Vici, Gaming and Leisure Properties Ratchet up Funds From Operation Guidance

Posted on: October 31, 2019, 06:20h. 

Last updated on: November 1, 2019, 10:11h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

For the second time in as many quarters, Vici Properties Inc. (NYSE:VICI) increased its full-year funds from operations (FFO) guidance. It noted that the recent completion of the JACK Cincinnati purchase, among other factors, contributed to the higher forecast.

Caesars Palace owner Vici raised FFO guidance, and so did rival Gaming and Leisure Properties. (Image: Las Vegas Review-Journal)

Vici, the owner of Caesars Palace in Las Vegas and more than 20 other domestic gaming properties, said it now expects 2019 FFO of $1.47 to $1.48 a share, which is above a prior projection of $1.45 to $1.47. Wall Street was expecting the real estate investment trust (REIT) to generate 2019 FFO of $1.41 per share.

Vici delivered third-quarter results Thursday after the close of US markets, reporting FFO of 35 cents per share on revenue of $222.5 million. Analysts expected FFO of 31 cents on turnover of $224.5 million.

Year over year we enjoyed the benefit of incremental rent from our Harrah’s Philadelphia, Margaritaville and Greektown acquisitions, the rent escalation called for in our leases, and 11 days of rent from our most recently closed acquisition, JACK Cincinnati,” said CEO Edward Pitoniak in a statement.

FFO, which is calculated by adding net income, amortization, and depreciation and subtracting property sales, is a metric frequently used by analyst and investors to properly gauge how much cash flow a REIT is generating.

Assessing a REIT’s cash flow is critical because in order for a company to gain the tax benefits that structure affords, it must pay out 90 percent of its earnings in the form of dividends. Vici, which announced a dividend increase last month, currently yields 5.05 percent.

Increasing Tenant Diversity

Pitoniak noted that in the third quarter of 2018, his company collected rent from a single tenant – Caesars Entertainment (NASDAQ:CZR). In the just-completed July through September period, Vici’s tenant count tripled to three.

Hard Rock International and Penn National Gaming (NASDAQ:PENN) are the real estate firm’s new tenants, and that roster is set to grow as more previously announced acquisitions close.

For example, when Century Casinos (NASDAQ:CNTY) finalizes purchases of the Mountaineer Casino, Racetrack and Resort in New Cumberland, W. Va. and the Isle Casino Cape Girardeau and Lady Luck Casino, both in Missouri, that operator will become another Vici tenant.

Earlier this week, Vici said it’s acquiring the Jack Cleveland Casino and the Jack Thistledown Racino from JACK Entertainment for $843.3 million in cash. Those deals are expected to close in early 2020.

Gaming And Leisure Joins The Party

Gaming and Leisure Properties (NASDAQ:GLPI) also delivered third-quarter results today and offered some bullish expectations for the current quarter.

The original gaming REIT said it expects FFO of 87 cents a share on revenue of $288.2 million for the last three months of 2019. Analysts were expecting 76 cents and turnover of $287 million.

GLPI owns the real estate assets of 46 casinos and related properties in 17 states, with 33 of those venues operated by Penn National.

During the July through September period, GLPI generated FFO of 87 cents on revenue of $287.62 million. Wall Street was expecting FFO of 76 cents on turnover of $288.11 million.