VICI PROPERTIES INC.
ANNUAL REPORT
2019
1t
C A E S A R S P A L A C E
L A S V E G A S , N V
H A R V E Y ’ S L A K E T A H O E
S T A T E L I N E , N V
M A R G A R I T A V I L L E B O S S I E R C I T Y
B O S S I E R C I T Y , L A
H A R R A H ’ S L A S V E G A S
L A S V E G A S , N V
H O R S E S H O E C O U N C I L B L U F F S
C O U N C I L B L U F F S , I A
C A S C A T A G O L F C O U R S E
B O U L D E R C I T Y , N V
Dear VICI Stockholders,
From VICI’s earliest days, we’ve focused relentlessly on the methods by which we will manage and grow your
REIT. Taking advantage of our collective REIT experience as a management team and as a Board of Directors,
we’ve attacked the following questions with as much energy and rigor as we can manage:
1. What’s the character of the culture out of which a great REIT grows? How do we attract and retain the
best people, on both our Board and our management team, so we can live up to what we believe is
axiomatic in real estate investment management: “the best people plus the lowest cost of capital
wins”?
2. What are the partnership principles and methods that build and sustain a great REIT? How can we
best implement those principles collaboratively, with our transaction partners, advisory partners,
capital partners, both equity and debt, and our long-term operating partners and tenants?
We’ve focused relentlessly on these questions because we believe finding the right answers to these questions
is key to instilling and maintaining the right methods for managing, governing and growing VICI into the future.
We focus intensely on our methods—or our means—because we fundamentally believe that the scalability of
our REIT management and governance methods ultimately drives the scalability of our REIT results—or our
ends.
Looking back at 2019, our achievements were of a magnitude matched by very few other American REITs. We
believe we had one of the most productive and value-creating years of any REIT in recent history. We’re proud
of our achievements. But we’re even more proud that those outcomes are the result of the management team
and the management method that we’ve been building since VICI Day 1.
Here’s the essence of our strategic method: growing relationships. It is as simple as that. If we grow the right
relationships in the right way, we will successfully grow and sustain the value of the REIT in the right way. The
right way comes down to growing and constantly bettering our business by growing new relationships with new
partners and sustaining and broadening mutually beneficial relationships with existing partners.
These key partnerships include:
1. Our People: In 2019, our second full year of operation, VICI was one of only eight American REITs
to receive certification as a Great Place to Work®. We are using the Great Places to Work®
program to monitor and improve the experience of our people, because VICI’s success depends
on the unceasing energy and engagement of our people.
2. Our Gaming Partners: In 2019, we expanded and improved our portfolio by establishing new
relationships with operating partners in Reno, Nevada (Eldorado Resorts, Inc. (“Eldorado”)),
Hollywood, Florida (Hard Rock), Vienna, Austria (Century Casinos, Inc.) and Detroit, Michigan
(JACK Entertainment). In doing so, we added to our existing strong relationships with great
partners
in Las Vegas, Nevada (Caesars Entertainment Corporation) and Wyomissing,
Pennsylvania (Penn National Gaming, Inc.).
3. Our Equity Partners: In 2019, we bettered our capital structure by growing our relationships with
the equity investment community. As of the end of the year, we were the most owned Triple Net
REIT by America’s dedicated REIT investment managers, measured both as a percentage of
market capitalization and in absolute dollars. We were also the number one aggregate Triple Net
REIT holding of Europe’s top real estate investors as of the end of the year.
4. Our Credit Partners: In late 2019 and early 2020, we further fortified our capital structure by
initiating and quickly expanding our relationships within the fixed-income community, raising
nearly $5 billion of unsecured debt at some of the best pricing achieved in recent history by such
grade of credit. Through those financings, we redeemed in full our secured second lien debt and
spread our debt maturity ladder more evenly across the next decade. We were able to achieve
these goals,
in part, because we were recognized for our stated ambition to become an
investment-grade credit.
5. Our Learning Partners—Gaming:
It is through our relationships with great operators and
knowledgeable advisors that we learn more about the gaming marketplaces and stay current on
broader trends and developments, both in those markets where we already own gaming real
estate and those in which we may potentially acquire gaming real estate.
6. Our Potential New Sector Partners: It is also by growing relationships with operators and asset
owners in other experiential sectors that we are learning and will continue to learn about these
other sectors—learning that will determine if, when, with whom and how we will invest in
sectors beyond gaming.
This fundamental strategic method—growing our REIT and our value by growing our relationships with valuable
partners—sounds simple and basic. And it is. At VICI, we are big believers in the power of the simple and basic
to create long-term value.
2019 Growth & Portfolio Management Activities
To sum up 2019, we led the Gaming REIT sector in acquisition activity. Indeed, we were the only Gaming REIT to
announce any arms-length transactions in 2019. In total, we announced $4.9 billion of transactions, across
regional and Las Vegas assets, at a blended 7.9% cap rate.
Including the impact of our pending $3.2 billion transaction with Eldorado, which we announced in June 2019
and expect to close in the first half of 2020, we increased our annualized rent by approximately 45%, doubled
our roster of best-in-class tenants and demonstrated consistent accretive acquisition activity for the third
consecutive year (and during our third year in existence).
During the fourth quarter of 2019, we closed the acquisition of three regional properties with Century
Casinos. This $278 million transaction added $25 million of annual rent under a master lease, representing an
attractive 9.0% cap rate. This transaction has important strategic significance in that it creates a new
partnership with Century Casinos, an expert operator of small to mid-sized assets with the ambition to grow
their U.S. gaming platform and demonstrates that we can further diversify through partnerships with
operators of all sizes.
Also in the fourth quarter of 2019, we announced our acquisition of JACK Cleveland Casino and JACK
Thistledown Racino in a sale-leaseback transaction with JACK Entertainment. We subsequently closed on this
transaction in January 2020, acquiring both properties for a total of $843 million, adding $65.9 million of annual
rent to our portfolio through a master lease. This acquisition was consummated at an attractive 7.8% cap rate
for urban real estate in Ohio, one of the fastest growing regional markets in the country.
We have also worked diligently to secure an embedded growth pipeline intended to ensure that we maintain
visible, long-term growth. Upon the closing of the Eldorado transaction later this year, our embedded pipeline
will include two right of first refusal (“ROFR”) opportunities on Las Vegas Strip assets, a put/call option on two
high-quality assets in the growing Indianapolis gaming market, a put/call option on the world-class Caesars
Forum Convention Center in Las Vegas and an additional ROFR on an urban-core casino in Baltimore,
Maryland.
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2019 Balance Sheet Activities
Since our emergence in October 2017, we have brought relentless focus to ensuring that we have a capital
structure designed to weather all cycles and provide the safety and protection that our partners and investors
expect.
• During 2019, and into the first part of 2020, we continued to transform our balance sheet through the
following disciplined capital allocation. In June 2019, we raised $2.4 billion of equity through the
largest REIT primary share offering to date, fully funding all of the equity required for the Eldorado
transaction and the JACK Cleveland/Thistledown transaction.
•
•
•
In March 2019, we efficiently raised $128 million of net proceeds through our At-the-Market (“ATM”)
offering program. In early 2020, we opportunistically raised additional net proceeds of $200 million
through the ATM program to ensure funding for our transaction pipeline.
In May 2019, we upsized our line of credit by $600 million, increasing the total capacity to $1.0 billion,
enhancing our liquidity profile and extending the maturity from 2022 out to 2024.
In 2019 and early 2020, we significantly reduced our debt cost and improved our maturity ladder
through the following initiatives:
o
o
In November 2019, we executed our inaugural unsecured notes offering with an upsized
offering of $2.25 billion, comprised of $1.250 billion of 7-year notes at 4.25% and $1.0 billion
of 10-year notes at 4.625%. The proceeds from this offering were used to retire the secured
Caesars Palace Las Vegas CMBS debt, where we replaced a stand-alone secured mortgage
that carried a rate of 4.36% with a blended rate of 4.32% on the unsecured notes that were
used to retire this secured debt.
In February 2020, we closed on a subsequent $2.5 billion unsecured notes offering,
which was comprised of $750 million of 5-year notes at 3.5%, $750 million of 7-year
notes at 3.825% and $1.0 billion of 10.5-year notes at 4.125%. A portion of these
proceeds were used to redeem in full the outstanding $498.5 million in aggregate
principal amount of 8.0% second lien secured notes and the remaining $2.0 billion of the
net proceeds were put into escrow pending the consummation of the Eldorado
transaction. Including these proceeds and the proceeds from settling the forward sale
agreements from the June 2019 equity offering, we have $3.2 billion of capital
earmarked for the Eldorado transaction.
All this debt financing activity significantly improves our composition and weighted cost of debt. At our
emergence in 2017, we had 100% secured debt with a weighted average interest rate of 5.49% and a weighted
average maturity of 2.9 years. In comparison, we now have $6.85 billion of total debt outstanding, 69% of which
is unsecured, with a weighted average interest rate of 4.20%, a weighted average maturity of 7.1 years and no
maturities coming due until 2024.
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Final Thoughts
In 2019, VICI produced a total return to our stockholders of 43.2%, making us a Top-3 Triple Net REIT in total-
return performance. This total-return performance is the result of the work we are doing—with the vital
support of our operating, equity and credit partners—to consistently improve and grow our portfolio, our
tenant roster, our leases, our balance sheet and our Adjusted Funds From Operations growth rate.
Our performance to date, to re-state our fundamental strategic approach, is the result of the relationships we
have built and strive to grow every day.
To all of our current stockholders, who support us in this value-creation venture, we extend our gratitude.
Best regards,
Edward B. Pitoniak
John W.R. Payne
David A. Kieske
Samantha S. Gallagher
Chief Executive Officer
President and
Chief Operating Officer
Executive Vice President
and Chief Financial Officer
Executive Vice President
and General Counsel
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28
PROPERTIES
43M
SQUARE FEET
16
MSAS
4
CHAMPIONSHIP
GOLF COURSES
1.8M
SQ FT OF
GAMING SPACE
180
RESTAURANTS
AND BARS
15.6K
HOTEL ROOMS
1r
764K
SQ FT OF
MEETING AND
CONFERENCE
SPACE
50+
RETAIL
OUTLETS
G R E E K T O W N C A S I N O ‐ H O T E L
D E T R O I T , M I
C E N T U R Y C A S I N O C A P E G I R A R D E A U
C A P E G I R A R D E A U , M O
C A E S A R S A T L A N T I C C I T Y
A T L A N T I C C I T Y , N J
H A R R A H ’ S L A K E T A H O E
S T A T E L I N E , N V
C A E S A R S P A L A C E
L A S V E G A S , N V
H A R V E Y ’ S L A K E T A H O E
S T A T E L I N E , N V
H O R S E S H O E B O S S I E R C I T Y
B O S S I E R C I T Y , L A
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, 2019
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.)
535 Madison Avenue, 20th 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
Trading Symbol
VICI
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 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 28, 2019 (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 $10.1 billion, based on the closing price of the common stock as reported on the NYSE on that
date.
As of February 19, 2020, the registrant had 468,491,573 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s definitive proxy statement relating to the 2020 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
Index to Consolidated Financial Statements and Schedules
4
31
63
63
63
63
64
67
69
91
91
91
92
92
93
93
93
93
93
94
94
95
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.
“2025 Notes” refers to $750.0 million aggregate principal amount of 3.500% senior unsecured notes due 2025
issued by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in February 2020.
“2026 Notes” refers to $1.25 billion aggregate principal amount of 4.250% senior unsecured notes due 2026
issued by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in November 2019.
“2027 Notes” refers to $750.0 million aggregate principal amount of 3.750% senior unsecured notes due 2027
issued by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in February 2020.
“2029 Notes” refers to $1.0 billion aggregate principal amount of 4.625% senior unsecured notes due 2029 issued
by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in November 2019.
“2030 Notes” refers to $1.0 billion aggregate principal amount of 4.125% senior unsecured notes due 2030 issued
by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in February 2020.
“Caesars” refers to Caesars Entertainment Corporation, a Delaware corporation, and, as the context requires,
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.
“Century Casinos” refers to Century Casinos, Inc., a Delaware corporation, and, as the context requires, its
subsidiaries.
“Century Portfolio” refers to the real estate assets associated with the (i) Mountaineer Casino, Racetrack & Resort
located in New Cumberland, West Virginia, (ii) Century Casino Caruthersville located in Caruthersville, Missouri
and (iii) Century Casino Cape Girardeau located in Cape Girardeau, Missouri, which we purchased on December
6, 2019.
“Century Portfolio Lease Agreement” refers to the lease agreement for the Century Portfolio, as amended from
time to time.
“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, as the context requires, 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 and repaid in full on November
26, 2019.
“CPLV Lease Agreement” refers to the lease agreement for Caesars Palace Las Vegas, as amended from time to
time, which will be combined with the HLV Lease Agreement into a single Las Vegas master lease upon the closing
of the pending Eldorado/Caesars Merger.
1
“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.
“Eldorado Transaction” refers to a series of transactions between us and Eldorado in connection with the Eldorado/
Caesars Merger, including the acquisition of the Harrah’s New Orleans, Harrah’s Atlantic City and Harrah’s
Laughlin properties, modifications to the Caesars Lease Agreements, and rights of first refusal.
“Eldorado” refers to Eldorado Resorts, Inc., a Nevada corporation, and, as the context requires, its subsidiaries.
“Eldorado/Caesars Merger” refers to the merger contemplated under an Agreement and Plan of Merger pursuant
to which a subsidiary of Eldorado will merge with and into Caesars, with Caesars surviving as a wholly owned
subsidiary of Eldorado.
“February 2020 Senior Unsecured Notes” refers collectively to the 2025 Notes, 2027 Notes and the 2030 Notes.
“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, which we purchased on May 23, 2019.
“Greektown Lease Agreement” refers to the lease agreement for Greektown, as amended from time to time.
“Hard Rock” means Hard Rock International, and, as the context requires, its subsidiary and affiliate entities.
“Hard Rock Cincinnati” refers to the casino-entitled land and real estate and related assets associated with the
Hard Rock Cincinnati Casino, located in Cincinnati, Ohio, which we purchased on September 20, 2019 (and
previously referred to in our prior filings as JACK Cincinnati).
“Hard Rock Cincinnati Lease Agreement” refers to the lease agreement for Hard Rock Cincinnati, as amended
from time to time.
“HLV Lease Agreement” refers to the lease agreement for the Harrah’s Las Vegas facilities, as amended from time
to time, which will be combined with the CPLV Lease Agreement into a single Las Vegas master lease upon the
closing of the Eldorado/Caesars Merger.
“JACK Entertainment” refers to JACK Ohio LLC, and, as the context requires, its subsidiary and affiliate entities.
“JACK Cleveland/Thistledown” refers to the casino-entitled land and real estate and related assets associated
with the JACK Cleveland Casino located in Cleveland, Ohio, and the video lottery gaming and pari-mutuel wagering
authorized land and real estate and related assets of JACK Thistledown Racino located in North Randall, Ohio,
which we purchased on January 24, 2020.
“JACK Cleveland/Thistledown Lease Agreement” refers to the lease agreement for JACK Cleveland/Thistledown,
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.
2
“Lease Agreements” refer collectively to the Caesars Lease Agreements, the Penn National Lease Agreements,
the Hard Rock Cincinnati Lease Agreement, the Century Portfolio Lease Agreement and, from and after January
24, 2020, the JACK Cleveland/Thistledown Lease Agreement, unless the context otherwise requires.
“Margaritaville” refers to the real estate of Margaritaville Resort Casino, located in Bossier City, Louisiana,
which we purchased on January 2, 2019.
“Margaritaville Lease Agreement” refers to the lease agreement for Margaritaville, as amended from time to time.
“Master Transaction Agreement” refers to the master transaction agreement with Eldorado relating to the Eldorado
Transaction.
“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.
“November 2019 Senior Unsecured Notes” refer collectively to the 2026 Notes and the 2029 Notes.
“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, as the context requires, its subsidiaries.
“Penn National Lease Agreements” refer collectively to the Margaritaville Lease Agreement and the Greektown
Lease Agreement, unless the context otherwise requires.
“Revolving Credit Facility” refers to the five-year first lien revolving credit facility entered into by VICI PropCo,
as amended from time to time.
“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 remained outstanding as of December 31, 2019, and which were
redeemed in full on February 20, 2020.
“Seminole Hard Rock” means Seminole Hard Rock Entertainment, Inc.
“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.
3
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 28 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 40 million square feet, our well-maintained properties are currently located across urban, destination
and drive-to markets in twelve states, contain approximately 15,600 hotel rooms and feature over 180 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 mutually beneficial relationships with Caesars, Penn National, Hard Rock, Century Casinos
and JACK Entertainment, all of which are leading owners and operators of gaming, entertainment and leisure
properties. Our long-term triple-net Lease Agreements with subsidiaries of our operators 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.
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 conduct our operations as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. We
generally will not be subject to U.S. federal income taxes on our taxable income to the extent that we annually
distribute all of our net taxable income to stockholders and maintain our qualification as a REIT. We conduct our
real property business through our Operating Partnership and our golf course business through a taxable REIT
subsidiary (a “TRS”), VICI Golf.
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, Harrah’s, Horseshoe, Bally’s, Margaritaville, Greektown, JACK, Hard Rock, Century and
Mountaineer. 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
4
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, Margaritaville, Greektown,
JACK, Hard Rock, Century and Mountaineer 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 enhances the value of our properties and maintains their competitive market position.
Our properties feature diversified sources of revenue on both a business and geographic basis.
Our portfolio includes 28 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, Penn National, Hard Rock, Century Casinos and JACK Entertainment, providing us with a predictable
level of rental revenue to support future cash distributions to our stockholders.
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 our tenants to
pay to us all rent due under the Lease Agreements.
We believe our relationship with Caesars, Penn National, Hard Rock, Century Casinos and JACK Entertainment,
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.
The payment obligations of our tenants are guaranteed by Caesars, Penn National, Seminole Hard Rock,
Century Casinos and Rock Ohio Ventures LLC, as applicable.
All of our existing properties are leased to subsidiaries of Caesars, Penn National, Hard Rock, Century Casinos
and JACK Entertainment. 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, Penn National guarantees the payment obligations of our tenant under the Penn National Lease
Agreements, Seminole Hard Rock guarantees the payment obligations of our tenant under the Hard Rock Cincinnati
Lease Agreement, Century Casinos guarantees the payment obligations of our tenant under the Century Portfolio
5
Lease Agreement and Rock Ohio Ventures LLC guarantees the payment obligations of our tenants under the JACK
Cleveland/Thistledown Lease Agreement.
In addition to the properties leased from us, Caesars, Penn National, Hard Rock and Century Casinos operate
numerous other casino resorts, collectively comprising a nationally recognized portfolio of brands. In addition,
Caesars uses the Caesars Rewards® program, which is core to its cross-market strategy and is designed to encourage
Caesars’ customers to direct a larger share of their entertainment spending to Caesars. Subsequent to the closing
of the Eldorado/Caesars merger, the Caesars Rewards® program will remain as the customer loyalty program and
will include the Eldorado owned brands. Our other tenants operate their own customer loyalty rewards programs
including Penn National using the mychoice® reward program and Hard Rock using the Hard Rock Rewards®
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 over 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 over 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, risk management 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 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.
6
Our Properties
The following map and tables summarize our current portfolio of properties, our pending acquisitions and our
properties subject to the right of first refusal agreement and put/call agreement, subject to the closing of the Eldorado/
Caesars Merger. 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.
7
MSA / Property
Location
Approx.
Casino Sq.
Ft. (000’s)
Approx.
Gaming
Units
Hotel
Rooms
Lease
Agreement
Current Portfolio - Casinos
Las Vegas, NV
124
1,600
3,970
Las Vegas—Destination Gaming
Caesars Palace Las
Vegas
Harrah’s Las Vegas
San Francisco / Sacramento
Harvey’s Lake Tahoe
Harrah’s Reno (1)
Harrah’s Lake Tahoe
Philadelphia
Las Vegas, NV
Lake Tahoe, NV
Reno, NV
Stateline, NV
Caesars Atlantic City
Bally’s Atlantic City
Harrah’s Philadelphia (2)
Atlantic City, NJ
Atlantic City, NJ
Chester, PA
Chicago
Horseshoe Hammond
Harrah’s Joliet (3)
Hammond, IN
Joliet, IL
Cincinnati
Hard Rock Cincinnati
Cincinnati, OH
Cleveland
JACK Cleveland (4)
JACK Thistledown
Racino (4)
Cleveland, OH
North Randall, OH
Dallas
Horseshoe Bossier City
Bossier City, LA
Harrah’s Louisiana
Downs (2)
Margaritaville Resort
Casino
Detroit
Bossier City, LA
Bossier City, LA
89
44
40
45
116
127
113
108
39
100
96
57
28
12
27
Greektown Casino Hotel
Detroit, MI
100
Kansas City
Harrah’s North Kansas
City
St. Louis
North Kansas City, MO
Century Cape Girardeau
Century Caruthersville
Cape Girardeau, MO
Caruthersville, MO
Pittsburgh
Mountaineer Casino
Resort & Racetrack
Memphis
New Cumberland, WV
Horseshoe Tunica
Tunica Roadhouse (5)
Robinsonville, MS
Robinsonville, MS
60
42
21
76
63
N/A
8
1,310
2,540
720
640
830
2,020
1,960
2,560
2,370
1,130
740
930
510
1,140
1,210
N/A
N/A
200
1,900
N/A
CPLV
HLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Joliet
Hard Rock
Cincinnati
1,450
1,480
1,240
830
1,270
2,780
1,360
880
510
N/A
N/A
610
N/A
395
400
390
N/A
N/A
JACK Cleveland/
Thistledown
JACK Cleveland/
Thistledown
Non-CPLV
Non-CPLV
Margaritaville
Greektown
Non-CPLV
Century Portfolio
Century Portfolio
1,520
357
Century Portfolio
1,110
N/A
510
140
Non-CPLV
Non-CPLV
Approx.
Casino Sq.
Ft. (000’s)
Approx.
Gaming
Units
Hotel
Rooms
Lease
Agreement
MSA / Property
Location
Omaha
Harrah’s Council Bluffs
Council Bluffs, IA
Horseshoe Council
Bluffs
Nashville
Council Bluffs, IA
Harrah’s Metropolis
Metropolis, IL
New Orleans
Harrah’s Gulf Coast
Biloxi, MS
21
60
24
31
570
1,450
870
800
250
N/A
260
500
Louisville
Caesars Southern
Indiana
Total Casinos
Elizabeth, IN
28
87
1,750
1,680
36,840
500
15,552
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
Chariot Run Golf
Course
Total Golf Courses
Total
Laconia, IN
4
32
N/A
N/A
N/A
N/A
—
1,750
N/A
N/A
N/A
N/A
—
N/A
N/A
N/A
N/A
—
36,840
15,552
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
Non-CPLV
N/A
N/A
N/A
N/A
Pending Acquisitions
Philadelphia
Harrah’s Atlantic City (7)
Atlantic City, NJ
New Orleans
Harrah’s New Orleans (7)
New Orleans, LA
Laughlin
Harrah’s Laughlin (7)
Total
Laughlin, NV
3
156
125
56
337
2,270
2,590
Non-CPLV (6)
1,630
450
Non-CPLV (6)
910
4,810
1,510
4,550
Non-CPLV (6)
9
MSA / Property
Location
Approx.
Casino Sq.
Ft. (000’s)
Put/Call Properties
Approx.
Gaming
Units
Hotel
Rooms
Lease
Agreement
Indianapolis
Indiana Grand Racing &
Casino (2)(7)
Harrah’s Hoosier Park (2)
(7)
Las Vegas
Caesars Forum
Convention Center
Total
Anderson, IN
Shelbyville, IN
Las Vegas, NV
3
84
54
N/A
138
2,070
1,070
N/A
3,140
N/A
N/A
N/A
—
N/A
N/A
N/A
(1) On December 31, 2019 we and Caesars entered into a definitive agreement to sell the Harrah’s Reno asset for $50 million to a third
party. We are entitled to receive 75% of the proceeds of the sale and Caesars is entitled to receive 25% of the proceeds. The annual rent
payments under the Non-CPLV Lease Agreement will remain unchanged following completion of the disposition.
(2) Property has live horse racing.
(3) Owned by Harrah’s Joliet Landco LLC, a joint venture of which VICI PropCo is the 80% owner and the managing member.
(4) On January 24, 2020, we completed the previously announced transaction to acquire JACK Cleveland/Thistledown.
(5) In January of 2019, Caesars combined the gaming operations of Tunica Roadhouse and Horseshoe Tunica.
(6) The Harrah’s Atlantic City, Harrah’s New Orleans and Harrah’s Laughlin properties will be added to the Non-CPLV Lease Agreement
upon the closing of the Eldorado Transaction.
(7) Subject to closing of Eldorado/Caesars Merger. See Item 1 - Business - Our Relationship with Caesars - Call Right Agreements and
Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Summary of Recent Activities -
Eldorado Transaction.
10
Our Lease Agreements
We derive substantially all of our revenues from rental revenue from the Lease Agreements for our properties, each
of which are “triple-net” leases, pursuant to which the tenant bears responsibility for all property costs and expenses
associated with ongoing maintenance and operation, including utilities, property tax and insurance.
Caesars Lease Agreements - Overview
The following is a summary of the material lease provisions of the Caesars Lease Agreements (which does not
reflect the modifications to the Caesars Lease Agreements contemplated in connection with the closing of the
Eldorado Transaction):
($ In thousands)
Lease Provision (1)
Initial Term
Renewal Terms
Current Annual Rent
(2)
Escalator
commencement
Escalator (3)
EBITDAR to Rent
Ratio floor (4)
Variable Rent
commencement/reset
Variable Rent split (5)
Variable Rent
percentage (5)
Non-CPLV Lease
Agreement and Joliet
Lease Agreement
CPLV Lease Agreement
HLV Lease Agreement
15 years
15 years
15 years
Four, five-year terms
Four, five-year terms
Four, five-year terms
$508,534
$207,745
$89,157
Lease year two
Lease year two
Lease year two
Lease years 2-5 - 1.5%
Lease years 6-15 -
Consumer price index
subject to 2% floor
Consumer price index
subject to 2% floor
Lease years 2-5 - 1%
Lease years 6-15 -
Consumer price index
subject to 2% floor
1.2x commencing lease
year 8
1.7x commencing lease
year 8
1.6x commencing lease
year 6
Lease years 8 and 11
Lease years 8 and 11
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
80% Base Rent and 20%
Variable Rent
80% Base Rent and 20%
Variable Rent
4%
4%
4%
____________________
(1) All capitalized terms used without definition herein have the meanings detailed in the applicable Caesars Lease Agreements.
(2) In relation to the Non-CPLV Lease Agreement, Joliet Lease Agreement and CPLV Lease Agreement, the amount represents the current
annual base rent payable for the current lease year which is the period from November 1, 2019 through October 31, 2020. In relation to the
HLV Lease Agreement the amount represents current annual base rent payable for the current lease year which is the period from January 1,
2020 through December 31, 2020.
(3) 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, 2019.
(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. The EBITDAR to Rent Ratio floor is conditioned upon obtaining a favorable private letter ruling from the Internal
Revenue Service. The coverage floors, which coverage floors serve to reduce the rent escalators under the Caesars Lease Agreements in the
event that the “EBITDAR to Rent Ratio” coverage is below the stated floor, will be removed upon execution of the amendments to the Caesars
Lease Agreements in connection with the closing of the Eldorado Transaction.
(5) Variable Rent is not subject to the Escalator and is calculated as an increase or decrease of Net Revenues, as defined in the Caesars Lease
Agreements, multiplied by the Variable Rent percentage.
11
Penn National Lease Agreements - Overview
The following is a summary of the material lease provisions of the Penn National Lease Agreements:
($ In thousands)
Lease Provision
Initial term
Renewal terms
Current annual rent (1)
Escalation
commencement
Escalation
Margaritaville Lease Agreement
Greektown Lease Agreement
15 years
Four, five-year terms
$23,544
Lease year two
15 years
Four, five-year terms
$55,600
Lease year two
2% of Building base rent, subject to the
net revenue to rent ratio floor
2% of Building base rent, subject to the
EBITDAR to rent ratio floor
Performance to rent
ratio floor (2)
Percentage rent (3)
6.1x net revenue commencing lease year
two
$3,000 (fixed for lease year one and two)
1.85x EBITDAR commencing lease year
two
$6,400 (fixed for lease year one and two)
Percentage rent reset
Lease year three and each and every
other lease year thereafter
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)
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 relation to the Margaritaville Lease Agreement, the amount represents current annual base rent payable for the current lease year, which
is the period from February 1, 2020 through January 31, 2021. In relation to the Greektown Lease Agreement, the amount represents current
annual base rent payable for the current lease year which is the period from May 23, 2019 through May 31, 2020.
(2) In February 2020 the performance basis of the Margaritaville Lease Agreement was changed from a 1.9x EBITDAR to rent ratio to a 6.1x
net revenue to rent ratio. In the event that the net revenue or EBITDAR to rent ratio coverage is below the stated floor, the escalation will be
reduced to such amount to achieve the stated net revenue or EBITDAR to rent ratio coverage, provided that the amount shall never result in
a decrease to the prior year’s rent. In relation to the Greektown Lease Agreement, the EBITDAR to rent ratio floor is conditioned upon obtaining
a favorable private letter ruling from the Internal Revenue Service.
(3) Percentage rent is subject to the percentage rent multiplier. After the percentage rent reset in lease year three, any amounts related to
percentage rent are considered contingent rent in accordance with GAAP. No such rent has been recognized for the year ended December 31,
2019.
12
Hard Rock Cincinnati Lease Agreement - Overview
The following is a summary of the material lease provisions of the Hard Rock Cincinnati Lease Agreement:
($ In thousands)
Lease Provision
Initial term
Renewal terms
Current annual rent (1)
Escalator commencement
Escalator (2)
Term
15 years
Four, five-year terms
$42,750
Lease year two
Lease years 2-4 - 1.5%
Lease years 5-15 - The greater of 2% or the change in consumer
price index (“CPI”) unless the change in CPI is less than 0.5%, in
which case there is no escalation in rent for such lease year
Variable rent commencement/reset
Variable rent split (3)
Variable rent percentage (3)
Lease year 8
80% Base Rent and 20% Variable Rent
4%
____________________
(1)The amount represents the current annual base rent payable for the current lease year, which is the period from September 20, 2019 through
September 30, 2020.
(2) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP. No
such rent has been recognized for the year ended December 31, 2019.
(3) Variable rent is not subject to the escalator and is calculated as an increase or decrease of the average of net revenues for lease years 5
through 7 compared to the average net revenue for lease years 1 through 3, multiplied by the Variable rent percentage.
