U.S. Markets open in 11 mins

Edited Transcript of VICI.N earnings conference call or presentation 1-Aug-19 2:00pm GMT

Q2 2019 VICI Properties Inc Earnings Call

Aug 22, 2019 (Thomson StreetEvents) -- Edited Transcript of VICI Properties Inc earnings conference call or presentation Thursday, August 1, 2019 at 2:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* David Andrew Kieske

VICI Properties Inc. - CFO

* Edward Baltazar Pitoniak

VICI Properties Inc. - CEO & Director

* John W. R. Payne

VICI Properties Inc. - President & COO

* Samantha Sacks Gallagher

VICI Properties Inc. - Executive VP, General Counsel & Secretary

================================================================================

Conference Call Participants

================================================================================

* Barry Jonathan Jonas

SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst

* Bradford Gordon Dalinka

Morgan Stanley, Research Division - Research Associate

* Cameron Lewis Hughes

Citigroup Inc, Research Division - Senior Associate

* Carlo Santarelli

Deutsche Bank AG, Research Division - Research Analyst

* Daniel Scott Adam

Nomura Securities Co. Ltd., Research Division - Research Analyst

* David Brian Katz

Jefferies LLC, Research Division - MD and Senior Equity Analyst of Gaming, Lodging & Leisure

* Delia Kathryn Whyte

Evercore ISI Institutional Equities, Research Division - Research Analyst

* John G. DeCree

Union Gaming Securities, LLC, Research Division - Director and Head of North America Equity & High Yield Research

* John James Massocca

Ladenburg Thalmann & Co. Inc., Research Division - Associate

* Richard Jon Milligan

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Stephen White Grambling

Goldman Sachs Group Inc., Research Division - Equity Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the VICI Properties Second Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note that this conference call is being recorded today, August 1, 2019. I will now turn the call over to Samantha Gallagher, General Counsel with VICI Properties.

--------------------------------------------------------------------------------

Samantha Sacks Gallagher, VICI Properties Inc. - Executive VP, General Counsel & Secretary [2]

--------------------------------------------------------------------------------

Thank you, operator, and good morning. Everyone should have access to the company's second quarter 2019 earnings release and supplemental information. The release and supplemental information can be found in the Investors section of the VICI Properties website at www.viciproperties.com.

Some of our comments today will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements, which are usually identified by the use of words such as will, expect, should, guidance, intends, projects or other similar phrases are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.

Therefore, you should exercise caution in interpreting and relying on them. I refer you to the company's SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition.

During the call, we will discuss non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered an isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available on our second quarter 2019 earnings release and our supplemental information.

Hosting the call today, we have Ed Pitoniak, Chief Executive Officer; John Payne, President and Chief Operating Officer; David Kieske, Chief Financial Officer; and Gabe Wasserman, Chief Accounting Officer. Ed and team will provide some opening remarks, and then we'll open the call to questions. With that, I'll turn the call over to Ed.

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [3]

--------------------------------------------------------------------------------

Thank you, Samantha. Good morning, everyone, and thanks for joining us on our Q2 2019 earnings call. The second quarter of 2019 has proven to be another extremely busy quarter in VICI's short history. In a moment, John will recap our Q2 growth activities, and David will recap our Q2 financing activities and financial results.

But before we get to that, I'd like to spend a moment putting our Q2 activities and results into the context of what we're striving to achieve over the long term for our shareholders.

VICI is now almost 2 years old, and we have accomplished a lot in a short amount of time. In a nutshell, we have announced approximately $6.7 billion of acquisitions and raised approximately $5.6 billion of equity.

We reduced our leverage from 8.4x net-debt-to-adjusted EBITDA at emergence to 3.7x net debt-to-EBITDA at quarter-end by refinancing nearly $2 billion of debt at lower interest rates and eliminating over $1.3 billion of debt. We also increased the company's annual base rent by 181% if you include the incremental annual rent of the pending transactions announced but not yet closed. That is a lot of activity over the short term, all of which has been in pursuit of our goal to build an institutional REIT for the long term.

Towards that end, we have upheld a relentless focus on the following: improving our portfolio for the long term through accretive acquisitions and investments; enhancing our lease structures and terms for the long run; growing our tenant relationships and enhancing tenant strength for the long term; having the broadest investment spectrum across the gaming real estate landscape; building a balance sheet for the long term, a balance sheet that can successfully weather any economic or credit cycle we may endure; building and executing a VICI dividend strategy for the long term, a strategy that delivers a secure and well-covered dividend with sustainable growth, with dividend growth funded by achieved income growth, not anticipated income growth; building an ownership base for the long term, an ownership base that recognizes and values the quality, durability and irreplaceability of our real estate; and building an unrivaled growth pipeline that gives our shareholders the value of predictable, long-term growth years into the future.

The investment community can trust this relentless focus on creating long-term value, means that we will not cease our prospects for creating lasting shareholder value for the purposes of capturing a short-term gain. For some of the longest duration leases in the industry, we're able to take an expansive outlook and act accordingly. Take for example, the stat I mentioned earlier that we have announced approximately $6.7 billion of acquisitions and raised approximately $5.6 billion of equity. A REIT focused on immediate short-term accretion would not have relied as heavily on equity funding for the announced acquisitions, especially not far in advance of acquisition closings. If we have not taken this disciplined approach, however, while we may have generated more immediate accretion, we would have sacrificed long-term value creation for that kind of short-term gain.

Another short-term measure would have been to delay funding until closing, but in doing so, we would have taken significant market and pricing risk. In either case, we would not have stayed true to our relentless focus on building a REIT that can thrive through all cycles, a focus we believe is essential for our investors to be able to trust and rely upon as we act in their best interest in our capital allocation decisions.

Looking back on the transactions we announced this quarter, and those we have completed in our short history, you'll see a consistency and that we fund our transactions in a manner designed to provide long-term funding certainty, long-term accretion, long-term security of cash flow and long-term sustainability and growth of the VICI dividend.

We realized that the long-term nature of our acquisition and capital allocation strategies makes it challenging to calculate with precision the immediate impact of our related funding activities. We benefit greatly from cultivating a base of investors and covering analysts who, collectively, understand and support the long-term value creation that we believe our strategies will deliver.

We especially value this understanding and backing when our shareholders stepped up with such strong support for the equity raise we launched concurrently with the announcement of our transformative transaction with Eldorado. And before I turn things over to John, I'd like to stress the degree to which our transaction with Eldorado was all about long-term value creation. We believe this transaction will enable us to: number one, contribute significantly to the long-term success and competitiveness of our largest tenant; number two, significantly improve and extend our Caesars leases for the long term; number three, add significant long-term AFFO accretion; finally, number four, restock our growth pipeline for the long term.

