Vici Properties (VICI) Q3 2024 Earnings Name Transcript

Vici Properties (VICI -0.54%)
Q3 2024 Earnings Name
Nov 01, 2024, 10:00 a.m. ET

Contents:

• Ready Remarks
• Questions and Solutions
• Name Contributors

Ready Remarks:

Operator

Good day, women and gents. Thanks for standing by. Welcome to the VICI Properties third quarter 2024 earnings convention name. [Operator instructions] Please notice that this convention name is being recorded immediately, November 1, 2024.

I’ll now flip the decision over to Samantha Gallagher, normal counsel with VICI Properties.

Samantha Sacks Gallagher — Govt Vice President, Normal Counsel, and Secretary

Thanks, operator, and good morning. Everybody ought to have entry to the corporate’s third quarter 2024 earnings launch and supplemental info. The discharge and supplemental info may be discovered within the traders part of the VICI Properties web site at www.viciproperties.com. A few of our feedback immediately shall be forward-looking statements throughout the which means of the federal securities legal guidelines.

Ahead-looking statements, that are normally recognized by way of phrases equivalent to will, consider, anticipate, ought to, information, intend, outlook, initiatives or different related phrases are topic to quite a few dangers and uncertainties that might trigger precise outcomes to vary materially from what we anticipate. Due to this fact, you must train warning in deciphering and counting on them. I refer you to the corporate’s SEC filings for a extra detailed dialogue of the dangers that might affect future working outcomes and monetary situation. In the course of the name, we are going to talk about sure non-GAAP measures, which we consider may be helpful in evaluating the corporate’s working efficiency.

These measures shouldn’t be thought-about in isolation or as an alternative choice to our monetary outcomes ready in accordance with GAAP. A reconciliation of those measures to essentially the most straight comparable GAAP measure is obtainable on our web site in our third quarter 2024 earnings launch, our supplemental info and our filings with the SEC. For extra info with respect to non-GAAP measures of sure tenants and or counterparties mentioned on this name, please consult with the respective firm’s public filings with the SEC. Internet hosting the decision immediately, we’ve Ed Pitoniak, chief government officer; John Payne, president and chief working officer; David Kieske, chief monetary officer; Gabe Wasserman, chief accounting officer; and Laurie McCluskey, senior vice chairman of capital markets.

Ed and workforce will present some opening remarks, after which we’ll open the decision to questions. With that, I will flip the decision over to Ed.

Edward Baltazar Pitoniak — Chief Govt Officer

Thanks, Samantha, and good morning, everybody. It is an excessive world we’re at present dwelling in, is not it? I want this was a video name in order that I can ask for a present of hand on what number of of you predicted that the Fed would decrease the Fed funds fee 50 bps in mid-September, and over the following six weeks, the U.S. 10-year yield would rise 70 bps. In case you work at a hedge fund and wager that prediction, let me know for those who need assistance spending all the cash you simply made.

At VICI, we by no means tire of attempting to make sense of the occasions we’re dwelling by in order that we may be situationally prepared for the longer term which will come up out of the presence. To let you know about one of many means we use to make sense of the occasions we’re dwelling by, I want you to please seize that old school factor referred to as the pen or pencil, and that old school factor referred to as a chunk of paper. Draw a horizontal or latitude line on the paper, this axis will characterize shopper financial situations. On the left finish of the latitude line, put awful, and on the proper finish of the road, put nice.

Now by the center of the horizontal line, draw a vertical or longitude line, this axis will characterize REIT capital market situations. On the high finish of the longitude line, put nice, and on the backside finish of the road, put awful. You now have one of many key maps we use at VICI to find out at any given time the place we’re situated, latitudinally and longitudinally, in relation to shopper financial situations and REIT capital market situations and the place we could be headed. Over VICI’s seven years of existence, we’ve operated in each quadrant on this grid, and we’ve efficiently generated earnings progress and dividend progress throughout our journey by all these quadrants.

Given 2024’s volatility, we’ve operated in or verged on nearly all of those quadrants year-to-date. We like the place we at present are, in place to fund the alternatives we’re engaged on, however as all the time at VICI, we stay situationally prepared for no matter lat-long place we could also be in or headed towards. We have labored exhausting to develop a philosophy, technique, and observe of capital allocation that allows VICI to allocate capital regardless of which quadrant we discover ourselves in at any given time. We achieved the sustained and sustainable capital allocation by two key means, inner funding functionality by all cycles and investments that fund over time.

When entry to our price of capital is in a destructive quadrant, we wish to be able to what we have come to name capital markets unbiased, which means that we’ve inner capital sources obtainable to us that we are able to use to generate accretive exterior progress. At VICI, capital markets independence is funded by each retained money move and what we name regained money move, which means repayments of loans we made by VICI experiential credit score options. Relying on the mortgage repayments acquired in a given yr, our annual inner money sources obtainable for allocation may be wherever from $350 million to $500 million. When levered with debt, this can provide us $500 million to just about $1 billion of investing energy even when, once more, general capital market situations usually are not constructive.

VICI’s means to fund exterior progress it doesn’t matter what quadrant we’re in builds off our basis of same-store NOI progress, that, because of our leases, hire escalation charges and 100% occupancy is much superior to traditional internet lease REITs as documented by Inexperienced Avenue. We capitalize on the sustained funding functionality by creating funding alternatives that allow us to place capital out the door in a daily sustained cadence with Q3 2024 being an instance of 1 / 4 during which we introduced no new transactions, however nonetheless, put almost $250 million of incremental capital to work by our property associate progress funds and lending initiatives. Sustainable capital allocation is integral to a topic that we’re spiritual about. At VICI, we’re spiritual concerning the energy of compounding, the compounding of earnings progress, the compounding of dividend progress, the compounding of complete return.

One of many keys of compounding just isn’t go backwards, not in earnings, not in dividends, not in complete return. A key to sustained ahead momentum is the power to generate earnings and worth progress by all cycles in all quadrants of our VICI situations map. We do not know what the approaching quarters will usher in REIT capital market situations or shopper financial situations, so we work daily to be prepared for what could come. With that, I will now flip the decision over to John and David, who will discuss our progress outlook and present efficiency.

John?