13
Century Portfolio Lease Agreement - Overview
The following is a summary of the material lease provisions of the Century Portfolio Lease Agreement:
($ In thousands)
Lease Provision
Initial term
Renewal terms
Current annual rent (1)
Term
15 years
Four, five-year terms
$25,000
Escalator commencement
Lease year two
Escalator (2)
Net revenue to rent ratio floor
Variable rent commencement/reset
Variable rent split (3)
Variable rent percentage (3)
Lease years 2-3 - 1.0%
Lease years 4-15 - The greater of 1.25% or the change in consumer
price index (“CPI”)
7.5x commencing lease year six - if the coverage ratio is below the
stated amount the escalator will be reduced to 0.75%
Lease year 8 and 11
80% Base Rent and 20% Variable Rent
4%
____________________
(1) The amount represents the current annual base rent payable for the current lease year, which is the period from December 6, 2019 through
December 31, 2020.
(2) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP. No
such rent has been recognized for the year ended December 31, 2019.
(3) Variable rent is not subject to the escalator and is calculated for lease year 8 as an increase or decrease of the average of net revenues for
lease years 5 through 7 compared to the average net revenue for lease years 1 through 3 and for lease year 11 as an increase or decrease of
the average of net revenues for lease years 8 through 10 compared to the average net revenue for lease years 5 through 7, multiplied by the
Variable rent percentage.
14
JACK Cleveland/Thistledown Lease Agreement - Overview
Subsequent to year end, on January 24, 2020, we completed the previously announced JACK Cleveland/
Thistledown Acquisition (as defined below). The following is a summary of the material lease provisions of our
lease with a subsidiary of JACK Entertainment, which commenced on January 24, 2020, the date of acquisition:
($ In thousands)
Lease Provision
Initial term
Renewal terms
Current annual rent (1)
Term
15 years
Four, five-year terms
$65,880
Escalator commencement
Lease year two
Escalator (2)
Net revenue to rent ratio floor
Variable rent commencement/reset
Variable rent split (3)
Variable rent percentage (3)
Lease years 2-3 - 1.0%
Lease years 4-6 - 1.5%
Lease Years 7-15 - The greater of 1.5% or the change in consumer
price index (“CPI”) capped at 2.5%
4.9x in any lease year (commencing in lease year 5) - if the coverage
ratio is below the stated amount there is no escalation in rent for such
lease year
Lease year 8 and 11
80% Base Rent and 20% Variable Rent
4%
____________________
(1) The amount represents the current annual base rent payable for the current lease year, which is the period from January 24, 2020 through
January 31, 2021.
(2) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP.
(3) Variable rent is not subject to the escalator and is calculated for lease year 8 as an increase or decrease of the average of net revenues for
lease years 5 through 7 compared to the average net revenue for lease years 1 through 3 and for lease year 11 as an increase or decrease of
the average of net revenues for lease years 8 through 10 compared to the average net revenue for lease years 5 through 7, multiplied by the
Variable rent percentage.
15
Capital Expenditure Requirements
Under our Lease Agreements our tenants are responsible for all capital expenditures at our properties. 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:
The following table summarizes the capital expenditure requirements of the respective tenants under the Caesars
Lease Agreements (which does not reflect the modifications to the Caesars Lease Agreements contemplated in
connection with the closing of the Eldorado Transaction, including the inclusion of the Harrah’s New Orleans,
Harrah’s Atlantic City and Harrah’s Laughlin properties in the Non-CPLV Lease Agreement):
Provision
Yearly minimum
expenditure
Rolling three-year
minimum (2)
Initial minimum
capital expenditure
Non-CPLV Lease
Agreement and Joliet Lease
Agreement
CPLV Lease Agreement
1% of net revenues (1)
1% of net revenues (1)
HLV Lease Agreement
1% of net revenues
commencing in 2022
$255 million
$84 million
N/A
N/A
N/A
$171 million (2017 - 2021)
____________________
(1) The lease agreement requires a $100 million floor on annual 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 on capital expenditures (excluding gaming equipment) over a rolling three-year period, with $255
million allocated to Non-CPLV, $84 million allocated to CPLV and 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 on capital
expenditures (including gaming equipment) across certain of its affiliates and other assets, together with the $350 million requirement.
The following table summarizes the capital expenditure requirements of Penn National, Hard Rock, Century
Casinos and JACK Entertainment under each of the respective Lease Agreements:
Provision
Penn National Lease
Agreements
Hard Rock
Cincinnati Lease
Agreement
Century Portfolio
Lease Agreement
Yearly minimum
expenditure
1% of net revenues
based on rolling
four-year basis
1% of net revenues
1% of net gaming
revenues (1)
JACK Cleveland/
Thistledown Lease
Agreement
Initial minimum of
$30 million (2)
Thereafter - 1% of
net revenues on a
rolling three-year
basis
____________________
(1) Minimum of 1% of net gaming revenue on a rolling three-year basis for each individual facility and 1% of net gaming revenues per fiscal
year for the facilities collectively.
(2) Initial minimum required to be spent from the period commencing April 1, 2019 through December 31, 2022.
16
Our Relationship with Caesars
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, 2019, Caesars operates 53 properties, consisting of 23 owned and operated
properties, eight properties that it manages on behalf of third parties and 20 properties that it leases from us.
We are independent from Caesars. However, we believe we have a mutually beneficial relationship with Caesars.
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 herein 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
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.
17
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
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.
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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 acquired 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,
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.
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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. Accordingly, the Second Amended and Restated Right of
First Refusal Agreement will terminate in accordance with its terms upon the consummation of the Eldorado/
Caesars Merger.
Upon closing of the Eldorado/Caesars Merger, the Second Amended and Restated Right of First Refusal Agreement
will be terminated and we will enter into the Las Vegas ROFR (as defined and described below in Item 7 under
“Management’s Discussion and Analysis-Eldorado Transaction-Las Vegas Strip Assets ROFR”) and the Horseshoe
Baltimore ROFR (as defined and described below in Item 7 under “Management’s Discussion and Analysis-
Eldorado Transaction- Horseshoe Baltimore ROFR”).
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.
As described below in Item 7 under “Management’s Discussion and Analysis-Eldorado Transaction-Acquisition
of the MTA Properties” we have entered into agreements to acquire all of the land and real estate assets associated
with Harrah’s Atlantic City, Harrah’s New Orleans and Harrah’s Laughlin, and the existing call right agreements
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will terminate, upon the earlier to occur of the closing of the corresponding MTA Property Acquisition or our
obtaining specific performance or liquidated damages with respect to the relevant property.
Caesars Forum Put/Call Agreement
Claudine Propco LLC (“HLV Owner”), our wholly owned subsidiary, and certain subsidiaries of Caesars entered
into a put/call agreement (the “Caesars Forum 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 Caesars Forum Put/Call Agreement. The Caesars Forum Put/Call Agreement survives the closing
of the Eldorado/Caesars Merger.
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 $10.3 million annual membership fee, $3.1 million of use fees and $1.2
million of minimum rounds fees subject to certain adjustments. The Golf Course Use Agreement survives the
closing of the Eldorado/Caesars Merger.
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 that we are required to pay pursuant to our tax returns and
we have agreed to indemnify Caesars for any taxes allocated to us that Caesars or CEOC is required to pay pursuant
to a Caesars or CEOC tax return.
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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. The Tax Matters Agreement survives the closing of the Eldorado/Caesars Merger.
Eldorado Transaction
On June 24, 2019, Eldorado entered into a definitive agreement and plan of merger (the “Eldorado/Caesars Merger
Agreement”) by and among Eldorado, Colt Merger Sub, Inc. (“Merger Sub”) and Caesars, pursuant to which
Merger Sub will merge with and into Caesars, with Caesars surviving as a wholly owned subsidiary of Eldorado.
Upon closing of the Eldorado/Caesars Merger, Eldorado will be renamed Caesars.
On the same day, in connection with the announcement of the Eldorado/Caesars Merger, we entered into a Master
Transaction Agreement with Eldorado relating to the MTA Properties Acquisitions (as defined and described below
in Item 7 under “Management’s Discussion and Analysis-Eldorado Transaction-Acquisition of the MTA
Properties”) and modifications to our Caesars Lease Agreements, and the entry into the Las Vegas ROFR, the
Horseshoe Baltimore ROFR and the Centaur Properties Put/Call Agreement. Additionally, as described in Item 7
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” below, upon the
consummation of the Eldorado Transaction, Eldorado will execute new guaranties (collectively, the “Eldorado
Guaranties”) of the Formation Lease Agreements and the existing guaranties by Caesars of the Formation Lease
Agreements, along with all covenants and other obligations of Caesars incurred in connection with such guaranties,
will be terminated with respect to Caesars (which will become a subsidiary of Eldorado following the closing of
the Eldorado/Caesars Merger). The Eldorado Transaction and the Eldorado/Caesars Merger both continue to be
subject to regulatory approvals and customary closing conditions. Eldorado has publicly disclosed that it expects
the Eldorado/Caesars Merger to be completed in the first half of 2020, and we expect the Eldorado Transaction to
close concurrently. However, we can provide no assurances that the Eldorado/Caesars Merger or the Eldorado
Transaction described herein will close in the anticipated timeframe, on the contemplated terms or at all.
Refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a
more detailed description of the Eldorado Transaction.
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, Penn National, Hard
Rock, Century Casinos and JACK Entertainment 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.
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Employees
Approximately 140 employees were employed by us at December 31, 2019. Of these employees, 16 are employed
at our Operating Partnership and approximately 124 are employed at our TRS, 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 our tenants; 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, Penn National, Hard Rock, Century Casinos and JACK Entertainment
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.
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.
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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.
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 continue to focus on developing our efforts relative to implementing and reporting on environmental
sustainability efforts at our properties. We have implemented tenant engagement initiatives designed to assist us
in understanding the environmental impact of our leased properties and to gather environmental sustainability data
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in order to monitor sustainability metrics throughout our leased property portfolio. Our existing leased properties
are leased pursuant to long-term triple-net leases, which provide our tenants with complete control over operations
at our leased properties, including over the implementation of environmental sustainability initiatives consistent
with their business strategies and our revenue objectives, and do not permit us to require the collection or reporting
of environmental sustainability data. Although not contractually required, in 2019, certain of our tenants reported
to us on LEED certification, water and energy use, emissions and waste diversion. In addition, we have implemented
recording and reporting protocols at our owned and operated golf courses in order to monitor our environmental
impact at those properties and commence our process towards setting long-term sustainability targets. In 2019, we
relocated our corporate headquarters to a LEED Gold certified building with an Energy Star label. We are committed
to the improvement of environmental conditions through our business activities within the scope of our capabilities,
and we periodically engage with key stakeholders with regard to environmental sustainability priorities, among
other things.
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, Harrah’s, Horseshoe, Bally’s, Greektown, JACK, Hard Rock, Century
and Mountaineer. 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 Penn National, Hard Rock, Century Casinos and
JACK Entertainment, we are reliant on Caesars, Penn National, Hard Rock, Century Casinos and JACK
Entertainment 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 28 market-leading properties and own and operate four golf courses. We believe there are potential
opportunities to acquire additional gaming, hospitality and entertainment assets. 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
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. We may also pursue
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opportunities to provide mortgage financing of preferred equity investments for investment in certain situations
where this structure is more advantageous than owning the underlying real estate.
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 Debt
Although we do not presently intend to invest in mortgages or other forms of real estate-related debt, other than
in a manner that is ancillary to an equity investment, we may elect, in our discretion, to invest in real estate debt,
including, without limitation, traditional mortgages, participating or convertible mortgages, mezzanine loans or
preferred equity investments; provided, in each case, that such investment is consistent with our qualification as
a REIT. Investments in real estate-related debt run the risk that a borrower may default under certain provisions
governing the debt investment and that the collateral securing the investment may not be sufficient to enable us to
recover 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 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 180 days.
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 that 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
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
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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) on January 17, 2017.
Our principal executive offices are located at 535 Madison Ave., 20th Floor, New York, New York 10022 and our
main telephone number at that location is (646) 949-4631. 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, Penn National, Hard Rock, Century Casinos and JACK
Entertainment (and, following the completion of the Eldorado Transaction, subsidiaries of the combined
Eldorado/Caesars) as tenants of our properties and Caesars, Penn National, Seminole Hard Rock, Century
Casinos and Rock Ohio Ventures LLC or certain of their respective subsidiaries (and, following the
completion of the Eldorado Transaction, subsidiaries of the combined Eldorado/Caesars) 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’, Penn National’s, Hard Rock’s, Century Casinos’ and JACK Entertainment’s (and following the
completion of the Eldorado Transaction, the combined Eldorado/Caesars) historical results may not be a
reliable indicator of their future results;
•
•
•
our substantial amount of indebtedness and ability to service, refinance and otherwise fulfill our obligations
under 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;
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•
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•
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the ability to receive, or delays in obtaining, the governmental and regulatory approvals and consents
required to consummate our pending acquisitions in connection with the Eldorado Transaction, or other
delays or impediments to completing these acquisitions;
our ability to obtain the financing necessary to complete our pending acquisitions in connection with the
Eldorado Transaction on the terms we currently expect or at all;
the possibility that our pending acquisitions in connection with the Eldorado Transaction may not be
completed or that completion may be unduly delayed;
the possibility that we identify significant environmental, tax, legal or other issues that materially and
adversely impact the value of properties acquired (or other benefits we expect to receive) in the Eldorado
Transaction or any of our other pending or recently completed acquisitions;
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;
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, war, political and public health conditions or uncertainty or civil unrest,
violence or terrorist activities or threats on our properties and changes in economic conditions or
heightened travel security and health measures instituted in response to these events;
the impact of changes in general economic conditions, including low consumer confidence, unemployment
levels and depressed real estate prices resulting from the severity and duration of any downturn in the U.S.
or global economy;
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, including from other REITs, investment companies, gaming
companies. private equity and hedge fund investors, sovereign funds, lenders, gaming companies and other
investors that may have greater resources and access to capital and a lower cost of capital or different
investment parameters than us; and
additional factors discussed herein under “Risk Factors” and listed from time to time in our filings with the
SEC, including without limitation, in our subsequent reports on Form 10-K, Form 10-Q and Form 8-K.
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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 following the completion of the Eldorado
Transaction, the combined Eldorado/Caesars) and their respective subsidiaries unless or until we substantially
diversify our portfolio and an event that has a material adverse effect on any of its 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 the Caesars Lease
Agreements. Because these 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 Caesars Lease Agreements.
Caesars relies on the properties it owns and/or operate for income to satisfy its obligations, including its debt service
requirements and lease payments due to us under the Caesars Lease Agreements or to others under other lease
agreements. If income from these properties were to decline for any reason, or if the debt service requirements of
our tenants were to increase for any reason or if their creditworthiness were to become impaired for other reasons,
Caesars (and following the completion of the Eldorado Transaction, the combined Eldorado/Caesars) may become
unable or unwilling to satisfy its payment and other obligations under the Caesars Lease Agreements. The inability
or unwillingness of Caesars (and following the completion of the Eldorado Transaction, the combined Eldorado/
Caesars) to meet their respective subsidiaries’ payment and other obligations under the Caesars Lease Agreements,
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.
The gaming and entertainment industry is highly competitive and our tenants’ failure to continue to compete
successfully could adversely affect their businesses, financial conditions, results of operations, and cash flows. In
particular, our tenants’ businesses may be adversely impacted by the reinvestment and expansion by competitors
in existing jurisdictions, and expansion of gaming into new jurisdictions in which gaming was not previously
permitted, which would result in increased competition in these jurisdictions. Additionally, the casino entertainment
industry represents a significant source of tax revenues to the various jurisdictions in which casinos operate. From
time to time, various state and federal legislators and officials have proposed changes in tax laws, or in the
administration of such laws, including increases in tax rates, which would affect the industry. If adopted, such
changes could adversely impact the business, financial condition, and results of operations of our tenants.
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In addition, following the completion of the Eldorado Transaction, the combined Eldorado/Caesars will be our
largest tenant. Eldorado has publicly disclosed that it expects to achieve approximately $500.0 million of synergies,
over time, following completion of the Eldorado/Caesars Merger. The combined Eldorado/Caesars may be unable
to achieve these synergies during the time period that it expects to do so, or at all, and a failure to achieve these
synergies may adversely affect the combined Eldorado/Caesars, including its creditworthiness, and impair its ability
to meet its obligations to us. Moreover, given the combined Eldorado/Caesar’s expected significance to our business,
a failure on the part of the combined Eldorado/Caesars to realize expected synergies and any related improvement
to its creditworthiness, or any deterioration of its creditworthiness, could materially and adversely affect us, even
in the absence of a default under our agreements with the combined Eldorado/Caesars.
Due to our dependence on rental payments from subsidiaries of Caesars (and following the completion of the
Eldorado Transaction, the combined Eldorado/Caesars) 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 33% of our lease revenue for the year ended
December 31, 2019. 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
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 (and after the completion of the Eldorado Transaction, the combined Eldorado/
Caesars and its subsidiaries will be) 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’ (or, after the completion of the Eldorado Transaction, Eldorado’s) businesses and
properties fail to generate sufficient earnings, the applicable tenants, Caesars and/or CRC (before the completion
of the Eldorado Transaction) and Eldorado (after the completion of the completion of the Eldorado Transaction)
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.
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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 its 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 (and, after the completion of the completion of the Eldorado Transaction, subsidiaries of
Eldorado) 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-Our Lease Agreement-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 (before the completion of the Eldorado Transaction) and Eldorado (after the
completion of the Eldorado Transaction) 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 (and,
after the completion of the Eldorado Transaction, Eldorado), 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 the applicable guarantor’s ability to satisfy their respective obligations to us under the related
guarantees.
Caesars’ indebtedness (and, after the completion of the Eldorado Transaction, Eldorado’s 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, 2019, Caesars’ consolidated
estimated debt service (including principal and interest) for 2020 will be approximately $504.0 million and $10.2
billion thereafter to maturity. As a result, a significant portion of Caesars’ liquidity needs, and, after the completion
of the Eldorado Transaction, Eldorado’s liquidity needs, are for debt service, 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 (before the completion of the Eldorado Transaction) and Eldorado (after the
completion of the completion of the Eldorado Transaction) 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.
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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 and our tenants 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 extensive 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. Regulatory authorities also have broad powers with respect to the
licensing of casino operations, and may revoke, suspend, condition or limit the gaming or other licenses of our
tenants, impose substantial fines or take other actions, any one of which could adversely impact the business,
financial condition and results of operations of our tenants. In addition, in many jurisdictions, licenses are granted
for limited durations and require renewal from time to time.
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
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:
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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
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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, because we and our tenants are subject to regulation in numerous jurisdictions, and because regulatory
agencies within each jurisdiction review compliance with gaming laws in other jurisdictions, it is possible that
gaming compliance issues in one jurisdiction may lead to reviews and compliance issues in other jurisdictions.
The loss of 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
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
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leased property, solely at the option of the tenants. Upon completion of the Eldorado Transaction, the initial lease
term under each of the Caesars Lease Agreements shall be extended such that the expiration of such initial lease
term shall occur 15 years following the completion of the Eldorado Transaction. 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. Given the coterminous nature of the Formation Lease Agreements
(and, after completion of the Eldorado Transaction, the Caesars Lease Agreements), this risk would be exacerbated
if Caesars (or, after completion of the Eldorado Transaction, Eldorado) determined not to renew or was prohibited
from renewing due to the remaining useful life of the leased property, all such 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.
We may fail to complete the Eldorado Transaction or may not complete it on the contemplated terms.
The completion of the Eldorado Transaction is subject to certain customary regulatory and other closing conditions,
many of which are beyond our control, including the closing of the Eldorado/Caesars Merger to which we are not
a party, which make the completion and timing thereof uncertain; there can be no assurance that such conditions
will be satisfied on the anticipated schedule, or at all. Completion of certain of the transactions contemplated by
the Master Transaction Agreement, such as the put/call agreement relating to the Centaur Properties, the Horseshoe
Baltimore ROFR, the Las Vegas ROFR and certain lease modifications, are subject to the negotiation of definitive
documentation and, while the principal terms of these transactions are specified in the Master Transaction
Agreement, there can be no assurance that we will be successful in negotiating definitive documentation.
If one or more of the transactions contemplated by the Eldorado Transaction is not completed on the anticipated
schedule, on the contemplated terms or at all, we could be subject to a number of risks that may adversely affect
our business and the market price of our common stock, including:
• we have incurred and expect to continue to incur significant transaction expenses relating to the Eldorado
Transaction, such as legal, accounting and financial advisory fees, whether or not the Eldorado Transaction
is completed;
•
time and resources committed by our management to matters relating to the Eldorado Transaction could
otherwise have been devoted to pursuing other opportunities;
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•
•
the market price of our common stock could decline to the extent that the current market price reflects a
market assumption that the Eldorado Transaction will be completed;
if we physically settle the Forward Sale Agreements prior to identifying a suitable alternative use of the
proceeds thereof, our stockholders may experience significant dilution; and
• we would not realize the potential benefits, including the increased rental revenue, that we expect to
realize from consummating these transactions, and our earnings, FFO and AFFO per share could be
materially and adversely affected.
We cannot provide any assurance that each of the transactions contemplated by the Eldorado Transaction will be
completed or that there will not be a delay in the completion of any or all of these transactions. If the Eldorado
Transaction is not consummated, our reputation in our industry and in the investment community could be damaged,
and the market price of our common stock could decline.
Even if the Eldorado Transaction is completed, we may not achieve the intended benefits, and the Eldorado
Transaction may disrupt our current plans or operations.
If the Eldorado Transaction is completed, there can be no assurance that we will be able to realize the intended
benefits of such transaction. If the Eldorado/Caesars Merger is consummated, we may be obligated to complete
the Eldorado Transaction even if, during the pendency of the Eldorado/Caesars Merger, the finances and operations
of Eldorado are materially and adversely impacted. Moreover, the limited contractual protections under our
agreements with Eldorado will not include (a) restrictions on certain asset sales by Caesars, (b) a right to
automatically obtain liens on certain Caesars property under certain circumstances if Caesars refinances certain
debt, (c) a right to obtain the benefit of certain covenants if made by Caesars if Caesars refinances certain debt
with debt provided by affiliates or insiders of Caesars or (d) provisions designed to ensure that the guaranty and
the associated leases will continue to remain in place if any lease is terminated, without our express written consent,
all of which we are currently entitled to under our existing agreements with Caesars.
If the Eldorado Transaction is consummated and we do not receive the amount of net proceeds from the settlement
of the Forward Sale Agreements that we expect, we may incur a substantially greater amount of debt either
through additional long-term debt financing, under the Bridge Facilities or under our Revolving Credit Facility.
This additional debt could materially and adversely affect us, including by increasing our interest expense,
restricting our ability to engage in additional transactions or incur additional indebtedness, or result in a
downgrade or other adverse action with respect to our credit rating.
If we do not receive the amount of net proceeds from the settlement of the Forward Sale Agreements that we expect,
we may be required to fund any shortfall with additional long-term debt, borrowings under the Bridge Facilities
or borrowings under our Revolving Credit Facility equal to the difference to fund the purchase price and related
fees and expenses. Our net consolidated borrowing costs will depend on our overall indebtedness, our
creditworthiness, interest rates in effect from time to time (including at the time we incur such debt), the structure
of our debt, taxes and other factors. No assurance can be given that long-term debt financing will be available to
us on attractive terms, or at all, initially or to refinance any borrowings under the Bridge Facilities or borrowings
under our Revolving Credit Facility.
Our credit ratings impact the cost and availability of borrowings and, accordingly, our cost of capital. Our credit
ratings at any time will reflect each rating organization’s opinion of our financial strength, operating performance
and ability to meet our debt obligations. There can be no assurance that we will achieve a particular rating or
maintain a particular rating in the future. Any reduction in our credit ratings may limit our ability to borrow at
interest rates consistent with the interest rates that have been available to us and may subject us to additional
covenants under our debt instruments. An inability to achieve or maintain expected credit ratings would materially
and adversely affect our ability to obtain long-term debt financing or to refinance amounts borrowed under the
Bridge Facilities or borrowings under our Revolving Credit Facility.
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The completion of the Eldorado Transaction is subject to the receipt of consents and approvals, which cannot
be assured or which may impose conditions that could have a material adverse effect on us.
Completion of the Eldorado Transaction is conditioned upon the receipt of certain consents and approvals, including,
without limitation, gaming regulatory approvals. Although we have agreed to use our reasonable best efforts to
obtain such consents and approvals, there can be no assurance that these consents or approvals will be obtained
and that the other conditions to completing these transactions will be satisfied. In addition, the governmental
authorities from which the regulatory approvals are required may impose conditions on the completion of these
transactions or require changes to the terms of the transaction documents. Such conditions or changes and the
process of obtaining regulatory approvals could have the effect of delaying or impeding consummation of one or
more of these transactions or of imposing additional costs or limitations on us following completion of the Eldorado
Transaction, any of which might have a material adverse effect on us following completion of the Eldorado
Transaction.
We are subject to provisions under the respective transaction documents that, in specified circumstances, could
require us to pay significant termination fees or liquidated damages to the sellers in the MTA Properties
Acquisitions.
The transaction documents for the Eldorado Transaction provide that, in specified circumstances, we could be
required to pay significant termination fees or liquidated damages to the sellers. If the Eldorado Transaction is
terminated under certain circumstances, we could become liable to Eldorado for a termination fee of up to $75.0
million. If we become obligated to pay a termination fee or liquidated damages, the payment could have a material
adverse effect on us.
If Eldorado declares bankruptcy and such action results in a lease being re-characterized as a disguised
financing transaction in its bankruptcy proceeding, our business, results of operations, financial condition and
cash flows could be materially and adversely affected.
If Eldorado declares bankruptcy, our business could be materially and adversely affected if a bankruptcy court re-
characterizes the CPLV Additional Rent Acquisition or the HLV Additional Rent Acquisition (as defined below)
as a disguised financing transaction. In the event of re-characterization, our claim under a lease agreement with
respect to the additional rent acquired in the HLV Additional Rent Acquisition and CPLV Additional Rent
Acquisition could either be secured or unsecured. Generally, the leases permit us to take steps to create and perfect
a security interest in the leased property, but such attempts could be subject to challenge by the tenant or its creditors
and, with respect to the CPLV Additional Rent Acquisition and the HLV Additional Rent Acquisition, there is no
assurance that a court would find that portion of our claim to be secured. The bankrupt lessee and other Eldorado
affiliates and their creditors under this scenario might have the ability to restructure the terms, including the amount
owed to us under the lease with respect to the additional rent. If approved by the bankruptcy court, we could be
bound by the new terms, and prevented from collecting such additional rent that we paid for in the CPLV Additional
Rent Acquisition and HLV Additional Rent Acquisition, and our business, results of operations, financial condition
and cash flows could be materially and adversely affected.
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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, Horseshoe, Harrah’s, Bally’s, Margaritaville, Greektown, JACK, Hard Rock,
Century and Mountaineer. 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
after the completion of the Eldorado Transaction, Eldorado), Penn National, Hard Rock, Century Casinos, or JACK
Entertainment entity could also have a material adverse effect on our business, financial condition, liquidity, results
of operations and prospects.
We have a substantial amount of indebtedness, 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, 2019, we had
approximately $4.8 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;
$1.3 billion of outstanding 2026 Notes; and
$1.0 billion of outstanding 2029 Notes.
In addition, giving effect to the completion of our February 2020 Notes Offering (which consisted of the issuance
of $750.0 million of 2025 Notes, $750.0 million of 2027 Notes and $1.0 billion of 2030 Notes) and the redemption
and repayment of the Second Lien Notes with a portion of the proceeds thereof, as of February 20, 2020, we had
approximately $6.9 billion principal amount of indebtedness outstanding.
As of December 31, 2019, we also have $1.0 billion of available capacity to borrow under our Revolving Credit
Facility.
Our Term Loan B and Revolving Credit Facility are 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;
our vulnerability to adverse economic, industry or competitive developments may be increased;
• 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;
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• 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
REIT 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
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 may 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
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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
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.
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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, engage in transactions with affiliates and pay certain dividends and other restricted payments. In
addition, we are required to comply with certain financial maintenance covenants. These restrictions could seriously
harm our business by, among other things, limiting our operational flexibility. 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 any debt that is secured by such assets, 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, 2019, we had in place six interest rate swap agreements with third party financial institutions
having an aggregate notional amount of $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.
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We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is
determined or the use of alternative reference rates.
Our indebtedness under the Term Loan B Facility and Revolving Credit Facility bears interest at variable interest
rates that use LIBOR as a benchmark rate. On July 27, 2017, the United Kingdom’s Financial Conduct Authority,
which regulates LIBOR, announced that it intends to stop persuading or requiring banks to submit LIBOR quotations
after 2021 (the “FCA Announcement”). The FCA Announcement indicates that the continuation of LIBOR on the
current basis cannot and will not be assured after 2021 and, as such, LIBOR may cease to exist or otherwise be
unsuitable for use as a benchmark. A change or transition away from LIBOR as a common reference rate in the
global financial market could have a material, adverse effect on our business. Recent proposals for LIBOR reforms
may result in the establishment of new methods of calculating LIBOR or the establishment of one or more alternative
benchmark rates. If LIBOR ceases to exist, we cannot predict what such successor rate would be utilized and the
impact of such rate on us and we may determine that we need to negotiate an amendment to our Term Loan B
Facility and Revolving Credit Facility with our lenders. As a result, our interest expense may increase, our ability
to refinance some or all of our existing indebtedness and our available cash flow may be adversely affected.
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 Caesars Forum 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 Caesars Forum 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 acquired 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 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. As described in Item 7 below under
“Management’s Discussion and Analysis-Eldorado Transaction-Acquisition of the MTA Properties” we have
entered into agreements to acquire all of the land and real estate assets associated with the Option Properties, and
each of the Call Right Agreements will terminate upon the earlier to occur of the closing of the corresponding
MTA Property Acquisition or our obtaining specific performance or liquidated damages with respect to the relevant
property in accordance with the terms of the Master Transaction Agreement. The Second Amended and Restated
Right of First Refusal Agreement will terminate upon the closing of the Eldorado/Caesars Merger and we will
enter into the Las Vegas ROFR (as defined and described below in Item 7 under “Management’s Discussion and
Analysis-Eldorado Transaction-Las Vegas Strip Assets ROFR”) and the Horseshoe Baltimore ROFR (as defined
and described below in Item 7 under “Management’s Discussion and Analysis-Eldorado Transaction- Horseshoe
Baltimore ROFR”).
The Caesars Forum 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 Caesars Forum Put/Call Agreement.
The Caesars Forum Put/Call Agreement survives the closing of the Eldorado/Caesars Merger. In addition, the HLV
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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 Caesars Forum 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.
If the Eldorado Transaction is completed, we may not be able to purchase the properties subject to the Centaur
Properties Put/Call Agreement, Las Vegas ROFR or the Horseshoe Baltimore ROFR if we are unable to obtain
additional financing or financing on acceptable terms.