And that's a great introduction to what John has to say about our Q2 2019 growth activities. And with that, over to you, John.

--------------------------------------------------------------------------------

John W. R. Payne, VICI Properties Inc. - President & COO [4]

--------------------------------------------------------------------------------

Thanks, Ed, and good morning to everyone. As Ed mentioned, we had quite a busy quarter. We closed on 1 acquisition and announced over $4 billion in new acquisition. We established 3 new tenant relationships while adding upon closing 7 new properties across 6 regional markets, while at the same time, we refreshed our growth pipeline.

I'd like to spend a minute on each of these transactions and their strategic benefit for VICI.

JACK Cincinnati. As we discussed on last quarter's call, on April 5, we kicked off the quarter by announcing the JACK Cincinnati transaction in partnership with Hard Rock International. We've agreed to acquire a $42.75 million in rent for $558 million, representing an attractive 7.7% cap rate. With this transaction, we will enter the strong urban gaming market of Cincinnati, with the world-class gaming operator with a proven track record of success in the Ohio market. And we add another first-class operator to our tenant roster.

Greektown. Next, on May 23, we officially closed on the acquisition of the Greektown Casino-Hotel for approximately $700 million, simultaneously leasing the asset to Penn National. This high-quality asset located on 7 acres in the urban core of Detroit is a great addition to the VICI portfolio and adds $55.6 million in rent at an attractive 7.9% cap rate. We're pleased to expand our partnership with Penn National and further diversify our tenant income while adding to our geographic diversification by entering a strong and stable regional market.

Century Casinos. On June 17, we announced the acquisition of 3 regional gaming properties for $278 million in partnership with Century Casinos. Upon closing, this transaction will add an additional $25 million in rent under a master lease at a very attractive 9% cap rate. The transaction provides us several strategic benefits. First, we are creating a new tenant partnership with Century Casinos, an expert operator of small-to-midsize assets with plans to expand further into U.S. regional gaming. Second, we'll be entering the State of West Virginia in the Pittsburgh MSA, thereby

(technical difficulty)

traffic diversification while adding value for our shareholders that are accretive to AFFO on a long-term basis.

The Eldorado transaction. Lastly, one week after we announced the Century transaction, we announced the transformative $3.2 billion deal in conjunction with Eldorado's proposed combination with Caesars Entertainment. The combination of Eldorado and Caesars will create the largest domestic gaming company, with market-leading assets in nearly every regional market benefiting from the most robust and sophisticated customer loyalty database, Caesars Rewards. We are thrilled to partner with Eldorado to provide a portion of the capital they need in order to execute on their goal of creating the largest and most dynamic gaming company in the country.

This transaction is especially attractive for VICI as we will add $252.5 million of incremental rent, including $98.5 million of rent from our Las Vegas Strip properties and $154 million of rent across our regional master lease, all for a blended cap rate of 7.9%. What's more that I touched upon, we have also refilled a strong diverse growth pipeline that ensures the company maintains visible, long-term growth opportunities. This refresh pipeline includes 2 ROFR opportunities on Las Vegas Strips assets, a put call option on 2 high-quality assets in the growing Indianapolis gaming market and an additional ROFR on an urban core casino in Baltimore. We're excited to work with the Eldorado team and look forward to our continued partnership in the future as we both execute on our strategic goals.

In conclusion, with over $4 billion of transactions announced in the second quarter alone, we have accomplished an incredible amount for VICI shareholders. We're very proud of the progress we've made in adding to our tenant roster, further diversifying our geographic distribution, refreshing our growth pipeline, and of course, doing it all in a manner that is long-term accretive to AFFO. As I've -- our activity in the quarter indicates, we have proven our ability to source, execute and finance acquisitions of all shapes and sizes. We will continue to be determined, and we believe VICI remains in a great position to capitalize on opportunities that the market presents.

With that, I'll turn the call over to David, who will discuss our balance sheet and financial results. David?

--------------------------------------------------------------------------------

David Andrew Kieske, VICI Properties Inc. - CFO [5]

--------------------------------------------------------------------------------

Thanks, John. I'll first cover a few of the highlights from our quarterly financial results before turning to our balance sheet and the specifics surrounding our recent transaction activity. As a reminder, starting on January 1, 2019, under ASC 842, the new lease accounting standard, we're no longer required to present real estate taxes and the related tenant reimbursements on a gross basis since they are paid directly by our tenants to the relevant taxing authority. Therefore, neither of these items appear on our June 30, 2019, statement of operations. The prior periods will not be retrospectively adjusted, and therefore, the historical financial statement presentation remains unchanged and continues to include the gross of the real estate taxes and the related tenant reimbursements.

Our total revenues in Q2 '19, excluding the tenant reimbursement of property taxes, increased 9.3% over Q2 '18 to $220.7 million. Our G&A was $6.5 million for the quarter, and as a percentage of total revenues, was only 3% for the quarter, which is in line with our full year projection and represents one of the lowest ratios in the triple-net sector. We incurred $2.9 million of transaction expenses in the quarter primarily related to the legal and accounting costs associated with documenting the leases for JACK Cincinnati, the Century portfolio and the Eldorado transaction. These costs are required to be expensed under the new leasing guidance.

Our AFFO for the second quarter was $156.8 million or $0.38 per share. AFFO increased almost 22% year-over-year, while AFFO per share increased approximately 9% over the prior year, given the equity issuances last November and the most recent offering at quarter end.

Our results once again highlight our highly efficient triple-net model as flow-through of cash revenue to adjusted EBITDA was approximately 105% and while flow-through of cash revenue to AFFO was approximately 95%. As always, for additional transparency, we point you to the quarterly financial supplement, which is located in the Investors section of our website under the menu heading Financials. We believe you'll find this detailed information helpful and welcome any feedback on the materials.

Moving on to our balance sheet and capital markets activity. We had an active quarter, further strengthening our balance sheet and positioning the company for continued growth. In connection with the Eldorado transaction, combined with other the transaction that have been announced but not yet closed, we pursued a comprehensive capital funding strategy. Our objective was to immediately derisk the balance sheet by effectively locking in funding certainty for a transformative sequence of deals. With this approach, we will have some near-term dilutions but we believe this capital will ensure that we maintain balance sheet flexibility in an effort to provide our shareholders of the long-term growth. This thinking led to the activity during the last week of the quarter.

