2018
VICI Properties Inc.
Annual Report
CAE S ARS PALAC E
L AS V E GAS , NV
HORSESHOE COUNCIL BLUFFS
COUNCIL BLUFFS, IA
CASCATA GOLF COURSE
BOULDER CIT Y, NV
HARRAH’S GULF COAST
BI LOX I, MS
HARVEYS LAKE TAHOE
STATEL INE, NV
HAR RAH’S
LAS V EGAS , NV
CEO LETTER TO STOCKHOLDERS
Dear VICI Stockholders,
This 2018 VICI Annual Report is the distillation, in words and numbers, of a very productive and positive year for
our company.
Overview
If we call it a baker’s dozen and make it a 13-month year—by including December 2017, a truly foundational
month in VICI’s development—it was a period in which we began the forging of an institutional-quality
commercial real estate company—a truly blue-chip REIT. Those steps included:
• Raising $3.1 billion of equity (including $2.1 billion of public equity issued during calendar year 2018
alone, leading all American REITs in primary equity issuance during 2018);
• De-leveraging over that same time period from 8.4x Net Debt to Adjusted EBITDA to 4.2x Net Debt to
Adjusted EBITDA at year-end 2018;
• Acquiring or announcing the acquisition of approximately $2.7 billion of real estate at a blended
going-in cap rate of 8.3%;
• Diversified our roster of best-in-class gaming operators—announcing two transactions with a new
tenant and exceptional operator, Penn National Gaming; and
•
Increasing our annualized dividend by 9.5% after only two quarters of being a dividend-paying REIT.
These were all vital steps in building a foundation of enduring value for VICI’s stockholders.
Our Real Estate and Our Tenants
In addition to building a foundation of enduring value for our stockholders, one of our most important
objectives in 2018 was beginning to help investors answer the question “Just how good is this real estate?”
The quick answer? Really good, as in institutional-quality good.
To best understand what we mean when defining our real estate as “institutional-quality good,” let’s review
some of the key criteria that, we believe, currently characterize institutional-quality real estate and the tenants
who occupy it, pay the rent and thus underwrite the property’s value. In these criteria, we are particularly
focused on real estate occupied by tenants who serve their customers, face to face, within the real estate.
• Mission critical to the tenant’s business, especially if the tenant serves its customers directly within
that real estate;
• Real estate that fully meets the needs of its tenants, with unique attributes that may be difficult or
expensive to replicate or adapt in other locations or in other forms of real estate;
• Real estate that has meaningful barriers to entry,
including, among others, barriers related to
regulation, permitting and entitlement, complexity, and cost of replacement;
•
The applicable tenant class, if it serves consumers directly in the real estate, has a strong relationship
with the end user, driven by a proven ability to keep the consumer’s experience fresh, innovative,
relevant and fulfilling;
• Real estate in locations that are and are likely to remain optimally situated in relation to the tenant’s
marketplace;
• Real estate that generates income from financially strong and sound credit quality tenants;
•
Tenant businesses that are relatively resilient through economic cycles;
• Vacancy risk that is relatively low from existing tenants and / or the applicable tenant class is deep
enough that replacement tenants can be found if necessary;
• Real estate that is subject to relatively low risk of obsolescence, with design and construction features
that allow the asset to evolve with the needs of the operator and consumer desires; and
•
The tenants’ offerings (services, experiences) are at relatively low risk of being “displaced” (i.e., put
into a box and shipped directly to the consumer’s home or workplace).
If the real estate of a given asset class meets most or all the foregoing criteria, the institutional nature of the
real estate is generally recognized and valued accordingly. And if it is not yet recognized, it is a strong candidate
for positive re-valuation and full embrace by institutional investors.
VICI is just such a candidate, because our real estate, our tenants and their businesses meet the criteria listed
above.
Our real estate is mission critical to our tenants and very difficult and expensive to replace or substitute. Our
tenants—Caesars and Penn National—are institutionally expert at conceiving and delivering superb guest
experiences that generate delight,
liberal spending and loyalty. These experiences require the uniquely
designed and expansive spaces that our real estate provides, offering diverse guest experiences that meet
diverse guest needs, for a diverse guest base and they do so with an energy and creativity that ensures the
guest experiences evolve and don’t grow stale.
The resulting enduring relationship our operators have with their guests drives our real estate’s enduring
relevance and durability for generations to come.
Note, as well, the resilience of our tenants’ businesses, through all economic cycles, especially at the regional
level, which comprises 66% of our portfolio NOI. As you can see in the graph below, core regional gaming
markets suffered only a 3.9% drop in revenue peak-to-trough through the 2008-2009 financial crisis. This
period, encompassing the worst financial crisis in nearly 80 years, saw gaming revenue decline 9% overall, but
in doing so declined at only half the rate of the S&P 500, which suffered an 18% drop in revenue.
Core Regional Gaming Revenues (US$bn, annual)
$18.5
18.0
17.5
17.0
16.5
2007 peak: $18.0bn
2017: $18.3bn
2009 trough:
$17.3bn
2009-17 Change in:
Revenues: +$1.0bn
Investment: +$1.7bn
Peak to Trough: -3.9%
2017 vs Peak: +1.9%
2017 vs Trough: +6.0%
2007
2009
2011
2013
2015
2017
This strength and resilience of our tenants’ businesses, together with their credit quality, give us high
confidence that our operators have sufficient post-rent income to fund all their obligations, invest in and
maintain our properties through all economic cycles.
Our tenants, Caesars and Penn, offer place-based experiences that are shared—guests coming together at the
same time and in the same place. Shared experiences are inherently resistant to being disrupted by new
channels of commerce, simply because shared experience can’t be put into a box and shipped to your house.
In addition, the time, expense and complexity of regulatory approval, entitlement and construction, create
barriers to entry in our sector that are likely to lessen the risk of asset supply growth that swamps the rate of
demand growth.
Our Income: Character & Quality
When it comes to the transparency and integrity of our income, our triple-net lease structure ensures that our
investors can be confident that our reported AFFO is our true AFFO, since we have no significant property
management, leasing or capital expenditure obligations, giving our cash flows a high degree of transparency
and integrity for our investors, more so than any other real estate sector.
What we demonstrated in 2018—in a brand-new REIT within a still-young REIT asset class—is that the nature,
quality and durability of our real estate, the operating excellence of our tenants, and the cash flow they
produce yields us property rent that meets the institutional criteria described above. Our real estate is of
institutional quality because our real estate’s income is of institutional quality.
Our ESG Framework
The environmental and social practices (the “E” and “S” of ESG) pertaining to our real estate are also of
institutional quality, particularly as exercised, day by day, by our tenants, Caesars and Penn National. For
example, Caesars is committed to environmental stewardship through a data-driven and disciplined
environmental awareness and engagement program implemented at the property level, and Penn National is
committed to good corporate citizenship in the communities in which it operates through the Penn National
Gaming Foundation, a 501(c)(3) organization. In addition, both Caesars and Penn National maintain policies to
provide equal opportunity for all employees and applicants for employment, and work environments free from
discrimination, harassment, intimidation or retaliation for reporting or opposing such conduct. Each of their
businesses are leading contributors to the fiscal health of the communities in which they operate, and both
Caesars and Penn National have strong community outreach and giving programs.
We fully support and supplement our tenants in these environmental and social practices, and we have our own
environmental management and community support practices within our corporate operations, and VICI Golf,
which include promoting energy efficiency, recycling and other activities to minimize our impact on the
environment. We also support charitable service and strive to create partnerships with local organizations that
are aligned with our business values. We are firmly committed to our sustainability practices, which are
imperative in attracting and retaining the best institutional quality capital and helping our tenants manage
operating costs, which ultimately enhances the value of our real estate and, in turn, stockholder value. In
addition, like our tenants, we maintain policies to provide equal opportunity for all employees and applicants
for employment, and a work environment free from discrimination, harassment, intimidation or retaliation for
reporting or opposing such conduct.
VICI’s direct commitment to governance was and is a founding principle that guides the decision-making and
actions of our Board and our management team. We govern our company on behalf and for the benefit of our
one and only class of stockholder, the common-equity stockholder, and on their behalf, we take great care in
governing the company in a way that acknowledges, addresses and respects the needs of all our key
stakeholders.
Looking Forward
For investors who believe, as we do, that the next few decades should be a golden age for place-based leisure
experiences—given the Baby Boom and Millennial age waves—we believe our model is a superior way for
investors to derive real estate income from this surge.
Our assets and, moreover, our operators are ready for this surge.
Consider, as an example, our flagship property, Caesars Palace Las Vegas. The core of the property dates back to
1966 and yet Caesars, as operator and tenant, has ceaselessly created new experiences and re-invigorated
existing experiences, so that the property continues to attract and delight millions of guests each year, creating
memories and loyalty that will sustain the real estate’s income quality, durability and value for decades to
come.
In summary, we are tremendously excited to have this opportunity to tell the value story of our experiential real
estate sector in institutional real estate terms. Not all REIT asset classes have proven that they are truly of
institutional quality, whether because of the nature of the tenant’s business and end-user relationship, or
because supply growth outpaced demand growth at a value-destroying rate.
We believe experiential real estate represents the next compelling institutionalization opportunity in American
commercial real estate, and we are very grateful to all of you, our current stockholders, for being among the
first to see and seize this opportunity. We look forward to working with you for years to come in growing the
value of our business.
Best regards,
Edward B. Pitoniak
Chief Executive Officer
For a definition and reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures, see the section entitled “Reconciliation of Non-GAAP Measures” in our Annual Report.
HARRAH’S RENO
RENO, NV
H AR RAH ’S LAKE TAHOE
STATEL IN E, NV
22
PRO PERTIES
14.8K
HOTEL ROOMS
626K
SQ FT MEETING/
CONFERENCE SPACE
11
METROPOLITAN
STATISTICAL AREAS
39
MILLION SQ FT
4
CHAMPIONSHIP
GOLF COURSES
50+
RETAIL OUTLETS
150
RESTAURANTS/BARS
1.3M
SQ FT OF GAMING
SPACE
HOR SES HOE
BOSSIER CIT Y
BOSSIER CIT Y, LA
HA RVEYS TAHOE
STATEL INE, NV
CAES ARS PALACE
LAS V EGAS, NV
HARVEYS OUTDOOR
AMPITHEATER
STATEL INE, NV
HORSESHOE BOSSIER CIT Y
BOSSIER CIT Y, LA
CAE S ARS ATL ANTIC CIT Y
ATLAN TIC CIT Y, NJ
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2018
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ________ to _________
Commission file number: 000-55791
________________________________________________
VICI PROPERTIES INC.
(Exact name of registrant as specified in its charter)
________________________________________________
Maryland
(State or other jurisdiction of incorporation or organization)
81-4177147
(I.R.S. Employer Identification No.)
430 Park Avenue, 8th Floor New York, New York 10022
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (646) 949-4631
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class
Common stock, $0.01 par value
Name of each exchange on which registered
New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
As of June 29, 2018 (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the common stock
held by non-affiliates of the registrant was approximately $7.6 billion, based on the closing price of the common stock as reported on the NYSE on that date.
As of February 11, 2019, the registrant had 404,726,821 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s definitive proxy statement relating to the 2019 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission
within 120 days after the end of the calendar year to which this report relates, are incorporated by reference into Part III, Items 10-14 of this Annual Report on
Form 10-K as indicated herein.
TABLE OF CONTENTS
Page
Part I
Part II
Part III
Part IV
Item 1 – Business
Item 1A – Risk Factors
Item 1B – Unresolved Staff Comments
Item 2 – Properties
Item 3 – Legal Proceedings
Item 4 – Mine Safety Disclosures
Item 5 – Market for the Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Item 6 – Selected Financial Data
Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Item 7A – Quantitative and Qualitative Disclosures About Market Risk
Item 8 – Financial Statements and Supplementary Data
Item 9 – Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Item 9A – Controls and Procedures
Item 9B – Other Information
Item 10 – Directors, Executive Officers and Corporate Governance
Item 11 – Executive Compensation
Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13 – Certain Relationships and Related Transactions, and Director Independence
Item 14 – Principal Accounting Fees and Services
Item 15 – Exhibits and Financial Statement Schedules
Item 16 – Form 10-K Summary
Signatures
2
22
47
47
47
47
48
51
53
66
67
67
67
68
69
69
69
69
69
70
77
78
Index to Consolidated Financial Statements and Schedules
F - 1
PART I
In this Annual Report on Form 10-K, the words “VICI,” the “Company,” “we,” “our,” and “us” refer to VICI
Properties Inc. and its subsidiaries, on a consolidated basis, unless otherwise stated or the context requires
otherwise.
We refer to (i) our Consolidated Financial Statements as our “Financial Statements,” (ii) our Consolidated Balance
Sheets as our “Balance Sheet,” (iii) our Consolidated Statements of Operations and Comprehensive Income as
our “Statement of Operations,” and (iv) our Consolidated Statement of Cash Flows as our “Statement of Cash
Flows.” References to numbered “Notes” refer to the Notes to our Consolidated Financial Statements.
“Caesars” refers to Caesars Entertainment Corporation, a Delaware corporation, and its subsidiaries.
“Caesars Entertainment Outdoor” refers to the historical operations of the golf courses that were transferred from
CEOC to VICI Golf on the Formation Date.
“Caesars Lease Agreements” refer collectively to the CPLV Lease Agreement, the Non-CPLV Lease Agreement,
the Joliet Lease Agreement and the HLV Lease Agreement, unless the context otherwise requires.
“CEOC” refers to Caesars Entertainment Operating Company, Inc., a Delaware corporation, and its subsidiaries,
prior to the Formation Date, and following the Formation Date, CEOC, LLC, a Delaware limited liability company
and its subsidiaries. CEOC is a subsidiary of Caesars.
“CPLV CMBS Debt” refers to $1.55 billion of asset-level real estate mortgage financing of Caesars Palace Las
Vegas, incurred by a subsidiary of the Operating Partnership on October 6, 2017.
“CPLV Lease Agreement” refers to the lease agreement for Caesars Palace Las Vegas, as amended from time to
time.
“CRC” refers to Caesars Resort Collection, LLC, a Delaware limited liability company which is a subsidiary of
Caesars.
“Eastside Property” refers to 18.4 acres of property located in Las Vegas, Nevada, east of Harrah’s Las Vegas
that we sold to Caesars in December, 2017.
“Formation Date” refers to October 6, 2017.
“Formation Lease Agreements” refers to the CPLV Lease Agreement, the Joliet Lease Agreement and the Non-
CPLV Lease Agreement, collectively.
“Greektown” refers to the real estate assets associated with the Greektown Casino-Hotel, located in Detroit,
Michigan. On November 13, 2018, we entered into definitive agreements to acquire all of the land and real estate
assets associated with Greektown,
“HLV Lease Agreement” refers to the lease agreement for the Harrah’s Las Vegas facilities, as amended from time
to time.
“Joliet Lease Agreement” refers to the lease agreement for the facilities in Joliet, Illinois, as amended from time
to time.
“Lease Agreements” refer collectively to the Caesars Lease Agreements and the Margaritaville Lease Agreement,
unless the context otherwise requires.
“Margaritaville Lease Agreement” refers to the lease agreement for Margaritaville Resort Casino.
1
“Margaritaville Resort Casino” refers to the real estate of Margaritaville Resort Casino, located in Bossier City,
Louisiana, which we purchased on January 2, 2019.
“Non-CPLV Lease Agreement” refers to the lease agreement for the regional properties leased to Caesars other
than the facilities in Joliet, Illinois, as amended from time to time.
The “Operating Partnership” refers to VICI Properties L.P., a Delaware limited partnership and a wholly owned
subsidiary of VICI.
“Penn National” refers to Penn National Gaming, Inc. and its subsidiaries.
“Revolving Credit Facility” refers to the five-year first lien revolving credit facility entered into by VICI PropCo
in December 2017.
“Second Lien Notes” refers to $766.9 million aggregate principal amount of 8.0% second priority senior secured
notes due 2023 issued by a subsidiary of the Operating Partnership in October 2017, of which approximately
$498.5 million aggregate principal amount remains outstanding.
“Term Loan B Facility” refers to the seven-year senior secured first lien term loan B facility entered into by VICI
PropCo in December 2017.
“VICI Golf” refers to VICI Golf LLC, a Delaware limited liability company that is the owner and operator of the
Caesars Entertainment Outdoor business.
“VICI PropCo” or “PropCo” refers to VICI Properties 1 LLC, a Delaware limited liability company and an
indirect wholly-owned subsidiary of VICI.
ITEM 1.
Business
We are an owner and acquirer of experiential real estate assets across leading gaming, hospitality, entertainment
and leisure destinations. Our national, geographically diverse portfolio currently consists of 22 market leading
properties, including Caesars Palace Las Vegas and Harrah’s Las Vegas, two of the most iconic entertainment
facilities on the Las Vegas Strip. Our entertainment facilities are leased to leading brands that seek to drive consumer
loyalty and value with guests through superior services, experiences, products and continuous innovation. Across
approximately 39 million square feet, our well-maintained properties are currently located across urban, destination
and drive-to markets in ten states, contain approximately 14,800 hotel rooms and feature over 150 restaurants, bars
and nightclubs.
Our portfolio also includes approximately 34 acres of undeveloped or underdeveloped land on and adjacent to the
Las Vegas Strip that is leased to Caesars, which we may look to monetize as appropriate. We also own and operate
four championship golf courses located near certain of our properties, two of which are in close proximity to the
Las Vegas Strip.
We believe we have a mutually beneficial relationship with Caesars and Penn National, both of which are leading
owners and operators of gaming, entertainment and leisure properties. Our long-term triple-net Lease Agreements
with subsidiaries of Caesars and Penn National provide us with a highly predictable revenue stream with embedded
growth potential. We believe our geographic diversification limits the effect of changes in any one market on our
overall performance. We are focused on driving long-term total returns through managing experiential asset growth
and allocating capital diligently, maintaining a highly productive tenant base, and optimizing our capital structure
to support external growth. As a growth focused public real estate company, we expect our relationship with our
partners will position us for the acquisition of additional properties across leisure and hospitality.
2
Our portfolio is competitively positioned and well-maintained. Pursuant to the terms of the Lease Agreements,
which require our tenants to invest in our properties, and in line with our tenants’ commitment to build guest loyalty,
we anticipate our tenants will continue to make strategic value-enhancing investments in our properties over time,
helping to maintain their competitive position. In addition, given our scale and deep industry knowledge, we believe
we are well-positioned to execute highly complementary single-asset and portfolio acquisitions to augment growth.
We have elected to be taxed as a real estate investment trust (“REIT”) for U.S. Federal income tax purposes
commencing with our taxable year ended December 31, 2017. We believe our election of REIT status combined
with the income generation from the Lease Agreements will enhance our ability to make distributions to our
stockholders, providing investors with current income as well as long-term growth.
Our Competitive Strengths
We believe the following strengths effectively position us to execute our business and growth strategies:
Leading portfolio of high-quality experiential gaming, hospitality, entertainment and leisure assets.
Our portfolio features Caesars Palace Las Vegas and Harrah’s Las Vegas and market-leading urban, destination
and regional properties with significant scale. Our properties are well-maintained and leased to leading brands,
such as Caesars, Horseshoe, Harrah’s, Bally’s and Margaritaville. These brands seek to drive loyalty and value
with guests through superior service and products and continuous innovation. Our portfolio benefits from its strong
mix of demand generators, including casinos, guest rooms, restaurants, entertainment facilities, bars and nightclubs
and convention space. We believe our properties are well-insulated from incremental competition as a result of
high replacement costs, as well as regulatory restrictions and long-lead times for new development. The high
quality of our properties appeals to a broad base of customers, stimulating traffic and visitation.
Our portfolio is anchored by our Las Vegas properties, Caesars Palace Las Vegas and Harrah’s Las Vegas, which
are located at the center of the Strip. We believe Las Vegas is a market characterized by steady economic growth
and high consumer and business demand with limited new supply. Our Las Vegas properties, which are two of the
most iconic entertainment facilities in Las Vegas, feature gaming entertainment, large-scale hotels, extensive food
and beverage options, state-of-the-art convention facilities, retail outlets and entertainment showrooms.
Our portfolio also includes market-leading regional resorts and destinations that we believe are benefiting from
significant invested capital over recent years. The regional properties we own include award-winning land-based
and dockside casinos, hotels and entertainment facilities that are market leaders within their respective regions.
The properties operate primarily under the Caesars, Harrah’s, Horseshoe, Bally’s and Margaritaville trademark
and brand names, which, in many instances, have market-leading brand recognition.
Under the terms of the Lease Agreements, the tenants are required to continue to invest in the properties, which
we believe will enhance the value of our properties.
Our properties feature diversified sources of revenue on both a business and geographic basis.
Our portfolio includes 22 geographically diverse casino resorts that serve numerous Metropolitan Statistical Areas
(“MSAs”) nationally. This diversity reduces our exposure to adverse events that may affect any single market. This
also allows our tenants to derive multiple revenue streams from an economically diverse set of customers and
services to such customers. These include gaming, food and beverage, entertainment, hospitality and other sources
of revenue. We believe that this geographic diversity and the diversity of revenue sources that our tenants derive
from our leased properties improves the stability of rental revenue.
Our long-term Lease Agreements provide a highly predictable base level of rent with embedded growth potential.
Our properties are 100% occupied pursuant to our long-term triple-net Lease Agreements with subsidiaries of
Caesars and Penn National, providing us with a predictable level of rental revenue to support future cash distributions
to our stockholders.
3
All of our casino resort properties are established assets with extensive operating histories. Based on historical
performance of the properties, we expect that the properties will generate sufficient revenues for Caesars’ and Penn
National’s subsidiaries to pay to us all rent due under the Lease Agreements.
We believe our relationship with Caesars and Penn National, including our contractual agreements with them and
their applicable subsidiaries, will continue to drive significant benefits and mutual alignment of strategic interests
in the future.
Caesars or CRC guarantees the payment obligations of our tenants under the Caesars Lease Agreements and
Penn National guarantees the payment obligations of our tenant under the Margaritaville Lease Agreement.
All of our existing properties are leased to subsidiaries of Caesars or Penn National. Caesars guarantees the payment
obligations of our tenants under the Formation Lease Agreements, CRC, a subsidiary of Caesars, guarantees the
payment obligations of our tenant under the HLV Lease Agreement and Penn National guarantees the payment
obligations of our tenant under the Margaritaville Lease Agreement.
In addition to the properties leased from us, Caesars and Penn National operate numerous other casino resorts,
collectively comprising a nationally recognized portfolio of brands. With respect to Caesars these include Caesars,
Harrah’s, Horseshoe and Bally’s, and Caesars operates its portfolio of properties (including the properties that are
leased from us) using the Caesars Rewards® customer loyalty program. Core to Caesars’ cross market strategy,
the Caesars Rewards® program is designed to encourage Caesars’ customers to direct a larger share of their
entertainment spending to Caesars. With respect to Penn National its brands include, but are not limited to,
Hollywood, Boomtown, Argosy and Margaritaville, and Penn National operates its portfolio of properties (including
the property leased from us) using the mychoice® customer loyalty program.
Experienced management team and independent board of directors with robust corporate governance
We have an experienced and independent management team that has been actively engaged in the leadership,
acquisition and investment aspects of the hospitality, gaming, entertainment and real estate industries throughout
their careers. Our Chief Executive Officer, Edward Pitoniak, and President and Chief Operating Officer, John
Payne, are industry veterans with an average of 30 years of experience in the REIT, gaming and experiential real
estate industries, during which time they were able to drive controlled growth and diversification of significant
real estate and gaming portfolios. Mr. Pitoniak’s service as an independent board member of public companies
provides him with a unique and meaningful management perspective and enables him to work with our independent
board of directors as a trusted steward of our extensive portfolio. Our Chief Financial Officer and General Counsel
have an average of 20 years of experience in the REIT, real estate and hospitality industries and bring significant
leadership and expertise to our team across capital markets, corporate finance, acquisitions and corporate
governance. Our independent board of directors, which is made of highly skilled and seasoned real estate, gaming,
hospitality, consumer products and corporate professionals, was established to ensure that there was no overlap
between our tenants and the companies with which our directors are affiliated. In addition, our board of directors
is not staggered, with each of our directors subject to re-election annually. Robust corporate governance in the best
interests of our stockholders is of central importance to the management of our company, as we have a separate
Chairman of the Board and Chief Executive Officer and all members of our audit and finance committee qualify
as an “audit committee financial expert” as defined by the SEC. Directors are elected in uncontested elections by
the affirmative vote of a majority of the votes cast, and stockholder approval is required prior to, or in certain
circumstances within twelve months following, the adoption by our board of a stockholder rights plan.
4
Our Properties
The following chart and table summarize our current portfolio of properties, our pending acquisition, our properties
subject to the call option agreement with Caesars and our properties subject to the right of first refusal agreement
and put/call agreement with Caesars. Our properties are diversified across a range of primary uses, including
gaming, hotel, convention, dining, entertainment, retail, golf course and other resort amenities and activities.
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(cid:18)(cid:346)(cid:258)(cid:396)(cid:349)(cid:381)(cid:410)(cid:3)(cid:90)(cid:437)(cid:374)(cid:853)(cid:3)(cid:62)(cid:258)(cid:272)(cid:381)(cid:374)(cid:349)(cid:258)(cid:853)(cid:3)(cid:47)(cid:69)
(cid:1005)(cid:856)
(cid:75)(cid:374)(cid:3)(cid:69)(cid:381)(cid:448)(cid:286)(cid:373)(cid:271)(cid:286)(cid:396)(cid:3)(cid:1005)(cid:1008)(cid:853)(cid:3)(cid:1006)(cid:1004)(cid:1005)(cid:1012)(cid:853)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:18)(cid:381)(cid:373)(cid:393)(cid:258)(cid:374)(cid:455)(cid:3)(cid:258)(cid:374)(cid:374)(cid:381)(cid:437)(cid:374)(cid:272)(cid:286)(cid:282)(cid:3)(cid:410)(cid:346)(cid:258)(cid:410)(cid:3)(cid:349)(cid:410)(cid:3)(cid:286)(cid:374)(cid:410)(cid:286)(cid:396)(cid:286)(cid:282)(cid:3)(cid:349)(cid:374)(cid:410)(cid:381)(cid:3)(cid:282)(cid:286)(cid:296)(cid:349)(cid:374)(cid:349)(cid:410)(cid:349)(cid:448)(cid:286)(cid:3)(cid:258)(cid:336)(cid:396)(cid:286)(cid:286)(cid:373)(cid:286)(cid:374)(cid:410)(cid:400)(cid:3)(cid:393)(cid:437)(cid:396)(cid:400)(cid:437)(cid:258)(cid:374)(cid:410)(cid:3)(cid:410)(cid:381)(cid:3)(cid:449)(cid:346)(cid:349)(cid:272)(cid:346)(cid:3)(cid:115)(cid:47)(cid:18)(cid:47)(cid:3)(cid:449)(cid:349)(cid:367)(cid:367)(cid:3)(cid:258)(cid:272)(cid:395)(cid:437)(cid:349)(cid:396)(cid:286)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:367)(cid:258)(cid:374)(cid:282)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:396)(cid:286)(cid:258)(cid:367)(cid:3)(cid:286)(cid:400)(cid:410)(cid:258)(cid:410)(cid:286)(cid:3)(cid:258)(cid:400)(cid:400)(cid:286)(cid:410)(cid:400)(cid:3)(cid:258)(cid:400)(cid:400)(cid:381)(cid:272)(cid:349)(cid:258)(cid:410)(cid:286)(cid:282)(cid:3)(cid:449)(cid:349)(cid:410)(cid:346)(cid:3)(cid:39)(cid:396)(cid:286)(cid:286)(cid:364)(cid:410)(cid:381)(cid:449)(cid:374)(cid:856)(cid:3)(cid:4)(cid:272)(cid:395)(cid:437)(cid:349)(cid:400)(cid:349)(cid:410)(cid:349)(cid:381)(cid:374)(cid:3)(cid:349)(cid:400)(cid:3)(cid:393)(cid:286)(cid:374)(cid:282)(cid:349)(cid:374)(cid:336)(cid:3)(cid:272)(cid:381)(cid:373)(cid:393)(cid:367)(cid:286)(cid:410)(cid:349)(cid:381)(cid:374)(cid:853)(cid:3)
(cid:400)(cid:437)(cid:271)(cid:361)(cid:286)(cid:272)(cid:410)(cid:3)(cid:410)(cid:381)(cid:3)(cid:272)(cid:437)(cid:400)(cid:410)(cid:381)(cid:373)(cid:258)(cid:396)(cid:455)(cid:3)(cid:272)(cid:367)(cid:381)(cid:400)(cid:349)(cid:374)(cid:336)(cid:3)(cid:272)(cid:381)(cid:374)(cid:282)(cid:349)(cid:410)(cid:349)(cid:381)(cid:374)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:396)(cid:286)(cid:336)(cid:437)(cid:367)(cid:258)(cid:410)(cid:381)(cid:396)(cid:455)(cid:3)(cid:258)(cid:393)(cid:393)(cid:396)(cid:381)(cid:448)(cid:258)(cid:367)(cid:400)(cid:856)
5
MSA / Property
Location
Approx.
Casino Sq Ft
(000’s)
Approx.
Gaming
Units
Hotel
Rooms
Lease
Agreement
Current Portfolio - Casinos
124
89
44
40
45
116
127
113
108
39
28
12
27
Las Vegas—Destination
Gaming
Caesars Palace Las Vegas
Harrah’s Las Vegas
Las Vegas, NV
Las Vegas, NV
San Francisco / Sacramento
Harvey’s Lake Tahoe
Harrah’s Reno
Harrah’s Lake Tahoe
Philadelphia
Caesars Atlantic City
Bally’s Atlantic City
Harrah’s Philadelphia (1)
Chicago
Lake Tahoe, NV
Reno, NV
Stateline, NV
Atlantic City, NJ
Atlantic City, NJ
Chester, PA
Horseshoe Hammond
Harrah’s Joliet (2)
Hammond, IN
Joliet, IL
Dallas
Horseshoe Bossier City
Bossier City, LA
Bossier City, LA
Bossier City, LA
Harrah’s Louisiana
Downs (1)
Margaritaville Resort
Casino (3)
Kansas City
Harrah’s North Kansas
City
Memphis
North Kansas City, MO
60
Horseshoe Tunica
Tunica Roadhouse (4)
Robinsonville, MS
Robinsonville, MS
Omaha
Harrah’s Council Bluffs
Horseshoe Council Bluffs
Council Bluffs, IA
Council Bluffs, IA
Nashville
Harrah’s Metropolis
Metropolis, IL
New Orleans
Harrah’s Gulf Coast
Biloxi, MS
Louisville, KY
Horseshoe Southern
Indiana
Bluegrass Downs (1)
Total Casinos
Elizabeth, IN
Paducah, KY
22
63
N/A
21
60
24
31
87
N/A
1,258
6
1,600
1,310
720
640
830
2,020
1,960
2,560
2,370
1,130
1,240
830
1,267
1,360
1,110
N/A
570
1,450
870
800
3,970
2,540
740
930
510
1,140
1,210
N/A
N/A
200
610
N/A
CPLV
HLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Joliet
Non-CPLV
Non-CPLV
395
Margaritaville
390
510
140
250
N/A
260
500
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
1,680
N/A
26,317
500
N/A
14,795
Current Portfolio - Golf Courses
Las Vegas
Cascata Golf Course
Rio Secco Golf Course
Boulder City, NV
Henderson, NV
New Orleans
Grand Bear Golf Course
Saucier, MS
Louisville, KY
Chariot Run Golf Course
Total Golf Courses
Total
Detroit
Laconia, IN
4
26
Pending Acquisition
N/A
N/A
N/A
N/A
—
1,258
N/A
N/A
N/A
N/A
—
N/A
N/A
N/A
N/A
—
26,317
14,795
N/A
N/A
N/A
N/A
Greektown Casino-Hotel
Detroit, MI
100
2,480
400
N/A
Option Properties
Philadelphia
Harrah’s Atlantic City
Atlantic City, NJ
New Orleans
Harrah’s New Orleans
New Orleans, LA
Nevada
Harrah’s Laughlin
Laughlin, NV
Total
3
156
125
55
336
2,270
2,590
1,620
450
910
4,800
1,500
4,540
N/A
N/A
N/A
(1) Property has live horse racing.
(2) Owned by Harrah’s Joliet Landco LLC, a joint venture of which VICI PropCo is the 80% owner and the managing member.
(3) We completed the previously announced acquisition of Margaritaville Resort Casino on January 2, 2019.
(4) In January of 2019, Caesars combined the gaming operations of Tunica Roadhouse and Horseshoe Tunica.
Our Tenants
All of our properties with the exception of the golf courses and Margaritaville Resort Casino are leased to Caesars.
The golf courses are internally managed (through our taxable REIT subsidiary, VICI Golf) and the Margaritaville
Resort Casino is leased to Penn National.
Caesars is a leading owner and operator of gaming, entertainment and leisure properties. Caesars maintains a
diverse brand portfolio with a wide range of options that appeal to a variety of gaming, travel and entertainment
consumers. As of December 31, 2018, Caesars operates 53 properties, consisting of 24 owned and operated
properties, eight properties that it manages on behalf of third parties and 21 properties that it leases from us.
Caesars was our only tenant as of December 31, 2018 and is the guarantor of the lease payment obligations of the
properties that it leases from us. Caesars is a publicly traded company that is subject to the informational filing
requirements of the Securities Exchange Act of 1934, as amended, and is required to file periodic reports on Form
10-K and Form 10-Q and current reports on Form 8-K with the Securities and Exchange Commission. Caesars’
SEC filings are available to the public from the SEC’s web site at www.sec.gov. We make no representation as to
the accuracy or completeness of the information regarding Caesars that is available through the SEC’s website or
otherwise made available by Caesars or any third party, and none of such information is incorporated by reference
in this Annual Report on Form 10-K.
7
Overview of our Lease Agreements
We derive substantially all of our revenues from rental revenue from the leases of our properties to certain
subsidiaries of Caesars and Penn National pursuant to the Lease Agreements, each of which are “triple-net” leases,
pursuant to which the tenant bears responsibility for all property costs and expenses associated with ongoing
maintenance and operation, including utilities, property tax and insurance.
Caesars Lease Agreements - Overview
On December 26, 2018, each of the Caesars Lease Agreements were amended to better align our interests with
that of our tenant Caesars. As provided for in the amended lease agreements, the provisions regarding the Escalators
for the Non-CPLV Lease Agreement and Joliet Lease Agreement were amended so that the rent escalation
commenced effective as of November 1, 2018. The following is a summary of the material lease provisions of our
Caesars Lease Agreements prior to amendment and as amended:
($ In thousands)
Non-CPLV Lease Agreement and
Joliet Lease Agreement (1)
CPLV Lease Agreement
Lease Provision (2)
Initial Term
Renewal Terms
Initial Base Rent (3)
Escalator
commencement
Prior to
Amendment
As Amended
Prior to
Amendment
15 years
15 years
Four, five-year
terms
Four, five-year
terms
$472,925
$493,925
Lease year six
Lease year two
15 years
Four, five-
year terms
$165,000
Lease year
two
As Amended
15 years
Four, five-
year terms
$200,000
Lease year
two
HLV Lease
Agreement (6)
Prior to
Amendment
and as
Amended
15 years
Four, five-
year terms
$87,400
Lease year
two
Lease years
2-5 - 1%
Lease Years
6-15 -
Consumer
price index
subject to 2%
floor
1.6x
commencing
lease year 6
Consumer
price index
subject to 2%
floor
Consumer
price index
subject to 2%
floor
None
1.7x
commencing
lease year 8
Lease years 8
and 11
Lease years 8
and 11
Lease years 8
and 11
80% Base
Rent and 20%
Variable Rent
80% Base
Rent and 20%
Variable Rent
80% Base
Rent and 20%
Variable Rent
Lease years 2-5
- 1.5%
Lease Years
6-15 -
Consumer price
index subject to
2% floor
1.2x
commencing
lease year 8
Lease years 8
and 11
Lease years
8-10 - 70%
Base Rent and
30% Variable
Rent
Lease years
11-15- 80%
Base Rent and
20% Variable
Rent
Escalator
Consumer
price index
subject to 2%
floor
EBITDAR to Rent
Ratio floor (4)
None
Variable Rent
commencement/reset
Lease years 8
and 11
Lease years
8-10 - 70%
Base Rent and
30% Variable
Rent
Lease years
11-15- 80%
Base Rent and
20% Variable
Rent
Lease years
8-10 - 19.5%
Lease years
11-15 - 13%
Variable Rent split (5)
Variable Rent
percentage (5)
4%
13%
4%
4%
8
____________________
(1) With respect to the Joliet Lease Agreement, we are entitled to receive 80% of the rent thereunder pursuant to the operating agreement of
our joint venture, Harrah’s Joliet Landco LLC.
(2) All capitalized terms used without definition herein have the meanings detailed in the applicable Caesars Lease Agreement.
(3) The base rents of the Non-CPLV Lease Agreement and CPLV Lease Agreement were adjusted by $21.0 million and $35.0 million, respectively,
to incorporate the base rent for Harrah’s Philadelphia and Octavius Tower, respectively. The additional $35.0 million of rent for Octavius
Tower is not subject to the Escalator.
(4) In the event that the EBITDAR to Rent Ratio coverage is below the stated floor, the Escalator of the respective Caesars Lease Agreements
will be reduced to such amount to achieve the stated EBITDAR to Rent Ratio coverage, provided that the amount shall never result in a decrease
to the prior year’s rent.
(5) Variable Rent is not subject to the Escalator and is calculated based on the increase or decrease of Net Revenues, as defined in the Caesars
Lease Agreements, multiplied by the Variable Rent percentage.
(6) No material modifications to the HLV Lease Agreement occurred as a result of the amendments to the Caesars Lease Agreements.
Margaritaville Lease Agreement - Overview
The following summarizes the key terms of the Margaritaville Lease Agreement, which is effective as of January
2, 2019 upon closing the acquisition of the Margaritaville Resort Casino:
($ In thousands)
Lease Provision
Initial term
Renewal terms
Term
15 years
Four, five-year terms
Building base rent
$17,200
Escalation commencement
Lease year two
Escalation
EBITDAR to rent ratio floor (1)
Land base rent (2)
Percentage rent (3)
2% of Building Base rent, subject to the EBITDAR to rent ratio floor
1.9x commencing lease year two
$3,000
$3,000 (fixed for lease year one and two)
Percentage rent reset
Lease year three and each and every other lease year thereafter
Percentage rent multiplier
The product of (i) 4% and (ii) the excess (if any) of (a) the average annual
net revenue of a trailing two-year period preceding such reset year over (b)
a threshold amount (defined as 50% of LTM net revenues prior to
acquisition)
____________________
(1) In the event that the EBITDAR to rent ratio coverage is below the stated floor, the escalation will be reduced to such amount to achieve the
stated EBITDAR to rent ratio coverage, provided that the amount shall never result in a decrease to the prior year’s rent.
(2) Land base rent is not subject to escalation.
(3) Percentage rent is subject to the percentage rent multiplier.
Capital Expenditure Requirements
The Lease Agreements specify certain minimum amounts that our tenants must spend on capital expenditures that
constitute installation or restoration and repair or other improvements of items with respect to the leased properties.
The following table summarizes the capital expenditure requirements under the Lease Agreements:
9
Provision
Yearly minimum
expenditure
Rolling three-year
minimum (2)
Initial minimum
capital expenditure
Non-CPLV Lease
Agreement and Joliet
Lease Agreement
1% of net revenues (1)
CPLV Lease
Agreement
1% of net
revenues (1)
HLV Lease
Agreement
1% of net revenues
commencing in
2022
Margaritaville
Lease Agreement
1% of net revenues
based on four-year
average
$255 million
$84 million
N/A
N/A
N/A
$171 million
(2017 - 2021)
N/A
N/A
____________________
(1) The lease agreement requires a $100 million floor on capital expenditures for CPLV, Joliet and Non-CPLV in the aggregate. Additionally,
annual building & improvement capital improvements must be equal to or greater than 1% of prior year net revenues.
(2) CEOC is required to spend $350 million with the remaining balance of $11 million to facilities covered by any Formation Lease Agreement
in such proportion as CEOC may elect. Additionally, CEOC is required to expend a minimum of $495 million across certain of its affiliates
and other assets, together with the $350 million requirement.
In addition to customary default remedies, if CEOC does not spend the full amount of the minimum capital
expenditures as required under the applicable Formation Lease Agreement, we have the right to seek the remedy
of specific performance to require CEOC to spend any such unspent amount or deposit such amounts in a reserve
account. CEOC’s obligations to spend the minimum capital expenditures will constitute monetary obligations
included in Caesars’ obligations as guarantor with respect to these Formation Lease Agreements.
Our Relationship with Caesars
We are independent from Caesars. As of December 31, 2018, all our gaming facilities were leased to subsidiaries
of Caesars. Consistent with our diversification strategy, on January 2, 2019 we completed the previously disclosed
transaction to acquire the Margaritaville Resort Casino and entered into a long-term lease with a subsidiary of
Penn National.
We believe we have a mutually beneficial relationship with Caesars, a leading owner and operator of gaming,
entertainment and leisure properties. Our long-term triple-net Lease Agreements with subsidiaries of Caesars
provide us with a highly predictable revenue stream with embedded growth potential. We believe our geographic
diversification limits the effect of changes in any one market on our overall performance. We are focused on driving
long-term total returns through managing assets and allocating capital diligently, maintaining a highly productive
tenant base, capitalizing on strategic development and redevelopment opportunities, and optimizing our capital
structure to support opportunistic growth.
To govern the ongoing relationship between us and Caesars and our respective subsidiaries, we entered into various
agreements with Caesars and/or its subsidiaries as described herein. The summaries presented below are not
complete and are qualified in their entirety by reference to the full text of the applicable agreements, which are
included as exhibits to this Annual Report on Form 10-K.
Caesars Guaranty
Pursuant to the Management and Lease Support Agreements, Caesars guarantees the payment and performance
of all monetary obligations of CEOC and/or its subsidiaries under the Formation Lease Agreements and of the
“User” under the Golf Course Use Agreement, subject to the following terms: (i) Caesars will be liable for the full
amounts of the monetary obligations owed under the Formation Lease Agreements and the Golf Course Use
Agreement (not merely for any deficiency amount), unless and until irrevocably paid in full; (ii) Caesars will have
no obligation to make a payment with respect to the leases unless an event of default is continuing under the
applicable Formation Lease Agreement and Caesars was given notice of the applicable default (or event or
circumstance that is or would become a default) of our tenant and/or its subsidiaries under the applicable Lease
Agreement, and, with respect to monetary defaults, did not cure such default within the period set forth in the
10
agreements; and (iii) Caesars’ and the Managers’ obligations with respect to each Management and Lease Support
Agreement (including Caesars’ guaranty obligations) will terminate if the applicable Formation Lease Agreement
is terminated by us, except to the extent of any accrued and unpaid guaranty obligations through the date of such
termination and damages to which we are entitled due to such termination. Caesars’ guaranty obligations will also
terminate if (x) the Management and Lease Support Agreement is terminated by the parties thereto, (y) a replacement
Lease Agreement and Management and Lease Support Agreement are entered into by us, Caesars and/or its affiliates
upon certain bankruptcy-related events (or if we elect in writing not to enter into such replacement agreements or
such replacement agreements are not entered into as a direct and proximate result of our acts or failure to act) or
(z) we terminate a Manager for cause (as defined in the Management and Lease Support Agreements) and an
arbitrator determines that cause did not exist. Notwithstanding the foregoing, Caesars’ guaranty obligations will
continue (i) to the extent of any accrued and unpaid guaranty obligations through the date of termination of the
guaranty and such damages to which we are entitled due to such termination, (ii) during a two-year post-termination
transition period during which the applicable Manager continues to act as manager and (iii) in all respects if the
Managers are terminated for cause.
Collateral
Caesars’ guaranty of the Formation Leases is not currently collateralized. However, if CEOC’s first lien debt (or
any guaranty thereof made by Caesars) is secured by Caesars’ or certain of its subsidiaries’ assets under certain
circumstances the collateral securing any such first lien debt of CEOC shall also serve as collateral for Caesars’
guaranty obligations on a pari passu basis with such CEOC first lien debt. Such security interest will automatically
be released upon the earlier to occur of (i) the termination of the security interest granted by Caesars or its subsidiaries
securing CEOC’s first lien debt (or Caesars’ guaranty thereof) and (ii) (x) the date on which Caesars’ guaranty
obligations under the Management and Lease Support Agreements have been irrevocably paid or (y) to the extent
Caesars’ guaranty obligation under the Management and Lease Support Agreement is terminated, twelve months
after such termination. Such security interest would be a “silent” security interest that provides us with a secured
claim against Caesars while any such Caesars debt guaranty or pledge of assets remains in effect, but we will have
no voting, enforcement or default related rights with respect to such debt guaranty or collateral, unless and until
the occurrence of certain defaults in respect of any of Caesars’ guaranty obligations with respect to the Lease
Agreements, or CEOC’s first lien debt. The collateral that secures Caesars’ guaranty obligations will be the same
collateral that secures any such Caesars debt guaranty obligations at any time, and Caesars’ guaranty obligations
will be secured by such collateral on a pari passu basis with such debt guaranty obligations for so long as such
debt guaranty obligations are secured.
Caesars Covenants
The Management and Lease Support Agreements contain customary terms and waivers of all suretyship and other
defenses by Caesars and include a covenant by Caesars requiring that (a) a sale of certain material assets by Caesars
be for fair market value consideration, on arm’s-length terms in certain cases, with the approval of Caesars’ board
of directors, and (b) non-cash dividends by Caesars are permitted only to the extent such dividends would not
reasonably be expected to result in Caesars’ inability to perform its guaranty obligations under such agreements.