At the closing of the Eldorado Transaction, a right of first refusal that we have with respect to the Centaur Properties
will terminate and we will enter into a put/call agreement with Eldorado, whereby (i) we will have the right to
acquire all of the land and real estate assets associated with two gaming facilities in Indiana currently owned by
Caesars - Harrah’s Hoosier Park and Indiana Grand (together the “Centaur Properties”) at a price equal to 13.0x
the initial annual rent of each facility, and to simultaneously lease back each such property to a subsidiary of
Eldorado for initial annual rent equal to the property’s trailing four quarters EBITDA at the time of acquisition
divided by 1.3 (i.e., the initial annual rent will be set at 1.3x rent coverage) and (ii) Eldorado will have the right
to require us to acquire the Centaur Properties at a price equal to 12.5x the initial annual rent of each facility, and
to simultaneously lease back each such Centaur Property to a subsidiary of Eldorado for initial annual rent equal
to the property’s trailing four quarters EBITDA at the time of acquisition divided by 1.3 (i.e., the initial annual
rent will be set at 1.3x rent coverage). Either party will be able to trigger its respective put or call, as applicable,
beginning on January 1, 2022 and ending on December 31, 2024. We will also enter into the Las Vegas ROFR (as
defined and described below in Item 7 under “Management’s Discussion and Analysis-Eldorado Transaction-Las
Vegas Strip Assets ROFR”) and the Horseshoe Baltimore ROFR (as defined and described below in Item 7 under
“Management’s Discussion and Analysis-Eldorado Transaction- Horseshoe Baltimore ROFR”) with respect to
certain Las Vegas Strip assets and the Horseshoe Baltimore gaming facility, respectively. Eldorado will make an
independent financial decision regarding whether to trigger the rights and obligations under the various agreements,
as applicable, and we will make an independent financial decision whether to purchase the properties. In addition,
in order to exercise these rights, we would likely be required to secure additional financing and our substantial
level of indebtedness 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 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, after the completion of the Eldorado
Transaction, Eldorado) Penn National, Hard Rock, Century Casinos or JACK Entertainment, any claim for damages
under the applicable 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 (or, after the completion of the Eldorado
Transaction, Eldorado), as the case may be, a default by the applicable tenant under the Caesars Lease Agreements,
or by the applicable guarantor 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 or the applicable guarantor would assume the Caesars Lease Agreements or the related
guarantees, and if the Caesars Lease Agreements or guarantees were rejected, the tenant or the guarantors, as
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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, after the completion of the Eldorado Transaction, Eldorado),
Penn National, Hard Rock, Century Casinos or JACK Entertainment 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
experiential 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 experiential 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 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 at the
time 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.
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 Non-CPLV Lease Agreement allows the tenant to remove a property from the Non-CPLV Lease
Agreement and each of our Lease Agreements (excluding the Non-CPLV Lease Agreement) may be terminated
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by the applicable tenant if: (i) a casualty event occurs (a) in the case of the Non-CPLV Lease Agreement, the CPLV
Lease Agreement, the Joliet Lease Agreement and the HLV Lease Agreement, during the final two years of the
term and (b) in the case of the Hard Rock Cincinnati Lease Agreement, the Century Portfolio Lease Agreement
and the JACK Cleveland/Thistledown Lease Agreement, the final year of the term, and (ii) the cost to rebuild or
restore the applicable property in connection with a casualty event exceeds 25% (or, in the case of the Century
Portfolio Lease Agreement, 50%) of such property’s 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, the HLV Lease Agreement, the Hard Rock Cincinnati Lease Agreement, the Century Portfolio Lease
Agreement or the JACK Cleveland/Thistledown Lease Agreement, as the case may be. The Penn National Lease
Agreements allows the tenants to terminate their respective leases 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 Margaritaville or Greektown
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 or the Greektown Lease Agreement, respectively. 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, the Penn National Lease Agreements, the Hard Rock Cincinnati Lease Agreement, the
Century Portfolio Lease Agreement or the JACK Thistledown/Cleveland 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.
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 the following:
limitations on alterations, changes, expansions, or reconfiguration of properties; limitations on use of properties;
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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, our chief
financial officer and our general counsel. 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
financing, which could materially and adversely affect our business, financial condition, liquidity, results of
operations and prospects.
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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 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.
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
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 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.
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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 provisions 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
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.
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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.
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 REITs can generally elect out of the limitation).
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, financings
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 our 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
including any net capital gains, we will be subject to U.S. Federal corporate income tax on any undistributed portion
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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 taxable REIT
subsidiary 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 or otherwise minimize 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
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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
to a taxable REIT subsidiary, 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,
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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
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 dilution or higher leverage. While the IRS has issued
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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.
The U.S. federal income tax treatment of the cash that we might receive from cash settlement of Forward Sale
Agreements is unclear and could jeopardize our ability to meet the REIT qualification requirements.
In the event that we elect to settle the Forward Sale Agreements for cash and the settlement price is below the
applicable forward sale price, we would be entitled to receive a cash payment from the forward purchasers. Under
Section 1032 of the Code, generally, no gains and losses are recognized by a corporation in dealing in its own
shares, including pursuant to a “securities futures contract,” as defined in the Code by reference to the Exchange
Act. Although we believe that any amount received by us in exchange for our shares of common stock would
qualify for the exemption under Section 1032 of the Code, because it is not entirely clear whether a Forward Sale
Agreement qualifies as a “securities futures contract,” the U.S. federal income tax treatment of any cash settlement
payment we receive is uncertain. In the event that we recognize a significant gain from the cash settlement the
Forward Sale Agreements, we might not be able to satisfy the gross income requirements applicable to REITs
under the Code. If we were to fail to satisfy one or both of the gross income tests for any taxable year, we may
nevertheless qualify as a REIT for such year if we were entitled to relief under certain provisions of the Code. If
these relief provisions were inapplicable, we would not qualify as a REIT. Even if these relief provisions were to
apply, a tax based on the amount of the relevant REIT’s non-qualifying income would be imposed.
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.
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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 advancement of 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
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
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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.
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
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•
“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. 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. There can be no assurance that any of these provisions of our charter or
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.
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 future acquisitions;
•
•
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;
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•
•
•
•
•
•
•
•
•
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
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.
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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.
Provisions contained in the Forward Sale Agreements could result in substantial dilution to our earnings per
share or result in substantial cash payment obligations.
The forward purchasers under the Forward Sale Agreements will have the right to accelerate the Forward Sale
Agreements (with respect to all or any portion of the transaction under the Forward Sale Agreements that the
forward purchasers determine is affected by an event described below) and require us to settle on a date specified
by the forward purchasers if:
•
they or their affiliate (x) is unable in its commercially reasonable good faith judgment to hedge its exposure
under the applicable Forward Sale Agreements because insufficient shares of common stock have been
made available for borrowing by securities lenders or (y) would incur a stock loan cost in excess of a
specified threshold to hedge its exposure under the applicable Forward Sale Agreement;
• we declare any dividend, issue or distribution on our common stock (x) payable in cash in excess of
specified amounts, (y) payable in securities of another company that we acquire or own (directly or
indirectly) as a result of a spin-off or similar transaction or (z) payable in any other type of securities
(other than our common stock), rights, warrants or other assets for payment at less than the prevailing
market price;
•
•
•
certain ownership thresholds applicable to the forward purchasers and their respective affiliates are
exceeded;
an event (x) is announced that, if consummated, would result in a specified extraordinary event (including
certain mergers or tender offers, as well as certain events involving our nationalization, or insolvency, or
a delisting of our common shares) or (y) occurs that would constitute a delisting or change in law; or
certain other events of default or termination events occur, including, among others, any material
misrepresentation made in connection with the Forward Sale Agreements or our insolvency (each as more
fully described in the Forward Sale Agreements).
A forward purchaser’s decision to exercise its right to accelerate the settlement of its Forward Sale Agreement will
be made irrespective of our interests, including our need for capital. In such cases, we could be required to issue
and deliver shares of common stock under the physical settlement provisions of the applicable Forward Sale
Agreement, which would result in dilution to our earnings per share.
61
We expect to physically settle the Forward Sale Agreements and receive proceeds from the sale of those shares of
our common stock upon one or more forward settlement dates no later than September 26, 2020. However, the
Forward Sale Agreements may be settled earlier in whole or in part at our option. Subject to certain conditions,
we have the right to elect physical, cash or net share settlement under the Forward Sale Agreements at any time
and from time to time, in part or in full. The Forward Sale Agreements will be physically settled by delivery of
shares of our common stock, unless we elect to cash settle or net share settle the Forward Sale Agreements. Delivery
of shares of our common stock upon physical settlement (or, if we elect net share settlement, upon such settlement
to the extent we are obligated to deliver shares of our common stock) will result in dilution to our earnings per
share.
If we elect cash settlement or net share settlement with respect to all or a portion of the shares of common stock
underlying a Forward Sale Agreement, we expect the applicable forward purchaser (or its affiliate) to purchase a
number of shares of our common stock in secondary market transactions over an unwind period to:
•
•
return shares of our common stock to securities lenders in order to unwind its hedge (after taking into
consideration any shares of our common stock to be delivered by us to such forward purchaser, in the
case of net share settlement); and
if applicable, in the case of net share settlement, deliver shares of common stock to us to the extent required
in settlement of such Forward Sale Agreements.
The purchase of shares of our common stock in connection with the forward purchasers or their respective affiliates
unwinding their hedge positions could cause the price of shares of our common stock to increase over such time
(or reduce the amount of a decrease over such time), thereby increasing the amount of cash we would be required
to pay to the forward purchasers (or decreasing the amount of cash that the forward purchasers would be required
to pay us) upon a cash settlement of the Forward Sale Agreements or increasing the number of shares of common
stock we would be required to deliver to the forward purchasers (or decreasing the number of shares of common
stock that the forward purchasers would be required to deliver to us) upon net share settlement of the Forward Sale
Agreements.
The forward sale price that we expect to receive upon physical settlement of the Forward Sale Agreements will be
subject to adjustment on a daily basis based on a floating interest rate factor determined by reference to a specified
daily rate less a spread and will be decreased by amounts related to expected dividends on our common stock
during the term of the Forward Sale Agreements. If the specified daily rate is less than the spread on any day, the
interest rate factor will result in a reduction of the applicable forward sale price for that day. As of December 31,
2019, the specified daily rate was greater than the spread but we can give no assurance that this rate will not decrease
to a rate below the spread during the term of the Forward Sale Agreements (which would reduce the proceeds that
we would receive upon settlement of the Forward Sale Agreements). If the prevailing market price for our common
stock during the unwind period under a Forward Sale Agreement is above the applicable forward sale price, in the
case of cash settlement, we would pay the applicable forward purchaser under the applicable Forward Sale
Agreement an amount per share in cash equal to the difference or, in the case of net share settlement, we would
deliver to the applicable forward purchaser a number of shares of common stock having a value equal to the
difference. Thus, we could be responsible for a potentially substantial cash payment in the case of cash settlement.
In case of our bankruptcy or insolvency, the Forward Sale Agreements would automatically terminate, and we
would not receive the expected proceeds from the sale of common stock under such agreements.
If we institute, or a regulatory authority with jurisdiction over us institutes, or we consent to, a proceeding seeking
a judgment in bankruptcy or insolvency or any other relief under any bankruptcy or insolvency law or other similar
law affecting creditors’ rights, or we or a regulatory authority with jurisdiction over us presents a petition for our
winding-up or liquidation, or we consent to such a petition, the Forward Sale Agreements will automatically
terminate. If the Forward Sale Agreements so terminate, we would not be obligated to deliver to the forward
purchasers any shares of common stock not previously delivered, and the forward purchasers would be discharged
62
from their obligation to pay the forward sale price per share in respect of any shares of common stock not previously
settled. Therefore, to the extent that there are any shares of common stock with respect to which the Forward Sale
Agreements have not been settled at the time of the commencement of any such bankruptcy or insolvency
proceedings, we would not receive the forward sale price per share in respect of those shares of common stock.
ITEM 1B. Unresolved Staff Comments
None.
ITEM 2.
Properties
Our geographically diverse portfolio consists of 28 market-leading properties that are leased to Caesars, Penn
National, Hard Rock, Century Casinos and JACK Entertainment, 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.
All of our properties, except for Margaritaville, our Harrah’s Joliet property in Joliet Illinois and our golf courses,
secure our Term Loan B and Revolving Credit Facility. See Note 7 — 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, 2019, 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.
63
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 19, 2020, there were 468,491,573 shares of common stock issued and outstanding that were held
by approximately 26 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, AFFO, 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. 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.
Recent Sales of Unregistered Securities
We did not sell any unregistered equity securities during the year ended December 31, 2019.
64
Issuer Repurchases of Equity Securities
During the three months ended December 31, 2019, certain employees surrendered shares of common stock owned
by them to satisfy their statutory minimum federal and state income tax obligations associated with the vesting of
shares of restricted common stock issued under our stock incentive plan.
The following table summarizes all of our common stock repurchases during the fourth quarter of 2019:
Total Number of
Shares
Purchased
Average Price
Paid per Share (1)
Total Number Of
Shares Purchased
As Part Of
Publicly
Announced Plans
Or Programs
Maximum Number
Of Shares That
May Yet Be
Purchased Under
The Plans Or
Programs
—
2,112
$
—
2,112
$
—
24.60
—
24.60
—
—
—
—
—
—
—
—
Period
October 1, 2019 through
October 31, 2019
November 1, 2019 through
November 30, 2019
December 1, 2019 through
December 31, 2019
Total
(1) The price paid per share is based on the closing price of our common stock as of the date of the determination of the statutory minimum
federal income tax.
Registered Offering of Securities - Use of Proceeds
Not applicable.
65
Stock Performance Graph
The graph below matches VICI Properties’ cumulative total stockholder return for the period from October 18,
2017 to December 31, 2019 on common stock with the cumulative total returns of the S&P 500 index and the
MSCI US REIT 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, 2019. 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.
Company / Index
VICI Properties Inc.
MSCI US REIT
Index
S&P 500
10/18/17
12/31/17
3/31/18
6/30/18
9/30/18
12/31/18
3/31/19
6/30/19
9/30/19
12/31/19
$ 100.0
$ 110.8
$
99.0
$ 111.6
$ 116.9
$ 101.5
$ 118.3
$ 119.1
$ 122.4
$ 138.1
$ 100.0
$
98.8
$
89.9
$
97.8
$
97.9
$ 100.0
$ 104.4
$ 103.1
$ 106.1
$ 113.8
$
$
90.3
$ 103.9
$ 104.2
$ 111.1
$ 109.2
97.9
$ 110.7
$ 114.9
$ 116.2
$ 126.1
66
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.
Year Ended
December 31, 2019 December 31, 2018
Period from
October 6, 2017
to December 31, 2017*
(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
$
894,798
$
897,977
$
52,299
842,499
(248,384)
(58,143)
555,986
(1,705)
554,281
140,023
757,954
(212,663)
(23,040)
533,558
(1,441)
532,117
545,964
523,619
Per share data:
Net income per common share - Basic
Net income per common share - Diluted
Cash dividends declared per common share
Other Data:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
$
$
$
$
$
$
$
$
1.25
1.24
1.1700
682,159
(1,361,379)
1,182,666
$
$
$
$
1.43
1.43
0.9975
504,082
(1,140,877)
1,037,836
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
Financial Position Data:
Cash and cash equivalents
Restricted cash
Short-term investments
Total assets
Debt, net
Non-controlling interests
Stockholders’ equity
_____________________________
As of December 31,
2019
2018
2017
$
1,101,893
$
577,883
$
—
59,474
13,265,619
4,791,563
83,806
8,048,989
20,564
520,877
11,333,368
4,122,264
83,573
6,901,022
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
67
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
Financial Position Data:
Cash
Total assets
Long-term debt
Liabilities subject to compromise
Equity
Period from
January 1, 2017 to
October 5, 2017
Year Ended December 31,
2016
2015
$
$
14,136
14,136
$
18,785
18,778
—
—
—
(2)
(2)
7
(7)
—
—
—
As of
October 5, 2017
As of December 31,
2016
2015
$
111
$
920
$
89,253
—
249
83,141
90,475
—
265
84,143
18,077
18,059
18
(18)
—
3
3
351
92,034
14
267
85,375
68
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 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 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, 2019 and 2018 and the
period from October 6, 2017 (Formation Date) to December 31, 2017. Other financial information included,
beginning on page F-50 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 2019 Activities (and Significant Activities Subsequent to Year-End)
Since January 1, 2019 our significant activities, in reverse chronological order, are as follows:
Unsecured February 2020 Senior Notes Offering and Redemption and Repayment of the Second Lien Notes
On February 5, 2020, the Operating Partnership issued (i) $750.0 million in aggregate principal amount of 3.500%
senior unsecured notes due 2025, (ii) $750.0 million in aggregate principal amount of 3.750% senior unsecured
notes due 2027 and (iii) $1.0 billion of 4.125% senior unsecured notes due 2030. We placed $2.0 billion of the net
proceeds into escrow pending the consummation of the Eldorado Transaction, and used the remaining net proceeds
from the 2025 Notes, together with cash on hand, to redeem in full the outstanding $498.5 million in aggregate
principal amount of the Second Lien Notes plus the Second Lien Notes Applicable Premium, which resulted in a
total redemption amount of approximately $537.5 million. The 2025 Notes will mature on February 15, 2025, the
2027 Notes will mature on February 15, 2027 and the 2030 Notes will mature on August 15, 2030. Interest on the
2025 Notes will accrue at a rate of 3.500% per annum, interest on the 2027 Notes will accrue at a rate of 3.750%
per annum and interest on the 2030 Notes will accrue at a rate of 4.125% per annum. Interest on the February 2020
69
Unsecured Notes will be payable semi-annually in cash in arrears on February 15 and August 15 of each year,
commencing on August 15, 2020. The indentures governing the February 2020 Senior Unsecured Notes contain
certain covenants substantially similar to those in the indentures governing the November 2019 Senior Unsecured
Notes, and the February 2020 Senior Unsecured Notes are guaranteed by the guarantors of the November 2019
Senior Unsecured Notes.
Closing of Purchase of JACK Cleveland/Thistledown
On January 24, 2020, we completed the previously announced transaction to acquire the casino-entitled land and
real estate and related assets of the JACK Cleveland Casino, located in Cleveland, Ohio and the video lottery
gaming and pari-mutuel wagering authorized land and real estate and related assets of the JACK Thistledown
Racino located in North Randall, Ohio from affiliates of JACK Entertainment, for approximately $843.3 million
in cash (the “JACK Cleveland/Thistledown Acquisition”). Simultaneous with the closing of the JACK Cleveland/
Thistledown Acquisition, we entered into a master triple-net lease agreement for JACK Cleveland and JACK
Thistledown with subsidiaries of JACK Entertainment. The lease has an initial total annual rent of $65.9 million
and an initial term of 15 years, with four five-year tenant renewal options. The tenant’s obligations under the lease
are guaranteed by Rock Ohio Ventures LLC (“Rock Ohio Ventures”). Additionally, we made a $50.0 million loan
(the “ROV Loan”) to affiliates of Rock Ohio Ventures secured by, among other things, certain non-gaming real
estate assets owned by such affiliates and guaranteed by Rock Ohio Ventures. The ROV Loan bears interest at
9.0% per annum for a period of five years with two one-year extension options.
Repricing of Term Loan B Facility
On January 24, 2020, VICI PropCo entered into Amendment No. 1 to the Amended and Restated Credit Agreement,
which, among other things, reduced the interest rate on the Propco Term Loan B Facility from LIBOR plus 2.00%
to LIBOR plus 1.75%.
Sale of Harrah’s Reno
On December 31, 2019 we and Caesars entered into a definitive agreement to sell the Harrah’s Reno asset for
$50.0 million to a third party. We are entitled to receive 75% of the proceeds of the sale and Caesars is entitled to
receive 25% of the proceeds. The annual rent payments under the Non-CPLV Lease Agreement will remain
unchanged following completion of the disposition.
Closing of Purchase of Century Portfolio
On December 6, 2019, we completed the previously announced transaction to acquire the land and real estate assets
of (i) Mountaineer Casino, Racetrack & Resort located in New Cumberland, West Virginia, (ii) Century Casino
Caruthersville located in Caruthersville, Missouri and (iii) Century Casino Cape Girardeau located in Cape
Girardeau, Missouri from affiliates of Eldorado, for approximately $277.8 million, and a subsidiary of Century
Casinos acquired the operating assets of the Century Portfolio for approximately $107.2 million (together, the
“Century Portfolio Acquisition”). Simultaneous with the closing of the Century Portfolio Acquisition, we entered
into a master triple-net lease agreement for the Century Portfolio with a subsidiary of Century Casinos. The master
lease has an initial total annual rent of $25.0 million and an initial term of 15 years, with four five-year tenant
renewal options. The tenant’s obligations under the lease are guaranteed by Century Casinos.
Unsecured November 2019 Senior Notes Offering and Repayment of the CPLV CMBS Debt
On November 26, 2019, the Operating Partnership issued (i) $1,250 million in aggregate principal amount of
4.250% Senior Notes due 2026, and (ii) $1,000 million in aggregate principal amount of 4.625% Senior Notes due
2029. We used the proceeds of the offering to repay in full the CPLV CMBS Debt, and pay certain fees and expenses,
and any remaining net proceeds were used to complete the purchase of the JACK Cleveland/Thistledown
70
Acquisition. The 2026 Notes will mature on December 1, 2026, and the 2029 Notes will mature on December 1,
2029. Interest on the 2026 Notes will accrue at a rate of 4.250% per annum, and interest on the 2029 Notes will
accrue at a rate of 4.625% per annum. Interest on the Notes will be payable semi-annually in cash in arrears on
June 1 and December 1 of each year, commencing on June 1, 2020.
Closing of Purchase of Hard Rock Cincinnati
On September 20, 2019, we completed the previously announced transaction to acquire the casino-entitled land
and real estate and related assets of Hard Rock Cincinnati, located in Cincinnati, Ohio from affiliates of JACK
Entertainment LLC, for approximately $558.3 million, and a subsidiary of Hard Rock acquired the operating assets
of the Hard Rock Cincinnati Casino for $186.5 million (together, the “Hard Rock Cincinnati Acquisition”).
Simultaneous with the closing of the Hard Rock Cincinnati Acquisition, we entered into a triple-net lease agreement
for Hard Rock Cincinnati with a subsidiary of Hard Rock. The lease has an initial total annual rent of $42.8 million
and an initial term of 15 years, with four five-year tenant renewal options. The tenant’s obligations under the lease
are guaranteed by Seminole Hard Rock Entertainment, Inc.
Eldorado Transaction
On June 24, 2019, we entered into a master transaction agreement (the “Master Transaction Agreement” or “MTA”)
with Eldorado relating to the transactions described below (collectively, the “Eldorado Transaction”), all of which
are conditioned upon consummation of the closing of the merger contemplated under an Agreement and Plan of
Merger (the “Eldorado/Caesars Merger Agreement”) pursuant to which a subsidiary of Eldorado will merge with
and into Caesars, with Caesars surviving as a wholly owned subsidiary of Eldorado. Upon closing of the merger,
Eldorado will be renamed Caesars. Any references to Eldorado in the subsequent transaction discussion refer to
the combined Eldorado/Caesars subsequent to the closing of the Eldorado/Caesars Merger, as applicable.
The Eldorado Transaction and the Eldorado/Caesars Merger are both subject to regulatory approvals and customary
closing conditions. Eldorado has publicly disclosed that it expects the Eldorado/Caesars Merger to be completed
in the first half of 2020. However, we can provide no assurances that the Eldorado/Caesars Merger or the Eldorado
Transaction described herein will close in the anticipated timeframe, on the contemplated terms or at all. We intend
to fund the Eldorado Transaction with a combination of cash on hand, proceeds from the settlement of our forward
sales agreements entered into as part of our June equity offering, as described in Note 11 - Stockholders’ Equity
in the Notes to our Financial Statements, and with the proceeds from our February 2020 Senior Unsecured Notes
Offering.
The Master Transaction Agreement contemplates the following transactions:
•
Acquisition of the MTA Properties. We have agreed to acquire all of the land and real estate assets
associated with Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City (or, if necessary,
certain replacement properties designated in the Master Transaction Agreement) (collectively, the “MTA
Properties” and each, an “MTA Property”) for an aggregate purchase price of $1,823.5 million (which
reflects a purchase price adjustment of $14.0 million related to Harrah’s New Orleans) (the “MTA
Properties Acquisitions” and each, an “MTA Property Acquisition”). Simultaneous with the closing of
each MTA Property Acquisition the Non-CPLV Lease Agreement will be amended to include such MTA
Property, with (i) initial aggregate total annual rent payable to us and attributable to the MTA Properties
of $154.0 million, (ii) so long as the MTA Property Acquisitions are consummated concurrent with the
closing of the Eldorado/Caesars Merger, an initial term of approximately 15 years and (iii) the same
renewal terms available to the other tenants under the Non-CPLV Lease Agreement at such time. The
Non-CPLV Lease Agreement will also be amended to adjust certain minimum capital expenditure
requirements and other related terms and conditions as a result of the MTA Properties being included in
the Non-CPLV Lease Agreement.
71
On September 26, 2019, we entered into the following agreements (each of which were entered into in
accordance with the terms of the Master Transaction Agreement): (i) a Purchase and Sale Agreement
(the “Harrah’s New Orleans Purchase Agreement”) pursuant to which we agreed to acquire, and Eldorado
agreed to cause to be sold, all of the fee and leasehold interests in the land and real property improvements
associated with Harrah’s New Orleans in New Orleans, Louisiana for a cash purchase price of $789.5
million (which reflects a purchase price adjustment of $14.0 million); (ii) a Purchase and Sale Agreement
(the “Harrah’s Atlantic City Purchase Agreement”) pursuant to which we agreed to acquire, and Eldorado
agreed to cause to be sold, all of the land and real property improvements associated with Harrah’s Resort
Atlantic City and Harrah’s Atlantic City Waterfront Conference Center in Atlantic City, New Jersey for
a cash purchase price of $599.3 million; and (iii) a Purchase and Sale Agreement (the “Harrah’s Laughlin
Purchase Agreement” and, collectively with the Harrah’s New Orleans Purchase Agreement and the
Harrah’s Atlantic City Purchase Agreement, the “MTA Property Purchase Agreements” and each, a “MTA
Property Purchase Agreement”) pursuant to which we agreed to acquire, and Eldorado agreed to cause
to be sold, all of the equity interests in a newly formed entity that will acquire the land and real property
improvements associated with Harrah’s Laughlin Hotel & Casino in Laughlin, Nevada for a cash purchase
price of $434.8 million.
Each of our existing call options on the Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic
City properties will terminate upon the earlier to occur of the closing of the corresponding MTA Property
Acquisition or our obtaining specific performance or liquidated damages with respect to the relevant
property. The closings of the MTA Property Acquisitions are subject to conditions in addition to the
consummation of the Eldorado/Caesars Merger, and are not cross-conditioned on each other (that is, we
are not required to close on “all or none” of the MTA Properties). In addition, the closing of the other
transactions that comprise the Eldorado Transaction is not conditioned on the completion of any or all
of the MTA Property Acquisitions.
CPLV Lease Agreement Amendment. In consideration of a payment by us to Eldorado of $1,189.9 million,
we and Eldorado will amend the CPLV Lease Agreement to (i) increase the annual rent payable to us
under the CPLV Lease Agreement by $83.5 million (the “CPLV Additional Rent Acquisition”) and (ii)
provide for the amended terms described below.
HLV Lease Agreement Termination and Creation of Las Vegas Master Lease. In consideration of a
payment by us to Eldorado of $213.8 million, we and Eldorado will terminate the HLV Lease Agreement
and the related lease guaranty. Annual rent previously payable to us with respect to the Harrah’s Las
Vegas property will be increased by $15.0 million (the “HLV Additional Rent Acquisition”). The CPLV
Lease Agreement will be amended (as amended, the “Las Vegas Master Lease Agreement”) to provide,
among other things, that the Harrah’s Las Vegas property, which is currently subject to the HLV Lease
Agreement, will be leased pursuant thereto (with the Harrah’s Las Vegas property subject to the higher
rent escalator currently in place under the CPLV Lease Agreement). Thereafter the Las Vegas Master
Lease Agreement will be a multi-property master lease whereby the Harrah’s Las Vegas property tenant
and the Caesars Palace Las Vegas property tenant will collectively be the tenant.
Centaur Properties Put/Call Agreement. Affiliates of Caesars currently own two gaming facilities in
Indiana - Harrah’s Hoosier Park and Indiana Grand (together the “Centaur Properties”). At the closing
of the Eldorado/Caesars Merger, a right of first refusal that we have with respect to the Centaur Properties
will terminate and we will enter into a put/call agreement with Eldorado, whereby (i) we will have the
right to acquire all of the land and real estate assets associated with the Centaur Properties at a price
equal to 13.0x the initial annual rent of each facility (determined as provided below), and to simultaneously
lease back each such property to a subsidiary of Eldorado for initial annual rent equal to the property’s
trailing four quarters EBITDA at the time of acquisition divided by 1.3 (i.e., the initial annual rent will
be set at 1.3x rent coverage) and (ii) Eldorado will have the right to require us to acquire the Centaur
72
•
•
•
•
•
•
Properties at a price equal to 12.5x the initial annual rent of each facility, and to simultaneously lease
back each such Centaur Property to a subsidiary of Eldorado for initial annual rent equal to the property’s
trailing four quarters EBITDA at the time of acquisition divided by 1.3 (i.e., the initial annual rent will
be set at 1.3x rent coverage). Either party will be able to trigger its respective put or call, as applicable,
beginning on January 1, 2022 and ending on December 31, 2024. The put/call agreement will provide
that the leaseback of the Centaur Properties will be implemented through addition of the Centaur
Properties to the Non-CPLV Lease Agreement.
Las Vegas Strip Assets ROFR. We will enter into a right of first refusal agreement with Eldorado (the
“Las Vegas ROFR”) whereby we will have the first right, with respect to the first two of certain specified
Las Vegas Strip assets that Eldorado proposes to sell, whether pursuant to a sale leaseback or a WholeCo
sale, to a third party, to acquire any such asset (it being understood that we will have the opportunity to
find an operating company should Eldorado elect to pursue a WholeCo sale). Pursuant to the Master
Transaction Agreement, the specified Las Vegas Strip assets subject to the Las Vegas ROFR will be the
land and real estate assets associated (i) with respect to the first such asset subject to the Las Vegas ROFR,
the Flamingo Las Vegas, Paris Las Vegas, Planet Hollywood and Bally’s Las Vegas gaming facilities,
and (ii) with respect to the second asset subject to the Las Vegas ROFR, the foregoing assets plus The
LINQ gaming facility. If we enter into a sale leaseback transaction with Eldorado on any of these facilities,
the leaseback will be implemented through the addition of such properties to the CPLV Lease Agreement.