On June 28, we completed an upsize follow-on offering of 115 million shares sold at a price of $21.50 per share for net proceeds of approximately $2.4 billion. The offering was comprised of a 50 million share regular weight common stock offering resulting in immediate net proceeds of approximately $1 billion and the shares being added to our total share count on June 28. We also entered into forward-sale agreements for the additional 65 million shares. Upon settlement, the forward component of the offering is anticipated to raise net proceeds of approximately $1.3 billion. We retain the ability to settle the forward transaction in whole or in tranches at any time between now and September 26, 2020. We view the success of this upsize offering as a significant expression of support, confidence and trust from our shareholders, and we do not take that commitment lightly. We will continue to work to deploy your capital accretively as we execute on our long-term strategic goals.

For the remainder of the funding needed to close the Eldorado transaction as well as the refinancing of the existing secured CMBS loan currently on Caesars Palace, Las Vegas, we intend to access the debt markets through a combination of term loans and unsecured bonds on a leverage-neutral basis.

Related to our debt, in May, we amended our revolving credit facility. We increased the borrowing capacity by $600 million to a total capacity of $1 billion. We also extended the maturity by 2 years to May 2024, and we moved our interest rate to a leverage base grid, with a range of 175 basis points to 200 basis points over LIBOR.

Our total outstanding debt at quarter end was $4.1 billion with the weighted average interest rate of 4.97%. 98% of our debt is fixed, with the remaining 2% floating, providing clarity to our future interest expense. The weighted average maturity of our debt is approximately 4.5 years and we have no debt maturing until 2022. We ended the quarter with over $2 billion in liquidity, including approximately $1.3 billion of cash and short-term investments, and availability of $1 billion under our revolver subject to compliance with the terms of our revolver. As of June 30, our net-debt-to-LTM EBITDA was approximately 3.7x, well below the low end of our long-term target of 5 to 5.5x.

Regarding our acquisition activity, John touched on most of the specifics, so I won't repeat it all. We closed on the Greektown transaction on May 23rd, adding approximately $55.6 million in annual cash rents at a 7.9% cap rate. Then between the 3 announced pending transactions, JACK Cincinnati, the Century portfolio and Eldorado, we will add just over $320 million in the annual cash rent, increasing our annualized rental income by approximately 32% in just 1 quarter.

In terms of timing, we expect JACK Cincinnati to close by the end of 2019. With the Century portfolio, we continue to target closing in early 2020, and the Eldorado transaction is targeted to close in the first half of 2020.

Now with respect to guidance. Beginning this quarter, we will be presenting our guidance in absolute dollars as well as on a per share basis to provide additional transparency. We're updating our full year 2019 guidance to reflect the closing of Greektown on May 23 as well as all capital markets activities completed in the second quarter. We now expect AFFO more to be between $635 million and $645 million or $1.45 and $1.47 per share versus our prior guidance of $600 million to $615 million or $1.47 to $1.50 per share. Our underlying AFFO assumptions are consistent with prior guidance adjusted for the closing of Greektown. While the per share range now accounts for the 50 million shares issued in Q2 and the potential dilutive impacts resulting from a forward sale agreements we entered into in June to the extent that our stock trades above the deal price, as we will be required to record treasury stock dilution under GAAP. As always, our guidance does not reflect any of the pending acquisitions.

Turning to our dividend. We paid a dividend of $28.75 based on the annualized dividend of $1.15 per share on July 12th to stockholders of record until the close business on June 28. With that, operator, please open the line for questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from Carlo Santarelli with Deutsche Bank.

--------------------------------------------------------------------------------

Carlo Santarelli, Deutsche Bank AG, Research Division - Research Analyst [2]

--------------------------------------------------------------------------------

This question is probably really going to blow your mind. But if I can...

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [3]

--------------------------------------------------------------------------------

We're ready.

--------------------------------------------------------------------------------

Carlo Santarelli, Deutsche Bank AG, Research Division - Research Analyst [4]

--------------------------------------------------------------------------------

If I can, in the prospectus back in June, you guys did talk about another deal that you were potentially in later stages of negotiations for. I don't know if you're able to comment directly on that specific reference. But if you could talk a little bit about maybe how things have proceeded in terms of the pipeline, that would be helpful.

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [5]

--------------------------------------------------------------------------------

John, you want to go ahead?

--------------------------------------------------------------------------------

John W. R. Payne, VICI Properties Inc. - President & COO [6]

--------------------------------------------------------------------------------

Sure. Well, I can't specifically talk about that, but I think as the past 22 months have indicated, I hope to you, Carlo, that we remain busy and active at all times. And so we continue to work on that deal that we called out, and we continue to be on the road quite a bit

(technical difficulty)

to others and look at other opportunities as well. So it's busy even during the summer months right now.

--------------------------------------------------------------------------------

Carlo Santarelli, Deutsche Bank AG, Research Division - Research Analyst [7]

--------------------------------------------------------------------------------

And then if I could maybe, David, you would be best positioned for this one. But in terms of that specific transaction with the financing that you have done to date, including the equity as well as the term loan and on secures that you are targeting, are you guys in pretty good shape, in your opinion, to kind of do the deal with, not necessarily may be cash on hand, but cash on hand and the proceeds of what you're going to raise later in the year regardless of this transaction?

--------------------------------------------------------------------------------

David Andrew Kieske, VICI Properties Inc. - CFO [8]

--------------------------------------------------------------------------------

Yes, that's right, Carlo. And just to clarify in terms of what we'll raise later in the year in terms of as we access the debt market, so we did not need any more equity, we will not go back to the equity markets to fund. The acquisitions that we have announced or the potential acquisition that's referred to in S4, part of the reason we upsized the offering was to take into account our pipeline, we feel confident about our pipeline and do not foresee us needing any more equity in the near term.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

Our next question comes from John DeCree with Union Gaming.

--------------------------------------------------------------------------------

John G. DeCree, Union Gaming Securities, LLC, Research Division - Director and Head of North America Equity & High Yield Research [10]

--------------------------------------------------------------------------------

Congratulations on a busy 2Q, I think busy might be an understatement, but congratulations nonetheless. Wanted to talk high level for a second. Ed, in your prepared remarks, you discussed the importance of balancing the short-term accretion with long-term value creation. And I think some of the merits of the transactions you've done are quite obvious with replenishing the growth pipeline, so on and so forth. But I was wondering if you could talk a little bit more -- it might be helpful to kind of talk about some of the strategies for long-term value creation and kind of really where you see VICI going as we get out a year and some of these transactions close, and your kind of ultimate goal for the company.

