VICI Properties (NYSE:VICI) may very well be one of many extra resilient gaming shares if that uncanny state of affairs arrives as some forecasters backtrack on recession expectations. There may be
The nation’s largest gaming property proprietor says how its purchasers, together with on line casino operators Caesars Leisure (NASDAQ: CZR) and MGM Resorts Worldwide (NYSE: MGM), will deal with a pointy contraction within the economic system. I’ve sturdy considerations about
On the Nareit REITweek convention in New York final week, VICI administration stated, “The financial resilience of the sport is spectacular.” The Actual Property Funding Belief (REIT) is the biggest landowner on the Las Vegas Strip and owns actual property property in a few of the world’s most well-known on line casino accommodations, together with Caesars Palace, MGM Grand and The Venetian.
VICI owns 10 Strip venues in Nevada, 13 total, with tenants together with Apollo World Administration, Caesars, Arduous Rock Worldwide and MGM.
VICI believes tenants have discovered a lesson
As a result of cyclical nature of on line casino video games, the trade may very well be susceptible if a recession hits. There may be excellent news particular to VICI.
First, analysts see no indicators of a deepening recession on the Las Vegas Strip. Second, REITs imagine their purchasers have discovered classes throughout previous financial shocks, corresponding to the worldwide monetary disaster and the coronavirus pandemic.
On the NAREIT convention, VICI administration stated on line casino operators work nicely with their clients, permitting them to shift methods nimbly even at a time when customers are holding again on spending. As famous on the convention, a part of the owner’s optimism is rooted within the gaming trade’s documented means to climate and recuperate from recessions. One other benefit for VICI is that the capital markets are open to top quality REITs.
“REITs with entry to capital will climate this example and capitalize on it…the REITs would be the winners,” stated Mark Streeter, managing director of JPMorgan Chase & Co. , at a convention.
VICI has deflation insulation
Again within the final yr, the primary theme that analysts and buyers have centered on in gaming shares has been the attainable unfavorable impression of inflation. VICI has held up comparatively nicely over the previous yr, up 2.67%, because of REITs’ repute as inflation-fighting property.
This doesn’t imply that REITs can be susceptible within the occasion of a deflationary surroundings. First, inflation stays excessive, suggesting that the tip of deflation is probably going nonetheless a way off.
Second, VICI has a monitor document of performing nicely at the same time as deflation units in, as highlighted by the spectacular rally in inventory costs within the rapid aftermath of the worst part of the COVID-19 pandemic. Lastly, nearly all of lease agreements between VICI and on line casino operators comprise escalator clauses that modestly enhance rents yearly or each few years.
