01—Abstract
Summary
Summary of the 10-K filed February 20, 2020. Cited figures are marked; the original filing is the authoritative source.
VICI Properties Inc. (VICI) reported total revenues of $894.8 milliona for 2019, compared with $898.0 million in 2018, and net income attributable to common stockholders of $546.0 million, or $1.24 per diluted share.
Leasing revenue rose to $865.9 millionb from $789.5 million, driven by the addition of properties acquired in 2018 and 2019. Income from direct financing and sales-type leases was $822.2 million, and tenant reimbursement of property taxes ceased after the adoption of ASC 842. Net cash from operating activities was $682.2 million, and AFFO was $649.6 million, or $1.48 per diluted share.
The company is a REIT whose 28 gaming, hospitality and entertainment properties are leased on long-term triple-net leases to subsidiaries of Caesars, Penn National, Hard Rock, Century Casinos and JACK Entertainment, and nearly all revenue comes from Caesars lease agreements. The filing is dominated by the pending Eldorado Transaction, under which VICI agreed to acquire the land and real estate of Harrah's New Orleans, Harrah's Laughlin and Harrah's Atlantic City for an aggregate $1,823.5 millionc, amend the CPLV Lease Agreement for a $1,189.9 million payment, and terminate the HLV Lease Agreement for $213.8 million. Completion depends on the Eldorado/Caesars Merger, which the filing says Eldorado expects to close in the first half of 2020.
The company also notes that its tenants' lease payments and related guarantees are concentrated in Caesars, and that Las Vegas Strip properties generated approximately 33% of lease revenue in 2019. At December 31, 2019, total debt was $4.8 billiond, with $1.0 billion available under the Revolving Credit Facility, and cash and short-term investments of $1.16 billion.
After year-end, VICI issued $2.5 billion of senior unsecured notes in February 2020, placing $2.0 billion in escrow for the Eldorado Transaction, and redeemed the $498.5 million Second Lien Notes. The company reports total debt of about $6.9 billion as of February 20, 2020.
02—Key points
Key Highlights
- Total revenues were $894.8 million in 2019, down slightly from $898.0 million in 2018, reflecting the end of tenant reimbursement of property taxes under ASC 842; leasing revenue increased to $865.9 million from $789.5 million.
- Net income attributable to common stockholders was $546.0 million in 2019 versus $523.6 million in 2018; diluted EPS was $1.24 versus $1.43, and AFFO per diluted share was $1.48 versus $1.43.
- Eldorado Transaction is pending: $1,823.5 million for three Harrah's properties, a $1,189.9 million CPLV lease payment and a $213.8 million HLV lease termination, conditioned on the Eldorado/Caesars Merger expected in the first half of 2020.
- Total debt was $4.8 billion at December 31, 2019; about $6.9 billion as of February 20, 2020 after the February 2020 senior unsecured notes offering and redemption of the Second Lien Notes.
- Caesars is the dominant tenant: substantially all revenue comes from the Caesars Lease Agreements, which the filing says represented 93% of 2019 lease revenues, with about $4.2 billion of fixed annual rents and golf membership fees over the next five years.
- Geographic concentration: properties on the Las Vegas Strip generated approximately 33% of 2019 lease revenue.
- Acquisitions in 2019 included Greektown, Margaritaville, Hard Rock Cincinnati and the Century Portfolio, and the JACK Cleveland/Thistledown acquisition closed January 24, 2020 for about $843.3 million in cash.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, VICI Properties kept $0.61.
- Revenue$894.8M100.0%
- Cost of revenue−$18.9M2.1%
- Gross profit$875.9M97.9%
- Operating costs−$823.6M92.0%
- Operating income$52.3M5.8%
- Interest, other & tax$493.7M55.2%
- Net income$546.0M61.0%
Where FY2019 revenue went
$894.8M- Operating costs: $823.6M, 92% of revenue
- Operating income: $52.3M, 5.8% of revenue
- Cost of revenue: $18.9M, 2.1% of revenue
Kept 5.8% as operating incomeOperating income $52.3M · 5.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 20, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $894.80M$897.98M | −0.4% |
| Cost of Revenue | $18.90M$17.37M | +8.8% |
| Gross Profit | $875.90M$880.61M | −0.5% |
| Operating Income | $52.30M$140.02M | −62.6% |
| Interest Expense | $248.38M$212.66M | +16.8% |
| Net Income | $545.96M$523.62M | +4.3% |
| EPS (Basic) | $1.25$1.43 | −12.6% |
| EPS (Diluted) | $1.24$1.43 | −13.3% |
| Shares Outstanding (Basic) | 435.07M367.23M | +18.5% |
| Shares Outstanding (Diluted) | 439.15M367.32M | +19.6% |
05—Questions
Frequently Asked Questions
What is the Eldorado Transaction and when is it expected to close?
VICI agreed to acquire the land and real estate of Harrah's New Orleans, Harrah's Laughlin and Harrah's Atlantic City for an aggregate $1,823.5 million, amend the CPLV Lease Agreement for $1,189.9 million, and terminate the HLV Lease Agreement for $213.8 million. It is conditioned on the Eldorado/Caesars Merger, which Eldorado has publicly said it expects to complete in the first half of 2020. The filing states that VICI cannot assure that the transactions will close on the anticipated timeframe, on the contemplated terms, or at all.
How concentrated is VICI's tenant and geographic exposure?
Substantially all revenue comes from the Caesars Lease Agreements, which represented 93% of 2019 lease revenues. Properties on the Las Vegas Strip generated approximately 33% of 2019 lease revenue. Caesars is obligated to pay about $4.2 billion in fixed annual rents and golf course membership fees over the next five years.
How did VICI's debt and liquidity change around year-end 2019?
At December 31, 2019, total debt was $4.8 billion and cash plus short-term investments was about $1.16 billion, with $1.0 billion available under the Revolving Credit Facility. In February 2020 VICI issued $750.0 million of 2025 notes, $750.0 million of 2027 notes and $1.0 billion of 2030 notes, placed $2.0 billion in escrow for the Eldorado Transaction, and redeemed the $498.5 million Second Lien Notes. The filing states total debt was about $6.9 billion as of February 20, 2020.
Why did VICI's reported revenue and operating expenses change in 2019?
Tenant reimbursement of property taxes of $81.2 million in 2018 disappeared in 2019 (with a matching $81.8 million property tax expense removed) because of the adoption of ASC 842, under which tenants pay property taxes directly. Leasing revenue rose $76.3 million, driven by properties added in 2018 and 2019, and interest expense increased $35.7 million to $248.4 million.
What do the lease terms look like?
The leases are long-term triple-net leases with initial terms of 15 years and four five-year renewal options. Caesars leases include rent escalators and variable rent components, and the filing notes that Caesars' guaranty of the Formation Lease Agreements is not currently collateralized. The filing states that the leases require tenants to bear property costs, insurance, taxes and utilities.
06—Continue