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [11]

--------------------------------------------------------------------------------

Yes. Well, I think, John, our fundamental opportunity continues to be to invest in what we believe is fundamentally great real estate, real estate of high institutional quality. And yet, we're able to do so at this time, at what are still, we believe, bargain prices. If you wanted to put it into something of a private equity real estate framework, typically in private equity real estate, you talk about either core yields, core plus yields value-add and opportunistic or opportunistic and value-add. And we believe right now, we're buying core plus to opportunistic yields for what is fundamentally real core real estate. We love this opportunity.

And we believe -- for those who haven't yet been able to see it, we highly recommend that everybody take a look at the report that Green Street put out on our sector earlier this week. It's a collaborate effort on the part of VICI, MGP and GLPI. And we think it further emphasizes the core message, which is this is fundamentally a great real estate. And what we fundamentally have is the opportunity to build a great portfolio of real estate with great tenants, whose operating business is what ensures the long-term integrity and durability of our real estate cash flows.

So again, we just want to continue to tell the story. We want to continue to ignore the noise in the market. We're at a point right now as a country, frankly, where there is so much noise and nervousness, whether around politics and policy or the capital markets. And yet we think underneath all of that, the economy continues to be very strong. And as you have seen, John, with the reports out of Penn and Boyd last night, and as everybody saw from the June Strip data, gaming continues to go along really well. And we believe it's got a long runaway ahead of it. And we also like obviously the prospects for other experience with sectors as you look at demographic trends and cultural trends that we think are going to continue to put great value on experience in real estate. I realize that's a 50,000-foot answer, but I hope it is of some service to you.

--------------------------------------------------------------------------------

John G. DeCree, Union Gaming Securities, LLC, Research Division - Director and Head of North America Equity & High Yield Research [12]

--------------------------------------------------------------------------------

That's helpful. That's all I was looking for. I think good comments. And I think if you've answered my follow-up. So maybe just switch gears slightly. You guys provided some unique financing sources for 2 very different types of companies. One, very large scale and one much smaller scale. I think historically over the last couple of years, we've seen some of the gaming partners be a little resistant to partnering with REITs, so we've certainly seen the change over the last 12 or 18 months. As you provide unique financing opportunities for these companies of all different sizes and positionings, have you seen increased receptivity or inbounds from other potential partners? I guess the short question is, are you seeing an increase in the acceptance and receptivity to refinancing on forward transactions?

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [13]

--------------------------------------------------------------------------------

Yes. I'm going to turn it over John in just a second here, John Payne, John DeCree. But what I just want to say before I turn it over to John is that what we're seeing is greatly increased receptivity from gaming companies that want to grow. It's as simple as that. Gaming companies who want to grow are realizing that gaming REITs are a great way to help finance their growth. We represent another source of permanent capital, permanent capital that is frankly more affordable than equity they might raise out or other permanent capital they might raise in the public markets. And we continue to believe that gaming growth -- gaming-oriented growth companies will continue to look to VICI for help in achieving their growth ambitions. But to give you more color and granularity on that, I'll turn it over to John.

--------------------------------------------------------------------------------

John W. R. Payne, VICI Properties Inc. - President & COO [14]

--------------------------------------------------------------------------------

Yes, John, it's a great question, and I give a lot of credit to my colleagues on the phone, Ed, David, Sam, Gabe and the whole team that come from a REIT background. And I think in the gaming space, the explanation of how a REIT can help a company grow was really based on my colleagues helping me tell that story to potential sellers that hasn't been done before in our space. And so the first year, we spent a lot of time doing that and it has led, as you can see, the opportunities with a wide variety of folks in our space and really outside in the experiential space. So to answer your question specifically, we obviously continue to spend a lot of time with outbound calls. But as I've said over previous quarters, we're seeing more inbound calls and we're also seeing more inbound calls with folks who understand the model a lot better than they did a few years ago, where it wasn't just throw a lease on the table and, say, take it. It's an explanation of how a REIT in our space can be a partner, can be a long-term partner, can help the companies grow. And so it's been a good start for our company.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

Our next question comes from Stephen Grambling with Goldman Sachs.

--------------------------------------------------------------------------------

Stephen White Grambling, Goldman Sachs Group Inc., Research Division - Equity Analyst [16]

--------------------------------------------------------------------------------

First, on the intermediate term, you have outlined a lot of the details around the incremental rent from the announced transactions. You've already, to a degree, front-loaded the financing for these. So maybe if could help investors frame what the AFFO per share, kind of power is, of the business as we look at all these transactions together maybe a couple of years out. And then maybe a follow-up to John's question, as you look longer term, I mean what are the guardrails to think about when we start to look outside of gaming? Or is that still not really something that is top-of-mind?

--------------------------------------------------------------------------------

David Andrew Kieske, VICI Properties Inc. - CFO [17]

--------------------------------------------------------------------------------

Yes, Stephen, it is a good question. I mean just on the announced acquisitions, the $4 billion that we announced in the second quarter, that adds about $320 million of rent. Obviously, we need to lever that. I mean based on our share count, that's $0.60 a share per -- of rent and obviously we need to put that in a leverage neutral basis. So the way we set up the REIT is that to have year-in, year-out growth of 10% to 12% on the total return. And part of the issue that we face in this sector is this front-loading that growth, right. We have announced Greektown in November, we closed it this year, so you get 3 quarters of an odd year of rent and AFFO in' 19, and now Century as well as Eldorado will close next year. So continue to build the growth in AFFO for years to come. We've -- we'll get about half of the Eldorado transactions, that's assuming the midyear close in 2020 and then a full year of rent in 2021. So we continue to ladder the growth of the company by working day in and day out to add the acquisitions and see it can fit into the AFFO growth over time.

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [18]

--------------------------------------------------------------------------------

And for the second part of your question, Stephen, in terms of outside of gaming, what would we see as guardrails. Most fundamentally, the real estate has to be home to an experience that we believe has great durability to it, that it is an experience that is greatly valued today by the end user and is an experience that will be greatly valued by the end user 25, 35 years from now. And that experience probably have to have within it what we call experience complexity. It's what we love about gaming. It is an experientially complex business in which the operator has the opportunity every day to refine the experience, add new elements to it, replace what has become obsolete with what is new and fresh. And we will look -- when we do look outside of gaming, we will look for that same experience complexity and that same fundamental durability of experience.