Horseshoe Baltimore ROFR. We and Eldorado agreed to enter into a right of first refusal agreement
pursuant to which we will have the first right to enter into a sale leaseback transaction with respect to
the land and real estate assets associated with the Horseshoe Baltimore gaming facility (subject to any
consent required from Caesars’ joint venture partners with respect to this asset) (the “Horseshoe Baltimore
ROFR”).
Lease Guaranties and MLSA Terminations. Eldorado will execute new guaranties (the “Eldorado
Guaranties”) of the CPLV Lease Agreement, the Non-CPLV Lease Agreement and the Joliet Lease
Agreement, and the existing guaranties by Caesars of such leases, along with all covenants and other
obligations of Caesars incurred in connection with such guaranties, will be terminated with respect to
Caesars (which will become a subsidiary of Eldorado following the closing of the Eldorado/Caesars
Merger). The Eldorado Guaranties will guaranty the prompt and complete payment and performance in
full of: (i) all monetary obligations of the tenants under the respective leases, including all rent and other
sums payable by the tenants under the leases and any obligation to pay monetary damages in connection
with any breach and to pay any indemnification obligations of the tenants under the leases; and (ii) the
performance when due of all other covenants, agreements and requirements to be performed and satisfied
by the tenants under the leases. In addition, we and Eldorado will terminate the Management and Lease
Support Agreements with respect to the CPLV Lease Agreement, the Non-CPLV Lease Agreement and
the Joliet Lease Agreement, and certain provisions currently set forth therein will be added to the
respective leases, as amended, and the Eldorado Guaranties.
• Other Lease Amendments. The CPLV Lease Agreement, the Non-CPLV Lease Agreement and the Joliet
Lease Agreement will be amended to, among other things, (i) remove the rent coverage floors, which
coverage floors serve to reduce the rent escalators under such leases in the event that the “EBITDAR to
Rent Ratio” (as defined in each of the CPLV Lease Agreement, the Non-CPLV Lease Agreement and the
Joliet Lease Agreement) coverage is below the stated floor and (ii) extend the term of each such lease by
such additional period of time as necessary to ensure that following the consummation of the Eldorado/
Caesars Merger, each lease will have a full 15-year initial lease term. The Non-CPLV Lease Agreement
also will be amended to, among other things: (a) permit the tenant under the Non-CPLV Lease Agreement
to cause facilities subject to the Non-CPLV Lease Agreement that in the aggregate represent up to five
percent of the aggregate EBITDAR of (A) all of the facilities under such Non-CPLV Lease Agreement
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and (B) the Harrah’s Joliet facility, for the 2018 fiscal year (defined as the “2018 EBITDAR Pool” in the
Non-CPLV Lease Agreement, without giving effect to any increase in the 2018 EBITDAR Pool as a result
of a facility being added to the Non-CPLV Lease Agreement) to be sold (whereby the tenant and landlord
under the Non-CPLV Lease Agreement would sell the operations and real estate, respectively, with respect
to such facility), provided, among other things, that (1) we and Eldorado mutually agree to the split of
proceeds from such sales, (2) such sales do not result in any impairment(s)/asset write down(s) by us, (3)
rent under the Non-CPLV Lease Agreement remains unchanged following such sale and (4) the sale does
not result in us recognizing certain taxable gain; (b) restrict the ability of the tenant thereunder to transfer
and sell the operating business of Harrah’s New Orleans and Harrah’s Atlantic City to replacement tenants
without our consent and remove such restrictions with respect to Horseshoe Southern Indiana (in
connection with the restrictions applying to Harrah’s New Orleans) and Horseshoe Bossier City (in
connection with the restrictions applying to Harrah’s Atlantic City), provided that the tenant under the
Non-CPLV Lease Agreement may only sell such properties if certain terms and conditions are met,
including that replacement tenants meet certain criteria provided in the Non-CPLV Lease Agreement; and
(c) require that the tenant under the Non-CPLV Lease Agreement complete and pay for all capital
improvements and other payments, costs and expenses related to the extension of the existing operating
license with respect to Harrah’s New Orleans, including, without limitation, any such payments, costs
and expenses required to be made to the City of New Orleans, the State of Louisiana or any other
governmental body or agency.
• CPLV CMBS Refinancing. We were obligated to cause the CPLV CMBS Debt to be repaid in full prior
to the closing of the Eldorado/Caesars Merger. Eldorado has agreed to reimburse us for 50% of our out-
of-pocket costs in connection with the prepayment penalties associated with refinancing the CPLV CMBS
Debt (which reimbursement obligations exist pursuant to the MTA regardless of whether the Eldorado/
Caesars Merger is consummated). We repaid the CPLV CMBS Debt in full in November 2019 resulting
in a prepayment penalty of $110.8 million, $55.4 million of which will be reimbursed by Eldorado. Due
to the prepayment of the CPLV CMBS Debt, we recognized a loss on extinguishment of debt of $58.1
million during the year ended December 31, 2019, the majority of which related to the prepayment penalty.
• Eldorado Bridge Facility. On June 24, 2019, in connection with the Eldorado Transaction, VICI PropCo
entered into a commitment letter (the “Commitment Letter”) with Deutsche Bank Securities Inc. and
Deutsche Bank AG Cayman Islands Branch (collectively, the “Bridge Lender”), pursuant to which and
subject to the terms and conditions set forth therein, the Bridge Lender has agreed to provide (i) a 364-
day first lien secured bridge facility of up to $3.3 billion in the aggregate (the “Eldorado Senior Bridge
Facility”) and (ii) a 364-day second lien secured bridge facility of up to $1.5 billion in the aggregate (the
“Eldorado Junior Bridge Facility,” and, together with the Eldorado Senior Bridge Facility, the “Bridge
Facilities”), for the purpose of providing a portion of the financing necessary to fund the consideration
to be paid pursuant to the terms of the Eldorado Transaction documents and related fees and expenses.
Following the issuance of the 2026 Notes and 2029 Notes in November 2019, the commitments under
the Bridge Facility were reduced by $1.6 billion, to $3.2 billion. Following the issuance of the February
2020 Senior Unsecured Notes we placed $2.0 billion of the net proceeds into escrow pending the
consummation of the Eldorado Transactions and the commitments under the Bridge Facility were further
reduced by $2.0 billion to $1.2 billion.
The Master Transaction Agreement contains customary representations, warranties and covenants by the parties
to the agreement and is subject to the consummation of the Eldorado/Caesars Merger as well as customary closing
conditions, including, among other things, that: (i) the absence of any law or order restraining, enjoining or otherwise
preventing the transactions contemplated by the Master Transaction Agreement; (ii) the receipt of certain regulatory
approvals, including gaming regulatory approvals; (iii) certain restructuring transaction shall have been
consummated; (iv) the accuracy of the respective parties’ representations and warranties, subject to customary
74
qualifications; and (v) material compliance by the parties with their respective covenants and obligations. The
Master Transaction Agreement contains certain termination rights, including that the Master Transaction Agreement
shall automatically terminate upon the termination of the Eldorado/Caesars Merger Agreement and a right by us
to terminate the Master Transaction Agreement in the event the closing of the transactions contemplated by the
Master Transaction Agreement has not occurred by the date on which the Eldorado/Caesars Merger is required to
close pursuant to the Eldorado/Caesars Merger Agreement, but in no event later than December 24, 2020.
If the Master Transaction Agreement is terminated by Eldorado under certain circumstances where we have a
financing failure, we may be obligated to pay Eldorado a reverse termination fee of $75.0 million (the “Reverse
Termination Fee”). If the amendment of the CPLV Lease Agreement is not entered into on the date on which the
Eldorado/Caesars Merger closes, under certain circumstances, we may be obligated to pay Eldorado a fee of $45.0
million (the “CPLV Break Payment”), provided we will not be obligated to pay both the Reverse Termination Fee
and the CPLV Break Payment. If the Eldorado/Caesars Merger does not close for any reason, under certain
circumstances, Eldorado may be obligated to pay us a termination fee of $75.0 million. For more information, see
Item 1A. “Risk Factors”.
Closing of Purchase of Greektown
On May 23, 2019, we completed the previously announced transaction 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,
and an affiliate of Penn National acquired the operating assets of Greektown for $300.0 million in cash (together,
the “Greektown Acquisition”). Simultaneous with the closing of the Greektown Acquisition, we entered into a
triple-net lease agreement for Greektown with a subsidiary of Penn National. The lease has 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 are guaranteed by Penn National and certain of its subsidiaries.
Credit Agreement Amendments - Upsize and Extend
On May 15, 2019, we amended our Revolving Credit Facility to, among other things, increase borrowing capacity
by $600 million to a total of $1.0 billion and extend the maturity date to May 2024. Borrowings under the Revolving
Credit Facility initially bore interest at a rate based on a leverage-based pricing grid with a range of 1.75% to 2.00%
over LIBOR (London Interbank Offered Rate), or between 0.75% and 1.00% over the base rate, in each case
depending on our total net debt to adjusted total assets ratio. The Revolving Credit Facility replaces our previous
revolving credit facility, which had a total borrowing capacity of $400 million, a maturity date in December 2022,
and under which borrowings bore interest at 200 basis points over LIBOR.
Interest Rate Swaps
On January 3, 2019, we entered into two additional interest rate swap agreements with third-party financial
institutions 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, the LIBOR component of the interest rate on $500.0 million of the
outstanding debt under the Term Loan B Facility at a blended rate of 2.38%. Subsequent to the effectiveness and
for the duration of the interest rate swap transactions, we are only subject to interest rate risk on $100.0 million of
variable rate debt.
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Closing of Purchase of Margaritaville
On January 2, 2019, we completed the previously announced transaction to acquire the land and real estate assets
of Margaritaville, located in Bossier City, Louisiana, for $261.1 million. Penn National acquired the operating
assets of Margaritaville for $114.9 million. Simultaneous with the closing of this transaction, we entered into a
triple-net lease agreement 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 tenant renewal options. The tenant’s obligations under the lease
are guaranteed by Penn National and certain of its subsidiaries.
KEY TRENDS THAT MAY AFFECT OUR BUSINESS
Subsidiaries of Caesars Penn National, Hard Rock, Century Casinos and JACK Entertainment are the lessees of
all of our properties pursuant to the Lease Agreements, and Caesars, CRC, Penn National, Seminole Hard Rock,
Century Casinos or Rock Ohio Ventures LLC 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 our tenants, 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 any of our tenant’s 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 the
combined Eldorado/Caesars (following the closing of the Eldorado Transaction), including pursuant to: (i) the
Centaur Properties Put/Call Agreement; (ii) the Caesars Forum Put/Call Agreement; and (iii) the Las Vegas Strip
ROFR and Horseshoe Baltimore ROFR. However, the combined Eldorado/Caesars entity will make an independent
financial decision regarding whether to trigger the rights of first refusal under the Las Vegas ROFR and Horseshoe
Baltimore ROFR, and we will make an independent financial decision whether to purchase the properties. Finally,
we believe the approximately 34 acres 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 the combined Eldorado/Caesars following the closing of the Eldorado Transaction),
that the combined Eldorado/Caesars entity will trigger the rights of first offer under the Las Vegas ROFR and
Horseshoe Baltimore ROFR, or that we will otherwise be successful in acquiring any properties (whether subject
to the Las Vegas ROFR, the Horseshoe Baltimore ROFR, or otherwise). 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. We anticipate that we would
seek to finance these acquisitions with a combination of debt and equity, although no assurance can be given that
76
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
current Lease Agreements require our tenants 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.
DISCUSSION OF OPERATING RESULTS
Results of Operations for the Years Ended December 31, 2019 and December 31, 2018
(In thousands)
Revenues
Income from direct financing and sales-type
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
Transaction and acquisition 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
2019
2018
Variance
822,205
$
741,564
$
43,653
—
28,940
894,798
24,569
3,831
—
18,901
—
4,998
52,299
842,499
(248,384)
20,014
(58,143)
555,986
(1,705)
554,281
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
80,641
(4,319)
(81,240)
1,739
(3,179)
140
145
(81,810)
1,530
(12,334)
4,605
(87,724)
84,545
(35,721)
8,707
(35,103)
22,428
(264)
22,164
(8,317)
(8,498)
181
$
545,964
$
523,619
$
22,345
77
Revenue
For the years ended December 31, 2019 and 2018, our revenue was comprised of the following items:
(In thousands)
Leasing revenue
Tenant reimbursement of property taxes
Golf course business revenue
Total revenue
2019
2018
Variance
$
$
865,858
$
789,536
$
—
28,940
81,240
27,201
894,798
$
897,977
$
76,322
(81,240)
1,739
(3,179)
Leasing Revenue
The following table details the components of our income from direct financing, sales-type and operating leases:
(In thousands)
Income from direct financing and sales-type
leases
Income from operating leases (1)
Total leasing revenue
Direct financing and sales-type lease
adjustments (2)
Total contractual leasing revenue
$
$
2019
2018
Variance
822,205
$
741,564
$
43,653
865,858
47,972
789,536
239
866,097
$
(45,404)
744,132
$
80,641
(4,319)
76,322
45,643
121,965
____________________
(1) 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.
(2) Amounts represent the non-cash adjustment to income from direct financing and sales-type leases in order to recognize income on an
effective interest basis at a constant rate of return over the term of the leases.
Leasing revenue is generated from rent from our Lease Agreements. Total leasing revenue increased $76.3 million
during the year ended December 31, 2019 compared to the year ended December 31, 2018. Total contractual leasing
revenue increased $122.0 million during the year ended December 31, 2019 compared to the year ended December
31, 2018. The increase was primarily driven by the addition of Octavius Tower, Harrah’s Philadelphia,
Margaritaville, Greektown, JACK Cincinnati and the Century Portfolio to our real estate portfolio in July 2018,
December 2018, January 2019, May 2019, September 2019 and December 2019, respectively.
Tenant reimbursement of property taxes
During the year ended December 31, 2018, we recorded $81.2 million of income from tenant reimbursement of
property taxes. Upon the adoption of ASC 842 on January 1, 2019, we ceased recording tenant reimbursement of
property taxes as these taxes are paid directly by our tenants to the applicable government entity.
Golf Course Business Revenue
Revenues from golf operations increased $1.7 million during the year ended December 31, 2019 compared to the
year ended December 31, 2018. The increase was primarily driven by an increase in the number of rounds played
at our golf courses, as well as by an increase in the contractual fees paid to us by Caesars for the use of our golf
courses, pursuant to a golf course use agreement.
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Operating Expenses
General and Administrative Expenses
General and administrative expenses increased $0.1 million during the year ended December 31, 2019 compared
to the year ended December 31, 2018. The increase was primarily driven by an increase in stock based compensation
which was partially offset by certain non-recurring costs incurred during the first six months of the year ended
December 31, 2018 as a result of being a newly publicly-traded company primarily following our initial public
offering and the transition and relocation of our corporate headquarters from Las Vegas, NV to New York, NY.
Property Taxes
During the year ended December 31, 2018, we recorded $81.8 million of income from tenant reimbursement of
property taxes. Upon the adoption of ASC 842 on January 1, 2019, we ceased recording tenant reimbursement of
property taxes as these taxes are paid directly by our tenants to the applicable government entity.
Golf Course Business Expenses
Expenses from golf operations increased $1.5 million during the year ended December 31, 2019 compared to the
year ended December 31, 2018 due to an increase in the number of rounds played and an increase in the water
usage charges at one of our golf courses. In addition, $3.8 million and $3.7 million of depreciation expense was
incurred primarily by the golf business during the year ended December 31, 2019 and 2018, respectively.
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. We had no such related impairment during the year ended December 31, 2019.
Transaction and Acquisition Expenses
Transaction and acquisition costs increased $4.6 million during the year ended December 31, 2019 compared to
the year ended December 31, 2018. The increase was primarily due to the adoption of ASC 842, which requires
us to expense certain legal and third-party costs associated with our leases that were previously capitalized.
Interest Expense
Interest expense increased $35.7 million during the year ended December 31, 2019 compared to the year ended
December 31, 2018. The increase is primarily attributable to our November 2019 Senior Unsecured Notes, our
interest rate swap agreements which we entered into in April 2018 and January 2019 and an increase in the
amortization of our deferred financing fees as a result of the costs associated with our Revolving Credit Facility
and Bridge Facilities. With respect to the interest rate swap agreements, prior to entering into such agreements in
the comparative period, we were paying a lower variable rate as compared to the fixed rate under the interest rate
swap agreements. These amounts were partially offset by a reduction in interest rates due to the repayment of
amounts outstanding under 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 $8.7 million during the year ended December 31, 2019 compared to the year ended
December 31, 2018. The increase is primarily driven by increased cash on hand from our primary follow-on equity
offerings in November 2018 and June 2019 and debt offering in November 2019.
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Loss on Extinguishment of Debt
During the year ended December 31, 2019 we recognized a loss on extinguishment of debt of $58.1 million resulting
from the$110.8 million prepayment penalties associated with the full repayment of our CPLV CMBS Debt in
November 2019, net of $55.4 million of which will be reimbursed by Eldorado. During the year ended December
31, 2018 we recognized a loss on extinguishment of debt of $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%.
Results of Operations for the Year Ended December 31, 2018 and the Period from October 6, 2017 to
December 31, 2017
For a comparison of our results of operations for the fiscal years ended December 31, 2018 and the period from
October 6, 2017 to December 31, 2017, see “Part II, Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended December 31,
2018, filed with the SEC on February 14, 2019 and incorporated by reference herein.
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, we define FFO as net income (or loss) (computed in accordance with GAAP) excluding (i)
gains (or losses) from sales of certain real estate assets, (ii) depreciation and amortization related to real estate,
(iii) gains and losses from change in control and (iv) impairment write-downs of certain real estate assets and
investments in entities when the impairment is directly attributable to decreases in the value of depreciable real
estate held by the entity.
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 and sales-type 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 related to non-depreciable real estate and gains (or losses) on debt
extinguishment.
We calculate Adjusted EBITDA by adding or subtracting from AFFO interest expense and interest income
(collectively, 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
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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.
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 and sales-type lease adjustments attributable to
common stockholders
Transaction and acquisition expenses
Non-cash stock-based compensation
Amortization of debt issuance costs and original issue discount
Other depreciation
Capital expenditures
Loss on impairment
Loss on extinguishment of debt
AFFO
Interest expense, net
Income tax expense
Adjusted EBITDA
Net income per common share
Basic
Diluted
FFO per common share
Basic
Diluted
AFFO per common share
Basic
Diluted
Year Ended
December 31, 2019
Year Ended
December 31, 2018
$
545,964
$
—
545,964
492
4,998
5,223
33,034
3,815
(2,097)
—
58,143
649,572
195,336
1,705
846,613
1.25
1.24
1.25
1.24
1.49
1.48
$
$
$
$
$
$
$
$
$
$
$
$
$
$
523,619
—
523,619
(44,852)
393
2,342
5,976
3,679
(899)
12,334
23,040
525,632
195,380
1,441
722,453
1.43
1.43
1.43
1.43
1.43
1.43
Weighted average number of common shares outstanding
Basic
Diluted
435,071,096
439,152,946
367,226,395
367,316,901
81
LIQUIDITY AND CAPITAL RESOURCES
Overview
As of December 31, 2019, our available cash balances, short-term investments and capacity under our Revolving
Credit Facility were as follows:
(In thousands)
Cash and cash equivalents
Short-term investments
Capacity under Revolving Credit Facility (1)
Total
December 31, 2019
1,101,893
59,474
1,000,000
2,161,367
$
$
____________________
(1) Subject to compliance with the financial covenants and other applicable provisions of 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 material contractual commitments refer to Note 10 - 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. Taking into
account our February 2020 Senior Unsecured Notes Offering and the redemption of our Second Lien Secured
Notes, we currently have $6.9 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 7 -
Debt, in the Notes to our Consolidated Financial Statements.
We closed the JACK Cleveland/Thistledown Acquisition on January 24, 2020 using a mix of cash on hand and a
portion of the proceeds that we raised from our November 2019 Senior Unsecured Notes Offering. We anticipate
closing the Eldorado Transaction in the first half of 2020 and expect to fund the purchase with a mix of cash on
hand, the settlement of our Forward Sales Agreements and a portion of the proceeds that we raised from our
February 2020 Senior Unsecured Notes Offering. To the extent we are unable to settle the Forward Sales Agreements
we intend to use the capacity under the Bridge Facility in lieu of such financing. 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 Bridge Facilities, and proceeds from the issuance of debt and equity securities (including issuances under our
Forward Sale Agreements and our ATM Agreement). All of the Lease Agreements call for an initial term of fifteen
years with four, five-year tenant renewal options and are designed to provide us with a reliable and predictable
long-term 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
82
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 years ended December 31, 2019 and 2018:
(In thousands)
Cash, cash equivalents and restricted cash
Provided by operating activities
Used in investing activities
Provided by financing activities
Net increase in cash, cash equivalents and
restricted cash
$
$
Cash Flows from Operating Activities
2019
2018
Variance ($)
$
682,159
(1,361,379)
1,182,666
$
504,082
(1,140,877)
1,037,836
178,077
(220,502)
144,830
503,446
$
401,041
$
102,405
Net cash provided by operating activities increased $178.1 million for the year ended December 31, 2019 compared
with the year ended December 31, 2018. The increase is primarily driven by an increase in cash rental payments
from the addition of Octavius Tower, Harrah’s Philadelphia, Margaritaville, Greektown, Hard Rock Cincinnati and
the Century Portfolio to our real estate portfolio in July 2018, December 2018, January 2019, May 2019, September
2019 and December 2019, respectively.
Cash Flows Used In Investing Activities
Net cash used in investing activities increased $220.5 million for the year ended December 31, 2019 compared
with the year ended December 31, 2018. The increase is primarily driven by the acquisitions of Margaritaville,
Greektown, Hard Rock Cincinnati and the Century Portfolio for a total of $1,821.1 million, including acquisition
costs, during the year ended December 31, 2019 compared with the acquisition of Octavius Tower and Harrah’s
Philadelphia for a total of $619.3 million, including acquisition costs and net of the lease modification fee, during
the year ended December 31, 2018. This increase was partially offset by an increase in net maturities of short-term
investments of $982.3 million during the year ended December 31, 2019 as compared to the year ended December
31, 2018
83
Cash Flows from Financing Activities
Net cash provided by financing activities increased $144.8 million for the year ended December 31, 2019 compared
with the year ended December 31, 2018.
During the year ended December 31, 2019 the primary sources and uses of cash from financing activities included:
• Net proceeds from the sale of an aggregate of $1,164.3 million of our common stock from a primary
follow-on offering and our at-the-market offering program;
• Gross proceeds from our November 2019 Senior Unsecured Notes offering of $2,250.0 million;
•
Full repayment of $1,550.0 million of our CPLV CMBS Debt, including the $110.8 million prepayment
penalty plus fees;
• Dividend payments of $504.0 million;
• Debt issuance costs of $56.1 million; and
• Distributions of $8.1 million to non-controlling interest
During the year ended December 31, 2018 the primary sources and uses of cash from financing activities include:
• Net proceeds from the sale of an aggregate of $2,001.5 million of our common stock from our initial
public offering and our November 2018 primary follow-on offering;
• 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
• Debt issuance costs of $1.1 million; and
• Distributions of $9.8 million to non-controlling interest.
84
Debt
The following tables detail our debt obligations as of December 31, 2019:
($ in thousands)
Description of Debt
VICI PropCo Senior Secured Credit Facilities
Revolving Credit Facility(2)
Term Loan B Facility(3)
Second Lien Notes(4)
November 2019 Senior Unsecured Notes
2026 Notes(5)
2029 Notes(5)
Total Debt
____________________
December 31, 2019
Final
Maturity
Interest
Rate
Face Value
Carrying
Value(1)
2024
2024
2023
2026
2029
L + 2.00% $
— $
—
L + 2.00%
2,100,000
2,076,962
8.00%
498,480
498,480
4.25%
4.625%
1,250,000
1,000,000
1,231,227
984,894
$ 4,848,480
$ 4,791,563
(1) Carrying value is net of original issue discount and unamortized debt issuance costs incurred in conjunction with debt.
(2)
Interest on any outstanding balance is payable monthly. The Revolving Credit Facility initially bore interest at LIBOR plus 2.25% and
was subject to a 0.5% commitment fee. Upon our initial public offering, on February 5, 2018, the interest rate was reduced to LIBOR
plus 2.00%. On May 15, 2019, we amended our Revolving Credit Facility to, among other things, increase borrowing capacity by $600
million to a total of $1.0 billion and extend the maturity date to May 2024. After giving effect to the amendments executed on May 15,
2019, borrowings under the Revolving Credit Facility will bear interest at a rate based on a leverage based pricing grid with a range of
1.75% to 2.00% over LIBOR, or between 0.75% and 1.00% over the base rate depending on our total net debt to adjusted total assets
ratio. Additionally, after giving effect to the amendments executed on May 15, 2019, the commitment fee under the Revolving Credit
Facility is calculated on a leverage-based pricing grid with a range of 0.375% to 0.5%, in each case depending on our total net debt to
adjusted total assets ratio. As of December 31, 2019, the commitment fee was 0.375%.
Interest on any outstanding balance is payable monthly. The Term Loan B Facility 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%. In connection with the repricing of the
Term Loan B Facility in January of 2020, the interest rate was decreased to LIBOR plus 1.75%. As of December 31, 2019, we had six
interest rate swap agreements outstanding with third-party financial institutions having an aggregate notional amount of $2.0 billion at
a blended LIBOR rate of 2.7173%. 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. 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. Subsequent to the year end, on February 20, 2020 we used the proceeds from the issuance of the 2025
Notes to redeem in full the Second Lien Notes at a redemption price of 100% of the principal amount of the Second Lien Notes then
outstanding plus the Second Lien Notes Applicable Premium, which resulted in a total redemption amount of approximately $537.5
million.
Interest is payable quarterly.
(3)
(4)
(5)
Unsecured February 2020 Senior Notes Offering and Redemption and Repayment of the Second Lien Notes
On February 5, 2020, the Operating Partnership issued (i) $750 million in aggregate principal amount of 3.500%
senior unsecured notes due 2025, (ii) $750 million in aggregate principal amount of 3.750% senior unsecured notes
due 2027 and (iii) $1.0 billion of 4.125% senior unsecured notes due 2030. We placed $2.0 billion of the net
proceeds into escrow pending the consummation of the Eldorado Transaction, and used the remaining net proceeds
from the 2025 Notes, together with cash on hand, to redeem in full the outstanding $498.5 million in aggregate
principal amount of the Second Lien Notes plus the Second Lien Notes Applicable Premium, which resulted in a
total redemption amount of approximately $537.5 million. The 2025 Notes will mature on February 15, 2025, the
2027 Notes will mature on February 15, 2027 and the 2030 Notes will mature on August 15, 2030. Interest on the
2025 Notes will accrue at a rate of 3.500% per annum, interest on the 2027 Notes will accrue at a rate of 3.750%
per annum and interest on the 2030 Notes will accrue at a rate of 4.125% per annum.
85
Unsecured November 2019 Senior Notes Offering and Repayment of the CPLV CMBS Debt
On November 26, 2019, the Operating Partnership issued (i) $1,250 million in aggregate principal amount of
4.250% Senior Notes due 2026, and (ii) $1,000 million in aggregate principal amount of 4.625% Senior Notes due
2029. We used the proceeds of the offering to repay in full the CPLV CMBS Debt, and pay certain fees and expenses,
and any remaining net proceeds were used to complete the JACK Cleveland/Thistledown Acquisition (which we
consummated on January 24, 2020). The 2026 Notes will mature on December 1, 2026, and the 2029 Notes will
mature on December 1, 2029. Interest on the 2026 Notes will accrue at a rate of 4.250% per annum, and interest
on the 2029 Notes will accrue at a rate of 4.625% per annum.
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,
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 “Second Lien Notes
Indenture”) by and among VICI PropCo and its wholly owned subsidiary, VICI FC Inc. (together, the “Second
Lien Notes Issuers”), the subsidiary guarantors party thereto, and UMB Bank National Association, as trustee. The
Second Lien Notes Indenture contains covenants that limit the Second Lien Notes 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
86
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. Subsequent to December 31, 2019, on February 20, 2020
we used the proceeds from the issuance of the 2025 Notes to redeem in full the Second Lien Notes at a redemption
price of 100% of the principal amount of the Second Lien Notes then outstanding plus the Second Lien Notes
Applicable Premium, which resulted in a total redemption amount of approximately $537.5 million.
The November 2019 Senior Unsecured Notes were issued in November 2019, pursuant to indentures (the “2019
Senior Unsecured Notes Indentures”) by and among the Operating Partnership and VICI Note Co. Inc. (the “Co-
Issuer” and, together with the Operating Partnership, the “2019 Senior Unsecured Notes Issuers”), the subsidiary
guarantors party thereto and UMB Bank, National Association, as trustee. The 2019 Senior Unsecured Notes
Indentures contains covenants that limit the 2019 Senior Unsecured Notes Issuers’ and their restricted subsidiaries’
ability to, among other things: (i) incur additional debt; (ii) create liens on assets; (iii) make distributions and pay
dividends on or redeem or repurchase stock; (iv) make certain types of investments; (v) sell stock in certain
subsidiaries; (vi) enter into agreements that restrict dividends or other payments from subsidiaries; (vii) enter into
transactions with affiliates; (viii) issue guarantees of debt; and (ix) sell assets or merge with other companies. 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 fund a dividend or distribution
by VICI that it believes is necessary to maintain its status as a REIT or to avoid payment of any tax for any calendar
year that could be avoided by reason of such distribution, and the ability to make certain restricted payments not
to exceed 95% of our cumulative Funds From Operations (as defined in the 2019 Senior Unsecured Notes
Indentures), plus the aggregate net proceeds from (i) the sale of certain equity interests in, (ii) capital contributions
to, and (iii) certain convertible indebtedness of, the Operating Partnership. The indentures governing the February
2020 Senior Unsecured Notes contain certain covenants substantially similar to those in the indentures governing
the November 2019 Senior Unsecured Notes.
At December 31, 2019, the Company was in compliance with all required debt-related financial covenants.
Non-Guarantor Subsidiaries of November 2019 Senior Unsecured Notes and February 2020 Senior
Unsecured Notes
The subsidiaries of the Operating Partnership that do not guarantee the November 2019 Senior Unsecured Notes
or the February 2020 Senior Unsecured Notes accounted for: (i) 7.0% of the Operating Partnership’s revenue (or
6.8% of our consolidated revenue) for the fiscal year ended December 31, 2019 and (ii) 5.2% of the Operating
Partnership’s total assets (or 5.2% of our consolidated total assets) as of December 31, 2019.
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 Item 1 “Business-
Overview of our Lease Agreements” .
87
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 Item 1 “Business-Overview of our Lease Agreements”. 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.
