VICI Properties' credit rating to be affected by non-gaming acquisitions
VICI Properties (NYSE: VICI ) is the largest owner of casino assets in the country. However, the company's non-gaming acquisitions could impact the company's credit rating.
The owner of Caesars Palace is currently rated "BBB-" (the lowest investment grade) by Fitch Ratings, but the market could be hurt by a recent spate of non-gaming deals by real estate investment trusts (REITs). become. That includes financing adventure properties like Canyon Ranch and Cabot.
VICI's ratings focus on the back-and-forth between the company's relatively high tenant and asset concentration and higher-yielding gaming operators with weaker credit profiles, as well as the strength of the casino property structure and the balancing effect of VICI's own lease structure ,” based on Fitch Ratings.
The move away from casino properties diversifies VICI's tenant base , which primarily includes Caesars Entertainment Inc. (NASDAQ: CZR ) and MGM Resorts International (NYSE: MGM ) and Geographic Footprint of REITs. However, there are potential pros and cons as REITs move further into non-gaming experiential properties.
VICI Non-Gaming Income, Risk
One of the main benefits of VICI's focus on the gaming industry is that there are barriers to entry into the industry. Additionally, tenants are becoming increasingly financially sound, confirming their ability to meet their lease obligations to landlords, especially in Las Vegas where casino properties are enjoying appreciation.
Over time, these characteristics may also apply to other forms of experiential real estate. But there may be some fluctuations along the way.
"VICI's recent investments in Canyon Ranch, Bowlero, Kalahari, Chelsea Piers and Cabot differ from this dynamic in terms of scale, strategic importance and regulatory barriers to entry," Fitch added. "These operations are less likely to be affected than gaming operations Commercial cyclicality may also increase, which is a key risk. However, VICI still has strong legal and structural protections in these transactions, as evidenced by the master lease agreement with Bowlero."
On the other hand, these transactions enhance VICI's tenant diversification while providing opportunities for revenue and access to funds from operations (AFFO) growth.
VICI credit impact unclear
As mentioned above, VICI has the lowest investment-grade credit rating and the likelihood of a downgrade is currently low. But REITs are also unlikely to appreciate in value anytime soon.
The bottom line is that it may take some time for non-gaming acquisitions and investments to have a significant impact on VICI's revenue and profits and its credibility. An improved credit rating could lower VICI's financing costs, a distinct advantage for a company with a flair for acquisitions.
"While individual transactions to date have been relatively small, they are likely to become a more significant part of the company's business over time," Fitch concluded. "Fitch believes VICI's interest in non-gaming experiential properties The investment makes sense; however, despite the company's solid underwriting history, risks remain. As VICI continues to invest in this area, Fitch will continue to monitor the company's non-gaming property performance and overall credit profile."
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Source: www.casino.org