In addition, until October 6, 2023, or, if earlier, (x) on the date on which Caesars’ guaranty obligations under the
Management and Lease Support Agreements have been irrevocably paid or (y) to the extent Caesars’ guaranty
obligation under the Management and Lease Support Agreements are terminated by the express terms of the
Management and Lease Support Agreements, twelve months after such termination, Caesars may not directly or
indirectly (i) declare or pay any dividend, distribution, or similar payment with respect to any of Caesars’ capital
stock or other equity interests, (ii) purchase or otherwise acquire or retire for value any of Caesars’ capital stock
or other equity interests, or (iii) engage in any other transaction with any direct or indirect holder of Caesars’ capital
stock or other equity interests, which is similar in purpose or effect to those described above. However, Caesars
will be permitted to execute such transactions if (a) Caesars’ equity market capitalization after giving effect to such
transaction is at least $5.5 billion, (b) the amount of such transaction (together with any and all other such dividends
and distributions and other transactions made under this clause (b) but excluding, any dividends, distributions or
11
other transactions to be made under clause (c) or (d) below in such fiscal year), does not exceed, in the aggregate,
(x) 25% of the net proceeds, up to a cap of $25 million in any fiscal year, from the disposition of assets by Caesars
and its subsidiaries and (y) $100 million from other sources in any fiscal year, (c) Caesars’ equity market
capitalization after giving effect to such transaction is at least $4.5 billion and such transaction made under this
clause (c) (excluding, any dividends, distributions or other transactions made under clause (b) above or clause
(d) below in such fiscal year) is less than or equal to $125 million per annum and is funded solely by asset sale
proceeds or (d) solely with respect to a transaction described in clause (a) above, the aggregate amount of such
transactions (excluding transactions made under clause (b) or (c) above) is not more than $199.5 million. Similarly,
until October 6, 2023, or the expiration of the restrictions described above (except in the case of the exceptions
under clauses (a) and (c) above), any net proceeds from the disposition of assets by Caesars or its subsidiaries in
excess of $25 million that are directly or indirectly distributed to, or otherwise received by, Caesars in any fiscal
year will not be used to fund any restricted payment of Caesars described above in clauses (i) through (iii) above.
Second Amended and Restated Right of First Refusal Agreement
We entered into a second amended and restated right of first refusal agreement with Caesars (the “Second Amended
and Restated Right of First Refusal Agreement”), which contains a right of first refusal in our favor, pursuant to
which we have the right to own (and cause to be leased to, and managed by, Caesars (or its affiliate or affiliates))
any domestic gaming facility located outside of Greater Las Vegas, proposed to be acquired or developed by Caesars
that is not (i) then subject to a pre-existing lease, management agreement or other contractual restriction that was
not entered into in contemplation of such acquisition or development and which (x) was entered into on arms’-
length terms and (y) would not be terminated upon or prior to such transaction, (ii) a transaction for which the
opco/propco structure would be prohibited by applicable laws, or which would require governmental consent or
approval (unless already received), (iii) any transaction that does not consist of owning or acquiring a fee or
leasehold interest in real property, (iv) a transaction in which Caesars will not own at least 50% of, or control, the
entity that will own the gaming facility, (v) a transaction in which one or more third parties will own or acquire,
in the aggregate, a beneficial economic interest of at least 30% in the applicable gaming facility, and such third
parties are unable, or make a bona fide, good faith refusal, to enter into the opco/propco structure, (vi) a transaction
in which Caesars or its subsidiaries proposes to acquire a then-existing gaming facility from Caesars or its
subsidiaries, and (vii) a transaction with respect to any asset remaining in CEOC after the formation transactions.
The Second Amended and Restated Right of First Refusal further provides us, subject to certain exclusions, the
right to acquire (and lease to Caesars) (x) any of the properties that Caesars has agreed to acquire from Centaur
Holdings, LLC, should Caesars determine to sell any such properties in a sale-leaseback transaction, (y) certain
income-producing improvements if built by Caesars in lieu of the Caesars Forum Convention Center on the Eastside
Property, subject to certain exclusions and (z) a portion of the undeveloped land adjacent to the Las Vegas Strip,
if acquired from us and developed by Caesars in accordance with certain procedures set forth in the Non-CPLV
Lease Agreement. If, among other things, we decline to exercise our right of first refusal, the Non-CPLV Lease
Agreement and Joliet Lease Agreement establish a variable rent floor to any facility outside of Greater Las Vegas
and located within a 30-mile radius of any facility as to which we declined our right of first refusal. If we exercise
such right, we and Caesars will structure such transaction in a manner that allows the subject property to be owned
by us and leased to Caesars. In such event, Caesars (or its designee) will enter into a lease with respect to the
subject property whereby (i) rent thereunder will be established based on formulas consistent with the EBITDAR
coverage ratio (determined based on the prior 12-month period) with respect to the Lease Agreement then in effect
and (ii) such other terms as are agreed by the parties.
The Second Amended and Restated Right of First Refusal Agreement also contains a right of first refusal in favor
of Caesars, pursuant to which Caesars will have the right to lease and manage any domestic gaming facility located
outside of Greater Las Vegas, proposed to be acquired by us that is not: (i) any asset that is then subject to a pre-
existing lease, management agreement or other contractual restriction that was not entered into in contemplation
of such acquisition and which (x) was entered into on arms’ length terms and (y) would not be terminated upon or
prior to closing of such transaction, (ii) any transaction for which the opco/propco structure would be prohibited
by applicable laws or which would require governmental consent (unless already received), (iii) any transaction
structured by the seller as a sale-leaseback, (iv) any transaction in which we will not own at least 50% of, or control,
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the entity that will own the gaming facility, and (v) any transaction in which we propose to acquire a then-existing
gaming facility from ourselves or our affiliates. If Caesars (or its designee) exercises such right, we and Caesars
will structure such transaction in a manner that allows the subject property to be owned by us and leased to Caesars.
In such event, Caesars (or its designee) will enter into a lease with respect to the additional property whereby
(i) rent thereunder will be established based on formulas consistent with the adjusted EBITDA coverage ratio (as
set forth in the agreement) with respect to the lease then in effect and (ii) such other terms as are agreed by the
parties.
In the event that the foregoing rights are not exercised by us or Caesars and CEOC, as applicable, each party will
have the right to consummate the subject transaction without the other’s involvement, provided the same is on
terms no more favorable to the counterparty than those presented to us or Caesars and CEOC, as applicable.
The rights of first refusal will not apply if (A) the Management and Lease Support Agreements have been terminated
or have expired by their terms or with our consent, (B) Caesars is no longer managing the facilities, or (C) a change
of control occurs with respect to either Caesars or us.
Call Right Agreements
We entered into certain call right agreements (the “Call Right Agreements”), which provide our Operating
Partnership with the opportunity to acquire Harrah’s Atlantic City, Harrah’s New Orleans and Harrah’s Laughlin
(“Option Properties”) from Caesars. Our Operating Partnership can exercise the call rights within five years from
the Formation Date. The purchase price for each property will be 10 multiplied by the initial property lease rent
for the respective property, with the initial property lease rent for each property being the amount that causes the
ratio of (x) EBITDAR of the property for the most recently ended four quarter period for which financial statements
are available to (y) the initial property lease rent to equal 1.67.
Under certain circumstances, the owner may propose one or more replacement properties and the material terms
of the purchase and if such proposal is at least as economically beneficial to us as the exercise of the call right, the
parties must proceed with the sale of that property and any dispute with respect to the same (including whether
such proposal was a qualifying proposal) will be submitted to arbitration.
If the exercise of the call right is not permissible because a debt agreement does not permit the sale and such
limitation is not resolved within one year from exercise of the right and the owner has not made an alternative
proposal that is at least as economically beneficial to us as the exercise of the call right, the owner must pay us an
amount equal to the value of our loss as of the Formation Date which will increase at a rate of 8.5% per annum,
with annual compounding for the period from the date of each agreement until the date on which payment of the
value loss amount is made.
If the exercise of the call right is not permissible due to a reason other than because of a debt limitation and the
owner has not made an alternative proposal that is at least as economically beneficial to us as the exercise of the
call right, then the parties must use commercially reasonable efforts to resolve the issue in accordance with the
agreement. If the applicable issue making the transaction impermissible is not resolved by the foregoing described
deadline, the owner must use commercially reasonable efforts to sell the property to an alternative purchaser for
the fair market value of the property, and , upon the closing of any such alternative transaction we would be entitled
to any portion of the purchase price that exceeds the amount that would otherwise be determined in accordance
with the applicable agreement.
If the exercise of the call right is permissible, the parties will use good faith, commercially reasonable efforts, for
a period of ninety days following the delivery of the election notice to negotiate and enter into a sale agreement
and conveyance and ancillary documents with respect to the applicable property together with a leaseback
agreement.
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Put-Call Agreement
Claudine Propco LLC (“HLV Owner”), our wholly owned subsidiary, and certain subsidiaries of Caesars entered
into a put-call agreement (the “Put-Call Agreement”) which provides for (i) a put right in favor of Caesars, which
would result in the sale by Caesars to HLV Owner and simultaneous leaseback by HLV Owner to Caesars of a
convention center (the “Caesars Forum Convention Center”) that Caesars is currently constructing on the Eastside
Property (the “Put Right”), (ii) if Caesars exercises the Put Right and, among other things, the sale of the Caesars
Forum Convention Center to HLV Owner does not close for certain reasons more particularly described in the
agreement, then a repurchase right in favor of Caesars, which, if exercised, would result in the sale by HLV Owner
to Caesars of Harrah’s Las Vegas (the “Repurchase Right”) and (iii) a call right in favor of HLV Owner, which, if
exercised, would result in the sale by Caesars to HLV Owner and simultaneous leaseback by HLV Owner to Caesars
of the Caesars Forum Convention Center (the “Call Right”). The Put Right may be exercised by Caesars between
January 1, 2024 and December 31, 2024. The Repurchase Right may be exercised by Caesars during a one-year
period commencing on the date upon which the closing under the Put Right transaction does not occur and ending
on the day immediately preceding the first anniversary thereof. The purchase price for Harrah’s Las Vegas would
be an amount equal to 13 times the rent due under the HLV Lease Agreement for the most recently ended four
consecutive fiscal quarter period for which financial statements are available as of the date of Caesars’ election to
execute the Repurchase Right. The Call Right may be exercised by HLV Owner between January 1, 2027 and
December 31, 2027. The purchase price for the Caesars Forum Convention Center is equal to 13 times the rent
due in connection with the leaseback thereof, which will be determined pursuant to the formulas set forth in the
Put/Call Agreement.
Golf Course Use Agreement
Pursuant to a golf course use agreement (as amended , the “Golf Course Use Agreement”), VICI Golf granted to
CEOC and CES (collectively, the “users”) certain priority rights and privileges with respect to access and use of
the following golf course properties: Rio Secco (Henderson, Nevada), Cascata (Boulder City, Nevada), Chariot
Run (Laconia, Indiana) and Grand Bear (Saucier, Mississippi). Pursuant to the Golf Course Use Agreement, the
users are granted specific rights and privileges to the golf courses, including (i) preferred access to tee times for
guests of users’ casinos and/or hotels located within the same markets as the golf courses, (ii) preferred rates for
guests of users’ casinos and/or hotels located within the same markets as the golf courses, and (iii) availability for
golf tournaments and events at preferred rates and discounts. Payments under the Golf Course Use Agreement are
currently comprised of an approximately $10.2 million annual membership fee, $3.1 million of use fees and $1.2
million of minimum rounds fees subject to certain adjustments.
Tax Matters Agreement
We have entered into a tax matters agreement (the “Tax Matters Agreement”), which addresses matters relating to
the payment of taxes and entitlement to tax refunds by Caesars, CEOC, the Operating Partnership and us, and
allocates certain liabilities, including providing for certain covenants and indemnities, relating to the payment of
such taxes, receipt of such refunds, and preparation of tax returns relating thereto. In general, the Tax Matters
Agreement provides for the preparation and filing by Caesars of tax returns relating to CEOC and for the preparation
and filing by us of tax returns relating to us and our operations. Under the Tax Matters Agreement, Caesars has
agreed to indemnify us for any taxes allocated to CEOC which we are required to pay pursuant to our tax returns
and we have agreed to indemnify Caesars for any taxes allocated to us which Caesars or CEOC is required to pay
pursuant to a Caesars or CEOC tax return.
Under the Tax Matters Agreement, Caesars has agreed to indemnify us for taxes attributable to acts or omissions
taken by Caesars and we have agreed to indemnify Caesars for taxes attributable to our acts or omissions, in each
case that cause a failure of the transactions entered into as part of the Plan of Reorganization to qualify as tax-free
under the code.
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Competition
We compete for real property investments with other REITs, gaming companies, investment companies, private
equity and hedge fund investors, sovereign funds, lenders and other investors. In addition, revenues from our
properties are dependent on the ability of our tenants and operators, subsidiaries of Caesars, and with the closing
of Margaritaville Resort Casino, Penn National, to compete with other gaming operators. The operators of our
properties compete on a local and regional basis for customers. The gaming industry is characterized by a high
degree of competition among a large number of participants, including riverboat casinos, dockside casinos, land-
based casinos, video lottery, sweepstakes and poker machines not located in casinos, Native American gaming,
emerging varieties of Internet gaming and other forms of gaming in the United States.
As a landlord, we compete in the real estate market with numerous developers and owners of properties. Some of
our competitors are significantly larger, have greater financial resources and lower costs of capital than we have,
have greater economies of scale and have greater name recognition than we do. Increased competition will make
it more challenging to identify and successfully capitalize on acquisition opportunities that meet our investment
objectives. Our ability to compete is also impacted by national and local economic trends, availability of investment
alternatives, availability and cost of capital, construction and renovation costs, existing laws and regulations, new
legislation and population trends.
Employees
Approximately 140 employees were employed by us at December 31, 2018. These employees are employed either
at our Operating Partnership or at our taxable REIT subsidiary, VICI Golf, or their respective subsidiaries.
Governmental Regulation and Licensing
The ownership, operation and management of gaming and racing facilities are subject to pervasive regulation.
Each of our gaming and racing facilities is subject to regulation under the laws, rules, and regulations of the
jurisdiction in which it is located. Gaming laws and regulations generally require gaming industry participants to:
•
•
ensure that unsuitable individuals and organizations have no role in gaming operations;
establish and maintain responsible accounting practices and procedures;
• maintain effective controls over their financial practices, including establishment of minimum procedures
for internal fiscal affairs and the safeguarding of assets and revenues;
• maintain systems for reliable record keeping;
•
•
file periodic reports with gaming regulators; and
ensure that contracts and financial transactions are commercially reasonable, reflect fair market value and
are arms-length transactions.
Gaming laws and regulations impact our business in two respects: (1) our ownership of land and buildings in which
gaming activities are operated by subsidiaries of Caesars or Penn National pursuant to the Lease Agreements; and
(2) the operations of our tenants as operators in the gaming industry. Further, many gaming and racing regulatory
agencies in the jurisdictions in which our tenants operate require us and our affiliates to apply for and maintain a
license as a key business entity or supplier because of our status as landlord.
Our businesses and the business of Caesars or Penn National are also subject to various Federal, state and local
laws and regulations in addition to gaming regulations. These laws and regulations include, but are not limited to,
restrictions and conditions concerning alcoholic beverages, environmental matters, employees, health care,
currency transactions, taxation, zoning and building codes and marketing and advertising. Such laws and regulations
could change or could be interpreted differently in the future, or new laws and regulations could be enacted. Material
changes, new laws or regulations, or material differences in interpretations by courts or governmental authorities
could adversely affect our operating results.
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Violations of Gaming Laws
If we, our subsidiaries or the tenants of our properties violate applicable gaming laws, our gaming licenses could
be limited, conditioned, suspended or revoked by gaming authorities, and we and any other persons involved could
be subject to substantial fines. Further, a supervisor or conservator can be appointed by gaming authorities to
operate our gaming properties, or in some jurisdictions, take title to our gaming assets in the jurisdiction, and under
certain circumstances, earnings generated during such appointment could be forfeited to the applicable jurisdictions.
Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. Finally, the loss of
our gaming licenses could result in an event of default under our certain of our indebtedness, and cross-default
provisions in our debt agreements could cause an event of default under one debt agreement to trigger an event of
default under our other debt agreements. As a result, violations by us of applicable gaming laws could have a
material adverse effect on us.
Review and Approval of Transactions
Substantially all material loans, leases, sales of securities and similar financing transactions by us and our
subsidiaries must be reported to and in some cases approved by gaming authorities. Neither we nor any of our
subsidiaries may make a public offering of securities without the prior approval of certain gaming authorities.
Changes in control through merger, consolidation, stock or asset acquisitions, management or consulting
agreements, or otherwise are subject to receipt of prior approval of gaming authorities. Entities seeking to acquire
control of us or one of our subsidiaries must satisfy gaming authorities with respect to a variety of stringent standards
prior to assuming control.
Insurance
The Lease Agreements require the tenants to maintain, with financially sound and reputable insurance companies
(and in certain cases subject to the right of the tenants to self-insure), insurance (subject to customary deductibles
and retentions) in such amounts and against such risks as are customarily maintained by similarly situated companies
engaged in the same or similar businesses operating in the same or similar locations. The Lease Agreements provide
that the amount and type of insurance that the tenants have in effect as of the commencement of the leases will
satisfy for all purposes the requirements to insure the properties. However, such insurance coverage may not be
sufficient to fully cover our losses.
Environmental Matters
Our properties are subject to environmental laws regulating, among other things, air emissions, wastewater
discharges and the handling and disposal of wastes, including medical wastes. Certain of the properties we own
utilize above or underground storage tanks to store heating oil for use at the properties. Other properties were built
during the time that asbestos-containing building materials were routinely installed in residential and commercial
structures. The Lease Agreements generally obligate our tenants to comply with applicable environmental laws
and to indemnify us if its noncompliance results in losses or claims against us, and we expect that any future leases
will include the same provisions for other operators. A tenant’s failure to comply could result in fines and penalties
or the requirement to undertake corrective actions which may result in significant costs to the operator and thus
adversely affect their ability to meet their obligations to us.
Pursuant to U.S. Federal, state and local environmental laws and regulations, a current or previous owner or operator
of real property may be required to investigate, remove and/or remediate a release of hazardous substances or other
regulated materials at, or emanating from, such property. Further, under certain circumstances, such owners or
operators of real property may be held liable for property damage, personal injury and/or natural resource damage
resulting from or arising in connection with such releases. Certain of these laws have been interpreted to be joint
and several unless the harm is divisible and there is a reasonable basis for allocation of responsibility. We also may
be liable under certain of these laws for damage that occurred prior to our ownership of a property or at a site where
we sent wastes for disposal. The failure to properly remediate a property may also adversely affect our ability to
lease, sell or rent the property or to borrow funds using the property as collateral.
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In connection with the ownership of our current properties and any properties that we may acquire in the future,
we could be legally responsible for environmental liabilities or costs relating to a release of hazardous substances
or other regulated materials at or emanating from such property. We are not aware of any environmental issues
that are expected to have a material impact on the operations of any of our properties.
Sustainability
We incorporate sustainability into our investment and asset management strategies, with a focus on minimizing
environmental impact. During the acquisition of new properties, we will assess both sustainability opportunities
and climate change-related risks as part of our due diligence process. Our properties are generally leased to our
tenants under long-term, triple-net leases, which give our tenants the control over our properties and the ability to
institute energy conservation and environmental management programs. Our tenants are large companies with
sophisticated conservation and sustainability programs. These programs limit the use of resources and limit the
impact of our properties on the environment, including but not limited to implementing specific environmental
efficiency enhancements, green building and lighting standards, standards regarding the reduction in energy and
water consumption, and recycling programs. As part of our asset management strategy, we also work with our
tenants to monitor environmental performance and support implementation of operational best practices. We are
committed to being a responsible corporate citizen and minimizing our impact on the environment. Our approach
to corporate citizenship is reinforced by periodic engagement with key stakeholders to understand their corporate
responsibility priorities.
Intellectual Property
Most of the properties within our portfolio are currently operated and promoted under trademarks and brand names
not owned by us, including Caesars Palace, Horseshoe, Harrah’s, Bally’s and Margaritaville. In addition, properties
that we may acquire in the future may be operated and promoted under these same trademarks and brand names,
or under different trademarks and brand names we do not, or will not, own. During the term that our properties
are managed by Caesars and Penn National, we are reliant on Caesars and Penn National to maintain and protect
the trademarks, brand names and other licensed intellectual property used in the operation or promotion of the
leased properties. Operation of the leased properties, as well as our business and financial condition, could be
adversely impacted by infringement, invalidation, unauthorized use or litigation affecting any such intellectual
property. In addition, if any of our properties are rebranded, it could have a material adverse effect on us, as we
may not enjoy comparable recognition or status under a new brand.
Investment Policies
Investment in Real Estate or Interests in Real Estate
Our investment objectives are to increase cash flow from operations, achieve sustainable long-term growth and
maximize stockholder value to allow for stable dividends and stock appreciation. We have not established a specific
policy regarding the relative priority of these investment objectives.
Our business is focused primarily on gaming and leisure sector properties and activities directly related thereto.
We own 22 market-leading properties and own and operate four golf courses. We believe there are potential
opportunities to acquire additional gaming, hospitality and entertainment destinations. Our future investment
activities will not be limited to any geographic area or to a specific percentage of our assets. We intend to engage
in such future investment activities in a manner that is consistent with our qualification as a REIT for U.S. Federal
income tax purposes. We do not have a specific policy to acquire assets primarily for capital gain or primarily for
income. In addition, we may purchase or lease income-producing commercial and other types of properties for
long-term investment, expand and improve the properties we presently own or other acquired properties, or sell
such properties, in whole or in part, when circumstances warrant.
We may participate with third parties in property ownership, through joint ventures or other types of co-
ownership, and we may engage in such activities in the future if we determine that doing so would be the most
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effective means of owning or acquiring properties. We do not expect, however, to enter into a joint venture or other
partnership arrangement to make an investment that would not otherwise meet our investment policies. We also
may acquire real estate or interests in real estate in exchange for the issuance of common stock, preferred stock or
options to purchase stock or interests in our subsidiaries, including our Operating Partnership.
Equity investments in acquired properties may be subject to existing mortgage financing and other indebtedness
or to new indebtedness which may be incurred in connection with acquiring or refinancing these investments.
Principal and interest on our debt will have a priority over any dividends with respect to our common stock.
Investments are also subject to our policy not to be required to register as an investment company under the
Investment Company Act of 1940, as amended.
Investments in Real Estate Mortgages
Although we do not presently intend to invest in mortgages or deeds of trust, other than in a manner that is ancillary
to an equity investment, we may elect, in our discretion, to invest in mortgages and other types of real estate
interests, including, without limitation, participating or convertible mortgages; provided, in each case, that such
investment is consistent with our qualification as a REIT. Investments in real estate mortgages run the risk that
one or more borrowers may default under certain mortgages and that the collateral securing certain mortgages may
not be sufficient to enable us to recoup our full investment.
Securities of or Interests in Persons Primarily Engaged in Real Estate Activities and Other Issuers
Subject to the asset tests and gross income tests necessary for REIT qualification, we may invest in securities of
other REITs, other entities engaged in real estate activities or securities of other issuers, including for the purpose
of exercising control over such entities. We do not currently have any policy limiting the types of entities in which
we may invest or the proportion of assets to be so invested, whether through acquisition of an entity’s common
stock, limited liability or partnership interests, interests in another REIT or entry into a joint venture. We have no
current plans to make additional investments in entities that are not engaged in real estate activities. Our investment
objectives are to maximize the cash flow of our investments, acquire investments with growth potential and provide
cash distributions and long-term capital appreciation to our stockholders through increases in the value of our
company. We have not established a specific policy regarding the relative priority of these investment objectives.
Investments in Short-term Commercial Paper and Discount Notes
We generally invest our excess cash on hand in short-term income producing investments, such as commercial
paper, government securities, including those issued by government-sponsored enterprises such as the Federal
Home Loan Mortgage Corporation and certain of the Federal Home Loan Banks, or money market funds that
invest in government securities and/or commercial paper that are consistent with our intention to continue to qualify
as a REIT for federal income tax purposes. These investments generally have original maturities between 91 and
120 days.
Investment in Other Securities
Other than as described above, we do not intend to invest in any additional securities of third parties, such as bonds,
preferred stocks or common stock.
Financing Policies
We expect to employ leverage in our capital structure in amounts that we determine appropriate from time to time.
Our board of directors has not adopted a policy which limits the total amount of indebtedness that we may incur,
but will consider a number of factors in evaluating our level of indebtedness from time to time, as well as the
amount of such indebtedness that will be either fixed or variable rate. We are, however, and expect to continue to
be subject to certain indebtedness limitations pursuant to the restrictive covenants of our outstanding indebtedness.
We may from time to time modify our debt policy in light of then-current economic conditions, relative availability
and costs of debt and equity capital, market values of our properties, general market conditions for debt and equity
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securities, fluctuations in the market price of our shares of common stock, growth and acquisition opportunities
and other factors. If these limits are relaxed, we could become more highly leveraged, resulting in an increased
risk of default on our obligations and a related increase in debt service requirements that could adversely affect
our financial condition, liquidity and results of operations and our ability to make distributions to our stockholders.
To the extent that our board of directors or management determines that it is necessary to raise additional capital,
we may, without stockholder approval, borrow money under our Revolving Credit Facility, issue debt or equity
securities, including securities senior to our shares, retain earnings (subject to the REIT distribution requirements
for U.S. Federal income tax purposes), assume indebtedness, obtain mortgage financing on a portion of our owned
properties, engage in a joint venture, or employ a combination of these methods.
Corporate Information
We were initially organized as a limited liability company in the State of Delaware on July 5, 2016 as a wholly
owned subsidiary of CEOC. On May 5, 2017, we subsequently converted to a corporation under the laws of the
State of Maryland and issued shares of common stock to CEOC as part of our formation transactions, which shares
were subsequently transferred by CEOC to its creditors as part of the Third Amended Joint Plan of Reorganization
of Caesars Entertainment Operating Company, Inc. et. al. (the “Plan of Reorganization”) confirmed by the United
States Bankruptcy Court for the Northern District of Illinois (Chicago) (the “Bankruptcy Court”) on January 17,
2017. See Note 1—Business Formation and Basis of Presentation to our Consolidated Financial Statements for
more information regarding the formation transactions.
Our principal executive offices are located at 430 Park Avenue, 8th Floor, New York, New York 10022 and our
main telephone number at that location is (646) 949-4785. Our website address is www.viciproperties.com. None
of the information on, or accessible through, our website or any other website identified herein is incorporated in,
or constitutes a part of, this Annual Report on Form 10-K. Our electronic filings with the SEC (including annual
reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and any amendments to
these reports), including the exhibits, are available free of charge through our website as soon as reasonably
practicable after we electronically file them with or furnish them to the SEC.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K, including statements such as “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” or
similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are based on our current plans, expectations and projections
about future events. We caution you therefore against relying on any of these forward-looking statements. They
give our expectations about the future and are not guarantees. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance and achievements to materially differ
from any future results, performance and achievements expressed in or implied by such forward-looking statements.
The forward-looking statements included herein are based upon our current expectations, plans, estimates,
assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic, competitive and market conditions and
future business decisions, all of which are difficult or impossible to predict accurately and many of which are
beyond our control. Although we believe that the expectations reflected in such forward-looking statements are
based on reasonable assumptions, our actual results, performance and achievements could differ materially from
those set forth in the forward-looking statements and may be affected by a variety of risks and other factors,
including, among others:
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our dependence on subsidiaries of Caesars and Penn National as tenants of our properties and Caesars and
Penn National or certain of their respective subsidiaries as guarantors of the lease payments and the negative
consequences any material adverse effect on their respective businesses could have on us;
our dependence on the gaming industry;
our ability to pursue our business and growth strategies may be limited by our substantial debt service
requirements and by the requirement that we distribute 90% of our REIT taxable income in order to qualify
for taxation as a REIT and that we distribute 100% of our REIT taxable income in order to avoid current entity-
level U.S. Federal income taxes;
the impact of extensive regulation from gaming and other regulatory authorities;
the ability of our tenants to obtain and maintain regulatory approvals in connection with the operation of our
properties;
the possibility that our tenants may choose not to renew the Lease Agreements following the initial or
subsequent terms of the leases;
restrictions on our ability to sell our properties subject to the Lease Agreements;
• Caesars’ and Penn National’s historical results may not be a reliable indicator of their future results;
•
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•
our substantial amount of indebtedness and ability to service and refinance such indebtedness;
limits on our operational and financial flexibility imposed by our debt agreements;
our historical financial information may not be reliable indicators of our future results of operations, financial
condition and cash flows;
the ability to receive, or delays in obtaining, the governmental and regulatory approvals and consents required
to consummate our pending acquisition of Greektown, or other delays or impediments to completing this
acquisition;
our ability to obtain the financing necessary to complete the pending acquisition on the terms we currently
expect or at all;
the possibility that the pending acquisition may not be completed or that completion may be unduly delayed;
the effects of our recently completed acquisition and the pending acquisitions on us, including the post-
acquisition impact on our financial condition, financial and operating results, cash flows, strategy and plans;
the possibility our separation from CEOC fails to qualify as a tax-free spin-off, which could subject us to
significant tax liabilities;
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the impact of changes to the U.S. Federal income tax laws;
the possibility of foreclosure on our properties if we are unable to meet required debt service payments;
the impact of a rise in interest rates on us;
our inability to successfully pursue investments in, and acquisitions of, additional properties;
the impact of natural disasters or terrorism on our properties;
the loss of the services of key personnel;
the inability to attract, retain and motivate employees;
the costs and liabilities associated with environmental compliance;
failure to establish and maintain an effective system of integrated internal controls;
the costs of operating as a public company;
our inability to operate as a stand-alone company;
our inability to maintain our qualification for taxation as a REIT;
our reliance on distributions received from the Operating Partnership to make distributions to our stockholders;
the amount of our cash distributions could be impacted if we were to sell any of our properties in the future;
our ability to continue to make distributions to holders of our common stock or maintain anticipated levels of
distributions over time;
competition for acquisition opportunities from other REITs and gaming companies that may have greater
resources and access to capital and a lower cost of capital than us; and
additional factors discussed herein under “Risk Factors” and listed from time to time in our filings with the
Securities and Exchange Commission (the “SEC”), including without limitation, in our subsequent reports on
Form 10-K, Form 10-Q and Form 8-K.
Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place
undue reliance on any forward-looking statements. All forward-looking statements are made as of the date of this
Annual Report on Form 10-K and the risk that actual results, performance and achievements will differ materially
from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the
Federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events, changed circumstances or any other reason. In light of the
significant uncertainties inherent in forward-looking statements, the inclusion of such forward-looking statements
should not be regarded as a representation by us.
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ITEM 1A. Risk Factors
You should be aware that the occurrence of any of the events described in this section and elsewhere in this report
or in any other of our filings with the SEC could have a material adverse effect on our business, financial position,
results of operations and cash flows. In evaluating us, you should consider carefully, among other things, the risks
described below. The risks and uncertainties described below are not the only ones we face, but do represent those
risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known
to us or that, as of the date of this Annual Report on Form 10-K, we deem immaterial may also harm our business.
Some statements included in this Annual Report on Form 10-K, including statements in the following risk factors,
constitute forward-looking statements. Please refer to the section entitled “Cautionary Note Regarding Forward-
Looking Statements.”
Risks Related to Our Business and Operations
We are and will be significantly dependent on Caesars and Penn National and their respective subsidiaries
unless or until we substantially diversify our portfolio and an event that has a material adverse effect on either
of their respective businesses, financial condition, liquidity, results of operations or prospects could have a
material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
We depend on our tenants to operate the properties that we own in a manner that generates revenues sufficient to
allow the tenants to meet their obligations to us. Substantially all of our revenue is from our leases with subsidiaries
of Caesars and Penn National. Because these master leases are triple-net leases, we depend on the tenants to pay
substantially all insurance, taxes, utilities and maintenance and repair expenses in connection with these leased
properties and to indemnify, defend, and hold us harmless from and against various claims, litigation, and liabilities
arising in connection with their businesses. See “Item 1 - Business.” There can be no assurance that the tenants
will have sufficient assets, income or access to financing to enable them to satisfy their payment and other obligations
under their leases with us, or that the applicable guarantor will be able to satisfy its guarantee of the applicable
tenant’s obligations under the Lease Agreements.
The tenants and applicable guarantors rely on the properties they or their respective subsidiaries own and/or operate
for income to satisfy their obligations, including their debt service requirements and lease payments due to us
under the Lease Agreements or to others under other lease agreements. If income from these properties were to
decline for any reason, or if Caesars’ or Penn National’s debt service requirements were to increase for any reason
or if their creditworthiness were to become impaired for other reasons, a tenant or the applicable guarantor may
become unable or unwilling to satisfy its payment and other obligations under their leases with us. The inability
or unwillingness of either Caesars or Penn National to meet their respective subsidiaries’ payment and other
obligations under the leases, in each case, could materially and adversely affect our business, financial condition,
liquidity, results of operations and prospects, including our ability to make distributions to our stockholders.
Due to our dependence on rental payments from subsidiaries of Caesars and Penn National as our primary source
of revenue, we may be limited in our ability to enforce our rights under the leases or to terminate the applicable
lease with respect to any particular property. Failure by the tenants to comply with the terms of their respective
leases or to comply with the gaming regulations to which the leased properties are subject could require us to find
another tenant for such property, to the extent possible, and there could be a decrease or cessation of rental payments
by the tenants. In such event, we may be unable to locate a suitable, credit-worthy tenant at similar rental rates or
at all, which would have the effect of reducing our rental revenues and could have a material adverse effect on us.
Because a concentrated portion of our revenues are generated from the Strip, we are subject to greater risks
than a company that is more geographically diversified.
Our properties on the Las Vegas Strip generated approximately 36% of our lease revenue for the year ended
December 31, 2018. Therefore, our business may be significantly affected by risks common to the Las Vegas
tourism industry. For example, the cost and availability of air services and the impact of any events that disrupt
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air travel to and from Las Vegas can adversely affect the business of our tenants. We cannot control the number or
frequency of flights to or from Las Vegas, but the tenants rely on air traffic for a significant portion of their visitors.
Reductions in flights by major airlines as a result of higher fuel prices or lower demand can impact the number of
visitors to our properties. Additionally, there is one principal interstate highway between Las Vegas and Southern
California, where a large number of the customers that frequent our properties reside. Capacity constraints of that
highway or any other traffic disruptions may also affect the number of customers who visit our facilities. Moreover,
due to the importance of our two properties on the Strip, we may be disproportionately affected by general risks
such as acts of terrorism, natural disasters, including major fires, floods and earthquakes, and severe or inclement
weather, should such developments occur in or nearby Las Vegas.
Caesars and its subsidiaries are party to certain leasing and financial commitments with us, which may have
a negative impact on Caesars’ business and operating condition.
Caesars and/or its subsidiaries entered into certain leasing and financial commitments, evidenced by agreements,
with us. See Item 1 - “Business - Our Relationship with Caesars” for additional information regarding such
agreements.
Caesars is obligated to pay us in the aggregate approximately $4.2 billion in fixed annual rents and golf course
membership fees over the next five years of the respective Caesars Lease Agreements, subject to certain escalators
and adjustments. If Caesars’ businesses and properties fail to generate sufficient earnings, the applicable tenants,
Caesars and/or CRC may be unable to satisfy their respective obligations under the Lease Agreements or the related
guarantees, respectively. Additionally, these obligations may limit their ability to make investments to maintain
and grow their portfolio of businesses and properties, which may adversely affect their competitiveness and ability
to satisfy their obligations to us.
Subsidiaries of Caesars are required to pay a significant portion of their cash flow from operations to us pursuant
to, and subject to the terms and conditions of, the Caesars Lease Agreements, which could adversely affect
Caesars’ ability to fund their operations or development projects, raise capital, make acquisitions, and otherwise
respond to competitive and economic changes and its ability to satisfy its payment obligations to us under the
Lease Agreements and the related guarantees.
Subsidiaries of Caesars are required to pay a significant portion of their cash flow from operations to us pursuant
to, and subject to the terms and conditions of, the Caesars Lease Agreements. See Item 1 “Business - Caesars Lease
Agreements - Overview” and Item 1 “Business - Our Relationship with Caesars.” As a result of this commitment,
Caesars’ ability to fund its operations or development projects, raise capital, make acquisitions and otherwise
respond to competitive and economic changes may be adversely affected, which could adversely affect the ability
of the applicable tenants to satisfy their obligations to us under the Caesars Lease Agreements and the ability of
Caesars and/or CRC to satisfy their respective obligations to us under the related guarantees.
In addition, during the initial seven years of the Caesars Lease Agreements, the annual rent escalations under the
Caesars Lease Agreements will continue to apply regardless of the amount of cash flows generated by the properties
that are subject to the Caesars Lease Agreements. Accordingly, if the cash flows generated by such properties
decrease, or do not increase at the same rate as the rent escalations, the rents payable under the Caesars Lease
Agreements will comprise a higher percentage of the cash flows generated by the subsidiaries of Caesars, which
could make it more difficult for the applicable subsidiaries to make their payment obligations to us under the
Caesars Lease Agreements and ultimately could adversely affect Caesars’ and/or CRC’s ability to satisfy their
respective obligations to us under the related guarantees.
Caesars’ indebtedness and the fact that a significant portion of its cash flow is used to make interest payments
could adversely affect its ability to satisfy its obligations under the Caesars Lease Agreements.
As disclosed in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, Caesars’ consolidated
estimated debt service (including principal and interest) for 2019 will be approximately $654.0 million and
$23.6 billion thereafter to maturity. As a result, a significant portion of Caesars’ liquidity needs are for debt service,
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including significant interest payments. Such substantial indebtedness and the restrictive covenants under the
agreements governing such indebtedness could limit the ability of the applicable tenants to satisfy their obligations
to us under the Lease Agreements and the ability of Caesars’ and/or CRC to satisfy their respective obligations
under the related guarantees.
We are dependent on the gaming industry and may be susceptible to the risks associated with it, which could
materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.
As the landlord of gaming facilities, we are impacted by the risks associated with the gaming industry. Therefore,
so long as our investments are concentrated in gaming-related assets, our success is dependent on the gaming
industry, which could be adversely affected by economic conditions in general, changes in consumer trends and
preferences and other factors over which we and our tenants have no control. As we are subject to risks inherent
in substantial investments in a single industry, a decrease in the gaming business would likely have a greater adverse
effect on us than if we owned a more diversified real estate portfolio, particularly because a component of the rent
under the Lease Agreements will be based, over time, on the performance of the gaming facilities operated by our
tenants on our properties and such effect could be material and adverse to our business, financial condition, liquidity,
results of operations and prospects.
The gaming industry is characterized by a high degree of competition among a large number of participants,
including riverboat casinos, dockside casinos, land-based casinos, video lottery, sweepstakes and poker machines
not located in casinos, Native American gaming, internet lotteries and other internet wagering gaming services
and, in a broader sense, gaming operators face competition from all manner of leisure and entertainment activities.
Gaming competition is intense in most of the markets where our facilities are located. Recently, there has been
additional significant competition in the gaming industry as a result of the upgrading or expansion of facilities by
existing market participants, the entrance of new gaming participants into a market, internet gaming or legislative
changes. As competing properties and new markets are opened, we may be negatively impacted. Additionally,
decreases in discretionary consumer spending brought about by weakened general economic conditions such as,
but not limited to, lackluster recoveries from recessions, high unemployment levels, higher income taxes, low
levels of consumer confidence, weakness in the housing market, cultural and demographic changes and increased
stock market volatility may negatively impact our revenues and operating cash flows.
We face extensive regulation from gaming and other regulatory authorities, and our charter provides that any
of our shares held by investors who are found to be unsuitable by state gaming regulatory authorities are subject
to redemption.
The ownership, operation, and management of gaming and racing facilities are subject to pervasive regulation.
These gaming and racing regulations impact our gaming and racing tenants and persons associated with our gaming
and racing facilities, which in many jurisdictions include us as the landlord and owner of the real estate. Certain
gaming authorities in the jurisdictions in which we hold properties may require us and/or our affiliates to maintain
a license as a key business entity or supplier because of our status as landlord. Gaming authorities also retain great
discretion to require us to be found suitable as a landlord, and certain of our stockholders, officers and directors
may be required to be found suitable as well.
In many jurisdictions, gaming laws can require certain of our stockholders to file an application, be investigated,
and qualify or have his, her or its suitability determined by gaming authorities. Gaming authorities have very broad
discretion in determining whether an applicant should be deemed suitable. Subject to certain administrative
proceeding requirements, the gaming regulators have the authority to deny any application or limit, condition,
restrict, revoke or suspend any license, registration, finding of suitability or approval, or fine any person licensed,
registered or found suitable or approved, for any cause deemed reasonable by the gaming authorities.
Gaming authorities may conduct investigations into the conduct or associations of our directors, officers, key
employees or investors to ensure compliance with applicable standards. If we are required to be found suitable
and are found suitable as a landlord, we will be registered as a public company with the gaming authorities and
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will be subject to disciplinary action if, after we receive notice that a person is unsuitable to be a stockholder or
to have any other relationship with us, we:
•
•
•
•
pay that person any distribution or interest upon any of our voting securities;
allow that person to exercise, directly or indirectly, any voting right conferred through securities held
by that person;
pay remuneration in any form to that person for services rendered or otherwise; or
fail to pursue all lawful efforts to require such unsuitable person to relinquish his or her voting securities,
including, if necessary, the immediate purchase of the voting securities for cash at fair market value.
Many jurisdictions also require any person who acquires beneficial ownership of more than a certain percentage
of voting securities of a gaming company and, in some jurisdictions, non-voting securities, typically 5% of a
publicly-traded company, to report the acquisition to gaming authorities, and gaming authorities may require such
holders to apply for qualification, licensure or a finding of suitability, subject to limited exceptions for “institutional
investors” that hold a company’s voting securities for passive investment purposes only. Our outstanding shares
of capital stock are held subject to applicable gaming laws. Any person owning or controlling at least 5% of the
outstanding shares of any class of our capital stock is required to promptly notify us of such person’s identity.
Some jurisdictions may also limit the number of gaming licenses in which a person may hold an ownership or a
controlling interest.
Further, our directors, officers, key employees and investors in our shares must meet approval standards of certain
gaming regulatory authorities. If such gaming regulatory authorities were to find such a person or investor
unsuitable, we may be required to sever our relationship with that person or the investor may be required to dispose
of his, her or its interest in us. Our charter provides that all of our shares held by investors who are found to be
unsuitable by regulatory authorities are subject to redemption upon our receipt of notice of such finding.
Additionally, the loss of our gaming licenses could result in an event of default under our certain of our indebtedness,
and cross-default provisions in our debt agreements could cause an event of default under one debt agreement to
trigger an event of default under our other debt agreements.
Finally, substantially all material loans, significant acquisitions, leases, sales of securities and similar financing
transactions by us and our subsidiaries must be reported to, and in some cases approved by, gaming authorities in
advance of the transaction. Neither we nor any of our subsidiaries may make a public offering of securities without
the prior approval of certain gaming authorities. Changes in control through merger, consolidation, stock or asset
acquisitions, management or consulting agreements, or otherwise may be subject to receipt of prior approval of
certain gaming authorities. Entities seeking to acquire control of us or one of our subsidiaries (and certain of our
affiliates) must satisfy gaming authorities with respect to a variety of stringent standards prior to assuming control.
Failure to satisfy the stringent licensing standards may preclude entities from acquiring control of us or one of our
subsidiaries (and certain of our affiliates) and/or require the entities to divest such control.
Required regulatory approvals can delay or prohibit transfers of our gaming properties, which could result in
periods in which we are unable to receive rent for such properties and have a material adverse effect on our
business, financial condition, liquidity, results of operations and prospects.
Our tenants are (and any future tenants of our gaming properties will be) required to be licensed under applicable
law in order to operate any of our properties as gaming facilities. If the Lease Agreements, or any future lease
agreement we enter into, are terminated (which could be required by a regulatory agency) or expire, any new tenant
must be licensed and receive other regulatory approvals to operate our properties as gaming facilities. Any delay
in, or inability of, the new tenant to receive required licenses and other regulatory approvals from the applicable
state and county government agencies may prolong the period during which we are unable to collect the applicable
rent. Further, in the event that the Lease Agreements or future lease agreements are terminated or expire and a new
tenant is not licensed or fails to receive other regulatory approvals, the properties may not be operated as gaming
facilities and we will not be able to collect the applicable rent. Moreover, we may be unable to transfer or sell the
25
affected properties as gaming facilities, which could materially and adversely affect our business, financial
condition, liquidity, results of operations and prospects.
Tenants may choose not to renew the Lease Agreements.
The Lease Agreements each have an initial lease term of 15 years with the potential to extend the term for up to
four additional five-year terms thereafter, provided that for certain facilities the aggregate lease term, including
renewals, is cutback to the extent it would otherwise exceed 80% of the remaining useful life of the applicable
leased property, solely at the option of the tenants. At the expiration of the initial lease term or of any additional
renewal term thereafter, a tenant may choose not to renew the Lease Agreements. If the Lease Agreements expire
without renewal and we are not able to find suitable, credit-worthy tenants to replace a tenant on the same or more
attractive terms, our business, financial condition, liquidity, results of operations and prospects may be materially
and adversely affected, including our ability to make distributions to our stockholders at the then current level, or
at all. This risk would be exacerbated if Caesars (or Penn National, as the case may be) determined not to renew
or was prohibited from renewing due to the remaining useful life of the leased property, all Lease Agreements at
any one time.
Net leases may not result in fair market lease rates over time, which could negatively impact our results of
operations and cash flows and reduce the amount of funds available to make distributions to stockholders.