John W. R. Payne — President and Chief Working Officer

Thanks, Ed. Good morning to all of you on the decision immediately. We’re usually requested the place we spend most of our time and power. And whereas we have constructed a workforce that may assess the big selection of alternatives throughout experiential sectors in numerous geographies in tandem, I’ve mentioned many occasions that on line casino gaming will proceed to be a serious driver of our progress.

The dimensions and scale of gaming property is one ingredient contributing to this focus, and we additionally like gaming due to how experiences at these property proceed to evolve, particularly in Las Vegas. We consider the tailwinds round gaming in Las Vegas will proceed to create funding alternatives for VICI much like the Venetian Companion Property Progress Fund funding we introduced in the course of the second quarter. A current Monetary Occasions article exemplifies our view of the longer term alternatives in Las Vegas. Within the article, Barry Diller, the chairman of IAC, shared his ideas on his firm’s stake in MGM Resorts.

He mentioned, you may’t disintermediate a bodily expertise, which is why we’re betting on Las Vegas. He then goes on to say, the quantity of leisure, sports activities, dwell performances in each attainable selection together in Las Vegas is unequaled wherever on the earth. This quote underlies the deserves of VICI’s experiential actual property technique in addition to our vital possession of Las Vegas actual property. VICI is positioned to be a primary associate of our operators as they search to take a position additional on this one-of-a-kind metropolis.

An instance we’ve usually cited is the chance introduced by the sports activities triangle on the south finish of the Las Vegas strip. With our possession of all six MGM property contained inside and alongside Allegiant Stadium, T-Cellular Enviornment, and the potential A Stadium on the previous Tropicana web site. Given the elevated densification and foot site visitors within the space, our companions at MGM could search to reinvest in these property over the approaching years. The dimensions of funding alternative inside property VICI already owns gives us with a really distinctive benefit.

We have now additionally utilized our Companion Property Progress Fund with regional tenants, together with Century, who this week is internet hosting the grand opening of their land-based on line casino in Caruthersville, Missouri. In 2022, VICI introduced an funding of $52 million to fund growth of this new on line casino resort at Century Caruthersville to interchange the final remaining riverboat on line casino on open water in Missouri. We have taken nice care within the number of our companions and investments to make sure not solely a best-in-class portfolio with high quality earnings, however a portfolio of investments and companions we are able to develop with. This ethos is foundational to our capital allocation technique and units VICI up properly for future pipeline alternatives and constant capital deployment.

Within the third quarter, we deployed $230 million of capital by numerous loans and Companion Property Progress Fund agreements. This has been our thirteenth quarter of consecutive capital deployment. VICI has constructed a legacy of getting higher as we develop greater, and we consider our disciplined technique will enable us to be situationally able to proceed to ship constant and sustainable progress. Now I will flip the decision over to David, who will talk about our monetary outcomes and steerage.

David?

David Kieske — Govt Vice President, Chief Monetary Officer

Nice. Thanks, John. Thanks, all people, for becoming a member of us. I will contact on our stability sheet, liquidity, outcomes, and our up to date full yr steerage.

Subsequent to quarter finish, we settled 7 million shares and acquired roughly $201 million beneath our ahead sale agreements. These proceeds contributed to funding the Venetian capital funding we introduced in Q2. We at present have roughly $2.9 billion in complete liquidity, comprised of roughly $160 million in money and money equivalents, $430 million of estimated proceeds obtainable beneath our excellent forwards and $2.3 billion of availability beneath our revolving credit score facility. As well as, our revolving credit score facility has an accordion choice, permitting us to request further lender commitments of as much as $1 billion.

By way of leverage, our complete debt is at present $17.1 billion. Our internet debt to annualized third quarter adjusted EBITDA, excluding the affect of unsettled ahead fairness, is roughly 5.4 occasions inside our goal leverage vary of 5 occasions to five.5 occasions. We have now a weighted common rate of interest of 4.36%, taking into consideration our hedge portfolio and a weighted common 6.3 years to maturity. Concerning the earnings assertion.

AFFO per share was $0.57 for the quarter, a rise of 4.9%, in comparison with $0.54 for the quarter ended September 30, 2023. Our outcomes as soon as once more spotlight our extremely environment friendly triple internet mannequin given the rise in adjusted EBITDA as a proportion of the corresponding enhance in income. Our margins proceed to run robust within the excessive 90% vary when eliminating noncash objects. Our G&A was $16.5 million for the quarter, and as a share of complete revenues, was just one.7%, which continues to be one of many lowest ratios in not solely the triple internet sector however throughout all REITs.

Turning to steerage. We’re updating our AFFO steerage for 2024 in each absolute {dollars} in addition to on a per share foundation. AFFO for the yr ending December 31, 2024, is anticipated to now be between $2.36 billion and $2.37 billion or between $2.25 and $2.26 per diluted frequent share. And simply as a reminder, our steerage doesn’t embrace the affect on working outcomes from any transactions that haven’t closed, curiosity earnings from any loans that don’t but have closing draw buildings, attainable future acquisitions or inclinations, capital markets exercise or different nonrecurring transactions or objects.

With that, Adam, please open the road for questions.

Questions & Solutions:

Operator

[Operator instructions] Our first query comes from Barry Jonas from Truist Securities. Barry, your line is open. Please go forward.

Barry Jonas — Analyst

Hey, guys. Good morning. I needed to start out with tribal gaming, see for those who had any up to date views there? Perhaps you might spell out any parameters you’ll stay up for execute any loans or sale leasebacks. Thanks.

Edward Baltazar Pitoniak — Chief Govt Officer

Sure, good morning, Barry. I believe the start line for us to VICI is that over our seven years, led by John and the workforce, we’ve developed very constructive highly effective relationship relationships with American Tribal Nations. We at present have 4 tribal relationships. As you realize, Barry, all of them clearly contain partnering with tribes in industrial gaming alternatives off of tribal land.

And when it comes once more to doing enterprise with tribes, we love doing enterprise with them. They’re industrial, they’re collaborative and nice to do enterprise with. In relation to doing enterprise on tribal land, it’s, once more, not about tribes being idiosyncratic. It is concerning the construction that applies to tribal gaming on tribal land that’s idiosyncratic.

