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Vici Properties Inc. (VICI) SEC Filing 10-K Annual Report for the fiscal year ending Friday, December 31, 2021

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VICI Annual Reports

  • 10-K Annual Report February 2022
  • 10-K Annual Report February 2021
    10-K Annual Report February 2020
    10-K Annual Report February 2019
    10-K Annual Report March 2018

Vici Properties Inc.

CIK: 1705696 Ticker: VICI
Cover - USD ($)
$ in Billions
12 Months Ended
Dec. 31, 2021
Feb. 22, 2022
Jun. 30, 2021
Cover [Abstract]   
Document Type10-K  
Document Annual Reporttrue  
Document Period End DateDec. 31, 2021  
Current Fiscal Year End Date--12-31  
Document Transition Reportfalse  
Entity File Number000-55791  
Entity Registrant NameVICI PROPERTIES INC.  
Entity Incorporation, StateMD  
Entity Tax Identification Number81-4177147  
Entity Address, Street535 Madison Avenue, 20th Floor  
Entity Address, CityNew York,  
Entity Address, StateNY  
Entity Address, Postal Zip Code10022  
City Area Code646  
Local Phone Number949-4631  
Title of each classCommon stock, $0.01 par value  
Trading SymbolVICI  
Name of each exchange on which registeredNYSE  
Entity Well-known Seasoned IssuerYes  
Entity Voluntary FilersNo  
Entity Current Reporting StatusYes  
Entity Interactive Data CurrentYes  
Entity Filer CategoryLarge Accelerated Filer  
Entity Small Businessfalse  
Entity Emerging Growth Companyfalse  
ICFR Auditor Attestation Flagtrue  
Entity Shell Companyfalse  
Entity Public Float  $ 16.6
Entity Common Stock, Shares Outstanding 748,390,629 
Amendment Flagfalse  
Document Fiscal Period FocusFY  
Document Fiscal Year Focus2021  
Entity Central Index Key0001705696  
Documents Incorporated by Reference
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s definitive proxy statement relating to the 2022 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.
  

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, 2021
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)
________________________________________________
 
Maryland81-4177147
(State or other jurisdiction of incorporation or organization)(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 classTrading SymbolName of each exchange on which registered
Common stock, $0.01 par value
VICI
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 filerAccelerated filer
Non-accelerated filerSmaller 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.
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 30, 2021 (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 $16.6 billion, based on the closing price of the common stock as reported on the NYSE on that date.
As of February 22, 2022, the registrant had 748,390,629 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s definitive proxy statement relating to the 2022 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 CONTENTSPage


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.
“Apollo” refers to Apollo Global Management, Inc., a Delaware corporation, and, as the context requires, certain of its subsidiaries and affiliates.
“BREIT JV” refers to the joint venture between MGP and Blackstone Real Estate Income Trust, Inc. in which the Company will retain MGP’s existing 50.1% ownership stake following the closing of the MGP Transactions.
“Caesars” refers to Caesars Entertainment, Inc., a Delaware corporation, formerly Eldorado, following the consummation of the Eldorado/Caesars Merger on July 20, 2020 and Eldorado’s conversion to a Delaware corporation.
“Caesars Forum Convention Center” refers to the Caesars Forum Convention Center in Las Vegas, Nevada, and the approximately 28 acres of land upon which the Caesars Forum Convention Center is built and/or otherwise used in connection with or necessary for the operation of the Caesars Forum Convention Center.
“Caesars Lease Agreements” refer collectively to (i) prior to the consummation of the Eldorado Transaction, the CPLV Lease Agreement, the Non-CPLV Lease Agreement, the Joliet Lease Agreement and the HLV Lease Agreement, and (ii) from and after the consummation of the Eldorado Transaction, the Las Vegas Master Lease Agreement, the Regional Master Lease Agreement and the Joliet Lease Agreement, in each case, unless the context otherwise requires.
“Caesars Southern Indiana” refers to the real estate assets associated with the Caesars Southern Indiana Casino and Hotel, located in Elizabeth, Indiana, the operations of which were purchased by EBCI from Caesars on September 3, 2021, and which retained the Caesars brand name in accordance with the terms of a licensing agreement negotiated between EBCI and Caesars.
“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 October 6, 2017 (the “Formation Date”), and following the Formation Date, CEOC, LLC, a Delaware limited liability company and, as the context requires, its subsidiaries. CEOC was a subsidiary of Pre-Merger Caesars, and following the consummation of the Eldorado/Caesars Merger, is a subsidiary of Caesars.
“Co-Issuer” refers to VICI Note Co. Inc., a Delaware corporation, and co-issuer of the Senior Unsecured Notes.
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“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 was combined with the HLV Lease Agreement into the Las Vegas Master Lease Agreement upon the consummation of the Eldorado Transaction.
“Credit Agreement” refers to the Credit Agreement, dated as of February 8, 2022, by and among the Operating Partnership, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, as amended from time to time.
“Credit Facilities” refers collectively to the Delayed Draw Term Loan and the Revolving Credit Facility.
“Delayed Draw Term Loan” refers to the three-year unsecured delayed draw term loan facility of the Operating Partnership provided under the Credit Agreement.
“EBCI” refers to the Eastern Band of Cherokee Indians, a federally recognized Tribe located in western North Carolina, and, as the context requires, its subsidiary and affiliate entities.