All of our rental revenue is generated from the Lease Agreements, which are triple-net leases, and provide greater
flexibility to the respective tenants related to the use of the applicable leased property than would be the case with
ordinary property leases, such as the right to freely sublease portions of each leased property, to make alterations
in the leased premises and to terminate the lease prior to its expiration under specified circumstances. Furthermore,
net leases typically have longer lease terms and, thus, there is an increased risk that contractual rental increases in
future years will fail to result in fair market rental rates during those years. As a result, our results of operations
and cash flows and distributions to our stockholders could be lower than they would otherwise be if we did not
enter into a net lease.
The Lease Agreements may restrict our ability to sell the properties.
Our ability to sell or dispose of our properties may be hindered by the fact that such properties are subject to the
Lease Agreements, as the terms of the Lease Agreements require that a purchaser assume the Lease Agreements
or, in certain cases, enter into a severance lease with the tenants for the sold property on substantially the same
terms as contained in the applicable Lease Agreement, which may make our properties less attractive to a potential
buyer than alternative properties that may be for sale.
Properties within our portfolio are, and properties that we may acquire in the future are likely to be, operated
and promoted under certain trademarks and brand names that we do not own.
Most of the properties within our portfolio are currently operated and promoted under trademarks and brand names
not owned by us, including Caesars Palace, Horseshoe, Harrah’s, Bally’s and Margaritaville. In addition, properties
that we may acquire in the future may be operated and promoted under these same trademarks and brand names,
or under different trademarks and brand names we do not, or will not, own. During the term that our properties
are managed by our tenants, we will be reliant on our tenants to maintain and protect the trademarks, brand names
and other licensed intellectual property used in the operation or promotion of the leased properties. Operation of
the leased properties, as well as our business and financial condition, could be adversely impacted by infringement,
invalidation, unauthorized use or litigation affecting any such intellectual property. Moreover, if any of our
properties are rebranded unsuccessfully, it could have a material adverse effect on our business, financial condition,
liquidity, results of operations and prospects, as we may not enjoy comparable recognition or status under a new
brand. A transition of management away from a Caesars or Penn National entity could also have a material adverse
effect on our business, financial condition, liquidity, results of operations and prospects.
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We have a substantial amount of indebtedness and expect to incur additional indebtedness in connection with
the closing of the pending Greektown acquisition and may incur additional indebtedness in the future. Our
substantial indebtedness exposes us to the risk of default under our debt obligations, limits our operating
flexibility, increases the risks associated with a downturn in our business or in the businesses of our tenants,
and requires us to use a substantial portion of our cash to service our debt obligations.
We have a substantial amount of indebtedness and debt service requirements. As of December 31, 2018, we had
approximately $4.1 billion in long-term indebtedness, consisting of:
•
•
•
$2.1 billion of total indebtedness outstanding under our Term Loan B Facility;
$498.5 million of outstanding Second Lien Notes; and
$1.55 billion of CPLV CMBS Debt.
In addition, we expect to incur additional indebtedness in connection with the closing of the pending Greektown
acquisition and to pay related fees and expenses, and we may incur additional indebtedness in the future to finance
additional acquisitions or otherwise. As of December 31, 2018, we also have $400.0 million of available capacity
to borrow under our Revolving Credit Facility.
Our indebtedness is collateralized by substantially all of our properties. Payments of principal and interest under
this indebtedness, or any other instruments governing debt we may incur in the future, may leave us with insufficient
cash resources to pursue our business and growth strategies or to pay the distributions currently contemplated or
necessary to qualify or maintain qualification as a REIT. Our substantial outstanding indebtedness or future
indebtedness, and the limitations imposed on us by our debt agreements, could have other significant adverse
consequences, including the following:
•
our cash flow may be insufficient to meet our required principal and interest payments;
• we may be unable to borrow additional funds as needed or on favorable terms, which could, among other
things, adversely affect our ability to capitalize upon emerging acquisition opportunities, including
exercising our rights of first refusal and call rights described herein, or meet operational needs;
• we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable
than the terms of our original indebtedness;
• we may be forced to dispose of one or more of our properties if permitted under the Lease Agreements,
possibly on disadvantageous terms at a loss;
•
the ability of the Operating Partnership to distribute cash to us may be limited or prohibited, which would
materially and adversely affect our ability to make distributions on our common stock;
• we may fail to comply with the payment and restrictive covenants in our loan documents, which would
entitle the lenders to accelerate payment of outstanding loans and foreclose on any properties servicing
such loans; and
• we may be unable to hedge floating rate debt, counterparties may fail to honor their obligations under our
hedge agreements and these agreements may not effectively hedge interest rate fluctuation risk.
If any one of these events were to occur, our financial condition, results of operations, cash flows, the market price
of our common stock and our ability to satisfy our debt service obligations and to pay distributions to our
stockholders could be materially and adversely affected. In addition, the foreclosure on our properties could create
taxable income without accompanying cash proceeds, which could result in entity level taxes to us or could adversely
affect our ability to meet the distribution requirements necessary to qualify or maintain qualification as a REIT.
In addition, the Code generally requires that a REIT distribute annually to its stockholders at least 90% of its REIT
taxable income (with certain adjustments), determined without regard to the deduction for dividends paid and
excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it distributes annually
less than 100% of its REIT taxable income, including capital gains. VICI Golf is also subject to U.S. Federal
income tax at regular corporate rates on any of its taxable income. In order to maintain our status as a REIT and
27
avoid or otherwise minimize current entity-level U.S. Federal income taxes, a substantial portion of our cash flow
after operating expenses and debt service will be required to be distributed to our stockholders.
Because of the limitations on the amount of cash available to us after satisfying our debt service obligations and
our distribution obligations to maintain our status as a REIT and avoid or otherwise minimize current entity-level
U.S. Federal income taxes, our ability to pursue our business and growth strategies will be limited.
Any mechanic’s liens or similar liens incurred by the tenants under the Lease Agreements may attach to, and
constitute liens on, our interests in the properties.
To the extent the tenants under the Lease Agreements make any improvements, these improvements could cause
mechanic’s liens or similar liens to attach to, and constitute liens on, our interests in the properties. To the extent
that mechanic’s liens or similar liens are recorded against any of the properties or any properties we may acquire
in the future, the holders of such mechanic’s liens or similar liens may enforce them by court action and courts
may cause the applicable properties or future properties to be sold to satisfy such liens, which could negatively
impact our revenues, results of operations, cash flows and distributions to our stockholders. Further, holders of
such liens could have priority over our stockholders in the event of bankruptcy or liquidation, and as a result, a
trustee in bankruptcy may have difficulty realizing or foreclosing on such properties in any such bankruptcy or
liquidation, and the amount of distributions our stockholders could receive in such bankruptcy or liquidation could
be reduced.
Adverse changes in our credit rating may affect our borrowing capacity and borrowing terms.
Our outstanding debt is periodically rated by nationally recognized credit rating agencies. The credit ratings are
based upon our operating performance, liquidity and leverage ratios, overall financial condition, and other factors
viewed by the credit rating agencies as relevant to both our industry and the economic outlook. Our credit rating
may affect the amount of capital we can access, as well as the terms of any financing we obtain. Because we rely
in part on debt financing to fund growth, the absence of an investment grade credit rating or any credit rating
downgrade or negative outlook may have a negative effect on our future growth.
We will have future capital needs and may not be able to obtain additional financing on acceptable terms.
We may incur additional indebtedness in the future to refinance our existing indebtedness or to finance newly
acquired properties or for general corporate or other purposes. Any significant additional indebtedness could require
a substantial portion of our cash flow to make interest and principal payments due on our indebtedness. Greater
demands on our cash resources may reduce funds available to us to pay distributions, make capital expenditures
and acquisitions, or carry out other aspects of our business and growth strategies. Increased indebtedness can also
limit our ability to adjust rapidly to changing market conditions, make us more vulnerable to general adverse
economic and industry conditions and create competitive disadvantages for us compared to other companies with
relatively lower debt levels. Increased future debt service obligations may limit our operational and financial
flexibility. Further, to the extent we were required to incur indebtedness, our future interest costs would increase,
thereby reducing our earnings and cash flows from what they otherwise would have been.
Moreover, our ability to obtain additional financing and satisfy our financial obligations under indebtedness
outstanding from time to time will depend upon our future operating performance, which is subject to then prevailing
general economic and credit market conditions, including interest rate levels and the availability of credit generally,
and financial, business and other factors, many of which are beyond our control. The prolonged continuation or
worsening of current credit market conditions would have a material adverse effect on our ability to obtain financing
on favorable terms, if at all.
We may be unable to obtain additional financing or financing on favorable terms or our operating cash flow may
be insufficient to satisfy our financial obligations under indebtedness outstanding from time to time (if any). Among
other things, the absence of an investment grade credit rating or any credit rating downgrade or negative outlook
could increase our financing costs and could limit our access to financing sources. If financing is not available
when needed, or is available on unfavorable terms, we may be unable to pursue our business and growth strategies
28
or otherwise take advantage of new business opportunities or respond to competitive pressures, any of which could
have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
We may raise additional funds in the future through the issuance of equity securities and, as a result, our stockholders
may experience significant dilution, which may adversely affect the market price of our common stock and make
it more difficult for our stockholders to sell our shares at a time and price that they deem appropriate and could
impair our future ability to raise capital through an offering of our equity securities.
Our ability to refinance our indebtedness as it becomes due depends on many factors, some of which are beyond
our control.
Our ability to refinance our existing indebtedness and any future indebtedness will depend, in part, on our current
and projected financial condition, liquidity and results of operations and economic, financial, competitive,
legislative, regulatory and other factors. Many of these factors are beyond our control. We cannot assure you that
we will be able to refinance any of our indebtedness as it becomes due, on commercially reasonable terms or at
all. If we are not able to refinance our indebtedness as it becomes due, we will be obligated to pay such indebtedness
with cash from our operations and we may not have sufficient cash to do so, which would have a material and
adverse effect on us.
Covenants in our debt agreements limit our operational flexibility, and a covenant breach or default could
materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.
The agreements governing our indebtedness contain customary covenants, including restrictions on our ability to
grant liens on our assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or
consolidations and pay certain dividends and other restricted payments. These covenants could impair our ability
to pursue our business and growth strategies, take advantage of new business opportunities or successfully compete.
A breach of any of these covenants or covenants under any other agreements governing our indebtedness could
result in an event of default. Cross-default provisions in our debt agreements could cause an event of default under
one debt agreement to trigger an event of default under our other debt agreements. Upon the occurrence of an event
of default under any of our debt agreements, the lenders could elect to declare all outstanding debt under such
agreements to be immediately due and payable. If we were unable to repay or refinance the accelerated debt, the
lenders could proceed against any assets pledged to secure that debt, including foreclosing on or requiring the sale
of our properties, and our assets may not be sufficient to repay such debt in full. Covenants that limit our operational
flexibility as well as defaults under our debt instruments could have a material adverse effect on our business,
financial condition, liquidity, results of operations and prospects.
A rise in interest rates may increase our overall interest rate expense and could adversely affect our stock price.
A rise in interest rates may increase our overall interest rate expense and have an adverse impact on our ability to
pay distributions to our stockholders. The risk presented by holding variable rate indebtedness can be managed or
mitigated by utilizing interest rate protection products. However, there is no assurance that we will utilize any of
these products effectively or all, or that such products will be available to us. In addition, in the event of a rise in
interest rates, new debt, whether fixed or variable, is likely to be more expensive, which could, among other things,
make the financing of any acquisition more expensive, and we may be unable to incur new debt or replace maturing
debt with new debt at equal or better interest rates.
Further, the dividend yield on our common stock, as a percentage of the price of such common stock, will influence
the market price of such common stock. Thus, an increase in market interest rates may lead prospective purchasers
of our common stock to expect a higher dividend yield, which would adversely affect the market price of our
common stock.
We have engaged and may engage in hedging transactions that may limit gains or result in losses.
We use derivatives to hedge certain of our liabilities and we currently have interest rate swap agreements in place.
As of December 31, 2018, we had in place four interest rate swap agreements with third party financial institutions
having an aggregate notional amount of $1.5 billion. Subsequent to year end, on January 3, 2019, we entered into
29
two additional interest rate swap transactions having an aggregate notional amount of $500.0 million (bringing
the aggregate notional amount of debt subject to an interest rate swap to $2.0 billion). The interest rate swap
transactions are designated as cash flow hedges that effectively fix the LIBOR component of the interest rate on
a portion of the outstanding debt under the Term Loan B Facility. The counterparties of these arrangements are
major financial institutions; however, we are exposed to credit risk in the event of non-performance by the
counterparties. This has certain risks, including losses on a hedge position, which may reduce the return on our
investments. Such losses may exceed the amount invested in such instruments. In addition, counterparties to a
hedging arrangement could default on their obligations. We may have to pay certain costs, such as transaction fees
or breakage costs, related to hedging transactions.
We may not be able to purchase the properties subject to the Call Right Agreements, the Second Amended and
Restated Right of First Refusal Agreement or the Put-Call Agreement if we are unable to obtain additional
financing. In addition, we may be forced to dispose of Harrah’s Las Vegas to Caesars, possibly on
disadvantageous terms.
The Call Right Agreements provide for our right for up to five years after the Formation Date to enter into binding
agreements to purchase the real property interest and all improvements associated with the Option Properties from
Caesars. The Put/Call Agreement that we entered into with Caesars, among other things, provides us with the
opportunity or the obligation to acquire the Caesars Forum Convention Center and lease it back to Caesars. The
Second Amended and Restated Right of First Refusal Agreement provides us the right, subject to certain exclusions,
to (i) acquire (and lease to Caesars) any domestic gaming facilities located outside of the Gaming Enterprise District
of Clark County, Nevada, proposed to be acquired or developed by Caesars, and (ii) acquire (and lease to Caesars)
any of the properties that Caesars has recently agreed to acquire from Centaur Holdings, LLC, in each case, should
Caesars determine to sell any such properties. In order to exercise these rights, we would likely be required to
secure additional financing and our substantial level of indebtedness following the Formation Date or other factors
could limit our ability to do so on attractive terms or at all. If we are unable to obtain financing on terms acceptable
to us, we may not be able to exercise these rights and acquire these properties. Even if financing with acceptable
terms is available to us, there can be no assurance that we will exercise any of these rights.
The Put/Call Agreement, among other things, grants Caesars the right to sell to (and simultaneously lease back
from) us the Caesars Forum Convention Center. If Caesars exercises the right to sell to (and lease from) us the
Caesars Forum Convention Center and the transactions do not close for reasons other than a default by Caesars or
a failure to obtain any required regulatory approvals, Caesars will have the right to acquire Harrah’s Las Vegas
from us, all on and subject to the terms and conditions set forth in the Put/Call Agreement. In addition, the HLV
Lease Agreement grants Caesars the right to purchase Harrah’s Las Vegas from us if we engage in certain transactions
with entities deemed to be competitors of Caesars or if the landlord under the lease otherwise becomes a competitor
of Caesars. The disposition of Harrah’s Las Vegas to Caesars pursuant to the Put/Call Agreement or the HLV Lease
Agreement may be at disadvantageous terms and could have a material adverse effect on our business, financial
condition, liquidity, results of operations and prospects.
The bankruptcy or insolvency of any tenant or guarantor could result in the termination of the Lease Agreements
and the related guarantees and material losses to us.
We are subject to the credit risk of our tenants. We cannot assure you that our tenants will not default on their leases
and fail to make rental payments to us. In particular, disruptions in the financial and credit markets, local economic
conditions and other factors affecting the gaming industry may affect our tenants’ ability to obtain financing to
operate their businesses or continue to profitability execute their business plans. This, in turn, may cause our tenants
to be unable to meet their financial obligations, including making rental payments to us, which may result in their
bankruptcy or insolvency. In the event of a bankruptcy of Caesars, CRC or Penn National, any claim for damages
under the guarantee may not be paid in full. Furthermore, although the tenants’ performance and payments under
the Caesars Lease Agreements are guaranteed by Caesars or CRC, as the case may be, a default by the applicable
tenant under the Caesars Lease Agreement, or by Caesars or CRC with regard to its guarantee, may cause a default
under certain circumstances with regard to the entire portfolio covered by the Caesars Lease Agreements. In event
of a bankruptcy, there can be no assurances that the tenants, Caesars or CRC would assume the Caesars Lease
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Agreements or the related guarantees, and if the Caesars Lease Agreements or guarantees were rejected, the tenant,
Caesars or CRC, as applicable, may not have sufficient funds to pay the damages that would be owed to us a result
of the rejection and we might not be able to find a replacement tenant on the same or better terms. For these and
other reasons, the bankruptcy of one or more tenants, Caesars, CRC or Penn National would have a material adverse
effect on our business, financial condition, liquidity, results of operations and prospects.
Our pursuit of investments in, and acquisitions of, additional properties may be unsuccessful or fail to meet
our expectations.
We intend to continue to pursue acquisitions of additional properties and seek acquisitions and other strategic
opportunities. Accordingly, we may often be engaged in evaluating potential transactions and other strategic
alternatives. In addition, from time to time, we may engage in discussions that may result in one or more transactions.
Although there is uncertainty that any of these discussions will result in definitive agreements or the completion
of any transaction, we may devote a significant amount of our management resources to such a transaction, which
could negatively impact our operations. We may incur significant costs in connection with seeking acquisitions or
other strategic opportunities regardless of whether the transaction is completed and, to the extent applicable, in
combining our operations if such a transaction is completed.
We operate in a highly competitive industry and face competition from other REITs, investment companies, private
equity and hedge fund investors, sovereign funds, lenders, gaming companies and other investors, some of whom
are significantly larger and have greater resources, access to capital and lower costs of capital. Increased competition
will make it more challenging to identify and successfully capitalize on acquisition opportunities that meet our
investment objectives. If we cannot identify and purchase a sufficient quantity of gaming properties and other
properties at favorable prices or if we are unable to finance acquisitions on commercially favorable terms, our
business, financial condition, liquidity, results of operations and prospects could be materially and adversely
affected. Additionally, the fact that we must distribute 90% of our REIT taxable income in order to maintain our
qualification as a REIT may limit our ability to rely upon rental payments from our leased properties or subsequently
acquired properties in order to finance acquisitions. As a result, if debt or equity financing is not available on
acceptable terms, further acquisitions might be limited or curtailed.
Investments in and acquisitions of gaming properties and other properties we might seek to acquire entail risks
associated with real estate investments generally, including that the investment’s performance will fail to meet
expectations, that the cost estimates for necessary property improvements will prove inaccurate or the operator or
manager will underperform. Real estate development projects present other risks, including construction delays
or cost overruns that increase expenses, the inability to obtain required zoning, occupancy and other governmental
approvals and permits on a timely basis, and the incurrence of significant development costs prior to completion
of the project.
Further, even if we were able to acquire additional properties in the future, there is no guarantee that such properties
would be able to maintain their historical performance, which may prevent the ability of our tenants to pay the
partial or total amount of the required lease payments under the respective Lease Agreements. In addition, our
financing of these acquisitions could negatively impact our cash flows and liquidity, require us to incur substantial
debt or involve the issuance of substantial new equity, which would be dilutive to existing stockholders. We have
a substantial amount of indebtedness outstanding, which may affect our ability to pay distributions, may expose
us to interest rate fluctuation risk and may expose us to the risk of default under our debt obligations. In addition,
we cannot assure you that we will be successful in implementing our business and growth strategies or that any
expansion will improve operating results. The failure to identify and acquire new properties effectively, or the
failure of any acquired properties to perform as expected, could have a material adverse effect on our business,
financial condition, liquidity, results of operations and prospects and our ability to make distributions to our
stockholders.
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We may fail to consummate the pending acquisition of Greektown or may not consummate such acquisition on
the terms agreed to. We could be required, under certain circumstances, to pay significant termination fees or
liquidated damages to the seller in the pending acquisition.
The consummation of our pending acquisition of Greektown is subject to certain customary regulatory and other
closing conditions, which make the completion and timing of the closing uncertain and, accordingly, there can be
no assurance that such conditions will be satisfied on the anticipated schedule, or at all. If we fail to consummate
the pending acquisition, we will not have acquired the revenue generating asset that will be required to produce
the earnings and cash flow we anticipated. As a result, failure to consummate the acquisition would reduce our
anticipated rental revenue and adversely affect our earnings per share and our ability to make distributions to
stockholders, and the market price of our common stock could decline to the extent that the current market price
reflects a market assumption that the pending acquisition will be completed. Furthermore, our ability to raise the
amount of long-term debt financing necessary to fund the pending acquisition is subject to market and economic
conditions.
The transaction documents for the pending acquisition provide that, in specified circumstances, we could be required
to pay significant termination fees or liquidated damages to the seller. If such a termination fee or liquidated
damages is payable under any such circumstance described above, the payment could have a material adverse
effect on us.
We may sell or divest different properties or assets after an evaluation of our portfolio of businesses. Such sales
or divestitures would affect our costs, revenues, results of operations, financial condition and liquidity.
From time to time, we may evaluate our properties and may, as a result, sell or attempt to sell, divest, or spin-
off different properties or assets, subject to the terms of the Lease Agreements. These sales or divestitures would
affect our costs, revenues, results of operations, financial condition, liquidity and our ability to comply with financial
covenants. Divestitures have inherent risks, including possible delays in closing transactions (including potential
difficulties in obtaining regulatory approvals), the risk of lower-than-expected sales proceeds for the divested
businesses, and potential post-closing claims for indemnification. In addition, current economic conditions and
relatively illiquid real estate markets may result in fewer potential bidders and unsuccessful sales efforts.
Our properties are subject to risks from natural disasters such as earthquakes, hurricanes, severe weather and
terrorism.
Our properties are located in areas that may be subject to natural disasters, such as earthquakes, and extreme
weather conditions, including, but not limited to, hurricanes. Such natural disasters or extreme weather conditions
may interrupt operations at the casinos, damage our properties, and reduce the number of customers who visit our
facilities in such areas. A severe earthquake could damage or destroy our properties. In addition, our operations
could be adversely impacted by a drought or other cause of water shortage. A severe drought of extensive duration
experienced in Las Vegas or in the other regions in which we operate could adversely affect the business and
financial results at our properties. Although the tenants are required to maintain both property and business
interruption insurance coverage, such coverage is subject to deductibles and limits on maximum benefits, including
limitation on the coverage period for business interruption, and we cannot assure you that we or the tenants will
be able to fully insure such losses or fully collect, if at all, on claims resulting from such natural disasters. While
the Lease Agreements require, and new lease agreements are expected to require, that comprehensive insurance
and hazard insurance be maintained by the tenants, there are certain types of losses, generally of a catastrophic
nature, such as earthquakes, hurricanes and floods, that may be uninsurable or not economically insurable. Insurance
coverage may not be sufficient to pay the full current market value or current replacement cost of a loss. Inflation,
changes in building codes and ordinances, environmental considerations, and other factors also might make it
infeasible to use insurance proceeds to replace the property after such property has been damaged or destroyed.
Under such circumstances, the insurance proceeds received might not be adequate to restore the economic position
with respect to such property. If we experience a loss that is uninsured or that exceeds our policy coverage limits,
we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those
properties.
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Terrorist attacks or other acts of violence may result in declining economic activity, which could harm the demand
for goods and services offered by our tenants and the value of our properties and might adversely affect the value
of an investment in our common stock. Such a resulting decrease in retail demand could make it difficult for us to
renew or re-lease our properties to suitable, credit-worthy tenants at lease rates equal to or above historical rates.
Terrorist activities or violence also could directly affect the value of our properties through damage, destruction
or loss, and the availability of insurance for such acts, or of insurance generally, might be lower or cost more,
which could increase our operating expenses and adversely affect our results of operations and cash flows. To the
extent that any of our tenants is affected by future terrorist attacks or violence, its business similarly could be
adversely affected, including the ability of our tenants to continue to meet their obligations to us. These events
might erode business and consumer confidence and spending and might result in increased volatility in national
and international financial markets and economies. Any one of these events might decrease demand for real estate,
decrease or delay the occupancy of our new or redeveloped properties, and limit our access to capital or increase
our cost of raising capital.
In addition, the Caesars Lease Agreements, as applicable, allow the tenants to remove a property from the Non-
CPLV Lease Agreement and to terminate the CPLV Lease Agreement, the Joliet Lease Agreement or the HLV
Lease Agreement, as the case may be, during the final two years of the lease terms if the cost to rebuild or restore
a property in connection with a casualty event exceeds 25% of total property fair market value. Similarly, if a
condemnation event occurs that renders a facility unsuitable for its primary intended use, the applicable tenants
may remove the property from the Non-CPLV Lease Agreement and may terminate the CPLV Lease Agreement,
the Joliet Lease Agreement or the HLV Lease Agreement, as the case may be. The Margaritaville Lease Agreement
allows the tenant to terminate the Margaritaville Lease Agreement during the final year of the lease term if 50%
or more of the square feet of the improvements are destroyed by a casualty event such that the improvements are
rendered substantially untenantable. If a condemnation event occurs that renders the Margaritaville Resort Casino
reasonably uneconomical for the operation of the improvements thereon on a commercially practicable basis for
their permitted use as rentable facilities capable of producing a fair and reasonable net income therefrom, the tenant
may terminate the Margaritaville Lease Agreement. If a property is removed from the Non-CPLV Lease Agreement
or if the CPLV Lease Agreement, the Joliet Lease Agreement, the HLV Lease Agreement or the Margaritaville
Lease Agreement, as the case may be, is terminated, we will lose the rent associated with the related facility, which
would have a negative impact on our financial results. In this event, following termination of the lease of a property,
even if we are able to restore the affected property, we could be limited to selling or leasing such property to a new
tenant in order to obtain an alternate source of revenue, which may not happen on comparable terms or at all.
Changes in building and/or zoning laws may require us to update a property in the event of recapture or prevent
us from fully restoring a property in the event of a substantial casualty loss and/or require us to meet additional
or more stringent construction requirements.
Due to changes, among other things, in applicable building and zoning laws, ordinances and codes that may affect
certain of our properties that have come into effect after the initial construction of the properties, certain properties
may not comply fully with current building and/or zoning laws, including electrical, fire, health and safety codes
and regulations, use, lot coverage, parking and setback requirements, but may qualify as permitted non-
conforming uses. Although the Lease Agreements require our tenants to pay for and ensure continued compliance
with applicable law, there is no assurance that future leases will be negotiated on the same basis or that our tenants
will make any changes required by the terms of the Lease Agreements and/or any future leases we may enter into.
In addition, such changes may limit a tenant’s ability to restore the premises of a property to its previous condition
in the event of a substantial casualty loss with respect to the property or the ability to refurbish, expand or renovate
such property to remain compliant, or increase the cost of construction in order to comply with changes in building
or zoning codes and regulations. If a tenant is unable to restore a property to its prior use after a substantial casualty
loss or is required to comply with more stringent building or zoning codes and regulations, we may be unable to re-
lease the space at a comparable effective rent or sell the property at an acceptable price, which may materially and
adversely affect our business, financial condition, liquidity, results of operations and prospects.
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Certain properties are subject to restrictions pursuant to reciprocal easement agreements, operating agreements
or similar agreements.
Many of the properties that we own are, and properties that we may acquire in the future may be, subject to use
restrictions and/or operational requirements imposed pursuant to ground leases, restrictive covenants or conditions,
reciprocal easement agreements or operating agreements or other instruments that could, among other things,
adversely affect our ability to lease space to third parties. Such property restrictions could include: limitations on
alterations, changes, expansions, or reconfiguration of properties; limitations on use of properties; limitations
affecting parking requirements; or restrictions on exterior or interior signage or facades. In certain cases, consent
of the other party or parties to such agreements may be required when altering, reconfiguring, expanding or
redeveloping. Failure to secure such consents when necessary may harm our ability to execute leasing strategies,
which could adversely affect us.
The loss of the services of key personnel could have a material adverse effect on our business.
Our success and ability to grow depends, in large part, upon the leadership and performance of our executive
management team, particularly our chief executive officer, our president and chief operating officer, and our chief
financial officer. Any unforeseen loss of our executive officers’ services, or any negative market or industry
perception with respect to them or arising from their loss, could have a material adverse effect on our business.
We do not have key man or similar life insurance policies covering members of our senior management. We have
employment agreements with our executive officers, but these agreements do not guarantee that any given executive
will remain with us, and there can be no assurance that any such officers will remain with us. The appointment or
replacement of certain key members of our executive management team is subject to regulatory approvals based
upon suitability determinations by gaming regulatory authorities in the jurisdictions where our properties are
located. If any of our executive officers is found unsuitable by any such gaming regulatory authorities, or if we
otherwise lose their services, we would have to find alternative candidates and may not be able to successfully
manage our business or achieve our business objectives.
Environmental compliance costs and liabilities associated with real estate properties owned by us may materially
impair the value of those investments.
As an owner of real property, we are subject to various Federal, state and local environmental and health and safety
laws and regulations. Although we do not operate or manage most of our properties, we may be held primarily or
jointly and severally liable for costs relating to the investigation and clean-up of any property from which there
has been a release or threatened release of a regulated material as well as other affected properties, regardless of
whether we knew of or caused the release, and to preserve claims for damages. Further, some environmental laws
create a lien on a contaminated site in favor of the government for damages and the costs the government incurs
in connection with such contamination.
Although under the Lease Agreements the tenants are required to indemnify us for certain environmental liabilities,
including environmental liabilities it causes, the amount of such liabilities could exceed the financial ability of the
applicable tenants to indemnify us. In addition, the presence of contamination or the failure to remediate
contamination may adversely affect our ability to sell or lease our properties or to borrow using our properties as
collateral.
We may be required to contribute insurance proceeds with respect to casualty events at our properties to the
lenders under our debt financing agreements.
In the event that we were to receive insurance proceeds with respect to a casualty event at any of our properties,
we may be required under the terms of our debt financing agreements to contribute all or a portion of those proceeds
to the repayment of such debt, which may prevent us from restoring such properties to their prior state. If the
remainder of the proceeds (after any such required repayment) were insufficient to make the repairs necessary to
restore the damaged properties to a condition substantially equivalent to its state immediately prior to the casualty,
we may not have sufficient liquidity to otherwise fund these repairs and may be required to obtain additional
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financing, which could materially and adversely affect our business, financial condition, liquidity, results of
operations and prospects.
If we fail to establish and maintain an effective system of integrated internal controls, we may not be able to
report our financial results accurately, which could have a material adverse effect on us.
As a reporting company, we are required to develop and implement substantial control systems, policies and
procedures in order to qualify and maintain our qualification as a REIT and satisfy our periodic SEC reporting
requirements. We cannot assure you that we will be able to successfully develop and implement these systems,
policies and procedures and to operate our company or that any such development and implementation will be
effective. Failure to do so could jeopardize our status as a REIT or as a reporting company, and the loss of such
statuses would materially and adversely affect us. If we fail to develop, implement or maintain proper overall
business controls, including as required to support our growth, our operating and financial results could be harmed,
or we could fail to meet our reporting obligations. In addition, the existence of a material weakness or significant
deficiency could result in errors in our financial statements that could require a restatement, cause us to fail to meet
our SEC reporting obligations and cause investors to lose confidence in our reported financial information, which
could have a material adverse effect on us and on the market price of our common stock.
We face risks associated with security breaches through cyber-attacks, cyber-intrusions or otherwise, as well
as other significant disruptions of our information technology (IT) networks and related systems.
We face risks associated with security breaches, whether through cyber-attacks or cyber-intrusions over the internet,
malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to
systems inside our organization, and other significant disruptions of our IT networks and related systems. The risk
of a security breach or disruption, particularly through cyber-attack or cyber-intrusion, including by computer
hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and
sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and
related systems are essential to the operation of our business and our ability to perform day-to-day operations.
Although we make efforts to maintain the security and integrity of these types of IT networks and related systems,
and we have implemented various measures to manage the risk of a security breach or disruption, there can be no
assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions
would not be successful or damaging. A security breach or other significant disruption involving our IT networks
and related systems could disrupt the proper functioning of our networks and systems; result in misstated financial
reports, violations of loan covenants and/or missed reporting deadlines; result in our inability to monitor our
compliance with the rules and regulations regarding our qualification as a REIT; result in the unauthorized access
to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise
valuable information of ours or others, which others could use to compete against us or for disruptive, destructive
or otherwise harmful purposes and outcomes; require significant management attention and resources to remedy
any damages that result; subject us to claims for breach of contract, damages, credits, penalties or termination of
certain agreements; or damage our reputation among our tenants and investors generally. Any or all of the foregoing
could have a material adverse effect on our financial condition, results of operations, cash flow and ability to make
distributions with respect to, and the market price of, our common stock.
Climate change may adversely affect our business.
Climate change, including rising sea levels, extreme weather and changes in precipitation and temperature, may
result in physical damage to, a decrease in demand for and/or a decrease in rent from and value of our properties
located in the areas affected by these conditions. We own a number of assets in low-lying areas close to sea level,
making those assets susceptible to a rise in sea level. If sea levels were to rise, we may incur material costs to
protect our low-lying assets (to the extent not covered by our tenants under the terms of our leases) or may sustain
damage, a decrease in value or total loss of such assets. In addition, climate change may result in reduced economic
activity in these areas, which could harm the operations of our tenants and reduce the demand at our properties,
which could reduce the rent payable to us under our triple-net leases and make it difficult for us to renew or re-
lease our properties on favorable lease terms. Furthermore, our insurance premiums may increase as a result of
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the threat of climate change or the effects of climate change may not be covered by our insurance policies. In
addition, changes in federal and state legislation and regulations on climate change could result in increased capital
expenditures to improve the energy efficiency of our existing properties or other related aspects of our properties
in order to comply with such regulations or otherwise adapt to climate change. Any of the above could have a
material and adverse effect on us.
If our separation from CEOC, together with certain related transactions, does not qualify as a transaction that
is generally tax-free for U.S. Federal income tax purposes, CEOC could be subject to significant tax liabilities
and, in certain circumstances, we could be required to indemnify CEOC for material taxes pursuant to
indemnification obligations under the Tax Matters Agreement.
The IRS issued a private letter ruling with respect to certain issues relevant to our separation from CEOC, including
relating to the separation and certain related transactions as tax-free for U.S. Federal income tax purposes under
certain provisions of the Code. The IRS ruling does not address certain requirements for tax-free treatment of the
separation. CEOC received from its tax advisors a tax opinion substantially to the effect that, with respect to such
requirements on which the IRS did not rule, such requirements should be satisfied. The IRS ruling and the tax
opinion that CEOC received, relied on (among other things) certain representations, assumptions and undertakings,
including those relating to the past and future conduct of our business, and the IRS ruling, and the opinion would
not be valid if such representations, assumptions and undertakings were incorrect in any material respect.
Notwithstanding the IRS ruling and the tax opinion, the IRS could determine the separation should be treated as
a taxable transaction for U.S. Federal income tax purposes if it determines any of the representations, assumptions
or undertakings that were included in the request for the IRS ruling are false or have been violated or if it disagrees
with the conclusions in the opinion that are not covered by the IRS ruling.
If the reorganization fails to qualify for tax-free treatment, in general, CEOC would be subject to tax as if it had
sold our assets to us in a taxable sale for their fair market value, and CEOC’s creditors who received shares of our
common stock pursuant to the Plan of Reorganization would be subject to tax as if they had received a taxable
distribution in respect of their claims equal to the fair market value of such shares.
Under the Tax Matters Agreement that we entered into with Caesars, we generally are required to indemnify Caesars
against any tax resulting from the separation to the extent that such tax resulted from certain of our representations
or undertakings being incorrect or violated. Our indemnification obligations to Caesars are not limited by any
maximum amount. As a result, if we are required to indemnify Caesars or such other persons under the circumstances
set forth in the Tax Matters Agreement, we may be subject to substantial liabilities.
We may not be able to engage in desirable strategic or capital-raising transactions following the spin-off. In
addition, we could be liable for adverse tax consequences resulting from engaging in significant strategic or
capital-raising transactions.
To preserve the tax-free treatment to CEOC of the spin-off, for the two-year period following the spin-off, we may
be prohibited, except in specific circumstances, from: (1) entering into any transaction pursuant to which all or a
portion of our stock would be acquired, whether by merger or otherwise, (2) issuing equity securities beyond certain
thresholds, (3) repurchasing our common stock, (4) ceasing to actively conduct the business of operating VICI
Golf, or (5) taking or failing to take any other action that prevents the spin-off and related transactions from being
tax-free. These restrictions may limit our ability to pursue strategic transactions or engage in new business or other
transactions that may maximize the value of our business.
Risks Related to our Status as a REIT
We may not qualify or maintain our qualification as a REIT.
We elected to be taxed as a REIT for U.S. Federal income tax purposes commencing with our taxable year ended
December 31, 2017 and expect to operate in a manner that will allow us to continue to be classified as such. The
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Code generally requires that a REIT distribute annually to its stockholders at least 90% of its REIT taxable income
(with certain adjustments), determined without regard to the deduction for dividends paid and excluding net capital
gains, and that it pay tax at regular corporate rates to the extent that it distributes annually less than 100% of its
REIT taxable income, including capital gains. In addition, a REIT is required to pay a 4% nondeductible excise
tax on the amount, if any, by which the distributions it makes in a calendar year are less than the sum of 85% of
its ordinary income, 95% of its capital gain net income and 100% of its undistributed income from prior years. As
a result, in order to avoid current entity level U.S. Federal income taxes, a substantial portion of our cash flow
after operating expenses and debt service will be required to be distributed to our stockholders.
If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. Federal income tax on our
taxable income at regular corporate rates, and dividends paid to our stockholders would not be deductible by us
in computing our REIT taxable income. Any resulting corporate tax liability could be substantial and would reduce
the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on
the market price of our common stock. Unless we were entitled to relief under certain Code provisions, we also
would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which
we failed to qualify as a REIT. As a result, the amount available for distribution to holders of equity securities that
would otherwise receive dividends would be reduced for the year or years involved. Furthermore, the U.S. Federal
income tax consequences of distributions and sales of our shares to certain of our stockholders could be adversely
impacted if we were to fail to qualify as a REIT.
Finally, our qualification to be taxed as a REIT will depend on our satisfaction of certain asset, income,
organizational, distribution, stockholder ownership and other requirements on a continuing basis. Our ability to
satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some
of which are not susceptible to a precise determination, and for which we may not obtain independent appraisals.
Any failure to qualify to be taxed as a REIT, or failure to remain to be qualified to be taxed as a REIT, would have
a material and adverse effect on us.
Qualification to be taxed as a REIT involves highly technical and complex provision of the Code, and violations
of these provisions could jeopardize our REIT qualification.
Qualification as a REIT involves the application of highly technical and complex Code provisions for which only
limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our
REIT qualification. Our qualification as a REIT depends on our satisfaction of certain asset, income, organizational,
distribution, stockholder ownership and other requirements on a continuing basis. In addition, our ability to satisfy
the requirements to qualify as a REIT may depend in part on the actions of third parties over which we have no
control or only limited influence, including in cases where we own an equity interest in an entity that is classified
as a partnership for U.S. Federal income tax purposes.
We may in the future choose to pay dividends in the form of our own common stock, in which case stockholders
may be required to pay income taxes in excess of the cash dividends they receive.
We may seek in the future to distribute taxable dividends that are payable in cash or our common stock. Taxable
stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income
to the extent of our current and accumulated earnings and profits for U.S. Federal income tax purposes as to which
non-corporate stockholders will generally be eligible for a deduction equal to 20% of such distributions. As a result,
stockholders receiving dividends in the form of common stock may be required to pay income taxes with respect
to such dividends in excess of the cash dividends received, if any. If a U.S. stockholder sells the common stock
that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in
income with respect to the dividend, depending on the market price of our common stock at the time of the sale.
In addition, in such case, a U.S. stockholder could have a capital loss with respect to the common stock sold that
could not be used to offset such dividend income. Moreover, with respect to certain non-U.S. stockholders, we
may be required to withhold U.S. Federal income tax with respect to such dividends, including in respect of all or
a portion of such dividend that is payable in common stock. Furthermore, such a taxable share dividend could be
viewed as equivalent to a reduction in our cash distributions, and that factor, as well as the possibility that a
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significant number of our stockholders determine to sell our common stock in order to pay taxes owed on dividends,
may put downward pressure on the market price of our common stock.
Changes to the U.S. Federal income tax laws, including the recent enactment of certain tax reform measures,
could have a material and adverse effect on us.
U.S. federal income tax laws governing REITs and other corporations and the administrative interpretations of
those laws may be amended at any time, potentially with retroactive effect. We cannot predict whether, when or
to what extent new U.S. federal tax laws, regulations, interpretations or rulings will be issued. Prospective investors
are urged to consult their tax advisors regarding the effect of potential changes to the U.S. Federal tax laws on an
investment in our common stock.
Recently enacted changes to the U.S. federal income tax laws could have a material and adverse effect on us. For
example, certain changes in law pursuant to the law known as the Tax Cuts and Jobs Act could reduce the relative
competitive advantage of operating as a REIT as compared with operating as a C corporation, including by:
•
•
•
reducing the rate of tax applicable to individuals and C corporations, which could reduce the relative
attractiveness of the generally single level of taxation on REIT distributions;
permitting immediate expensing of capital expenditures, which could likewise reduce the relative
attractiveness of the REIT taxation regime; and
limiting the deductibility of interest expense, which could increase the distribution requirement of REITs
(though such limitations generally should not affect REITs).
We could fail to qualify to be taxed as a REIT if income we receive from our tenants is not treated as qualifying
income.
Under applicable provisions of the Code, we will not be treated as a REIT unless we satisfy various requirements,
including requirements relating to the sources of our gross income. Rents received or accrued by us from our
tenants will not be treated as qualifying rent for purposes of these requirements if the leases are not respected as
true leases for U.S. federal income tax purposes and instead are treated as service contracts, joint ventures or some
other type of arrangement. If some or all of our leases are not respected as true leases for U.S. Federal income tax
purposes, we may fail to qualify to be taxed as a REIT. Furthermore, our qualification as a REIT will depend on
our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements
on a continuing basis. Our ability to satisfy the asset tests depends upon our analysis of the characterization and
fair market values of our assets, some of which are not susceptible to a precise determination, and for which we
may not obtain independent appraisals.
In addition, subject to certain exceptions, rents received or accrued by us from any tenant (or affiliated tenants)
will not be treated as qualifying rent for purposes of these requirements if we or an actual or constructive owner
of 10% or more of our stock actually or constructively owns 10% or more of the total combined voting power of
all classes of such tenant’s stock entitled to vote or 10% or more of the total value of all classes of such tenant’s
stock. Our charter provides restrictions on ownership and transfer of our shares of stock, including restrictions on
such ownership or transfer that would cause the rents received or accrued by us from tenants to be treated as non-
qualifying rent for purposes of the REIT gross income requirements. Nevertheless, there can be no assurance that
such restrictions will be effective in ensuring that rents received or accrued by us from tenants will not be treated
as qualifying rent for purposes of REIT qualification requirements.
REIT distribution requirements could adversely affect our ability to execute our business plan.
We generally must distribute annually to our stockholders at least 90% of our REIT taxable income (with certain
adjustments), determined without regard to the dividends paid deduction and excluding any net capital gains, in
order for us to qualify as a REIT so that U.S. Federal corporate income tax does not apply to earnings that we
distribute. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT but distribute
less than 100% of our REIT taxable income, determined without regard to the dividends paid deduction and
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including any net capital gains, we will be subject to U.S. Federal corporate income tax on any undistributed portion
of such taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that
we distribute to our stockholders in a calendar year is less than a minimum amount specified under U.S. Federal
tax laws. We intend to make distributions to our stockholders to comply with the REIT requirements of the Code
and to avoid or otherwise minimize paying entity level Federal or excise tax (other than at any TRS of ours). We
may generate taxable income greater than our income for financial reporting purposes prepared in accordance with
GAAP. Further, we may generate taxable income greater than our cash flow from operations after operating expenses
and debt service as a result of differences in timing between the recognition of taxable income and the actual receipt
of cash or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization
payments. In order to avoid or otherwise minimize current entity level U.S. Federal income taxes, we will generally
be required to distribute sufficient cash flow after operating expenses and debt service payments to satisfy the
REIT distribution requirements. While we intend to make distributions to our stockholders to comply with the
REIT requirements of the Code, we may not have sufficient liquidity to meet the REIT distribution requirements.
If our cash flow is insufficient to satisfy the REIT distribution requirements, we could be required to raise capital
on unfavorable terms, sell assets at disadvantageous prices, distribute amounts that would otherwise be invested
in future acquisitions or issue dividends in the form of shares of our common stock to make distributions sufficient
to enable us to pay out enough of our REIT taxable income to satisfy the REIT distribution requirement and to
avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs
or change the value of our equity. Thus, compliance with the REIT requirements may hinder our ability to grow,
which could adversely affect the market price of our common stock.
Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.
Even if we qualify for taxation as a REIT, we may be subject to certain U.S. Federal, state and local taxes on our
income and assets, including taxes on any undistributed income and state or local income, property and transfer
taxes. For example, in order to meet the REIT qualification requirements, we currently hold and expect in the
future to hold some of our assets and conduct certain of our activities through one or more taxable REIT subsidiaries
or other subsidiary corporations that will be subject to Federal, state, and local corporate-level income taxes as
regular C corporations (i.e., corporations generally subject to corporate-level income tax under Subchapter C of
Chapter 1 the Code). In addition, we may incur a 100% excise tax on transactions with a taxable REIT subsidiary
if they are not conducted on an arm’s length basis. Any of these taxes would decrease cash available for distribution
to our stockholders.
Complying with REIT requirements may cause us to liquidate or forgo otherwise attractive opportunities and
limit our expansion opportunities.
To qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among
other things, our sources of income, the nature of our investments in real estate and related assets, the amounts we
distribute to our stockholders and the ownership of our stock. We may also be required to make distributions to
stockholders at disadvantageous times or when we do not have funds readily available for distribution.