And when you’ve gotten an idiosyncratic state of affairs, it is typically helpful to create a counterfactual that allows you to higher perceive the idiosyncrasy, the dangers related to the idiosyncrasy and maybe a greater understanding of easy methods to value the danger of that idiosyncrasy. So to create a counterfactual, I will ask you, Barry, to think about a situation during which we introduced that we have accomplished a take care of a industrial gaming operator on freehold industrial land. However in that deal, we let you know that, that industrial gaming operator is the one occasion on the earth entitled to function the gaming ground on the heart of the asset and certain the financial engine of the asset. And furthermore, that very same operator owns the land beneath the whole lot, and thus, can be the bottom lessor to us as the bottom lessee.

So that’s, by definition, a sandwich lease. And from the whole lot we have been capable of be taught, that’s what applies to the transaction you are implicitly referring to that bought introduced final week by our friends and colleagues at GLPI. We give full credit score to GLPI for saying this, for doing the work that went behind it. However I might say we’re nonetheless arising the training curve when to know — in relation to understanding the dangers related to that construction and easy methods to greatest value the danger.

At VICI, we spend quite a lot of time specializing in tail danger. And actually, there could also be moments when some individuals really feel each externally and internally, possibly we spend just a little an excessive amount of time centered on tail danger. However on this explicit case, the tail danger, once more, is so idiosyncratic and so distinctive to the state of affairs that we’re not at some extent the place we are able to say with any confidence, OK, the code has been cracked and the idiosyncratic dangers which have all the time utilized right here have both been eradicated or are — have been minimized to a level the place we are able to confidently value the danger.

Barry Jonas — Analyst

Nice. I actually admire that. Perhaps only for a follow-up, I needed to the touch on Vegas. Curious for those who checked out Caesar’s sale of the LINQ, I consider, right me if I am incorrect, you bought a ROFR there.

After which with that sale, questioning if we may see something occur with these 26 adjoining acres that VICI owns? Thanks.

Edward Baltazar Pitoniak — Chief Govt Officer

Sure. Simply to be clear, Barry, we didn’t have a ROFR on the LINQ Promenade. The property we’ve a ROFR on are on line casino property and never the Promenade, which is a definite property unto itself. There may be an idiosyncrasy — properly, I should not name it an idiosyncrasy.

The LINQ Promenade just isn’t technically a internet lease property. However we’re very glad to see TPG and particularly our pals at Acadia, led by Ken Bernstein, go in there. I believe there’s quite a lot of potential to proceed to make {that a} quarter precisely to your level, can turn out to be a really highly effective quarter to the land that we personal in again of the Promenade within the space in and round Caesar’s Discussion board Conference Heart.

Barry Jonas — Analyst

Nice. Thanks, Ed.

Edward Baltazar Pitoniak — Chief Govt Officer

Thanks, Barry.

Operator

The following query comes from Anthony Paolone from J.P. Morgan. Anthony, your line is open. Please go forward.

Anthony Paolone — Analyst

Thanks. Good morning. John, you talked about in your feedback simply quite a lot of alternatives for issues like reinvestment into properties and such. So I imply, are you able to simply discuss simply as you have a look at the pipeline, how a lot of it’s now actually centered on these sorts of investments versus new acquisitions and whether or not that is modified a lot within the final quarter or two?

John W. R. Payne — President and Chief Working Officer

Sure, Tony. Good morning. Excellent query. I do not suppose it is modified.

What I like about what we have accomplished is created these pillars of progress. We have got alternatives to proceed to have actual property acquisitions. As you referred to in my feedback, the power to develop with our Property Companion Progress Funds, with property that we already personal, notably in Las Vegas, though as I discussed in my opening remarks, we’re performing some — we do have some alternatives in our regional property as a result of they’re giant as properly. After which we’ve this chance, as Ed talked about in his remarks, with VICI Experiential Credit score Options, our credit score e book the place it is open doorways for us to return in, present a credit score resolution after which over time, hopefully flip it into actual property possession.

So, Tony, I would not say we’re centered extra immediately on the Property Companion Progress Funds than the opposite two. I like the truth that we’re spending time and I’ve bought a workforce now which are spending time on all three of those, which is able to present progress for us for the long run.

Anthony Paolone — Analyst

OK. Thanks. After which simply the follow-up there, possibly for you, John, and in addition, Ed, you commented concerning the 70-basis-point transfer within the 10-year over a fairly brief time frame. Do you suppose that is had any impact on simply the propensity of your counterparts to wish to transact or on simply the place pricing would possibly should be?

Edward Baltazar Pitoniak — Chief Govt Officer

Sure. Tony, it is — I would not say that transfer over the past month has essentially by itself been extremely impactful, but it surely’s all been a part of a interval of volatility that has simply been — properly, frankly, it has been type of nauseating. And I do suppose it is led to a stage of indecision and inaction that’s mirrored actually for us and what we have been capable of come ahead and let you know about. And for sure, we very a lot hope that this era of volatility will quickly begin to move.

Simply to dramatize that volatility, Tony. Again in 2018, the variety of days within the buying and selling yr when the U.S. 10-year moved 10 foundation factors or extra with three. In 2019, it was seven.

In 2020, it was 16. In 2021, it was eight. In 2022, it was 46 days. It was 39 days final yr.

And given the volatility we have seen, crikey, even this week, I believe we’re into the 20s now. And that is actually simply an instance of how lots of people have actually — lots of people on either side of the transaction desk have simply been attempting to determine the place am I immediately and the place the hell am I going to be subsequent week? And for sure, we’re amongst these many in each America and globally who hope issues actually type of relax subsequent week, and that the type of volatility we have particularly seen within the transfer index begins to settle down as a result of it has undoubtedly led to every kind of various behaviors by traders, and I believed we’re — NFL rankings are down over the past month, and that is attributed to the election. It is like, man, persons are simply so distracted and wired that may’t even — a few of the time and focus to look at NFL video games for crikey’s sake.

Anthony Paolone — Analyst

Proper. Thanks for the colour.

Operator

The following query comes from Chris Darling from Inexperienced Avenue. Chris, your line is open. Please go forward.

Chris Darling — Inexperienced Avenue Advisors — Analyst

Thanks. Good morning. Perhaps for Ed, are you able to discuss concerning the potential alternative to amass gaming property in off-strip Vegas areas? And to the extent there’s alternative and curiosity in your half in pursuing that, it would be useful for those who may elaborate possibly on what you search for when it comes to yield, protection, but in addition how you concentrate on partnering with the proper operator in that type of situation.

