Vici Properties, a real estate investment trust specialising in casino and leisure properties, recorded a significant decline in its operating results in the third quarter. Funds from operations (FFO) attributable to common stockholders fell by 55.1 per cent year-on-year to 342 million dollars, down from 762 million dollars or 0.71 dollars per share in the prior-year period.
The development was driven by higher capital costs in the net-lease REIT segment as well as uncertainties regarding a regional master lease agreement with Caesars Entertainment. With Fertitta Entertainment pursuing an acquisition of major tenant Caesars, Vici recognised expected credit losses of 458 million dollars in the reporting quarter. Of this, 331 million dollars relates to the agreement with Caesars, which runs until 2055.
Strategic review and macroeconomic headwinds
As Edward Pitoniak, Chief Executive Officer of Vici, explained during the earnings call, the team is analysing every dollar of the revenue streams from the regional Caesars leased properties under various valuation models. The focus is on determining which income structure and associated measures will generate the greatest overall value for shareholders.
Pitoniak also pointed to subdued sentiment in the net-lease REIT market resulting from persistently high interest rates, as well as headwinds from cautious consumer demand against the backdrop of inflation. To protect shareholders during phases of higher capital costs, the company aims for a leverage ratio of 5.5 times earnings before interest, taxes, depreciation and amortisation.
- —Funds from operations (FFO) fell by 55.1 per cent to 342 million dollars
- —Provisions for expected credit losses of 458 million dollars, including 331 million dollars related to Caesars
- —Total revenue increased by 5.8 per cent to 1.07 billion dollars
- —New 2 billion dollar share repurchase programme running until September 2029
Revenue increase and liquidity options
Although value-accretive growth is more challenging in the current market environment, the management board highlighted other ways of raising capital. These include future cash inflows from the repayment of outstanding loans as well as asset sales. In addition, Vici announced a 2 billion dollar share buyback programme running until 30 September 2029. Should unallocated investment capital become available, Vici will consider repurchasing its own shares.
On the top line, the REIT recorded stable business despite the exceptional charges: total revenue rose by 5.8 per cent year-on-year in the third quarter to 1.07 billion dollars, meeting market analysts' estimates.