As a REIT, we must ensure that, at the end of each calendar quarter, at least 75% of the value of our assets consists
of cash, cash items, government securities and “real estate assets” (as defined in the Code), including certain
mortgage loans and securities. The remainder of our investments (other than government securities, qualified real
estate assets and securities issued by a taxable REIT subsidiary) generally cannot include more than 10% of the
outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities
of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than government
securities, qualified real estate assets and securities issued by a taxable REIT subsidiary) can consist of the securities
of any one issuer, and no more than 20% of the value of our total assets can be represented by securities of one or
more taxable REIT subsidiaries. In addition, not more than 25% of our total assets may be represented by debt
instruments issued by publicly offered REITs that are “nonqualified” debt instruments. If we fail to comply with
these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of
the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and
suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio, or contribute
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to a TRS, or forgo otherwise attractive investments in order to maintain our qualification as a REIT. These actions
could have the effect of reducing our income and amounts available for distribution to our stockholders. In addition
to the asset tests set forth above, to qualify as a REIT we must continually satisfy tests concerning, among other
things, the sources of our income, the amounts we distribute to our stockholders and the ownership of our stock.
We may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source-
of-income or asset-diversification requirements for qualifying as a REIT. Thus, compliance with the REIT
requirements may hinder our ability to make certain attractive investments.
We may be subject to built-in gains tax on the disposition of certain of our properties.
If we acquire certain properties in tax-deferred transactions, which properties were held by one or more C
corporations before they were held by us, we may be subject to a built-in gain tax on future disposition of such
properties. This is the case with respect to all or substantially all of the properties acquired from CEOC pursuant
to the formation transactions as well as certain other properties we have acquired and may acquire in the future.
If we dispose of any such properties during the five-year period following acquisition of the properties from the
respective C corporation (i.e., during the five-year period following ownership of such properties by a REIT), we
will be subject to U.S. Federal income tax (and applicable state and local taxes) at the highest corporate tax rates
on any gain recognized from the disposition of such properties to the extent of the excess of the fair market value
of the properties on the date that they were contributed to or acquired by us in a tax-deferred transaction over the
adjusted tax basis of such properties on such date, which are referred to as built-in gains. Similarly, if we recognize
certain other income considered to be built-in income during the five-year period following the property
acquisitions described above, we could be subject to U.S. Federal tax under the built-in gains tax rules. We would
be subject to this corporate-level tax liability (without the benefit of the deduction for dividends paid) even if we
qualify and maintain our status as a REIT. Any recognized built-in gain will retain its character as ordinary income
or capital gain and will be taken into account in determining REIT taxable income and the REIT distribution
requirements. Any tax on the recognized built-in gain will reduce REIT taxable income. We may choose to forego
otherwise attractive opportunities to sell assets in a taxable transaction during the five-year built-in gain recognition
period in order to avoid this built-in gain tax. However, there can be no assurance that such a taxable transaction
will not occur. The amount of any such built-in gain tax could be material and the resulting tax liability could have
a negative effect on our cash flow and limit our ability to pay distributions required to qualify and maintain our
status as a REIT.
Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax
liabilities.
The REIT provisions of the Code substantially limit our ability to hedge our assets and liabilities. Income from
certain hedging transactions that we may enter into to manage risk of interest rate changes with respect to borrowings
made or to be made to acquire or carry real estate assets or from transactions to manage risk of currency fluctuations
with respect to any item of income or gain that satisfy the REIT gross income tests (including gain from the
termination of such a transaction) does not constitute “gross income” for purposes of the 75% or 95% gross income
tests that apply to REITs, provided that certain identification requirements are met. To the extent that we enter into
other types of hedging transactions or fail to properly identify such transaction as a hedge, the income is likely to
be treated as non-qualifying income for purposes of both of the gross income tests. As a result of these rules, we
may be required to limit our use of advantageous hedging techniques or implement those hedges through a taxable
REIT subsidiary. This could increase the cost of our hedging activities because the taxable REIT subsidiary may
be subject to tax on gains or expose us to greater risks associated with changes in interest rates that we would
otherwise want to bear. In addition, losses in the taxable REIT subsidiary will generally not provide any tax benefit,
except that such losses could theoretically be carried back or forward against past or future taxable income of the
taxable REIT subsidiary.
We may pay a purging distribution, if any, in common stock and cash.
In order to qualify as a REIT, we must distribute any “earnings and profits,” as defined in the Code, accumulated
by us during any period for which we did not qualify as a REIT or by any entity whose accumulated earnings and
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profits we acquire during any period for which such entity did not qualify as a REIT. Such distribution requirement
applied to any earnings and profits that were allocated from CEOC to us in connection with the formation
transactions by the end of the first taxable year in which we elected REIT status. Based on our analysis, we do not
believe that any earnings and profits were allocated to us in connection with the formation transactions or any
other transaction to which we are party and therefore did not make a purging distribution and do not currently
intend to make any purging distribution, with respect to transactions to which we are a party. If we are required to
make a purging distribution in the future, we may pay the purging distribution to our stockholders in a combination
of cash and shares of our common stock. Each of our stockholders will be permitted to elect to receive the
stockholder’s entire entitlement under the purging distribution in either cash or shares of our common stock, subject
to a cash limitation. If our stockholders elect to receive a portion of cash in excess of the cash limitation, each such
electing stockholder will receive a pro rata portion of cash corresponding to the stockholder’s respective entitlement
under the purging distribution declaration. The IRS has issued a revenue procedure that provides that, so long as
a REIT complied with certain provisions therein, certain distributions that are paid partly in cash and partly in
stock will be treated as taxable dividends that would satisfy the REIT distribution requirements and qualify for the
dividends paid deduction for U.S. Federal income tax purposes. In a purging distribution, if any, a stockholder of
our common stock will be required to report dividend income equal to the amount of cash and common stock
received as a result of the purging distribution even though we may distribute no cash or only nominal amounts
of cash to such stockholder.
The cash available for distribution to stockholders may not be sufficient to pay dividends at expected levels, nor
can we assure you of our ability to make distributions in the future. We may use borrowed funds to make
distributions
If cash available for distribution is less than the amount necessary to make cash distributions, our inability to make
the expected distributions could result in a decrease in the market price of our common stock. All distributions
will be made at the discretion of our board of directors and will depend upon various factors, including, but not
limited to: our historical and projected financial condition, cash flows, results of operations and REIT taxable
income, limitations contained in financing instruments, debt service requirements, operating cash inflows and
outflows, including capital expenditures and acquisitions, limitations on our ability to use cash generated in one
or more taxable REIT subsidiaries, if any, to fund distributions and applicable law. We may not be able to make
distributions in the future. In addition, some of our distributions may include a return of capital. To the extent that
we decide to make distributions in excess of our current and accumulated earnings and profits in the future, such
distributions would generally be considered a return of capital for Federal income tax purposes to the extent of the
holder’s adjusted tax basis in their shares. A return of capital is not taxable, but it has the effect of reducing the
holder’s adjusted tax basis in our common stock. To the extent that such distributions exceed the adjusted tax basis
of a holder’s shares, they will be treated as gain from the sale or exchange of such stock. If we borrow to fund
distributions, our future interest costs would increase, thereby reducing our earnings and cash available for
distribution from what they otherwise would have been.
For purposes of satisfying the minimum distribution requirement to qualify for and maintain REIT status, our REIT
taxable income will be calculated without reference to our cash flow. Consequently, under certain circumstances,
we may not have available cash to make our required distributions, and we may need to raise additional equity or
debt in order to fund our intended distributions, or we may distribute a portion of our distributions in the form of
our common stock or debt instruments, which could result in significant stockholder dilution or higher leverage.
While the IRS has issued a revenue procedure indicating that certain distributions that are made partly in cash and
partly in stock will be treated as taxable dividends that would satisfy that REIT annual distribution requirement
and qualify for the dividends paid deduction for U.S. Federal income tax purposes, no assurance can be provided
that we will be able to satisfy the requirements of the revenue procedure. Therefore, it is unclear whether and to
what extent we will be able to make taxable dividends payable in-kind. In addition, to the extent we were to make
distributions that include our common stock or debt instruments, a stockholder of ours will be required to report
dividend income as a result of such distributions even though we distributed no cash or only nominal amounts of
cash to such stockholder.
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Risks Related to Our Organizational Structure
VICI is a holding company with no direct operations and relies on distributions received from the Operating
Partnership to make distributions to its stockholders.
VICI is a holding company and conducts its operations through subsidiaries, including the Operating Partnership
and VICI Golf. VICI does not have, apart from the units that it owns in the Operating Partnership and VICI Golf,
any independent operations. As a result, VICI relies on distributions from its Operating Partnership to make any
distributions to its stockholders it might declare on its common stock and to meet any of its obligations, including
any tax liability on taxable income allocated to it from the Operating Partnership (which might not be able to make
distributions to VICI equal to the tax on such allocated taxable income). In turn, the ability of subsidiaries of the
Operating Partnership to make distributions to the Operating Partnership, and therefore, the ability of the Operating
Partnership to make distributions to VICI, depends on the operating results of these subsidiaries and the Operating
Partnership and on the terms of any financing arrangements they have entered into. In addition, because VICI is
a holding company, claims of common stockholders of VICI are structurally subordinated to all existing and future
liabilities and other obligations (whether or not for borrowed money) and any preferred equity of the Operating
Partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, VICI’s
assets and those of the Operating Partnership and its subsidiaries will be available to satisfy the claims of VICI
common stockholders only after all of VICI’s, the Operating Partnership’s and its subsidiaries’ liabilities and other
obligations and any preferred equity of any of them have been paid in full.
The Operating Partnership may, in connection with its acquisition of additional properties or otherwise, issue
additional common units or preferred units to third parties. Such issuances would reduce VICI’s ownership in the
Operating Partnership. Because stockholders of VICI do not directly own common units or preferred units of the
Operating Partnership, they do not have any voting rights with respect to any such issuances or other partnership
level activities of the Operating Partnership.
Our rights and the rights of our stockholders to take action against our directors and officers are limited.
The Maryland General Corporation Law (the “MGCL”) provides that a director has no liability in any action based
on an act of the director if he or she has acted in good faith, in a manner he or she reasonably believes to be in the
corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under
similar circumstances. As permitted by the MGCL, our charter limits the liability of our directors and officers to
our company and our stockholders for money damages, to the maximum extent permitted by Maryland law. Under
Maryland law, our present directors and officers will not have any liability to us or our stockholders for money
damages other than liability resulting from:
•
•
actual receipt of an improper benefit or profit in money, property or services; or
a final judgment based upon a finding that his or her action or failure to act was the result of active and
deliberate dishonesty by the director or officer and was material to the cause of action adjudicated.
Our charter provides that we have the power to obligate ourselves, and our amended and restated bylaws obligate
us, to indemnify our directors and officers for actions taken by them in those capacities and to pay or reimburse
their reasonable expenses in advance of final disposition of a proceeding to the maximum extent permitted by
Maryland law. In addition, we have entered into indemnification agreements with our directors and
executive officers that provide for indemnification and advance expenses to the maximum extent permitted by
Maryland law. As a result, we and our stockholders may have more limited rights against our directors and officers
than might otherwise exist under common law.
Our board of directors may change our major corporate policies without stockholder approval and those changes
may materially and adversely affect us.
Our board of directors will determine and may eliminate or otherwise change our major corporate policies, including
our acquisition, investment, financing, growth, operations and distribution policies. While our stockholders have
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the power to elect or remove directors, changes in our major corporate policies may be made by our board of
directors without stockholder approval and those changes could adversely affect our business, financial condition,
liquidity, results of operations and prospects, the market price of our common stock and our ability to make
distributions to our stockholders and to satisfy our debt service requirements.
The ability of our board of directors to revoke or otherwise terminate our REIT qualification, with stockholder
approval, may cause adverse consequences to our stockholders.
Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, only with
the affirmative vote of stockholders entitled to cast a majority of all votes entitled to be cast on the matter, if the
board determines that it is no longer in our best interests to continue to qualify as a REIT. If we cease to be a REIT,
we would become subject to Federal income tax on our taxable income and would no longer be required to distribute
most of our taxable income to our stockholders, which may have adverse consequences on the total return to our
stockholders.
Our charter and bylaws contain provisions that may delay, defer or prevent an acquisition of our common stock
or a change in control.
Our charter and bylaws contain provisions, the exercise or existence of which could delay, defer or prevent a
transaction or a change in control that might involve a premium price for our stockholders or otherwise be in their
best interests, including the following:
• Our charter contains restrictions on the ownership and transfer of our stock.
In order for us to qualify as a REIT, no more than 50% of the value of outstanding shares of our stock may be
owned, beneficially or constructively, by five or fewer individuals (or certain other persons) at any time during
the last half of each taxable year (“closely held”). Subject to certain exceptions, our charter prohibits any stockholder
from owning beneficially or constructively, with respect to any class or series of our capital stock, more than 9.8%
(in value or by number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of such
class or series of our capital stock.
The constructive ownership rules under the Code are complex and may cause the outstanding stock owned by a
group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a
result, the acquisition of 9.8% or less of the outstanding shares of a class or series of our stock by an individual or
entity could cause that individual or entity or another individual or entity to own constructively in excess of the
relevant ownership limits.
Among other restrictions on ownership and transfer of shares, our charter also prohibits any person from owning
shares of our stock that would result in our being “closely held” under Section 856(h) of the Code or otherwise
cause us to fail to qualify as a REIT. Any attempt to own or transfer shares of our common stock or of any of our
other capital stock in violation of these restrictions may result in the shares being automatically transferred to a
charitable trust or may be void.
Our charter provides that our board may grant exceptions to the 9.8% ownership limit, subject in each case to
certain initial and ongoing conditions designed to protect our status as a REIT. These ownership limits may prevent
a third-party from acquiring control of us if our board of directors does not grant an exemption from the ownership
limits, even if our stockholders believe the change in control is in their best interests. An exemption from the 9.8%
ownership limit was granted to certain stockholders, and our board may in the future provide exceptions to the
ownership limit for other stockholders, subject to certain initial and ongoing conditions designed to protect our
status as a REIT.
• Our board of directors has the power to cause us to issue and authorize additional shares of our capital
stock without stockholder approval.
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Our charter authorizes us to issue authorized but unissued shares of common or preferred stock in addition to the
shares of common stock issued and outstanding. In addition, our board of directors may, without stockholder
approval, amend our charter to increase the aggregate number of our shares of stock or the number of shares of
stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of common
or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares. As a result,
our board of directors may establish a class or series of shares of common or preferred stock that could delay or
prevent a transaction or a change in control that might involve a premium price for our shares of common stock
or otherwise be in the best interests of our stockholders.
Certain provisions of Maryland law may limit the ability of a third party to acquire control of us.
Certain provisions of the MGCL may have the effect of inhibiting a third party from acquiring us or of impeding
a change of control under circumstances that otherwise could provide our common stockholders with the opportunity
to realize a premium over the then prevailing market price of such shares, including:
•
•
“business combination” provisions that, subject to limitations, (a) prohibit certain business combinations
between an “interested stockholder” (defined generally as any person who beneficially owns 10% or more
of the voting power of our outstanding shares of voting stock or an affiliate or associate of ours who, at
any time within the two-year period immediately prior to the date in question, was the beneficial owner
of 10% or more of the voting power of our then outstanding shares of our common stock) or an affiliate
of any interested stockholder and us for five years after the most recent date on which the stockholder
becomes an interested stockholder, and (b) thereafter impose two super-majority stockholder voting
requirements on these combinations; and
“control share” provisions that provide that holders of “control shares” of our company (defined as voting
shares of stock that, if aggregated with all other shares of stock owned or controlled by the acquirer (except
solely by virtue of a revocable proxy), would entitle the acquirer to exercise one of three increasing ranges
of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or
indirect acquisition of ownership or control of “control shares”) have no voting rights with respect to
“control shares” except to the extent approved by our stockholders by the affirmative vote of at least two-
thirds of all of the votes entitled to be cast on the matter, excluding all votes entitled to be cast by the
acquirer of control shares, and by any of our officers and employees who are also our directors.
Our charter provides that, notwithstanding any other provision of our charter or our bylaws, the Maryland Business
Combination Act (Title 3, Subtitle 6 of the MGCL) does not apply to any business combination between us and
any interested stockholder or any affiliate of any interested stockholder of ours and that we expressly elect not to
be governed by the provisions of Section 3-602 of the MGCL in whole or in part. Any amendment to such provision
of our charter must be approved by the affirmative vote of stockholders entitled to cast a majority of all votes
entitled to be cast on the matter. Pursuant to the MGCL, our bylaws contain a provision exempting from the
Maryland Control Share Acquisition Act any and all acquisitions by any person of shares of our stock. This provision
of our bylaws may not be altered, amended or repealed except by our stockholders by the affirmative vote of at
least two-thirds of all the votes entitled to be cast on the matter. There can be no assurance that this exemption
contained in our bylaws will not be amended or eliminated at any time in the future.
Additionally, provisions of Title 3, Subtitle 8 of the MGCL permit a Maryland corporation such as the Company,
by action of its board of directors and without stockholder approval and regardless of what is provided in the charter
or bylaws, to elect to avail itself of certain takeover defenses, such as a classified board, unless the charter or a
resolution adopted by the board of directors prohibits such election. Our charter provides that we are prohibited
from making any such election unless first approved by our stockholders by the affirmative vote of a majority of
all votes entitled to be cast on the matter.
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Conflicts of interest could arise between the interests of our stockholders and the interests of holders of Operating
Partnership units which may impede business decisions that could benefit our stockholders.
Conflicts of interest could arise as a result of the relationships between us, on the one hand, and our Operating
Partnership or any limited partner thereof, if any, on the other. Our directors and officers have duties to us under
applicable Maryland law. At the same time, we, as general partner of our Operating Partnership, have fiduciary
duties and obligations to our Operating Partnership and its limited partners under Delaware law and the partnership
agreement of our Operating Partnership in connection with the management of our Operating Partnership. Our
duties as general partner to our Operating Partnership and its limited partners may come into conflict with the
duties of our directors and officers to VICI. These conflicts may be resolved in a manner that is not in the best
interests of our stockholders.
Risks Related to Our Common Stock
The market price and trading volume of shares of our common stock may be volatile.
The market price of our common stock may be volatile. In addition, the stock markets generally may experience
significant volatility, often unrelated to the operating performance of the individual companies whose securities
are publicly traded. The trading volume in our common stock may fluctuate and cause significant price variations
to occur. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly
in the future. If the market price of our common stock declines, you may be unable to sell your shares.
Some of the factors, many of which are beyond our control, that could negatively affect the market price of our
common stock or result in fluctuations in the price or trading volume of our common stock include:
•
•
•
•
•
•
actual or anticipated variations in our quarterly results of operations or distributions;
changes in our earnings, Funds From Operations (“FFO”) or Adjusted Funds From Operations (“AFFO
”) estimates;
publication of research reports about us, our tenants or the real estate or gaming industries;
adverse developments involving our tenants;
changes in market interest rates that may cause purchasers of our shares to demand a different yield;
changes in market valuations of similar companies;
• market reaction to any additional capital we raise in the future, including availability and attractiveness
of long-term debt financing in connection with the acquisition of Greektown;
•
•
•
•
•
•
•
•
•
•
our failure to achieve the anticipated benefits of our recently completed or pending acquisitions within
the timeframe or to the extent anticipated by financial or industry analysts;
additions or departures of key personnel;
reaction to any other of our public announcements;
sales or potential sales of our common stock by us or our significant stockholders;
other actions by institutional stockholders;
strategic actions taken by us or our competitors, such as acquisitions;
speculation in the press or investment community about us, our tenants, our industry or the economy in
general;
new laws or regulations or new interpretations of existing laws or regulations applicable to our
business and operations or the gaming industry;
changes in tax or accounting standards, policies, guidance, interpretations or principles;
the occurrence of any of the other risk factors presented in this Annual Report on Form 10-K or our
other SEC filings; and
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•
adverse conditions in the financial markets or general U.S. or international economic conditions,
including those resulting from war, acts of terrorism and responses to such events.
An increase in market interest rates could cause potential investors to seek higher returns and therefore reduce
demand for our common stock and result in a decline in our share price.
One of the factors that may influence the market price of shares of our common stock is the yield of our shares
(i.e., the annualized distributions per share of our common stock as a percentage of the market price per share of
our common stock) relative to market interest rates. An increase in market interest rates, which are currently at
low levels relative to historical rates, may lead prospective purchasers of our common stock to expect a higher
yield which may result in a decline in the market price of our common stock. Higher interest rates would likely
increase our borrowing costs and potentially decrease our cash available for distribution. Thus, higher market
interest rates could also cause the market price of shares of our common stock to decline.
Future incurrences of debt, which would be senior to our shares of common stock upon liquidation, and/or
issuance of preferred equity securities, which may be senior to our shares of common stock for purposes of
distributions or upon liquidation, could adversely affect the market price of our common stock.
In the future, we may attempt to increase our capital resources by incurring additional debt, including medium-
term notes, trust preferred securities and senior or subordinated notes, or issuing preferred shares. If a liquidation
event were to occur, holders of our debt securities and preferred shares and lenders with respect to other borrowings
will receive distributions of our available assets prior to the holders of our shares of common stock. In addition,
our preferred stock, if issued, would likely limit our ability to make liquidating or other distributions to the holders
of shares of our common stock under certain circumstances. Any future common stock offerings may dilute the
holdings of our existing stockholders or reduce the market price of our common stock, or both. Holders of shares
of our common stock are not entitled to preemptive rights or other protections against dilution. Since our decision
to issue debt securities, incur other forms of indebtedness or to issue additional common stock or preferred stock
in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate
the amount, timing, nature or success of our future offerings. Thus, our stockholders bear the risk of our issuing
senior securities, incurring other senior obligations or issuing additional common stock in the future, which may
reduce the market price of shares of our common stock, reduce cash available for distribution to common
stockholders or dilute their stockholdings in us.
The number of shares available for future sale could adversely affect the market price of shares of our
common stock.
We cannot predict whether future issuances of our shares or the availability of shares of our common stock for
resale in the open market will decrease the market price per share of shares of our common stock. Sales of a
substantial number of shares of our common stock in the public market, or the perception that such sales might
occur, could adversely affect the market price of shares of our common stock. If any of our stockholders cause, or
there is a perception that they may cause, a large number of their shares to be sold in the public market, the sales
could reduce the market price of shares of our common stock and could impede our ability to raise future capital.
Our earnings and cash distributions could affect the market price of shares of our common stock.
Our common stock may trade at prices that are higher or lower than the net asset value per share. To the extent
that we retain operating cash flow for investment purposes, working capital reserves or other purposes rather than
distributing the cash flows to stockholders, these retained funds, while increasing the value of our underlying assets,
may negatively impact the market price of shares of our common stock. Our failure to meet market expectations
with regard to future earnings and cash distributions could adversely affect the market price of shares of our common
stock.
46
ITEM 1B. Unresolved Staff Comments
None.
ITEM 2.
Properties
Our geographically diverse portfolio consists of 22 market-leading properties that are leased to Caesars and Penn
National, including Caesars Palace Las Vegas and Harrah’s Las Vegas, two of the most iconic entertainment facilities
on the Las Vegas Strip, approximately 34 acres of undeveloped or underdeveloped land on and adjacent to the Las
Vegas Strip that is leased to Caesars and four championship golf courses located near certain of our properties,
two of which are in close proximity to the Las Vegas Strip.
Our properties secure our long-term debt. See Note 9 — Debt to our Consolidated Financial Statements for
additional information.
See Item 1 “Business-Our Properties” for further information pertaining to our properties.
ITEM 3.
Legal Proceedings
In the ordinary course of business, from time to time, we may be subject to legal claims and administrative
proceedings. As of December 31, 2018, we are not subject to any litigation that we believe could have, individually
or in the aggregate, a material adverse effect on our business, financial condition or results of operations, liquidity
or cash flows.
ITEM 4.
Mine Safety Disclosures
Not applicable.
47
PART II
ITEM 5.
Market for the Company’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Market Information
On February 1, 2018, in connection with our initial registered public offering, our common stock began trading
on the New York Stock Exchange (“NYSE”) under the symbol “VICI.”
Holders
As of February 11, 2019, there were 404,726,821 shares of common stock issued and outstanding that were held
by approximately 47 stockholders of record, not including beneficial owners of shares registered in nominee or
street name.
Distribution Policy
We intend to make regular quarterly distributions to holders of shares of our common stock. We cannot assure you
that our estimated distributions will be made or sustained or that our board of directors will not change our
distribution policy in the future. Any distributions will be at the sole discretion of our board of directors, and their
form, timing and amount, if any, will depend upon a number of factors, including our actual and projected results
of operations, FFO, liquidity, cash flows and financial condition, the revenue we actually receive from our
properties, our operating expenses, our debt service requirements, our capital expenditures, prohibitions and other
limitations under our financing arrangements, our REIT taxable income, the annual REIT distribution requirements,
applicable law and such other factors as our board of directors deems relevant. For more information regarding
risk factors that could materially and adversely affect us and our ability to make cash distributions, see Item 1A
“Risk Factors.” If our operations do not generate sufficient cash flow to enable us to pay our intended or required
distributions, we may be required either to fund distributions from working capital, borrow or raise equity or to
reduce such distributions. In addition, our charter allows us to issue preferred stock that could have a preference
on distributions and could limit our ability to make distributions to our common stockholders. Additionally, under
certain circumstances, agreements relating to our indebtedness could limit our ability to make distributions to our
common stockholders.
Federal income tax law requires that a REIT distribute annually at least 90% of its REIT taxable income (with
certain adjustments), determined without regard to the dividends paid deduction and excluding any net capital
gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its
REIT taxable income, determined without regard to the dividends paid deduction and including any net capital
gains. In addition, a REIT will be required to pay a 4% nondeductible excise tax on the amount, if any, by which
the distributions it makes in a calendar year are less than the sum of 85% of its ordinary income, 95% of its capital
gain net income and 100% of its undistributed income from prior years.
We intend to make distributions to our stockholders to comply with the REIT requirements of the Code and to
avoid or otherwise minimize paying entity level Federal or excise tax (other than at any TRS of ours). We may
generate taxable income greater than our income for financial reporting purposes prepared in accordance with
GAAP. In particular, during the first several years of the leases, under the terms of the Formation Lease Agreements,
rental income will be allocated for tax purposes generally in an amount greater than cash rents. Further, we may
generate REIT taxable income greater than our cash flow from operations after operating expenses and debt service
as a result of differences in timing between the recognition of REIT taxable income and the actual receipt of cash
or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization
payments.
48
Recent Sales of Unregistered Securities
We did not sell any unregistered equity securities during the year ended December 31, 2018.
Issuer Repurchases of Equity Securities
We did not repurchase any shares of our common stock during the three months ended December 31, 2018.
Registered Offering of Securities - Use of Proceeds
On January 31, 2018, our Registration Statement on Form S-11, as amended (Commission File No. 333-221997)
and our Registration Statement on Form S-11MEF (Commission File No. 333-222806) were declared effective by
the SEC, pursuant to which we sold a total of 69,575,000 shares of our common stock at a price per share of $20.00,
for an aggregate offering price of $1.3915 billion (the “Offering”) before fees, expenses and commissions. Morgan
Stanley & Co. LLC, Goldman Sachs & Co. LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated acted
as principal representatives of the underwriters in the Offering. The Offering was completed on February 5, 2018,
after sales of all 69,575,000 shares of common stock (inclusive of the full exercise by the underwriters of their
overallotment option to purchase 9,075,000 additional shares of common stock). There was no material change in
the planned use of proceeds from the Offering as described in our final prospectus filed with the SEC pursuant to
Rule 424(b) under the Securities Act on February 2, 2018, except that we deployed the remaining proceeds as
follows: (i) on July 11, 2018, we utilized $507.5 million of the offering proceeds to purchase Octavius Tower; (ii)
on December 26, 2018 we utilized $82.5 million of the offering proceeds to purchase Harrah’s Philadelphia; and
(iii) on January 2, 2019 we utilized $261.1 million of the offering proceeds to purchase Margaritaville Resort
Casino.
Stock Performance Graph
The graph below matches VICI Properties’ cumulative total stockholder return for the period from October 18,
2017 to December 31, 2018 on common stock with the cumulative total returns of the S&P 500 index and the
FTSE NAREIT Equity REITs index. The graph tracks the performance of a $100 investment in our common stock
and in each index (with the reinvestment of all dividends as required by the SEC) from October 18, 2017 the first
date on which our shares of common stock were publicly traded, until December 31, 2018. The return shown on
the graph is not necessarily indicative of future performance.
The following performance graph shall not be deemed to be "filed" for purposes of Section 18 of the Exchange
Act, nor shall this information be incorporated by reference into any future filing under the Securities Act or the
Exchange Act, except to the extent that we specifically incorporate it by reference into a filing.
49
Company / Index
10/18/2017
12/31/17
3/31/18
6/30/18
9/30/18
12/31/18
VICI Properties Inc
MSCI US REIT Index
S&P 500
$
$
$
100.0
100.0
100.0
$
$
$
110.8
98.8
104.4
$
$
$
99.0
89.9
103.1
$
$
$
111.6
97.8
106.1
$
$
$
116.9
97.9
113.8
$
$
$
101.5
90.3
97.9
50
ITEM 6.
Selected Financial Data
The following selected financial data is derived from our Financial Statements. It should be read in conjunction
with the Financial Statements and Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in this Annual Report on Form 10-K.
(In thousands, except share and per share data)
Statement of Operations:
Revenues
Total operating expenses
Operating income
Interest expense
Loss from extinguishment of debt
Income before income taxes
Income tax (expense) benefit
Net income
Net income attributable to common stockholders
Per share data:
Net income per common share - Basic
Net income per common share - Diluted
Cash dividends declared
Other Data:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Financial Position Data:
Cash and cash equivalents
Restricted cash
Short-term investments
Total assets
Debt, net
Non-controlling interests
Stockholders’ equity
_____________________________
Year Ended
December 31, 2018
Period from October 6, 2017
to December 31, 2017*
$
897,977
$
140,023
757,954
(212,663)
(23,040)
533,558
(1,441)
532,117
523,619
1.43
1.43
0.9975
504,082
(1,140,877)
1,037,836
$
$
$
$
As of December 31,
2018
2017
577,883
$
20,564
520,877
11,333,368
4,122,264
83,573
6,901,022
$
$
$
$
$
187,609
43,413
144,196
(63,354)
(38,488)
42,636
1,901
44,537
42,662
0.19
0.19
—
129,440
(1,136,251)
1,148,446
183,646
13,760
—
9,739,712
4,785,756
84,875
4,776,364
*Represents the period from October 6, 2017, the date of the Company’s Formation, through December 31, 2017
51
The following table sets forth the selected historical combined financial data of Caesars Entertainment Outdoor
as our predecessor, the operations of which were contributed to VICI Golf on the Formation Date. These operations
are comprised of: (i) the Rio Secco golf course in Henderson, Nevada; (ii) the Cascata golf course in Boulder City,
Nevada; (iii) the Grand Bear golf course in Saucier, Mississippi; and (iv) the Chariot Run golf course in Laconia,
Indiana. The following selected financial is derived from the historical combined financial statements of Caesars
Entertainment Outdoor, our predecessor. It should be read in conjunction with the Financial Statements and Item
7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual
Report on Form 10-K.
(In thousand)
Statement of Operations:
Net revenues
Total operating expenses
Income from operations
Interest expense
Income before taxes
Income tax (expense) benefit
Net (loss) income
Period from
January 1, 2017
to October 5,
2017
Year Ended December 31,
2016
2015
2014
$
14,136
$
18,785
$
18,077
$
14,136
—
—
—
(2)
(2)
18,778
7
(7)
—
—
—
18,059
18
(18)
—
3
3
18,908
18,869
39
(39)
—
4
4
Financial Position Data:
Cash
Total assets
Long-term debt
Liabilities subject to compromise
Equity
As of
October 5, 2017
111
$
89,253
—
249
83,141
As of December 31,
2016
2015
$
920
$
90,475
—
265
351
92,034
14
267
84,143
85,375
52
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations in
conjunction with the audited consolidated Financial Statements and notes thereto of VICI Properties Inc., the
combined Financial Statements and notes thereto of Caesars Entertainment Outdoor and other financial
information included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this
discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with
respect to our business and growth strategies, statements regarding the industry outlook and our expectations
regarding the future performance of our business contained herein are forward-looking statements. See
“Cautionary Note Regarding Forward-Looking Statements.” You should also review the “Risk Factors” section
in Item 1A of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results
to differ materially from the results described in or implied by such forward-looking statements.
OVERVIEW
We are a Maryland corporation that was created to hold certain real estate assets owned by Caesars Entertainment
Operating Company (“CEOC”), upon CEOC’s emergence from bankruptcy. Pursuant to CEOC’s Plan of
Reorganization, on October 6, 2017 (the “Formation Date”), the historical business of CEOC was separated by
means of a spin-off transaction whereby the real property assets (“Formation Properties”) of CEOC and certain of
its subsidiaries, including four golf course businesses, were transferred through a series of transactions to us.
Following the Formation Date, we are a stand-alone entity that was initially owned by certain former creditors of
CEOC. We are primarily engaged in the business of owning and acquiring gaming, hospitality and entertainment
destinations. We lease our properties to subsidiaries of Caesars and Penn National. We conduct our real property
business through an operating partnership and our golf course business through a taxable REIT subsidiary (“TRS”),
VICI Golf LLC.
The financial information included in this Annual Report on Form 10-K are our consolidated results (including
the real property business and the golf course business) for the year ended December 31, 2018 and the period from
October 6, 2017 (Formation Date) to December 31, 2017. Other financial information included, beginning on page
F-41 of this Annual Report on Form 10-K, are the historical combined Financial Statements of Caesars
Entertainment Outdoor, the golf course business owned by CEOC until Formation Date. The financial information
included for Caesars Entertainment Outdoor includes the period from January 1, 2017 to October 5, 2017.
Summary of Significant 2018 Activities
• On February 5, 2018, we completed an initial public offering of 69,575,000 shares of common stock at
an offering price of $20.00 per share for an aggregate offering value of $1.4 billion, resulting in net
proceeds of $1.3 billion after commissions and expenses.
• On April 24, 2018, we entered into four interest rate swap agreements with third party financial institutions
having an aggregate notional amount of $1.5 billion. The interest rate swap transactions are designated
as cash flow hedges that effectively fix the LIBOR component of the interest rate on a portion of the
outstanding debt under the Term Loan B Facility at 2.8297%.
• On June 18, 2018, we entered into definitive agreements to (i) acquire the land and real estate assets of
the Margaritaville Resort Casino, located in Bossier City, Louisiana for $261.1 million and (ii) concurrently
with the closing of the transaction, entered into a triple-net lease on the property with a subsidiary of Penn
National. The lease has an initial annual rent of $23.2 million and an initial term of 15 years, with four
five-year renewal options. The tenant’s obligations under the lease will be guaranteed by Penn National
and certain of its subsidiaries. We completed the transaction on January 2, 2019.
53
• On July 11, 2018, we completed the transaction with Caesars to acquire, and lease back, all of the land
and real estate assets associated with the Octavius Tower at Caesars Palace (“Octavius Tower”) for a
purchase price of $507.5 million in cash. Octavius Tower provides for annual rent of $35.0 million payable
in equal consecutive monthly installments.
• On September 17, 2018 we announced an increase in our targeted annualized dividend to $1.15 per share
of common stock, which represents a 9.5% increase from our previous annualized dividend rate of $1.05
per share.
• On November 13, 2018, we entered into definitive agreements to acquire from affiliates of JACK
Entertainment LLC all of the land and real estate assets associated with the Greektown, located in Detroit,
Michigan, for $700.0 million in cash, and an affiliate of Penn National Gaming, Inc. has agreed to acquire
the operating assets of Greektown for $300.0 million in cash. Simultaneous with the closing of the
acquisition, the Company will enter into a triple-net lease agreement for Greektown with a subsidiary of
Penn National. The lease will have an initial total annual rent of $55.6 million and an initial term of 15
years, with four five-year tenant renewal options. The tenant’s obligations under the lease will be
guaranteed by Penn National and certain of its subsidiaries. The transaction is expected to close in mid-2019
and is subject to regulatory approvals and customary closing conditions. We can provide no assurances
that the acquisition of Greektown will be consummated on the terms or timeframe described herein, or
at all.
• On November 19, 2018, we completed a primary follow-on offering of 34,500,000 shares of common
stock (including 4,500,000 shares of common stock sold pursuant to the exercise in full of the underwriters’
option to purchase additional shares of common stock) at an offering price of $21.00 per share for an
aggregate offering value of $724.5 million, resulting in net proceeds of $694.2 million. We intend to
contribute the net proceeds from the offering to pay a portion of the aggregate $700.0 million purchase
price for the recently announced acquisition of the land and real estate assets of Greektown related fees
and expenses.
• On December 19, 2018, we entered into an equity distribution agreement, or ATM Agreement, pursuant
to which we may sell, from time to time, up to an aggregate sales price of $750.0 million of our common
stock pursuant to “at the market” offerings.
• On December 26, 2018 we completed the previously announced transaction with Caesars to acquire all
of the land and real estate assets associated with Harrah’s Philadelphia Casino and Racetrack (“Harrah’s
Philadelphia”) from Caesars for $241.5 million, which purchase price was reduced by $159.0 million to
reflect the aggregate net present value of the contemplated modifications to the Caesars Lease Agreements,
resulting in cash consideration of approximately $82.5 million. In connection with the closing, the Non-
CPLV Lease Agreement was amended to, among other things, include Harrah’s Philadelphia. The
amendment to the Non-CPLV Lease Agreement provided for an additional $21.0 million in annual rent
for Harrah’s Philadelphia, which is subject to the amended provisions of the lease.
• On December 26, 2018, simultaneous with the completion of the acquisition of Harrah’s Philadelphia,
we modified certain of the terms in the Caesars Lease Agreements. Such modifications, which are
summarized in Item 1 of this 10-K, provide for better alignment of our strategic interests with that of our
tenant, Caesars.
54
KEY TRENDS THAT MAY AFFECT OUR BUSINESS
Subsidiaries of Caesars and Penn National are the lessees of all of our properties pursuant to the Lease Agreements,
and Caesars, CRC or Penn National guarantees the obligations of the tenants under the Lease Agreements. The
Lease Agreements account for substantially all of our revenues. Additionally, we expect to realize organic growth
in rental revenue through annual rent escalators in our Lease Agreements. Accordingly, we are dependent on
Caesars, Penn National, the gaming industry and the health of the economies in the areas where our properties are
located for the foreseeable future, and an event that has a material adverse effect on Caesars’ or Penn Nationals’
business, financial condition, liquidity, results of operations or prospects would have a material adverse effect on
our business, financial condition, liquidity, results of operations and prospects. See Item 1A “Risk Factors—Risks
Related to Our Business and Operations.”
We actively seek to grow our portfolio through acquisitions of experiential real estate in geographically diverse
dynamic markets spanning hospitality, entertainment, leisure and gaming properties. Additionally, we expect to
grow our portfolio through acquisitions by pursuing opportunities to execute sale leaseback transactions with
Caesars, pursuant to: (i) the Call Right Agreements, relating to three properties; (ii) rights of first refusal relating
to certain domestic gaming facilities proposed to be acquired or developed by Caesars located outside the Gaming
Enterprise District of Clark County, Nevada and the properties that Caesars acquired from Centaur Holdings, LLC
in Indiana; and (iii) the Put/Call Agreement, which includes rights relating to the Caesars Forum Convention Center
in Las Vegas. Finally, we believe the approximately 34 acres (after giving effect to the sale of approximately 18.4
acres to Caesars in December 2017) of undeveloped or underdeveloped land on and adjacent to the Las Vegas Strip
that we own will provide attractive opportunities for potential future expansion and development. In pursuing
external growth initiatives, we will generally seek to acquire properties that can generate stable rental revenue
through long-term leases with tenants with established operating histories, and we will consider various factors
when evaluating acquisitions, including the ability to continue to diversify our tenant base and increasing our
geographic diversification.
Our operating and financial performance in the future will be significantly influenced by the success of our
acquisition strategy, and the timing and the availability and terms of financing of any acquisitions that we may
complete. We can provide no assurance that we will exercise any of our contractual rights to purchase one or more
properties from Caesars or otherwise be successful in acquiring any properties. Additionally, our ability to
successfully implement our acquisition strategy will depend upon the availability and terms of financing, including
debt and equity capital. Further, the pricing of any acquisitions we may consummate and the terms of any leases
that we may enter into will significantly impact our future results. Competition to execute sale leaseback transactions
with attractive properties and desirable tenants is intense, and we can provide no assurance that any future
acquisitions or leases will be on terms as favorable to us as those relating to recent transactions. Should we exercise
an option to purchase a property under a Call Right Agreement, the purchase price will be equal to ten times the
property’s annual rent, which, in turn, will equal approximately 60% of the trailing property EBITDAR at the time
of exercise. Accordingly, the purchase price and rent for any property we may acquire under a Call Right Agreement
and lease to Caesars will depend upon the property’s trailing 12-month EBITDAR at the time of exercise. We
anticipate that we would seek to finance these acquisitions with a combination of debt and equity, although no
assurance can be given that we would be able to issue equity in such amounts on favorable terms, or at all, or that
we would not determine to incur more debt on a relative basis at the relevant time due market conditions or
otherwise. In addition to rent, our tenants are required to pay the following: (1) all facility maintenance; (2) all
insurance required in connection with the leased properties and the business conducted on the leased properties;
(3) taxes levied on or with respect to the leased properties (other than taxes on our income); and (4) all utilities
and other services necessary or appropriate for the leased properties and the business conducted on the leased
properties. Accordingly, due to the “triple-net” structure of our leases, we do not expect to incur significant property-
level expenses.
55
DISCUSSION OF OPERATING RESULTS
(In thousands)
Revenues
2018
2017*
Variance
Income from direct financing leases
$
741,564
$
150,171
$
47,972
81,240
27,201
897,977
24,429
3,686
81,810
17,371
12,334
393
140,023
757,954
(212,663)
11,307
(23,040)
533,558
(1,441)
532,117
11,529
19,558
6,351
187,609
9,939
751
19,558
4,126
—
9,039
43,413
144,196
(63,354)
282
(38,488)
42,636
1,901
44,537
591,393
36,443
61,682
20,850
710,368
14,490
2,935
62,252
13,245
12,334
(8,646)
96,610
613,758
(149,309)
11,025
15,448
490,922
(3,342)
487,580
Income from operating leases
Tenant reimbursement of property taxes
Golf operations
Revenues
Operating expenses
General and administrative
Depreciation
Property taxes
Golf operations
Loss on impairment
Acquisition and transaction expenses
Total operating expenses
Operating income
Interest expense
Interest income
Loss from extinguishment of debt
Income before income taxes
Income tax (expense) benefit
Net income
Less: Net income attributable to non-
controlling interests
Net income attributable to common
stockholders
_____________________________
(8,498)
(1,875)
(6,623)
$
523,619
$
42,662
$
480,957
*Represents the period from October 6, 2017, the date of the Company’s Formation, through December 31, 2017
Revenue
For the year ended December 31, 2018 and the period from October 6, 2017 to December 31, 2017, our revenue
was $898.0 million and $187.6 million, respectively, and was comprised as follows:
(In thousands)
Real property business revenue
Golf course business revenue
Total revenue
2018
2017
Variance
$
$
870,776
27,201
897,977
$
$
181,258
6,351
187,609
$
$
689,518
20,850
710,368
56
Real Property Business Revenue
Real property business revenue is generated from rent from our Lease Agreements and reimbursements of property
taxes, and increased $689.5 million during the year ended December 31, 2018 compared to the period from October
6, 2017 to December 31, 2017. The increase was primarily driven by a full year of operations in 2018, compared
to only three months of operations in 2017. Additionally, we added Octavius Tower and Harrah’s Philadelphia to
our real estate portfolio in 2018.
The following table details the components of our income from direct financing and operating leases:
(In thousands)
Income from direct financing leases
Income from operating leases
Total leasing revenue
Less: Direct financing lease adjustment (1)
Total contractual leasing revenue
2018
2017
741,564
$
47,972
789,536
(45,404)
744,132
$
150,171
11,529
161,700
(8,443)
153,257
$
$
____________________
(1) Amounts represent the non-cash adjustment to income from direct financing leases in order to recognize income on an effective interest
basis at a constant rate of return over the term of the leases.
Golf Course Business Revenue
Revenues from golf operations increased $20.9 million during the year ended December 31, 2018 compared to
the period from October 6, 2017 to December 31, 2017. The increase was primarily driven by a full year of
operations in 2018, compared to only three months of operations in 2017.
Revenues from golf operations was $14.1 million for the period from January 1, 2017 to October 5, 2017 and $18.8
million for the year ended December 31, 2016. Revenues for the period from January 1, 2017 to October 5, 2017
comprised of golf revenues of $11.4 million, food and beverage revenues of $1.3 million and retail and other
revenues of $1.4 million. Revenues for the year ended December 31, 2016 were comprised of golf revenues of
$14.6 million, food and beverage revenues of $2.1 million and other revenues of $2.1 million.
Operating Expenses
General and Administrative Expenses
General and administrative expenses increased $14.5 million during the year ended December 31, 2018 compared
to the period from October 6, 2017 to December 31, 2017. The increase is primarily driven by a full year of
operations in 2018, compared to only three months of operations in 2017, partially offset by certain non-recurring
formation related expenses incurred in 2017.
Property Taxes
Property taxes paid or reimbursed by our tenants increased $62.3 million during the year ended December 31,
2018 compared to the period from October 6, 2017 to December 31, 2017. The increase is primarily driven by a
full year of operations in 2018, compared to only three months of operations in 2017.