Off-Balance Sheet Arrangements
As of December 31, 2019, 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 Sales-Type Leases, Net
We account for our investments in leases under ASC 842 “Leases” (“ASC 842”), which we adopted on January
1, 2019. Upon lease inception or lease modification, we assess lease classification to determine whether the lease
should be classified as a direct financing, sales-type or operating lease. As required by ASC 842, we separately
assess the land and building components of the property to determine the classification of each component, unless
the impact of doing so is immaterial. If the lease component is determined to be a direct financing or sales-type
lease, we record a net investment in the lease, which is equal to the sum of the lease receivable and the unguaranteed
residual asset, discounted at the rate implicit in the lease. Any difference between the fair value of the asset and
the net investment in the lease is considered selling profit or loss and is either recognized upon execution of the
lease or deferred and recognized over the life of the lease, depending on the classification of the lease. Due to the
nature of our assets, the net investment in the lease is generally equal to the purchase price of the asset, and the
land and building components of an investment generally have the same lease classification.
For leases determined to be sales-type leases, we further assess to determine whether the transaction is considered
a sale leaseback transaction. If we determine that the lease meets the definition for a sale leaseback transaction,
the lease is considered a financing receivable and is recognized in accordance with ASC 310 “Receivables” (“ASC
310”). We currently do not have any lease investments that are accounted for as financing receivables under ASC
310.
Upon adoption of ASC 842, we made an accounting policy election to use a package of practical expedients that,
among other things, allow us to not reassess prior lease classifications or initial direct costs for leases that existed
as of the balance sheet date.
88
Lease Term
We assess the noncancelable lease term under ASC 842, which includes any reasonably assured renewal periods.
All of our Lease Agreements provide for an initial term, with multiple tenant renewal options. We have individually
assessed all of our Lease Agreements and concluded that the lease term includes all of the periods covered by
extension options as it is reasonably certain our tenants will renew the Lease Agreements. We believe our tenants
are economically compelled to renew the Lease Agreements due to the importance of our real estate to the operation
of their business, the significant capital they have invested in our properties and the lack of suitable replacement
assets.
Income from Leases
We recognize the related income from our direct financing and sales-type 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 and sales-type leases will not equal income from our Lease Agreements. Rather, a portion of the
cash rent we receive is recorded as Income from direct financing and sales-type leases in our Statement of Operations
and a portion is recorded as a change to Investments in direct financing and sales-type leases, net.
Under ASC 840, we determined that the land component of Caesars Palace Las Vegas was greater than 25% of the
overall fair value of the combined land and building components. At lease inception the land was determined to
be an operating lease and we record the related income 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. Revenue
from this lease is recorded as Income from operating leases in our Statement of Operations.
Initial direct costs incurred in connection with entering into lease agreements are included in the balance of the
net investment in lease. In relation to direct financing and sales-type leases, such amounts will be recognized as a
reduction to Income from investments in leases over the life of the lease using the effective interest method. Costs
that would have been incurred regardless of whether the lease was signed, such as legal fees and certain other third-
party fees, are expensed as incurred to Transaction and acquisition expenses in our Statement of Operations.
89
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, 2019.
(In thousands)
Long-term debt (1)
2026 Notes (2)
2029 Notes (3)
Term Loan B Facility, principal (4)
Second Lien Notes, principal (5)
Revolving Credit Facility,
principal (6)
Scheduled interest payments (7)
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
2-3 Years
4-5 Years
After 5
Years
$
1,250,000
$
— $
— $
— $ 1,250,000
1,000,000
2,100,000
498,480
—
—
—
—
—
—
—
1,000,000
10,000
2,090,000
—
—
498,480
—
—
—
1,451,134
6,299,614
242,823
242,823
479,284
489,284
399,808
329,219
2,988,288
2,579,219
20,663
914
1,884
1,960
15,905
13,080
9,365
43,108
3,270
571
4,755
6,540
1,858
10,282
3,270
1,858
7,088
—
5,078
20,983
Total Contractual Commitments
$
6,342,722
$ 247,578
$ 499,566
$ 2,995,376
$ 2,600,202
________________________________________
(1) Subsequent to December 31, 2019, on February 5, 2020, the Operating Partnership issued (i) $750.0 million in aggregate
principal amount of 3.500% senior unsecured notes due 2025, (ii) $750.0 million in aggregate principal amount of 3.750%
senior unsecured notes due 2027 and (iii) $1.0 billion of 4.125% senior unsecured notes due 2030. The 2025 Notes will
mature on February 15, 2025, the 2027 Notes will mature on February 15, 2027 and the 2030 Notes will mature on August
15, 2030.
(2) The 2026 Notes will mature on December 1, 2026.
(3) The 2029 Notes will mature on December 1, 2029.
(4) 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). Subsequent
to December 31, 2019, on January 24, 2020 the Term Loan B Facility was amended to reduce the interest rate from LIBOR
plus 2.00% to LIBOR plus 1.75%
(5) Subsequent to the year end, on February 20, 2020 we used the proceeds from the issuance of the 2025 Notes to redeem in
full the Second Lien Notes at a redemption price of 100% of the principal amount of the Second Lien Notes then outstanding
plus the Second Lien Notes Applicable Premium, which resulted in a total redemption amount of approximately $537.5
million.
(6) The Revolving Credit Facility will mature on May 15, 2024.
(7) Estimated interest payments on variable interest loans are based on a LIBOR rate as of December 31, 2019.
90
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
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, 2019, we had $4,848.5 million of debt outstanding of which $2,748.5 million was fixed rate
debt and $2,000.0 million was hedged variable rate debt, the remaining $100.0 million of our indebtedness was
unhedged. As of December 31, 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 - Exhibits and Financial Statement Schedules of this Form 10-K appear on pages F-2 to F-63. 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.
91
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) of 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.
Our management has evaluated, under the supervision and with the participation of our principal executive officer
and principal financial officer, 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
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, 2019 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, 2019.
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, 2019.
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.
92
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 29, 2020 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 29, 2020 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 29, 2020 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 29, 2020 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 29, 2020 with the SEC pursuant to Regulation 14A under the Exchange Act.
93
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules
(a)(1).
Financial Statements.
See the accompanying Index to Consolidated Financial Statements and Schedules on page F-1.
(a)(2).
Financial Statement Schedules.
See the accompanying Index to Consolidated Financial Statements and Schedules on page F-1.
(a)(3).
Exhibits.
ITEM 16.
Form 10-K Summary
None.
94
SIGNATURES
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.
VICI PROPERTIES INC.
February 20, 2020
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 20, 2020
/S/ DAVID A. KIESKE
David A. Kieske
Chief Financial Officer
(Principal Financial Officer)
February 20, 2020
/S/ GABRIEL F. WASSERMAN
Gabriel F. Wasserman
Chief Accounting Officer
(Principal Accounting Officer)
February 20, 2020
/S/ JAMES R. ABRAHAMSON
James R. Abrahamson
/S/ DIANA CANTOR
Diana Cantor
/S/ MONICA H. DOUGLAS
Monica H. Douglas
/S/ ELIZABETH I. HOLLAND
Elizabeth I. Holland
/S/ CRAIG MACNAB
Craig Macnab
/S/ MICHAEL D. RUMBOLZ
Michael D. Rumbolz
Chair of the Board of Directors
February 20, 2020
Director
February 20, 2020
Director
February 20, 2020
Director
February 20, 2020
Director
February 20, 2020
Director
February 20, 2020
95
[THIS PAGE INTENTIONALLY LEFT BLANK]
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
VICI Properties Inc.:
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Year Ended December 31, 2019 and 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 - 5
F - 6
F - 7
F - 8
F - 10
F - 62
F - 63
F - 64
F - 65
F - 66
F - 67
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, 2019 and 2018, the related consolidated statements of operations and comprehensive income,
stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2019 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, 2019 and 2018, and the results of its operations
and its cash flows for each of the two years in the period ended December 31, 2019 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, 2019, 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 20, 2020, 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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures
that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
F - 2
Evaluation of Lease Renewal Options in Lease Classification Assessment - Refer to Note 2 to the financial statements
Critical Audit Matter Description
Upon lease inception, the Company assesses lease classification under Accounting Standard Codification Topic 842 - Leases
to determine whether its leases should be classified as a direct financing, sales-type, or operating lease. This assessment
requires management to evaluate the classification of each lease component based on specified criteria, including, among
other matters, determining the noncancelable lease term and comparing the present value of the future minimum lease
payments to the fair value of the leased components. In performing its lease classification assessment, management was
required to make significant judgments in determining whether its tenants are economically compelled to exercise their
renewal options in determining the appropriate noncancelable lease term at the commencement date of each lease. The
Company has concluded that it is reasonably certain that its tenants will exercise such renewal options.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures, related to management’s determination of the appropriate noncancelable lease term at the
commencement date of its leases, included the following, among others:
• We tested the design and operating effectiveness of controls over management’s review of lease classification of
the lease components which included an evaluation of the lease renewal options in determination of the overall
noncancelable lease term.
• We read the executed lease agreements to understand material lease provisions, including renewal options, and
evaluated their implications in the determination of the overall noncancelable lease term.
• We evaluated the significant judgments management made in concluding that it is reasonable that its tenants’ will
exercise all of their lease renewal options.
/s/ Deloitte & Touche LLP
New York, New York
February 20, 2020
We have served as the Company's auditor since 2016.
F - 3
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, 2019, 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, 2019, 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, 2019, of the Company and our
report dated February 20, 2020, 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 20, 2020
F - 4
VICI PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31, 2019
December 31, 2018
Assets
Real estate portfolio:
Investments in direct financing and sales-type leases, net
$
10,734,245
$
Investments in operating leases
Land
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 10)
Stockholders’ equity
Common stock, $0.01 par value, 700,000,000 shares
authorized and 461,004,742 and 404,729,616 shares issued
and outstanding at December 31, 2019 and December 31,
2018, respectively
Preferred stock, $0.01 par value, 50,000,000 shares
authorized and no shares outstanding at December 31, 2019
and 2018
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total VICI stockholders’ equity
Non-controlling interests
Total stockholders’ equity
1,086,658
94,711
1,101,893
—
59,474
188,638
8,916,047
1,086,658
95,789
577,883
20,564
520,877
115,550
$
$
13,265,619
$
11,333,368
4,791,563
$
4,122,264
20,153
73,600
70,340
137,056
123,918
14,184
73,600
43,605
116,287
62,406
5,216,630
4,432,346
4,610
4,047
—
7,817,582
(65,078)
208,069
7,965,183
83,806
8,048,989
—
6,648,430
(22,124)
187,096
6,817,449
83,573
6,901,022
11,333,368
Total liabilities and stockholders’ equity
$
13,265,619
$
See accompanying Notes to Consolidated Financial Statements.
F - 5
VICI PROPERTIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except share and per share data)
Year Ended December 31,
2019
2018
Period from
October 6, 2017
to December 31, 2017
Revenues
Income from direct financing and sales-type
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
Transaction and acquisition 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
$
822,205
$
741,564
$
43,653
—
28,940
894,798
24,569
3,831
—
18,901
—
4,998
52,299
842,499
(248,384)
20,014
(58,143)
555,986
(1,705)
554,281
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
Less: Net income attributable to non-controlling
interests
Net income attributable to common stockholders
Net income per common share
Basic
Diluted
$
$
$
(8,317)
(8,498)
545,964
$
523,619
$
1.25
1.24
$
$
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
Weighted average number of common shares outstanding
Basic
Diluted
435,071,096
439,152,946
367,226,395
367,316,901
227,828,844
227,985,455
Other comprehensive income
Net income attributable to common stockholders
Unrealized loss on cash flow hedges
Comprehensive income attributable to common
stockholders
$
$
545,964
$
(42,954)
523,619
$
(22,124)
503,010
$
501,495
$
42,662
—
42,662
See accompanying Notes to Consolidated Financial Statements.
F - 6
VICI PROPERTIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
Common
Stock
Preferred
Stock
Additional
Paid-in
Capital
Accumulate
d Other
Comprehen
sive Loss
Retained
Earnings
Total VICI
Stockholders’
Equity
Non-
controlling
Interest
Total
Stockholders’
Equity
$ 1,772
$
120
$ 3,431,781
$
— $
— $ 3,433,673
$ 83,000
$ 3,516,673
—
514
176
541
—
3,003
—
—
—
(120)
(394)
—
—
—
249,811
963,241
1,385
— 4,645,824
—
—
—
—
—
—
42,662
42,662
1,875
44,537
—
—
—
—
—
249,987
963,782
1,385
—
—
—
—
—
249,987
963,782
1,385
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
—
—
694,189
—
694,189
—
(9,800)
(9,800)
— (379,185)
(379,185)
—
(379,185)
693,844
—
—
2,338
—
—
(22,124)
—
—
2,342
(22,124)
—
—
2,342
(22,124)
— 6,648,430
(22,124)
187,096
6,817,449
83,573
6,901,022
—
—
— 545,964
545,964
8,317
554,281
562
— 1,163,983
—
—
—
—
1,164,545
— 1,164,545
—
(8,084)
(8,084)
— (524,991)
(524,991)
—
(524,991)
—
—
—
—
—
—
—
345
—
—
4
—
4,047
—
—
—
1
—
—
—
—
—
5,169
—
—
(42,954)
—
—
5,170
(42,954)
—
—
5,170
(42,954)
Balance as of
October 6, 2017
Net income
Preferred stock
conversion
Mandatory debt
conversion
Private equity
placement
Stock-based
compensation, net
of forfeitures
Balance as of
December 31, 2017
Net income
Issuance of common
stock from Initial
Public Offering
Issuance of common
stock from follow-
on offering
Distribution to non-
controlling interest
Dividends declared
Stock-based
compensation, net
of forfeitures
Unrealized loss on
cash flow hedges
Balance as of
December 31, 2018
Net income
Issuance of common
stock, net
Distribution to non-
controlling interest
Dividends declared
Stock-based
compensation, net
of forfeitures
Unrealized loss on
cash flow hedges
Balance as of
December 31, 2019 $ 4,610
$ — $ 7,817,582
$ (65,078) $208,069
$ 7,965,183
$ 83,806
$ 8,048,989
See accompanying Notes to Consolidated Financial Statements.
F - 7
VICI PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2019
2018
Period from
October 6, 2017
to December 31,
$
554,281
$
532,117
$
44,537
Cash flows from operating activities
Net income
Adjustments to reconcile net income to cash flows
provided by operating activities:
Direct financing and sales-type 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 and sales-type 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 cash used in investing activities
Cash flows from financing activities
Proceeds from offering of common stock
Proceeds from private placement of common stock
Proceeds from November 2019 Senior Unsecured
Notes
Payment of CPLV CMBS Debt
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
F - 8
(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
239
5,223
3,831
33,034
—
58,143
—
(5,635)
5,969
26,735
339
682,159
(45,404)
2,342
3,686
5,976
12,334
23,040
(348)
(22,945)
(7,411)
(24,512)
25,207
504,082
(1,812,404)
(8,698)
—
(440,353)
901,756
1,044
(2,724)
(1,361,379)
(771,507)
(6,780)
159,000
(942,311)
421,434
186
(899)
(1,140,877)
1,164,307
—
2,001,493
—
—
—
(100,000)
(300,000)
(290,058)
—
2,250,000
(1,663,544)
—
—
—
—
—
—
—
—
—
—
298,000
(1,638,387)
(311,721)
VICI PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Repurchase of Mezzanine Debt
Debt issuance costs
Proceeds from unrecognized sale of real estate
Mandatory debt conversion costs
Distributions to non-controlling interests
Dividends paid
—
(56,055)
—
—
(8,084)
(503,958)
—
(1,117)
—
—
(9,800)
(262,682)
(400,000)
(31,501)
73,600
(13)
—
—
Net cash provided by financing activities
1,182,666
1,037,836
1,148,446
Net increase in cash, cash equivalents and restricted cash
503,446
401,041
141,635
Cash, cash equivalents and restricted cash, beginning of
period
598,447
197,406
Cash, cash equivalents and restricted cash, end of period $
1,101,893
$
598,447
$
55,771
197,406
$
$
Supplemental cash flow information:
Cash paid for interest
Cash paid for income taxes
Supplemental non-cash investing and financing
activity:
Dividends declared, not paid
CPLV CMBS Debt prepayment penalty
reimbursement receivable from Eldorado
Lease liabilities arising from obtaining right-of-use
assets
Debt issuance costs payable
Deferred transaction costs payable
Transfer of investments in operating leases to land
Transfer of investments in direct financing leases to
investments in operating leases
209,379
$
213,309
$
36,779
2,590
1,375
137,149
$
116,503
$
55,401
26,516
16,066
1,314
—
—
—
—
—
742
22,189
10,967
—
—
—
—
—
—
—
—
See accompanying Notes to Consolidated Financial Statements.
F - 9
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.
“2025 Notes” refers to $750 million aggregate principal amount of 3.500% senior unsecured notes due 2025
issued by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in February 2020.
“2026 Notes” refers to $1.25 billion aggregate principal amount of 4.250%senior unsecured notes due 2026 issued
by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in November 2019.
“2027 Notes” refers to $750 million aggregate principal amount of 3.750% senior unsecured notes due 2027
issued by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in February 2020.
“2029 Notes” refers to $1.0 billion aggregate principal amount of 4.625% senior unsecured notes due 2029 issued
by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in November 2019.
“2030 Notes” refers to $1.0 billion aggregate principal amount of 4.125% senior unsecured notes due 2030 issued
by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in February 2020.
“Caesars” refers to Caesars Entertainment Corporation, a Delaware corporation, and, as the context requires,
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.
“Century Casinos” refers to Century Casinos, Inc., a Delaware corporation, and, as the context requires, its
subsidiaries.
“Century Portfolio” refers to the real estate assets associated with the (i) Mountaineer Casino, Racetrack & Resort
located in New Cumberland, West Virginia, (ii) Century Casino Caruthersville located in Caruthersville, Missouri
and (iii) Century Casino Cape Girardeau located in Cape Girardeau, Missouri, which we purchased on December
6, 2019.
“Century Portfolio Lease Agreement” refers to the lease agreement for the Century Portfolio, as amended from
time to time.
“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, as the context requires, 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 and repaid in full on November
26, 2019.
F - 10
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
“CPLV Lease Agreement” refers to the lease agreement for Caesars Palace Las Vegas, as amended from time to
time, which will be combined with the HLV Lease Agreement into a single Las Vegas master lease upon the closing
of the pending Eldorado/Caesars Merger.
“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.
“Eldorado Transaction” refers to a series of transactions between us and Eldorado in connection with the Eldorado/
Caesars Merger, including the acquisition of the Harrah’s New Orleans, Harrah’s Atlantic City and Harrah’s
Laughlin properties, modifications to the Caesars Lease Agreements, and rights of first refusal.
“Eldorado” refers to Eldorado Resorts, Inc., a Nevada corporation, and, as context requires, its subsidiaries.
“Eldorado/Caesars Merger” refers to the merger contemplated under an Agreement and Plan of Merger pursuant
to which a subsidiary of Eldorado will merge with and into Caesars, with Caesars surviving as a wholly owned
subsidiary of Eldorado.
“February 2020 Senior Unsecured Notes” refers collectively to the 2025 Notes, 2027 Notes and the 2030 Notes.
“Formation Date” refers to October 6, 2017.
“Greektown” refers to the real estate assets associated with the Greektown Casino-Hotel, located in Detroit,
Michigan, which we purchased on May 23, 2019.
“Greektown Lease Agreement” refers to the lease agreement for Greektown, as amended from time to time.
“Hard Rock” means Hard Rock International, and, as context the requires, its subsidiary and affiliate entities.
“Hard Rock Cincinnati” refers to the casino-entitled land and real estate and related assets associated with the
Hard Rock Cincinnati Casino, located in Cincinnati, Ohio, which we purchased on September 20, 2019 (and
previously referred to in our prior filings as JACK Cincinnati).
“Hard Rock Cincinnati Lease Agreement” refers to the lease agreement for Hard Rock Cincinnati, as amended
from time to time.
“HLV Lease Agreement” refers to the lease agreement for the Harrah’s Las Vegas facilities, as amended from time
to time, which will be combined with the CPLV Lease Agreement into a single Las Vegas master lease upon the
closing of the Eldorado/Caesars Merger.
“JACK Entertainment” refers to JACK Ohio LLC, and, as the context requires, its subsidiary and affiliate entities.
“JACK Cleveland/Thistledown” refers to the casino-entitled land and real estate and related assets associated
with the JACK Cleveland Casino located in Cleveland, Ohio, and the video lottery gaming and pari-mutuel wagering
authorized land and real estate and related assets of JACK Thistledown Racino located in North Randall, Ohio,
which we purchased on January 24, 2020.
“JACK Cleveland/Thistledown Lease Agreement” refers to the lease agreement for JACK Cleveland/Thistledown,
as amended from time to time.
F - 11
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
“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, the Penn National Lease Agreements,
the Hard Rock Cincinnati Lease Agreement, the Century Portfolio Lease Agreement and, from and after January
24, 2020, the JACK Cleveland/Thistledown Lease Agreement, unless the context otherwise requires.
“Margaritaville” refers to the real estate of Margaritaville Resort Casino, located in Bossier City, Louisiana,
which we purchased on January 2, 2019.
“Margaritaville Lease Agreement” refers to the lease agreement for Margaritaville, as amended from time to time.
“Master Transaction Agreement” refers to the master transaction agreement with Eldorado relating to the Eldorado
Transaction.
“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.
“November 2019 Senior Unsecured Notes” refer collectively to the 2026 Notes and the 2029 Notes.
“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, as the context requires, its subsidiaries.
“Penn National Lease Agreements” refer collectively to the Margaritaville Lease Agreement and the Greektown
Lease Agreement, unless the context otherwise requires.
“Revolving Credit Facility” refers to the five-year first lien revolving credit facility entered into by VICI PropCo,
as amended from time to time.
“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 remained outstanding as of December 31, 2019, and which were
redeemed in full on February 20, 2020.
“Seminole Hard Rock” means Seminole Hard Rock Entertainment, Inc.
“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.
F - 12
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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, as of December 31, 2019, of 26 market-leading properties, including Caesars Palace Las Vegas and
Harrah’s Las Vegas. As of December 31, 2019, our properties are leased to, and our tenants are, subsidiaries of
Caesars, Penn National, Hard Rock and Century Casinos. We also own and operate four championship golf courses
located near certain of our properties.
We conduct our operations as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. As
such, we generally will not be subject to U.S. federal income taxes on our taxable income to the extent that we
annually distribute all of our net taxable income to stockholders and maintain our qualification as a REIT. We
conduct our real property business through our Operating Partnership and our golf course business, through a
taxable REIT subsidiary (“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”) as set forth in the Accounting Standards 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 property 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.
F - 13
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 for the CPLV CMBS Debt. The CPLV CMBS Debt was repaid
in full in November 2019 and accordingly, we no longer have any restricted cash balances as of December 31,
2019.
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, 2019
1,101,893
$
December 31, 2018
577,883
$
—
20,564
$
1,101,893
$
598,447
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 180 days
and are accounted for as available for sale securities. As of December 31, 2019 and 2018, we had $59.5 million
and $520.9 million, respectively, of short-term investments.
Investments in Direct Financing and Sales-Type Leases, Net
We account for our investments in leases under ASC 842 “Leases” (“ASC 842”), which we adopted on January
1, 2019. Upon lease inception or lease modification, we assess lease classification to determine whether the lease
should be classified as a direct financing, sales-type or operating lease. As required by ASC 842, we separately
assess the land and building components of the property to determine the classification of each component, unless
the impact of doing so is immaterial. If the lease component is determined to be a direct financing or sales-type
lease, we record a net investment in the lease, which is equal to the sum of the lease receivable and the unguaranteed
residual asset, discounted at the rate implicit in the lease. Any difference between the fair value of the asset and
the net investment in the lease is considered selling profit or loss and is either recognized upon execution of the
lease or deferred and recognized over the life of the lease, depending on the classification of the lease. Due to the
nature of our assets, the net investment in the lease is generally equal to the purchase price of the asset, and the
land and building components of an investment generally have the same lease classification.
F - 14
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For leases determined to be sales-type leases, we further assess to determine whether the transaction is considered
a sale leaseback transaction. If we determine that the lease meets the definition for a sale leaseback transaction,
the lease is considered a financing receivable and is recognized in accordance with ASC 310 “Receivables” (“ASC
310”). We currently do not have any lease investments that are accounted for as financing receivables under ASC
310.
Upon adoption of ASC 842, we made an accounting policy election to use a package of practical expedients that,
among other things, allow us to not reassess prior lease classifications or initial direct costs for leases that existed
as of the balance sheet date. As such, we have not reassessed the classification of our Caesars Lease Agreements,
as these leases existed prior to our adoption of ASC 842.
We determined that the land and building components of the Margaritaville Lease Agreement, the Greektown Lease
Agreement, the Hard Rock Cincinnati Lease Agreement and the Century Portfolio Lease Agreement meet the
definition of a sales-type lease. The Caesars Lease Agreements continue to be accounted for as direct financing
leases and are included within Investments in direct financing and sales-type leases on the Balance Sheet, with the
exception of the land component of Caesars Palace Las Vegas which was determined to be an operating lease and
is included in Investments in operating leases on the Balance Sheet. The income recognition for our direct financing
leases recognized under ASC 840 is consistent with the income recognition for our sales-type lease under ASC
842.
Lease Term
We assess the noncancelable lease term under ASC 842, which includes any reasonably assured renewal periods.
All of our Lease Agreements provide for an initial term, with multiple tenant renewal options. We have individually
assessed all of our Lease Agreements and concluded that the lease term includes all of the periods covered by
extension options as it is reasonably certain our tenants will renew the Lease Agreements. We believe our tenants
are economically compelled to renew the Lease Agreements due to the importance of our real estate to the operation
of their business, the significant capital they have invested in our properties and the lack of suitable replacement
assets.
Income from Leases
We recognize the related income from our direct financing and sales-type 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 and sales-type leases will not equal income from our Lease Agreements. Rather, a portion of the
cash rent we receive is recorded as Income from direct financing and sales-type leases in our Statement of Operations
and a portion is recorded as a change to Investments in direct financing and sales-type leases, net.
Under ASC 840, we determined that the land component of Caesars Palace Las Vegas was greater than 25% of the
overall fair value of the combined land and building components. At lease inception the land was determined to
be an operating lease and we record the related income 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. Revenue
from this lease is recorded as Income from operating leases in our Statement of Operations.
Initial direct costs incurred in connection with entering into lease agreements are included in the balance of the
net investment in lease. In relation to direct financing and sales-type leases, such amounts will be recognized as a
reduction to Income from investments in leases over the life of the lease using the effective interest method. Costs
that would have been incurred regardless of whether the lease was signed, such as legal fees and certain other third-
party fees, are expensed as incurred to Transaction and acquisition expenses in our Statement of Operations.
F - 15
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 2018 we reclassified the entire $22.2 million
carrying value of the vacant, non-operating land from Investments in operating leases to Land.
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 did 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 is included within Other assets on our Balance Sheet and represents
assets primarily related to VICI Golf, our golf operations. 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 investments in operating leases, land and property and equipment used in operations for impairment
under ASC 360 “Property, Plant and Equipment” (“ASC 360”) 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. We
assess our investments in direct financing and sales-type leases for impairment under ASC 310. Under ASC 310,
the net investment in the lease is identified for impairment when it becomes probable that we will be unable to
collect all rental payments associated with our investment in 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.
F - 16
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 9 - 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 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.
Tenant Reimbursement of Property Taxes
Real estate taxes paid directly by our tenants to taxing authorities were recorded gross on our Balance Sheets and
Income Statements during 2018 and 2017, as we concluded we are the primary obligor. Such amounts were 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 2019, such amounts are 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
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 $10.3 million annual
membership fee, $3.1 million of use fees and approximately $1.2 million of minimum rounds fees. The annual
F - 17
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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” and recognized ratably over the performance period.
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.
Income Taxes-REIT Qualification
We conduct our operations as a REIT for U.S. federal income tax purposes. 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 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.
F - 18
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Transaction and Acquisition Expenses
Transaction and acquisition-related expenses that are not capitalizable under GAAP, including most leasing costs
under ASC 842, are expensed in the period they occur. Transaction and acquisition expenses also include dead
deal costs.
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 13—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.
See Note 12—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
Caesars is the guarantor of all the lease payment obligations of the tenants under the respective leases of the
properties that it leases from us, with the exception of Harrah’s Las Vegas which is guaranteed by a subsidiary of
Caesars. Revenue from the Caesars Lease Agreements represented 93 %, 100% and 100% of our lease revenues
for the years ended December 31, 2019 and 2018 and the period from October 6, 2017 through December 31,
2017, respectively. Additionally, our properties on the Las Vegas Strip generated approximately 33%, 36% and
28% of our lease revenues for the years ended December 31, 2019 and 2018 and the period from October 6, 2017
through December 31, 2017, respectively. We do not believe there are any other significant concentrations of credit
risk.
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 SEC. 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.
F - 19
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reclassifications
In the quarter ended June 30, 2019 we reclassified property and equipment used in operations, net to Other assets
in the Balance Sheet in order to simplify our presentation. As of December 31, 2019 and 2018, such amounts
represent $70.4 million and $71.5 million of the balance of Other assets, respectively.
Note 3 — Recently Issued Accounting Pronouncements
Accounting Pronouncements Recently Adopted
ASU No. 2016-02 - Leases (Topic 842) - February 2016 (as amended through March 2019): The guidance is
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 and is
implemented using a modified retrospective approach, with the option to apply the guidance at the effective date
or the beginning of the earliest comparative period.
We adopted the guidance on January 1, 2019 and elected to apply the effective date method and, as such, have not
re-cast prior periods to show the effects of ASC 842. Additionally, upon adoption, we elected a package of practical
expedients that, among other things, allow us to not reassess prior lease classifications or initial direct costs for
leases that existed before the adoption date. As such, we have not reassessed the classification of our Caesars Lease
Agreements, as these leases existed prior to our adoption of ASC 842.
Lessor Accounting
The new guidance did not have a material impact on the accounting treatment of our triple-net tenant leases, which
are the primary source of our revenues. As such, upon adoption of ASC 842, we have not recorded any adjustment
to our beginning balance of retained earnings. However, as of January 1, 2019, there are certain changes to the
guidance under ASC 842, which will have an impact on future operating results, as follows:
• Costs that are paid directly by the lessee to a third party, such as real estate taxes and insurance, are no
longer recognized in our Statement of Operations. Prior to our adoption of ASC 842, we presented on a
gross basis the real estate taxes that were paid by our tenants directly to the taxing authority. Subsequent
to our adoption of ASC 842, Tenant reimbursements of property taxes and Property taxes expense are
presented on a net basis, as the lessee pays for such costs directly. However, consistent with our effective
date adoption approach, we have not re-cast prior year financial results to conform to the current period
presentation.
•
Initial direct costs associated with the execution of lease agreements, such as legal fees and certain
transaction costs will no longer be capitalizable and instead are expensed in the period incurred.