“EBCI Lease Agreement” refers to the lease agreement for Caesars Southern Indiana, as amended from time to time.
“Eldorado” refers to Eldorado Resorts, Inc., a Nevada corporation, and, as the context requires, its subsidiaries. Following the consummation of the Eldorado/Caesars Merger on July 20, 2020, Eldorado converted to a Delaware corporation and changed its name to Caesars Entertainment, Inc.
“Eldorado Master Transaction Agreement” or “Eldorado MTA” refers to the Master Transaction Agreement dated June 24, 2019 with Eldorado relating to the Eldorado Transaction. The Eldorado MTA was previously referred to as the “Master Transaction Agreement” or “MTA”.
“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 Original Call Properties, modifications to the Caesars Lease Agreements, and rights of first refusal.
“Eldorado/Caesars Merger” refers to the merger consummated on July 20, 2020 under an Agreement and Plan of Merger pursuant to which a subsidiary of Eldorado merged with and into Pre-Merger Caesars, with Pre-Merger Caesars surviving as a wholly owned subsidiary of Caesars (which changed its name from Eldorado in connection with the closing of the Eldorado/Caesars Merger).
“February 2020 Senior Unsecured Notes” refers collectively to the 2025 Notes, the 2027 Notes and the 2030 Notes.
“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 Seminole Hard Rock International, LLC, 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.
“Hard Rock Cincinnati Lease Agreement” refers to the lease agreement for Hard Rock Cincinnati, as amended from time to time.
“Harrah’s Original Call Properties” refers to the land and real estate assets associated with Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City, which we purchased on July 20, 2020 upon the consummation of the Eldorado Transaction. The Harrah’s Original Call Properties were previously referred to as the “MTA Properties”.
“HLV Lease Agreement” refers to the lease agreement for the Harrah’s Las Vegas facilities, as amended from time to time, which was combined with the CPLV Lease Agreement into the Las Vegas Master Lease Agreement upon the consummation of the Eldorado Transaction.
“JACK Entertainment” refers to JACK Ohio LLC, and, as the context requires, its subsidiary and affiliate entities.
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“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 facility in Joliet, Illinois, as amended from time to time.
“Las Vegas Master Lease Agreement” refers to the lease agreement for Caesars Palace Las Vegas and the Harrah’s Las Vegas facilities, as amended from time to time, from and after the consummation of the Eldorado Transaction.
“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, the JACK Cleveland/Thistledown Lease Agreement, the EBCI Lease Agreement and the Venetian 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.
“Mergers” refers to a series of transactions contemplated under the MGP Master Transaction Agreement, consisting of (i) the contribution of our interest in the Operating Partnership to New VICI Operating Company, which will serve as our new operating company, followed by (ii) the merger of MGP with and into REIT Merger Sub, with REIT Merger Sub surviving the merger, followed by (iii) the distribution by REIT Merger Sub of the interests of the general partner of MGP OP to the Operating Partnership and, (iv) the merger of REIT Merger Sub with and into MGP OP, with MGP OP surviving such merger.
“MGM” refers to MGM Resorts International, a Delaware corporation, and, as the context requires, its subsidiaries.
“MGM Master Lease Agreement” refers to the form of amended and restated triple-net master lease to be entered into by us and MGM with respect to certain MGM properties that will be owned by us upon consummation of the MGP Transactions.
“MGM Tax Protection Agreement” refers to the form of tax protection agreement that we have agreed to enter into with MGM upon consummation of the MGP Transactions.
“MGP” refers to MGM Growth Properties LLC, a Delaware limited liability company, and, as the context requires, its subsidiaries.
“MGP Master Transaction Agreement” refers to that certain Master Transaction Agreement between the Company, MGP, MGP OP, the Operating Partnership, Venus Sub LLC, a Delaware limited liability company and wholly owned subsidiary of the Operating Partnership (“REIT Merger Sub”), VICI Properties OP LLC, a Delaware limited liability company and indirect wholly owned subsidiary of the Company (“New VICI Operating Company”), and MGM entered into on August 4, 2021.
“MGP OP” refers to MGM Growth Properties Operating Partnership LP, a Delaware limited partnership, and, as the context requires, its subsidiaries.
“MGP OP Notes” refers collectively to the notes issued by MGP OP and MGP Finance Co-Issuer, Inc. (“MGP Co-Issuer” and, together with MGP OP, the “MGP Issuers”), consisting of (i) the 5.625% Senior Notes due 2024 issued pursuant to the indenture, dated as of April 20, 2016, (ii) the 4.625% Senior Notes due 2025 issued pursuant to the indenture, dated as of June 5, 2020, (iii) the 4.500% Senior Notes due 2026 issued pursuant to the indenture, dated as of August 12, 2016, (iv) the 5.750% Senior Notes due 2027 issued pursuant to the indenture, dated as of January 25, 2019, (v) the 4.500% Senior Notes due 2028 issued pursuant to the indenture, dated as of September 21, 2017, and (vi) the 3.875% Senior Notes due 2029 issued pursuant to the indenture, dated as of November 19, 2020, in each case, as amended or supplemented as of the date hereof, among the MGP Issuers, the subsidiary guarantors party thereto (the “MGP Subsidiary Guarantors”) and U.S. Bank National Association, as trustee (the “MGP Trustee”).