Golf Course Business Expenses
Expenses from golf operations increased $13.2 million during the year ended December 31, 2018 compared to the
period from October 6, 2017 to December 31, 2017. In addition, $3.7 million and $0.8 million of depreciation
expense was incurred by the golf business during the year ended December 31, 2018 and the period from October
6, 2017 to December 31, 2017. The increases were primarily driven by a full year of operations in 2018, compared
to only three months of operations in 2017.
57
Golf-related expenses totaled $14.1 million for the period from January 1, 2017 to October 5, 2017. Golf-related
expenses totaled $18.8 million and for the year ended December 31, 2016.
Loss on Impairment
During the year ended December 31, 2018 the Company recognized a $12.3 million loss on impairment related to
certain vacant, non-operating land parcels transferred by CEOC to us on the Formation Date. All of the land parcels
are located outside of Las Vegas and none of the land parcels are a component of the operations of our regional
property portfolio. No such impairment occurred in the comparative period.
Transaction and Acquisition Costs
For the year ended December 31, 2018 transaction and acquisition costs totaled $0.4 million. For the period from
October 6, 2017 to December 31, 2017, transaction and acquisition costs totaled $9.0 million and were comprised
of expenses related to the acquisition of Harrah’s Las Vegas and the sale of the Eastside Property.
Interest Expense
Interest expense increased $149.3 million during the year ended December 31, 2018 compared to the period from
October 6, 2017 to December 31, 2017. The increase is primarily driven by a full year of operations in 2018,
compared to only three months of operations in 2017, offset by the pay down of amounts outstanding on our
Revolving Credit Facility and the partial paydown of the Term Loan B Facility and Second Lien Notes in February
of 2018.
Interest Income
Interest income increased $11.0 million during the year ended December 31, 2018 compared to the period from
October 6, 2017 to December 31, 2017. The increase is primarily driven by a full year of operations in 2018,
compared to only three months of operations in 2017 as well as increased cash on hand from our IPO on February
1, 2018 and primary follow-on equity offering on November 15, 2018.
Loss on Extinguishment of Debt
During the year ended December 31, 2018 we recognized a loss on extinguishment of debt of a $23.0 million
resulting from the redemption of $268.4 million in aggregate principal of our Second Lien Notes in February 2018
at a redemption price of 108%. During the period from October 6, 2017 to December 31, 2017 we recognized a
loss on extinguishment of debt of $38.5 million resulting from the repurchase of $400.0 million aggregate principal
amount of prior mezzanine debt of Caesars Palace Las Vegas.
58
RECONCILIATION OF NON-GAAP MEASURES
We present Funds From Operations (“FFO”), FFO per share, Adjusted Funds From Operations (“AFFO”), AFFO
per share, and Adjusted EBITDA, which are not required by, or presented in accordance with, generally accepted
accounting principles in the United States (“GAAP”). These are non-GAAP financial measures and should not be
construed as alternatives to net income or as an indicator of operating performance (as determined in accordance
with GAAP). We believe FFO, FFO per share, AFFO, AFFO per share and Adjusted EBITDA provide a meaningful
perspective of the underlying operating performance of our business.
FFO is a non-GAAP financial measure that is considered a supplemental measure for the real estate industry and
a supplement to GAAP measures. Consistent with the definition used by The National Association of Real Estate
Investment Trusts (“NAREIT”), we define FFO as net income (or loss) (computed in accordance with GAAP)
excluding gains (or losses) from sales of property plus real estate depreciation.
AFFO is a non-GAAP financial measure that we use as a supplemental operating measure to evaluate our
performance. We calculate AFFO by adding or subtracting from FFO direct financing lease adjustments, transaction
costs incurred in connection with the acquisition of real estate investments, non-cash stock-based compensation
expense, amortization of debt issuance costs and original issue discount, other non-cash interest expense, non-real
estate depreciation (which is comprised of the depreciation related to our golf course operations), capital
expenditures (which are comprised of additions to property, plant and equipment related to our golf course
operations), impairment charges and gains (or losses) on debt extinguishment.
We calculate Adjusted EBITDA by adding or subtracting from AFFO interest expense, net and income tax expense.
These non-GAAP financial measures: (i) do not represent cash flow from operations as defined by GAAP; (ii)
should not be considered as an alternative to net income as a measure of operating performance or to cash flows
from operating, investing and financing activities; and (iii) are not alternatives to cash flow as a measure of liquidity.
In addition, these measures should not be viewed as measures of liquidity, nor do they measure our ability to fund
all of our cash needs, including our ability to make cash distributions to our stockholders, to fund capital
improvements, or to make interest payments on our indebtedness. Investors are also cautioned that FFO, FFO per
share, AFFO, AFFO per share and Adjusted EBITDA, as presented, may not be comparable to similarly titled
measures reported by other real estate companies, including REITs, due to the fact that not all real estate companies
use the same definitions. Our presentation of these measures does not replace the presentation of our financial
results in accordance with GAAP.
59
Reconciliation of Net Income to FFO, FFO per Share, AFFO, AFFO per Share and Adjusted EBITDA
(In thousands, except share data and per share data)
Net income attributable to common stockholders
Real estate depreciation
FFO
Direct financing lease adjustments attributable to common
stockholders
Loss on extinguishment of debt
Loss on impairment
Non-cash stock-based compensation
Amortization of debt issuance costs and original issue
discount
Other depreciation
Capital expenditures
Transaction and acquisition costs
AFFO
Interest expense, net
Income tax expense (benefit)
Adjusted EBITDA
Net income per common share
Basic and diluted
FFO per common share
Basic and diluted
AFFO per common share
Basic and diluted
Weighted average number of common shares outstanding
Basic
Diluted
Year Ended
December 31, 2018
$
523,619
$
—
523,619
(44,852)
23,040
12,334
2,342
5,976
3,679
(899)
393
525,632
195,380
1,441
722,453
1.43
1.43
1.43
$
$
$
$
$
$
$
$
Period from
October 6, 2017 to
December 31, 2017
42,662
—
42,662
(8,362)
38,488
—
1,385
156
751
(51)
9,039
84,068
62,916
(1,901)
145,083
0.19
0.19
0.37
367,226,395
367,316,901
227,828,844
227,985,455
60
LIQUIDITY AND CAPITAL RESOURCES
Overview
As of December 31, 2018, our available cash balance was $577.9 million, our restricted cash balance was $20.6
million, our short-term investment balance was $520.9 million, and $400.0 million was available for future
borrowings under our Revolving Credit Facility.
Our short-term obligations consist primarily of regular interest payments on our debt obligations, dividends to our
common stockholders, normal recurring operating expenses, recurring expenditures for corporate and
administrative needs, certain lease and other contractual commitments related to our golf operations and certain
non-recurring expenditures. For a list of our contractual commitments refer to Note 12 - Commitments and
Contingent Liabilities, in the Notes to our Financial Statements.
Our long-term obligations consist primarily of principal payments on our outstanding debt obligations. We currently
have $4.1 billion of debt obligations outstanding, none of which are maturing in the next twelve months. For a
summary of principal debt balances and their maturity dates and principal terms refer to Note 9 - Debt, in the Notes
to our Consolidated Financial Statements. We anticipate closing the acquisition of Greektown in mid-2019, and
we expect to fund the purchase with approximately $350.0 million of cash on hand (which represents a portion of
the proceeds that we raised in our November 2018 equity offering) and $350.0 million of debt, either through
additional long-term debt financing or under our Revolving Credit Facility. We anticipate funding future transactions
with a mix of debt, equity and available cash.
We believe that we have sufficient liquidity to meet our liquidity and capital resource requirements primarily
through currently available cash and cash equivalents, restricted cash, short term investments, cash received under
our Lease Agreements, borrowings from banks, including undrawn capacity under our Revolving Credit Facility,
and proceeds from the issuance of debt and equity securities. All of the Lease Agreements call for an initial term
of fifteen years with four, five-year renewal options (except for Harrah’s Philadelphia) and are designed to provide
us with a reliable and predictable revenue stream. However, our cash flows from operations and our ability to
access capital resources could be adversely affected due to uncertain economic factors and volatility in the financial
and credit markets. In particular, we can provide no assurances that our tenants will not default on their leases or
fail to make full rental payments if their businesses become challenged due to, among other things, adverse economic
conditions.
Our ability to raise funds through the issuance of debt and equity securities and access to other third-party sources
of capital in the future will be dependent on, among other things, general economic conditions, general market
conditions for REITs, market perceptions and the trading price of our stock. We will continue to analyze which
sources of capital are most advantageous to us at any particular point in time, but the capital markets may not be
consistently available on terms we deem attractive, or at all.
Cash Flow Analysis
The table below summarizes our cash flows for the year ended December 31, 2018 and the period from October
6, 2017 to December 31, 2017:
(In thousands)
Cash, cash equivalents and restricted cash
Provided by operating activities
Used in investing activities
Provided by financing activities
2018
2017
Variance ($)
$
$
504,082
(1,140,877)
1,037,836
129,440
(1,136,251)
1,148,446
$
374,642
(4,626)
(110,610)
259,406
Net increase in cash, cash equivalents and restricted cash
401,041
141,635
61
Cash Flows from Operating Activities
Net cash provided by operating activities increased $374.6 million for the year ended December 31, 2018 compared
with the period from October 6, 2017 to December 31, 2017. The increase is primarily driven by a full year of
operations in 2018, compared to only three months of operations in 2017.
Cash Flows from Investing Activities
Net cash used in investing activities increased $4.6 million for the year ended December 31, 2018 compared with
the period from October 6, 2017 to December 31, 2017. During 2018, the primary use of cash from investing
activities was our investment in direct financing leases of $771.5 million related to the purchase of Octavius Tower
and Harrah’s Philadelphia and net investments in short-term investments of $520.9 million. During the period from
October 6, 2017 to December 31, 2017, our investment in deferred financing leases of $1,136.2 million related to
the acquisition of Harrah’s Las Vegas was the primary use of cash from investing activities.
Cash Flows from Financing Activities
Net cash provided by financing activities decreased $110.6 million for the year ended December 31, 2018 compared
with the period from October 6, 2017 to December 31, 2017.
During the year ended December 31, 2018 the primary sources and uses of cash from financing activities include:
• Net proceeds from our initial public offering of $1,307.1 million of our common stock;
• Net proceeds from our primary follow-on equity offering of $694.4 million of our common stock;
• Repayment of $300.0 million on our Revolving Credit Facility;
• Repayment of $100.0 million on our Term Loan B Facility;
• Redemption of $290.1 million in aggregate principal amount of our Second Lien Notes;
• Dividend payments of $262.7 million
During the period from October 6, 2017 to December 31, 2017 the primary sources and uses of cash from financing
activities include:
•
•
•
Proceeds from the issuance of $2,200.0 million of our Term Loan B Facility;
Proceeds from the $300.0 million draw from our Revolving Credit Facility;
Proceeds from the private placement issuance of $1,000.0 million of our common stock;
• The sale of approximately 18.4 acres of undeveloped land located behind the LINQ Hotel & Casino and
Harrah’s Las Vegas to Caesars for $73.6 million;
• Repayment of our $1,638.4 million senior secured first lien Prior Term Loan;
• Repayment of our $311.7 million first-priority senior secured Prior First Lien Notes;
• The purchase by VICI PropCo of the entirety of the outstanding CPLV mezzanine debt in the aggregate
principal amount of $400.0 million;
• Costs of $36.2 million related to our common stock private placement and premium and fees related to
the purchase of the mezzanine debt of $38.4 million; and
• Debt issuance costs of $31.5 million related to our Term Loan B Facility and Revolving Credit Facility.
62
Debt
The following table summarizes our debt related transactions from the Formation Date to December 31, 2018:
Description of Debt
VICI PropCo Senior
Secured Credit
Facilities
Revolving Credit
Facility
Term Loan B
Facility
First Lien Term
Loan (“Prior Term
Loan”)
First Priority
Senior Secured
Notes (“Prior First
Lien Notes”)
Second Lien Notes
Face Value (In thousands)
Debt At
Formation
Mandatory
Conversion
Refinancing
Transactions
Debt at
December 31,
2017
IPO
Transaction
Debt at
December 31,
2018
$
— $
— $
300,000
$
300,000
$ (300,000) $
—
—
— 2,200,000
2,200,000
(100,000)
2,100,000
1,638,387
— (1,638,387)
311,721
766,892
(311,721)
—
—
—
766,892
—
—
(268,412)
—
—
498,480
1,550,000
—
—
—
—
1,550,000
(200,000)
(200,000)
—
—
—
—
—
—
—
—
—
—
$ (668,412) $ 4,148,480
CPLV Debt
CPLV CMBS Debt
1,550,000
CPLV Mezzanine
Debt
Senior tranche
200,000
Intermediate
tranche
Junior tranche
200,000
250,000
—
—
—
—
—
(250,000)
Total Debt
$4,917,000
$ (250,000) $
149,892
$ 4,816,892
Impact of Initial Public Offering
On February 5, 2018, we completed an initial public offering of 69,575,000 shares of common stock (which included
9,075,000 shares of common stock related to the overallotment option exercised by the underwriters in full) at an
offering price of $20.00 per share for gross proceeds of $1.4 billion, resulting in net proceeds of $1.3 billion after
commissions and expenses. We utilized a portion of the net proceeds from the stock offering to: (a) pay down
$300.0 million of indebtedness outstanding under the Revolving Credit Facility; (b) redeem $268.4 million in
aggregate principal amount of the Second Lien Notes at a redemption price of 108% plus accrued and unpaid
interest to the date of the redemption; and (c) repay $100.0 million of the Term Loan B Facility.
Covenants
On December 22, 2017, VICI PropCo entered into a credit agreement (the “Credit Agreement”) governing the
Term Loan B Facility and the Revolving Credit Facility. The Credit Agreement contains customary covenants that,
among other things, limit the ability of VICI PropCo and its restricted subsidiaries to: (i) incur additional
indebtedness; (ii) merge with a third party or engage in other fundamental changes; (iii) make restricted payments;
(iv) enter into, create, incur or assume any liens; (v) make certain sales and other dispositions of assets; (vi) enter
into certain transactions with affiliates; (vii) make certain payments on certain other indebtedness; (viii) make
certain investments; and (ix) incur restrictions on the ability of restricted subsidiaries to make certain distributions,
63
loans or transfers of assets to VICI PropCo or any restricted subsidiary. These covenants are subject to a number
of exceptions and qualifications, including the ability to make unlimited restricted payments to maintain our REIT
status and to avoid the payment of federal or state income or excise tax, the ability to make restricted payments in
an amount not to exceed 95% of our Funds from Operations (as defined in the Credit Agreement) subject to no
event of default under the Credit Agreement and pro forma compliance with the financial covenant pursuant to the
Credit Agreement, and the ability to make additional restricted payments in an aggregate amount not to exceed
the greater of 0.6% of Adjusted Total Assets (as defined in the Credit Agreement) or $30,000,000. Commencing
with the first full fiscal quarter ended after December 22, 2017, if the outstanding amount of the Revolving Credit
Facility plus any drawings under letters of credit issued pursuant to the Credit Agreement that have not been
reimbursed as of the end of any fiscal quarter exceeds 30% of the aggregate amount of the Revolving Credit Facility,
VICI PropCo and its restricted subsidiaries on a consolidated basis would be required to maintain a maximum
Total Net Debt to Adjusted Total Assets Ratio, as defined in the Credit Agreement, as of the last day of any applicable
fiscal quarter.
The CPLV CMBS Debt was incurred in October 2017 pursuant to a loan agreement containing certain covenants
limiting CPLV Property Owner LLC’s ability to among other things: (i) incur additional debt; (ii) enter into certain
transactions with its affiliates; (iii) consolidate, merge, sell or otherwise dispose of its assets; and (iv) allow transfers
of its direct or indirect equity interests.
The Second Lien Notes were issued on October 6, 2017, pursuant to an indenture (the “Indenture”) by and among
VICI PropCo and its wholly owned subsidiary, VICI FC Inc. (together, the “Issuers”), the subsidiary guarantors
party thereto, and UMB Bank National Association, as trustee. The Indenture contains covenants that limit the
Issuers’ and their restricted subsidiaries’ ability to, among other things: (i) incur additional debt; (ii) pay dividends
on or make other distributions in respect of their capital stock or make other restricted payments; (iii) make certain
investments; (iv) sell certain assets; (v) create or permit to exist dividend and/or payment restrictions affecting
their restricted subsidiaries; (vi) create liens on certain assets to secure debt; (vii) consolidate, merge, sell or
otherwise dispose of all or substantially all of their assets; (viii) enter into certain transactions with their affiliates;
and (ix) designate their subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of
exceptions and qualifications, including the ability to declare or pay any cash dividend or make any cash distribution
to VICI to the extent necessary for VICI to distribute cash dividends of 100% of our “real estate investment trust
taxable income” within the meaning of Section 857(b)(2) of the Internal Revenue Code of 1986, as amended,
certain restricted payments not to exceed the amount of our cumulative earnings (calculated pursuant to the Indenture
as $30,000,000 plus 95% of our cumulative Adjusted Funds From Operations (as defined in the Indenture) less
cumulative distributions, with certain other adjustments), and the ability to make restricted payments in an amount
equal to the greater of 0.6% of Adjusted Total Assets (as defined in the Indenture) or $30,000,000.
At December 31, 2018, the Company was in compliance with all required debt-related financial covenants.
Capital Expenditures
As described in our leases, capital expenditures for properties under the Lease Agreements are the responsibility
of the tenants. Minimum capital expenditure spending requirements of the tenants are described in “Overview of
our Lease Agreements” of Item 1 - Business.
Inflation
Our leases provide for certain increases in rent as a result of a fixed annual rent escalator or changes in the Consumer
Price Index as further described in “Overview of our Lease Agreements” of Item 1 - Business. Inflation may cause
the rent provisions to result in rent increases over time. However, we could be negatively affected if increases in
rent are not sufficient to cover increases in our operating expenses due to inflation. In addition, inflation and
increased cost may have an adverse impact on our tenants if increases in their operating expenses exceed increases
in revenue due to inflation.
64
Off-Balance Sheet Arrangements
As of December 31, 2018, and as of the date this report was filed, we do not have any off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our Financial Statements are prepared in accordance with GAAP. We have identified certain accounting policies
that we believe are the most critical to the presentation of our financial information over a period of time. These
accounting policies may require our management to take decisions on subjective and/or complex matters relating
to reported amounts of assets, liabilities, revenue, costs, expenses and related disclosures, including, but not limited
to, the application of fresh start reporting, determining the useful lives of real estate properties, and evaluating the
impairment of long-lived assets, and allocation of costs and deferred income taxes. The judgment on such estimates
and underlying assumptions is based on our historical experience that we believe is reasonable under the
circumstances. Actual results may differ from the estimates.
Investments in Direct Financing and Operating Leases
Upon lease inception, we assess lease classification under ASC 840 “Leases” (“ASC 840”) to determine if the
lease should be classified as capital or operating. If a lease is determined to be a capital lease, we further assess if
it is a direct financing or sales-type lease as defined in ASC 840. For leases determined to be direct financing
capital leases, upon execution of the lease transaction, the asset is classified to Investments in direct financing
leases, net. For direct financing leases where the land represents greater than 25% of the fair value of the underlying
asset, the land and building components of the lease are bifurcated and separately assessed for classification.
We have determined that all of our leases meet the definition of direct financing leases under ASC 840, with the
exception of the land component of our investment in Caesars Palace Las Vegas and certain parcels of land contained
in the Non-CPLV Lease Agreement. We recognize the related income from our direct financing leases on an effective
interest basis at a constant rate of return over the terms of the applicable leases. As a result, the cash payments
accounted for under direct financing leases will not equal income from direct financing leases. Rather, a portion
of the cash rent we receive is recorded as Income from direct financing leases in our Statement of Operations and
a portion is recorded as a change to the Investments in direct financing leases, net.
Initial direct costs incurred in connection with direct financing lease transactions are included in the balance of
Investments in direct financing leases, net. Such amounts will be recognized as a reduction to Income from direct
financing leases over the life of the lease using the effective interest method.
Under the operating lease model, as the lessor, at lease inception the land is recorded as Investments in operating
leases in our Balance Sheet and we record income from operating leases on a straight-line basis over the lease
term. The amount of annual minimum lease payments attributable to the land element after deducting executory
costs, including any profit thereon, is determined by applying the lessee’s incremental borrowing rate to the value
of the land. We record this lease income as Income from operating leases in our Statement of Operations.
65
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Information concerning our obligations and commitments to make future payments under contracts such as our
indebtedness and future minimum lease commitments under operating leases is included in the following table as
of December 31, 2018.
(In thousands)
Long-term debt
Term Loan B Facility, principal (1)
CPLV CMBS Debt, principal (2)
Second Lien Notes, principal (3)
Revolving Credit Facility, principal (4)
Scheduled interest payments (5)
Total debt contractual obligations
Leases and contracts
Operating lease for Cascata Golf
Course Land
Golf maintenance contract for Rio
Secco and Cascata Golf Course
Office leases
Total leases and contract obligations
Payments Due By Period
Total
Within 1
Year
1-3 Years
4-5 Years
After 5
Years
$ 2,100,000
$
1,550,000
498,480
—
—
—
—
—
1,050,788
5,199,268
211,372
211,372
422,745
422,745
$
32,000
$ 2,068,000
— 1,550,000
—
—
498,480
—
324,340
2,404,820
—
—
—
92,330
2,160,330
21,559
896
1,847
1,921
16,895
16,350
414
38,323
3,270
345
4,512
6,540
69
8,456
6,540
—
8,461
—
—
16,895
Total Contractual Commitments
$ 5,237,591
$ 215,884
$ 431,201
$ 2,413,281
$ 2,177,225
________________________________________
(1) The Term Loan B Facility is subject to amortization of 1.0% of principal per annum payable in equal quarterly installments
on the last business day of each calendar quarter. However, as a result of prepaying $100.0 million in February 2018 the next
principal payment due on the Term Loan B Facility is September 2022. The Term Loan B Facility will mature on December
22, 2024 or the date that is three months prior to the maturity of the Second Lien Notes, whichever is earlier (or if the maturity
is extended pursuant to the terms of the agreement, such extended maturity date as determined pursuant thereto).
(2) The CPLV CMBS Debt will mature on October 10, 2022.
(3) The Second Lien Notes will mature on October 15, 2023.
(4) The Revolving Credit Facility will mature on December 22, 2022.
(5) Estimated interest payments on variable interest loans are based on a LIBOR rate as of December 31, 2018. Subsequent to
year end, on January 3, 2019, we entered into two additional interest rate swap transactions having an aggregate notional
amount of $500.0 million at a blended rate of 2.38%.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing
market interest rates. In the normal course of business, we are exposed to the effect of interest rate changes. We
have entered into derivative agreements to mitigate exposure to unexpected changes in interest. Market risk refers
to the risk of loss from adverse changes in market interest rates. We periodically use derivative financial instruments
to seek to manage, or hedge, interest rate risks related to our borrowings. We do not use derivatives for trading or
speculative purposes and only enter into contracts with major financial institutions based on their credit rating and
66
other factors. We intend to enter into derivative agreements only with counterparties that we believe have a strong
credit rating to mitigate the risk of counterparty default or insolvency.
As of December 31, 2018, we had $4,148.5 million of debt outstanding of which $2,048.5 million was fixed rate
debt and $1,500.0 million was hedged variable rate debt, the remaining $600.0 million of our indebtedness was
unhedged. Subsequent to December 31, 2018 we entered into two interest swap transactions which are effective
January 22, 2019, for a notional amount of $500 million, effectively bringing our unhedged variable rate debt to
$100.0 million. As of December 31, 2018, a one percent increase or decrease in the annual interest rate on our
unhedged variable rate borrowings of $600.0 million would increase or decrease our annual cash interest expense
by approximately $6.0 million. Subsequent to January 22, 2019, a one percent increase or decrease in the annual
interest rate on our unhedged variable rate borrowings of $100.0 million would increase or decrease our annual
cash interest expense by approximately $1.0 million.
We may manage, or hedge, interest rate risks related to our borrowings by means of interest rate swap agreements.
We also expect to manage our exposure to interest rate risk by maintaining a mix of fixed and variable rates for
our indebtedness. However, the REIT provisions of the Code substantially limit our ability to hedge our assets and
liabilities.
ITEM 8.
Financial Statements and Supplementary Financial Data
The financial statements required by this item and the reports of the independent accountants thereon required by
Item 15 of this Form 10-K appear on pages F-2 to F-56. See accompanying Index to the Consolidated Financial
Statements on page F-1. The supplementary financial data required by Item 302 of Regulation S-K appears in
pages S-1 to S-6 to the consolidated financial statements.
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
ITEM 9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) designed to provide reasonable assurance that information
required to be disclosed in reports filed under the Exchange Act, is recorded, processed, summarized and reported
within the specified time periods and accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required
disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including the
principal executive officer and principal financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) as of the end of the period covered
by this report. Based upon this evaluation, our principal executive officer and principal financial officer concluded
that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting
is a process designed under the supervision of our principal executive officer and principal financial officer to
67
provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated
financial statements for external reporting purposes in accordance with GAAP.
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide
reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations
of our management; and provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.
Management conducted an assessment of the effectiveness of our internal control over financial reporting as of
December 31, 2018 based on the framework established in the updated Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on
this assessment, management has determined that our internal control over financial reporting was effective as
of December 31, 2018.
Deloitte & Touche LLP, an independent registered public accounting firm, has audited our financial statements
included in this report on Form 10-K and issued its attestation report, which is included herein and expresses an
unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2018.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as is defined in Rules 13a–15(f) and 15d–
15(f) under the Exchange Act) that occurred during our most recent quarter, that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. Other Information
None.
68
PART III
ITEM 10.
Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated by reference to the Company’s definitive proxy statement
to be filed not later than April 30, 2019 with the SEC pursuant to Regulation 14A under the Exchange Act.
ITEM 11.
Executive Compensation
The information required by this item is incorporated by reference to the Company’s definitive proxy statement
to be filed not later than April 30, 2019 with the SEC pursuant to Regulation 14A under the Exchange Act.
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
The information required by this item is incorporated by reference to the Company’s definitive proxy statement
to be filed not later than April 30, 2019 with the SEC pursuant to Regulation 14A under the Exchange Act.
ITEM 13.
Certain Relationships and Related Transactions and Director
Independence
The information required by this item is incorporated by reference to the Company’s definitive proxy statement
to be filed not later than April 30, 2019 with the SEC pursuant to Regulation 14A under the Exchange Act.
ITEM 14.
Principal Accounting Fees and Services
The information required by this item is incorporated by reference to the Company’s definitive proxy statement
to be filed not later than April 30, 2019 with the SEC pursuant to Regulation 14A under the Exchange Act.
69
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules
(a)(1).
Financial Statements.
See the accompanying Index to Financial Statement Schedule on page F-1.
(a)(2).
Financial Statement Schedules.
See the accompanying Index to Financial Statement Schedule on page F-1.
(a)(3).
Exhibits.
Filed
Herewith
Incorporated by Reference
Form
T-3/A of
VICI
Properties
1 LLC
Exhibit
Filing Date
T3E-2
8/11/2017
8-K
2.1
10/11/2017
8-K
2.1
6/19/2018
8-K
2.1
7/12/2018
8-K
2.2
7/12/2018
8-K
2.1
11/14/2018
8-K
2.2
11/14/2018
8-K
8-K
3.1
10/11/2017
3.2
10/11/2017
Exhibit
Number
2.1
2.2
2.3**
2.4**
2.5**
2.6**
2.7**
3.1
3.2
Exhibit Description
Third Amended Joint Plan of Reorganization of
Caesars Entertainment Operating Company, Inc.,
et al., under Chapter 11 of the Bankruptcy Code,
dated January 13, 2016.
Separation Agreement, dated as of October 6,
2017, between Caesars Entertainment Operating
Company, Inc. and VICI Properties Inc.
Agreement and Plan of Merger dated as of June
18, 2018 by and among VICI Properties Inc.,
Riverview Merger Sub Inc., Penn Tenant II, LLC,
Penn National Gaming, Inc., Bossier Casino
Venture (HoldCo), Inc. and Silver Slipper
Gaming, LLC.
Purchase and Sale Agreement dated as of July 11,
2018 by and between Caesars Octavius, LLC and
Octavius Propco LLC.
Purchase and Sale Agreement dated as of July 11,
2018 by and between Chester Downs and Marina,
LLC and Philadelphia Propco LLC.
Transaction Agreement dated as of November 13,
2018 by and among Greektown Mothership LLC,
Penn Tenant III, LLC and VICI Properties L.P.
Real Estate Purchase Agreement dated as of
November 13, 2018 by and between Greektown
Mothership LLC and VICI Properties L.P.
Articles of Amendment and Restatement of VICI
Properties Inc.
Amended and Restated Bylaws of VICI Properties
Inc.
70
X
X
4.1
4.2
4.3
4.4
4.5
10.1
10.2
10.3
10.4
10.5
10.6
Indenture, dated as of October 6, 2017, by and
among VICI Properties 1 LLC, VICI FC Inc., the
subsidiary guarantors party thereto from time to
time, and UMB Bank, National Association, as
trustee, governing the First-Priority Senior
Secured Floating Rate Notes due 2022.
Supplemental Indenture No. 1, dated as of
December 26, 2017, among Claudine Propco LLC
as New Guarantor, VICI Properties 1 LLC and
VICI FC Inc., as issuers, and UMB Bank,
National Association, as trustee.
Supplemental Indenture No. 2, dated as of
December 26, 2017, among Claudine Propco LLC
as New Guarantor, among VICI Properties 1 LLC
and VICI FC Inc., as issuers, and UMB Bank,
National Association, as trustee.
Supplemental Indenture No. 3, dated as of
September 24, 2018, among VICI Properties 1
LLC and VICI FC Inc., as issuers, and UMB
Bank, National Association, as trustee
Registration Rights Agreement, dated as of
December 22, 2017, between VICI Properties Inc.
and the other parties named therein.
Lease (CPLV), dated as of October 6, 2017, by
and among CPLV Property Owner LLC, Desert
Palace LLC, Caesars Entertainment Operating
Company, Inc. and CEOC, LLC, relating to the
CPLV Facilities.
First Amendment to Lease (CPLV), dated as of
December 26, 2018, by and among CPLV
Property Owner LLC, Desert Palace LLC and
CEOC, LLC.
Lease (Non-CPLV), dated as of October 6, 2017,
by and among the entities listed on Schedules A
and B thereto and CEOC, LLC, relating to the
Non-CPLV Facilities.
First Amendment to Lease (Non-CPLV) dated as
of December 22, 2017, by and among the entities
listed on Schedules A and B thereto and CEOC,
LLC
Second Amendment to Lease (Non-CPLV) dated
as of February 16, 2018, by and among the
entities listed on Schedules A and B thereto and
CEOC, LLC.
Third Amendment to Lease (Non-CPLV) dated as
of April 2, 2018, by and among the entities listed
on Schedules A and B thereto and CEOC, LLC.
10.7+
Fourth Amendment to Lease (Non-CPLV), dated
as of December 26, 2018, by and among the
entities listed on Schedules A and B thereto and
CEOC, LLC.
71
8-K
4.1
10/11/2017
8-K
4.1
9/25/2018
S-11/A
4.5
1/17/2018
8-K
10.1
10/11/2017
8-K
10.1
12/27/2018
8-K
10.2
10/11/2017
10-K/A 10.40
4/30/2018
10-Q
10.1
5/4/2018
10-Q
10.2
5/4/2018
8-K
10.2
12/27/2018
8-K
10.3
10/11/2017
8-K
10.3
12/27/2018
8-K
10.4
10/11/2017
10-Q
10.3
5/4/2018
8-K
10.5
10/11/2017
8-K
10.5
12/27/2018
8-K
10.6
10/11/2017
10.8
10.9+
10.10
10.11
10.12
10.13
10.14
Lease (Joliet), dated as of October 6, 2017, by and
between Harrah’s Joliet Landco LLC and Des
Plaines Development Limited Partnership,
relating to the Joliet Facilities.
First Amendment to Lease (Joliet), dated as of
December 26, 2018, by and between Harrah’s
Joliet Landco LLC and Des Plaines Development
Limited Partnership.
Golf Course Use Agreement, dated as of October
6, 2017, by and among Rio Secco LLC, Cascata
LLC, Chariot Run LLC, Grand Bear LLC,
Caesars Enterprise Services, LLC, CEOC, LLC
and, solely for purposes of Section 2.1(c) thereof,
Caesars License Company, LLC.
First Amendment to Golf Course Use Agreement,
dated as of April 20, 2018 by and among Rio
Secco LLC, Cascata LLC, Chariot Run LLC, and
Grand Bear LLC, Caesars Enterprise Services
LLC, CEOC, LLC, and solely for certain sections
referenced therein, Caesars License Company,
LLC.
Management and Lease Support Agreement,
dated as of October 6, 2017, by and among Desert
Palace LLC, Caesars Entertainment Operating
Company, Inc., CEOC, LLC, CPLV Manager,
LLC, Caesars Entertainment Corporation, CPLV
Property Owner LLC, and solely for certain
articles and sections named therein, Caesars
License Company, LLC and Caesars Enterprise
Services, LLC relating to the CPLV Facilities.
First Amendment to Management and Lease
Support Agreement (CPLV), dated as of
December 26, 2018, by and among Desert Palace
LLC, CEOC, LLC, CPLV Manager, LLC, Caesars
Entertainment Corporation, CPLV Property
Owner LLC, and solely for certain articles and
sections named therein, Caesars License
Company, LLC and Caesars Enterprise Services,
LLC.
Management and Lease Support Agreement,
dated as of October 6, 2017, by and among
CEOC, LLC, the entities listed therein, Non-
CPLV Manager, LLC, Caesars Entertainment
Corporation and solely for certain articles and
sections named therein, Caesars License
Company, LLC and Caesars Enterprise Services,
LLC relating to the Non-CPLV Facilities.
72
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
First Amendment to Management and Lease
Support Agreement (Non-CPLV), dated as of
December 26, 2018, by and among CEOC, LLC,
the entities listed on Schedule A and Schedule B
thereto, Chester Downs and Marina, LLC, Non-
CPLV Manager, LLC, Caesars Entertainment
Corporation, Philadelphia Propco LLC, and solely
for certain articles and sections named therein,
Caesars License Company, LLC and Caesars
Enterprise Services, LLC.
Management and Lease Support Agreement,
dated as of October 6, 2017, by and among Des
Plaines Development Limited Partnership, Joliet
Manager, LLC, Caesars Entertainment
Corporation, Harrah’s Joliet Landco LLC and
solely for certain articles and sections named
therein, Caesars License Company, LLC and
Caesars Enterprise Services, LLC relating to the
Joliet Facilities.
First Amendment to Management and Lease
Support Agreement (Joliet), dated as of December
26, 2018, by and among Des Plaines
Development Limited Partnership, Joliet
Manager, LLC, Caesars Entertainment
Corporation, Harrah’s Joliet Landco LLC and
solely for certain articles and sections named
therein, Caesars License Company, LLC and
Caesars Enterprise Services, LLC.
Call Right Agreement, dated as of October 6,
2017, by and between VICI Properties L.P. and
Caesars Entertainment Corporation relating to
Harrah’s New Orleans.
Call Right Agreement, dated as of October 6,
2017, by and between VICI Properties L.P. and
Caesars Entertainment Corporation relating to
Harrah’s Laughlin.
Call Right Agreement, dated as of October 6,
2017, by and between VICI Properties L.P. and
Caesars Entertainment Corporation relating to
Harrah’s Atlantic City.
Tax Matters Agreement, dated as of October 6,
2017, by and among Caesars Entertainment
Corporation, CEOC, LLC, VICI Properties Inc.,
VICI Properties L.P. and CPLV Property Owner
LLC.
Loan Agreement, dated as of October 6, 2017, by
and among CPLV Property Owner LLC, as
borrower, JPMorgan Chase Bank, National
Association, Barclays Bank PLC, Goldman Sachs
Mortgage Company and Morgan Stanley Bank,
N.A., as lenders, governing the CPLV CMBS
Debt.
73
8-K
10.6
12/27/2018
8-K
10.7
10/11/2017
8-K
10.7
12/27/2018
8-K
10.9
10/11/2017
8-K
10.10
10/11/2017
8-K
10.11
10/11/2017
8-K
10.12
10/11/2017
8-K
10.13
10/11/2017
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
Omnibus Amendment to Loan Documents, dated
as of December 26, 2018, by and among
Wilmington Trust, National Association, as
Trustee for the Benefit of Holders of Caesars
Palace Las Vegas Trust 2017-VICI, Commercial
Mortgage Pass-Through Certificates, Series 2017-
VICI, CPLV Property Owner LLC and VICI
Properties L.P, relating to, among other things, the
CPLV CMBS Debt.
Mezzanine A Loan Agreement, dated as of
October 6, 2017, by and among CPLV Mezz 1
LLC, Wilmington Savings Fund Society, FSB, as
Administrative Agent and Collateral Agent, and
the lenders party thereto, governing the senior
mezzanine debt.
Consent and Omnibus Amendment to Loan
Documents, dated as of December 26, 2018, by
and among CPLV Mezz 1 LLC, VICI Properties
L.P. and Wilmington Savings Fund Society, FSB,
as administrative and collateral agent for the
lenders under the Mezzanine A Loan Agreement,
dated October 6, 2017, relating to the loan with
respect thereto.
Mezzanine B Loan Agreement, dated as of
October 6, 2017, by and among CPLV Mezz 2
LLC, Wilmington Savings Fund Society, FSB, as
Administrative Agent and Collateral Agent, and
the lenders party thereto, governing the
intermediate mezzanine debt.
Consent and Omnibus Amendment to Loan
Documents, dated as of December 26, 2018, by
and among CPLV Mezz 2 LLC, VICI Properties
L.P. and Wilmington Savings Fund Society, FSB,
as administrative and collateral agent for the
lenders under the Mezzanine B Loan Agreement,
dated October 6, 2017, relating to the loan with
respect thereto.
Credit Agreement, dated as of December 22,
2017, among VICI Properties 1 LLC, as the
borrower, Goldman Sachs Bank USA, as
administrative agent and the other parties thereto.
Amendment No. 1 to Credit Agreement, dated as
of September 24, 2018, by and among VICI
Properties 1 LLC, as the borrower, Goldman
Sachs Bank USA, as administrative agent and the
other parties thereto
Second Lien Intercreditor Agreement, dated as of
October 6, 2017, among VICI Properties 1 LLC
and VICI FC Inc., as the Borrowers, Wilmington
Trust, National Association, as Credit Agreement
Agent, UMB Bank, National Association, as the
Initial Other First Priority Lien Obligations Agent,
and each Other First Priority Lien Obligations
Agent from time to time party thereto.
74
8-K
10.8
12/27/2018
8-K
10.16
10/11/2017
8-K
10.9
12/27/2018
8-K
10.15
10/11/2017
8-K
10.10
12/27/2018
8-K
10.1
12/26/2017
8-K
10.1
9/25/2018
8-K
10.21
10/11/2017
10.31
10.32
10.33
10.34†
10.35†
10.36†
10.37†
Second Lien Collateral Agreement, dated as of
October 6, 2017, among VICI Properties 1 LLC,
VICI FC Inc., each Subsidiary Party thereto, and
UMB Bank, National Association, as Collateral
Agent.
Amended and Restated Agreement of Limited
Partnership of VICI Properties L.P.
Form of Indemnification Agreement, between
VICI Properties Inc. and its directors and officers.
Employment Agreement, dated as of October 6,
2017, by and between VICI Properties Inc. and
Edward Pitoniak.
Employment Agreement, dated as of October 6,
2017, by and between VICI Properties Inc. and
John Payne.
Employment Agreement, dated as of November
27, 2017, by and between VICI Properties Inc.
and David Kieske.
Employment Agreement dated as of April 24,
2018 by and among VICI Properties Inc., VICI
Properties L.P. and Samantha Gallagher.
8-K
10.22
10/11/2017
8-K
10.23
10/11/2017
10
10.20
9/28/2017
8-K
10.25
10/11/2017
8-K
10.26
10/11/2017
S-11/A 10.32
1/17/2018
10-Q
10.2
8/2/2018
10.38† VICI Properties Inc. 2017 Stock Incentive Plan.
8-K
10.28
10/11/2017
10.39
10.40
10.41
10.42
10.43
10.44
Purchase and Sale Agreement, dated as of
November 29, 2017, by and between Harrah’s Las
Vegas, LLC, a Nevada limited liability company,
as seller, and Claudine Property Owner LLC, a
Delaware limited liability company, as buyer.
Purchase and Sale Agreement, dated as of
November 29, 2017, by and between Vegas
Development LLC, a Delaware limited liability
company, as seller and Eastside Convention
Center, LLC, a Delaware limited liability
company, as buyer.
Guaranty, made and entered into as of November
29, 2017 by VICI Properties I LLC, a Delaware
limited liability company, as guarantor.
Common Stock Purchase Agreement, dated as of
November 29, 2017, between the Company and
each purchaser, or the investment advisor or
manager for one or more purchasers, identified on
Schedule I thereto.
Membership Interest Purchase Agreement dated
as of June 18, 2018 by and among VICI
Properties Inc., Riverview Merger Sub Inc., Penn
Tenant II, LLC and Penn National Gaming, Inc.
Second Amended and Restated Right of First
Refusal Agreement, dated as of December 26,
2018, by and between Caesars Entertainment
Corporation and VICI Properties L.P.
75
8-K
10.1
11/30/2017
8-K
10.2
11/30/2017
8-K
10.3
11/30/2017
8-K
10.4
11/30/2017
8-K
10.1
6/19/2018
8-K
10.11
12/27/2018
10.45
10.46
10.47
10.48
Guaranty of Lease as of the 22nd day of
December, 2017, by and between Caesars Resort
Collection, LLC and Claudine Propco, LLC.
Amended and Restated Lease, dated as of
December 22, 2017, by and among Claudine
Propco, LLC and Harrah’s Las Vegas, LLC.
First Amendment to Amended and Restated
Lease, dated as of December 26, 2018, by and
between Claudine Propco, LLC and Harrah’s Las
Vegas, LLC.
Put-Call Right Agreement, dated as of December
22, 2017, by and among Claudine Propco LLC,
Vegas Development Land Owner LLC and 3535
LV Newco, LLC.
S-11/A 10.36
1/17/2018
S-11/A 10.37
1/17/2018
8-K
10.4
12/27/2018
S-11/A 10.38
1/17/2018
10.49† Form of Restricted Stock Grant
10-K
10.39
3/28/2018
8-K
8-K
10.1
8/30/2018
10.2
8/30/2018
10.50†
10.51†
10.52†
Form of LTIP Time-Based Restricted Stock Grant
Agreement
Form of LTIP Performance-Based Restricted
Stock Unit Agreement
Amendment No. 1 to VICI Properties Inc. 2017
Stock Incentive Plan
21.1
23.1
23.2
24.1
31.1
31.2
32.1
32.2
Subsidiaries of VICI Properties Inc.
Consent of Deloitte & Touche LLP for VICI
Properties Inc.
Consent of Deloitte & Touche LLP for Caesars
Entertainment Outdoor
Power of Attorney (included on signature page)
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Certification of Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
Certification of Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
101.INS XBRL Instance Document - the instance
document does not appear in the Interactive Data
File because its XBRL tags are embedded within
the Inline XBRL document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase
Document
76
X
X
X
X
X
X
X
*
*
X
X
X
101.DEF XBRL Taxonomy Extension Definition Linkbase
Document
101.LAB XBRL Taxonomy Extension Label Linkbase
Document
101.PRE XBRL Taxonomy Extension Presentation
Linkbase Document
X
X
X
* Furnished herewith
** Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby
undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the U.S.
Securities and Exchange Commission.
† Management contracts and compensation plans and arrangements.
+ Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the
SEC.
ITEM 16.
Form 10-K Summary
None.
77
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
VICI PROPERTIES INC.
February 14, 2019
By:
/S/ EDWARD B. PITONIAK
Edward B. Pitoniak
Chief Executive Officer and Director
POWER OF ATTORNEY
Each of the officers and directors of VICI Properties Inc., whose signature appears below, in so signing, also makes,
constitutes and appoints each of Edward B. Pitoniak, David A. Kieske and Gabriel F. Wasserman, and each of
them, his or her true and lawful attorneys-in-fact, with full power and substitution, for him or her in any and all
capacities, to execute and cause to be filed with the SEC any and all amendments to this Annual Report on Form
10-K, with exhibits thereto and all other documents connected therewith and to perform any acts necessary to be
done in order to file such documents, and hereby ratifies and confirms all that said attorneys-in-fact or their substitute
or substitutes may do or cause to done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ EDWARD B. PITONIAK
Edward B. Pitoniak
Chief Executive Officer and Director
(Principal Executive Officer)
February 14, 2019
/S/ DAVID A. KIESKE
David A. Kieske
Chief Financial Officer
(Principal Financial Officer)
February 14, 2019
/S/ GABRIEL F. WASSERMAN
Gabriel F. Wasserman
Chief Accounting Officer
(Principal Accounting Officer)
February 14, 2019
/S/ JAMES R. ABRAHAMSON
James R. Abrahamson
Chair of the Board of Directors
February 14, 2019
/S/ DIANA CANTOR
Diana Cantor
/S/ EUGENE I. DAVIS
Eugene I. Davis
/S/ ERIC L. HAUSLER
Eric L. Hausler
/S/ ELIZABETH I. HOLLAND
Elizabeth I. Holland
/S/ CRAIG MACNAB
Craig Macnab
/S/ MICHAEL D. RUMBOLZ
Michael D. Rumbolz
Director
February 14, 2019
Director
February 14, 2019
Director
February 14, 2019
Director
February 14, 2019
Director
February 14, 2019
Director
February 14, 2019
78
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
VICI Properties Inc.:
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2018 and 2017
Year Ended December 31, 2018 and Period from October 6, 2017 to December 31, 2017
Consolidated Statements of Operations and Comprehensive Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Caesars Entertainment Outdoor (Predecessor):
Report of Independent Registered Public Accounting Firm
Combined Balance Sheets as of October 5, 2017 and December 31, 2016
Period from January 1, 2017 to October 5, 2017 and Years Ended December 31, 2016 and 2015
Combined Statements of Operations
Combined Statements of Equity
Combined Statements of Cash Flows
Notes to Combined Financial Statements
VICI Properties Inc.:
Schedule I - Condensed Financial Information of Registrant Parent Company Only
Schedule III - Real Estate Assets and Accumulated Depreciation
F - 2
F - 4
F - 5
F - 6
F - 7
F - 9
F - 41
F - 42
F - 43
F - 44
F - 45
F - 46
S - 1
S - 6
F - 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of VICI Properties Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of VICI Properties Inc. and subsidiaries (the
"Company") as of December 31, 2018 and 2017, the related consolidated statements of operations and
comprehensive income, stockholders' equity, and cash flows, for the year ended December 31, 2018 and for the
period from October 6, 2017 (Formation Date) to December 31, 2017, and the related notes and the schedules
listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018
and 2017, and the results of its operations and its cash flows for year ended December 31, 2018 and for the period
from October 6, 2017 (Formation Date) to December 31, 2017, in conformity with accounting principles generally
accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 14, 2019, expressed an unqualified
opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
New York, New York
February 14, 2019
We have served as the Company's auditor since 2016.
