Own The Las Vegas Strip

Brit Ryle

Posted April 1, 2024

Book a couple nights in Vegas at Caesars Palace or Harrah’s, lose a little loot in their casinos and you could joke that you’re simply rendering unto Caesar that which is Caesar’s…

After all, those properties are part of Caesars Entertainment’s (NYSE: CZR) casino empire. At least sort of…

Caesars owns the name on the door. And it gets to count up the money. But even Caesars has to render a portion of the take unto another entity…

Because Caesars Entertainment doesn’t actually own the buildings or the land on which Caesar’s Place or Harrah’s stands. A company named VICI Properties (NYSE: VICI) owns them. VICI is a real estate investment trust, a REIT. VICI shares sell for right at $30 a piece and it pays a fat 5.8% ($1.66 a share) annual dividend.

VICI used to be part of Caesar’s Entertainment. But as often happens Caesar’s spun the real estate ownership out as a separate company in 2017. VICI is now effectively Caesar’s landlord…

It’s a common thing to do because the parent company gets a chunk of cash and slashes employment expenses. The new company gets a triple net lease agreement with the parent company that guarantees it a steady cash flow.

For VICI, that will mean 12-month revenue of $3.77 billion when fiscal 2024 ends in June. Now, if $3.77 billion sounds like a lot of rent to collect on two Vegas properties, well, you’re right. VICI owns a lot more than just two Vegas properties…

In 2022, it bought out MGM Properties and added Mandalay Bay, MGM Grand, Luxor, New York New York, Excalibur, and Park MGM to its impressive portfolio. VICI also owns the Mirage and the Venetian. 

Here’s a visual, everything in blue is VICI:

VICI pretty much owns the Vegas strip: including 33 acres of land ready for development. And with Vegas tourism at record levels, that land has gotten more valuable. 

In total, VICI owns a total of 127 million square feet of space all over the U.S. 50 casinos plus a couple of horse tracks, over 500 restaurants, clubs and sports books, and 60,000 hotel rooms. 

On the 5-year chart, you can see the pandemic sell-off and recovery. The big spike in volume coincides with the MGM Properties acquisition. But notice the stock has traded between $25 and $35 since 2021. That’s a long consolidation and could lead to a strong upside move. 

Interest rate cuts from the Fed should be a catalyst. If investors can no longer get ~5% from a money-market fund when rates fall, a REIT like VICI that pays 5.8% should look pretty darn good. 

Briton Ryle
Chief Investment Strategist
Pro Trader Today
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