Edward Baltazar Pitoniak — Chief Govt Officer

And simply to be clear, Chris, once you’re saying — once you say, off-strip, you are referring to the locals and downtown markets in Las Vegas?

Chris Darling — Inexperienced Avenue Advisors — Analyst

Sure, precisely.

Edward Baltazar Pitoniak — Chief Govt Officer

Or are you talking about regional gaming?

Chris Darling — Inexperienced Avenue Advisors — Analyst

It might be both, truthfully, however I am extra so referring to throughout the Vegas Metro space itself simply off-strip.

Edward Baltazar Pitoniak — Chief Govt Officer

I see. Sure, good. John and workforce are doing quite a lot of work in that space, John, would you?

John W. R. Payne — President and Chief Working Officer

Sure. Chris, good to speak to you this morning. In case you’ve been following us as you’ve gotten for the previous couple of years, you’ve got heard us discuss our love of Las Vegas. And clearly, we have nice property on the strip, however we have been spending years assembly with operators, not solely within the native downtown market, however as you mentioned, within the regional market the place there are just a few fabulous property.

And also you ask what we do, we clearly spend time to know the operator’s high quality, the asset high quality, the credit score high quality, what a construction of a lease may appear to be, how we may doubtlessly assist an operator who has property within the native downtown or regional market develop, not solely within the present property, but when they’ve a plan to develop the variety of property, how we may — our capital may assist them develop. So it is undoubtedly been a spotlight of me and my workforce not solely just lately but in addition over the previous couple of years and there actually are some neat locations that we might like to be companions with nice operators there.

Chris Darling — Inexperienced Avenue Advisors — Analyst

All proper, useful ideas. After which possibly only one extra, and that is extra so centered on the regional facet outdoors of Vegas. Simply questioning for those who felt that you must be just a little bit extra conservative from an underwriting standpoint these days, given a few of the aggressive pressures, seemingly a slower progress backdrop that we’re in immediately? So any ideas round that will be useful to listen to.

Edward Baltazar Pitoniak — Chief Govt Officer

I will have John discuss concerning the market in a second, Chris. However what I might similar to to speak about only for a second is a e book that was actually influential to me. And once I learn it just a few years in the past, it is given to me by a man, a few of you realize him, named Mike Simanovsky, the founding father of Conversant. And it is a e book by Edward Chancellor, during which he collects the assays — sorry, not the assays, the funding memos of asset administration store out of London referred to as Marathon.

And one in every of Marathon’s major funding thesis is to determine classes which are at decrease danger of extra capital being invested within the class and creating extra capability. And I believe one of many issues we’re aware of proper now in American regional gaming is ensuring we perceive, market by market, the diploma to which given regulatory regime is liable to authorizing the creation of extra capability than the market actually ought to have the ability to maintain. And I believe there are areas, and I might say specifically, areas like Illinois and Indiana, the place I believe all of us need to be aware of, OK, when is sufficient, sufficient? However when it comes to the present tone of the market, regional market, I will flip it over to John.

John W. R. Payne — President and Chief Working Officer

Sure. Chris, and Ed hit on this very properly. Nearly — as you underwrite regional gaming, you must you must perceive a few of the historical past of it, locations like Pennsylvania that added new licenses or Illinois that added VLTs. You begin to see new states add historic horse racing machines that now look similar to slot machine.

So to your level, as we have a look at regional property, and in our lifetime, we are going to proceed to purchase actual property and buildings and regional property, however we’re very considerate in understanding the most effective we are able to on the time the competitors that’s available in the market that might affect the asset that we’re shopping for after which potential new markets that might open up. As a result of if somebody who’s been within the enterprise, I do not just like the date myself, however I am nearly happening 30 years, I do not suppose there’s a perception that states like Nebraska or Virginia, Kentucky, which has HHR machines, would actually have gaming for the time being that they do now, the magnitude that they do now. So to reply your query, we’re being considerate and disciplined in our underwriting as we have a look at regional property.

Chris Darling — Inexperienced Avenue Advisors — Analyst

Admire the ideas. That is all for me.

Edward Baltazar Pitoniak — Chief Govt Officer

Thanks, Chris.

Operator

The following query comes from Smedes Rose from Citi. Your line is open. Please go forward.

Smedes Rose — Analyst

Hello. Thanks. In your final name, you talked just a little bit about a few of your fascinating weak spot, particularly on the decrease finish of type of the patron spectrum. I am questioning for those who proceed to listen to that type of suggestions and for those who suppose which may affect their propensity to type of reinvest or to take part in your funds that you have talked about beforehand?

Edward Baltazar Pitoniak — Chief Govt Officer

John?

John W. R. Payne — President and Chief Working Officer

Sure. Smedes, it is good to speak to you this morning. Most likely the primary half is a greater query for our nice operators which have intensive particulars on their databases and the place they’re seeing constructive progress and the place they’re seeing some weak spot. I believe you’ve got seen the earnings which have come out, and a few have talked, notably within the regional markets, that they’re seeing just a little little bit of slowness within the decrease segments of their enterprise.

However we proceed to — that is the great thing about having nice companions and having fairly just a few of them, we proceed to satisfy with them, discuss how they’re interested by progress, and is there a approach which are completely different pillars of capital that I talked about earlier may assist them develop. And whether or not that is for the Property Companion Progress Fund, whether or not they have a credit score alternative, whether or not they’re constructing, wish to construct a brand new lodge, whether or not they’d prefer to construct a on line casino on land as an alternative of on a ship. These are all sort of conversations we prefer to have and are having with our companions. And we hope that results in progress for us with all several types of our companions.

Smedes Rose — Analyst

After which, Ed, possibly simply type of greater image as you simply take into consideration coming into 2025. I imply, would you be giving a type of affordable on the exterior progress facet as you concentrate on possibly you do extra frequent offers of smaller scope? Or are you guys nonetheless possibly chasing type of like the large offers, possibly within the non-gaming area that will type of extra meaningfully drive your earnings progress subsequent yr? I assume I am simply attempting to consider the chance set now that you have had extra time, I assume, to consider type of non-gaming and gaming funding alternatives, simply the way it would possibly play out right here?