F - 2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of VICI Properties Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of VICI Properties Inc. and subsidiaries (the
“Company”) as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December
31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2018, of the
Company and our report dated February 14, 2019, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
/s/ Deloitte & Touche LLP
New York, New York
February 14, 2019
F - 3
VICI PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31, 2018
December 31, 2017
Assets
Real estate portfolio:
Investments in direct financing leases, net
$
8,916,047
$
Investments in operating leases
Land
Property and equipment used in operations, net
Cash and cash equivalents
Restricted cash
Short-term investments
Other assets
Total assets
Liabilities
Debt, net
Accrued interest
Deferred financing liability
Deferred revenue
Dividends payable
Other liabilities
Total liabilities
Commitments and Contingencies (Note 12)
Stockholders’ equity
Common stock, $0.01 par value, 700,000,000 shares
authorized and 404,729,616 and 300,278,938 shares issued
and outstanding at December 31, 2018 and December 31,
2017, respectively
Preferred stock, $0.01 par value, 50,000,000 shares
authorized and no shares outstanding at December 31, 2018
and 2017
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total VICI stockholders’ equity
Non-controlling interests
Total stockholders’ equity
1,086,658
95,789
71,513
577,883
20,564
520,877
44,037
8,268,643
1,110,400
73,600
74,300
183,646
13,760
—
15,363
$
$
11,333,368
$
9,739,712
4,122,264
$
4,785,756
14,184
73,600
43,605
116,287
62,406
21,595
73,600
68,117
—
14,280
4,432,346
4,963,348
4,047
3,003
—
6,648,430
(22,124)
187,096
6,817,449
83,573
6,901,022
—
4,645,824
—
42,662
4,691,489
84,875
4,776,364
9,739,712
Total liabilities and stockholders’ equity
$
11,333,368
$
See accompanying Notes to Consolidated Financial Statements.
F - 4
VICI PROPERTIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except share and per share data)
Year Ended
December 31, 2018
Period from
October 6, 2017
to December 31, 2017
$
741,564
$
Revenues
Income from direct financing leases
Income from operating leases
Tenant reimbursement of property taxes
Golf operations
Revenues
Operating expenses
General and administrative
Depreciation
Property taxes
Golf operations
Loss on impairment
Acquisition and transaction expenses
Total operating expenses
Operating income
Interest expense
Interest income
Loss from extinguishment of debt
Income before income taxes
Income tax (expense) benefit
Net income
Less: Net income attributable to non-controlling interests
Net income attributable to common stockholders
Net income per common share
Basic
Diluted
Weighted average number of common shares outstanding
Basic
Diluted
Other comprehensive income
Net income attributable to common stockholders
Unrealized loss on cash flow hedges
Comprehensive income attributable to common stockholders
$
$
$
$
$
See accompanying Notes to Consolidated Financial Statements.
F - 5
47,972
81,240
27,201
897,977
24,429
3,686
81,810
17,371
12,334
393
140,023
757,954
(212,663)
11,307
(23,040)
533,558
(1,441)
532,117
(8,498)
523,619
1.43
1.43
$
$
$
150,171
11,529
19,558
6,351
187,609
9,939
751
19,558
4,126
—
9,039
43,413
144,196
(63,354)
282
(38,488)
42,636
1,901
44,537
(1,875)
42,662
0.19
0.19
367,226,395
367,316,901
227,828,844
227,985,455
523,619
(22,124)
501,495
$
$
42,662
—
42,662
Balance as of
October 6,
2017
Net income
Preferred
stock
conversion
Mandatory
debt
conversion
Private equity
placement
Share-based
compensation
Balance as of
December 31,
2017
Net income
Issuance of
common
stock from
Initial Public
Offering
Issuance of
common
stock from
follow-on
offering
Distributions
to non-
controlling
interests
Dividends
declared
Share-based
compensation
Unrealized
loss on cash
flow hedges
Balance as of
December 31,
2018
VICI PROPERTIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
Common
Stock
Preferred
Stock
Additional
paid-in
capital
Accumulat
ed Other
Comprehe
nsive Loss
Retained
Earnings
Total VICI
Stockholders’
Equity
Non-
controlling
Interests
Total
Stockholders’
Equity
$ 1,772
$
120
$ 3,431,781
$
— $
— $ 3,433,673
$ 83,000
$ 3,516,673
—
—
—
—
42,662
42,662
1,875
44,537
514
(120)
(394)
176
541
—
—
—
—
249,811
963,241
1,385
—
—
—
—
—
—
—
—
—
249,987
963,782
1,385
—
—
—
—
—
249,987
963,782
1,385
$ 3,003
$
— $ 4,645,824
$
— $ 42,662
$ 4,691,489
$ 84,875
$ 4,776,364
—
—
—
— 523,619
523,619
8,498
532,117
695
— 1,306,424
—
—
1,307,119
—
1,307,119
345
—
693,844
—
—
—
—
4
—
—
—
—
—
—
—
—
694,189
—
694,189
—
—
(9,800)
(9,800)
— (379,185)
(379,185)
2,338
—
—
(22,124)
—
—
2,342
(22,124)
—
—
—
(379,185)
2,342
(22,124)
$ 4,047
$
— $ 6,648,430
$ (22,124) $ 187,096
$ 6,817,449
$ 83,573
$ 6,901,022
See accompanying Notes to Consolidated Financial Statements.
F - 6
VICI PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to cash flows provided
by operating activities:
Direct financing lease adjustments
Stock-based compensation
Depreciation
Amortization of debt issuance costs and original issue
discount
Loss on impairment
Loss on extinguishment of debt
Deferred income taxes
Change in operating assets and liabilities:
Other assets
Accrued interest
Deferred revenue
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities
Investments in direct financing leases
Capitalized transaction costs
Lease modification fee
Investments in short-term investments
Maturities of short-term investments
Proceeds from sale of land
Acquisition of property and equipment, net of change in
related payables
Net cash used in investing activities
Cash flows from financing activities
Proceeds from initial public offering of common stock
Proceeds from follow-on offering of common stock
Proceeds from private placement of common stock
Payment of Term Loan B Facility
Payment of Revolving Credit Facility
Payment of Second Lien Notes
Proceeds from issuance of Term Loan B Facility, net
Proceeds from issuance of Revolving Credit Facility, net
Payment of Prior Term Loan
Payment of Prior First Lien Notes
Repurchase of Mezzanine Debt
Debt issuance costs
Proceeds from unrecognized sale of real estate
Mandatory debt conversion costs
F - 7
Year Ended
December 31, 2018
Period from
October 6, 2017
to December 31, 2017
$
532,117
$
44,537
(45,404)
2,342
3,686
5,976
12,334
23,040
(348)
(22,945)
(7,411)
(24,512)
25,207
504,082
(771,507)
(6,780)
159,000
(942,311)
421,434
186
(899)
(1,140,877)
1,307,119
694,374
—
(100,000)
(300,000)
(290,058)
—
—
—
—
—
(1,117)
—
—
(8,443)
1,385
751
156
—
—
(1,912)
(7,159)
21,595
68,081
10,449
129,440
(1,136,200)
—
—
—
—
—
(51)
(1,136,251)
—
—
963,782
—
—
—
2,194,686
298,000
(1,638,387)
(311,721)
(400,000)
(31,501)
73,600
(13)
VICI PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Distributions to non-controlling interests
Dividends paid
Net cash provided by financing activities
Net increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
Supplemental cash flow information:
Cash paid for interest
Cash paid for income taxes
Supplemental non-cash investing and financing activity:
Dividends declared, not paid
Transfer of investments in operating leases to land
Transfer of investments in direct financing leases to
investments in operating leases
Changes in accruals for additions to deferred transaction
costs
$
$
$
(9,800)
(262,682)
1,037,836
401,041
197,406
598,447
$
213,309
$
1,375
116,503
$
22,189
10,967
742
—
—
1,148,446
141,635
55,771
197,406
36,779
—
—
—
—
—
See accompanying Notes to Consolidated Financial Statements.
F - 8
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In this Annual Report on Form 10-K, the words ”VICI,” the “Company,” “we,” “our,” and “us” refer to VICI
Properties Inc. and its subsidiaries, on a consolidated basis, unless otherwise stated or the context requires
otherwise.
We refer to (i) our Consolidated Financial Statements as our “Financial Statements,” (ii) our Consolidated Balance
Sheets as our “Balance Sheet,” (iii) our Consolidated Statements of Operations and Comprehensive Income as
our “Statement of Operations,” and (iv) our Consolidated Statement of Cash Flows as our “Statement of Cash
Flows.” References to numbered “Notes” refer to the Notes to our Consolidated Financial Statements.
“Caesars” refers to Caesars Entertainment Corporation, a Delaware corporation, and its subsidiaries.
“Caesars Entertainment Outdoor” refers to the historical operations of the golf courses that were transferred from
CEOC to VICI Golf on the Formation Date.
“Caesars Lease Agreements” refer collectively to the CPLV Lease Agreement, the Non-CPLV Lease Agreement,
the Joliet Lease Agreement and the HLV Lease Agreement, unless the context otherwise requires.
“CEOC” refers to Caesars Entertainment Operating Company, Inc., a Delaware corporation, and its subsidiaries,
prior to the Formation Date, and following the Formation Date, CEOC, LLC, a Delaware limited liability company
and its subsidiaries. CEOC is a subsidiary of Caesars.
“CPLV CMBS Debt” refers to $1.55 billion of asset-level real estate mortgage financing of Caesars Palace Las
Vegas, incurred by a subsidiary of the Operating Partnership on October 6, 2017.
“CPLV Lease Agreement” refers to the lease agreement for Caesars Palace Las Vegas, as amended from time to
time.
“CRC” refers to Caesars Resort Collection, LLC, a Delaware limited liability company which is a subsidiary of
Caesars.
“Eastside Property” refers to 18.4 acres of property located in Las Vegas, Nevada, east of Harrah’s Las Vegas
that we sold to Caesars in December, 2017.
“Formation Date” refers to October 6, 2017.
“Formation Lease Agreements” refers to the CPLV Lease Agreement, the Joliet Lease Agreement and the Non-
CPLV Lease Agreement, collectively.
“Greektown” refers to the real estate assets associated with the Greektown Casino-Hotel, located in Detroit,
Michigan. On November 13, 2018, we entered into definitive agreements to acquire all of the land and real estate
assets associated with Greektown,
“HLV Lease Agreement” refers to the lease agreement for the Harrah’s Las Vegas facilities, as amended from
time to time.
“Joliet Lease Agreement” refers to the lease agreement for the facilities in Joliet, Illinois, as amended from time
to time.
“Lease Agreements” refer collectively to the Caesars Lease Agreements and the Margaritaville Lease Agreement,
unless the context otherwise requires.
“Margaritaville Lease Agreement” refers to the lease agreement for Margaritaville Resort Casino.
F - 9
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
“Margaritaville Resort Casino” refers to the real estate of Margaritaville Resort Casino, located in Bossier City,
Louisiana, which we purchased on January 2, 2019.
“Non-CPLV Lease Agreement” refers to the lease agreement for regional properties other than the facilities in
Joliet, Illinois, as amended from time to time.
The “Operating Partnership” refers to VICI Properties L.P., a Delaware limited partnership and a wholly owned
subsidiary of VICI.
“Penn National” refers to Penn National Gaming, Inc. and its subsidiaries.
“Revolving Credit Facility” refers to the five-year first lien revolving credit facility entered into by VICI PropCo
in December 2017.
“Second Lien Notes” refers to $766.9 million aggregate principal amount of 8.0% second priority senior secured
notes due 2023 issued by a subsidiary of the Operating Partnership in October 2017, of which approximately
$498.5 million aggregate principal amount remains outstanding.
“Term Loan B Facility” refers to the seven-year senior secured first lien term loan B facility entered into by VICI
PropCo in December 2017.
“VICI Golf” refers to VICI Golf LLC, a Delaware limited liability company that is the owner and operator of the
Caesars Entertainment Outdoor business.
“VICI PropCo” or “PropCo” refers to VICI Properties 1 LLC, a Delaware limited liability company and an
indirect wholly-owned subsidiary of VICI.
Note 1 — Business and Organization
We are a Maryland corporation that is primarily engaged in the business of owning and acquiring gaming, hospitality
and entertainment destinations, subject to long-term triple net leases. Our national, geographically diverse portfolio
consists of 21 market-leading properties, including Caesars Palace Las Vegas and Harrah’s Las Vegas. As of
December 31, 2018, we leased all of our properties to subsidiaries of Caesars; however, following our acquisition
of Margaritaville Resort Casino on January 2, 2019, we lease such property to Penn National. We also own and
operate four championship golf courses located near certain of our properties.
We were created to hold certain real estate assets owned by CEOC, upon CEOC’s emergence from bankruptcy.
Pursuant to CEOC’s Plan of Reorganization, on Formation Date, the historical business of CEOC was separated
by means of a spin-off transaction whereby the real property assets (“Formation Properties”) of CEOC and certain
of its subsidiaries, including four golf course businesses, were transferred to us through a series of transactions.
Following the Formation Date, we are a stand-alone entity that was initially owned by certain former creditors of
CEOC.
We have elected to be taxed as a real estate investment trust (“REIT”) for U.S. Federal income tax purposes
commencing with our taxable year ended December 31, 2017. We conduct our real property business through our
Operating Partnership and our golf course business, through a taxable REIT subsidiary (a “TRS”), VICI Golf.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards
F - 10
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the applicable
rules and regulations of the Securities and Exchange Commission (“SEC”).
On the Formation Date, upon CEOC’s emergence from bankruptcy, we adopted fresh-start reporting in accordance
with provisions of ASC 852, “Reorganizations” (“ASC 852”). In the application of fresh start accounting, we
allocated the enterprise value to the fair value of assets and liabilities in conformity with the guidance for the
acquisition method of accounting for business combinations under ASC 805, “Business Combinations” (“ASC
805”).
Principles of Consolidation and Non-controlling Interest
The accompanying consolidated Financial Statements include our accounts and the accounts of our Operating
Partnership, and the subsidiaries in which we or our Operating Partnership has a controlling interest, which includes
a single variable interest entity (“VIE”) where we are the primary beneficiary. All intercompany accounts and
transactions have been eliminated in consolidation. We consolidate all subsidiaries in which we have a controlling
financial interest and VIEs for which we or one of our consolidated subsidiaries is the primary beneficiary.
We present non-controlling interest and classify such interest as a component of consolidated stockholders’ equity,
separate from VICI stockholders’ equity. Our non-controlling interest represents a 20% third-party ownership of
Harrah’s Joliet LandCo LLC, the entity that owns the Harrah’s Joliet facility and is the lessor under the related
Joliet Lease Agreement.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from these estimates.
Reportable Segments
Our real property business and our golf course business represent two reportable segments. The real property
business segment consists of leased real property and represents the substantial majority of our business. The golf
course business segment consists of four golf courses, each of which is an operating segment and is aggregated
into one reportable segment.
Corporate and overhead costs are allocated to reportable segments based upon revenue or headcount. Management
believes that the assumptions and methodologies used in the allocation of such expenses are reasonable.
Cash, Cash Equivalents, and Restricted Cash
Cash consists of cash-on-hand and cash-in-bank. Any investments with an original maturity of three months or
less from the date of purchase are considered cash equivalents and are stated at the lower of cost or market value.
Investments with an original maturity of greater than three months and less than one year from the date of purchase
are considered short-term investments and are stated at fair value.
As of December 31, 2018, restricted cash was primarily comprised of funds paid by us into a restricted account
for a lender required FF&E replacement reserve. Pursuant to the amended CMBS Loan Agreement we are required
to fund into escrow certain amounts to be used for FF&E replacement should Caesars vacate the property and
remove the furniture, fixtures and equipment upon exit. As of December 31, 2017, restricted cash was comprised
of funds paid monthly by Caesars for the CPLV rent that are held in a restricted cash management account for the
purpose of funding debt service or impositions related to CPLV debt issued by us. Once all debt service and
impositions are paid out of restricted cash, the remaining funds are returned to our unrestricted operating account.
F - 11
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Balance
Sheet to the total of the same such amounts presented in the Statement of Cash Flows.
(In thousands)
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash shown in the
Statement of Cash Flows
Short-Term Investments
December 31, 2018
577,883
$
December 31, 2017
183,646
$
20,564
13,760
$
598,447
$
197,406
We generally invest our excess cash in short-term investment grade commercial paper as well as discount notes
issued by government-sponsored enterprises including the Federal Home Loan Mortgage Corporation and certain
of the Federal Home Loan Banks. These investments generally have original maturities between 91 and 120 days
and are accounted for as available for sale securities. As of December 31, 2018, we had $520.9 million of short-
term investments. We did not have any short-term investments as of December 31, 2017.
Investments in Direct Financing and Operating Leases
Upon lease inception, we assess lease classification under ASC 840 “Leases” (“ASC 840”) to determine if the
lease should be classified as capital or operating. If a lease is determined to be a capital lease, we further assess if
it is a direct financing or sales-type lease as defined in ASC 840. For leases determined to be direct financing
capital leases, upon execution of the lease transaction, the asset is classified to Investments in direct financing
leases, net. For direct financing leases where the land represents greater than 25% of the fair value of the underlying
asset, the land and building components of the lease are bifurcated and separately assessed for classification.
We have determined that all of our leases meet the definition of direct financing leases under ASC 840, with the
exception of the land component of our investment in Caesars Palace Las Vegas and certain parcels of land contained
in the Non-CPLV Lease Agreement. We recognize the related income from our direct financing leases on an effective
interest basis at a constant rate of return over the terms of the applicable leases. As a result, the cash payments
accounted for under direct financing leases will not equal income from direct financing leases. Rather, a portion
of the cash rent we receive is recorded as Income from direct financing leases in our Statement of Operations and
a portion is recorded as a change to the Investments in direct financing leases, net.
Initial direct costs incurred in connection with direct financing lease transactions are included in the balance of
Investments in direct financing leases, net. Such amounts will be recognized as a reduction to Income from direct
financing leases over the life of the lease using the effective interest method.
Under the operating lease model, as the lessor, at lease inception the land is recorded as Investments in operating
leases in our Balance Sheet and we record income from operating leases on a straight-line basis over the lease
term. The amount of annual minimum lease payments attributable to the land element after deducting executory
costs, including any profit thereon, is determined by applying the lessee’s incremental borrowing rate to the value
of the land. We record this lease income as Income from operating leases in our Statement of Operations.
Investments in Land
Vacant, Non-Operating Land
On the Formation Date, CEOC transferred certain vacant, non-operating land parcels to us, which are subject to
the provisions of the Non-CPLV Lease Agreement. The Non-CPLV Lease Agreement allows for the sale of these
vacant, non-operating land parcels without Caesars’ consent since they are specifically identified as de minimis to
the operations of Caesars. All of the land parcels are located outside of Las Vegas and none of the land parcels are
a component of the operations of our regional property portfolio. In the 2018 we reclassified the remaining $22.2
million carrying value of the vacant, non-operating land from Investments in operating leases to Land.
F - 12
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Eastside Property
In 2017, we sold certain land parcels known as the Eastside Property to Caesars for a sales price of $73.6 million.
It was determined that the transaction does not meet the requirements of a completed sale for accounting purposes
due to a put/call option on the land parcels and a convention center currently in process of being constructed
(“Caesars Forum Convention Center”). The amount of $73.6 million is presented as Land with a corresponding
amount of $73.6 million recorded as Deferred financing liability in our Consolidated Balance Sheet.
Property and Equipment Used in Operations
Property and equipment used in operations represents assets for VICI Golf, our golf operations, and were recorded
at fair value of $75.0 million at the Formation Date. We assign lives to our assets based on our standard policy,
which is established by management as representative of the useful life of each category of asset.
Additions to property used in operations are stated at cost. We capitalize the costs of improvements that extend
the life of the asset and expense maintenance and repair costs as incurred. Gains or losses on the dispositions of
property and equipment are recognized in the period of disposal.
Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset
or the related lease as follows:
Depreciable land improvements
Building and improvements
Furniture and equipment
Impairment
2-50 years
5-25 years
2-5 years
We assess our real estate portfolio and property and equipment used in operations for impairment on a quarterly
basis or whenever certain events or changes in circumstances indicate a possible impairment of the carrying value
of the asset. Events or circumstances that may occur include changes in management’s intended holding period or
potential sale to a third party, significant changes in real estate market conditions or tenant financial difficulties
resulting in non-payment of the lease. Impairments are measured as the amount by which the current book value
of the asset exceeds the estimated fair value of the asset. With respect to estimated expected future cash flows for
determining whether an asset is impaired, assets are grouped at the lowest level of identifiable cash flows.
If and when an investment in direct financing leases is identified for impairment evaluation, we will apply the
guidance in both ASC 310, “Receivables” (“ASC 310”) and ASC 360 “Property, Plant and Equipment” (“ASC
360”). Under ASC 310, the lease receivable portion of the net investment in direct financing lease is identified for
impairment when it becomes probable that we will be unable to collect all rental payments associated with our
investment in direct financing leases. Under ASC 360, the residual value portion of the net investment in direct
financing leases is monitored for impairment under the same method we apply to real estate investments.
Tenant Reimbursement of Property Taxes
Real estate taxes paid directly by our tenants to taxing authorities are recorded gross on our Balance Sheets and
Income Statements, as we have concluded we are the primary obligor. Such amounts are presented as revenues
from tenant reimbursement of property taxes with a corresponding and offsetting property tax expense. Upon
adoption of ASC 842, “Leases” (“ASC 842”) in the first quarter of 2019, we believe such amounts will be presented
net, as the tenants pay the real estate taxes directly to the applicable taxing authority. Refer to Note 3 - Recently
Issued Accounting Pronouncements for further details.
Revenue from Golf Operations
On the Formation Date, subsidiaries of VICI Golf entered into a golf course use agreement (the “Golf Course Use
Agreement”) with New CEOC and Caesars Enterprise Services, LLC (“CES”) (collectively, the “users”), whereby
F - 13
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the users were granted certain priority rights and privileges with respect to access and use of certain golf course
properties. Payments under the Golf Course Use Agreement are currently comprised of a $10.2 million annual
membership fee, $3.1 million of use fees and approximately $1.2 million of minimum rounds fees. The annual
membership fee, use fees and minimum round fees are subject to an annual escalator beginning at the times provided
under the Golf Course Use Agreement. Revenue from the Golf Course Use Agreement is recognized in accordance
with ASC 606, “Revenue From Contracts With Customers”.
Additional revenues from golf course operations, food and beverage and merchandise sales are recognized at the
time of sale or when the service is provided and are reported net of sales tax. Golf memberships sold to individuals
are not refundable and are deferred and recognized within golf revenue in the Statements of Operations over the
expected life of an active membership, which is typically one year or less.
Fair Value Measurements
We measure the fair value of financial instruments based on assumptions that market participants would use in
pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements,
a fair value hierarchy distinguishes between market participant assumptions based on market data obtained from
sources independent of the reporting entity and the reporting entity’s own assumptions about market participant
assumptions. In accordance with the fair value hierarchy, Level 1 assets/liabilities are valued based on quoted
prices for identical instruments in active markets, Level 2 assets/liabilities are valued based on quoted prices in
active markets for similar instruments, on quoted prices in less active or inactive markets, or on other “observable”
market inputs and Level 3 assets/liabilities are valued based significantly on “unobservable” market inputs.
Refer to Note 11 - Fair Value for further information.
Derivative Financial Instruments
We record our derivative financial instruments as either Other assets or Other liabilities on our Balance Sheet at
fair value.
The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether
we elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging
relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying
as a hedge of the exposure to variability in expected future cash flows are considered cash flow hedges. We formally
document our hedge relationships and designation at the contract’s inception. This documentation includes the
identification of the hedging instruments and the hedged items, its risk management objectives, strategy for
undertaking the hedge transaction and our evaluation of the effectiveness of its hedged transaction.
On a quarterly basis, we also assess whether the derivative we designated in each hedging relationship is expected
to be, and has been, highly effective in offsetting changes in the value or cash flows of the hedged items. If it is
determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is
discontinued and the changes in fair value of the instrument are included in net income prospectively. If the hedge
relationship is terminated, then the value of the derivative is recorded in Accumulated other comprehensive income
and recognized in earnings when the cash flows that were hedged affect earnings. Changes in the fair value of our
derivative instruments that qualify as hedges are reported as a component of Accumulated other comprehensive
income on our consolidated financial statements.
We use derivative instruments to mitigate the effects of interest rate volatility inherent in our variable rate debt,
which could unfavorably impact our future earnings and forecasted cash flows. We do not use derivative instruments
for speculative or trading purposes.
Income Taxes-REIT Qualification
We have elected to be taxed as a REIT for U.S. Federal income tax purposes commencing with our taxable year
ended December 31, 2017. To qualify as a REIT, we must meet certain organizational and operational requirements,
including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders, determined
without regard to the dividends paid deduction and excluding any net capital gains. As a REIT, we generally will
F - 14
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
not be subject to federal income tax on income that we pay as distributions to our stockholders. If we fail to qualify
as a REIT in any taxable year, we will be subject to U.S. federal income tax on our taxable income at regular
corporate income tax rates, and distributions paid to our stockholders would not be deductible by us in computing
taxable income. Additionally, any resulting corporate liability created if we fail to qualify as a REIT could be
substantial and could materially and adversely affect our net income and net cash available for distribution to
stockholders. Unless we were entitled to relief under certain Code provisions, we also would be disqualified from
re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be
taxed as a REIT.
The TRS operations (represented by the four golf course businesses) are able to engage in activities resulting in
income that would not be qualifying income for a REIT. As a result, certain activities of the Company which occur
within its TRS operations are subject to federal and state income taxes. The provision for income taxes includes
current and deferred portions. The current income tax provision differs from the amount of income tax currently
payable because of temporary differences in the recognition of certain income and expense items between financial
reporting and income tax reporting. We use the asset and liability method to provide for income taxes, which
requires that our income tax expense reflect the expected future tax consequences of temporary differences between
the carrying amounts of assets or liabilities for financial reporting versus income tax purposes. Accordingly, a
deferred tax asset or liability for each temporary difference is determined based on enacted tax rates that we expect
to be in effect when the underlying items of income and expense are realized and the differences reverse.
We recognize any interest and penalties, as incurred, in general and administrative expenses in our Statement of
Operations.
Debt Issuance Costs
Debt issuance costs are deferred and amortized to interest expense over the contractual term of the underlying
indebtedness. We present unamortized deferred financing costs as a direct deduction from the carrying amount of
the associated debt liability.
Acquisition and Transaction Expenses
Dead deal costs and other transaction and acquisition related expenses which are not capitalizable under GAAP
are expensed in the period they occur.
Stock-Based Compensation
We account for stock-based compensation under ASC 718, Compensation - Stock Compensation (“ASC 718”),
which requires us to expense the cost of employee services received in exchange for an award of equity instruments
based on the grant-date fair value of the award. This expense is recognized ratably over the requisite service period
following the date of grant. For non-vested share awards that vest over a predetermined time period, we use the10-
day volume weighted average price using the 10 trading days ending on the grant date. For non-vested share awards
that vest based on market conditions, we use a Monte Carlo simulation (risk-neutral approach) to determine the
value of each tranche.
The unrecognized compensation relating to awards under our stock incentive plan will be amortized to general
and administrative expense over the awards’ remaining vesting periods. Vesting periods for award of equity
instruments range from zero to four years.
See Note 15—Stock-Based Compensation for further information related to the stock-based compensation.
Earnings Per Share
Earnings per share (”EPS”) is calculated in accordance with ASC 260, “Earnings Per Share”. Basic EPS is computed
by dividing net income applicable to common stockholders by the weighted-average number of shares of common
stock outstanding during the period. Diluted EPS reflects the additional dilution for all potentially-dilutive securities
including those from our stock incentive plan.
F - 15
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
See Note 14—Earnings Per Share for the detailed EPS calculation.
Underwriting Commissions and Offering Costs
Underwriting commissions and offering costs incurred in connection with common stock offerings are reflected
as a reduction of additional paid-in capital. Costs incurred that are not directly associated with the completion of
a common stock offering are expensed when incurred.
Concentrations of Credit Risk
As of December 31, 2018, all of our real estate holdings (other than VICI Golf) are currently leased by us to CEOC
or other affiliates of Caesars, and most of our revenues are derived from the Lease Agreements that we have with
CEOC or other affiliates of Caesars. Additionally, our properties on the Las Vegas Strip generated approximately
36% of our lease revenue for the year ended December 31, 2018. Other than having a single tenant from which
we will derive most of our revenue and our concentration in the Las Vegas market, we do not believe there are any
other significant concentrations of credit risk.
On November 13, 2018, we entered into definitive agreements to acquire from affiliates of JACK Entertainment
LLC all of the land and real estate assets associated with Greektown located in Detroit, Michigan, for $700.0
million in cash, and an affiliate of Penn National has agreed to acquire the operating assets of Greektown for $300.0
million in cash (together, the “Greektown Acquisition”). Additionally, on January 2, 2019 we completed the
previously disclosed transaction to acquire the Margaritaville Resort Casino located in Bossier City, Louisiana,
with Penn National . These transactions will result in us having a more diversified tenant base.
Note 3 — Recently Issued Accounting Pronouncements
Accounting Standard Update (“ASU”) No. 2018-13 - Fair Value Measurement (Topic 820) - August 2018: The
amendments in the update remove, modify and add certain fair value disclosures as a broader initiative to improve
the effectiveness of financial disclosures. The ASU is effective for all entities for fiscal years beginning after
December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified
disclosures upon issuance of this ASU. In 2018 we elected to early adopt this ASU, which resulted in no material
changes to our fair value disclosures.
ASU No. 2017-12 - Derivatives and Hedging (Topic 815) - August 2017: The amendments refine and expand
hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency
around how economic results are presented, both on the face of the financial statements and in the footnotes. It
also makes certain targeted improvements to simplify the application of hedge accounting guidance. The transition
guidance provides the option of early adoption using a modified retrospective transition method in any interim
period after issuance of the update, or alternatively requires adoption for fiscal years beginning after December
15, 2018. We adopted this guidance in the quarter ended June 30, 2018 in connection with the cash flow hedges
that we entered into in April 2018. Since we did not hold any derivatives prior to implementation of this guidance,
the adoption had no impact on our Financial Statements.
ASU No. 2016-13 - Financial Instruments-Credit Losses (Topic 326) - June 2016 (as amended through November
2018): This amended guidance changes how entities will measure credit losses for most financial assets and certain
other instruments, including direct financing leases, that are not measured at fair value through net income. The
guidance replaces the current “incurred loss” model with an “expected loss” approach, which will generally result
in earlier recognition of allowance for losses. The guidance is effective for fiscal years beginning after December
15, 2019, including interim periods within those fiscal years. Early adoption is permitted after December 2018.
We are currently evaluating the impact of adopting the new standard and have determined that, upon adoption, we
will be required to estimate and record credit losses related to our investments in deferred financing leases.
F - 16
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ASU No. 2016-02 - Leases (Topic 842) - February 2016 (as amended through December 2018): The amended
guidance requires most lease obligations to be recognized as a right-of-use asset with a corresponding liability on
the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the
amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2018. The guidance should be implemented
for the earliest period presented using a modified retrospective approach, which includes optional practical
expedients primarily focused on leases that commence before the effective date. We plan to elect to use such
practical expedients upon adoption on January 1, 2019.
We are currently finalizing our evaluation of the impact of adopting this new standard on our Financial Statements
but do not expect the adoption of the new guidance to have a material impact on the accounting treatment of our
triple-net tenant leases, which are the primary source of our revenues. However, upon adoption, we anticipate that
certain initial direct costs associated with the execution of lease agreements such as legal fees and transaction costs
will no longer be capitalizable and will instead be expensed in the period incurred. Additionally, pursuant to ASU
2018-20, tenant reimbursements of property taxes will be presented on a net basis, as the lessor pays for such costs
directly. Finally, we anticipate that long-term leases entered into or modified subsequent to our adoption will be
considered sales-type leases, as defined in ASC 842. The accounting for a sales-type lease is substantially consistent
with that of the current accounting for our deferred financing leases. If we enter into future sale-lease back
transactions with Caesars or other operators and the lease is determined to be a sales-type lease under ASC 842,
we will be required to account for such transaction as a financing receivable.
In relation to certain leases for which we are the lessee, such as the ground lease on the Cascata golf course, upon
adoption we will be required to record a right of use asset and corresponding lease liability on our balance sheet.
We do not anticipate a material change to our lease expense as a result of the change in accounting as such expense
will still be recorded on a straight-line basis.
ASU No. 2014-09 - Revenue from Contracts with Customers - May 2014 (amended January 2017): The new
guidance is intended to clarify the principles for recognizing revenue and to develop a common revenue standard
for GAAP applicable to revenue transactions. This guidance is effective for annual reporting periods beginning
after December 15, 2017, including interim periods within those reporting periods. We adopted this standard
effective January 1, 2018. There was no material impact on our Financial Statements as the majority of our revenue
recognition policies was not impacted by the new standard, as leases, which represent the substantial majority of
our revenues, were excluded from the new guidance. The adoption of this guidance did not change the timing or
process in which we recognize golf revenue.
Note 4 — Fresh-Start Reporting
On the Formation Date, we adopted fresh-start reporting in accordance with provisions of ASC 852. In the
application of fresh start accounting, we allocated the enterprise value to the fair value of assets and liabilities in
conformity with the guidance for the acquisition method of accounting for business combinations under ASC 805.
The amount remaining after allocation of the enterprise value to the fair value of identified tangible and intangible
assets and liabilities, if any, would be reflected as goodwill and subject to periodic evaluation for impairment. In
addition to fresh start accounting, our Financial Statements reflect all effects of the transactions contemplated by
the Plan of Reorganization.
Under ASC 852, fresh-start reporting is required upon emergence from Chapter 11 if (i) the value of the assets of
the emerging entity immediately before the date of confirmation is less than the total of all post-petition liabilities
and allowed claims; and (ii) holders of existing voting shares immediately before confirmation receive less than
50% of the voting shares of the emerging entity. Accordingly, we qualified for and adopted fresh-start reporting
as of October 6, 2017. Adopting fresh-start reporting results in a new reporting entity with no beginning retained
earnings or deficits. It also includes the issuance of new shares of the reorganized entity caused by change of control
under ASC 852.
F - 17
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The net book value of the real estate assets contributed to us by CEOC under the Plan of Reorganization was $4.8
billion. Based upon the analysis we completed with the assistance of outside third-party valuation experts, we
concluded the fair value of these assets were $8.3 billion, net of non-controlling interests related to the Joliet
facilities of $83.0 million.
Real estate assets were valued using an income approach and, more specifically, the discounted cash flow (“DCF”)
technique. Future lease payments for the properties were modeled according to the terms contained in the initial
Lease Agreements. Although we believe the length of the leases with CEOC will extend to the full thirty-five years
lease term (assuming the exercise of tenant renewal options) per the initial Lease Agreements, the real property
valuation analysis contemplates typical market participant oriented nine- and fourteen-year hold periods as a best
methodology to estimate the value of the cash flow during the full term of the lease. Appropriate expenses were
estimated and deducted from the future contract rent to derive expected future cash flows. Terminal or reversion
values are calculated for both hold period scenarios based on estimated market terminal capitalization rates. The
DCF technique estimates value by discounting back to present value the anticipated future cash flows for the
interim periods in the DCF model plus the present value of the terminal values using an appropriate discount rate.
The discount rate was derived based upon a weighted average cost of capital (“WACC”). The WACC was estimated
based upon observations of a peer group of guideline companies whose stock was publicly traded on recognized
exchanges as such guideline companies were considered comparable to us. Factors considered in deriving a WACC
included general market rates of return at the valuation date, business risks associated with the industry in which
VICI operates, and other specific risk factors deemed appropriate. An estimated discount rate of 9.0% was selected
as a base rate for all properties. Individual property discount rates were then adjusted based on the specific additional
aforementioned risk factors and, once adjusted, ranged from 7.5% to 17.5%.
F - 18
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following fresh-start balance sheet illustrates the financial effects of the implementation of the Plan and the
adoption of fresh-start reporting. It reflects the effect of the completion of the transactions included in the Plan,
including the issuance of equity and the contribution of properties.
(In thousands)
Assets
Real estate portfolio:
Investments in direct financing leases, net
Investments in operating leases
Property and equipment used in operations, net
Cash and cash equivalents
Other assets
Total assets
Liabilities
Debt
Deferred income taxes
Accounts payable and accrued expenses
Total liabilities
Redeemable preferred stock
Stockholders’ Equity
Common stock
Additional paid-in capital
Total VICI stockholders’ equity
Non-controlling interests
Total stockholders’ equity
Total liabilities and stockholders’ equity
Fair Value as of Formation Date
(October 6, 2017)
$
$
$
$
7,124,000
1,184,000
75,000
55,771
681
8,439,452
4,917,000
5,631
149
4,922,780
759,000
1,772
2,672,900
2,674,672
83,000
2,757,672
8,439,452
F - 19
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 5 — Property Transactions
2018 Transactions
Our significant activities in 2018, in reverse chronological order, are as follows:
Purchase of Harrah’s Philadelphia and Octavius Tower
On December 26, 2018 we completed the previously announced transaction with Caesars to acquire all of the land
and real estate assets associated with Harrah’s Philadelphia Casino and Racetrack (“Harrah’s Philadelphia”) from
Caesars for $241.5 million, which purchase price was reduced by $159.0 million to reflect the aggregate net present
value of the modifications to the Caesars Lease Agreements (as further described below and in Note 6 - Real Estate
Investments), resulting in cash consideration of approximately $82.5 million. In addition, on July 11, 2018, we
completed the previously announced transaction with Caesars to acquire, and lease back, all of the land and real
estate assets associated with the Octavius Tower at Caesars Palace (“Octavius Tower”) for a purchase price of
$507.5 million in cash. Octavius Tower is operated pursuant to the CPLV Lease Agreement, as amended, which
provides for annual rent with respect to Octavius Tower of $35.0 million payable in equal consecutive monthly
installments and has an initial term that expires on October 31, 2032, with four five-year renewal options.
In connection with the closing of the acquisition of Harrah’s Philadelphia, each of the Non-CPLV Lease Agreement
and the CPLV Lease Agreement were amended to, among other things, include Harrah’s Philadelphia and Octavius
Tower, respectively, and Caesars will continue to operate both properties under the terms of such leases as amended.
The amendment to the Non-CPLV Lease Agreement provided for an additional $21.0 million in annual rent for
Harrah’s Philadelphia, which is subject to the amended provisions of the lease. The HLV Lease Agreement and
the Joliet Lease Agreement were modified at such time to achieve consistency with the other Lease Agreements.
Refer to Note 6 - Real Estate Portfolio for a summary of the terms of the modified leases.
Purchase of Greektown
On November 13, 2018, we entered into definitive agreements to acquire from affiliates of JACK Entertainment
LLC all of the land and real estate assets associated with Greektown, for $700.0 million in cash. Simultaneous
with the closing of the Greektown Acquisition, the Company will enter into a triple-net lease agreement for
Greektown with a subsidiary of Penn National. The lease will have an initial total annual rent of $55.6 million and
an initial term of 15 years, with four five-year tenant renewal options. The tenant’s obligations under the lease will
be guaranteed by Penn National and certain of its subsidiaries. The transaction is expected to close mid-2019 and
is subject to regulatory approvals and customary closing conditions. We can provide no assurances that the
acquisition of Greektown will be consummated on the terms or timeframe described herein, or at all.
Purchase of Margaritaville Resort Casino
On June 18, 2018, we entered into definitive agreements to acquire (i) the land and real estate assets of the
Margaritaville Resort Casino, located in Bossier City, Louisiana, for $261.1 million and (ii) concurrently with the
closing of the transaction, triple-net lease the property to a subsidiary of Penn National. The lease has an initial
annual rent of $23.2 million and an initial term of 15 years, with four five-year renewal options. The tenant’s
obligations under the lease are guaranteed by Penn National and certain of its subsidiaries. We subsequently closed
on the acquisition of Margaritaville Resort Casino on January 2, 2019.
2017 Transactions
Our significant activities in 2017, in reverse chronological order, are as follows:
Purchase of Harrah’s Las Vegas Real Estate
In December 2017, we completed a transaction with Caesars, pursuant to which we acquired all of the land and
F - 20
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
real property improvements associated with the property commonly known as Harrah’s Las Vegas Hotel & Casino
(“Harrah’s Las Vegas” or “HLV”) for a purchase price of $1.1 billion.
At closing, we entered into the HLV Lease Agreement, whereby Caesars leased back Harrah’s Las Vegas from us.
Under the terms of the HLV Lease Agreement, Caesars is responsible for ongoing costs relating to the property,
including property taxes, insurance, and maintenance and repair costs that arise from the use of the property and
are required to continue to invest in the property and related equipment. The HLV Lease Agreement has an initial
15-year term with four five-year renewal terms exercisable at the option of the lessee (subject to certain conditions)
and provides for a fixed base rent for each of the first seven years of the lease term equal to $87.4 million annually.
We accounted for this transaction as a direct financing lease on our Balance Sheet.
Sale of Eastside Property
In December 2017, we sold the Eastside Property to Caesars for $73.6 million.
Pursuant to this agreement, Caesars is responsible for the remediation of the flood plain mechanism on the Eastside
Property. The costs of the remediation work will be borne fifty percent (50%) by us and fifty percent (50%) by
Caesars, pari passu, until such time as the total cost incurred in connection with the remediation work is equal to
$12.0 million. Any costs in excess of $12.0 million incurred in connection with the remediation work shall be the
sole responsibility of Caesars.
Due to the put/call option on the land parcels, as described below, it was determined that the transaction does not
meet the requirements of a completed sale for accounting purposes. As a result, at December 31, 2017, we
reclassified $73.6 million from Investment in operating leases to Land. Additionally, we recorded a $73.6 million
Deferred financing liability on our Balance Sheet.
Put/Call Agreement
The Caesars Forum Convention Center is currently being constructed on the Eastside Property. Accordingly, we
entered into a put/call agreement with Caesars, which provides both parties with certain rights and obligations
including: (i) a put right in favor of Caesars, which, if exercised, would result in the sale by Caesars to us and
simultaneous leaseback by us to Caesars of the Caesars Forum Convention Center (the “Put Right”); (ii) if Caesars
exercises the Put Right and, among other things, the sale of the Caesars Forum Convention Center to us does not
close for certain reasons more particularly described in the put/call agreement, then a repurchase right in favor of
Caesars, which, if exercised, would result in the sale of Harrah’s Las Vegas by us to Caesars; and (iii) a call right
in our favor, which, if exercised, would result in the sale by Caesars to us and simultaneous leaseback by us to
Caesars of the Caesars Forum Convention Center.
Amended and Restated Right of First Refusal Agreement
Simultaneously with the sale of the Eastside Property, we also entered into an Amended and Restated Right of
First Refusal Agreement with Caesars pursuant to which we will have a right, subject to certain exclusions, (i) to
acquire (and lease to Caesars) any of the gaming facilities of Centaur Holdings, LLC, which was acquired by
Caesars in the third quarter of 2018, (ii) to acquire (and lease to Caesars) any domestic gaming facilities located
outside of the Gaming Enterprise District of Clark County, Nevada, proposed to be acquired or developed by
Caesars, and (iii) to acquire certain income-producing improvements if built by Caesars in lieu of the Caesars
Forum Convention Center on the Eastside Property, subject to certain exclusions.
The Amended and Restated Right of First Refusal Agreement also contains a right of first refusal in favor of
Caesars, pursuant to which Caesars will have the right to lease and manage any domestic gaming facility located
outside of Greater Las Vegas, proposed to be acquired or developed by us that is not: (i) any asset that is then
subject to a pre-existing lease, management agreement or other contractual restriction that was not entered into in
contemplation of such acquisition or development and which (x) was entered into on arms’ length terms and
(y) would not be terminated upon or prior to closing of such transaction, (ii) any transaction for which the opco/
propco structure would be prohibited by applicable laws, rules or regulations or which would require governmental
consent, approval, license or authorization (unless already received), (iii) any transaction structured by the seller
F - 21
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
as a sale-leaseback, (iv) any transaction in which we and/or our affiliates will not own at least 50% of, or control,
the entity that will own the gaming facility, and (v) any transaction in which we or our affiliates propose to acquire
a then-existing gaming facility from ourselves or our affiliates.