• Long-term leases entered into or modified subsequent to our adoption of ASC 842 will most likely be
considered sales-type leases, as defined in ASC 842. The accounting for a sales-type lease is materially
consistent with that of the current accounting for our direct financing leases. If we determine that the lease
meets the definition for a sale leaseback transaction, the lease is considered a financing receivable and is
accounted for in accordance with ASC 310.
•
Prior to our adoption of ASC 842, the residual value component of our Lease Agreements was assessed
for impairment under ASC 360 while the receivable component was separately assessed for impairment
under ASC 310. Upon adoption of ASC 842, both the receivable and residual value components of the
direct financing and sales-type leases are assessed for impairment under ASC 310.
F - 20
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Lessee Accounting
In relation to certain operating leases for which we are the lessee, such as the ground lease on the Cascata golf
course, upon adoption of ASC 842, we recorded a right of use asset and corresponding lease liability of $11.1
million, which is included in Other assets and Other liabilities on our Balance Sheets. There was no change to our
lease expense as a result of the change in accounting as such expense is still being recorded on a straight-line basis.
Accounting Pronouncements Not Yet Adopted
ASU No. 2016-13 - Financial Instruments-Credit Losses (Topic 326) - June 2016 (as amended through May 2019):
This amended guidance changes how entities will measure credit losses for most financial assets and certain other
instruments, including direct financing and sales-type 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. As a result of the guidance, we will be required to estimate
and record non-cash credit losses related to our historical, and any future investments in direct financing and sales-
type leases and expand credit quality disclosures. We do not believe the new standard will materially impact any
of our other financial assets or instruments that we currently have on our balance sheet.
We will measure credit losses by engaging a data analytics firm to assist with estimating both the probability of
default (“PD”) and loss given default (“LGD”) of our tenants and their parent guarantors over the life of each
individual lease. These individual loss rates will then be applied to our net investment in direct financing and sales-
type leases. The estimated losses will be discounted using the effective interest rate implicit in the lease. We
currently estimate that our initial allowance for credit losses upon the adoption of the standard will be between
1% and 5% of our total net investment in direct financing and sales-type leases.
We will adopt the guidance on January 1, 2020 using the modified retrospective approach method of adoption.
Under this method we will record a cumulative-effect adjustment to the balance sheet and retained earnings by
recording a credit allowance for all of our existing investments in direct financing and sales-type leases. Periods
prior to the adoption date that are presented for comparative purposes will not be adjusted. Each time we enter
into a new direct financing or sales-type lease, we will be required to estimate a credit allowance which will result
in a non-cash charge to the Statement of Operations and a corresponding reduction in our net investment in the
lease. Finally, each reporting period we will be required to update the estimated allowance for any estimated changes
in the credit loss, with the resulting change being recorded through the Statement of Operations.
ASU No. 2018-16 - Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate
as a Benchmark Interest Rate for Hedge Accounting Purposes - October 2018: This amended guidance expands
the list of U.S. benchmark interest rates permitted in the application of hedge accounting by adding the OIS rate
based on SOFR as an eligible benchmark interest rate and is effective for interim and annual reporting periods in
fiscal years beginning after December 15, 2018. We are currently evaluating the effect of this new benchmark
interest rate option, and do not believe this ASU will have a material impact on our financial statements.
Note 4 — Property Transactions
Summary of Recent Activities
Since January 1, 2019 our significant activities, in reverse chronological order, are as follows:
Closing of Purchase of JACK Cleveland/Thistledown
On January 24, 2020 we completed the previously announced transaction to acquire the casino-entitled land and
real estate and related assets of the JACK Cleveland Casino, located in Cleveland, Ohio and the video lottery
gaming and pari-mutuel wagering authorized land and real estate and related assets of the JACK Thistledown
F - 21
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Racino located in North Randall, Ohio from affiliates of JACK Entertainment, for approximately $843.3 million
in cash (the “JACK Cleveland/Thistledown Acquisition”). Simultaneous with the closing of the JACK Cleveland/
Thistledown Acquisition, we entered into a master triple-net lease agreement for JACK Cleveland and JACK
Thistledown with subsidiaries of JACK Entertainment. The lease has an initial total annual rent of $65.9 million
and an initial term of 15 years, with four five-year tenant renewal options. The tenant’s obligations under the lease
are guaranteed by Rock Ohio Ventures LLC (“Rock Ohio Ventures”). Additionally, we made a $50.0 million loan
(the “ROV Loan”) to affiliates of Rock Ohio Ventures secured by, among other things, certain non-gaming real
estate assets owned by such affiliates and guaranteed by Rock Ohio Ventures. The ROV Loan bears interest at
9.0% per annum for a period of five years with two one-year extension options.
Sale of Harrah’s Reno
On December 31, 2019 we and Caesars entered into a definitive agreement to sell the Harrah’s Reno asset for
$50.0 million to a third party. We are entitled to receive 75% of the proceeds of the sale and Caesars is entitled to
receive 25% of the proceeds. The annual rent payments under the Non-CPLV Lease Agreement will remain
unchanged following completion of the disposition.
Closing of Purchase of Century Portfolio
On December 6, 2019, we completed the previously announced transaction to acquire the land and real estate assets
of (i) Mountaineer Casino, Racetrack & Resort located in New Cumberland, West Virginia, (ii) Century Casino
Caruthersville located in Caruthersville, Missouri and (iii) Century Casino Cape Girardeau located in Cape
Girardeau, Missouri from affiliates of Eldorado, for approximately $277.8 million, and a subsidiary of Century
Casinos acquired the operating assets of the Century Portfolio for approximately $107.2 million (together, the
“Century Portfolio Acquisition”). Simultaneous with the closing of the Century Portfolio Acquisition, we entered
into a master triple-net lease agreement for the Century Portfolio with a subsidiary of Century Casinos. The master
lease has an initial total annual rent of $25.0 million and an initial term of 15 years, with four five-year tenant
renewal options. The tenant’s obligations under the lease are guaranteed by Century Casinos. We determined that
the land and building components of the Century Portfolio Lease Agreement meet the definition of a sales-type
lease and have recorded the corresponding asset, including related transaction and acquisition costs, in Investments
in direct financing and sales-type leases on our Balance Sheet.
Closing of Purchase of Hard Rock Cincinnati
On September 20, 2019, we completed the previously announced transaction to acquire the casino-entitled land
and real estate and related assets of Hard Rock Cincinnati, located in Cincinnati, Ohio from affiliates of JACK
Entertainment LLC, for approximately $558.3 million, and a subsidiary of Hard Rock acquired the operating assets
of the Hard Rock Cincinnati Casino for $186.5 million (together, the “Hard Rock Cincinnati Acquisition”).
Simultaneous with the closing of the Hard Rock Cincinnati Acquisition, we entered into a triple-net lease agreement
for Hard Rock Cincinnati with a subsidiary of Hard Rock. The lease has an initial total annual rent of $42.8 million
and an initial term of 15 years, with four five-year tenant renewal options. The tenant’s obligations under the lease
are guaranteed by Seminole Hard Rock Entertainment, Inc. We determined that the land and building components
of the Hard Rock Cincinnati Lease Agreement meet the definition of a sales-type lease and have recorded the
corresponding asset, including related transaction and acquisition costs, in Investments in direct financing and
sales-type leases on our Balance Sheet.
F - 22
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Eldorado Transaction
On June 24, 2019, we entered into a master transaction agreement (the “Master Transaction Agreement” or “MTA”)
with Eldorado relating to the transactions described below (collectively, the “Eldorado Transaction”), all of which
are conditioned upon consummation of the closing of the merger contemplated under an Agreement and Plan of
Merger (the “Eldorado/Caesars Merger Agreement”) pursuant to which a subsidiary of Eldorado will merge with
and into Caesars, with Caesars surviving as a wholly owned subsidiary of Eldorado. Upon closing of the merger,
Eldorado will be renamed Caesars. Any references to Eldorado in the subsequent transaction discussion refer to
the combined Eldorado/Caesars subsequent to the closing of the Eldorado/Caesars Merger, as applicable.
The Eldorado Transaction and the Eldorado/Caesars Merger are both subject to regulatory approvals and customary
closing conditions. Eldorado has publicly disclosed that it expects the Eldorado/Caesars Merger to be completed
in the first half of 2020. However, we can provide no assurances that the Eldorado/Caesars Merger or the Eldorado
Transaction described herein will close in the anticipated timeframe, on the contemplated terms or at all. We intend
to fund the Eldorado Transaction with a combination of cash on hand, proceeds from the settlement of our forward
sales agreements entered into as part of our June equity offering, as described in Note 11 - Stockholders’ Equity
in the Notes to our Financial Statements, and proceeds from our February 2020 Senior Unsecured Notes Offering.
The Master Transaction Agreement contemplates the following transactions:
•
Acquisition of the MTA Properties. We have agreed to acquire all of the land and real estate assets
associated with Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City (or, if necessary,
certain replacement properties designated in the Master Transaction Agreement) (collectively, the “MTA
Properties” and each, an “MTA Property”) for an aggregate purchase price of $1,823.5 million (which
reflects a purchase price adjustment of $14.0 million related to Harrah’s New Orleans) (the “MTA
Properties Acquisitions” and each, an “MTA Property Acquisition”). Simultaneous with the closing of
each MTA Property Acquisition the Non-CPLV Lease Agreement will be amended to include such MTA
Property, with (i) initial aggregate total annual rent payable to us and attributable to the MTA Properties
of $154.0 million, (ii) so long as the MTA Property Acquisitions are consummated concurrent with the
closing of the Eldorado/Caesars Merger, an initial term of approximately 15 years and (iii) the same
renewal terms available to the other tenants under the Non-CPLV Lease Agreement at such time. The
Non-CPLV Lease Agreement will also be amended to adjust certain minimum capital expenditure
requirements and other related terms and conditions as a result of the MTA Properties being included in
the Non-CPLV Lease Agreement.
On September 26, 2019, we entered into the following agreements (each of which were entered into in
accordance with the terms of the Master Transaction Agreement): (i) a Purchase and Sale Agreement
(the “Harrah’s New Orleans Purchase Agreement”) pursuant to which we agreed to acquire, and Eldorado
agreed to cause to be sold, all of the fee and leasehold interests in the land and real property improvements
associated with Harrah’s New Orleans in New Orleans, Louisiana for a cash purchase price of $789.5
million (which reflects a purchase price adjustment of $14.0 million); (ii) a Purchase and Sale Agreement
(the “Harrah’s Atlantic City Purchase Agreement”) pursuant to which we agreed to acquire, and Eldorado
agreed to cause to be sold, all of the land and real property improvements associated with Harrah’s Resort
Atlantic City and Harrah’s Atlantic City Waterfront Conference Center in Atlantic City, New Jersey for
a cash purchase price of $599.3 million; and (iii) a Purchase and Sale Agreement (the “Harrah’s Laughlin
Purchase Agreement” and, collectively with the Harrah’s New Orleans Purchase Agreement and the
Harrah’s Atlantic City Purchase Agreement, the “MTA Property Purchase Agreements” and each, a “MTA
Property Purchase Agreement”) pursuant to which we agreed to acquire, and Eldorado agreed to cause
to be sold, all of the equity interests in a newly formed entity that will acquire the land and real property
improvements associated with Harrah’s Laughlin Hotel & Casino in Laughlin, Nevada for a cash purchase
price of $434.8 million.
F - 23
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Each of our existing call options on the Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic
City properties will terminate upon the earlier to occur of the closing of the corresponding MTA Property
Acquisition or our obtaining specific performance or liquidated damages with respect to the relevant
property. The closings of the MTA Property Acquisitions are subject to conditions in addition to the
consummation of the Eldorado/Caesars Merger, and are not cross-conditioned on each other (that is, we
are not required to close on “all or none” of the MTA Properties). In addition, the closing of the other
transactions that comprise the Eldorado Transaction is not conditioned on the completion of any or all
of the MTA Property Acquisitions.
CPLV Lease Agreement Amendment. In consideration of a payment by us to Eldorado of $1,189.9 million,
we and Eldorado will amend the CPLV Lease Agreement to (i) increase the annual rent payable to us
under the CPLV Lease Agreement by $83.5 million (the “CPLV Additional Rent Acquisition”) and (ii)
provide for the amended terms described below.
HLV Lease Agreement Termination and Creation of Las Vegas Master Lease. In consideration of a
payment by us to Eldorado of $213.8 million, we and Eldorado will terminate the HLV Lease Agreement
and the related lease guaranty. Annual rent previously payable to us with respect to the Harrah’s Las
Vegas property will be increased by $15.0 million (the “HLV Additional Rent Acquisition”). The CPLV
Lease Agreement will be amended (as amended, the “Las Vegas Master Lease Agreement”) to provide,
among other things, that the Harrah’s Las Vegas property, which is currently subject to the HLV Lease
Agreement, will be leased pursuant thereto (with the Harrah’s Las Vegas property subject to the higher
rent escalator currently in place under the CPLV Lease Agreement). Thereafter the Las Vegas Master
Lease Agreement will be a multi-property master lease whereby the Harrah’s Las Vegas property tenant
and the Caesars Palace Las Vegas property tenant will collectively be the tenant.
Centaur Properties Put/Call Agreement. Affiliates of Caesars currently own two gaming facilities in
Indiana - Harrah’s Hoosier Park and Indiana Grand (together the “Centaur Properties”). At the closing
of the Eldorado/Caesars Merger, a right of first refusal that we have with respect to the Centaur Properties
will terminate and we will enter into a put/call agreement with Eldorado, whereby (i) we will have the
right to acquire all of the land and real estate assets associated with the Centaur Properties at a price
equal to 13.0x the initial annual rent of each facility (determined as provided below), and to simultaneously
lease back each such property to a subsidiary of Eldorado for initial annual rent equal to the property’s
trailing four quarters EBITDA at the time of acquisition divided by 1.3 (i.e., the initial annual rent will
be set at 1.3x rent coverage) and (ii) Eldorado will have the right to require us to acquire the Centaur
Properties at a price equal to 12.5x the initial annual rent of each facility, and to simultaneously lease
back each such Centaur Property to a subsidiary of Eldorado for initial annual rent equal to the property’s
trailing four quarters EBITDA at the time of acquisition divided by 1.3 (i.e., the initial annual rent will
be set at 1.3x rent coverage). Either party will be able to trigger its respective put or call, as applicable,
beginning on January 1, 2022 and ending on December 31, 2024. The put/call agreement will provide
that the leaseback of the Centaur Properties will be implemented through addition of the Centaur
Properties to the Non-CPLV Lease Agreement.
Las Vegas Strip Assets ROFR. We will enter into a right of first refusal agreement with Eldorado (the
“Las Vegas ROFR”) whereby we will have the first right, with respect to the first two of certain specified
Las Vegas Strip assets that Eldorado proposes to sell, whether pursuant to a sale leaseback or a WholeCo
sale, to a third party, to acquire any such asset (it being understood that we will have the opportunity to
find an operating company should Eldorado elect to pursue a WholeCo sale). Pursuant to the Master
Transaction Agreement, the specified Las Vegas Strip assets subject to the Las Vegas ROFR will be the
land and real estate assets associated (i) with respect to the first such asset subject to the Las Vegas ROFR,
the Flamingo Las Vegas, Paris Las Vegas, Planet Hollywood and Bally’s Las Vegas gaming facilities,
and (ii) with respect to the second asset subject to the Las Vegas ROFR, the foregoing assets plus The
F - 24
•
•
•
•
•
•
•
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
LINQ gaming facility. If we enter into a sale leaseback transaction with Eldorado on any of these facilities,
the leaseback will be implemented through the addition of such properties to the CPLV Lease Agreement.
Horseshoe Baltimore ROFR. We and Eldorado agreed to enter into a right of first refusal agreement
pursuant to which we will have the first right to enter into a sale leaseback transaction with respect to
the land and real estate assets associated with the Horseshoe Baltimore gaming facility (subject to any
consent required from Caesars’ joint venture partners with respect to this asset) (the “Horseshoe Baltimore
ROFR”).
Lease Guaranties and MLSA Terminations. Eldorado will execute new guaranties (the “Eldorado
Guaranties”) of the CPLV Lease Agreement, the Non-CPLV Lease Agreement and the Joliet Lease
Agreement, and the existing guaranties by Caesars of such leases, along with all covenants and other
obligations of Caesars incurred in connection with such guaranties, will be terminated with respect to
Caesars (which will become a subsidiary of Eldorado following the closing of the Eldorado/Caesars
Merger). The Eldorado Guaranties will guaranty the prompt and complete payment and performance in
full of: (i) all monetary obligations of the tenants under the respective leases, including all rent and other
sums payable by the tenants under the leases and any obligation to pay monetary damages in connection
with any breach and to pay any indemnification obligations of the tenants under the leases; and (ii) the
performance when due of all other covenants, agreements and requirements to be performed and satisfied
by the tenants under the leases. In addition, we and Eldorado will terminate the Management and Lease
Support Agreements with respect to the CPLV Lease Agreement, the Non-CPLV Lease Agreement and
the Joliet Lease Agreement, and certain provisions currently set forth therein will be added to the
respective leases, as amended, and the Eldorado Guaranties.
Other Lease Amendments. The CPLV Lease Agreement, the Non-CPLV Lease Agreement and the Joliet
Lease Agreement will be amended to, among other things, (i) remove the rent coverage floors, which
coverage floors serve to reduce the rent escalators under such leases in the event that the “EBITDAR to
Rent Ratio” (as defined in each of the CPLV Lease Agreement, the Non-CPLV Lease Agreement and
the Joliet Lease Agreement) coverage is below the stated floor and (ii) extend the term of each such lease
by such additional period of time as necessary to ensure that following the consummation of the Eldorado/
Caesars Merger, each lease will have a full 15-year initial lease term. The Non-CPLV Lease Agreement
also will be amended to, among other things: (a) permit the tenant under the Non-CPLV Lease Agreement
to cause facilities subject to the Non-CPLV Lease Agreement that in the aggregate represent up to five
percent of the aggregate EBITDAR of (A) all of the facilities under such Non-CPLV Lease Agreement
and (B) the Harrah’s Joliet facility, for the 2018 fiscal year (defined as the “2018 EBITDAR Pool” in
the Non-CPLV Lease Agreement, without giving effect to any increase in the 2018 EBITDAR Pool as
a result of a facility being added to the Non-CPLV Lease Agreement) to be sold (whereby the tenant and
landlord under the Non-CPLV Lease Agreement would sell the operations and real estate, respectively,
with respect to such facility), provided, among other things, that (1) we and Eldorado mutually agree to
the split of proceeds from such sales, (2) such sales do not result in any impairment(s)/asset write down(s)
by us, (3) rent under the Non-CPLV Lease Agreement remains unchanged following such sale and (4)
the sale does not result in us recognizing certain taxable gain; (b) restrict the ability of the tenant thereunder
to transfer and sell the operating business of Harrah’s New Orleans and Harrah’s Atlantic City to
replacement tenants without our consent and remove such restrictions with respect to Horseshoe Southern
Indiana (in connection with the restrictions applying to Harrah’s New Orleans) and Horseshoe Bossier
City (in connection with the restrictions applying to Harrah’s Atlantic City), provided that the tenant
under the Non-CPLV Lease Agreement may only sell such properties if certain terms and conditions are
met, including that replacement tenants meet certain criteria provided in the Non-CPLV Lease Agreement;
and (c) require that the tenant under the Non-CPLV Lease Agreement complete and pay for all capital
improvements and other payments, costs and expenses related to the extension of the existing operating
license with respect to Harrah’s New Orleans, including, without limitation, any such payments, costs
F - 25
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
•
•
and expenses required to be made to the City of New Orleans, the State of Louisiana or any other
governmental body or agency.
CPLV CMBS Refinancing. We were obligated to cause the CPLV CMBS Debt to be repaid in full prior
to the closing of the Eldorado/Caesars Merger. Eldorado has agreed to reimburse us for 50% of our out-
of-pocket costs in connection with the prepayment penalties associated with refinancing the CPLV CMBS
Debt (which reimbursement obligations exist pursuant to the MTA regardless of whether the Eldorado/
Caesars Merger is consummated). We repaid the CPLV CMBS Debt in full in November of 2019 resulting
in a prepayment penalty of $110.8 million, $55.4 million of which will be reimbursed by Eldorado. Due
to the prepayment of the CPLV CMBS Debt, we recognized a loss on extinguishment of debt of $58.1
million during the year ended December 31, 2019, the majority of which related to the prepayment
penalty.
Eldorado Bridge Facility. On June 24, 2019, in connection with the Eldorado Transaction, VICI PropCo
entered into a commitment letter (the “Commitment Letter”) with Deutsche Bank Securities Inc. and
Deutsche Bank AG Cayman Islands Branch (collectively, the “Bridge Lender”), pursuant to which and
subject to the terms and conditions set forth therein, the Bridge Lender has agreed to provide (i) a 364-
day first lien secured bridge facility of up to $3.3 billion in the aggregate (the “Eldorado Senior Bridge
Facility”) and (ii) a 364-day second lien secured bridge facility of up to $1.5 billion in the aggregate (the
“Eldorado Junior Bridge Facility,” and, together with the Eldorado Senior Bridge Facility, the “Bridge
Facilities”), for the purpose of providing a portion of the financing necessary to fund the consideration
to be paid pursuant to the terms of the Eldorado Transaction documents and related fees and expenses.
Following the issuance of the 2026 Notes and 2029 Notes in November of 2019, the commitments under
the Bridge Facility were reduced by $1.6 billion, to $3.2 billion. Following the issuance of the February
2020 Senior Secured Notes we placed $2.0 billion of the net proceeds into escrow pending the
consummation of the Eldorado Transaction and the commitments under the Bridge Facility were further
reduced by $2.0 billion to $1.2 billion.
The Master Transaction Agreement contains customary representations, warranties and covenants by the parties
to the agreement and is subject to the consummation of the Eldorado/Caesars Merger as well as customary closing
conditions, including, among other things, that: (i) the absence of any law or order restraining, enjoining or otherwise
preventing the transactions contemplated by the Master Transaction Agreement; (ii) the receipt of certain regulatory
approvals, including gaming regulatory approvals; (iii) certain restructuring transaction shall have been
consummated; (iv) the accuracy of the respective parties’ representations and warranties, subject to customary
qualifications; and (v) material compliance by the parties with their respective covenants and obligations. The
Master Transaction Agreement contains certain termination rights, including that the Master Transaction Agreement
shall automatically terminate upon the termination of the Eldorado/Caesars Merger Agreement and a right by us
to terminate the Master Transaction Agreement in the event the closing of the transactions contemplated by the
Master Transaction Agreement has not occurred by the date on which the Eldorado/Caesars Merger is required to
close pursuant to the Eldorado/Caesars Merger Agreement, but in no event later than December 24, 2020.
If the Master Transaction Agreement is terminated by Eldorado under certain circumstances where we have a
financing failure, we may be obligated to pay Eldorado a reverse termination fee of $75.0 million (the “Reverse
Termination Fee”). If the amendment of the CPLV Lease Agreement is not entered into on the date on which the
Eldorado/Caesars Merger closes, under certain circumstances, we may be obligated to pay Eldorado a fee of $45.0
million (the “CPLV Break Payment”), provided we will not be obligated to pay both the Reverse Termination Fee
and the CPLV Break Payment. If the Eldorado/Caesars Merger does not close for any reason, under certain
circumstances, Eldorado may be obligated to pay us a termination fee of $75.0 million. For more information, see
Item 1A. “Risk Factors”.
F - 26
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Closing of Purchase of Greektown
On May 23, 2019, we completed the previously announced transaction 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,
and an affiliate of Penn National acquired the operating assets of Greektown for $300.0 million in cash (together,
the “Greektown Acquisition”). Simultaneous with the closing of the Greektown Acquisition, we entered into a
triple-net lease agreement for Greektown with a subsidiary of Penn National. The lease has 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 are guaranteed by Penn National and certain of its subsidiaries. We determined that the
land and building components of the Greektown Lease Agreement meet the definition of a sales-type lease and
have recorded the corresponding asset, including related transaction and acquisition costs, in Investments in direct
financing and sales-type leases on our Balance Sheet.
Closing of Purchase of Margaritaville
On January 2, 2019, we completed the previously announced transaction to acquire the land and real estate assets
of Margaritaville, located in Bossier City, Louisiana, for $261.1 million. Penn National acquired the operating
assets of Margaritaville for $114.9 million. Simultaneous with the closing of this transaction, we entered into a
triple-net lease agreement 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 tenant renewal options. The tenant’s obligations under the lease
are guaranteed by Penn National and certain of its subsidiaries. We determined that the land and building components
of the Margaritaville Lease Agreement meet the definition of a sales-type lease and have recorded the corresponding
asset, including related transaction and acquisition costs, in Investments in direct financing and sales-type leases
on our Balance Sheet.
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), 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, 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 tenant 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. 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 5 - Real Estate Portfolio for a summary of the terms of the modified leases.
F - 27
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Agreements with Caesars
Caesars Forum Convention Center - Put/Call Agreement
In December 2017, we sold to Caesars approximately 18.4 acres of certain parcels located in Las Vegas, Nevada,
east of Harrah’s Las Vegas, known as the Eastside Property, for $73.6 million. The Caesars Forum Convention
Center is currently being constructed on the Eastside Property and is expected to be completed by the end of the
first quarter of 2020. 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. This agreement survives the
closing of the Eldorado/Caesars Merger.
Due to the 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, at December 31, 2017, we reclassified $73.6 million from
Investments in operating leases to Land and recorded a $73.6 million Deferred financing liability on our Balance
Sheet.
Second 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 Properties, which were 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
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, provides us with
the right to acquire from Caesars, under certain circumstances, certain undeveloped land adjacent to the Las Vegas
F - 28
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Strip. Upon closing of the Eldorado/Caesars Merger, the Second Amended and Restated Right of First Refusal
will be terminated and we will enter into the Las Vegas ROFR and the Horseshoe Baltimore ROFR.
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 5 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. As described
above under “Eldorado Transaction-Acquisition of the MTA Properties,” we have entered into agreements to
acquire all of the land and real estate assets associated with the MTA Properties, and the existing call right agreements
will terminate, upon the earlier to occur of the closing of the corresponding MTA Property Acquisition or our
obtaining specific performance or liquidated damages with respect to the relevant property in accordance with the
terms of the MTA.
F - 29
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 5 — Real Estate Portfolio
As of December 31, 2019, our real estate portfolio consisted of the following:
•
•
Investments in direct financing and sales-type leases, representing our investment in 26 casino assets
leased on a triple net basis to our tenants, Caesars, Penn National, Hard Rock and Century Casinos, under
eight separate lease agreements;
Investments in operating leases, representing the 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; and
• Land, representing our investment in the Eastside Property and certain non-operating, vacant land parcels
contained in the Non-CPLV Lease Agreement.
The following is a summary of the balances of our real estate portfolio as of December 31, 2019 and 2018:
December 31, 2019
December 31, 2018
(In thousands)
Minimum lease payments receivable under direct financing
and sales-type leases (1)
Estimated residual values of leased property (unguaranteed)
Gross investment in direct financing and sales-type leases
Unamortized initial direct costs
Less: Unearned income
Net investment in direct financing and sales-type leases
Investment in operating leases
Total Investments in leases, net
Land
$
31,460,712
$
2,525,469
33,986,181
42,819
(23,294,755)
10,734,245
1,086,658
11,820,903
94,711
Total Real estate portfolio
$
11,915,614
$
27,285,943
2,135,312
29,421,255
22,822
(20,528,030)
8,916,047
1,086,658
10,002,705
95,789
10,098,494
____________________
(1) Minimum lease payments do not include contingent rent, as discussed below, that may be received under the Lease Agreements.
The following table details the components of our income from direct financing, sales-type and operating leases:
(In thousands)
Income from direct financing and sales-type
leases
Income from operating leases
Total leasing revenue
Direct financing and sales-type lease
adjustments (1)
Total contractual leasing revenue
$
$
Year Ended December 31,
2019
2018
Period from
October 6, 2017 to
December 31, 2017
822,205
$
741,564
$
43,653
865,858
47,972
789,536
239
866,097
$
(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 and sales-type 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.
F - 30
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At December 31, 2019, minimum lease payments owed to us for each of the five succeeding years under direct
financing, sales-type and operating leases are as follows:
(In thousands)
2020
2021
2022
2023
2024
Thereafter
Total
Minimum Lease
Payments (1)
953,949
960,374
971,004
985,938
998,222
28,024,506
32,893,993
$
$
____________________
(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, assuming the exercise of all tenant renewal options, for our direct
financing, sales-type and operating leases at December 31, 2019 was 33.0 years.
F - 31
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Caesars Lease Agreements - Overview
The following is a summary of the material provisions of the Caesars Lease Agreements (which does not reflect
the modifications to the Caesars Lease Agreements contemplated in connection with the closing of the Eldorado
Transaction):
($ In thousands)
Lease Provision (1)
Initial Term
Renewal Terms
Current annual rent (2)
Escalator
commencement
Escalator (3)
EBITDAR to Rent
Ratio floor (4)
Variable Rent
commencement/reset
Variable Rent split (5)
Variable Rent
percentage (5)
Non-CPLV Lease
Agreement and Joliet
Lease Agreement
CPLV Lease Agreement
HLV Lease Agreement
15 years
15 years
15 years
Four, five-year terms
Four, five-year terms
Four, five-year terms
$508,534
$207,745
$89,157
Lease year two
Lease year two
Lease year two
Lease years 2-5 - 1.5%
Lease years 6-15 -
Consumer price index
subject to 2% floor
Consumer price index
subject to 2% floor
Lease years 2-5 - 1%
Lease years 6-15 -
Consumer price index
subject to 2% floor
1.2x commencing lease
year 8
1.7x commencing lease
year 8
1.6x commencing lease
year 6
Lease years 8 and 11
Lease years 8 and 11
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
80% Base Rent and 20%
Variable Rent
80% Base Rent and 20%
Variable Rent
4%
4%
4%
____________________
(1) All capitalized terms used without definition herein have the meanings detailed in the applicable Caesars Lease Agreements.
(2) In relation to the Non-CPLV Lease Agreement, Joliet Lease Agreement and CPLV Lease Agreement, the amount represents the current
annual base rent payable for the current lease year which is the period from November 1, 2019 through October 31, 2020. In relation to the
HLV Lease Agreement the amount represents current annual base rent payable for the current lease year which is the period from January 1,
2020 through December 31, 2020.
(3) 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 years ended December 31, 2019 and 2018.
(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. The EBITDAR to Rent Ratio floor is conditioned upon obtaining a favorable private letter ruling from the Internal
Revenue Service. The coverage floors, which coverage floors serve to reduce the rent escalators under the Caesars Lease Agreements in the
event that the “EBITDAR to Rent Ratio” coverage is below the stated floor, will be removed upon execution of the amendments to the Caesars
Lease Agreements in connection with the closing of the Eldorado Transaction.