Edward Baltazar Pitoniak — Chief Govt Officer

Sure, Smedes, it is one thing we take into consideration daily. We have now set forth targets and techniques at VICI that, like all targets and techniques, have trade-offs. And anybody who thinks their technique would not contain trade-offs both would not have a technique, would not perceive it or it isn’t really a differentiated technique. And in our give attention to experiential and our dedication to experiential, each gaming and nongaming, we’ve to simply accept the trade-off that it isn’t a class of actual property transaction that has an infinite stream of marketed processes.

So we have to do quite a lot of work daily, and John and the workforce and David and the workforce do work each single day, and Samantha and the workforce, to determine and chase down alternatives that normally usually are not marketed or if they’re marketed in any respect, it is fairly quietly. As we stay up for subsequent yr, John and David and Samantha and the groups are engaged on some very thrilling stuff, together with greater property and gaming. And the one time goes to inform if we are able to deliver these to full fruition, we want once more — there are occasions after we want, geez, it would be good to have one in every of these stamping machines the place we simply stamp out each week just a few offers or possibly we purchased automotive washes or dry cleaners or comfort shops or no matter, however that is not what we give attention to, that is not what we spend money on, and we’ve to simply accept the trade-off that our deal move shall be extra sporadic. However as we have a look at 2025 and given what we’re engaged on, we stay assured that we’re going to be bringing to the desk each gaming and nongaming offers, large and small.

And we’ll proceed the expansion profile we have had over our seven years.

Smedes Rose — Analyst

Thanks. Admire it.

Edward Baltazar Pitoniak — Chief Govt Officer

Thanks, Smedes.

Operator

The following query comes from John Dave from CBRE. John, your line is open. Please go forward.

Unknown speaker — — Analyst

Good morning, everybody. Thanks for taking all people’s questions. Ed, John, I needed to return to your response to an earlier query as a result of it is one thing I have been interested by loads, and I apologize in case your reply goes to be the identical. However I needed to speak concerning the regional gaming panorama and the pattern the place we’re seeing, possibly some new openings and a few areas the place there’s been much more unit progress, some cannibalization or same-store gross sales declines.

And so that you talked about you are being very cognizant of that. However I used to be curious for those who may go into just a little bit extra element about investments and a few of the issues that you simply’d think about in underwriting? Is it increased hire protection? Is it distinctive or sure operators that maybe have a aggressive scale benefit? Would you possibly solely think about bigger property which have a pair bigger obstacles to entry? So simply type of curious how you concentrate on deploying capital in regional gaming, the place possibly the — in some markets, the regulatory surroundings, I believe it is a bit extra predictable given historical past. However John, you identified to markets which have type of have casinos immediately that we weren’t interested by earlier than. So curious the way you type of underwrite a few of the standards you would possibly have a look at?

Edward Baltazar Pitoniak — Chief Govt Officer

Sure. I will flip it over to John in only a second, John. However I might say as a place to begin, you actually have to have a look at each state of affairs market by market to know, perceive what the aggressive market is. And for a given asset and for a given operator, what’s their alternative to carve out a worthwhile place in that market.

It will not essentially all the time be the large property. It might be small property that within the arms of the proper, smaller asset operator who is aware of easy methods to compete and generate profits with smaller property in a given market, these can nonetheless be very enticing to us. Nevertheless it actually comes down a lot to the diploma to which a given operator has a extremely, actually wholesome aggressive response operate. And that is one thing we have all the time valued.

However I believe to your implicit level, John, at a time like this, you actually wish to perceive that given operators’ means to compete profitably for market share. John, do you wish to add to that. John Payne?

John W. R. Payne — President and Chief Working Officer

Sure. I’ll, John. When Ed and I began VICI again in 2017, one of many issues I requested myself as I left my working profession was would the views from an operator make a distinction inside a REIT in the best way we underwrite our actual property? And to your query, that is the place my previous job truly has some worth in underwriting the enterprise. So we are able to dig into the enterprise.

And the great thing about our operators is that they have nice element on the patron and the place the patron is coming. So if we’re an asset that doubtlessly will get their friends from lots of of miles away, the prospect of affect from a brand new on line casino might be better than an asset that will get their customers from 15 miles away. That is only one instance of how we’re going to be disciplined as we go into regional markets. After all, we’ll weigh asset high quality, operator high quality, credit score high quality, construction of lease high quality, these sorts of issues, however we are able to additionally, with our operations background, go in and higher perceive may it get disrupted ought to the panorama change.

As a result of bear in mind, about being disciplined, we’re not investing only for the close to time period. I believe anybody may make investments for the close to time period and look good. Our mission is for the long run. And I believe that you must be disciplined within the surroundings we’re in and perceive what may finally affect the enterprise, possibly it is not this yr or subsequent yr however over the following decade.

Unknown speaker — — Analyst

Thanks. I admire incremental colour there. That is useful. And possibly a fast one, we talked just a little bit earlier additionally about possibly some gaming investments and alternatives within the Las Vegas locals market off the strip, however the metropolis is simply type of thriving in all methods.

I am curious if some nongaming stuff outdoors of the Las Vegas Strip, however within the Las Vegas metro space, one thing that is on the radar, alternatives which are beginning to possibly bubble up. I imply it is changing into a large sports activities city. And so interested by a few of the different property in your portfolio, youth sports activities, and many others., is that an space of focus, nongaming in Las Vegas off the strip that you simply’re listening to or in a significant approach proper now?

Edward Baltazar Pitoniak — Chief Govt Officer

Sure, I will flip it over to John. I used to be going to say, it is fascinating you deliver that up. We have gotten to know Jose Bautista, as a few of it’s possible you’ll bear in mind, who’s now the proprietor of the Las Vegas Lights, the soccer workforce within the USL. And as he appears to be like at how he offers his workforce a extremely good dwelling within the Las Vegas basin, one of many issues we have talked about is the diploma to which initiatives like the house area venture we have invested in, in Kansas Metropolis makes a lot sense in an surroundings like that when it comes to the demand for these type of new sport services, John DeCree.

However John Payne, go forward, please.

