01—Abstract
Summary
Summary of the 10-K filed February 14, 2019. Cited figures are marked; the original filing is the authoritative source.
VICI Properties Inc. (VICI) reported its first full year of operations as a stand-alone REIT for the year ended December 31, 2018, with total revenues of $897.98 milliona, net income of $532.1 million and net income attributable to common stockholders of $523.6 million, or $1.43 per diluted share.
The prior comparison is the period from October 6, 2017 (Formation Date) to December 31, 2017, when revenues were $187.6 millionb. Revenue growth primarily reflects a full year of operations and the addition of Octavius Tower and Harrah's Philadelphia during 2018. The filing states that substantially all revenue comes from triple-net Lease Agreements with subsidiaries of Caesars and Penn National, and that all properties are 100% occupied.
Caesars is obligated to pay approximately $4.2 billionc in fixed annual rents and golf membership fees over the next five years, and Caesars was the only tenant as of December 31, 2018. At year-end 2018, VICI reported total assets of $11.33 billion, total debt of $4.15 billion in face value, cash and cash equivalents of $577.9 million and short-term investments of $520.9 million, with $400.0 million available under its Revolving Credit Facility. Cash dividends declared were $0.9975 per share for 2018.
The company raised $1.3 billiond in net proceeds from its February 2018 IPO and $694.2 million from a November 2018 follow-on offering, and it announced a targeted annualized dividend of $1.15 per share in September 2018. Looking forward, the filing describes a pending acquisition of Greektown Casino-Hotel in Detroit for $700.0 million in cash, expected to close in mid-2019 with an initial annual rent of $55.6 million, and the completed acquisition of Margaritaville Resort Casino on January 2, 2019, leased to a subsidiary of Penn National. The filing also notes risks including tenant dependence on Caesars, the concentration of revenue on the Las Vegas Strip (approximately 36% of lease revenue), and substantial indebtedness.
02—Key points
Key Highlights
- Total revenues of $897.98 million for 2018, compared with $187.6 million for the October 6 to December 31, 2017 period, reflecting a full year of operations.
- Net income attributable to common stockholders of $523.6 million, or $1.43 per diluted share, for 2018.
- Lease revenue is generated from triple-net leases; the filing states all properties are 100% occupied and Caesars was the sole tenant as of December 31, 2018.
- Caesars is obligated to pay approximately $4.2 billion in fixed annual rents and golf membership fees over the next five years.
- Total assets of $11.33 billion and debt of $4.15 billion in face value as of December 31, 2018; $400.0 million available under the Revolving Credit Facility.
- Pending $700.0 million acquisition of Greektown, with a 15-year triple-net lease to Penn National subsidiaries carrying initial annual rent of $55.6 million, expected to close mid-2019.
- Dividends declared of $0.9975 per share in 2018, with a targeted annualized dividend increased to $1.15 per share in September 2018.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, VICI Properties kept $0.58.
- Revenue$898.0M100.0%
- Cost of revenue−$17.4M1.9%
- Gross profit$880.6M98.1%
- Operating costs−$740.6M82.5%
- Operating income$140.0M15.6%
- Interest, other & tax$383.6M42.7%
- Net income$523.6M58.3%
Where FY2018 revenue went
$898.0M- Operating costs: $740.6M, 82% of revenue
- Operating income: $140.0M, 16% of revenue
- Cost of revenue: $17.4M, 1.9% of revenue
Kept 16% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 14, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $897.98M$187.61M | +378.6% |
| Cost of Revenue | $17.37M— | — |
| Gross Profit | $880.61M— | — |
| Operating Expenses | $140.02M— | — |
| Operating Income | $140.02M$144.20M | −2.9% |
| Interest Expense | $212.66M$63.35M | +235.7% |
| Net Income | $523.62M$44.54M | +1075.7% |
| EPS (Basic) | $1.43— | — |
| EPS (Diluted) | $1.43— | — |
| Shares Outstanding (Basic) | 367.23M— | — |
| Shares Outstanding (Diluted) | 367.32M— | — |
05—Questions
Frequently Asked Questions
What drove the increase in VICI's revenue in 2018?
The filing attributes the increase primarily to a full year of operations in 2018 compared with only about three months in 2017, along with the addition of Octavius Tower and Harrah's Philadelphia to the real estate portfolio during 2018. Total revenues were $897.98 million for 2018 versus $187.6 million for the 2017 period.
How concentrated is VICI's tenant base and revenue?
The filing states that Caesars was the only tenant as of December 31, 2018, and that substantially all revenue comes from leases with Caesars and Penn National subsidiaries. Properties on the Las Vegas Strip generated approximately 36% of lease revenue for 2018, which the filing identifies as a concentration risk.
What acquisitions has VICI completed or agreed to make?
In 2018 VICI completed the purchases of Octavius Tower for $507.5 million and Harrah's Philadelphia for $241.5 million (reduced by $159.0 million for lease modifications, leaving cash consideration of about $82.5 million). It completed the Margaritaville Resort Casino acquisition on January 2, 2019 and has a pending $700.0 million Greektown acquisition expected to close in mid-2019.
How is VICI funding its growth and what is its debt position?
The company raised net proceeds of $1.3 billion from its February 2018 IPO and $694.2 million from its November 2018 follow-on offering. Debt at December 31, 2018 consisted of a $2.1 billion Term Loan B Facility, $498.5 million of Second Lien Notes and a $1.55 billion CPLV CMBS Debt, and the filing states the company was in compliance with its debt covenants. The filing says it expects to fund the Greektown purchase with about $350.0 million of cash on hand and $350.0 million of debt.
What do the filing's risk factors highlight for investors?
Key risks include dependence on Caesars and Penn National as tenants and guarantors, the company's substantial indebtedness and related covenants, the gaming industry's exposure to economic conditions, the possibility of non-renewal of leases at the end of their terms, and REIT qualification requirements. The filing also notes that the pending Greektown acquisition may not close on the anticipated terms or timeline.
06—Continue