In the event that the foregoing rights are not exercised by us or Caesars and CEOC, as applicable, each party will
have the right to consummate the subject transaction without the other’s involvement, provided the same is on
terms no more favorable to the counterparty than those presented to us or Caesars and CEOC, as applicable, for
consummating such transaction.
In December 2018, we entered into the Second Amended and Restated Right of First Refusal Agreement which
replaced the Amended and Restated Right of First Refusal Agreement and, among other things, provided us with
the right to acquire from Caesars, under certain circumstances, certain undeveloped land adjacent to the Las Vegas
Strip.
Option Properties
Call Right Agreements
On the Formation Date, we entered into certain call right agreements, which provide us with the opportunity to
acquire Harrah’s Atlantic City, Harrah’s New Orleans and Harrah’s Laughlin from Caesars. We can exercise the
call rights within five years from the Formation Date by delivering a request to the applicable owner of the property
containing evidence of our ability to finance the call right. The purchase price for each property will be 10 multiplied
by the initial property lease rent for the respective property, with the initial property lease rent for each property
being the amount that causes the ratio of (x) EBITDAR of the property for the most recently ended four-quarter
period for which financial statements are available to (y) the initial property lease rent to equal 1.67.
Note 6 — Real Estate Portfolio
Our real estate portfolio consisted of the following as of December 31, 2018 and 2017:
(In thousands)
Minimum lease payments receivable under direct financing
leases (1)
Estimated residual values of leased property (unguaranteed)
Gross investment in direct financing leases
Unamortized initial direct costs
Less: Unearned income
Net investment in direct financing leases, net
Investment in operating leases (2)
Land (3)
Total Real estate portfolio
December 31, 2018
December 31, 2017
$
27,285,943
$
2,135,312
29,421,255
22,822
(20,528,030)
8,916,047
1,086,658
95,789
$
10,098,494
$
29,302,166
1,987,651
31,289,817
—
(23,021,174)
8,268,643
1,110,400
73,600
9,452,643
____________________
(1) Minimum lease payments do not include contingent rent, as discussed below, that may be received under the Lease Agreements.
(2) Represents portion of land separately classified and accounted for under the operating lease model associated with our investment in
Caesars Palace Las Vegas and certain operating land parcels contained in the Non-CPLV Lease Agreement.
(3) Represents our investment in the Eastside Property and certain non-operating, de minimis land parcels contained in the Non-CPLV Lease
Agreement. Refer to Note 5 —Property Transactions in relation to the Eastside Property and “Loss on impairment” below for further information
on the non-operating de minimis land parcels.
F - 22
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table details the components of our income from direct financing and operating leases:
(In thousands)
Income from direct financing leases
Income from operating leases
Total leasing revenue
Less: Direct financing lease adjustment (1)
Total contractual leasing revenue
Year Ended
December 31, 2018
Period from
October 6, 2017 to
December 31, 2017
$
$
741,564
$
47,972
789,536
(45,404)
744,132
$
150,171
11,529
161,700
(8,443)
153,257
____________________
(1) Amounts represent the non-cash adjustment to income from direct financing leases in order to recognize income on an effective interest
basis at a constant rate of return over the term of the leases as well as the amortization of capitalized transaction and leasing costs.
At December 31, 2018, minimum lease payments owed to us for each of the five succeeding years under direct
financing and operating leases are as follows:
(In thousands)
2019
2020
2021
2022
2023
Thereafter
Total
Minimum Lease
Payments (1)
795,467
807,283
819,288
831,922
846,042
24,662,875
28,762,877
$
$
____________________
(1) Minimum lease payments do not include contingent rent, as discussed below, that may be received under the Lease Agreements.
The weighted average remaining lease term, including renewal options, for both operating and direct financing
leases at December 31, 2018 was 33.7 years.
Caesars Lease Agreements - Overview
On December 26, 2018, in connection with the closing of the acquisition of Harrah’s Philadelphia, each of the
Caesars Lease Agreements were amended to better align our interests with that of our tenant Caesars. Pursuant to
the amended lease agreements, the provisions regarding the Escalators for the Non-CPLV Lease Agreement and
Joliet Lease Agreement were amended so that the rent escalation commenced effective as of November 1, 2018.
F - 23
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a summary of the material lease provisions of our Caesars Lease Agreements prior to amendment
and as amended:
($ In thousands)
Non-CPLV Lease Agreement and
Joliet Lease Agreement (1)
CPLV Lease Agreement
Lease Provision (2)
Initial Term
Renewal Terms
Initial Base Rent (3)
Escalator
commencement
Prior to
Amendment
As Amended
Prior to
Amendment
15 years
15 years
Four, five-year
terms
Four, five-year
terms
$472,925
$493,925
Lease year six
Lease year two
15 years
Four, five-
year terms
$165,000
Lease year
two
As Amended
15 years
Four, five-
year terms
$200,000
Lease year
two
HLV Lease
Agreement (7)
Prior to
Amendment
and as
Amended
15 years
Four, five-
year terms
$87,400
Lease year
two
Lease years
2-5 - 1%
Lease Years
6-15 -
Consumer
price index
subject to 2%
floor
1.6x
commencing
lease year 6
Consumer
price index
subject to 2%
floor
Consumer
price index
subject to 2%
floor
None
1.7x
commencing
lease year 8
Lease years 8
and 11
Lease years 8
and 11
Lease years 8
and 11
80% Base
Rent and 20%
Variable Rent
80% Base
Rent and 20%
Variable Rent
80% Base
Rent and 20%
Variable Rent
Lease years 2-5
- 1.5%
Lease Years
6-15 -
Consumer price
index subject to
2% floor
1.2x
commencing
lease year 8
Lease years 8
and 11
Lease years
8-10 - 70%
Base Rent and
30% Variable
Rent
Lease years
11-15- 80%
Base Rent and
20% Variable
Rent
Escalator (4)
Consumer
price index
subject to 2%
floor
EBITDAR to Rent
Ratio floor (5)
None
Variable Rent
commencement/reset
Lease years 8
and 11
Lease years
8-10 - 70%
Base Rent and
30% Variable
Rent
Lease years
11-15- 80%
Base Rent and
20% Variable
Rent
Lease years
8-10 - 19.5%
Lease years
11-15 - 13%
Variable Rent split (6)
Variable Rent
percentage (6)
4%
13%
4%
4%
____________________
(1) With respect to the Joliet Lease Agreement, we are entitled to receive 80% of the rent thereunder pursuant to the operating agreement of
our joint venture, Harrah’s Joliet Landco LLC.
(2) All capitalized terms used without definition herein have the meanings detailed in the applicable Caesars Lease Agreement.
(3) The base rents of the Non-CPLV Lease Agreement and CPLV Lease Agreement were adjusted by $21.0 million and $35.0 million, respectively,
to incorporate the base rent for Harrah’s Philadelphia and Octavius Tower, respectively. The additional $35.0 million of rent for Octavius
Tower is not subject to the Escalator.
(4) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP. No
such rent has been recognized for the year ended December 31, 2018 and the period from October 6, 2017 to December 31, 2017.
(5) In the event that the EBITDAR to Rent Ratio coverage is below the stated floor, the Escalator of the respective Caesars Lease Agreements
will be reduced to such amount to achieve the stated EBITDAR to Rent Ratio coverage, provided that the amount shall never result in a decrease
to the prior year’s rent.
(6) Variable Rent is not subject to the Escalator and is calculated based on the increase or decrease of Net Revenues, as defined in the Caesars
Lease Agreements, multiplied by the Variable Rent percentage.
(7) No material modifications to the HLV Lease Agreement occurred as a result of the amendments to the Caesars Lease Agreements.
F - 24
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As a result of the amendments, the purchase price of Harrah’s Philadelphia was reduced by $159.0 million to reflect
the aggregate net present value of the modifications to the Caesars Lease Agreements. Additionally, the rent of the
Non-CPLV Lease Agreement and CPLV Lease Agreement was adjusted by $21.0 million and $35.0 million, per
annum respectively, to incorporate the rent for Harrah’s Philadelphia and Octavius Tower, respectively.
Margaritaville Lease Agreement - Overview
Subsequent to year end, on January 2, 2019, we completed the previously announced transaction to acquire the
Margaritaville Resort Casino. The following is a summary of the material lease provisions of our lease with a
subsidiary of Penn National which commenced on January 2, 2019, the date of acquisition:
($ In thousands)
Lease Provision
Initial term
Renewal terms
Building base rent
Escalation commencement
Escalation
EBITDAR to rent ratio floor (1)
Land base rent (2)
Percentage rent (3)
Term
15 years
Four, five-year terms
$17,200
Lease year two
2% of Building Base rent, subject to the EBITDAR to rent ratio floor
1.9x commencing lease year two
$3,000
$3,000 (fixed for lease year one and two)
Percentage rent reset
Lease year three and each and every other lease year thereafter
Percentage rent multiplier
The product of (i) 4% and (ii) the excess (if any) of (a) the average annual
net revenue of a trailing two-year period preceding such reset year over (b)
a threshold amount (defined as 50% of LTM net revenues prior to
acquisition)
____________________
(1) In the event that the EBITDAR to rent ratio coverage is below the stated floor, the escalation will be reduced to such amount to achieve the
stated EBITDAR to rent ratio coverage, provided that the amount shall never result in a decrease to the prior year’s rent.
(2) Land base rent is not subject to escalation.
(3) Percentage rent is subject to the percentage rent multiplier.
Loss on Impairment
We assess our real estate portfolio for impairment on a quarterly basis or whenever certain events or changes in
circumstances indicate a possible impairment of the carrying value of the asset. Events or circumstances that may
occur include changes in management’s intended holding period or potential sale to a third party, significant changes
in real estate market conditions or tenant financial difficulties resulting in non-payment of the lease. Impairments
are measured as the amount by which the current book value of the asset exceeds the estimated fair value of the
asset.
On the Formation Date, CEOC transferred certain vacant, non-operating land parcels to us which are subject to
the provisions of the Non-CPLV Lease Agreement. The Non-CPLV Lease Agreement allows for the sale of these
vacant, non-operating land parcels without Caesars consent since they are specifically identified as de minimis to
the operations of Caesars. All of the land parcels are located outside of Las Vegas and none of the land parcels are
a component of the operations of our regional property portfolio. These vacant parcels of land had a fair value of
$34.7 million on the Formation Date and were included in Investments in operating leases on our Balance Sheet.
We undertook a short-term strategic initiative to monetize certain of these vacant, non-operating land parcels. In
relation to this initiative, we sold one land parcel in the quarter ended September 30, 2018 and are actively engaged
in negotiations with buyers on two other parcels of land. Based on the sales prices that were or are being negotiated,
we determined that the fair value of these three land parcels was lower than their current carrying values and
F - 25
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
recognized an impairment charge of $6.3 million, based on the anticipated sales prices. As a result of the identified
impairment on these three parcels of land, we undertook an evaluation to assess whether indicators of impairment
were present on the remaining vacant, non-operating land parcels. We used a sales comparison approach to
determine the fair value of the remaining vacant, non-operating land parcels and identified $6.0 million in additional
impairment charges. The impairment loss recorded was the result of various factors including changes in market
conditions, strategic assessment and environmental and zoning issues that were identified during the sales process.
Taking into account the impairment charge recognized during the year ended December 31, 2018 and the sale of
one of the parcels that occurred during the year, the current carrying value of the vacant, non-operating land parcels
is $22.2 million as of December 31, 2018.
In the current year we reclassified the remaining $22.2 million carrying value of the vacant, non-operating land
from Investments in operating leases to Land. As of December 31, 2018, the balance of Land consists of $22.2
million representing the vacant, non-operating land and $73.6 million representing the Eastside Property.
Note 7 — Property and Equipment Used in Operations, Net
Property and equipment used in operations is primarily attributable to golf operations land, building and
improvements and consists of the following:
(In thousands)
Land and land improvements
Buildings and improvements
Furniture and equipment
Total property and equipment used in operations
Less: accumulated depreciation
Total property and equipment used in operations, net
(In thousands)
Depreciation expense
Note 8 — Other Liabilities
December 31, 2018
December 31, 2017
58,573
$
14,572
2,805
75,950
(4,437)
71,513
$
57,901
14,572
2,578
75,051
(751)
74,300
Year Ended
December 31, 2018
3,686
Period from
October 6, 2017
to December 31, 2017
751
$
$
$
$
The following table details the components of our other liabilities:
(In thousands)
Other accrued expenses
Derivative liability
Accrued payroll and other compensation
Deferred income taxes
Accounts payable
Total other liabilities
December 31, 2018
December 31, 2017
30,951
22,124
4,934
3,340
1,057
$
62,406
$
2,796
—
2,559
3,718
5,207
14,280
F - 26
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9 — Debt
The following tables detail our debt obligations as of December 31, 2018 and 2017:
($ in thousands)
Description of Debt
VICI PropCo Senior Secured Credit Facilities
Revolving Credit Facility(2)(3)
Term Loan B Facility(3)(4)(5)
Second Lien Notes(6)
CPLV Debt
December 31, 2018
Final
Maturity
Interest
Rate
Face Value
Carrying
Value(1)
2022
2024
2023
L + 2.00% $
— $
—
L + 2.00%
2,100,000
2,073,784
8.00%
498,480
498,480
CMBS Debt (the “CPLV CMBS Debt”) (7)
2022
4.36%
1,550,000
1,550,000
Total Debt
($ in thousands)
Description of Debt
VICI PropCo Senior Secured Credit Facilities
Revolving Credit Facility(2)(3)
Term Loan B Facility(3)(4)(5)
Second Lien Notes(6)
CPLV Debt
$ 4,148,480
$ 4,122,264
December 31, 2017
Final
Maturity
Interest
Rate
Face Value
Carrying
Value(1)
2022
2024
2023
L + 2.25% $
300,000
$
300,000
L + 2.25%
2,200,000
2,168,864
8.00%
766,892
766,892
CMBS Debt (the “CPLV CMBS Debt”) (7)
2022
4.36%
1,550,000
1,550,000
Total Debt
____________________
$ 4,816,892
$ 4,785,756
(1) Carrying value is net of unamortized original issue discount and unamortized debt issuance costs incurred in conjunction with debt.
Interest on any outstanding balance is payable monthly. Any unused balance is subject to a 0.5% commitment fee paid quarterly.
(2)
Initially bore interest at LIBOR plus 2.25%. Upon our initial public offering, on February 5, 2018, the interest rate was reduced to LIBOR
(3)
plus 2.00%.
Interest is payable monthly. On April 24, 2018, we entered into four interest rate swap agreements with third party financial institutions
having an aggregate notional amount of $1.5 billion. The interest rate swaps are designated as cash flow hedges that effectively fix the
LIBOR component of the interest rate on a portion of the outstanding debt at 2.8297%.
(4)
(5) Final maturity is December 2024 or, to the extent the Second Lien Notes remain outstanding, July 2023 (three months prior to the maturity
of the Second Lien Notes).
Interest is payable semi-annually.
Interest is payable monthly.
(6)
(7)
The following is a schedule of future minimum repayments of our long-term debt as of December 31, 2018:
(Dollars in thousands)
2019
2020
2021
2022
2023
Thereafter
Total minimum repayments
Future Minimum Payments
$
$
—
—
—
1,560,000
520,480
2,068,000
4,148,480
F - 27
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes our debt related transactions from the Formation Date to December 31, 2018:
Face Value (In thousands)
Debt At
Formation
Mandatory
Conversion
Refinancing
Transactions
Debt at
December
31, 2017
IPO
Transaction
Debt at
December
31, 2018
$
— $
— $
300,000
$ 300,000
2,200,000
2,200,000
$ (300,000) $
(100,000)
—
2,100,000
1,638,387
— (1,638,387)
311,721
766,892
(311,721)
—
—
—
766,892
—
—
(268,412)
—
—
498,480
Description of Debt
VICI PropCo Senior
Secured Credit Facilities
Revolving Credit
Facility
Term Loan B Facility
First Lien Term Loan
(“Prior Term Loan”)
First Priority Senior
Secured Notes (“Prior
First Lien Notes”)
Second Lien Notes
CPLV Debt
CPLV CMBS Debt
1,550,000
CPLV Mezzanine
Debt
Senior tranche
200,000
Intermediate
tranche
Junior tranche
200,000
250,000
—
—
—
—
—
(250,000)
— 1,550,000
— 1,550,000
(200,000)
(200,000)
—
—
—
—
—
—
—
—
—
—
$ (668,412) $ 4,148,480
Total Debt
$4,917,000
$ (250,000) $
149,892
$ 4,816,892
Senior Secured Credit Facilities
On December 22. 2017, VICI PropCo entered into a credit agreement (the “Credit Agreement”) comprised of a
$2.2 billion Term Loan B Facility and a $400.0 million Revolving Credit Facility, $300.0 million of which was
borrowed on December 22, 2017 (the Term Loan B Facility and the Revolving Credit Facility are referred to
together as the “Senior Secured Credit Facilities”). The Senior Secured Credit Facilities initially bore interest at
LIBOR plus 2.25%. Upon our initial public offering, on February 5, 2018, the interest rate was reduced to LIBOR
plus 2.00%, as contemplated by the Credit Agreement.
The Credit Agreement contains customary covenants that, among other things, limit the ability of VICI PropCo
and its restricted subsidiaries to: (i) incur additional indebtedness; (ii) merge with a third party or engage in other
fundamental changes; (iii) make restricted payments; (iv) enter into, create, incur or assume any liens; (v) make
certain sales and other dispositions of assets; (vi) enter into certain transactions with affiliates; (vii) make certain
payments on certain other indebtedness; (viii) make certain investments; and (ix) incur restrictions on the ability
of restricted subsidiaries to make certain distributions, loans or transfers of assets to VICI PropCo or any restricted
subsidiary. These covenants are subject to a number of exceptions and qualifications, including, with respect to
the restricted payments covenant, the ability to make unlimited restricted payments to maintain our REIT status
and to avoid the payment of federal or state income or excise tax, the ability to make restricted payments in an
amount not to exceed 95% of our Funds from Operations (as defined in the Credit Agreement) subject to no event
of default under the Credit Agreement and pro forma compliance with the financial covenant pursuant to the Credit
Agreement, and the ability to make additional restricted payments in an aggregate amount not to exceed the greater
of 0.6% of Adjusted Total Assets or $30,000,000. Commencing with the first full fiscal quarter ended after December
22, 2017, if the outstanding amount of the Revolving Credit Facility plus any drawings under letters of credit issued
pursuant to the Credit Agreement that have not been reimbursed as of the end of any fiscal quarter exceeds 30%,
F - 28
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
of the aggregate amount of the Revolving Credit Facility, VICI PropCo and its restricted subsidiaries on a
consolidated basis would be required to maintain a maximum Total Net Debt to Adjusted Total Assets Ratio, as
defined in the Credit Agreement as of the last day of any applicable fiscal quarter. The restricted net assets of VICI
PropCo as of December 31, 2018 were approximately $5.8 billion.
The Senior Secured Credit Facilities are secured by a first priority lien on substantially all of VICI PropCo’s and
its existing and subsequently acquired wholly-owned material domestic restricted subsidiaries’ material assets,
including mortgages on their respective real estate, subject to customary exclusions. None of VICI nor certain
subsidiaries of VICI PropCo, including CPLV Borrower, are subject to the covenants of the Credit Agreement or
are guarantors of the Senior Secured Credit Facilities. The Term B Loan Facility may be voluntarily prepaid at
VICI PropCo’s option, in whole or in part, at any time, and are subject to mandatory prepayment in the event of
receipt by VICI PropCo or any of its restricted subsidiaries of the proceeds from the occurrence of certain events,
including asset sales, casualty events and issuance of certain indebtedness.
On February 5, 2018, we completed an initial public offering resulting in net proceeds of approximately $1.3
billion. We used a portion of those proceeds to pay down the $300.0 million outstanding on the Revolving Credit
Facility and to repay $100.0 million of the principal amount outstanding on the Term Loan B Facility. Under the
Credit Agreement, the Term Loan B Facility is subject to amortization of 1.0% of principal per annum payable in
equal quarterly installments on the last business day of each calendar quarter. However, as a result of prepaying
$100.0 million of the Term Loan B Facility in February 2018 the next principal payment due on the Term Loan B
Facility is September 2022.
Refer to Note 10— Derivatives for a discussion of our interest rate swap agreements related to the Term Loan B
Facility.
CPLV CMBS Debt
The CPLV CMBS Debt was incurred on October 6, 2017 pursuant to a loan agreement (the “CMBS Loan
Agreement”), and is secured by a first priority lien on all of the assets of CPLV Property Owner LLC, as borrower
(“CPLV Borrower”), including CPLV Borrower’s (1) fee interest (except as provided in (2)) in and to Caesars
Palace Las Vegas (on the Formation Date other than Octavius Tower), (2) leasehold interest with respect to Octavius
Tower on the Formation Date, and (3) interest in the CPLV Lease Agreement and all related agreements, including
the Lease Agreements, subject only to certain permitted encumbrances as set forth in the CMBS Loan Agreement.
The CPLV CMBS Debt bears interest at 4.36% per annum. The CPLV CMBS Debt is evidenced by one or more
promissory notes and secured by, among other things, a mortgage, deed of trust or other similar security instrument
that creates a mortgage lien on the fee and/or leasehold interest of the CPLV Borrower.
The CMBS Loan Agreement contains certain covenants limiting CPLV Borrower’s ability to, among other things:
(i) incur additional debt; (ii) enter into certain transactions with its affiliates; (iii) consolidate, merge, sell or
otherwise dispose of its assets; and (iv) allow transfers of its direct or indirect equity interests.
Second Lien Notes
The Second Lien Notes were issued on October 6, 2017, pursuant to an indenture (the “Indenture”) by and among
VICI PropCo and its wholly owned subsidiary, VICI FC Inc. (together, the “Issuers”), the subsidiary guarantors
party thereto, and UMB Bank National Association, as trustee. The Second Lien Notes are guaranteed by each of
the Issuers’ existing and subsequently acquired wholly-owned material domestic restricted subsidiaries and secured
by a second priority lien on substantially all of the Issuers’ and such restricted subsidiaries’ material assets, including
mortgages on their respective real estate, subject to customary exclusions. None of VICI nor certain subsidiaries
of VICI PropCo, including CPLV Borrower, are subject to the covenants of the Indenture or are guarantors of the
Second Lien Notes.
The Indenture contains covenants that limit the Issuers’ and their restricted subsidiaries’ ability to, among other
things: (i) incur additional debt; (ii) pay dividends on or make other distributions in respect of their capital stock
or make other restricted payments; (iii) make certain investments; (iv) sell certain assets; (v) create or permit to
F - 29
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
exist dividend and/or payment restrictions affecting their restricted subsidiaries; (vi) create liens on certain assets
to secure debt; (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets; (viii)
enter into certain transactions with their affiliates; and (ix) designate their subsidiaries as unrestricted subsidiaries.
These covenants are subject to a number of exceptions and qualifications, including the ability to declare or pay
any cash dividend or make any cash distribution to VICI to the extent necessary for VICI to distribute cash dividends
of 100% of our “real estate investment trust taxable income” within the meaning of Section 857(b)(2) of the Internal
Revenue Code of 1986, as amended, the ability to make certain restricted payments not to exceed the amount of
our cumulative earnings (calculated pursuant to the Indenture as $30,000,000 plus 95% of our cumulative Adjusted
Funds From Operations (as defined in the Indenture) less cumulative distributions, with certain other adjustments),
and the ability to make restricted payments in an amount equal to the greater of 0.6% of Adjusted Total Assets (as
defined in the Indenture) or$30,000,000.
The Second Lien Notes are redeemable at the option of the Issuers, with the option to redeem up to 35% of the
original aggregate principal amount thereof with the net cash proceeds of certain issuances of common or preferred
equity by VICI PropCo or VICI, at a price equal to 108% of such principal amount of the Second Lien Notes
redeemed. In February 2018, we used a portion of the proceeds from our initial public offering to redeem $268.4
million of the Second Lien Notes, which represented 35% of the original aggregate principal amount, at a redemption
price of 108% plus accrued and unpaid interest to the date of redemption. Due to the partial redemption of the
Second Lien Notes, we recognized a loss on extinguishment of debt of $23.0 million during the three months ended
March 31, 2018, the majority of which relates to the premium paid on the redemption price.
Mandatory Conversion
The CPLV mezzanine debt junior tranche of $250.0 million was automatically exchanged for 17,630,700 shares
of the Company’s common stock on November 6, 2017. Refer to Note 13 - Stockholders' Equity for further
information on the mandatory conversion.
Financial Covenants
As described above, our debt obligations are subject to certain customary financial and protective covenants that
restrict VICI PropCo and its subsidiaries’ ability to incur additional debt, sell certain asset and restrict certain
payments, among other things. These covenants are subject to a number of exceptions and qualifications, including
the ability to make restricted payments to maintain our REIT status. At December 31, 2018, we are in compliance
with all required covenants under our debt obligations.
Note 10 — Derivatives
On April 24, 2018, we entered into four interest rate swap agreements with third party financial institutions having
an aggregate notional amount of $1.5 billion. The interest rate swap transactions are designated as cash flow hedges
that effectively fix the LIBOR component of the interest rate on a portion of the outstanding debt under the Term
Loan B Facility at 2.8297%.
The following table details our outstanding interest rate derivatives that were designated as cash flow hedges of
interest rate risk:
($ in thousands)
Instrument
December 31, 2018
Number of
Instruments
Fixed
Rate
Notional
Interest Rate Swaps
4
2.8297% $1,500,000
F - 30
Index
USD
LIBOR
Maturity
April 22, 2023
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 2018, the interest rate swaps are in net unrealized loss positions and are recognized within
Other liabilities. For the year ended December 31, 2018 the amount recorded in other comprehensive income
related to the derivative instruments was an unrealized loss of $22.1 million. For the year ended December 31,
2018, we recorded interest expense of $6.3 million related to the interest rate swap agreements.
Subsequent to year end, on January 3, 2019, we entered into two additional interest rate swap transactions having
an aggregate notional amount of $500.0 million. These interest rate swap transactions each have an effective date
of January 22, 2019 and a termination date of January 22, 2021 and are intended to be cash flow hedges that
effectively fix for two years, at a blended rate of 2.38%, the LIBOR component of the interest rate on $500.0
million of the outstanding debt under the Term Loan B Facility. Subsequent to the effectiveness and for the duration
of the interest rate swap transactions, the Company is only subject to interest rate risk on $100.0 million of variable
rate debt.
Note 11 — Fair Value
Recurring Fair Value Measurements
The following table summarizes our assets and liabilities measured at fair value on a recurring basis:
(In thousands)
December 31, 2018
Fair Value
Carrying Amount
Level 1
Level 2
Level 3
Financial assets:
Short-term investments (1)
Financial liabilities:
Derivative instruments - interest rate
swaps (2)
$
$
520,877
$
— $
520,877
$
22,124
$
— $
22,124
$
—
—
____________________
(1) The carrying value of these investment is equal to their fair value due to the short-term nature of the investments as well as their credit
quality.
(2) The fair values of our interest rate swap derivative instruments were estimated using advice from a third-party derivative specialist, based
on contractual cash flows and observable inputs comprising interest rate curves and credit spreads, which are Level 2 measurements as
defined under ASC 820.
Non-recurring Fair Value Measurements
The following table summarizes our assets and liabilities measured at fair value on a non-recurring basis:
(In thousands)
Financial assets:
Land (1)
December 31, 2018
Fair Value
Carrying Amount
Level 1
Level 2
Level 3
$
19,019
$
— $
7,419
$
11,600
____________________
(1) The fair value of the de minimis land valued based on the contract price represents a level 2 measurement as defined in ASC 820, while
the inputs for the de minimis land valued using the sales comparison approach represents level 3 measurements as defined in ASC 820.
The measurement and related estimates were made as of September 30, 2018.
F - 31
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the significant unobservable inputs used in Level 3 fair value measurements:
Asset Type
Land
Fair Value
$
11,600
Valuation Technique
Sales comparison
Range
$0.50 - 5.00
Weighted
Average
$
2.90
Square
Footage
4,002,908
Significant Assumptions ($ in per sq. ft.)
The estimated fair values of our financial instruments at December 31, 2018 and 2017 for which fair value is only
disclosed are as follows:
(In thousands)
Financial assets:
Cash and cash equivalents
Restricted cash
Financial liabilities:
Debt (1)
Revolving Credit Facility
Term Loan B Facility
Second Lien Notes
CPLV CMBS Debt
____________________
December 31, 2018
December 31, 2017
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
$
577,883
20,564
$
577,883
20,564
$
183,646
13,760
183,646
13,760
— $
— $
2,073,784
2,016,000
300,000
2,168,864
$
300,000
2,200,000
498,480
535,866
766,892
853,167
1,550,000
1,539,040
1,550,000
1,559,486
$
$
(1) The fair value of our debt instruments was estimated using quoted prices for identical or similar liabilities in markets that are not active
and, as such, these fair value measurements are considered Level 2 of the fair value hierarchy.
Note 12 — Commitments and Contingent Liabilities
Litigation
In the ordinary course of business, from time to time, we may be subject to legal claims and administrative
proceedings. As of December 31, 2018, we are not subject to any litigation that we believe could have, individually
or in the aggregate, a material adverse effect on our business, financial condition or results of operations, liquidity
or cash flows.
Operating Lease Commitments
We are liable under various operating leases for: (i) land at the Cascata golf course, which expires in 2038 and (ii)
offices in New Orleans, Louisiana and New York, New York, which expire in 2019 and 2020, respectively. Total
rental expense under these agreements, included in golf operations and general and administrative expenses in our
Statement of Operations, was approximately $1.5 million for the year ended December 31, 2018 and $0.3 million
for the period from October 6, 2017 to December 31, 2017.
F - 32
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The future minimum lease commitments relating to the base lease rent portion of noncancelable operating leases
at December 31, 2018 are as follows:
(In thousands)
2019
2020
2021
2022
2023
Thereafter
Total minimum lease commitments
Golf commitment
Lease Commitments
1,242
983
933
951
970
16,895
21,974
$
$
The TRS utilizes a third-party golf maintenance company for its Rio Secco and Cascata golf courses and recorded
expense to golf operations in the amount of $3.0 million, related to such agreements. On November 1, 2018, we
entered into new golf course maintenance agreements with BrightView Golf Maintenance, LLC related to the Rio
Secco and Cascata golf courses, which became effective January 1, 2019. The agreements are for five years and
expire on December 31, 2023, and include all labor and equipment necessary to maintain both golf course grounds.
Pursuant to the agreements, we pay an annual golf maintenance fee of $3.3 million and such fee is subject to an
annual escalator calculated as a weighted combination of the annual change in the Employment Cost Index (75%)
and Consumer Price Index (25%).
Other Contractual Commitments
As discussed in Note 5 — Property Transactions, pursuant to the Eastside Property sale agreement, Caesars is
responsible for the remediation of the flood plain mechanism on the Eastside Property. The costs of the remediation
work will be borne fifty percent (50%) by us and fifty percent (50%) by Caesars, pari passu, until such time as
the total cost incurred in connection with the remediation work is equal to $12.0 million. Any costs in excess of
$12.0 million incurred in connection with the remediation work shall be the sole responsibility of Caesars.
Note 13 — Stockholders' Equity
Stock
We have the authority to issue 750,000,000 shares of stock, consisting of 700,000,000 shares of Common Stock,
$0.01 par value per share and 50,000,000 shares of Preferred Stock, $0.01 par value per share.
2017 Transactions
Formation
On the Formation Date, the Company issued 177,160,494 shares of common stock and 12,000,000 shares of Series
A preferred stock with an aggregate liquidation preference of $300.0 million ($25 per share) to CEOC and certain
of its subsidiaries in exchange for the Properties and Caesars Entertainment Outdoor. CEOC distributed such shares
to certain of its creditors and to certain backstop parties.
Pursuant to the Plan and a Backstop Commitment Agreement dated September 12, 2017, the backstop purchasers
agreed, or otherwise had the right, to purchase a specified number of the shares of the Series A preferred stock for
cash, with the cash proceeds of such purchases being paid to certain creditors of CEOC. An aggregate of 6,002,907
shares of Series A preferred stock were purchased by the backstop purchasers on the Formation Date (the “Backstop
Shares”) at a price of $20.83 per share and an aggregate of 5,997,093 shares of Series A preferred stock were issued
to certain creditors of CEOC as a portion of the recovery on account of their claims.
F - 33
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Mandatory Conversions
On November 6, 2017, all of the Series A preferred stock automatically converted into 51,433,692 shares of the
Company’s common stock (the “Mandatory Preferred Conversion”). No additional consideration was payable in
connection with the Mandatory Preferred Conversion.
In addition, on the Formation Date, CPLV Mezz 3 LLC, a special-purpose parent entity of CPLV Mezz 2 LLC
(which itself is the special-purpose parent entity of CPLV Mezz 1 LLC, the special-purpose parent entity of CPLV
Property Owner LLC (the mortgage borrower under the CPLV CMBS Debt and the owner of CPLV)), issued a
junior tranche of CPLV mezzanine debt in an amount of $250.0 million to institutional accredited investors, which
debt automatically converted into an aggregate of 17,630,700 shares of the Company’s common stock on
November 6, 2017 (the “Mandatory Mezzanine Conversion”). No additional consideration was payable in
connection with the Mandatory Mezzanine Conversion.
Private Equity Placement
In November 2017, we entered into a common stock purchase agreement with certain of our existing investors,
which certain additional investors joined in December 2017, pursuant to which we agreed to sell,
contemporaneously with the consummation of the acquisition of the Harrah’s Las Vegas property, an aggregate of
54,054,052 shares of our common stock at a price of $18.50 per share in a private placement transaction, for gross
proceeds of approximately $1.0 billion. The net proceeds from the transaction of approximately $963.8 million
was used to partially fund the purchase price for the Harrah’s Las Vegas property and for working capital and
general corporate purposes. At the closing of the private placement, on December 22, 2017, we made a cash payment
equal to 2% of the committed amount, or $17.0 million in the aggregate, to the investors who entered into the
purchase agreement with us in November 2017. In addition, at the private placement closing, we entered into a
registration rights agreement with the investors, which provides, among other things, for us to file a shelf registration
statement for the benefit of the investors within 75 days following the closing. Subsequent to year end, on January
3, 2019, we filed a post-effective amendment to Form S-11 to de-register all of the shares that remained unsold
under the registration statement because we are no longer obligated to maintain the effectiveness of the registration
statement pursuant to the terms of the registration rights agreement. The post-effective amendment became effective
on January 30, 2019.
2018 Transactions
Initial Public Offering
On February 5, 2018, we completed an initial public offering of 69,575,000 shares of common stock at an offering
price of $20.00 per share for an aggregate offering value of $1.4 billion, resulting in net proceeds of $1.3 billion
after commissions and expenses.
Primary Follow-on Offering
On November 19, 2018, we completed a primary follow-on offering of 34,500,000 shares of common stock at an
offering price of $21.00 per share for an aggregate offering value of $724.5 million, resulting in net proceeds of
$694.2 million. We intend to contribute the net proceeds from the offering to pay a portion of the aggregate purchase
price of $700.0 million for the recently announced acquisition of the land and real estate assets of Greektown in
Detroit, Michigan, and related fees and expenses.
F - 34
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At-the-Market Offering Program
On December 19, 2018, we entered into an equity distribution agreement, or ATM Agreement, pursuant to which
we may sell, from time to time, up to an aggregate sales price of $750.0 million of our common stock. Sales of
common stock, if any, made pursuant to the ATM Agreement may be sold in negotiated transactions or transactions
that are deemed to be “at the market” offerings, as defined in Rule 415 of the Securities Act of 1933, as amended.
Actual sales will depend on a variety of factors including market conditions, the trading price of our common
stock, our capital needs, and our determination of the appropriate sources of funding to meet such needs. We did
not sell any shares of our common stock under the ATM Agreement during the year ended December 31, 2018.
After giving effect to the initial public offering, the primary follow-on offering and the issuance of certain unvested
restricted shares under the 2017 Stock Incentive Plan (the “Plan”), we have 404,729,616 shares of Common Stock
issued and outstanding as of December 31, 2018.
Distributions
Dividends declared (on a per share basis) during the year ended December 31, 2018 were as follows:
Declaration Date
March 15, 2018 (1)
June 14, 2018 (2)
September 17, 2018 (3)
December 13, 2018 (4)
____________________
Period
Dividend
February 5, 2018 - March 31, 2018
April 1, 2018 - June 30, 2018
July 1, 2018 - September 30, 2018
October 1, 2018 - December 31, 2018
$
$
$
$
0.16
0.2625
0.2875
0.2875
(1) The dividend was pro-rated for the period commencing upon the closing of our initial public offering and ending on March 31, 2018,
based on a quarterly distribution rate of $0.2625 per share. The dividend was paid on April 13, 2018 to stockholders of record as of the
close of business on March 29, 2018.
(2) The dividend was paid on July 13, 2018 to stockholders of record as of the close of business on June 28, 2018.
(3) The dividend was paid on October 11, 2018 to stockholders of record as of the close of business on September 28, 2018. This dividend
represents an increase in our targeted annualized dividend to $1.15 per share of common stock, which represents a 9.5% increase from
our previous annualized dividend rate of $1.05 per share.
(4) The dividend was paid on January 10, 2019 to stockholders of record as of the close of business on December 28, 2018.
Note 14 — Earnings Per Share
Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted-
average number of common shares outstanding during the period, excluding net income attributable to participating
securities (unvested restricted stock awards). Diluted earnings per share reflects the additional dilution for all
potentially-dilutive securities such as stock options, unvested restricted shares and unvested performance-based
restricted shares. The following table reconciles the weighted-average common shares outstanding used in the
calculation of basic earnings per share to the weighted-average common shares outstanding used in the calculation
of diluted earnings per share for the year ended December 31, 2018 and for the period from October 6, 2017 to
December 31, 2017:
(In thousands)
Determination of shares:
Year Ended
December 31, 2018
Period from
October 6, 2017
to December 31, 2017
Weighted-average common shares outstanding
Assumed conversion of restricted stock
Diluted weighted-average common shares outstanding
367,226
91
367,317
227,829
156
227,985
F - 35
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Basic and Diluted Earnings Per Share
(In thousands, except per share data)
Basic:
Net income attributable to common stockholders
Weighted-average common shares outstanding
Basic EPS
Diluted:
Net income attributable to common stockholders
Diluted weighted-average common shares outstanding
Diluted EPS
Note 15 — Stock-Based Compensation
Year Ended
December 31, 2018
Period from
October 6, 2017
to December 31, 2017
$
$
$
$
523,619
367,226
1.43
523,619
367,317
1.43
$
$
$
$
42,662
227,829
0.19
42,662
227,985
0.19
The Plan is designed to provide long-term equity-based compensation to our directors and employees. It is
administered by the Compensation Committee of the Board of Directors. Awards under the Plan may be granted
with respect to an aggregate of 12,750,000 shares of common stock and may be issued in the form of: (a) incentive
stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) dividend equivalent rights, (e)
restricted stock, (f) restricted stock units or (g) unrestricted stock. In addition, the Plan limits the total number of
shares of common stock with respect to which awards may be granted to any employee or director during any one
calendar year. At December 31, 2018, 12,240,831 shares of common stock remained available for issuance by us
as equity awards under the Plan.
Time-Based Restricted Stock
During 2017 and 2018, the Company granted approximately 164,000 and 157,000 shares of restricted stock under
the Plan subject to vesting restrictions based on service. Such restricted time-based stock awards vest ratably on
an annual basis over a service period of three to four years. The number of shares granted was determined based
on the 10-day volume weighted average price using the 10 trading days immediately preceding the grant date.
Performance-Based Restricted Stock Units
During 2018 the Company granted approximately 133,000 restricted stock units under the Plan subject to vesting
restrictions based on specified absolute and relative total stockholder return goals measured over a three-year
performance period. We used a Monte Carlo Simulation (risk-neutral approach) to determine the number of shares
that may be earned and vested pursuant to the award as these awards were deemed to have a market condition.
The risk-free interest rate assumptions used in the Monte Carlo Simulation were determined based on the zero-
coupon risk-free rate of 2.7% and an expected price volatility of 13.3%. The expected price volatility was calculated
based on both historical and implied volatility.
Total stock-based compensation expense recorded as General and administrative expense in the Statement of
Operations totaled $2.3 million for the year ended December 31, 2018 and $1.4 million for the period from October
6, 2017 to December 31, 2017. Compensation expense is recognized on a straight-line basis over the term of the
award.
F - 36
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table details the activity of our incentive stock, time-based restricted stock and performance-based
restricted stock units:
Outstanding as of Formation Date
Granted
Vested
Forfeited
Canceled
Outstanding as of December 31, 2017
Granted
Vested
Forfeited
Canceled
Outstanding as of December 31, 2018
Shares
Weighted Average
Grant Date Fair Value
—
— $
174,572
(50,962)
—
—
123,610
336,980
(59,954)
(2,383)
—
398,253
$
15.41
14.90
—
—
15.61
19.37
10.18
16.88
—
19.60
As of December 31, 2018, there was $5.5 million of unrecognized compensation cost related to non-vested share-
based compensation arrangements under the Plan. This cost is expected to be recognized over a weighted average
period of 2.33 years.
Note 16 — Income Taxes
We have elected to be taxed as a REIT for U.S. Federal income tax purposes commencing with our taxable year
ended December 31, 2017. U.S. federal income tax law generally requires that a REIT distribute annually at
least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital
gains, and that it pays taxes at regular corporate income tax rates to the extent that it annually distributes less
than 100% of its taxable income. The Company intends to meet those requirements and as a result, we generally
will not be subject to federal income tax except for the TRS operations.
The TRS operations (represented by the four golf course businesses) are able to engage in activities resulting in
income that would not be qualifying income for a REIT. As a result, certain activities of the Company which occur
within its TRS operations are subject to federal and state income taxes. Accordingly, the Company's tax provision
and deferred tax analysis are primarily from the results of TRS activities.
New tax legislation, commonly referred to as the Tax Cuts and Jobs Act (“Tax Reform Act”), was enacted on
December 22, 2017, which significantly changed U.S. tax law by, among other things, a permanent reduction of
the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018. ASC 740, “Accounting for Income
Taxes”, requires companies to recognize the effect of tax law changes in the period of enactment. Accordingly, in
2017 we recorded a reduction to our net deferred tax liability of $2.4 million, and a corresponding increase to
income tax benefit during the period.
F - 37
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The composition of our income tax expense (benefit) was as follows:
Year Ended December 31, 2018
Period from October 6, 2017
to December 31, 2017
(In thousands)
Federal
State
Income tax expense (benefit)
$
$
Current
1,693
126
Deferred
$
(459) $
81
Total
Current
Deferred
Total
1,234
207
$
$
— $
11
11
$
(1,909) $
(3)
(1,912) $
(1,909)
8
(1,901)
1,819
$
(378) $
1,441
At December 31, 2018 and 2017, the net effects of temporary differences that gave rise to significant portions of
the deferred tax assets and deferred tax liabilities were:
(In thousands)
Deferred tax assets:
Federal net operating loss
Accruals, reserves and other
Total deferred tax assets
Deferred tax liabilities:
Land, buildings and equipment, net
Total deferred tax liabilities
Net deferred tax liability
December 31, 2018
December 31, 2017
$
$
— $
117
117
(3,457)
(3,457)
(3,340) $
55
24
79
(3,797)
(3,797)
(3,718)
The following table reconciles our effective income tax rate to the historical federal statutory rate of 21% in 2018
and 35% in 2017:
Year Ended
December 31, 2018
Period from October 6, 2017
to December 31, 2017
Amount
Percent
Amount
Percent
(Amounts in thousands)
Federal income tax expense at statutory rate
REIT income not subject to federal income tax
Pre-tax gain attributable to taxable subsidiaries
State income taxes, net of federal benefits
Non-deductible expenses and other
Impact of Tax Reform on deferred tax liability
$
112,326
(111,035)
1,291
21.0% $
(20.8)
0.2
187
(37)
—
—
—
—
Income tax expense (benefit)
$
1,441
0.2% $
15,414
(14,897)
517
5
—
(2,423)
(1,901)
35.0 %
(33.8)
1.2
—
—
(5.5)
(4.3)%
As of December 31, 2018, we had estimated NOLs of $151.6 million, generated by our REIT, that will expire in
2029, unless they are utilized by us prior to expiration.
As of December 31, 2018, the 2017 and 2018 tax years remain subject to examination by taxing authorities. Since
our formation occurred in 2017, there are no prior tax years subject to examination.
F - 38
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 17 — Segment Information
Our real property business and our golf course business represent two reportable segments. The real property
business segment consists of leased real property and represents the substantial majority of our business. The golf
course business segment consists of four golf courses, with each being operating segments that are aggregated into
one reportable segment.
The results of each reportable segment presented below are consistent with the way our management assesses these
results and allocates resources, which is a consolidated view that adjusts for the impact of certain transactions
between our reportable segments, as described below.
The following tables present certain information with respect to the Company’s segments:
Year Ended December 31, 2018
Period from October 6, 2017
to December 31, 2017
Real
Property
Business
Golf
Course
Business
$
870,776
$
27,201
VICI
Consolidated
897,977
$
Real
Property
Business
$ 181,258
751,803
(212,663)
(23,040)
527,407
—
527,407
6,151
—
—
6,151
(1,441)
4,710
757,954
(212,663)
142,722
(63,354)
(23,040)
(38,488)
533,558
(1,441)
532,117
41,162
—
41,162
Golf
Course
Business
$
6,351
1,474
—
—
1,474
1,901
3,375
VICI
Consolidated
187,609
$
144,196
(63,354)
(38,488)
42,636
1,901
44,537
(In thousands)
Revenues
Operating income
Interest expense
Loss on
extinguishment of debt
Income before income
taxes
Income tax expense
Net income
Depreciation
7
3,679
3,686
—
751
751
Total assets
$ 11,247,637
$
85,731
$11,333,368
$ 9,660,244
$
79,468
$ 9,739,712
Note 18 — Subsequent Events
We have evaluated subsequent events and, except for the closing of Margaritaville Resort Casino on January 2,
2019, as described in Note 6, the interest rate swap transactions entered into on January 3, 2019, as described in
Note 10, the post-effective amendment to the registration statement on Form S-11 filed on January 3, 2019 (and
declared effective on January 30, 2019), as described in Note 13 and the payment of dividends on January 10,
2019, as described in Note 13, there were no other events relative to the Financial Statements that require additional
disclosure.