“MGP Transactions” refers collectively to a series of transactions pursuant to the MGP Master Transaction Agreement between us, MGP and MGM and the other parties thereto in connection with our acquisition of MGP, as contemplated by the MGP Master Transaction Agreement, including the MGM Tax Protection Agreement and the MGM Master Lease Agreement.
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“Non-CPLV Lease Agreement” refers to the lease agreement for regional properties (other than the facility in Joliet, Illinois) leased to Pre-Merger Caesars prior to the consummation of the Eldorado Transaction, as amended from time to time, which was replaced by the Regional Master Lease Agreement upon the consummation of the Eldorado Transaction.
“November 2019 Senior Unsecured Notes” refers 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., a Pennsylvania corporation, 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.
“Pre-Merger Caesars” refers to Caesars Entertainment Corporation, a Delaware corporation, and, as the context requires, its subsidiaries. Following the consummation of the Eldorado/Caesars Merger on July 20, 2020, Pre-Merger Caesars became a wholly owned subsidiary of Caesars.
“Regional Master Lease Agreement” refers to the lease agreement for the regional properties (other than the facility in Joliet, Illinois) leased to Caesars, as amended from time to time, from and after the consummation of the Eldorado Transaction.
“Revolving Credit Facility” refers to the four-year unsecured revolving credit facility of the Operating Partnership provided under the Credit Agreement.
“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, the remaining $498.5 million aggregate principal amount outstanding as of December 31, 2019 of which was redeemed in full on February 20, 2020.
“Secured Revolving Credit Facility” refers to the five-year first lien revolving credit facility entered into by VICI PropCo in December 2017, as amended, which was terminated on February 8, 2022.
“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, as amended from time to time, which was repaid in full on September 15, 2021.
“Venetian Acquisition” refers to our acquisition of the Venetian Resort, with Apollo, which closed on February 23, 2022.
“Venetian Lease Agreement” refers to the lease agreement for the Venetian Resort.
“Venetian Resort” refers to the land and real estate assets associated with The Venetian Resort Las Vegas and Venetian Expo, located in Las Vegas, Nevada, which we purchased on February 23, 2022.
“Venetian Tenant” refers to an affiliate of certain funds managed by affiliates of Apollo.
“VICI Golf” refers to VICI Golf LLC, a Delaware limited liability company that is the owner and operator of our golf segment business.
“VICI Issuers” refers to VICI Properties L.P., a Delaware limited partnership and VICI Note Co. Inc., a Delaware corporation.
“VICI PropCo” refers to VICI Properties 1 LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of VICI.
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Summary of Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, liquidity, results of operations and prospects. These risks are discussed more fully in Item 1A. Risk Factors. These risks include, but are not limited to, the following:
Risks Related to Our Business and Operations
We are and will always be significantly dependent on our tenants for our revenues, and an event that has a material adverse effect on any of our significant tenants’ 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;
The COVID-19 pandemic and its immediate and long-term effects, including its effect on our tenants and the gaming industry, has adversely impacted the gaming industry and could materially and adversely impact us, including by affecting our tenants and the gaming industry, upon which we are dependent;
Because a concentrated portion of our revenues are generated from the Las Vegas Strip, we are subject to greater risks than a company that is more geographically diversified;
Our significant tenants and their subsidiaries 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, our respective Lease Agreements and loan and other agreements with them. These lease payments, as well as interest payments on their outstanding indebtedness, could adversely affect our significant tenants’ business and financial condition, as well as their ability to satisfy their contractual payment obligations to us;
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;
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;
Required regulatory approvals can delay or prohibit transfers of our gaming properties or the consummation of other pending transactions, including consummation of the MGP Transactions, which could result in periods in which we are unable to receive rent for such properties or otherwise realize the benefits of such transactions;
Our long-term triple-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;
Tenants may choose not to renew the Lease Agreements;
If Caesars declares bankruptcy and, as a result, a lease is re-characterized as a disguised financing transaction, we could be materially and adversely affected;
We may not be able to purchase properties pursuant to our rights under certain agreements, including put-call and right of first refusal agreements, if we are unable to obtain additional financing. In addition, pursuant to one such agreement, we may be forced to dispose of Harrah’s Las Vegas, possibly on disadvantageous terms;
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;
Our pursuit of investments in, and acquisitions of, additional properties may be unsuccessful or fail to meet our expectations;
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;
Our properties and the properties securing our loans are subject to risks from climate change and natural disasters, such as earthquakes, hurricanes, and other extreme weather conditions, and terrorist attacks or other acts of violence;
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;
The possibility that our separation from CEOC fails to qualify as a tax-free spin-off, which could subject CEOC to significant tax liabilities and for which we could be required to indemnify CEOC;
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Risks Related to our Indebtedness and Financing
We have a substantial amount of indebtedness, and expect to incur additional indebtedness in the future, that 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;
Future incurrences of debt and/or issuance of preferred equity securities could adversely affect the market price of our common stock;
Risks Related to the Company Following the MGP Transactions
Our anticipated level of indebtedness will increase upon completion of the MGP Transactions;
Following the Mergers, we may be unable to realize the anticipated benefits of the MGP Transactions or do so within the anticipated timeframe;
Following the MGP Transactions, we may not continue to pay dividends at or above the rate we currently pay;
We may be obligated to indemnify MGM for certain tax liabilities;
Risks Related to our Status as a REIT
We may incur adverse tax consequences if we have failed or fail (or, after consummation of the MGP Transactions, MGP has failed) to qualify as a REIT for U.S. federal income tax purposes;
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;
The cash available for distribution to stockholders may not be sufficient to pay dividends at expected levels, nor can we make assurances of our ability to make distributions in the future. We may use borrowed funds to make distributions;
Risks Related to Our Organizational Structure
Our charter and bylaws contain provisions that may delay, defer or prevent an acquisition of our common stock or a change in control;
Certain provisions of Maryland law may limit the ability of a third party to acquire control of us; and
General Risks
The market price and trading volume of shares of our common stock may be volatile.