--------------------------------------------------------------------------------

Stephen White Grambling, Goldman Sachs Group Inc., Research Division - Equity Analyst [19]

--------------------------------------------------------------------------------

But -- so it doesn't sound like you are currently -- the need or compelled to look outside of game?

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [20]

--------------------------------------------------------------------------------

We're certainly doing all we can to learn about sectors outside of gaming, identify sectors outside of gaming that would have the characteristics that would lend themselves to a compelling investment thesis. But needless to say, with $4 billion of gaming acquisitions in 1 quarter, we're very, very excited about continuing to help gaming companies grow. And that includes big companies like Eldorado and Caesars and, obviously, smaller companies like Century, which see great growth opportunities for themselves as well.

--------------------------------------------------------------------------------

Operator [21]

--------------------------------------------------------------------------------

Our next question comes from the line of Smedes Rose with Citi.

--------------------------------------------------------------------------------

Cameron Lewis Hughes, Citigroup Inc, Research Division - Senior Associate [22]

--------------------------------------------------------------------------------

This is Cameron Hughes on behalf of Smedes. I just wanted to get your take on the range of deal sizes you might look at going forward, whether that would be larger like the Eldorado transaction, more complex or smaller like the Century deal?

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [23]

--------------------------------------------------------------------------------

John?

--------------------------------------------------------------------------------

John W. R. Payne, VICI Properties Inc. - President & COO [24]

--------------------------------------------------------------------------------

Well, I think you described the range for us. I think we -- as we started the company, we didn't put brackets around what we're going to look at and not look at. We thought that would restrict us and it would not allow us to meet all gaming operators and even non-gaming operators at this time. And so we really do -- we take any meaning, it doesn't mean we'll do any deal obviously. But we don't put parameters around the size. If it's accretive for us, if it's with a strategic partner like Century that many would describe as a small deal, not many $300 million deals are called small, but they are and they seem to be in this space. But that was with the -- as an example, an operator that we believe is growing in U.S. platform, and not only we do that deal but others. So the simple answer is we're looking at a lot of different things of all magnitude and we'll continue to do that because we think it will lead the quarters like we just ended.

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [25]

--------------------------------------------------------------------------------

Cameron, I just like to add to what John said that the fundamental value proposition of a REIT is to be able to distribute cash through all cycles. And given that reason for being, a REIT should inherently have some element of hedging in its portfolio strategy. A REIT should not be overexposed to any one geography, any one necessarily customer segment, so that one can again ensure that the cash is there to distribute through all cycles. And thus, we like having the biggest investment spectrum in the gaming REIT space. This again enables us to do the kind of deal we did with Eldorado, while we're also doing the kind of deal we did with Century because by having that diversity of tenant, diversity of geography, we again put the REIT in a place where we're not overexposing to any one particular aspect of the business that could lead to higher risk in terms of the sustainment of distributions.

--------------------------------------------------------------------------------

Operator [26]

--------------------------------------------------------------------------------

Our next question comes from John Massocca with Ladenburg Thalmann.

--------------------------------------------------------------------------------

John James Massocca, Ladenburg Thalmann & Co. Inc., Research Division - Associate [27]

--------------------------------------------------------------------------------

So just kind of roughly speaking, I mean what do you think your capacity is today to do larger deals given -- maybe assuming you closed in the more tangible acquisitions in the pipeline that you mentioned at the time of the equity offering? Essentially, is there enough kind of on your plate today that maybe there needs to be a pause? Or do you think you could continue to do some larger transactions going forward in the near term?

--------------------------------------------------------------------------------

David Andrew Kieske, VICI Properties Inc. - CFO [28]

--------------------------------------------------------------------------------

John, it's David. I will start and then John Payne can add on to that. I mean right now, obviously we've announced a lot and we have a lot to digest and to close. So right now, we're focused on ensuring that we lay out a disciplined financing plan with the long-term debt and continued our path towards lowering our cost of capital to ultimately pursuing a path with investment-grade. But in terms of the acquisitions, what we've got the capacity is to -- John said, we meet with a lot of people, and we're looking a lot of things. And some larger transactions started right now are probably off the table for us as we think about ensuring the closing at Cincinnati, the closing at Century, and then ultimately working with Eldorado to ensure seamless closing of the broader transaction early next year.

--------------------------------------------------------------------------------

John James Massocca, Ladenburg Thalmann & Co. Inc., Research Division - Associate [29]

--------------------------------------------------------------------------------

Okay. And then you kind of mentioned the debt markets in investment-grade. If you think about the cadence of the type of debt you plan to issue, is there any thought about potentially taking out the CMBS, to see the CMBS with term debt in order to position yourself for the rating agencies in the unsecured market? Or is the timing of all that going to be dictated more by the security of getting that kind of cash on hand?

--------------------------------------------------------------------------------

David Andrew Kieske, VICI Properties Inc. - CFO [30]

--------------------------------------------------------------------------------

Well, we will take out the CMBS debt as part of the broader Eldorado transaction. As we announced back in June, Eldorado has agreed to split those -- the transaction cost, the breakage cost with us. And as part of the overall transaction, we will either take that out with either term loan or high yield and just a little bit of -- depending on the markets, where they are and the cost of capital. And that cleans up our capital structure too which has been very -- some positive feedback for the rating agencies. And then that begins this -- remove -- the beginning of any rating agencies right now is just the amount of secured debt that we have in our cap structure. And so to start the morph towards an unsecured borrower ultimately to the high-yield markets, and then long term for the investment grade markets, is our plan over the course of the next several months.

--------------------------------------------------------------------------------

John James Massocca, Ladenburg Thalmann & Co. Inc., Research Division - Associate [31]

--------------------------------------------------------------------------------

Do you think you'll be able to raise any kind of investment-grade markets before, I guess, the closing of ERI? I know it's a bit of -- some of that is out of your hands.

--------------------------------------------------------------------------------

David Andrew Kieske, VICI Properties Inc. - CFO [32]

--------------------------------------------------------------------------------

No. The investment-grades are probably 24 -- 18 to 24, maybe 36 months up. We'll meet with the agencies in the fall here. But a lot of it will be again to remove the secured debt within our cap stack, and that's both for CMBS, the second liens that we can call next year in October of 2020, and then also the term loans we have today are secured debt. So we got a little bit work to do, but taking out that CMBS is the big first step and we're excited about that.