F - 39
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 19 — Quarterly Results of Operations (Unaudited)
The following is a summary of the unaudited quarterly results of operations for the year ended December 31, 2018
and the period from October 6, 2017 to December 31, 2017:
($ in thousands except per share
data)
Revenues
December 31,
2018
226,039
$
September 30,
2018
232,687
$
June 30,
2018
220,975
$
March 31,
2018
218,276
$
Quarter Ended
195,682
144,631
184,100
132,024
189,448
141,359
188,724
114,103
Period from
October 6 to
December 31,
2017
$
187,609
144,196
44,537
142,541
129,912
139,044
112,122
42,662
Operating income
Net income
Net income attributable to
common stockholders
Net income per common share
Basic and diluted
Dividends per share
$
$
0.37
0.2875
$
$
0.35
0.2875
$
$
0.38
0.2625
$
$
0.33
0.1600
$
$
0.19
—
F - 40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of VICI Properties Inc.
Opinion on the Financial Statements
We have audited the accompanying combined balance sheets of Caesars Entertainment Outdoor (the "Business")
as of October 5, 2017 and December 31, 2016, the related combined statements of operations, equity, and cash
flows for the period from January 1, 2017 to October 5, 2017 and for each of the two years in the period ended
December 31, 2016, and the related notes to the combined financial statements (collectively referred to as the
"Financial Statements"). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Business as of October 5, 2017 and December 31, 2016, and the results of its operations and its
cash flows for the period from January 1, 2017 to October 5, 2017 and for each of the two years in the period ended
December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Business’ management. Our responsibility is to express an
opinion on the Business’ financial statements based on our audits. We are a public accounting firm registered with
the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Business in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Business is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Business’ internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.
/s/ Deloitte & Touche LLP
Las Vegas, Nevada
March 28, 2018
We have served as the Business’ auditor since 2016.
F - 41
The following sets forth the historical combined financial statements of Caesars Entertainment Outdoor as
our predecessor, the operations of which were contributed to VICI Golf on October 6, 2017 as part of our
Formation Transactions.
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
COMBINED BALANCE SHEETS
(Amounts In Thousands)
October 5, 2017
December 31, 2016
Assets
Current assets
Cash
Receivables, net
Inventories
Prepayments
Total current assets
Property and equipment, net
Total assets
Liabilities and Equity
Current liabilities
Accounts payable
Accrued expenses
Current portion of long-term debt
Total current liabilities
Deferred income taxes
Liabilities subject to compromise
Total liabilities
Commitments and contingencies (Note 9)
Equity
Net investment
Retained earnings
Total equity
Total liabilities and equity
$
$
$
$
$
$
$
111
269
480
84
944
88,309
89,253
272
647
—
919
4,944
249
6,112
83,091
50
83,141
89,253
$
920
77
371
276
1,644
88,831
90,475
305
705
14
1,024
5,043
265
6,332
84,091
52
84,143
90,475
See accompanying Notes to Combined Financial Statements
F - 42
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
COMBINED STATEMENTS OF OPERATIONS
(Amounts In Thousands)
Period from
January 1, 2017 to
October 5, 2017
Year Ended
December 31, 2016
Year Ended
December 31, 2015
Revenues
Golf ($5,685, $6,353 and $5,146
attributable to related parties)
$
11,412
$
14,558
$
Food and beverage
Retail and other
Net revenues
Operating expenses
Direct
Golf
Food and beverage
Retail and other
Property costs
Depreciation
Administrative and other
Total operating expenses
Income from operations
Interest expense
Income before taxes
Income tax (expense) benefit
Net income (loss)
$
1,361
1,363
14,136
5,204
1,144
1,066
2,895
2,445
1,382
14,136
—
—
—
(2)
(2) $
2,150
2,077
18,785
7,082
1,828
1,691
3,138
3,030
2,009
18,778
7
(7)
—
—
— $
See accompanying Notes to Combined Financial Statements
14,071
2,150
1,856
18,077
6,767
1,936
1,581
3,133
2,882
1,760
18,059
18
(18)
—
3
3
F - 43
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
COMBINED STATEMENTS OF EQUITY
(Amounts In Thousands)
Balance at January 1, 2015
Net income
Transactions with parent, net
Balance at December 31, 2015
Net income
Transactions with parent, net
Balance at December 31, 2016
Net income (loss)
Transactions with parent, net
Balance at October 5, 2017
Net Investment
$
$
$
$
87,304
—
(1,981)
85,323
—
(1,232)
84,091
—
(1,000)
83,091
$
Retained Earnings
49
$
3
—
52
—
—
52
(2)
—
50
$
$
Total Equity
87,353
3
(1,981)
85,375
—
(1,232)
84,143
(2)
(1,000)
83,141
$
$
$
$
See accompanying Notes to Combined Financial Statements
F - 44
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
COMBINED STATEMENTS OF CASH FLOWS
(Amounts In Thousands)
Period from
January 1, 2017 to
October 5, 2017
Year Ended
December 31, 2016
Year Ended
December 31, 2015
$
(2) $
— $
3
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income to cash
flows provided by operating activities:
Depreciation
Net gain on asset sales
Deferred income taxes
Provisions for (recoveries of) bad debt
Change in current assets and liabilities:
Receivables
Other current assets
Inventories
Prepayments
Accounts payable
Accrued expenses
Cash flows provided by operating
activities
Cash flows from investing activities
Acquisitions of property and equipment, net
of change in related payables
Proceeds from sale of assets
Cash flows used in investing activities
Cash flows from financing activities
Repayments for capital leases
Transactions with parent, net
Cash flows used in financing activities
2,445
—
(99)
12
(203)
—
(109)
192
(49)
(58)
2,129
(1,924)
—
(1,924)
(14)
(1,000)
(1,014)
3,030
—
(111)
(10)
116
12
71
(223)
(39)
(125)
2,721
(869)
—
(869)
(51)
(1,232)
(1,283)
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
$
(809)
920
111
$
569
351
920
$
Supplemental Cash Flow Information:
Period from
January 1, 2017 to
October 5, 2017
Cash paid for interest
$
Year Ended
December 31, 2016
7
Year Ended
December 31, 2015
18
$
— $
See accompanying Notes to Combined Financial Statements
F - 45
2,882
(38)
(101)
31
(137)
69
(5)
6
52
126
2,888
(798)
66
(732)
(45)
(1,981)
(2,026)
130
221
351
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS
In these notes, the words “Caesars Entertainment Outdoor,” “Business,” “Outdoor Business,” “we,” “our,” and
“us” refer to the business and operation of the golf courses listed in Note 1 that were wholly owned by Caesars
Entertainment Operating Company, Inc. through October 5, 2017.
“CEOC” refers to the Caesars Entertainment Operating Company, Inc. “CEC”, “Caesars” and “Caesars
Entertainment” refer to Caesars Entertainment Corporation. On October 6, 2017 (the “Formation Date”), CEOC
merged with and into CEOC LLC, a Delaware limited liability company (“New CEOC”) with New CEOC surviving
the merger.
We also refer to (i) our Combined Financial Statements as our “Financial Statements,” (ii) our Combined
Statements of Operations as our “Statements of Operations,” and (iii) our Combined Balance Sheets as our
“Balance Sheets.”
Note 1 — Business and Basis of Presentation
Organization
Prior to the Formation Date, the Outdoor Business was a wholly owned business of CEOC and included the
operations of the Cascata golf course in Boulder City, Nevada, the Rio Secco golf course in Henderson, Nevada,
the Grand Bear golf course in Biloxi, Mississippi, and the Chariot Run golf course in Elizabeth, Indiana. Caesars
Entertainment Golf, Inc., Rio Development Company, Inc., Grand Casinos of Biloxi, LLC, and Riverboat Casino,
LLC, directly owned these golf courses, respectively, and were debtor-in-possession subsidiaries of CEOC.
The golf courses generate revenue through fees charged for general golf course usage (including green fees, golf
club rentals, and cart charges), annual or corporate memberships (at Rio Secco, Grand Bear and Chariot Run), a
school of golf (at Rio Secco), and food, beverage, and merchandise sales.
Bankruptcy
On January 15, 2015, CEOC and certain of its subsidiaries (the “Caesars Debtors”) voluntarily filed for relief under
Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the United States Bankruptcy
Court for the Northern District of Illinois (the “Bankruptcy Court”). As a result of this filing, CEOC operated as
a debtor-in-possession under the Bankruptcy Code. Because each of the four golf courses were owned by Caesars
Debtor entities, the Outdoor Business was also considered a debtor-in-possession prior to the Formation Date.
CEOC’s plan of reorganization (the “Plan”) was confirmed by the Bankruptcy Court on January 17, 2017.
Transfer of Operations and Assets to VICI
On the Formation Date, pursuant to the Bankruptcy Plan, subsidiaries of CEOC contributed the ownership of the
Business to VICI Properties Inc. (“VICI”). Following the Formation, the assets, liabilities and operations of the
Business are now included in VICI Golf LLC (“VICI Golf”), a Delaware limited-liability company. VICI Golf is
a wholly-owned subsidiary of VICI. VICI is a separate entity initially owned by certain former creditors of CEOC.
In addition, on the Formation Date, subsidiaries of VICI Golf, entered into a golf course use agreement (the “Golf
Course Use Agreement”) with New CEOC and Caesars Enterprise Services, LLC (“CES”) (collectively, the
“users”), whereby the users were granted certain priority rights and privileges with respect to access and use of
certain golf course properties. Payments under the Golf Course Use Agreement are comprised of a $10.0 million
annual membership fee, $3.0 million in annual use fees and minimum rounds fees of at least $1.1 million. The
annual membership fee, use fees and minimum round fees are subject to an annual escalator beginning at the times
provided under the Golf Course Use Agreement.
F - 46
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
Basis of Presentation
The Business’ Financial Statements were prepared in accordance with accounting principles generally accepted
in the United States (“GAAP”) and with the applicable rules and regulations of the Securities and Exchange
Commission (“SEC”).
The Financial Statements were derived from the financial statements of CEOC, prepared on a “carve-out” basis,
to present the financial position and results of operations of the Outdoor Business on a stand-alone basis. The
legal entities that own the Grand Bear and the Chariot Run golf courses also include non-golf course operations
that are excluded from these carve-out financial statements.
The Financial Statements include allocations of certain revenue amounts and general corporate expenses among
affiliated entities. Such allocated revenue and expenses may not reflect the results we would have incurred if we
had operated as a stand-alone company nor are they necessarily indicative of our future results. Management
believes the assumptions and methodologies used in the allocation of these revenues and expenses are reasonable.
Actual amounts could differ from those estimates.
Golf revenue from CEOC and Caesars' affiliates includes reimbursement for below market-rate golf tee times and
free play for certain casino guests. Variable golf fees provided by CEOC and Caesars affiliates are based on revenue
shortfalls necessary to cover the cost of maintaining the courses in appropriate playing conditions for casino guests.
The variable fee is dependent upon the number of rounds played, the types of rounds played (market-rate or
discounted rate), and costs incurred to allow the golf course to continue to offer golf as an amenity to its gaming
customers. These reimbursements and adjustments are included in golf revenue in the Statements of Operations.
Each of the golf courses represents a separate operating segment and we aggregate all such operations into one
reportable segment.
The Business’ Financial Statements reflect the application of ASC 852. This guidance requires that transactions
and events directly associated with the reorganization be distinguished from the ongoing operations of the business.
In addition, the guidance provides for changes in the accounting and presentation of liabilities.
Note 2 — Summary of Significant Accounting Policies
Cash
Cash consists of cash-on-hand and cash-in-bank.
Receivables
Accounts receivable are non-interest bearing and are initially recorded at cost. They include amounts for
sponsorship and other golf tournament fees, amounts due for hosted private events, and amounts due from credit
card clearing activities. The allowance for doubtful accounts is established and maintained based on our best
estimate of accounts receivable collectability. Management estimates collectability by specifically analyzing
accounts receivable aging, known troubled accounts and other historical factors that affect collections. Accounts
are written off when management deems the account to be uncollectible. Recoveries of accounts previously written
off are recorded into income when received. Trade receivables are due within one year or less and approximates
fair value.
F - 47
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
Allowance for Doubtful Accounts
(In thousands)
2017
2016
2015
Balance as of January 1,
Charges (credits) to income
Write-offs less recoveries
Balance as of October 5, 2017; December 31,
2016; and December 31, 2015, respectively
$
$
$
7
12
(11)
8
$
$
19
(10)
(2)
7
$
1
31
(13)
19
Inventory
Inventory, which consists primarily of food and beverages and merchandise held for resale, is stated at the lower
of cost or market. Losses on obsolete or excess inventory are not material.
Long-Lived Assets
The Business has significant capital invested in long-lived assets and judgments are made in determining their
estimated useful lives and salvage values and if or when an asset (or asset group) has been impaired. The accuracy
of these estimates affects the amount of depreciation and amortization expense recognized in the financial results
and whether a gain or loss should be recognized on the disposal of an asset. Lives assigned to the assets are based
on standard policy, established by management as representative of the useful life of each category of asset.
The carrying value of our long-lived assets is reviewed whenever events and circumstances indicate the carrying
value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and
eventual disposition. The factors considered by management in performing this assessment may include current
operating results, trends, prospects, as well as the effect of demand, competition, and other economic, legal, and
regulatory factors. In estimating expected future cash flows for determining whether an asset is impaired, assets
are grouped at the lowest level of identifiable cash flows, which in this case, is the four golf courses combined
together as an asset group. These analyses are sensitive to management assumptions and the estimates of the
obsolescence factors. Changes in these assumptions and estimates could have a material impact on the analyses
and the Financial Statements. For the period from January 1, 2017 to October 5, 2017 and the years ended December
31, 2016 and 2015, no impairment of long-lived assets was recorded.
Additions to property and equipment are stated at cost. Costs of improvements that extend the life of the asset are
capitalized. Maintenance and repair costs are expensed as incurred. Gains or losses on the dispositions of property
and equipment are recognized in the period of disposal. With respect to golf course improvements (included in
land improvements), only costs associated with original construction, complete replacements of items such as tee
boxes and putting greens, or the addition of new trees, sand traps, fairways or putting greens are capitalized. All
other related costs are expensed as incurred. For building improvements, only costs that extend the useful life of
the building are capitalized.
Certain land improvements include site preparations that prepare land for its intended use as a golf course. Like
the land itself, these improvements are inexhaustible and therefore not depreciated. Examples include excavation,
filling, grading and preparation of fairways and roughs. Depreciable land improvements are defined as
improvements made to land that have determinable estimated useful lives and deteriorate with use or passage of
time. These improvements were built or installed to enhance or facilitate the use of the land for a particular purpose.
Depreciable land improvements associated with the golf courses include greens, bunkers, tee boxes, cart paths,
fences and gates, landscaping and sprinkler systems.
F - 48
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset
or the related lease, as follows:
Useful Lives
Land improvements
Buildings and leasehold improvements
Building improvements
Furniture, fixtures, and equipment
12-60 years
40 years
5-15 years
2-10 years
Leasehold improvements are amortized over the shorter of the term of the respective lease or their useful life using
the straight-line method.
Liabilities Subject to Compromise
Under bankruptcy law, actions by creditors to collect amounts owed prior to the Petition Date are stayed and certain
other prepetition contractual obligations may not be enforced against the companies that own the Business.
Substantially all liabilities of the Debtors as of the Petition Date, except those paid under certain first day motions
filed with the Bankruptcy Court, have been classified as liabilities subject to compromise in the Balance Sheets.
Liabilities subject to compromise, including claims that became known after the bankruptcy petition was filed, are
reported using our best estimates of the expected amount of the total allowed claim.
Revenue Recognition
Revenues from golf course operations, food and beverage and merchandise sales are recognized at the time of sale
or when the service is provided and are reported net of sales tax. Golf memberships sold are typically to individuals
and are not refundable and are deferred and recognized within golf revenue in the Statements of Operations over
the expected life of an active membership, which is typically one year or less.
Included in golf revenue are market-rate fees received from public customers as well as discounted fees received
from CEOC and Caesars-affiliated customers or associates. In addition, certain VIP casino guests play the golf
courses for free. In these cases, the golf course receives amounts paid by CEOC and Caesars’ affiliates at an agreed
upon rate for the free play provided to their VIP guests. The reimbursement for free play was approximately
$611,000 for the period January 1, 2017 to October 5, 2017, and $620,000 and $708,000 for the years ended
December 31, 2016 and 2015, respectively.
There are additional variable golf fees provided by CEOC and Caesars’ affiliates based on revenue shortfalls
necessary to cover the cost of operating the courses at a high level appropriate for casino guests. The variable fee
is dependent upon the number of rounds played, the types of rounds played (market-rate or discounted rate), and
costs incurred to allow the golf course to continue to offer golf as an amenity to its gaming customers. Variable
golf fees included in golf revenue were approximately $4,692,000 for the period January 1, 2017 to October 5,
2017 and $4,862,000 and $3,669,000 for the years ended December 31, 2016 and 2015, respectively.
Advertising Expense
The golf courses are marketed through advertising and other promotional activities. Advertising expense is charged
to income during the period incurred. Advertising expense totaled approximately $63,000 for the period January
1, 2017 to October 5, 2017, and $118,000 and $74,000 for the years ended December 31, 2016 and 2015, respectively,
and is included in Administrative and other in the Statements of Operations.
Property Costs
Property costs are charged to income during the period incurred and include land rent, utilities and general repairs
and maintenance.
F - 49
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
Income Taxes
Historically, the Outdoor Business has been included in the consolidated federal income tax return of Caesars, as
well as certain state tax returns where Caesars or one of its subsidiaries files a state tax return. The provisions of
ASC 740, “Income Taxes,” was applied and the provision for income taxes was computed on a separate return
basis. The separate return method applies the accounting guidance for income taxes to the stand-alone combined
Financial Statements as if the Business was a separate taxpayer and a stand-alone enterprise for the periods
presented. As discussed in Note 7, these Financial Statements include certain allocations of income and expense
amongst affiliated entities. The tax provision was calculated assuming such allocations were appropriate for income
tax reporting purposes and do not include any transfer pricing adjustments with respect to such allocations. The
calculation of income taxes on a separate return basis requires a considerable amount of judgment and use of both
estimates and allocations. Management believes that the assumptions and estimates used to compute these tax
amounts are reasonable. However, the Financial Statements may not necessarily reflect our income tax expense
or tax payments in the future, or what tax amounts would have been if the Business had been a stand-alone enterprise
during the periods presented.
Federal and state income taxes currently payable are settled though our net investment equity account. Certain
taxes provided for are deferred because of temporary differences between reporting income and expenses for
financial statement purposes versus tax purposes. Federal income tax credits are recorded as a reduction of income
taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date.
Accruals for tax uncertainties are classified within other liabilities in our combined balance sheets. Amounts
accrued relate to any potential income tax liabilities resulting from uncertain tax positions, as well as potential
interest or penalties associated with those liabilities.
Note 3 — Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board (the “FASB”) issued the following authoritative guidance amending
the FASB Accounting Standards Codification.
Business Combinations - January 2017: Updated amendments intend to clarify the definition of a business with
the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as
acquisition (or disposals) of assets or businesses. Amendments in this update provide a more robust framework to
use in determining when a set of assets and activities is a business and to provide more consistency in applying
the guidance, reduce the costs of application, and make the definition of a business more operable. The amendments
are effective to annual periods beginning after December 15, 2017, including interim periods within those periods.
Early adoption is allowed as follows: (1) Transactions for which acquisition date occurs before the issuance date
or effective date of the amendments, only when the transaction has not been reported in Financial Statements that
have been issued or made available for issuance and (2) transactions in which a subsidiary is deconsolidated or a
group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when
the transaction has not been reported in Financial Statements that have been issued or made available for issuance.
The adoption of this standard could have a material impact on our Financial Statements should we have a future
acquisition of a business.
Leases - February 2016 (amended January 2017): The amended guidance requires most lease obligations to be
recognized as a right-of-use asset with a corresponding liability on the balance sheet. The guidance also requires
additional qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows
arising from leases. This guidance is effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2018. The guidance should be implemented for the earliest period presented using
a modified retrospective approach, which includes optional practical expedients primarily focused on leases that
F - 50
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
commence before the effective date. The qualitative and quantitative effects of adoption are still being analyzed.
We are in the process of evaluating the full impact the new guidance will have on our Financial Statements.
Revenue from Contracts with Customers - May 2014 (amended January 2017): The new guidance is intended to
clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP applicable to
revenue transactions. Existing industry guidance will be eliminated. The FASB has recently issued several
amendments to the standard, including clarification on accounting for and identifying performance obligations.
This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim
periods within those reporting periods. The guidance should be applied using the full retrospective method or
retrospectively with the cumulative effect initially applying the guidance recognized at the date of initial application.
We are adopting this standard effective January 1, 2018, retrospectively, and determined that there will not be a
material impact to our Financial Statements. The adoption of this guidance does not change the timing or process
in which we recognize golf revenue.
Income Taxes - October 2016: Amended guidance that addresses intra-entity transfers of assets other than inventory,
which requires the recognition of any related income tax consequences when such transfers occur. The amendments
should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained
earnings as of the beginning of the period of adoption. Amendments are effective for fiscal years beginning after
December 15, 2017, and interim reporting periods within those years. Early adoption is permitted. We do not expect
this standard will have a material impact on our Financial Statements.
Statement of Cash Flows - August 2016: Amended guidance addresses eight specific cash flow issues with the
objective of reducing diversity in how certain cash receipts and cash payments are presented and classified in the
statement of cash flows. The amendments should be applied retrospectively to each period presented. The
amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those
fiscal years. Early adoption is permitted. We have adopted this standard for our October 5, 2017 Statement of Cash
Flows.
Note 4 — Property and Equipment, Net
(In thousands)
Land and non-depreciable land improvements
Depreciable land improvements
Buildings and improvements
Furniture and equipment (including capital leases)
Construction in progress
Total property and equipment
Less: accumulated depreciation
Total property and equipment, net
$
$
December 31, 2016
35,525
$
40,174
35,133
5,445
—
116,277
(27,446)
88,831
October 5, 2017
35,525
40,183
35,153
4,833
1,831
117,525
(29,216)
88,309
$
(In thousands)
Depreciation expense (including capital lease
amortization)
$
2,445
$
3,030
$
2,882
Period from
January 1, 2017 to
October 5, 2017
Year Ended
December 31, 2016
Year Ended
December 31, 2015
F - 51
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
Note 5 — Accrued Expenses
Accrued utilities
Accrued real estate taxes and other taxes
Advance deposits
Deferred revenue
Accrued legal and professional fees
Payroll and other compensation
Other accruals
Total accrued expenses
(In thousands)
October 5, 2017
December 31, 2016
$
$
269
166
102
49
41
12
8
647
$
$
87
130
112
125
23
228
—
705
Note 6 — Liabilities Subject to Compromise
In March 2015, the Bankruptcy Court entered an order establishing May 26, 2015 as the bar date for potential
general creditors to file proofs of claims and established the required procedures with respect to filing such claims.
A bar date is the deadline by which creditors must file a proof of claim against the Debtors for the claim to be
allowed. In addition, a bar date of July 14, 2015 was established as a deadline for claims from governmental units.
As of October 5, 2017, the Business had received 55 proofs of claim, a portion of which assert, in part or in whole,
unliquidated claims. These proofs of claims include 9 claims that were carved out of the legal entities that own
the Business and that have additional claims, which do not correspond to the Business. In addition, the Business
has been assigned by the court an additional 13 claims. In the aggregate, total asserted liquidated proofs of claim
for approximately $122.2 million had been filed against or assigned to the Business. Based on reasonable current
estimates, the Business expects to ask the Bankruptcy Court to disallow 19 claims representing approximately
$116.3 million of such claims. These claims are classified by the Business as amended and replaced, duplicate,
redundant or non-Caesars Debtor claims.
As of October 5, 2017 and December 31, 2016, liabilities subject to compromise was approximately $249,000 and
$265,000, respectively, and consisted of accounts payable-related liabilities.
On October 6, 2017, the Business settled claims included in liabilities subject to compromise for $125,000
recognizing a reorganization gain of $124,000. In addition, approximately $5.1 million of claims are still disputed
and unresolved and have been transferred to New CEOC for final resolution.
Note 7 — Income Taxes
Income Tax (Provision)/Benefit
Current:
Federal
State
Deferred
Income Tax Benefit
(In thousands)
Period from
January 1, 2017 to
October 5, 2017
Year Ended
December 31, 2016
Year Ended
December 31, 2015
$
$
(100) $
—
98
(2) $
F - 52
(111) $
—
111
— $
(98)
—
101
3
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
Since the Outdoor Business does not have a formal tax sharing agreement in place with Caesars Entertainment for
federal income tax purposes, Caesars Entertainment pays all of the Outdoor Business’ federal income taxes. The
Outdoor Business’ portion was approximately $100,000 for the period January 1, 2017 to October 5, 2017 and
$111,000 and $98,000 for the years ended December 31, 2016 and 2015, respectively.
Income Tax Expense Reconciliation
(In thousands)
Period from
January 1, 2017 to
October 5, 2017
Year Ended
December 31, 2016
Year Ended
December 31, 2015
—
— $
Expected federal tax at the statutory tax rate
Increases/(decreases) in tax resulting from:
State taxes, net of federal tax benefit
Federal tax credits
Other
Income tax (expense)/benefit
$
$
— $
—
—
(2)
(2) $
Temporary Differences Resulting in Deferred Tax Assets and Liabilities
Deferred tax assets:
Federal net operating loss
State net operating loss
Federal tax credits
Other
Subtotal
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Depreciation and other property related items
Accrued expenses
Total deferred tax liabilities
Net deferred tax liability
—
—
—
— $
—
3
—
3
(In thousands)
As of October 5,
2017
As of December 31,
2016
$
$
$
5,561
378
82
8
6,029
1,930
4,099
(9,006)
(37)
(9,043)
(4,944) $
5,847
392
82
9
6,330
1,930
4,400
(9,423)
(20)
(9,443)
(5,043)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
As of October 5, 2017 and December 31, 2016, we had federal NOL carryforwards of $19.2 million and $20.1
million, respectively. These NOL carryforwards will begin to expire in 2032. In addition, we have federal
general business tax credit carryforwards of approximately $82 thousand which will begin to expire in 2032. As
of October 5, 2017 and December 31, 2016, we had state NOL carryforwards of $15.1 million and $15.5
million, respectively. These NOL carryforwards will begin to expire in 2032.
F - 53
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
Reconciliation of Unrecognized Tax Benefit
Period from
January 1, 2017 to
October 5, 2017
Balance at beginning of period
Additions based on tax positions related to the
current period
Balance at end of period
$
$
1,309
—
1,309
$
(In thousands)
Year Ended
December 31, 2016
1,309
$
Year Ended
December 31, 2015
1,309
$
—
1,309
$
—
1,309
We classify reserves for tax uncertainties within accrued expenses and deferred credits and other in our balance
sheets, separate from any related income tax payable or deferred income taxes. Reserve amounts related to
potential income tax liabilities resulting from uncertain tax positions as well as potential interest or penalties
associated with those liabilities.
We accrue interest and penalties related to unrecognized tax benefits in income tax expense. There were no
adjustments to our accrual for the period ending October 5, 2017 and the years ending December 31, 2016 and
2015, respectively, for accrued interest or penalties. There are no unrecognized tax benefits included in the balances
of unrecognized tax benefits as of October 5, 2017, December 31, 2016 and 2015 that, if recognized, would impact
the effective tax rate.
Note 8 — Related Party Transactions
We had transactions with CEOC resulting in net distributions of approximately $1.0 million for the period January
1, 2017 to October 5, 2017 and $1.2 million and $2.0 million for the years ending December 31, 2016 and 2015,
respectively. The net distributions are the result of cash generated by the operations of the Business and proceeds
from the sale of assets, partially offset by amounts contributed by CEOC to fund capital improvements and capital
lease obligations. These transactions are included as transactions with parent, net in our Combined Statements of
Equity.
Related Party Fees and Expenses
The following amounts are recorded with respect to the related-party transactions described in this section:
Transaction type
Insurance expense
Allocation of indirect
expenses from CEOC and
Caesars’ affiliates (1)
Golf revenue from CEOC and
Caesars’ affiliates (2)
Pass-through revenue with
CEOC and Caesars’ affiliates
(3)
Recorded as:
Administrative and other
Administrative and other
Golf revenue
Golf revenue
Food and beverage
revenue
Retail and other revenue
(In thousands)
Period from
January 1, 2017
to October 5,
2017
Year Ended
December 31,
2016
Year Ended
December 31,
2015
$
37
$
214
45
$
330
55
318
5,304
5,482
4,377
382
107
116
871
83
143
769
66
102
_____________
(1) The Statements of Operations include allocated overhead costs for certain functions historically performed
by CEOC and Caesars’ affiliates, including allocations of direct and indirect operating and maintenance costs
F - 54
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
and expenses for procurement, logistics and general and administrative costs and expenses related to executive
oversight, marketing, information technology, accounting, treasury, tax, and legal. These costs were allocated
on the basis of either revenue or payroll costs.
(2) See Summary of Significant Accounting Policies - Revenue Recognition.
(3) Primarily includes transactions where CEOC and Caesars affiliates’ customers charge their golf, food and
beverage and retail purchases directly to their hotel bill. Amounts collected from the customer by the hotel
are remitted to the golf course.
Savings and Retirement Plans
CEOC maintains a defined contribution savings and retirement plan that allows certain employees of the Business
to make pre-tax and after-tax contributions. Under the plan, participating employees may elect to contribute up to
50% of their eligible earnings, subject to IRS rules and regulations, and are eligible to receive a company match
of up to $600. Participating employees become vested in matching contributions on a pro-rata basis over five years
of credited service. Our contribution expense, included in direct operating expenses and administrative and other
expense, was approximately $27,000 for the period January 1, 2017 to October 5, 2017 and $34,000 and $39,000
for the years ended December 31, 2016 and 2015, respectively.
Note 9 — Litigation, Contractual Commitments and Contingent Liabilities
Litigation
The Business and its operations may be subject to litigation involving employment matters, personal injuries, and
other matters that arise in the normal course of business. We do not expect the outcome of such ordinary and routine
litigation to have a material effect on our combined financial position, results of operations, or cash flows.
Contingent Liabilities
In January 2015, a majority of the Trustees of the National Retirement Fund (“NRF”), a multi-employer defined
benefit pension plan, voted to expel Caesars and certain of its affiliates from the plan. The NRF has advised Caesars
and Caesars Entertainment Resort Properties, LLC (“CERP”) that this expulsion triggered a withdrawal liability
with a present value of approximately $360 million, payable in 80 quarterly payments of about $6 million. The
NRF filed a similar claim against each Caesars Debtor in CEOC’s bankruptcy. Although the Business’ employees
did not participate in this plan, because the entities that own the Business are a member of the Caesars Group (as
defined below), such entities are jointly and severally liable with Caesars and CEOC for any liability under the
NRF’s claims.
On March 13, 2017, CEOC, CEC, CERP, the Caesars employers that contribute to the NRF, and the NRF and
certain of its related parties entered into a settlement agreement resolving all issues related to the disputes with the
NRF. Under the terms of the settlement, CEC, or a person on CEC’s behalf, was required to pay a total of $45
million to the NRF on the Formation Date.
Under the Caesars Debtors’ Plan, the NRF is barred from asserting any claims against the Company and its
subsidiaries to the extent such claims arose prior to the Formation Date.
Operating Lease Commitments
The Business is liable under operating leases for land at the Cascata golf course, equipment and other miscellaneous
assets, which expire at various dates through 2039. Total rental expense under these agreements included in direct
golf operating expenses and property costs in our Statements of Operations were approximately $0.7 million for
the period January 1, 2017 to October 5, 2017 and approximately $1.0 million for each of the years ended
December 31, 2016 and 2015, respectively.
F - 55
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
The future minimum lease commitments relating to the base lease rent portion of noncancelable operating leases
at October 5, 2017 are as follows:
2017
2018
2019
2020
2021
2022 and thereafter
Total minimum rental commitments
Other Commitments
(In thousands)
Operating Leases
$
$
214
873
891
908
926
18,911
22,723
The Business utilizes a third-party golf maintenance company for its Rio Secco and Cascata golf courses. The
agreements are for five years and expire in February 2019 and include all labor and equipment necessary to maintain
both golf course grounds. Total expense under these agreements included in direct golf operating expenses in the
Statements of Operations were approximately $2.1 million for the period January 1, 2017 to October 5, 2017 and
$2.9 million and $2.8 million for the years ended December 31, 2016 and 2015, respectively.
The future commitments relating to these agreements at October 5, 2017 are as follows:
2017
2018
2019
Total maintenance agreement commitments
(In thousands)
Maintenance
Agreements
$
$
775
2,969
225
3,969
F - 56
CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY ONLY
VICI PROPERTIES INC.
CONDENSED BALANCE SHEETS
(In thousands, except share and per share data)
Schedule I
Assets
Cash and cash equivalents
Restricted cash
Short-term investments
Other assets
Due from affiliates
Investment in subsidiaries
Total assets
Liabilities
Other liabilities
Dividends payable
Due to affiliates
Total liabilities
Shareholders’ equity
Common stock, $0.01 par value, 700,000,000 shares
authorized and 404,729,616 and 300,278,938 shares issued
and outstanding at December 31, 2018 and December 31,
2017, respectively
Preferred stock, $0.01 par value, 50,000,000 shares
authorized and no shares outstanding at December 31, 2018
and 2017
Additional paid in capital
Accumulated other comprehensive loss
Retained earnings
Total shareholders' equity
December 31, 2018 December 31, 2017
$
$
$
377,704
$
119,117
48
520,877
2,150
133
6,033,310
6,934,222
$
486
$
116,287
—
116,773
—
—
—
57,573
9,545,013
9,721,703
—
—
155,001
155,001
4,047
3,003
—
6,648,430
(22,124)
187,096
6,817,449
—
9,563,417
—
282
9,566,702
9,721,703
Total liabilities and shareholders’ equity
$
6,934,222
$
See accompanying Notes to Condensed Financial Information
S - 1
CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY ONLY
VICI PROPERTIES INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands)
Schedule I
Revenues
Equity in earnings of investment in subsidiary
$
Revenues
Operating Expenses
General and administrative
Total operating expenses
Operating income
Interest income
Income before income taxes
Income taxes
Net income
Other comprehensive income
Net income
Unrealized loss on cash flow hedges - investment in
subsidiaries
Comprehensive income
$
$
$
Year Ended
December 31, 2018
Period from
October 6, 2017 to
December 31, 2017
516,116
$
516,116
78
78
516,038
7,581
523,619
—
523,619
$
523,619
$
(22,124)
501,495
$
—
—
—
—
—
282
282
—
282
282
—
282
See accompanying Notes to Condensed Financial Information
S - 2
CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY ONLY
VICI PROPERTIES INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
Schedule I
Year Ended
December 31, 2018
Period from
October 6, 2017 to
December 31, 2017
Cash flows from operating activities
Net income
Change in operating assets and liabilities:
Change in other assets
Change in other liabilities
Change in intercompany balances, net
Cash flows from operating activities
Cash flows from investing activities
Investment in subsidiary
Distributions from subsidiaries
Investments in short-term investments
Maturities of short-term investments
Cash flows used in investing activities
Cash flows from financing activities
Proceeds from private placement of common stock
Proceeds from initial public offering of common stock
Proceeds from follow-on offering of common stock
Dividends paid
Mandatory debt conversion costs
Cash flows provided by financing activities
$
523,619
$
(2,150)
270
(614)
521,125
(1,838,205)
357,781
(691,239)
170,362
(2,001,301)
—
1,307,119
694,374
(262,682)
—
1,738,811
Net increase in cash and cash equivalents
Cash, cash equivalents and restricted cash, beginning of
period
Cash, cash equivalents and restricted cash, end of period
$
258,635
119,117
377,752
$
See accompanying Notes to Condensed Financial Information
282
—
—
98,813
99,095
(1,000,000)
—
—
—
(1,000,000)
964,376
—
—
—
(13)
964,363
63,458
55,659
119,117
S - 3
CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY ONLY
VICI PROPERTIES INC.
NOTES TO CONDENSED FINANCIAL INFORMATION
Schedule I
1. Background and Basis of Presentation
The condensed parent company financial information has been prepared in accordance with Rule 12-04, Schedule
1 of Regulation S-X, as the restricted net assets of VICI Properties Inc. and its subsidiaries exceed 25% of the
consolidated net assets of VICI Properties Inc. and its subsidiaries (the “Company”). This information should be
read in conjunction with the Company’s consolidated financial statements included elsewhere in this filing.
2. Restricted net assets of subsidiaries
VICI Properties 1 LLC (“VICI PropCo”), a Delaware limited liability company and an indirect wholly-owned
subsidiary of VICI Properties, Inc., has certain restrictions on its ability to pay dividends or make intercompany
loans and advances pursuant to financing arrangements. On December 22, 2017, VICI PropCo entered into a credit
agreement (the “Credit Agreement”) governing the Term Loan B Facility and the Revolving Credit Facility. The
Credit Agreement contains customary covenants that, among other things, limit the ability of VICI PropCo and its
restricted subsidiaries to: (i) incur additional indebtedness; (ii) merge with a third party or engage in other
fundamental changes; (iii) make restricted payments; (iv) enter into, create, incur or assume any liens; (v) make
certain sales and other dispositions of assets; (vi) enter into certain transactions with affiliates; (vii) make certain
payments on certain other indebtedness; (viii) make certain investments; and (ix) incur restrictions on the ability
of restricted subsidiaries to make certain distributions, loans or transfers of assets to VICI PropCo or any restricted
subsidiary. These covenants are subject to a number of exceptions and qualifications, including the ability to make
unlimited restricted payments to maintain our REIT status and to avoid the payment of federal or state income or
excise tax, the ability to make restricted payments in an amount not to exceed 95% of our Funds from Operations
(as defined in the Credit Agreement) subject to no event of default under the Credit Agreement and pro forma
compliance with the financial covenant pursuant to the Credit Agreement, and the ability to make additional
restricted payments in an aggregate amount not to exceed the greater of 0.6% of Adjusted Total Assets (as defined
in the Credit Agreement) or $30,000,000. Commencing with the first full fiscal quarter ended after December 22,
2017, if the outstanding amount of the Revolving Credit Facility plus any drawings under letters of credit issued
pursuant to the Credit Agreement that have not been reimbursed as of the end of any fiscal quarter exceeds 30%
of the aggregate amount of the Revolving Credit Facility, VICI PropCo and its restricted subsidiaries on a
consolidated basis would be required to maintain a maximum Total Net Debt to Adjusted Total Assets Ratio, as
defined in the Credit Agreement, as of the last day of any applicable fiscal quarter.
The Second Lien Notes were issued on October 6, 2017, pursuant to an indenture (the “Indenture”) by and among
VICI PropCo and its wholly owned subsidiary, VICI FC Inc. (together, the “Issuers”), the subsidiary guarantors
party thereto, and UMB Bank National Association, as trustee. The Indenture contains covenants that limit the
Issuers’ and their restricted subsidiaries’ ability to, among other things: (i) incur additional debt; (ii) pay dividends
on or make other distributions in respect of their capital stock or make other restricted payments; (iii) make certain
investments; (iv) sell certain assets; (v) create or permit to exist dividend and/or payment restrictions affecting
their restricted subsidiaries; (vi) create liens on certain assets to secure debt; (vii) consolidate, merge, sell or
otherwise dispose of all or substantially all of their assets; (viii) enter into certain transactions with their affiliates;
and (ix) designate their subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of
exceptions and qualifications, including the ability to declare or pay any cash dividend or make any cash distribution
to VICI to the extent necessary for VICI to distribute cash dividends of 100% of our “real estate investment trust
taxable income” within the meaning of Section 857(b)(2) of the Internal Revenue Code of 1986, as amended,
certain restricted payments not to exceed the amount of our cumulative earnings (calculated pursuant to the Indenture
as $30,000,000 plus 95% of our cumulative Adjusted Funds From Operations (as defined in the Indenture) less
S - 4
cumulative distributions, with certain other adjustments), and the ability to make restricted payments in an amount
equal to the greater of 0.6% of Adjusted Total Assets (as defined in the Indenture) or $30,000,000.
The amount of restricted net assets the Company’s consolidated subsidiaries held as of December 31, 2018 was
approximately $5.8 billion.
3. Commitments, contingencies, and long-term obligations
For a discussion of the Company’s commitments, contingencies, and long-term obligations under its senior secured
credit facilities, see Note 9 of the Company’s consolidated financial statements.
S - 5
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
December 31, 2018
(in thousands)
Acquisition Costs
Costs
Capitalized
Subsequent to
Acquisition
Gross Amount at
Which Carried at
Close of Period
Encu
mbra
nces
Land and
Improve
ments
Buildi
ng
and
Impro
veme
nts
Land
and
Impro
veme
nts
Buildi
ng
and
Impro
veme
nts
Land and
Improve
ments
Buildi
ng
and
Impro
veme
nts
Total (a)
Accu
mulat
ed
Depre
ciatio
n
(b)
$1,010,967
$ — $ — $ — $1,010,967
$ — $1,010,967
$ —
Date
Acquired
10/6/2017
(c)
Use
ful
Life
N/A
Description
Location
Caesars
Palace Land
Las Vegas,
Nevada
Land Parcels
subject to
Non-CPLV
Lease
Agreement
Vacant, non-
operating
Land
Eastside
Property (e)
Various
(d)
75,691
Various
Las Vegas,
Nevada
22,189
73,600
—
—
—
—
—
—
—
—
—
75,691
22,189
73,600
—
—
—
75,691
— 10/6/2017
N/A
22,189
— 10/6/2017
N/A
73,600
— 10/6/2017
N/A
$1,182,447
$ — $ — $ — $1,182,447
$ — $1,182,447
$ —
(a) As discussed further in Note 2 — Summary of Significant Accounting Policies, the Lease Agreements are bifurcated between operating leases and
direct financing leases, resulting in land that is subject to operating lease treatment being recorded as a Real Estate Investments accounted for using the
operating method on the Company's Balance Sheet and included in this Schedule III. Building assets that triggered direct financing lease treatment are
recorded Investment in direct financing leases, net on the Company's Balance Sheet and are not included in this Schedule III.
(b) Pledged to secure obligations under the CPLV CMBS Debt.
(c) Octavius tower addition to the Land was acquired on July 11, 2018.
(d) Pledged to secure obligations under the Senior Secured Credit .
(e) The transaction to sell the Eastside Property to a subsidiary of Caesars closed on December 22, 2017. Due to a put/call option on the land parcels, it
was determined that the transaction does not meet the requirements of a completed sale for accounting purposes. As a result, we reclassified $73.6 million
from Real estate investments accounted for using the operating method to Land.
A summary of activity for real estate assets and accumulated depreciation for the period October 6, 2017 to December 31, 2018 is as
follows:
Balance as of October 6, 2017
Additions
Disposals
Depreciation expense
Balance as of December 31, 2017
Additions
Impairments
Disposals
Depreciation expense
Balance as of December 31, 2018
Real Estate
1,184,000
$
Accumulated
Depreciation
—
—
—
1,184,000
$
10,967
(12,334)
(186)
—
1,182,447
$
—
—
—
—
—
—
—
—
—
—
$
$
$
S - 6
MANAGEMENT TEAM
Edward B Pitoniak
Chief Executive Officer & Director
John W R Payne
President & Chief Operating Officer
David A Kieske
Executive Vice President & Chief Financial Officer
Samantha S Gallagher
Executive Vice President & General Counsel
Gabriel F Wasserman
Chief Accounting Officer
BOARD OF DIRECTORS
James R Abrahamson
Chair
Diana F Cantor
Director
Eugene I Davis
Director & Chair of the Audit & Finance Committee
Eric L Hausler
Director & Chair of the Nominating and Governance
Committee
Elizabeth I Holland
Director
Craig Macnab
Director & Chair of the Compensation Committee
Edward B Pitoniak
Director
Michael D Rumbolz
Director
STOCKHOLDER INFORMATION
Corporate Office
VICI Properties Inc.
430 Park Avenue, 8th Floor
New York, NY 10022
(646) 949-4631
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
New York, NY
Transfer Agent
Computershare
462 South 4th Street
Suite 1600
Louisville, KY 40202
(800) 962-4284
(781) 575-3120
www.computershare.com
VICI’s transfer agent responds to inquiries regarding
dividend payments, direct deposit of dividends, stock
transfers, address changes, and replacement of lost
dividend payments and lost stock certificates.
Annual Meeting
Tuesday, April 30, 2019, 10:00 a.m., ET
InterContinental New York Barclay Hotel
111 East 48th Street
New York, NY 10017
Stock Exchange Listing
New York Stock Exchange
Symbol: VICI
Annual Report on Form 10-K
We make available free of charge through our website,
at www.viciproperties.com/investors/sec-filings,
our
Form 10-K, as soon as reasonably practicable after such
material is electronically filed with or furnished to the
SEC.
Investor Communications
Investors seeking information about the company may
call or write Investor Relations at the Corporate Office or
e-mail
earnings
Investors@viciproperties.com. VICI
announcements, press releases, SEC filings and other
investor information are available at
the Investors
section of VICI’s website: www.viciproperties.com.
VICI Properties Inc.
430 Park Avenue
8th Floor
New York, NY 10022
www.viciproperties.com