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ITEM 1.Business
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 currently consists of 28 market leading properties, including Caesars Palace Las Vegas, Harrah’s Las Vegas and the Venetian Resort, three 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 over 62 million square feet, our well-maintained properties are currently located across urban, destination and drive-to markets in twelve states, contain approximately 25,000 hotel rooms and feature over 250 restaurants, bars and nightclubs. Subsequent to the closing of the MGP Transactions, which we anticipate will occur in the first half of 2022, we will have 43 market leading properties, 10 of which will be located on the Las Vegas Strip, consisting of 117 million square feet, 57,500 hotel rooms and featuring over 400 restaurants, bars and nightclubs across our portfolio.
Our portfolio also includes three real estate loan investments that we have originated for strategic reasons in connection with transactions that may provide the potential to convert our investment into the ownership of certain of the underlying real estate in the future. In addition, we own 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 lease our properties to subsidiaries of, or entities managed, by Caesars, Penn National, Seminole Hard Rock, Century Casinos, JACK Entertainment, EBCI and Apollo, with Caesars being our largest tenant (and subsequent to the MGP Transactions, MGM and Caesars being our largest tenants). We believe we have a mutually beneficial relationship with each of our tenants, all of which are leading owners and operators of gaming, entertainment and leisure properties. Our long-term triple-net Lease Agreements with our tenants 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 investment trust with long-term investments, we expect our relationship with our partners will position us for the acquisition of additional properties across leisure and hospitality over the long term. Despite the ongoing impact and uncertainty of the COVID-19 pandemic, we continue to evaluate and may opportunistically pursue accretive acquisitions or investments that may arise in the market.
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, as well as other investments, to augment growth as market conditions allow, with a focus on disciplined capital allocation.
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 believe our election of REIT status, combined with the income generation from the Lease Agreements, will enhance our ability to make distributions to our stockholders, providing investors with current income as well as long-term growth, subject to the current macroeconomic impact of the COVID-19 pandemic and market conditions more broadly. We conduct our real property business through our Operating Partnership and our golf course business through a taxable REIT subsidiary (a “TRS”), VICI Golf.
Impact of the COVID-19 Pandemic on Our Business
Since the emergence of the COVID-19 pandemic in early 2020, among the broader public health, societal and global impacts, the pandemic has resulted in governmental and/or regulatory actions imposing temporary closures or restrictions from time to time on our tenants’ operations at our properties and our golf course operations. Although all of our leased properties and our golf courses are currently open and operating, without restriction in some jurisdictions, they remain subject to any current or future operating limitations, restrictions or closures imposed by governmental and/or regulatory authorities. While our tenants’ recent performance at many of our leased properties has been at or above pre-pandemic levels, our tenants may continue to face additional challenges and uncertainty due to the impact of the COVID-19 pandemic, such as complying with operational and capacity restrictions and ensuring sufficient employee staffing and service levels, and the sustainability of maintaining improved operating margins and financial performance. The ongoing nature of the pandemic, including the impact of emerging variants, may further adversely affect our tenants’ businesses and, accordingly, our business and financial performance could be
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adversely affected in the future.
All of our tenants have fulfilled their rent obligations through February 2022 and we regularly engage with our tenants in connection with their business performance, operations, liquidity and financial results. As a triple-net lessor, we believe we are generally in a strong creditor position and structurally insulated from operational and performance impacts of our tenants, both positive and negative. However, the full extent to which the COVID-19 pandemic continues to adversely affect our tenants, and ultimately impacts us, depends on future developments which cannot be predicted with confidence, including the actions taken to contain the pandemic or mitigate its impact, including the availability, distribution, public acceptance and efficacy of approved vaccines, new or mutated variants of COVID-19 (including vaccine-resistant variants) or a similar virus, the direct and indirect economic effects of the pandemic and containment measures on our tenants, our tenants’ financial performance and any future operating limitations or closures. For more information, refer to “Part I – Item 1A. Risk Factors” included in this Annual Report on Form 10-K.
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, Harrah’s Las Vegas and the Venetian Resort and market-leading urban, destination and regional properties with significant scale. Our properties are well-maintained and leased to leading brands such as Venetian, Caesars, Harrah’s, Harvey’s, Horseshoe, 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 are generally 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, Harrah’s Las Vegas and the Venetian Resort, which are located at the center of the Las Vegas Strip. We believe Las Vegas is historically a market characterized by steady economic growth and high consumer and business demand with limited new supply, although such characteristics have been negatively impacted due to the COVID-19 pandemic. 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 casinos, hotels and entertainment facilities that are generally market leaders within their respective regions.
Subsequent to the closing of the MGP Transactions, which we anticipate will occur in the first half of 2022, we will add 15 high-quality properties, seven of which are located on the Las Vegas Strip and eight of which are regional gaming destinations.