(5) Variable Rent is not subject to the Escalator and is calculated as an increase or decrease of Net Revenues, as defined in the Caesars Lease
Agreements, multiplied by the Variable Rent percentage.
F - 32
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Penn National Lease Agreements - Overview
The following is a summary of the material provisions of the Penn National Lease Agreements:
($ In thousands)
Lease Provision
Initial term
Renewal terms
Current annual rent (1)
Escalation
commencement
Escalation
Performance to rent
ratio floor (2)
Percentage rent (3)
Percentage rent
reset
Percentage rent
multiplier
Margaritaville Lease Agreement
Greektown Lease Agreement
15 years
Four, five-year terms
$23,544
Lease year two
15 years
Four, five-year terms
$55,600
Lease year two
2% of Building base rent, subject to the
net revenue to rent ratio floor
2% of Building base rent, subject to the
EBITDAR to rent ratio floor
6.1x net revenue commencing lease year
two
1.85x EBITDAR commencing lease year
two
$3,000 (fixed for lease year one and two)
$6,400 (fixed for lease year one and two)
Lease year three and each and every
other lease year thereafter
Lease year three and each and every
other lease year thereafter
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)
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 relation to the Margaritaville Lease Agreement, the amount represents current annual base rent payable for the current lease year which
is the period from February 1, 2020 through January 31, 2021. In relation to the Greektown Lease Agreement, the amount represents current
annual base rent payable for the current lease year which is the period from May 23, 2019 through May 31, 2020.
(2) In February 2020 the performance basis of such ratio was adjusted from a 1.9x EBITDAR ratio to a 6.1x net revenue ratio. In the event
that the net revenue or EBITDAR to rent ratio coverage is below the stated floor, the escalation will be reduced to such amount to achieve the
stated net revenue or EBITDAR to rent ratio coverage, provided that the amount shall never result in a decrease to the prior year’s rent. In
relation to the Greektown Lease Agreement, the EBITDAR to rent ratio floor is conditioned upon obtaining a favorable private letter ruling
from the Internal Revenue Service.
(3) Percentage rent is subject to the percentage rent multiplier. After the percentage rent reset in lease year three, any amounts related to
percentage rent are considered contingent rent in accordance with GAAP. No such rent has been recognized for the years ended December 31,
2019 and 2018.
F - 33
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Hard Rock Cincinnati Lease Agreement - Overview
The following is a summary of the material lease provisions of the Hard Rock Cincinnati Lease Agreement:
($ In thousands)
Lease Provision
Initial term
Renewal terms
Current annual rent (1)
Escalator commencement
Escalator (2)
Variable rent commencement/reset
Variable rent split (3)
Variable rent percentage (3)
Term
15 years
Four, five-year terms
$42,750
Lease year two
Lease years 2-4 - 1.5%
Lease years 5-15 - The greater of 2% or the change in consumer
price index (“CPI”) unless the change in CPI is less than 0.5%, in
which case there is no escalation in rent for such lease year
Lease year 8
80% Base Rent and 20% Variable Rent
4%
____________________
(1)The amount represents the current annual base rent payable for the current lease year which is the period from September 20, 2019 through
September 30, 2020.
(2) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP. No
such rent has been recognized for the years ended December 31, 2019 and 2018.
(3) Variable rent is not subject to the escalator and is calculated as an increase or decrease of the average of net revenues for lease years 5
through 7 compared to the average net revenue for lease years 1 through 3, multiplied by the Variable rent percentage.
F - 34
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Century Portfolio Lease Agreement - Overview
The following is a summary of the material lease provisions of the Century Portfolio Lease Agreement:
($ In thousands)
Lease Provision
Initial term
Renewal terms
Current annual rent (1)
Term
15 years
Four, five-year terms
$25,000
Escalator commencement
Lease year two
Escalator (2)
Net revenue to rent ratio floor
Variable rent commencement/reset
Variable rent split (3)
Variable rent percentage (3)
Lease years 2-3 - 1.0%
Lease years 4-15 - The greater of 1.25% or the change in consumer
price index (“CPI”)
7.5x commencing lease year six - if the coverage ratio is below the
stated amount the escalator will be reduced to 0.75%
Lease year 8 and 11
80% Base Rent and 20% Variable Rent
4%
____________________
(1)The amount represents the current annual base rent payable for the current lease year which is the period from December 6, 2019 through
December 31, 2020.
(2) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP. No
such rent has been recognized for the years ended December 31, 2019 and 2018.
(3) Variable rent is not subject to the escalator and is calculated for lease year 8 as an increase or decrease of the average of net revenues for
lease years 5 through 7 compared to the average net revenue for lease years 1 through 3 and for lease year 11 as an increase or decrease of
the average of net revenues for lease years 8 through 10 compared to the average net revenue for lease years 5 through 7, multiplied by the
Variable rent percentage.
F - 35
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
JACK Cleveland/Thistledown Lease Agreement - Overview
Subsequent to year end, on January 24, 2020, we completed the previously announced JACK Cleveland/
Thistledown Acquisition. The following is a summary of the material lease provisions of our lease with a subsidiary
of JACK Entertainment which commenced on January 24, 2020, the date of acquisition:
($ In thousands)
Lease Provision
Initial term
Renewal terms
Current annual rent (1)
Term
15 years
Four, five-year terms
$65,880
Escalator commencement
Lease year two
Escalator (2)
Net revenue to rent ratio floor
Variable rent commencement/reset
Variable rent split (3)
Variable rent percentage (3)
Lease years 2-3 - 1.0%
Lease years 4-6 - 1.5%
Lease Years 7-15 - The greater of 1.5% or the change in consumer
price index (“CPI”) capped at 2.5%
4.9x in any lease year (commencing in lease year 5) - if the coverage
ratio is below the stated amount, there is no escalation in rent for
such lease year
Lease year 8 and 11
80% Base Rent and 20% Variable Rent
4%
____________________
(1)The amount represents the current annual base rent payable for the current lease year which is the period from January 24, 2020 through
January 31, 2021.
(2) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP.
(3) Variable rent is not subject to the escalator and is calculated for lease year 8 as an increase or decrease of the average of net revenues for
lease years 5 through 7 compared to the average net revenue for lease years 1 through 3 and for lease year 11 as an increase or decrease of
the average of net revenues for lease years 8 through 10 compared to the average net revenue for lease years 5 through 7, multiplied by the
Variable rent percentage.
F - 36
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Capital Expenditure Requirements
We manage our residual asset risk through protective covenants in our Lease Agreements, which require the tenant
to, among other things, hold specific insurance coverage, engage in ongoing maintenance of the property and invest
in capital improvements. With respect to the capital improvements, the Lease Agreements specify certain minimum
amounts that our tenants must spend on capital expenditures that constitute installation, restoration and repair or
other improvements of items with respect to the leased properties.
The following table summarizes the capital expenditure requirements of the respective tenants under the Caesars
Lease Agreements (which does not reflect the modifications to the Caesars Lease Agreements contemplated in
connection with the closing of the Eldorado Transaction, including the inclusion of the Harrah’s New Orleans,
Harrah’s Atlantic City and Harrah’s Laughlin properties in the Non-CPLV Lease Agreement):
Provision
Yearly minimum
expenditure
Rolling three-year
minimum (2)
Initial minimum
capital expenditure
Non-CPLV Lease
Agreement and Joliet Lease
Agreement
CPLV Lease Agreement
1% of net revenues (1)
1% of net revenues (1)
HLV Lease Agreement
1% of net revenues
commencing in 2022
$255 million
$84 million
N/A
N/A
N/A
$171 million (2017 - 2021)
____________________
(1) The lease agreement requires a $100 million floor on annual 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 on capital expenditures (excluding gaming equipment) over a rolling three-year period, with $255
million allocated to Non-CPLV, $84 million allocated to CPLV and 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 on capital
expenditures (including gaming equipment) across certain of its affiliates and other assets, together with the $350 million requirement.
The following table summarizes the capital expenditure requirements of Penn National, Hard Rock, Century
Casinos and JACK Entertainment under the Penn National Lease Agreements, Hard Rock Cincinnati Lease
Agreement, Century Portfolio Lease Agreement and JACK Cleveland/Thistledown Lease Agreement, respectively:
Provision
Penn National
Lease Agreements
Hard Rock
Cincinnati Lease
Agreement
Century Portfolio
Lease Agreement
Yearly minimum
expenditure
1% of net revenues
based on rolling
four-year basis
1% of net revenues
1% of net gaming
revenues (1)
JACK Cleveland/
Thistledown Lease
Agreement
Initial minimum of
$30 million (2)
Thereafter - 1% of
net revenues on a
rolling three-year
basis
____________________
(1) Minimum of 1% of net gaming revenue on a rolling three-year basis for each individual facility and 1% of net gaming revenues per fiscal
year for the facilities collectively.
(2) Initial minimum required to be spent from the period commencing April 1, 2019 through December 31, 2022.
F - 37
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Loss on Impairment
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. The Non-CPLV Lease 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.
During the quarter ended September 30, 2018 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 had price indications on two other parcels of land. Based on the sales prices and
price indications, we determined that the fair value of these three land parcels was lower than their current carrying
values and 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 in the quarter ended September 30, 2018 and
the sale of one of the parcels that occurred during such quarter, the current carrying value of the vacant, non-
operating land parcels is $21.1 million as of December 31, 2019.
Note 6 — Other Assets and Other Liabilities
Other Assets
The following table details the components of our other assets as of December 31, 2019 and 2018:
(In thousands)
Property and equipment used in operations, net
December 31, 2019
December 31, 2018
$
70,406
$
71,513
Receivables
Right of use assets
Debt financing costs
Deferred acquisition costs
Prepaid expenses
Interest receivable
Other
Tenant receivable for property taxes
Total other assets
60,111
26,426
14,575
11,134
3,252
1,626
1,108
—
$
188,638
$
—
—
6,190
7,062
3,060
886
1,253
25,586
115,550
F - 38
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property and equipment used in operations, included within other assets, is primarily attributable to the land,
building and improvements of our golf operations and consists of the following as of December 31, 2019 and 2018:
(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
December 31, 2019
December 31, 2018
$
$
59,346
$
14,805
4,523
78,674
(8,268)
70,406
$
58,573
14,572
2,805
75,950
(4,437)
71,513
(In thousands)
Depreciation expense
Other Liabilities
Year Ended December 31,
2019
2018
$
3,831
$
3,686
Period from
October 6, 2017
to December 31, 2017
751
$
The following table details the components of our other liabilities as of December 31, 2019 and 2018:
(In thousands)
Derivative liability
Lease liabilities
Other accrued expenses
Accrued payroll and other compensation
Deferred income taxes
Accounts payable
Total other liabilities
December 31, 2019
December 31, 2018
65,078
26,426
21,023
7,369
3,382
640
$
123,918
$
22,124
—
30,951
4,934
3,340
1,057
62,406
F - 39
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 7 — Debt
The following tables detail our debt obligations as of December 31, 2019 and 2018:
($ in thousands)
Description of Debt
VICI PropCo Senior Secured Credit Facilities
Revolving Credit Facility(2)
Term Loan B Facility(3)
Second Lien Notes(4)
November 2019 Senior Unsecured Notes
2026 Notes(5)
2029 Notes(5)
Total Debt
($ in thousands)
Description of Debt
VICI PropCo Senior Secured Credit Facilities
Revolving Credit Facility(2)
Term Loan B Facility(3)
Second Lien Notes(4)
CPLV Debt
CPLV CMBS Debt (6)
Total Debt
____________________
December 31, 2019
Final
Maturity
Interest
Rate
Face Value
Carrying
Value(1)
2024
2024
2023
2026
2029
L + 2.00% $
— $
—
L + 2.00%
2,100,000
2,076,962
8.00%
498,480
498,480
4.25%
4.625%
1,250,000
1,000,000
1,231,227
984,894
$ 4,848,480
$ 4,791,563
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
2022
4.36%
1,550,000
1,550,000
$ 4,148,480
$ 4,122,264
(3)
(1) Carrying value is net of original issue discount and unamortized debt issuance costs incurred in conjunction with debt.
(2)
Interest on any outstanding balance is payable monthly. The Revolving Credit Facility initially bore interest at LIBOR plus 2.25% and
was subject to a 0.5% commitment fee. Upon our initial public offering, on February 5, 2018, the interest rate was reduced to LIBOR
plus 2.00%. On May 15, 2019, we amended our Revolving Credit Facility to, among other things, increase borrowing capacity by $600
million to a total of $1.0 billion and extend the maturity date to May 2024. After giving effect to the amendments executed on May 15,
2019, borrowings under the Revolving Credit Facility will bear interest at a rate based on a leverage based pricing grid with a range of
1.75% to 2.00% over LIBOR, or between 0.75% and 1.00% over the base rate depending on our total net debt to adjusted total assets
ratio. Additionally, after giving effect to the amendments executed on May 15, 2019, the commitment fee under the Revolving Credit
Facility is calculated on a leverage-based pricing grid with a range of 0.375% to 0.5%, in each case depending on our total net debt to
adjusted total assets ratio. As of December 31, 2019, the commitment fee was 0.375%.
Interest on any outstanding balance is payable monthly. The Term Loan B Facility 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%. In connection with the repricing of the
Term Loan B Facility in January of 2020, the interest rate was decreased to LIBOR plus 1.75%. As of December 31, 2019, we had six
interest rate swap agreements outstanding with third-party financial institutions having an aggregate notional amount of $2.0 billion at
a blended LIBOR rate of 2.7173%. As of December 31, 2018, we had four interest rate swap agreements outstanding with third-party
financial institutions having an aggregate notional amount of $1.5 billion at a LIBOR rate of 2.8297%. The interest rate swaps are
designated as cash flow hedges that effectively fix the LIBOR component of the interest rate on a portion of the outstanding debt. Final
maturity is December 2024 or, to the extent the Second Lien Notes remain outstanding, July 2023 (three months prior to the maturity of
the Second Lien Notes).
Interest is payable semi-annually. Subsequent to the year end, on February 20, 2020 the Second Lien Notes were redeemed in full.
Interest is payable semi-annually.
(4)
(5)
(6) The CPLV CMBS Debt was repaid in full on November 26, 2019 with proceeds from the November 2019 Senior Unsecured Notes.
F - 40
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table is a schedule of future minimum payments of our debt obligations as of December 31, 2019:
($ in thousands)
2020
2021
2022
2023 (1)
2024
Thereafter
Total minimum repayments
____________________
Future Minimum Payments
$
$
—
—
10,000
520,480
2,068,000
2,250,000
4,848,480
(1) $498.5 million represents the Second Lien Notes which were redeemed in full on February 20, 2020.
November 2019 Senior Unsecured Notes
On November 26, 2019, the Operating Partnership and VICI Note Co. Inc. (the “Co-Issuer” and, together with the
Operating Partnership, the “Issuers”), wholly owned subsidiaries of the Company issued (i) $1,250 million in
aggregate principal amount of 4.250% Senior Unsecured Notes due 2026 under an indenture dated as of
November 26, 2019 (the “2026 Notes Indenture”), among the Issuers, the subsidiary guarantors party thereto and
UMB Bank, National Association, as trustee (the “Trustee”), and (ii) $1,000 million in aggregate principal amount
of 4.625% Senior Notes due 2029 under an indenture dated as of November 26, 2019 (the “2029 Notes Indenture”
and, together with the 2026 Notes Indenture, the “2019 Senior Unsecured Notes Indentures”), among the Issuers,
the subsidiary guarantors party thereto and the Trustee. The Operating Partnership and its subsidiaries represent
our “Real Property Business” segment, with the “Golf Course Business” segment corresponding to the portion of
our business operated through entities that are not direct or indirect subsidiaries of the Operating Partnership or
obligors of the Senior Unsecured Notes. See “Note 15 - Segment Information” for more information about our
segments.
The November 2019 Notes were sold in the United States only to accredited investors pursuant to an exemption
from the Securities Act of 1933, as amended (the “Securities Act”), and subsequently resold to persons reasonably
believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. persons
in accordance with Regulation S under the Securities Act.
We used the proceeds of the offering to repay in full the CPLV CMBS Debt, and pay certain fees and expenses
including the net prepayment penalty of $55.4 million. Subsequent to year end, on January 24, 2020, the remaining
net proceeds were used to pay for a portion of the purchase price of the JACK Cleveland/Thistledown Acquisition.
The 2026 Notes will mature on December 1, 2026, and the 2029 Notes will mature on December 1, 2029. Interest
on the 2026 Notes will accrue at a rate of 4.250% per annum, and interest on the 2029 Notes will accrue at a rate
of 4.625% per annum. Interest on the Notes will be payable semi-annually in cash in arrears on June 1 and December
1 of each year, commencing on June 1, 2020. The 2019 Senior Unsecured Notes will be fully and unconditionally
guaranteed, jointly and severally, on a senior unsecured basis by each existing and future direct and indirect wholly
owned material domestic subsidiary of the Operating Partnership that incurs or guarantees certain bank indebtedness
or any other material capital market indebtedness, other than certain excluded subsidiaries and the Co-Issuer.
The Issuers may redeem the 2026 Notes at any time prior to December 1, 2022, in whole or in part, at a redemption
price equal to 100% of the accrued principal amount thereof plus unpaid interest, if any, to the redemption date
plus a make-whole premium. The Issuers may redeem the 2026 Notes, in whole or in part, at any time on or after
December 1, 2022 at the redemption price of (i) 102.125% of the principal amount should such redemption occur
before December 1, 2023, (ii) 101.063% of the principal amount should such redemption occur before December
F - 41
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1, 2024 and (iii) 100% of the principal amount should such redemption occur on or after December 1, 2024, in
each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The Issuers may redeem
the 2029 Notes at any time prior to December 1, 2024, in whole or in part, at a redemption price equal to 100% of
the accrued principal amount thereof plus unpaid interest, if any, to the redemption date plus a make-whole premium.
The Issuers may redeem the 2029 Notes, in whole or in part, at any time on or after December 1, 2024 at the
redemption price of (i) 102.313% of the principal amount should such redemption occur before December 1, 2025,
(ii) 101.541% of the principal amount should such redemption occur before December 1, 2026, (iii) 100.771% of
the principal amount should such redemption occur before December 1, 2027 and (iv) 100% of the principal amount
should such redemption occur on or after December 1, 2027, in each case plus accrued and unpaid interest, if any,
to, but excluding, the redemption date. In addition, before December 1, 2022, the Issuers may redeem up to 40%
of each series of Notes with the net cash proceeds from certain equity offerings (i) at a redemption price of 104.250%
of the principal amount redeemed in the case of the 2026 Notes and (ii) at a redemption price of 104.625% of the
principal amount redeemed in the case of the 2029 Notes. However, the Issuers may only make such redemptions
if at least 60% of the aggregate principal amount of the series of 2019 Senior Unsecured Notes issued under the
applicable 2019 Senior Unsecured Notes Indenture remains outstanding after the occurrence of such redemption.
As of December 31, 2019, the restricted net assets of the Operating Partnership were approximately $7.9 billion.
The November 2019 Senior Unsecured Notes Indentures contain 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 fund a dividend or distribution by VICI that is believes is necessary to maintain its status as a REIT or to avoid
payment of any tax for any calendar year that could be avoided by reason of such distribution, and the ability to
make certain restricted payments not to exceed 95% of our cumulative Funds From Operations (as defined in the
2019 Senior Unsecured Notes Indentures), plus the aggregate net proceeds from (i) the sale of certain equity
interests in, (ii) capital contributions to, and (iii) certain convertible indebtedness of the Operating Partnership.
February 2020 Senior Unsecured Notes Offering and Redemption and Repayment of the Second Lien Notes
Subsequent to December, 31 2019, On February 5, 2020, the Operating Partnership issued (i) $750 million in
aggregate principal amount of 3.500% senior unsecured notes due 2025, (ii) $750 million in aggregate principal
amount of 3.750% senior unsecured notes due 2027 and (iii) $1.0 billion of 4.125% senior unsecured notes due
2030. We placed $2.0 billion of the net proceeds into escrow pending the consummation of the Eldorado Transaction,
and used the remaining net proceeds from the 2025 Notes, together with cash on hand, to redeem in full the
outstanding $498.5 million in aggregate principal amount of the Second Lien Notes plus the Second Lien Notes
Applicable Premium, which resulted in a total redemption amount of approximately $537.5 million. The 2025
Notes will mature on February 15, 2025, the 2027 Notes will mature on February 15, 2027 and the 2030 Notes
will mature on August 15, 2030. Interest on the 2025 Notes will accrue at a rate of 3.500% per annum, interest on
the 2027 Notes will accrue at a rate of 3.750% per annum and interest on the 2030 Notes will accrue at a rate of
4.125% per annum. Interest on the notes issued in February 2020 will be payable semi-annually in cash in arrears
on February 15 and August 15 of each year, commencing on August 15, 2020.
F - 42
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Senior Secured Credit Facilities
In December 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, (the Term Loan B Facility and the
Revolving Credit Facility, as amended as discussed below, 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.
On May 15, 2019, VICI PropCo, entered into Amendment No. 2 (“Amendment No. 2”) to the Credit Agreement,
pursuant to which certain lenders agreed to provide VICI PropCo with incremental revolving credit commitments
and availability under the revolving credit facility in the aggregate principal amount of $600.0 million on the same
terms as VICI PropCo’s current revolving credit facility under the Revolving Credit Facility. After giving effect
to Amendment No. 2, the Credit Agreement, provided total borrowing capacity pursuant to the revolving credit
commitments in the aggregate principal amount of $1.0 billion.
On May 15, 2019, immediately after giving effect to Amendment No. 2, VICI PropCo entered into Amendment
No. 3 (“Amendment No. 3”, together with Amendment No. 2, the “Amendments”) to the Credit Agreement, which
amended and restated the Credit Agreement in its entirety as of May 15, 2019 ( the “Amended and Restated Credit
Agreement”) to, among other things, (i) refinance the Revolving Credit Facility in whole with a new class of
revolving commitments, (ii) extend the maturity date to May 15, 2024, which represents an extension of the
December 22, 2022 maturity date of the Revolving Credit Facility, (iii) provide that borrowings under the Revolving
Credit Facility will bear interest at a rate based on a leverage-based pricing grid with a range of between 1.75%
to 2.00% over LIBOR, or between 0.75% and 1.00% over the base rate, in each case depending on our total net
debt to adjusted total assets ratio, (iv) provide that the commitment fee payable under the Revolving Credit Facility
will bear interest at a rate based on a leverage-based pricing grid with a range of between 0.375% to 0.50% depending
on our total net debt to adjusted total assets ratio, (v) amend the existing springing financial covenant, which
previously required VICI PropCo to maintain a total net debt to adjusted asset ratio of not more than 0.75 to 1.00
if there was 30% utilization of the Revolving Credit Facility, to require that, only with respect to the Revolving
Credit Facility commencing with the first full fiscal quarter ending after the effectiveness of Amendment No. 3,
VICI PropCo maintain a maximum total net debt to adjusted asset ratio of not more than 0.65 to 1.00 as of the last
day of any fiscal quarter (or, during any fiscal quarter in which certain permitted acquisitions were consummated
and the three consecutive fiscal quarters thereafter, not more than 0.70 to 1.00), and (vi) include a new financial
covenant only with respect to the Revolving Credit Facility, requiring VICI PropCo to maintain, commencing with
the first full fiscal quarter after the effectiveness of Amendment No. 3, an interest coverage ratio (defined as
EBITDA to interest charges) of not less than 2.00 to 1.00 as of the last day of any fiscal quarter. The Revolving
Credit Facility is available to be used for working capital purposes, capital expenditures, permitted acquisitions,
permitted investments, permitted restricted payments and for other lawful corporate purposes. The Amended and
Restated Credit Agreement provides for capacity to add incremental loans in an aggregate amount of: (x) $1.2
billion to be used solely to finance certain acquisitions; plus (y) an unlimited amount, subject to VICI PropCo not
exceeding certain leverage ratios.
On January 24, 2020, VICI PropCo entered into Amendment No. 1 to the Amended and Restated Credit Agreement,
which, among other things, reduced the interest rate on the PropCo Term Loan B Facility from LIBOR plus 2.00%
to LIBOR plus 1.75%.
The Amended and Restated Credit Agreement provides that, in the event the LIBOR Rate is no longer in effect, a
comparable or successor rate approved by the Administrative Agent under such facility shall be utilized, provided
that such approved rate shall be applied in a manner consistent with market practice.
The Amended and Restated Credit Agreement contains customary covenants that are consistent with those set forth
in the Credit Agreement (except as to the financial covenants described above), which, among other things, limit
F - 43
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 Amended
and Restated Credit Agreement) subject to no event of default under the Amended and Restated Credit Agreement
and pro forma compliance with the financial covenant pursuant to the Amended and Restated 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. We are also subject to the financial covenants set forth in the Amended
and Restated Credit Agreement as previously described above.
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 are subject to the covenants of the Amended and Restated Credit Agreement or are
guarantors of the Senior Secured Credit Facilities. The Term Loan B Facility may be voluntarily prepaid at VICI
PropCo’s option, in whole or in part, at any time, and is 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 Amended
and Restated 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 8— Derivatives for a discussion of our interest rate swap agreements related to the Term Loan B
Facility.
Second Lien Notes
The Second Lien Notes were issued on October 6, 2017, pursuant to an indenture (the “Second Lien 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 are subject to the covenants of the Indenture or are guarantors of the Second
Lien Notes.
The Second Lien 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
F - 44
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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.
Prior to October 15, 2020, the Second Lien Notes are redeemable at the option of the Issuers, at a redemption price
of 100% of the principal amount of the Second Lien Notes redeemed plus accrued and unpaid interest, if any, to
the applicable redemption date, plus an applicable premium equal to the excess of (a) the present value of (i) 104%
of the principal amount of the Second Lien Notes so redeemed plus (ii) all required interest payments due on such
Second Lien Notes through October 15, 2020, computed using a discount rate equal to the then-applicable U.S.
Treasury rate plus 50 basis points, over (b) the then-outstanding principal amount of the Second Lien Notes so
redeemed (the “Second Lien Notes Applicable Premium”). The Issuers also had the option to redeem up to 35%
of the original aggregate principal amount of the Second Lien Notes 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, plus accrued and unpaid interest, if any, to the redemption date. On or after October
15, 2020, the Second Lien Notes are redeemable at the option of the Issuers, at a redemption price of (a) 104% of
the principal amount of the Second Lien Notes so redeemed for the period October 15, 2020 through October 14,
2021 and (b) 100% of the principal amount of the Second Lien Notes so redeemed after October 15, 2021, in each
case, plus accrued and unpaid interest to the redemption date.
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.
Subsequent to December 31, 2019, on February 20, 2020 we used the proceeds from the issuance of the 2025 Notes
to redeem in full the Second Lien Notes at a redemption price of 100% of the principal amount of the Second Lien
Notes then outstanding plus the Second Lien Notes Applicable Premium, which resulted in a total redemption
amount of approximately $537.5 million. Due to the full redemption, we will recognize a loss on extinguishment
of debt in first quarter of 2020 of approximately $39.0 million.
Bridge Facilities
On June 24, 2019, in connection with the Eldorado Transaction, VICI PropCo entered into the Commitment Letter
with the Bridge Lender, pursuant to which and subject to the terms and conditions set forth therein, the Bridge
Lender has agreed to provide (i) a 364-day first lien secured bridge facility of up to $3.3 billion in the aggregate
and (ii) a 364-day second lien secured bridge facility of up to $1.5 billion in the aggregate, for the purpose of
providing a portion of the financing necessary to fund the consideration to be paid pursuant to the terms of the
Eldorado Transaction documents and related fees and expenses. The Bridge Facilities are subject to a tiered
commitment fee based on the period the commitment is outstanding and a structuring fee. The commitment fee is
equal to, with respect to any commitments that are terminated prior to July 22, 2019, 0.25% of such commitments,
with respect to any commitments that are outstanding on July 22, 2019 and are terminated prior to June 24, 2020,
0.50% of such commitments, with respect to any commitments that are outstanding on June 24, 2020 and are
terminated prior to September 24, 2020, 0.75% of such commitments, and with respect to any commitments that
are outstanding on September 24, 2020, 1.00% of such commitments. The structuring fee is equal to 0.10% of the
total aggregate commitments at the date of the Commitment Letter and was paid in full upon the first reduction of
F - 45
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the commitments. For the year ended December 31, 2019 we have recognized $26.0 million of fees related to the
Bridge Facilities in Interest expense on our Statement of Operations.
Commitments and loans under the Bridge Facilities will be reduced or prepaid, as applicable, in part upon any
issuance by us of equity or notes in a public offering or private placement and/or the incurrence of term loans and
certain other debt and upon other specified events prior to the consummation of the Eldorado Transaction, in each
case subject to the terms and certain exceptions set forth in the Commitment Letter, including that the commitments
and loans will not be reduced as a result of the proceeds from primary follow-on offerings. If we use the Bridge
Facilities, funding is contingent on the satisfaction of certain customary conditions set forth in the Commitment
Letter, including, among others, (i) the execution and delivery of definitive documentation with respect to the
Bridge Facilities in accordance with the terms set forth in the Commitment Letter and (ii) the consummation of
the transactions in accordance with the Eldorado Transaction documents. Although we do not currently expect
VICI PropCo to make any borrowings under the Bridge Facilities, there can be no assurance that such borrowings
will not be made or that we will be able to incur alternative long-term debt financing in lieu of borrowings under
the Bridge Facilities. Borrowing under the Bridge Facilities, if any, will bear interest at a floating rate that varies
depending on the duration of the loans thereunder. Under the Eldorado Senior Bridge Facility, interest will be
calculated on a rate between (i) LIBOR plus 200 basis points and LIBOR plus 275 basis or (ii) the base rate plus
100 basis points and the base rate plus 175 basis points, in each case depending on duration. Under the Eldorado
Junior Bridge Facility, interest will be calculated on a rate between (x) LIBOR plus 300 basis points and LIBOR
plus 375 basis or (y) the base rate plus 200 basis points and the base rate plus 275 basis points, in each case
depending on duration. The Bridge Facilities, if funded, will contain restrictive covenants and events of default
substantially similar to those contained in, with respect to the Eldorado Senior Bridge Facility, the Senior Secured
Credit Facilities and, with respect to the Eldorado Junior Bridge Facility, the Second Lien Notes. If we draw upon
the Bridge Facilities, there can be no assurances that we would be able to refinance the Bridge Facilities on terms
satisfactory to us, or at all.
Following the November 2019 Senior Unsecured Notes offering, the commitments under the Bridge Facility were
reduced by $1.6 billion, to $3.2 billion. Following the February 2020 Senior Unsecured Notes Offering we placed
$2.0 billion of the net proceeds into escrow pending the consummation of the Eldorado Transaction and the
commitments under the Bridge Facility were further reduced by $2.0 billion to $1.2 billion.
