and confusing at times in the marketplace, the Vici team is a team that continues to get good things done. Again, thanks for your time today, and we'll see you again in the next quarter.

This concludes today's conference call. Thank you all very much for joining.