Under the terms of the Lease Agreements, our tenants are required to continue to invest in our 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. Subsequent to the closing of the MGP Transactions, we will add 15 high-quality properties to our portfolio, serving three additional MSAs nationally.
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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, or entities managed by, Caesars, Penn National, Seminole Hard Rock, Century Casinos, JACK Entertainment, EBCI and Apollo 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, in most cases 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. While our tenants’ recent performance at many of our leased properties has been at or above pre-pandemic levels, some of our properties have been and continue to be adversely impacted by the COVID-19 pandemic, and the current operating results may not be indicative of long-term operating results.
We believe our relationships with Caesars, Penn National, Seminole Hard Rock, Century Casinos, JACK Entertainment, EBCI and Apollo, 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.
Upon closing of the MGP Transactions, we will enter into a long-term triple-net lease agreement with a subsidiary of MGM and we look forward to continuing to build our relationship with MGM. In addition, in connection with the announcement of Hard Rock’s pending acquisition of the operations of the Mirage from MGM, on closing of such acquisition, we will enter into a triple-net lease agreement with Hard Rock with respect to the land and real estate assets of the Mirage, helping to further strengthen our relationship with Hard Rock.
The payment obligations of our tenants are guaranteed by Caesars, Penn National, Seminole Hard Rock, Century Casinos, Rock Ohio Ventures LLC and EBCI, as applicable. All of our existing properties are leased to subsidiaries of, or entities managed by, Caesars, Penn National, Seminole Hard Rock, Century Casinos, JACK Entertainment, EBCI and Apollo. Caesars guarantees the payment obligations of our tenants under the Caesars Lease Agreements, 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 Lease Agreement, Rock Ohio Ventures LLC guarantees the payment obligations of our tenants under the JACK Cleveland/Thistledown Lease Agreement, and EBCI guarantees the payment obligations of our tenant under the EBCI Lease Agreement. The Venetian Tenant’s obligations under the Venetian Lease Agreement are not guaranteed by Apollo or any of its affiliates. However, we are a third-party beneficiary to an agreement between the Venetian Tenant and Las Vegas Sands Corp. (“LVS”) whereby LVS provides contingent lease payment support through 2023, if certain conditions are met. Subsequent to the closing of the MGP Transactions, MGM will guarantee the payment obligations of its tenant under the MGM Master Lease Agreement.
In addition to the properties leased from us, our tenants operate numerous other casino resorts, collectively comprising a nationally recognized portfolio of brands. Subsequent to the closing of our pending transactions, our portfolio will include additional nationally recognized brands.
An experienced management team with deep real estate and industry experience. 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 prior 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.
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A diverse and independent board of directors with robust business and corporate governance experience. Our diverse and independent board of directors, which is made up of highly skilled and seasoned real estate, gaming, hospitality, consumer products and corporate professionals, was originally established to ensure no overlap between our tenants and the companies with which our directors are affiliated and has continued to improve and mature since our formation in 2017. For example, since formation we have increased diversity by adding three independent, female directors to our board. As of December 31, 2021, 50% of our independent directors are women, one of whom is racially diverse. In addition, 50% of our board of director leaders (comprised of the Chairs of the board of directors and each committee) are women. 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, independent Chair of the board of directors, all members of our board except for our Chief Executive Officer are independent, 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 on an annual basis, 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.
Our Properties
Current Portfolio
The following tables summarize our current portfolio of properties which are diversified across a range of primary uses, including gaming, hotel, convention, dining, entertainment, retail, golf course and other resort amenities and activities.
MSA / PropertyLocationApprox. Casino Sq. Ft. (000’s)Approx. Gaming UnitsHotel 
Rooms
Lease Agreement
Current Portfolio - Casinos
Las Vegas—Destination Gaming
Caesars Palace Las VegasLas Vegas, NV1241,6603,970Las Vegas
Harrah’s Las VegasLas Vegas, NV891,3402,540Las Vegas
Venetian ResortLas Vegas, NV2252,2007,100Venetian
San Francisco / Sacramento
Harvey’s Lake TahoeLake Tahoe, NV51660740Regional
Harrah’s Lake TahoeStateline, NV54830510Regional
Laughlin
Harrah’s LaughlinLaughlin, NV569201,510Regional
Philadelphia
Caesars Atlantic CityAtlantic City, NJ1132,2801,140Regional
Harrah’s Atlantic CityAtlantic City, NJ1562,2202,590Regional
Harrah’s PhiladelphiaChester, PA1112,380N/ARegional