John W. R. Payne — President and Chief Working Officer

Sure. John, it is a superb query. And once you spend as a lot time as we’ve, not solely on the strip, however within the locals market, downtown within the regional market, lots of the operators are entrepreneurs. They’re concerned in issues, not solely casinos, which we love casinos, however different experiential property.

And so that you’re proper on level, Ed’s proper on level. Not solely are we learning the chance to personal nice actual property, on line casino actual property in these native regional market of Las Vegas, different alternatives have opened up and we’ll examine them and see if there’s one thing that we are able to get entangled within the close to time period and even in the long run. Nice query.

Unknown speaker — — Analyst

Superior. Thanks, guys. Thanks.

Operator

Subsequent query comes from Jim Kammert from Evercore. Your line is open. Please go forward.

Jim Kammert — Evercore ISI — Analyst

Good morning. Thanks. Ed, reflecting in your earlier feedback, the charges backing up and clearly, quite a lot of volatility. I might have thought naively, does that not doubtlessly assist the experiential credit score options e book given your means to shut certainty and scale obtainable capital?

Edward Baltazar Pitoniak — Chief Govt Officer

It does, Jim. It does. And I might say we’re — we have quite a lot of strains within the water proper now on the lending facet. However the uncertainty on a week-by-week foundation may cause us and any potential borrower to simply marvel, what’s market this week, proper? What’s my unfold this week, but when I decide to the unfold, what that unfold goes to appear to be subsequent week.

So once more, I believe it is all half and parcel of capital markets, shopper markets, and nearly each different market having been right here in a state of flux and volatility that has made decision-making more difficult. Jim, I will simply share with you that we started preparation of our annual long-term plan on July 1. We ended up presenting it to our board at Canyon Ranch in Lenox in mid-September. Over that 70-day interval, our inventory went — was in 2 share factors of our 52-week low after which went to a brand new 52-week excessive.

And over that interval, the U.S. 10-year went from 4.5 right down to, I believe, as little as 3.6. So once more, now we’re speaking a few interval of 4 months, July, August, September and October, which have simply been actually tumultuous, and I believe it is affected — I believe it undoubtedly affected deal move and has affected how we and all people else underwrite. However I believe all of us need to hope and consider that issues will come right down to a level the place all people feels a bit extra conviction within the visibility and certainty of what they’ll decide to.

Jim Kammert — Evercore ISI — Analyst

That is truthful sufficient. Good feedback. After which again to your opening feedback concerning the quadrant evaluation, I might think about VICI presumes are within the high — above the horizontal line when it comes to actual property and REIT capital markets. The place are you considering when it comes to the patron sentiment, and many others.? And the way is that doubtlessly influencing the way you’re interested by investing going into ’25?

Edward Baltazar Pitoniak — Chief Govt Officer

Sure. I hoped anyone would ask that query, Jim, the place do we expect we’re proper now. I might say, sure, we’re within the higher proper quadrant. Clearly, the patron typically appears to be like good.

However I believe it was wanted to ask just a little bit earlier, what’s going on throughout all the shopper spectrum. And are we seeing indicators of potential weak spot, whether or not it’s in bank card delinquency, automotive mortgage delinquency, footfalls into retail and different metrics. And it is a bit of a blended image, however I believe general, shopper financial situations are fairly good. And I might say REIT capital market situations have been typically good since mid-July, however they’ve actually been unstable in the previous few weeks.

So I might say higher proper. However what we all the time give attention to, as I alluded to, Jim, just isn’t solely the place we’re, however what do we expect the trajectory is when it comes to the place we could be going given the period of time it takes us to tug a deal collectively. We have to know the place we’re more likely to be in a interval sooner or later as a lot as we have to know the place we’re immediately.

Jim Kammert — Evercore ISI — Analyst

Nice. Admire your feedback. Thanks.

Edward Baltazar Pitoniak — Chief Govt Officer

Thanks, Jim.

Operator

The following query comes from John Kilichowski from Wells Fargo. John, your line is open. Please go forward.

John Kilichowski — Analyst

Hello, thanks. Final quarter, we spent quite a lot of time speaking about Harrah’s Hoosier Park name choice. And remind me if we have spoken about this earlier than, however once I take into consideration that asset and the discussion board, there’s additionally put choices hooked up to that, that expire December of this yr. How are you interested by these put choices? Is it seemingly? Or have you ever made any type of commentary or have they made commentary to you concerning the probability of them exercising these put choices? And does that hold capital sidelined as you wait to see what is going on to occur there?

Edward Baltazar Pitoniak — Chief Govt Officer

Sure. Truly, Caesars has acknowledged very explicitly at quite a lot of events, they don’t have any intention of placing the Indiana property to us. So no, that has not affected how we take into consideration our capital and our funding capabilities.

John Kilichowski — Analyst

OK. Understood. After which possibly on — simply on the election right here. Something on the poll because it pertains to regional gaming that we needs to be interested by?

Edward Baltazar Pitoniak — Chief Govt Officer

Not that I am conscious of. John Payne, are you?

John W. R. Payne — President and Chief Working Officer

Sure. There’s a few issues. I imply, there’s Missouri, Arkansas and Virginia. New on line casino, Virginia, Arkansas, Polk County after which in Missouri, they’re speaking about on-line sports activities betting in addition to a brand new on line casino in Ozark.

So truly fairly quiet for gaming, notably once you examine it to different years.

John Kilichowski — Analyst

OK. After which possibly final one for me. The capital that you simply put to work within the quarter, there was $150 million that went to the Venetian. However the different $80 million you talked about a mortgage, and I do not know if I caught the phrases of that mortgage or what fund that was in.

May you give us just a little extra colour on that capital?

Edward Baltazar Pitoniak — Chief Govt Officer

David?

David Kieske — Govt Vice President, Chief Monetary Officer

John, it is David. Good to speak to you. These are — the incremental $80-odd million is incremental attracts primarily beneath the Nice Wolf loans in Foxwoods after which the house area growth in addition to some smaller fundings for Cabot and Canyon Ranch. So beforehand introduced mortgage fundings or beforehand introduced loans which have continued to attract schedules.

John Kilichowski — Analyst

Received it. Understood. Thanks.

Operator

The following query comes from Dan Guglielmo from Capital One. Dan, your line is open. Please go forward.