--------------------------------------------------------------------------------

John James Massocca, Ladenburg Thalmann & Co. Inc., Research Division - Associate [33]

--------------------------------------------------------------------------------

Okay. And then can you provide any color maybe on potential timing for the taking out of the CMBS?

--------------------------------------------------------------------------------

David Andrew Kieske, VICI Properties Inc. - CFO [34]

--------------------------------------------------------------------------------

It's -- November 10th is when we can repay it, and that's the first call window. And then -- so sometime late fourth quarter or early first quarter 2020.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

Our next question comes from Daniel Adam with Nomura Instinet.

--------------------------------------------------------------------------------

Daniel Scott Adam, Nomura Securities Co. Ltd., Research Division - Research Analyst [36]

--------------------------------------------------------------------------------

So earlier in the week, Boyd had made some comments about the current M&A market. And I think their exact quote was that it feels a little quiet right now. Obviously, Boyd is an operator and you guys are a real estate company. But why do you think they're seeing the current M&A landscape differently than you are?

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [37]

--------------------------------------------------------------------------------

Yes, I think it varies by geography, by market segment, by operator size. You've obviously seen, Dan, in recent weeks, you obviously saw our announcement with Century, you saw the announcement of the transaction Twin River did with Eldorado. There are -- there is activity going on, and again it's going on maybe at segments or at asset level, asset size levels that Boyd does not operate at. And again, Boyd is a really good company. And again, I think it is part and parcel of the fact that this is a sector that, we, those of us move the gaming, like myself and David, are realizing it has more diversity to it than we initially understood. And these smaller assets need to be understood as smaller assets in the larger context of hospitality and entertainment and recreation because while they may be relatively small assets within the gaming universe in terms of EBITDA for our asset versus hotels or other recreational asset, these things make a lot of money. So there is activity going on. And again, we like the fact that we've got an investment spectrum that enabled us to do the kind of deal we did with Eldorado, for Strip assets, at the same time, that we can do the deal we did with Century.

--------------------------------------------------------------------------------

John W. R. Payne, VICI Properties Inc. - President & COO [38]

--------------------------------------------------------------------------------

And let me add -- just add little bit to that because I think sometimes, Daniel, it is just perspective. I mean we just finished announcing a quarter of $3 billion worth of acquisitions, just 3 years...

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [39]

--------------------------------------------------------------------------------

$4 billion.

--------------------------------------------------------------------------------

John W. R. Payne, VICI Properties Inc. - President & COO [40]

--------------------------------------------------------------------------------

$4 billion, sorry. Just in this perspective, I mean just in this space, 3 years ago, that would last 18 months before someone would do anything else. And so I think that it's just perspective changed a little bit to, say, well, there is not lot of activity in this space. And we're sitting in August and we're just one company that last quarter announced $4 billion of acquisition. So I'd say it's very active. Again, I'm not contradicting my friends at Boyd at all. It's just -- I think it depends on where your perspective is.

--------------------------------------------------------------------------------

Daniel Scott Adam, Nomura Securities Co. Ltd., Research Division - Research Analyst [41]

--------------------------------------------------------------------------------

Okay. That's helpful. And then my follow-up is a bit more nuanced. But with respect to the Las Vegas Strip ROFR, would your ROFR on those assets still apply if they transact it prior to the closing of the Eldorado-Caesars deal?

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [42]

--------------------------------------------------------------------------------

I'm sorry, who would they be in that case? Eldorado or Caesars?

--------------------------------------------------------------------------------

Daniel Scott Adam, Nomura Securities Co. Ltd., Research Division - Research Analyst [43]

--------------------------------------------------------------------------------

So would be Caesars in the inter-sell between now and closing?

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [44]

--------------------------------------------------------------------------------

Caesars really would be essentially precluded under their merger agreement with Eldorado, likely to do a deal without having Eldorado's approval, so it would be more complicated than that given the size that, that has.

--------------------------------------------------------------------------------

Operator [45]

--------------------------------------------------------------------------------

Our next question comes from David Katz with Jefferies.

--------------------------------------------------------------------------------

David Brian Katz, Jefferies LLC, Research Division - MD and Senior Equity Analyst of Gaming, Lodging & Leisure [46]

--------------------------------------------------------------------------------

You've covered a lot of ground, but I wanted to follow up on some of the earlier commentary from Ed. From the beginning, the discourse has been around establishing your independence from Caesars. And I think it's fair to say that you've walked a lot of that talk or maybe flown or driven. But this -- the Eldorado deal does sort of tether you, in some way, to a single tenant. And I recognize concentration is not the same as overall independence. But as we think about going forward, and deals that you may be considering, how much does that notion of independence and concentration factor into the decisions relative to accretion or the other evaluative criteria?

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [47]

--------------------------------------------------------------------------------

Yes. I think I'll start, David, and I'll turn it over to John. I think that what this transaction most represents is our ability to creatively transact with independent operators. In other words, what I'm trying to say, and I'm not saying very elegantly, David, is that we did this transaction with Eldorado. We didn't do it with Caesars, right? And I think it's a great testimony, especially to John's leadership in our business development activities, that we were able to initiate a relationship with Eldorado, an independent arm's length relationship that led to a transformative transaction, that does happen to involve our existing larger tenant.

So I think the greatest message to take out of this transaction is not an issue of are we independent or not from Caesars, it is our ability to create relationships that yield deal flow. And I think we work relentlessly hard every single day on the development of relationships because it is those relationships that generate deal flow. In this case, this particular deal does intensify our tenant concentration to a degree, but we take great confidence in the relationships we've built with Penn and Hard Rock and Century that we will continue to generate tenant diversity, which will ultimately lead to some lessening of that concentration, though that concentration in and of itself does not scare us. John, if you want to add to that?

--------------------------------------------------------------------------------

John W. R. Payne, VICI Properties Inc. - President & COO [48]

--------------------------------------------------------------------------------

No. I think you described it well. I mean I was -- our independence is a huge competitive advantage for us, and we don't have a parent company that gives us deals or hands us deals. We have to work every day to get out there to build relationships with others and prove that we can close deals with a wide variety of operators, and we're going to continue to do that. A simple way of doing it makes me work hard every day to get out there to get more deals. And it will continue to be -- the independence, as you mentioned, is going to continue to be a big factor of it.

--------------------------------------------------------------------------------

Operator [49]

--------------------------------------------------------------------------------

Our next question comes from Barry Jonas with SunTrust.