Chicago
Horseshoe HammondHammond, IN1172,290N/ARegional
Harrah’s Joliet (1)
Joliet, IL391,130200Regional
Cincinnati
Hard Rock CincinnatiCincinnati, OH1001,900N/AHard Rock Cincinnati
Cleveland
JACK ClevelandCleveland, OH961,450N/AJACK Cleveland/Thistledown
JACK Thistledown RacinoNorth Randall, OH571,480N/AJACK Cleveland/Thistledown
Dallas
Horseshoe Bossier CityBossier City, LA281,220600Regional
Margaritaville Resort CasinoBossier City, LA301,270395Margaritaville
Detroit
Greektown Casino HotelDetroit, MI1002,660400Greektown
Kansas City
Harrah’s North Kansas CityNorth Kansas City, MO601,300390Regional
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MSA / PropertyLocationApprox. Casino Sq. Ft. (000’s)Approx. Gaming UnitsHotel 
Rooms
Lease Agreement
St. Louis
Century Cape GirardeauCape Girardeau, MO42860N/ACentury Portfolio
Century CaruthersvilleCaruthersville, MO21520N/ACentury Portfolio
Pittsburgh
Mountaineer Casino Resort & RacetrackNew Cumberland, WV721,180357Century Portfolio
Memphis
Horseshoe TunicaRobinsonville, MS631,130510Regional
Omaha
Harrah’s Council BluffsCouncil Bluffs, IA21570250Regional
Horseshoe Council BluffsCouncil Bluffs, IA601,450150Regional
Nashville
Harrah’s MetropolisMetropolis, IL24870260Regional
New Orleans
Harrah’s Gulf CoastBiloxi, MS31800500Regional
Harrah’s New OrleansNew Orleans, LA1011,650450Regional
Louisville
Caesars Southern IndianaElizabeth, IN741,290500Regional
Total Casinos282,11539,51025,062
Current Portfolio - Golf Courses
Las Vegas
Cascata Golf CourseBoulder City, NVN/AN/AN/AN/A
Rio Secco Golf CourseHenderson, NVN/AN/AN/AN/A
New Orleans
Grand Bear Golf CourseSaucier, MSN/AN/AN/AN/A
Louisville
Chariot Run Golf CourseLaconia, INN/AN/AN/AN/A
Total Golf Courses4
Total322,11539,51025,062
(1) Owned by Harrah’s Joliet Landco LLC, a joint venture of which VICI PropCo is the 80% owner and the managing member.
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Pending Acquisitions and Put/Call Properties
The following tables summarize the properties we will acquire upon consummation of the MGP Transactions and the properties subject to put/call agreements with Caesars.
MSA / PropertyLocationApprox. Casino Sq. Ft. (000’s)Approx. Gaming UnitsHotel 
Rooms
Lease Agreement
Pending Acquisitions (1)
Las Vegas
Excalibur Las Vegas, NV949683,981MGM
LuxorLas Vegas, NV1019074,397MGM
The Mirage (2)
Las Vegas, NV948883,044
Mirage (2)
MGM Grand (3)
Las Vegas, NV1691,3684,993MGM
New York-New York/The ParkLas Vegas, NV811,0432,024MGM
Mandalay Bay (3)
Las Vegas, NV1521,1774,750MGM
Park MGM Las Vegas, NV668242,898MGM
Washington D.C.
MGM National HarborPrince George’s County, MD1462,774308MGM
Philadelphia
BorgataAtlantic City, NJ873,0452,767MGM
Memphis
Gold Strike TunicaTunica, MS481,0141,133MGM
New York City
Empire City Yonkers, NY1374,693N/AMGM
Cleveland
MGM Northfield ParkNorthfield, OH921,869N/AMGM
Boston
MGM SpringfieldSpringfield, MA1261,879240MGM
Detroit
MGM Grand DetroitDetroit, MA1513,206400MGM
New Orleans
Beau RivageBiloxi, MS871,7561,740MGM
Total151,63127,41132,675
Put/Call Properties
Indianapolis
Harrah’s Hoosier ParkShelbyville, IN541,070N/AN/A
Horseshoe IndianapolisAnderson, IN842,070N/AN/A
Las Vegas
Caesars Forum Convention CenterLas Vegas, NVN/AN/AN/AN/A
Total31383,140
(1) Subject to closing of the MGP Transactions, which remain subject to customary closing conditions and regulatory approvals. See Item 1A “Risk Factors – Risks Related to the Mergers.”
(2) As previously announced, in connection with MGM’s agreement to sell the operations of the Mirage to Hard Rock, the Company has agreed to enter into a separate lease with Hard Rock related to the land and real estate assets of the Mirage. Upon closing of the transaction, the MGM Master Lease Agreement will be amended to reflect the removal of the Mirage. Closing of the transaction remains subject to customary closing conditions and regulatory approvals, as well as the closing of the MGP Transactions.
(3) Mandalay Bay and MGM Grand Las Vegas real estate assets are owned by BREIT JV, in which we will have a 50.1% ownership interest upon closing of the MGP Transactions.
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Our Lease Agreements
We derive a substantial majority 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. For an overview of the provisions of our Lease Agreements and the tenant capital expenditure requirements under our Lease Agreements, refer to Note 4 - Real Estate Portfolio included in our Financial Statements within this Annual Report on Form 10-K.
Our Loan Agreements
Our loan portfolio consists of three real estate debt investments that we have originated for strategic reasons, and may provide the potential to convert our investment into the ownership of certain of the underlying real estate in a future period. For an overview of the provisions of our loan agreements, refer to Note 4 - Real Estate Portfolio included in our Financial Statements within this Annual Report on Form 10-K.
Our Embedded Growth Pipeline
We have entered into several right of first refusal and put-call agreements, as well as other strategic arrangements, which we believe provide the opportunity for significant embedded growth as we pursue our future strategic objectives. Each of the transactions contemplated by the following agreements remains subject to the terms and conditions of the applicable agreements, including with respect to due diligence, applicable regulatory approvals and customary closing conditions.