Daniel Guglielmo — Analyst

Hey, everybody. Thanks for taking my questions. It has been a tricky earnings for some operators and Vegas softness appears to be on investor minds. In your expertise, do Vegas developments like this affect cap charges for the on line casino actual property there? Or Is it too brief time period and simply type of the character of proudly owning these property?

Edward Baltazar Pitoniak — Chief Govt Officer

Sure, Dan, good to speak to you. I will have John Payne simply remind all people what MGM’s occupancy was on the strip in Q3. However in relation to cap charges, I might say cap charges are most likely way more depending on our actual property funding capital market situations and normal valuation developments than they’re in operator efficiency quarter-to-quarter. John, do you wish to simply discuss just a little bit about how —

John W. R. Payne — President and Chief Working Officer

I am a recovering operator, Dan, as you realize. So I noticed that — I’ve seen the feedback concerning the efficiency of our two largest tenants, MGM and Caesars. And also you have a look at a few of the numbers and so they ran — as Ed was saying, MGM are in 94% occupancy in quarter three, ADR was up from single digits. So I do know as you dig in and as they discuss what’s arising, you see some important feedback about F1, which once more, long run, F1 is nice for the town.

And brief time period, it is nice for the town. It is driving a weekend that was very gradual. Is it down a tiny bit from final yr? It appears to be like like we’ll have to attend and see. However as Ed and I discuss it, I am undecided if a lodge firm reported that that they had 94% occupancy in quarter three that there’d most likely be an enormous occasion thrown for them.

So it is fascinating, it is exhausting to measure these giant property on an each 90-day interval. And these are the most effective operators on the earth. Each time one thing is thrown at them, they work out easy methods to proceed to develop the enterprise. When each on line casino was shut down throughout COVID, they got here again and ran extra profitably than they ever run them earlier than.

So once more, if they’ve a tricky 90 days, they’re going to determine it out over the following 90, 180, within the subsequent couple of years. So we really feel actually good about Las Vegas and the groups which are operating their companies there.

Daniel Guglielmo — Analyst

I admire all that colour and that is sensible. And simply across the experiential companions, it is robust from type of RC to get a view of how the Nice Wolf, Cabots and Canyon Ranches of the world are doing in type of this advanced time. So at a excessive stage, once you all discuss with these companions, what are a few of the tailwinds and headwinds that they’re interested by?

Edward Baltazar Pitoniak — Chief Govt Officer

David, do you wish to take that?

David Kieske — Govt Vice President, Chief Monetary Officer

Sure, certain, completely satisfied to. Dan, good to talk with you. Look, once you drill into every of the companions, they’ve an providing that is very distinctive, and a part of the rationale we partnered with them within the first place. And so Nice Wolf, as a on line casino with out gaming, efficiency continues to be stable, possibly just a little little bit of a falloff within the weaker shopper, the lower-end shopper, much like gaming.

However the drive-to vacation spot of that providing and the affordability of that providing, you may go for at some point, you go for 5 days. And you do not take holidays away out of your children. And so their enterprise continues to be robust. They’ve opened 4 property, three property this yr with one other one opening early subsequent yr up in Foxwoods.

And so the pipeline and the efficiency of these property are nice. After which we talked about with pilgrimage golf and Cabot, the tire finish shopper, the golfer could be very, very avid of going out and attempting new programs. Cabot does an exceptional job of bringing in new friends within the advertising and marketing that they do for his or her property and highlighting the standard of the golf expertise that they are offering. After which we talked about with you up to now round wellness and mindfulness and other people’s need for longevity and higher dwelling.

And so the Canyon Ranches of the world are performing properly and proceed to draw prospects and supply a stage of service that’s second to none.

Daniel Guglielmo — Analyst

Nice. Thanks. Admire that.

Operator

The following query comes from Caitlin Burrows from Goldman Sachs. Caitlin, your line is open. Please go forward.

Unknown speaker — — Analyst

That is Jeremy on for Caitlin. I do know you guys talked about that this was the beginning of the property progress settlement with the Venetian. Are there some other particular associate property progress alternatives within the pipeline you are contemplating or going to strategy by? Thanks.

Edward Baltazar Pitoniak — Chief Govt Officer

John?

John W. R. Payne — President and Chief Working Officer

We constantly search for alternatives to spend money on our present property, notably those in Las Vegas. We do not have something to announce. However as I mentioned in my opening remarks, the sports activities triangle, the place we personal six property round an space of the city that’s rising and changing into extra dense. We hope over the approaching years, there will be a chance for us to take a position there, however nothing to announce presently.

Edward Baltazar Pitoniak — Chief Govt Officer

Sure, I used to be simply going so as to add, for these of you who do not observe MGM, I might encourage you to go have a look at their Q3 earnings deck which does have just a few pages speaking about precisely what John Payne simply talked about, which is the chance to accentuate, densify the property that MGM operates and that we personal within the space outlined by Allegiant, T-Cellular Enviornment, and the forthcoming A Stadium. We stand to be, along with MGM, the most important beneficiaries of the intensification of that space of Las Vegas. And actually, there is a credit score analyst on the market who speculated that MGM will truly be the best beneficiary when the A Stadium comes into operation.

Unknown speaker — — Analyst

Received it. That is useful. After which I assume another query as VICI continues to construct relationships and discover alternatives to get recurring transactions and progress, would you say the vast majority of these new relationships are within the nongaming area?

Edward Baltazar Pitoniak — Chief Govt Officer

John or David, do you wish to take that?

John W. R. Payne — President and Chief Working Officer

I will take that. I would not essentially say it is extra nongaming in any respect. There’s nonetheless alternatives on the gaming facet. As we mentioned earlier than, the nongaming different experiential transactions more than likely shall be of smaller scale than the gaming facet.

So we could have extra frequent, smaller, and which will result in extra nongaming companions. However there’s nonetheless many alternatives with new companions within the on line casino area, not solely in america however all around the world.

Edward Baltazar Pitoniak — Chief Govt Officer

Sure. And let me simply add that as a result of no one has requested about it in a short time. And that, after all, has to do with the New York gaming license approval course of. However when — properly, I ought to say, if the day comes and when the day comes, we hope that MGM is granted a full gaming license for the property that we personal the true property in Yonkers that shall be a serious property associate progress and alternative for VICI.

