There actually is a large conservation effort, which is great, albeit not enough. Ultimately, one cannot conserve their way to more water given the massive growth in that area and long term drought in the entire Colorado basin that feeds LV. I view water (in that area) a long term existential threat to VICI.
As always, excellent teaching, thank you. It’s nice to have your confirmation about VICI’s management. I bought a bunch after seeing an interview with the CEO just after the 2020 crash. He wanted to get the payout ratio down to low 60’s for many reasons, then said we could expect dividend raises. He did exactly that. i’m looking for a safe and increasing dividend over time, not a trade. Do you think drought and Lake Mead’s level is a concern to their Vegas tenants ability to pay the rent in 4-10 years?
Good question. I haven't looked into the water level much. I live in a high desert area and it's wild to see the amount of water that gets completely wasted. It would be good for those areas to consider policies that reduce waste of a subsidized resource.
How do you weigh the business concentration risk in both tenant and geography? Las Vegas is no longer recession resistant and little problems like water are mounting?
We sold our VICI last year for GLPI (I was thrilled you reviewed it) as a more defensive REIT. If a recession appears, local entertainment thrives and that's the bulk of GLPI's business model. I don't mind the slow fuddy-duddy growth as a defensive asset. Certainly not on my aggressive list :)
I would prefer more diversification, but that is part of the reason I'm not in this niche. Management pushing for big deals is pretty positive though. I would think they become more diversified over time as the AFFO per share growth depends on acquisitions. But that's mainly getting more tenants and more geography. Not necessarily changing sectors.
My bigger concern is simply that the properties are so unique (hard to repurpose) and consequently the REIT needs long-term leases that don't contain uncapped CPI escalators. Given the trillions going to the deficit each year, I would prefer assets that can roll leases much faster or where new demand will require more capacity.
Combine that with the risk rating and I end up requiring a higher rate of return. I would love to see lease terms that require tenants to keep the equivalent of BBB- credit metrics with rent doubling if the tenant fails that coverage. A real incentive for tenants to avoid excessive leverage.
There actually is a large conservation effort, which is great, albeit not enough. Ultimately, one cannot conserve their way to more water given the massive growth in that area and long term drought in the entire Colorado basin that feeds LV. I view water (in that area) a long term existential threat to VICI.
As always, excellent teaching, thank you. It’s nice to have your confirmation about VICI’s management. I bought a bunch after seeing an interview with the CEO just after the 2020 crash. He wanted to get the payout ratio down to low 60’s for many reasons, then said we could expect dividend raises. He did exactly that. i’m looking for a safe and increasing dividend over time, not a trade. Do you think drought and Lake Mead’s level is a concern to their Vegas tenants ability to pay the rent in 4-10 years?
Good question. I haven't looked into the water level much. I live in a high desert area and it's wild to see the amount of water that gets completely wasted. It would be good for those areas to consider policies that reduce waste of a subsidized resource.
How do you weigh the business concentration risk in both tenant and geography? Las Vegas is no longer recession resistant and little problems like water are mounting?
We sold our VICI last year for GLPI (I was thrilled you reviewed it) as a more defensive REIT. If a recession appears, local entertainment thrives and that's the bulk of GLPI's business model. I don't mind the slow fuddy-duddy growth as a defensive asset. Certainly not on my aggressive list :)
I would prefer more diversification, but that is part of the reason I'm not in this niche. Management pushing for big deals is pretty positive though. I would think they become more diversified over time as the AFFO per share growth depends on acquisitions. But that's mainly getting more tenants and more geography. Not necessarily changing sectors.
My bigger concern is simply that the properties are so unique (hard to repurpose) and consequently the REIT needs long-term leases that don't contain uncapped CPI escalators. Given the trillions going to the deficit each year, I would prefer assets that can roll leases much faster or where new demand will require more capacity.
Combine that with the risk rating and I end up requiring a higher rate of return. I would love to see lease terms that require tenants to keep the equivalent of BBB- credit metrics with rent doubling if the tenant fails that coverage. A real incentive for tenants to avoid excessive leverage.
Another reason I like GLPI business risk better. Their real estate can morph to a high and better more easily than VICI.
Meanwhile, based on your analysis, we are starting to buy TRNO, SUI and ARE. Thanks as always for your good work.