Caesars Indianapolis Put-Call Agreement. We have a put-call right agreement with Caesars (the “Caesars Indianapolis Put-Call Agreement”) with respect to two gaming facilities in Indiana, Harrah’s Hoosier Park and Horseshoe Indianapolis (together, the “Indianapolis Properties”), whereby (i) we have the right to acquire all of the land and real estate assets associated with the Indianapolis 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 Caesars 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) Caesars will have the right to require us to acquire the Indianapolis Properties at a price equal to 12.5x the initial annual rent of each facility, and to simultaneously lease back each such Indianapolis Property to a subsidiary of Caesars 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 Caesars Indianapolis Put-Call Agreement provides that the leaseback of the Indianapolis Properties will be implemented through the addition of the Indianapolis Properties to the Regional Master Lease Agreement.
Caesars Forum Put-Call Agreement. We have a put-call agreement with Caesars with respect to the Caesars Forum Convention Center (the “A&R Convention Center Put-Call Agreement”). The A&R Convention Center Put-Call Agreement provides for (i) 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 (the “Convention Center Call Right”), at a price equal to 13.0x the initial annual rent for Caesars Forum Convention Center as proposed by Caesars (which shall be between $25.0 million and $35.0 million), exercisable by us from September 18, 2025 (the scheduled maturity date of the Forum Convention Center Mortgage Loan) until December 31, 2026, (ii) 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 “Convention Center Put Right”) at a price equal to 13.0x the initial annual rent for the Caesars Forum Convention Center as proposed by Caesars (which shall be between $25.0 million and $35.0 million), exercisable by Caesars between January 1, 2024 and December 31, 2024, and (iii) if there is an event of default under the Forum Convention Center Mortgage Loan, the Convention Center Put Right will not be exercisable and we, at our option, may accelerate the Convention Center Call Right so that it is exercisable from the date of such event of default until December 31, 2026 (in addition to any other remedies available to us in connection with such event of default).
The A&R Convention Center Put-Call Agreement also provides for, if Caesars exercises the Convention Center 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 A&R Convention Center Put-Call Agreement, a repurchase right in favor of Caesars, which, if exercised, would result in the sale of the Harrah’s Las Vegas property by us to Caesars (the “HLV Repurchase Right”), exercisable by Caesars during a one-year period commencing on the date upon which the closing under the Convention Center Put Right transaction does not occur and ending on the day immediately preceding the
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one-year anniversary thereof for a price equal to 13.0x the rent of the Harrah’s Las Vegas property for the most recently ended annual period for which Caesars’ financial statements are available as of Caesars’ election to exercise the HLV Repurchase Right.
Las Vegas Strip Assets ROFR. We have a right of first refusal agreement with Caesars in connection with the consummation of the Eldorado Transaction (the “Las Vegas Strip ROFR Agreement”), pursuant to which we have the first right, with respect to the first two Las Vegas Strip assets described below that Caesars proposes to sell, whether pursuant to a sale leaseback or a sale of the real estate and operations (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 Caesars elect to pursue a WholeCo sale). The Las Vegas Strip assets subject to the Las Vegas Strip ROFR Agreement are the land and real estate assets associated (i) with respect to the first such asset subject to the Las Vegas Strip ROFR Agreement, the Flamingo Las Vegas, Paris Las Vegas, Planet Hollywood and Bally’s Las Vegas gaming facilities, and (ii) with respect to the second such asset subject to the Las Vegas Strip ROFR Agreement, the foregoing assets still unsold plus The LINQ gaming facility. If we enter into a sale leaseback transaction with Caesars with respect to any of these facilities, the leaseback may be implemented through the addition of such properties to the Las Vegas Master Lease Agreement.
Horseshoe Baltimore ROFR. We have a right of first refusal agreement with Caesars pursuant to which we 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).
Danville ROFR. We have a right of first refusal agreement with EBCI and Caesars pursuant to which we have the first right to enter into a sale leaseback transaction with respect to the real property associated with the development of a new casino resort in Danville, Virginia (the “Danville ROFR Agreement”).
Great Wolf Non-Binding Letter Agreement. We entered into a non-binding letter agreement, pursuant to which we will have the opportunity for a period of up to five years to provide up to a total of $300.0 million of mezzanine financing, inclusive of the $79.5 million related to the Great Wolf Lodge Maryland, for the development and construction of Great Wolf Resorts, Inc.’s extensive domestic and international indoor water park resort pipeline.
BigShots Non-Binding Strategic Arrangement. We have a non-binding, strategic arrangement with ClubCorp Holdings, Inc. (“ClubCorp”), a portfolio company of Apollo, to grow their BigShots golf subsidiary (“BigShots Golf”), whereby we may provide up to $80.0 million of mortgage financing for the construction of up to five new BigShots Golf facilities throughout the United States. As part of the non-binding arrangement, we expect to have a call right to acquire the real estate assets associated with any BigShots Golf facility financed by us, which transaction will be structured as a sale leaseback.