--------------------------------------------------------------------------------

Barry Jonathan Jonas, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [50]

--------------------------------------------------------------------------------

Maybe just another angle on Eldorado. They've said they are going to come out of the Caesars deal at around a 50/50 mix of lease versus wholly owned. How do you kind of weigh the opportunity to further penetrate that ratio versus the strong rent coverage ratio you have now?

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [51]

--------------------------------------------------------------------------------

Yes. No, it's a great question, Barry. And it was obviously a guiding principle to the deal we ended up constructing with Tom Reeg and Bret and the Eldorado team. We see great merit in them having that balance. It -- to your point, it is the substance, the key substance of our rent coverage. And it obviously is a key element in their cost of capital and how it is they are valued. So we would be very happy if they continue to maintain that kind of ratio. The ROFRs don't necessarily mean sale leasebacks. And we again think that Tom is approaching this with a philosophy that puts both companies, the new Caesars and VICI in very strong positions.

--------------------------------------------------------------------------------

Barry Jonathan Jonas, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [52]

--------------------------------------------------------------------------------

Great. And then just a follow-up, last quarter, we talked about other REITs potentially exploring the gaming asset class. Just curious, are you seeing anything out there? And given the unique nature of gaming, I mean what's the likelihood we see in other entrant?

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [53]

--------------------------------------------------------------------------------

I'll start and I'll turn it over to John, I think it's high. I mean speaking of this again, I go back to this being fundamentally really good real estate that is available at very, very attractive prices. And there are certain bidders that could show up for regional assets. There is perhaps another set of bidders who would show up for Las Vegas assets. I think we should all keep in mind that Las Vegas Strip real estate, gaming real estate does not require the real estate owner to be licensed, which could make it very comfortable for certain kinds of real estate institutional investors to very quickly move in to the ownership of Las Vegas Strip real estate.

And again, we are seeing the degree to which institutional capital applies very high value to Las Vegas Strip real estate. And if you happen to notice the latest print on the refinancing of the Grand Canal Shoppes at The Venetion, which got valued for the purpose of the loan made on those assets, I think it was implied cap rate of 4.5%, right? So again, I think there will be a lot of hunger for this real estate given how fundamentally good it is. In a commercial real estate environment where you're looking at sectors that are either undergoing secular challenges or otherwise, really fully baked in terms of how they are valued today.

--------------------------------------------------------------------------------

John W. R. Payne, VICI Properties Inc. - President & COO [54]

--------------------------------------------------------------------------------

And I'll just add on to that, I mean I think that as people see the number of transactions that we've done as a company at 7%, 8%, 9% cap rates, when there -- in other industries that are buying and the stability of our tenants and the quality of our tenants and their ability to attract new consumers and keep those consumers, and then there is other REITs that are in the spaces that buying things at 3%, 4%, 5%, I think there is no question that people are taking a look at this space. Obviously, EPR has put one of the best gaming executives I've worked with on their Board. And I don't think they do that if they weren't looking at -- about this space. And as I'm out talking to potential sellers, there is no doubt that there is other REITs that are beginning to try to understand the space. And that's why we've built our model on partnerships and winning the ties and being the firm that understand the growth plans and those things. So anyway, I agree with Ed that, over time, there's going to be others joining in our space.

--------------------------------------------------------------------------------

Operator [55]

--------------------------------------------------------------------------------

Our next question comes from R.J. Milligan with Baird.

--------------------------------------------------------------------------------

Richard Jon Milligan, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [56]

--------------------------------------------------------------------------------

Just a question on the reloaded captive pipeline. Obviously, you guys don't have some control in terms of the timing with those assets like you do with the call option properties. But curious if you could give some color on -- if you did have that optionality, when you would like to bring those assets on? And maybe what do you think the timing looks like based on your conversations with Eldorado?

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [57]

--------------------------------------------------------------------------------

Yes. Again, I'll start and John will add, R.J. The -- we obviously are going to generate tremendous rent growth in 2020 by virtue of the closing in Cincinnati, the closing of Century, and eventually the closing of the Eldorado transaction, which will probably also generate 2021 AFFO growth based on the timing of a midyear close. So to be honest with you, the pipeline -- if the pipeline starts in 2021, 2022, that's perfect in terms of growth cadence. And yes, we will be very responsive if Eldorado wishes to proceed on any of these opportunities at an earlier date. They are fundamental great opportunities, want to be great partner. If they are ready, we're ready. John, you want to add?

--------------------------------------------------------------------------------

John W. R. Payne, VICI Properties Inc. - President & COO [58]

--------------------------------------------------------------------------------

No. I think you described it well. How we thought about negotiating is having multiple opportunities in the future and not just one. So whether it's when they want to execute in Indianapolis or on a Strip or in Baltimore or other opportunities, you can see that our "embedded pipeline opportunities" are multiple and will allow us to again have that metronomic growth that historically has not been seen in the gaming REIT space. But I think you're seeing it in our 2 years of just continuing to knockout growth and acquisitions for our shareholders.

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [59]

--------------------------------------------------------------------------------

R.J., previously, we had a growth pipeline that lasted until 2022 given the original call agreements. And we used those call properties to effectively extend our growth pipeline to what we believe is probably around 2025, especially if you then incorporate the put call we already possessed on the Las Vegas, the FORUM convention center, which opens next spring by hosting the NFL Draft. So again, we've got a pipeline now that visibly goes to about 2025 and includes hundreds of millions of dollars of incremental rent. And I don't think there is many other American REITs out there with that kind of pipeline.

--------------------------------------------------------------------------------

Richard Jon Milligan, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [60]

--------------------------------------------------------------------------------

That's helpful. My second question is maybe you could comment on the Board's strategy in terms of the dividend. Just in terms of expectations for growth going forward, can we expect it to move in line with AFFO growth slightly lower as you look to maybe retain some free cash flow? Or is there any taxable issues where it might actually increase more than earnings growth?

--------------------------------------------------------------------------------

David Andrew Kieske, VICI Properties Inc. - CFO [61]

--------------------------------------------------------------------------------

Yes, it's David. Good question. As you saw last year, we announced the dividend increase in Q3. I think one of the things that we want to set this company up to be -- ultimately, be a dividend aristocrat. So year-in, year-out, consistent dividend announcement in terms of timing, and ultimately, dividend growth. We discussed the dividend with the Board on a quarterly basis. So any future increase is bound -- obviously, subject to Board approval. But we've always targeted an AFFO payout ratio in the mid-75% area, that's as we talked about with you to give us like -- kind of internal self-funding. So I think you will see it -- the dividend in and around that payout ratio and start to implement a consistent annual sequencing of increasing that dividend on an annual basis and not in line just with the announcement of acquisitions, but again to keep this with year-in, year-out consistent timing for our increase.