Unknown speaker — — Analyst

Received it. Thanks.

Operator

Subsequent query comes from David Katz from Jefferies. David, your line is open. Please go forward.

David Katz — Analyst

Thanks for taking my query. I believe you might have answered this partially, however I do wish to simply double again on the nongaming alternatives, which immediately are small. And John, I believe you touched on the truth that they maybe stay small. If we glance out just a little long term and begin considering three to 5 years, can they turn out to be one thing that’s lower than 10% or 15%? Or I do not anticipate you to essentially put a quantity on it, however give us a imaginative and prescient for a way these may turn out to be a lot bigger and long term, please?

Edward Baltazar Pitoniak — Chief Govt Officer

Sure. I believe, David, the best way we give it some thought is absolutely within the context of how can we construct our hire base on a year-by-year foundation with an ambition to develop the hire base by — at a base stage, about possibly three-odd p.c a yr, proper? And so that will characterize on our present hire base a run fee of about $90-odd million of latest hire yearly. And so we consider each alternative, together with nongaming alternatives on the diploma to which they’ll contribute to rising hire by 1 share level or two or three. And so after we discuss these smaller offers, nongaming offers, they’re small by the requirements of VICI offers.

They’re truly actually giant by the requirements of typical internet lease offers, which are likely to contain shopping for shops which may have between $200,000 and $400,000 of hire per field versus us doing offers that typically are going to have rents of many thousands and thousands of {dollars} of hire per field.

David Katz — Analyst

OK. Thanks. Good.

Operator

Our closing query immediately comes from Ronald Kamdem from Morgan Stanley. Ronald, your line is open. Please go forward.

Unknown speaker — — Analyst

Hey, good morning. It is Jenny on for Ron. Thanks for taking my query. I believe first is, I wish to dig just a little deeper on youth sports activities or leisure sports activities sector.

Are you able to discuss just a little bit extra on the outlook of this sector and never solely in Vegas, however national-wise, do you see extra alternatives for progress? And do you look to do extra strategic funding on this space within the subsequent three to 5 years? Thanks.

Edward Baltazar Pitoniak — Chief Govt Officer

Sure, Jenny. Nicely, we undoubtedly do. And I believe you may see how that is manifesting itself in sure personal fairness agency investments in youth sport. Harris Blitzer is clearly an excellent instance — or I ought to say, David Blitzer’s household workplace is a good instance of an organization that is actually centered on youth sport and also you see that in quite a lot of retailers.

And so they’re all capitalizing on the best way during which youth sport has grown as a key, key element of youth and household tradition. And it is just a little exhausting to inform precisely proper now given the info, what the youth inhabitants goes to appear to be over the approaching years. However I can let you know anecdotally, there are quite a lot of little children on the market proper now. Once more, I am undecided the info completely picks it up, however we have been evaluating notes on Halloween trick or treating participation charges final evening, and I do know — and Samantha was simply blown away by what number of children have been roaming the streets at Westport, Connecticut.

And there is quite a lot of children on the market and quite a lot of them are going to play sports activities at a excessive stage. And we expect that the necessity for services is simply going to develop.

Unknown speaker — — Analyst

Sure. I agree the info facet is just a little bit tough to get for youth sports activities. I assume my second query is I wish to know if you wish to talk about extra on the tone of the diversification technique, like acknowledging VICI have already got a fairly diversified tenant base. However is there any particular sector that you simply suppose you wish to broaden the present tenant base? Any particular sectors that you simply choose going ahead to have extra publicity?

Edward Baltazar Pitoniak — Chief Govt Officer

John or David?

David Kieske — Govt Vice President, Chief Monetary Officer

[Inaudible] Go forward, John.

John W. R. Payne — President and Chief Working Officer

Go forward, David. No, go forward. Go forward.

David Kieske — Govt Vice President, Chief Monetary Officer

Sure. I believe the query, Jenny, simply to verify I heard you, is about Canada, proper? And if we have a look at Canada and we have a look at the globe internationally, and John touched on this in his feedback about gaming operators earlier that there is each gaming and nongaming alternatives throughout the globe. We have spoken with quite a lot of you about how our workforce has actually mapped the globe and attempt to give attention to the place we are able to purchase actual property, and that is a operate of foreign money markets, rule of legislation, tax regime, sure nations had very, very excessive overseas taxes on overseas actual property possession. In order that negates a few of the aggressive alternative.

However particularly in Canada, we have clearly made our first overseas funding into Canada since then we have gone into Scotland within the Saint Lucia. We might love to do each extra gaming and nongaming north of the border. And we expect there’s nice operators up there, nice economies up there, nice components of the experiential spectrum that we would like to enter. And so we do not have something speedy, as John would say, however hopefully, there’s extra to return up there.

Unknown speaker — — Analyst

Completely is sensible. Thanks for the colour.

Operator

I will now hand the decision again to Ed for some closing remarks.

Edward Baltazar Pitoniak — Chief Govt Officer

Sure. Thanks, Adam. Due to all people for becoming a member of us immediately. And hey, guess what? Guess the place NAREIT is that this November? I assume it is simply a few weeks.

It’s in Las Vegas. We hope we see a lot of you there. We have got quite a lot of nice occasions which are going to assist showcase what is going on on in Las Vegas and attain out to a few of our respective banking companions, for those who’re curious about these occasions. They will be enjoyable.

With that, bye for now.

Operator

[Operator signoff]

Length: 0 minutes

Name individuals:

Samantha Sacks Gallagher — Govt Vice President, Normal Counsel, and Secretary

Edward Baltazar Pitoniak — Chief Govt Officer

John W. R. Payne — President and Chief Working Officer

David Kieske — Govt Vice President, Chief Monetary Officer

Barry Jonas — Analyst

Ed Pitoniak — Chief Govt Officer

Anthony Paolone — Analyst

John Payne — President and Chief Working Officer

Tony Paolone — Analyst

Chris Darling — Inexperienced Avenue Advisors — Analyst

Smedes Rose — Analyst

Unknown speaker — — Analyst

Jim Kammert — Evercore ISI — Analyst

John Kilichowski — Analyst

Daniel Guglielmo — Analyst

Dan Guglielmo — Analyst

David Katz — Analyst

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