CPLV CMBS Debt
The CPLV CMBS Debt was incurred on October 6, 2017 pursuant to a loan agreement (the “CMBS Loan
Agreement”), and was 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 bore interest at 4.36% per annum.
On November 26, 2019, we used the proceeds from the November 2019 Senior Unsecured Notes offering to repay
in full the CPLV CMBS Debt. Due to the prepayment of the CPLV CMBS Debt, we recognized a loss on
extinguishment of debt of $58.1 million during the year ended December 31, 2019, the majority of which related
to the prepayment penalty.
F - 46
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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, 2019, we are in compliance
with all required covenants under our debt obligations.
Note 8 — 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. On January 3, 2019, we entered into two additional interest rate
swap agreements with third-party financial institutions having an aggregate notional amount of $500.0 million. 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% and 2.3802%,
respectively. For the duration of the interest rate swap transactions, we are only subject to interest rate risk on
$100.0 million of variable rate debt.
The following tables detail our outstanding interest rate derivatives that were designated as cash flow hedges of
interest rate risk as of December 31, 2019 and 2018:
($ in thousands)
Instrument
Interest Rate Swaps
Interest Rate Swaps
($ in thousands)
Instrument
December 31, 2019
Number of
Instruments
Fixed
Rate
Notional
4
2
2.8297% $1,500,000
2.3802%
$500,000
Index
USD
LIBOR
USD
LIBOR
Maturity
April 22, 2023
January 22, 2021
December 31, 2018
Number of
Instruments
Fixed
Rate
Notional
Index
USD
LIBOR
Maturity
April 22, 2023
Interest Rate Swaps
4
2.8297% $1,500,000
As of December 31, 2019 and 2018, the interest rate swaps are in net unrealized loss positions and are recorded
within Other liabilities. The following table presents the effect of our derivative financial instruments on our
Statement of Operations:
(In thousands)
Unrealized loss recorded in other
comprehensive income
Interest recorded in interest expense
Year Ended December 31,
2019
2018
Period from
October 6, 2017
to December 31, 2017
$
$
(42,954) $
$
9,269
(22,124) $
$
6,305
—
—
F - 47
—
—
—
—
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9 — Fair Value
The following tables summarize our assets and liabilities measured at fair value on a recurring basis as of December
31, 2019 and 2018:
(In thousands)
Carrying Amount
Level 1
Fair Value
Level 2
Level 3
December 31, 2019
Financial assets:
Short-term investments (1)
Financial liabilities:
Derivative instruments -
interest rate swaps (2)
$
$
59,474
$
— $
59,474
$
65,078
$
— $
65,078
$
(In thousands)
Financial assets:
Short-term investments (1)
Financial liabilities:
Derivative instruments -
interest rate swaps (2)
December 31, 2018
Carrying Amount
Level 1
Fair Value
Level 2
Level 3
$
$
520,877
22,124
$
$
— $
520,877
— $
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.
F - 48
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The estimated fair values of our financial instruments at December 31, 2019 and 2018 for which fair value is only
disclosed are as follows:
(In thousands)
Financial assets:
December 31, 2019
December 31, 2018
Carrying Amount
Fair Value
Carrying Amount
Fair Value
Cash and cash equivalents
$
1,101,893
$
1,101,893
$
577,883
$
Restricted cash
Financial liabilities:
Debt (1)
Revolving Credit Facility
Term Loan B Facility
Second Lien Notes
CPLV CMBS Debt (2)
2026 Notes
2029 Notes
—
—
20,564
$
— $
— $
— $
2,076,962
498,480
—
1,231,227
984,894
2,110,500
538,358
—
1,287,500
1,045,000
2,073,784
498,480
1,550,000
—
—
577,883
20,564
—
2,016,000
535,866
1,539,040
—
—
____________________
(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.
(2) The CPLV CMBS Debt was repaid in full in November 2019.
The following table summarizes our assets and liabilities measured at fair value on a non-recurring basis in relation
to the impairment recorded during the three months ended September 30, 2018:
(In thousands)
Financial assets:
Land (1)
September 30, 2018
Carrying Amount
Level 1
Fair Value
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.
The following table summarizes the significant unobservable inputs used in the non-recurring 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.)
F - 49
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10 — 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, 2019, 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 2020 and 2030, respectively. The
weighted average remaining lease term as of December 31, 2019 under our operating leases was 16.3 years. Our
Cascata ground lease has three 10-year extension options. The rent of such options would be the in-place rent at
the time of renewal.
Total rental expense, included in golf operations and general and administrative expenses in our Statement of
Operations and contractual rent expense under these agreements were as follows:
(In thousands)
Rent expense
Cash paid for rent
Year Ended December 31,
2019
2018
$
$
1,622
1,257
$
$
Period from
October 6, 2017
to December 31, 2017
256
$
1,519
1,297
$
268
On May 10, 2019 we entered into a lease agreement for new office space in New York, NY for our corporate
headquarters. The lease has a 10-year term, with one 5-year extension option and requires a fixed annual rent of
$0.9 million. We determined the lease was an operating lease and recorded a $6.7 million right of use asset and a
corresponding lease liability within Other assets and Other liabilities, respectively, on our Balance Sheet. The
discount rate for the lease was determined to be 5.3% and was based on the yield of our current secured borrowings,
adjusted to match borrowings of similar terms.
On January 1, 2019, upon adoption of ASC 842, we recorded an $11.1 million right of use asset and a corresponding
lease liability within Other assets and Other liabilities, respectively, on our Balance Sheet, related to the ground
lease of the land at the Cascata Golf Course. The discount rate for the lease was determined to be 5.5% and was
based on the yield of our current secured borrowings, adjusted to match borrowings of similar terms.
The future minimum lease commitments relating to the base lease rent portion of noncancelable operating leases
at December 31, 2019 are as follows:
(In thousands)
2020
2021
2022
2023
2024
Thereafter
Total minimum lease commitments
Discounting factor
Lease liability
F - 50
Lease Commitments
1,485
1,862
1,880
1,899
1,919
20,983
30,028
12,290
17,738
$
$
$
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 11 — Stockholders' Equity
Stock
Authorized
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.
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 approximately
$1.3 billion after commissions and expenses.
Primary Follow-on Offerings
November 2018
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 used the net proceeds from the offering to pay the aggregate purchase price of $700.0 million
for the recently completed acquisition of the land and real estate assets of Greektown and related fees and expenses.
June 2019
On June 28, 2019, we completed a primary follow-on offering of (i) 50,000,000 (including 15,000,000 shares sold
pursuant to the exercise in full of the underwriters’ option to purchase additional common stock) shares of common
stock at an offering price of $21.50 per share for an aggregate offering value of $1.1 billion, resulting in net proceeds,
after the deduction of the underwriting discount and expenses, of $1.0 billion and (ii) 65,000,000 shares of common
stock that are subject to forward sale agreements to be settled by September 26, 2020. We did not initially receive
any proceeds from the sale of the shares of common stock subject to the forward sale agreements that were sold
by the forward purchasers or their respective affiliates (collectively the “Forward Sale Agreements”). We
determined that the Forward Sale Agreements meet the criteria for equity classification and are therefore exempt
from derivative accounting. We recorded the Forward Sale Agreements at fair value at inception, which we
determined to be zero. Subsequent changes to fair value are not required under equity classification.
We expect to settle the Forward Sale Agreements entirely by the physical delivery of shares of common stock in
exchange for cash proceeds, although we may elect cash settlement or net share settlement for all or a portion of
our obligations under the Forward Sale Agreements. The settlement of the Forward Sales Agreements is calculated
based on the forward sale price ($21.50) as adjusted for a floating interest rate factor and other fixed amounts based
on the passage of time, as specified in the Forward Sale Agreements. As of December 31, 2019, based on these
adjustments, the forward share price was $19.96 and would result in us receiving $1.3 billion in cash proceeds if
we were to physically settle the Forward Sale Agreements. Alternatively, if we were to net cash settle the Forward
Share Agreements, it would result in a cash outflow of $346.2 million or if we were to net share settle the Forward
Sale Agreements, it would result in us issuing 13.5 million shares. As of December 31, 2019, we have not settled
any portion of the Forward Sale Agreements.
Further, the shares of common stock issuable upon settlement of the Forward Sale Agreements are reflected in our
diluted earnings per share calculations using the treasury stock method. Under this method, the number of our
shares of common stock used in calculating diluted earnings per share is deemed to be increased by the excess, if
any, of the number of shares of common stock that would be issued upon full physical settlement of the Forward
Sale Agreements over the number of shares of common stock that could be purchased by us in the market (based
F - 51
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
on the average market price during the period) using the proceeds receivable upon full physical settlement (based
on the adjusted forward sales price at the end of the reporting period). If and when we physically or net share settle
the Forward Sale Agreements, the delivery of our shares of common stock will result in an increase in the number
of shares of common stock outstanding and dilution to our earnings per share. We used a portion of the net proceeds
from the offering for the Hard Rock Cincinnati Acquisition and the Century Portfolio Acquisition, and intend to
use the remaining net proceeds from the offering and the proceeds upon settlement of the Forward Sales Agreements
to fund a portion of the purchase price for the Eldorado Transaction and for general corporate purposes, which
may include the acquisition and improvement of properties, capital expenditures, working capital and the repayment
of indebtedness.
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. During
the year ended December 31, 2019, we sold a total of 6,107,633 shares under the at-the-market offering program
for net proceeds of $128.3 million. Subsequent to the year end, on February 7, 2020, we sold 7,500,000 shares
under the at-the-market offering program for net proceeds of $200.0 million. We have no obligation to sell the
remaining shares available for sale under the at-the-market offering program.
The following table details the issuance of outstanding shares of common stock, including restricted common
stock:
Common Stock Outstanding
Beginning Balance January 1
Issuance of common stock in initial public offering
Issuance of common stock in primary follow-on offerings (1)
Issuance of common stock under the at-the-market offering
program
Issuance of restricted and unrestricted common stock under the
stock incentive program, net of forfeitures (2)
Ending Balance December 31
2019
404,729,616
—
50,000,000
2018
300,278,938
69,575,000
34,500,000
6,107,633
—
167,493
375,678
461,004,742
404,729,616
____________________
(1) Excludes the 65,000,000 shares issued in June 2019 subject to Forward Sale Agreements to be settled by September 26, 2020.
(2) The years ended December 31, 2019 and 2018 excludes 157,512 share units and 133,491 share units, respectively, issued under the
performance-based stock incentive program.
F - 52
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Distributions
Dividends declared (on a per share basis) during the years ended December 31, 2019 and 2018 were as follows:
Declaration Date
Record Date
Payment Date
Year Ended December 31, 2019
March 14, 2019
March 29, 2019
April 11, 2019
June 13, 2019
June 28, 2019
July 12, 2019
September 12, 2019
September 27, 2019
October 10, 2019
December 12, 2019
December 27, 2019
January 9, 2020
Declaration Date
Record Date
Payment Date
Year Ended December 31, 2018
March 15, 2018 (1)
March 29, 2018
April 13, 2018
June 14, 2018
June 28, 2018
July 13, 2018
September 17, 2018
September 28, 2018
October 11, 2018
December 13, 2018
December 28, 2018
January 10, 2019
____________________
Period
January 1, 2019 -
March 31, 2019
April 1, 2019 -
June 30, 2019
July 1, 2019 -
September 30, 2019
October 1, 2019 -
December 31, 2019
Period
February 5, 2018 -
March 31, 2018
April 1, 2018 -
June 30, 2018
July 1, 2018 -
September 30, 2018
October 1, 2018 -
December 31, 2018
Dividend
$ 0.2875
$ 0.2875
$ 0.2975
$ 0.2975
Dividend
$
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.
Note 12 — Earnings Per Share
Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted-
average number of shares of common stock 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, unvested performance-based
restricted shares and the shares to be issued by us upon settlement of the Forward Sale Agreements. The shares
issuable upon settlement of the Forward Sale Agreements, as described in Note 11, are reflected in the diluted
earnings per share calculations using the treasury stock method. Under this method, the number of our shares of
common stock used in calculating diluted earnings per share is deemed to be increased by the excess, if any, of
the number of shares of common stock that would be issued upon full physical settlement of the Forward Sale
Agreements over the number of shares of common stock that could be purchased by us in the market (based on
the average market price during the period) using the proceeds receivable upon full physical settlement (based on
the adjusted forward sales price at the end of the reporting period). If and when we physically or net share settle
the Forward Sale Agreements, the delivery of shares of common stock would result in an increase in the number
of shares outstanding and dilution to earnings per share.
F - 53
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables reconcile the weighted-average shares of common stock 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:
(In thousands)
Determination of shares:
Weighted-average shares of common stock
outstanding
Assumed conversion of restricted stock
Assumed settlement of Forward Sale
Agreements
Diluted weighted-average shares of
common stock outstanding
Basic and Diluted Earnings Per Share
(In thousands, except per share data)
Basic:
Net income attributable to common
stockholders
Weighted-average shares of common stock
outstanding
Basic EPS
Diluted:
Net income attributable to common
stockholders
Diluted weighted-average shares of
common stock outstanding
Diluted EPS
$
$
$
$
Year Ended December 31,
2019
2018
Period from
October 6, 2017
to December 31, 2017
435,071
566
3,516
367,226
227,829
91
—
156
—
439,153
367,317
227,985
Year Ended December 31,
2019
2018
Period from
October 6, 2017
to December 31, 2017
545,964
$
523,619
$
42,662
435,071
1.25
$
367,226
1.43
$
227,829
0.19
545,964
$
523,619
$
42,662
439,153
1.24
$
367,317
1.43
$
227,985
0.19
F - 54
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 13 — Stock-Based Compensation
The 2017 Stock Incentive Plan (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, 2019, 11,899,660 shares of common stock
remained available for issuance by us as equity awards under the Plan.
Time-Based Restricted Stock
During the years ended December 31, 2019 and 2018 and the period from October 6, 2017 through December 31,
2017, the Company granted approximately 177,000, 172,000 and 124,000, shares of restricted stock, respectively,
under the Plan, respectively, 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 the years ended December 31, 2019 and 2018 the Company granted approximately 158,000 and 133,000
restricted stock units, respectively, 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 2.5% - 2.7% and an
expected price volatility of 13.3% - 20.0%. The expected price volatility was calculated based on both historical
and implied volatility.
The following table details the stock-based compensation expense recorded as General and administrative expense
in the Statement of Operations:
(In thousands)
Stock-based compensation expense
Year Ended December 31,
2019
2018
$
5,223
$
2,342
Period from
October 6, 2017
to December 31, 2017
1,385
$
F - 55
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:
Shares
Weighted Average
Grant Date Fair Value
—
— $
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
Granted
Vested
Forfeited
Canceled
174,572
(50,962)
—
—
123,610
336,980
(59,954)
(2,383)
—
398,253
338,788
(121,786)
(13,783)
—
15.41
14.90
—
—
15.61
19.37
10.18
16.88
—
19.60
22.03
18.57
20.44
—
21.16
Outstanding as of December 31, 2019
601,472
$
As of December 31, 2019, there was $7.8 million of unrecognized compensation cost related to non-vested stock-
based compensation arrangements under the Plan. This cost is expected to be recognized over a weighted average
period of 1.7 years.
Note 14 — Income Taxes
We conduct our operations as a REIT for U.S. federal income tax purposes. 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. We intend 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 of our activities which occur within
our TRS operations are subject to federal and state income taxes. Accordingly, our 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 - 56
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The composition of our income tax expense (benefit) was as follows:
Year Ended December 31,
2019
2018
Period from October 6, 2017
to December 31, 2017
(In thousands)
Federal
State
Income tax
expense
(benefit)
Current Deferred
46
$ 1,100
$
Total
$ 1,146
Current Deferred
$ 1,693
$
563
(4)
559
126
Total
(459) $ 1,234
207
81
Current Deferred
$ — $ (1,909) $(1,909)
8
Total
(3)
11
$ 1,663
$
42
$ 1,705
$ 1,819
$
(378) $ 1,441
$
11
$ (1,912) $(1,901)
At December 31, 2019 and 2018, 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, 2019
December 31, 2018
$
$
— $
96
96
(3,478)
(3,478)
(3,382) $
—
117
117
(3,457)
(3,457)
(3,340)
The following table reconciles our effective income tax rate to the historical federal statutory rate of 21% in 2019
and 2018 and 35% in 2017:
(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
Year Ended
December 31, 2019
Percent
Amount
Year Ended
December 31, 2018
Percent
Amount
Period from
October 6, 2017
to December 31, 2017
Percent
Amount
$ 116,757
21.0% $ 112,326
21.0% $ 15,414
35.0 %
(115,395)
(20.8)
(111,035)
(20.8)
(14,897)
(33.8)
1,362
542
(199)
—
0.3
0.1
—
—
1,291
187
(37)
—
0.2
—
—
517
5
—
1.2
—
—
(2,423)
—
0.2% $ (1,901)
(5.5)
(4.3)%
Income tax expense (benefit)
$
1,705
0.3% $
1,441
F - 57
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We declared dividends of $1.17 per common share and $0.9975 per common share during the years ended December
31, 2019 and 2018, respectively. We did not declare any dividends during the period from October 6, 2017 through
December 31, 2017. For U.S. Federal income tax purposes, the portion of the dividends allocated to stockholders
for the years ended December 31, 2019 and 2018 are characterized as follows:
($ per share)
Ordinary dividends
Section 199A dividends (1)
Qualified dividend (1)
Non-dividend distribution
Year Ended December 31,
2019
2018
$
$
$
$
0.8465
0.8159
0.0306
0.0985
$
$
$
$
0.9251
0.9251
—
—
____________________
(1) These amounts are a subset of, and are included in, the ordinary dividend amounts.
As of December 31, 2019, 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, 2019, the 2017, 2018 and 2019 tax years remain subject to examination by taxing authorities.
Since our formation occurred in 2017, there are no prior tax years subject to examination.
Note 15 — 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.
F - 58
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables present certain information with respect to our segments:
(In thousands)
Revenues
Operating income
Interest expense
Loss on extinguishment of debt
Income before income taxes
Income tax expense
Net income
Depreciation
Total assets
Total liabilities
(In thousands)
Revenues (1)
Operating income
Interest expense
Loss on extinguishment of debt
Income before income taxes
Income tax expense
Net income
Depreciation
Total assets
Total liabilities
Year Ended December 31, 2019
Real Property
Business
865,858
836,275
(248,384)
(58,143)
549,503
470
549,033
16
Golf Course Business
28,940
$
$
6,224
—
—
6,483
1,235
5,248
3,815
VICI Consolidated
894,798
842,499
(248,384)
(58,143)
555,986
1,705
554,281
—
3,831
13,177,318
5,199,029
$
$
88,301
17,601
$
$
13,265,619
5,216,630
Year Ended December 31, 2018
Real Property
Business
870,776
751,803
(212,663)
(23,040)
527,407
—
527,407
7
Golf Course Business
27,201
$
$
6,151
—
—
6,151
(1,441)
4,710
3,679
VICI Consolidated
897,977
757,954
(212,663)
(23,040)
533,558
(1,441)
532,117
3,686
11,247,637
4,424,861
$
$
85,731
7,485
$
$
11,333,368
4,432,346
$
$
$
$
$
$
F - 59
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Period from October 6, 2017
to December 31, 2017
(In thousands)
Revenues (1)
Operating income
Interest expense
Loss on extinguishment of debt
Income before income taxes
Income tax expense
Net income
Depreciation
$
Real Property
Business
181,258
142,722
(63,354)
(38,488)
41,162
—
41,162
—
Golf Course Business
6,351
$
$
1,474
—
—
1,474
1,901
3,375
751
VICI Consolidated
187,609
144,196
(63,354)
(38,488)
42,636
1,901
44,537
751
____________________
(1) Upon the adoption of ASC 842 on January 1, 2019, we ceased recording tenant reimbursement of property taxes as these taxes are paid
directly by our tenants to the applicable government entity.
Note 16 — Subsequent Events
We have evaluated subsequent events and, except for the payment of dividends on January 9, 2020, as described
in Note 11, and the closing of the JACK Cleveland/Thistledown Acquisition on January 24, 2020, as described in
Note 4, the repricing of the Term Loan B Facility on January 24, 2020, as described in Note 7, the sale of common
stock under the at-the-market offering program on February 7, 2020, as described in Note 11 and the February
2020 Senior Unsecured Notes offering that closed on February 5, 2020 and the repayment of the Second Lien
Notes on February 20, 2020, as described in Note 7, there were no other events relative to the Financial Statements
that require additional disclosure.
Note 17 — Quarterly Results of Operations (Unaudited)
The following is a summary of the unaudited quarterly results of operations for the years ended December 31,
2019 and 2018:
($ in thousands except per share data)
Revenues
Operating income
Net income
Net income attributable to
common stockholders
Net income per common share
Basic and Diluted
Dividends per share
Quarter Ended
December 31,
2019
September 30,
2019
June 30, 2019
$
237,537
$
222,513
$
226,758
100,713
208,380
146,515
220,746
205,495
154,127
March 31, 2019
214,002
$
201,866
152,926
98,631
144,435
152,049
150,849
$
$
0.21
0.2975
$
$
0.31
0.2975
$
$
0.37
0.2875
$
$
0.37
0.2875
F - 60
VICI PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
($ in thousands except per share data)
Revenues
Operating income
Net income
Net income attributable to
common stockholders
Net income per common share
Basic and diluted
Dividends per share
Quarter Ended
December 31,
2018
September 30,
2018
June 30, 2018
$
226,039
$
232,687
$
195,682
144,631
184,100
132,024
220,975
189,448
141,359
March 31, 2018
218,276
$
188,724
114,103
142,541
129,912
139,044
112,122
$
$
0.37
0.2875
$
$
0.35
0.2875
$
$
0.38
0.2625
$
$
0.33
0.1600
F - 61
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 - 62
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 - 63
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 - 64
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 - 65
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
COMBINED STATEMENTS OF CASH FLOWS
(Amounts In Thousands)
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
Period from
January 1, 2017 to
October 5, 2017
Year Ended
December 31, 2016
Year Ended
December 31, 2015
$
(2) $
— $
3
2,445
—
(99)
12
(203)
—
(109)
192
(49)
(58)
3,030
—
(111)
(10)
116
12
71
(223)
(39)
(125)
2,882
(38)
(101)
31
(137)
69
(5)
6
52
126
Cash flows provided by operating
activities
2,129
2,721
2,888
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
(1,924)
—
(1,924)
(14)
(1,000)
(1,014)
(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
$
(798)
66
(732)
(45)
(1,981)
(2,026)
130
221
351
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 - 66
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 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 - 67
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 - 68
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 - 69
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.
F - 70
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
Property Costs
Property costs are charged to income during the period incurred and include land rent, utilities and general repairs
and maintenance.
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.
F - 71
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
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
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.
F - 72
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
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
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
F -
73
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
$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) $
(111) $
—
111
— $
(98)
—
101
3
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
—
— $
—
—
—
— $
—
3
—
3
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) $
F -
74
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
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
(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.
Reconciliation of Unrecognized Tax Benefit
Period from
January 1, 2017 to
October 5, 2017
(In thousands)
Year Ended
December 31, 2016
1,309
$
Year Ended
December 31, 2015
1,309
$
Balance at beginning of period
Additions based on tax positions related to the
current period
Balance at end of period
$
$
1,309
—
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.
F - 75
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
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)
(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
Recorded as:
Administrative and other
Administrative and other
Golf revenue
5,304
5,482
4,377
Golf revenue
Food and beverage
revenue
Retail and other revenue
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
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.
F -
76
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
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.
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
F - 77
(In thousands)
Operating Leases
$
$
214
873
891
908
926
18,911
22,723
CAESARS ENTERTAINMENT OUTDOOR
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
Other Commitments
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 - 78
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
Total liabilities
Stockholders’ equity
Common stock, $0.01 par value, 700,000,000 shares
authorized and 461,004,742 and 404,729,616 shares issued
and outstanding at December 31, 2019 and December 31,
2018, respectively
Preferred stock, $0.01 par value, 50,000,000 shares
authorized and no shares outstanding at December 31, 2019
and 2018
Additional paid in capital
Accumulated other comprehensive loss
Retained earnings
Total stockholders’ equity
December 31, 2019 December 31, 2018
$
$
$
13,912
$
—
—
159
838
8,087,905
8,102,814
$
576
$
137,056
137,632
377,704
48
520,877
2,150
133
6,033,310
6,934,222
486
116,287
116,773
4,610
4,047
—
7,817,582
(65,078)
208,068
7,965,182
—
6,648,430
(22,124)
187,096
6,817,449
6,934,222
Total liabilities and stockholders’ equity
$
8,102,814
$
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
Year Ended December 31,
2019
2018
Period from
October 6, 2017 to
December 31, 2017
Expenses
General and administrative
Total expenses
—
—
78
78
Equity in earnings of investment in subsidiary $
532,699
$
516,116
$
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
13,265
545,964
—
7,581
523,619
—
545,964
$
523,619
$
545,964
$
523,619
$
(42,954)
503,010
$
(22,124)
501,495
$
$
$
$
—
—
—
282
282
—
282
282
—
282
See accompanying Notes to Condensed Financial Information
S - 2
Schedule I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY ONLY
VICI PROPERTIES INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities
Net income
$
545,964
$
523,619
$
282
Year Ended December 31,
2019
2018
Period from
October 6, 2017 to
December 31, 2017
Adjustments to reconcile net income to cash
flows provided by operating activities:
Equity in income from subsidiaries
Distributions of earnings from subsidiaries
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 follow-on offering of
common stock
Proceeds from private placement of
common stock
Proceeds from initial public offering of
common stock
Dividends paid
Mandatory debt conversion costs
Cash flows provided by financing
activities
(532,699)
13,334
48
1,370
(1,985)
26,032
(1,700,748)
232,875
(342,767)
760,419
(1,050,221)
—
—
(2,150)
270
(614)
521,125
(1,838,205)
357,781
(691,239)
170,362
(2,001,301)
—
—
—
—
98,813
99,095
(1,000,000)
—
—
—
(1,000,000)
1,164,307
694,374
—
—
—
964,376
—
(503,958)
—
1,307,119
(262,682)
—
—
—
(13)
660,349
1,738,811
964,363
Net increase in cash and cash equivalents
(363,840)
258,635
Cash, cash equivalents and restricted cash,
beginning of period
Cash, cash equivalents and restricted cash, end
of period
$
377,752
119,117
13,912
$
377,752
$
119,117
63,458
55,659
See accompanying Notes to Condensed Financial Information
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 “Second Lien Notes
Indenture”) by and among VICI PropCo and its wholly owned subsidiary, VICI FC Inc. (together, the “Second
Lien Notes Issuers”), the subsidiary guarantors party thereto, and UMB Bank National Association, as trustee. The
Second Lien Notes Indenture contains covenants that limit the Second Lien Notes 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
S - 4
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. Subsequent to December 31, 2019, on February 20, 2020
we used the proceeds from the 2025 Notes to redeem in full the Second Lien Notes at a redemption price of 100%
of the principal amount of the Second Lien Notes then outstanding plus the Second Lien Notes Applicable Premium,
which resulted in a total redemption amount of approximately $537.5 million.
The November 2019 Senior Unsecured Notes were issued in November 2019, pursuant to indentures (the “2019
Senior Unsecured Notes Indentures”) by and among the Operating Partnership and VICI Note Co. Inc. (the “Co-
Issuer” and, together with the Operating Partnership, the “2019 Senior Unsecured Notes Issuers”), the subsidiary
guarantors party thereto and UMB Bank, National Association, as trustee. The 2019 Senior Unsecured Notes
Indentures contains covenants that limit the 2019 Senior Unsecured Notes Issuers’ and their restricted subsidiaries’
ability to, among other things: pursuant to a indenture agreements containing certain covenants limiting our ability
(i) incur additional debt; (ii) create liens on assets; (iii) make distributions and pay dividends on or redeem or
repurchase stock; (iv) make certain types of investments; (v) sell stock in certain subsidiaries; (vi) enter into
agreements that restrict dividends or other payments from subsidiaries; (vii) enter into transactions with affiliates;
(viii) issue guarantees of debt; and (ix) sell assets or merge with other companies. 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 fund a dividend or distribution by VICI that is believes is necessary to maintain its
status as a REIT or to avoid payment of any tax for any calendar year that could be avoided by reason of such
distribution, and the ability to make certain restricted payments not to exceed 95% of our cumulative Funds From
Operations (as defined in the 2019 Senior Unsecured Notes Indentures), plus the aggregate net proceeds from (i)
the sale of certain equity interests in, (ii) capital contributions to, and (iii) certain convertible indebtedness of, the
Operating Partnership.
The amount of restricted net assets the Company’s consolidated subsidiaries held as of December 31, 2019 was
approximately $7.9 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 7 of the Company’s consolidated financial statements.
S - 5
Caesars
Palace Land
Land Parcels
subject to
Non-CPLV
Lease
Agreement
Vacant, non-
operating
Land
Eastside
Property (d)
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
December 31, 2019
(in thousands)
Acquisition Costs
Costs Capitalized
Subsequent to
Acquisition
Gross Amount at
Which Carried at Close
of Period
Description
Location
Encum
brances
Land and
Improve
ments
Building
and
Improve
ments
Land and
Improve
ments
Building
and
Improve
ments
Land and
Improve
ments
Building
and
Improve
ments
Total (a)
Accumu
lated
Depreci
ation
Las Vegas,
Nevada
$1,010,967
$
— $
— $
— $1,010,967
$
— $ 1,010,967
$
—
Date
Acquired
10/6/2017
(b)
Use
ful
Life
N/A
Various
(c)
75,691
Various
Las Vegas,
Nevada
21,111
73,600
—
—
—
—
—
—
—
—
—
75,691
21,111
73,600
—
—
—
75,691
— 10/6/2017
N/A
21,111
73,600
— 10/6/2017
N/A
— 10/6/2017
N/A
$1,181,369
$
— $
— $
— $1,181,369
$
— $ 1,181,369
$
—
(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) Octavius tower addition to the Land was acquired on July 11, 2018.
(c) Pledged to secure obligations under the Senior Secured Credit.
(d) 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, 2019 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
Additions
Impairments
Disposals
Depreciation expense
Balance as of December 31, 2019
Real Estate
1,184,000
$
Accumulated
Depreciation
—
—
—
1,184,000
$
10,967
(12,334)
(186)
—
1,182,447
$
—
—
(1,078)
—
1,181,369
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
$
$
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 & Chair of the Audit Committee
Monica H Douglas
Director
Elizabeth I Holland
Director
Craig Macnab
Director & Chair of the Compensation Committee
Edward B Pitoniak
Director
Michael D Rumbolz
Director & Chair of the Nominating and Governance
Committee
STOCKHOLDER INFORMATION
Corporate Office
VICI Properties Inc.
535 Madison Avenue, 20th 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
Thursday, April 30, 2020, 11:00 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.
535 Madison Avenue
20th Floor
New York, NY 10022
www.viciproperties.com