VICI credit rating confirmed as BBB-, outlook stable
Fitch Ratings affirmed VICI Properties' (NYSE: VICI ) corporate credit rating at 'BBB-' with a 'stable' outlook in a new report.
That means the largest landlords on the Las Vegas Strip have the lowest credit ratings on the investment-grade scale. Fitch noted that if the real estate investment trust (REIT) can maintain net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) below 4.5x as it diversifies its tenant base and VICI and its competitors demonstrate The ability to easily access capital markets when necessary.
In terms of tenant diversity, VICI's two largest clients are MGM Resorts International (NYSE: MGM ) and Caesars Entertainment Inc. (NASDAQ: CZR ), which This leaves this REIT with tremendous investment opportunities on the Las Vegas Strip as well as many other regional casino markets.
VICI, whose clients include Apollo Global Management, Century Casinos and Hard Rock International, confirmed that gaming REITs vary by region and casino size. Fitch notes that MGM and Caesars Entertainment Group together account for 76% of VICI's adjusted sales.
VICI’s Favorable Fundamentals
VICI is a leader in the broader real estate sector at a time when pressure is increasing in certain areas of the commercial real estate market, particularly office space. Strong rental income and the ability to thrive in an inflationary environment are among the factors supporting the REIT investment thesis.
On the positive side, the company has solid occupancy and rental income on the back of escalators tied to the Consumer Price Index, although gaming REITs overall are lower compared to more traditional commercial real estate property types. Contingent liquidity is weaker, which has a negative impact on valuations. " Fitch said. "The ratings also take into account Fitch's expectation that the deleveraging ratio will be below 5.5 by 2024; if deleveraging is delayed due to operational or capital allocation issues, the rating or outlook may decline. changes occur. "
VICI's leverage is trending towards the upper end of its historical range as a result of a series of transactions completed in recent years that have significantly expanded the REIT's client and property roster. Fitch expects the company to be able to reduce this to 5x to 5.5x by the end of 2024.
The ratings agency added: "Debt reduction will come from a combination of annual contracted rental revenue growth (all fixed but including potential increases in consumer price index-linked escalators) and whether residual post-merger cash flow will be used for acquisitions. "
VICI could be a long-term candidate
A better credit rating is critical for every company because the higher the issuer's credit rating, the more interest is saved when selling the company's debt.
Rating agencies such as Fitch generally do not downgrade or upgrade corporate ratings easily. But VICI is a solid candidate for long-term credit score improvement. The continued appeal of Las Vegas and area casino properties is one reason.
“On the positive side, non-traditional owners are increasingly purchasing Las Vegas properties (such as private equity), which is leading to lower capitalization rates and a long-term impact on the attractiveness of Las Vegas gaming properties. Positive impact,” Fitch concluded. “Regional gaming has performed better than many other hard-hit industries during the pandemic, which should also be positive in the long term as it relates to the attractiveness of regional gaming.”
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Source: www.casino.org
