Amid soaring Treasury yields, triple-net existent demesne investment funds trusts (REITs), including gambling casino REITs, stumbled endure year, but VICI Properties (NYSE: VICI) could emerge as a victor from the aggroup in 2024.
The Caesars Palace owner is positioned to buck the bearish triple-net trend this twelvemonth and potentially save above-average growth, according to Stifel analyst Simon the Canaanite Yarmark. He rates the largest cassino REIT a “buy” with a $35 terms target, implying upside of around 9.3% from the December 29 close.
VICI’s charter escalators, which are fastened to the Consumer Mary Leontyne Price Index (CPI), are confirming attributes at a clip when there’s concern inflation could over again accelerate.
VICI should welfare from meaningful lease escalations in the above-average inflationary environment. In total, we approximation that term of a contract escalations should outcome in ~$71 1000000 of incremental lease inward 2024 that was non captured inward 2023 results,” noted Yarmark.
Of that $71 million, an estimated $39 million is derived from VICI’s II master copy leases with Caesars Entertainment (NASDAQ: CZR).
Why VICI Could Rebound inwards 2024
VICI, the largest possessor of house servant casino real estate, the likes of other REITs, is sensitive to changes in interest rates. That way the stock was pinched lowest year as Treasury obligations yields spiked.
However, the setback scenario could be at recreate inward 2024. Ten-year First Lord of the Treasury yields have got declined from the Oct highs as the futures market place has more and more priced inward the possible action of multiple place cuts this twelvemonth past the Fed Reserve. Some fixed-income experts believe I of those reductions could come before the cease of the electric current quarter.
Lower interest group rates, a various tenant base, and a steadily rising dividend could follow among the tailwinds to impel VICI shares this year.
VICI’s client roster includes Phoebus Apollo Global Management, Century Casinos, and Hard John Rock International, among others, confirming the gaming REIT is various crossways regions and cassino sizes. MGM and Caesars, the deuce largest operators on the Las Vegas Strip, combine for 76% of VICI’s familiarised revenue.
“VICI generates over $500 billion of unloosen hard currency flux on an one-year groundwork brand the dividend,” added Yarmark. “The dividend was recently raised and historically has been raised inward 3Q. If they were to reinvest the $500 at a 7.0%-8.0% this will cater additional acquired finances from trading operations (AFFO) next year.”
VICI Could Make More Acquisitions This Year
New York-based VICI has a account of being acquisitive, which has enabled the REIT to broaden its geographical and tenant exposures. That trend could preserve this year.
Due to a serial of previously struck agreements, including some with Caesars, VICI has rights of first of all refusal (ROFR) on various gaming prop assets crosswise the country, should operators decide to sell this year inward bids to bring forth cash.
“Looking at 2024 growth, the troupe has a put/call accord on Harrah’s Hoosier Mungo Park and the Horseshoe capital of Indiana which tin follow exercised until year-end 2024. Under the terms of the agreement, Caesars could put the assets to VICI at an 8.0% crest rate, spell VICI could send for them at a 7.7% pileus rate,” concluded Yarmark. “Beyond that, the society has a put/call arrangement on the Caesars Forum Convention Center and ROFR agreements on cassino assets both inward Las Vegas and regional markets.”
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