--------------------------------------------------------------------------------

Richard Jon Milligan, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [62]

--------------------------------------------------------------------------------

Okay. That's helpful. And then last question, sort of a modeling question. David, can you talk about or quantify the impact you're assuming the AFFO from the forward or the dilution of the forward in the back half of the year?

--------------------------------------------------------------------------------

David Andrew Kieske, VICI Properties Inc. - CFO [63]

--------------------------------------------------------------------------------

Yes, R.J., if you layer in the 50 million shares, starting January 28 and take that out to whatever that is, 183, 182 days, that gives you about 435 million -- weighted average share count about 435 million. You've seen in our release, we're about 438 million, so that's a 3 million share impact from the forward.

--------------------------------------------------------------------------------

Richard Jon Milligan, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [64]

--------------------------------------------------------------------------------

And you said that should continue through the end of the year?

--------------------------------------------------------------------------------

David Andrew Kieske, VICI Properties Inc. - CFO [65]

--------------------------------------------------------------------------------

That's right, yes.

--------------------------------------------------------------------------------

Operator [66]

--------------------------------------------------------------------------------

Our next question comes from Delia Whyte with Evercore ISI.

--------------------------------------------------------------------------------

Delia Kathryn Whyte, Evercore ISI Institutional Equities, Research Division - Research Analyst [67]

--------------------------------------------------------------------------------

Can you comment on how the investor education initiatives are progressing? Do you guys think we are any closure to closing the gap between gaming and net lease REITs? Or do you think that we may take a downturn for this to actually play out?

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [68]

--------------------------------------------------------------------------------

Yes, it's a great question, Delia. We think that all 3 companies, MGP, GLPI and ourselves, have done a very good job of showing the degree to which, on a back testing basis, the gaming REIT rents would have been well covered even during the great financial crisis. So we have a lot of faith in -- a garden variety of recession, if you will, should absolutely have no harmful impacts to our cash flows or to those of our colleagues at MGP and GLPI. So we don't think that, that is, in and of itself, a necessity. We think that there is a growing awareness again of the quality of the real estate, and that's what should be the ultimate valuation of our sector. It takes time. Every cap rate compression story that's ever played out takes time. And frankly, the entrants of new bidders is a validating step that could be a key element in that re-rating. But at the end of the day, what we most have faith in is the fundamental intrinsic quality of our real estate and its ability to produce sustained free cash flow for our investors, cycle in, cycle out. That's the ultimate base case comfort that everyone should have. But above and beyond that, there is this opportunity for our real estate to be revalued accordingly.

--------------------------------------------------------------------------------

Delia Kathryn Whyte, Evercore ISI Institutional Equities, Research Division - Research Analyst [69]

--------------------------------------------------------------------------------

And I guess on a similar note, can you provide any detail on how you think about tenant quality? What factors are most important? And are there any red flags when a new tenant is under consideration?

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [70]

--------------------------------------------------------------------------------

Yes. I think the 2 fundamental elements are their operating strengths, do they operate well, do they know their customers, do they have a strong enduring relationship with the end-user, who is the ultimate determinant of the value of the property. And then do they have a good strong balance sheet that's going to enable them to weather every cycle, credit and economic. And so far, needless to say, we're very happy with the tenant roster we have. And we will continue to use those 2 key criteria, operating strength and balance sheet, to evaluate any other tenant we will do business with.

--------------------------------------------------------------------------------

Operator [71]

--------------------------------------------------------------------------------

Our next question comes from Bradford Dalinka with Morgan Stanley.

--------------------------------------------------------------------------------

Bradford Gordon Dalinka, Morgan Stanley, Research Division - Research Associate [72]

--------------------------------------------------------------------------------

Brad on for Thomas Allen. So just wanted to see if you could help us think about the balance sheet, vis-à-vis the put call options throughout there. I know in the past, you've talked about some long-term leverage targets. But do you plan to keep extra capacity in there in case there is a speed bump in the economy and maybe there could be a put rather than a call?

--------------------------------------------------------------------------------

David Andrew Kieske, VICI Properties Inc. - CFO [73]

--------------------------------------------------------------------------------

Bradford, it's a good question because obviously, part of the Eldorado's overall strategy is delevering, and I think Tom and Brad have been pretty vocal. But the put could be a potential mechanism for Eldorado to delever their balance sheet. So look, part of the way we think about it is we are -- once we settle the forward, we'll have $11 billion of equity market cap and be somewhere in sort of $16 billion, $17 billion total enterprise value company. We increased our line of credit this year to $1 billion, you'll probably see that increase over time as well. So as we approach the period between 2021 and 2024, what that asset could be -- potentially put to us, we feel less sufficient liquidity on our balance sheet or access to liquidity to be able to execute that put if Eldorado doesn't in fact do that given that time period.

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [74]

--------------------------------------------------------------------------------

I would just add to that, Brad, that when the day comes that all the puts or calls have been exercised, I would say as a general management principle, we will still want to have that capacity to take advantage of opportunity. As Warren Buffet says, you want to fearful when everybody else is greedy, and greedy when everybody else is fearful. So we always want the REIT to be in a position to be opportunistic when others may not have the capacity to be opportunistic.

--------------------------------------------------------------------------------

Operator [75]

--------------------------------------------------------------------------------

There are no further questions in queue at this time. I'll turn the call back over to Ed Pitoniak for closing remarks.

--------------------------------------------------------------------------------

Edward Baltazar Pitoniak, VICI Properties Inc. - CEO & Director [76]

--------------------------------------------------------------------------------

Thank you, operator, and thank you, everybody who has been on the call. To sum up the shortest, VICI's history has been Q2 2019 was an inflection point in our brief history. We announced new partnerships with great new tenants, Hard Rock and Century. We entered into a transaction to help facilitate the transformation of our largest tenant, Caesars. We further fortified our balance sheet with the largest primary REIT follow-on in history. We struck -- restack our growth pipeline, such that through embedded growth, we could potentially add hundreds of millions of dollars of new rent to our rent roll over the next 5 to 7 years. None of this would have happened without our shareholders, for whom we're honored to work and for whom we'll stay relentlessly focused on long-term value creation. Thanks again to all of you for joining us today.

--------------------------------------------------------------------------------

Operator [77]

--------------------------------------------------------------------------------

This concludes today's conference call. You may now disconnect.