VICI Vici Properties
Record 7.6% yield on IG-backed contractual rents; market overprices tenant risk, but growth slows.
The story
VICI owns 90+ triple-net gaming and experiential assets (Caesars Palace, MGM Grand, Venetian, regional casinos) under very long master leases with CPI-linked escalators and near-zero landlord capex. Demand rests on Las Vegas and regional gaming cash flows; rent coverage is healthy, but the main tenants (Caesars, PENN) carry high leverage, and weaker Las Vegas visitation has put tenant credit back in focus. The balance sheet is investment grade with mostly fixed-rate, well-laddered debt. The stock has sold off to a record ~7.6% yield. That raises its cost of capital and makes accretive acquisitions harder.
Reported D&A is zero because of sales-type lease accounting, so FFO is roughly net income, which includes non-cash CECL and straight-line items. AFFO runs about 90% of it, down from my prior 0.93 to fit the recurring-cost range. Year-1 growth is trimmed from 5.5% to 4.5% because the 26.35 to 23.98 drop and record yield limit accretive deals, leaving mostly 2-3% escalators and loan-book growth. Failure probability rises slightly to 0.03 on tenant-concentration risk. Beta and the 2.5% terminal growth, well below the 4.96% risk-free rate, are unchanged. The model's 60 baseline overstates value because it treats all NI as distributable; with honest haircuts, fair value should land nearer the low 40s, still a wide but explainable gap from the price given rate sensitivity and tenant fears.
Value drivers
| AFFO growth (Y1) | 4.5% |
| Terminal AFFO growth | 2.5% |
| AFFO / FFO ratio | 90.0% |
| Beta | 0.90 |
| Failure probability | 3.0% |
| Cost of equity | 9.0% |
Valuation bridge
| PV of AFFO (explicit) | 19.29B |
| PV of terminal value | 23.34B |
| Equity value | 41.35B |
| ÷ shares → per share | $37.56 |
News
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- Why VICI Properties’ 7.19% Yield Beats Realty Income’s Dividend Streak, At Least For Now
Projected AFFO
| Yr | FFO | AFFO | Growth | PV |
|---|---|---|---|---|
| 1 | 2.89B | 2.60B | 4.5% | 2.39B |
| 2 | 3.02B | 2.72B | 4.3% | 2.29B |
| 3 | 3.14B | 2.83B | 4.1% | 2.18B |
| 4 | 3.26B | 2.93B | 3.8% | 2.08B |
| 5 | 3.38B | 3.04B | 3.6% | 1.98B |
| 6 | 3.49B | 3.14B | 3.4% | 1.87B |
| 7 | 3.60B | 3.24B | 3.2% | 1.77B |
| 8 | 3.71B | 3.34B | 2.9% | 1.67B |
| 9 | 3.81B | 3.43B | 2.7% | 1.58B |
| 10 | 3.91B | 3.52B | 2.5% | 1.48B |
Key risks
- Caesars/PENN credit stress or lease renegotiation amid Las Vegas softness
- Higher-for-longer rates compressing valuation and making acquisitions non-accretive
- CPI escalator caps limiting rent growth if inflation stays elevated
Catalysts
- Rate cuts narrowing the 7.6% yield spread to Treasuries
- Accretive deals or experiential/loan-book expansion once cost of capital improves