Partner Property Growth Fund
As part of our ongoing dialogue with our tenants, we continually seek opportunities to further our long-term partnerships and pursue our respective strategic objectives. We have entered into certain arrangements, which we collectively refer to as the “Partner Property Growth Fund,” with certain tenants relating to our funding of “same-store” capital improvements, including redevelopment, new construction projects and other property improvements, in exchange for increased rent pursuant to the terms of our existing Lease Agreements with such tenants (and subject to the specific terms and conditions included in any such agreement). Each of our Lease Agreements include provisions that provide a mechanic through which to pursue such opportunities. We continue to evaluate additional Partner Property Growth Fund opportunities with our tenants and expect to pursue further investment as one component of our strategic growth plans, consistent with our aim to work collaboratively with our tenants to invest in growth opportunities and capital improvements that achieve mutually beneficial outcomes. Most recently, we funded $18.0 million for the construction of a new gaming patio amenity at JACK Thistledown Racino, resulting in the addition of $1.8 million of incremental annual rent to the JACK Cleveland/Thistledown Lease Agreement (to commence in April 2022). The following is a summary of our potential Partner Property Growth Fund opportunities:
Hard Rock-Mirage Redevelopment. In connection with the announcement of Hard Rock’s pending acquisition of the operations of the Mirage from MGM (and our agreement to enter into a triple-net lease agreement with Hard Rock with respect to the land and real estate assets of the Mirage upon closing of such acquisition), we agreed with Hard Rock to negotiate definitive documentation (to be entered into upon closing of such acquisition) providing us the opportunity to fund an up to $1.5 billion redevelopment of the Mirage through our Partner Property Growth Fund if Hard Rock elects to seek third party financing for such redevelopment. The specific terms of the redevelopment and related funding remain subject to the negotiation of definitive documentation between us and Hard Rock, and the
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closing of the Mirage sale remains subject to customary closing conditions, including regulatory approvals, as well as the consummation of the MGP Transactions, and there are no assurances that the redevelopment of the Hard Rock-Mirage will occur on the contemplated terms, including through our financing, or at all.
Venetian Resort. In connection with the Venetian Acquisition, we entered into a Property Growth Fund Agreement (“Venetian PGFA”) with the Venetian Tenant. Under the Venetian PGFA, we agreed to provide up to $1.0 billion for various development and construction projects affecting the Venetian Resort to be identified by the Venetian Tenant and that satisfy certain criteria more particularly set forth in the Venetian PGFA, in consideration of additional incremental rent to be paid by the Venetian Tenant under the Venetian Lease Agreement and calculated in accordance with a formula set forth in the Venetian PGFA.
The benefits of the foregoing and any future Partner Property Growth Fund opportunities will be dependent upon independent decisions made by our tenants with respect to any capital improvement projects and the source of funds for such projects, as well as the total funding ultimately requested under such arrangements. See Item 1A - “Risk Factors—Risks Related to Our Business and Operations for additional information.
Our Golf Courses
We own and operate four championship golf courses located near certain of our properties, Rio Secco in Henderson, Nevada, Cascata in Boulder City, Nevada, Chariot Run in Laconia, Indiana and Grand Bear in Saucier, Mississippi. In addition, Rio Secco and Cascata are in close proximity to the Las Vegas Strip. These golf courses provide ancillary revenue pursuant to their operations and a golf course use agreement entered into with Caesars, as described below.
Golf Course Use Agreement. Pursuant to a golf course use agreement (as amended, the “Golf Course Use Agreement”), Caesars is granted specific rights and privileges to the golf courses, including (i) preferred access to tee times for guests of Caesars casinos and/or hotels located within the same markets as the golf courses, (ii) preferred rates for guests of Caesars 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 $10.6 million annual membership fee, $3.4 million of use fees and $1.3 million of minimum rounds fees, subject to certain adjustments.
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, sports betting, travel and entertainment consumers. As of December 31, 2021, Caesars domestically operates 52 properties, consisting of 20 owned and operated properties, 6 properties that it manages or are branded on behalf of third parties, 18 properties that it leases from us and 8 properties that it leases from other third parties.
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. Caesars has executed guaranties with respect to the Las Vegas Master Lease Agreement (the “Las Vegas Lease Guaranty”), the Regional Master Lease Agreement (the “Regional Lease Guaranty”) and the Joliet Lease Agreement (the “Joliet Lease Guaranty” and, together with the Las Vegas Lease Guaranty and the Regional Lease Guaranty, the “Caesars Guaranties”), guaranteeing the prompt and complete payment and performance in full of: (i) all monetary obligations of the tenants under the Caesars Lease Agreements, including all rent and other sums payable by the tenants under the Caesars Lease Agreements and any obligation to pay monetary damages in connection with any breach and to pay any indemnification obligations of the tenants under the Caesars Lease Agreements, (ii) the performance when due of all other covenants, agreements and requirements to be performed and satisfied by the tenants under the Caesars Lease Agreements, and (iii) all monetary obligations under the Golf Course Use Agreement.
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
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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.
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 (as defined to qualify as tax-free under the code).
Competition
We compete for real property investments with other REITs, gaming companies, investment companies, private equity firms, hedge funds, sovereign funds, lenders and other private investors. In addition, revenues from our properties are dependent on the ability of our tenants and operators to compete with other gaming operators. The operators of our properties compete on a local, regional, national and international 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, sports betting and other forms of gaming in the United States.
As a landlord, we compete in the real estate market with numerous developers, owners and acquirors of properties. Some of our competitors may be 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, including regional or localized impacts of the COVID-19 pandemic, availability of investment alternatives, availability and cost of capital, construction and renovation costs, existing laws and regulations, new legislation and population trends.
Human Capital Management
As of December 31, 2021, we employed approximately 152 employees, 105 of which are full-time. Of our total employees, 18 are employed at our Operating Partnership in support of our primary business as a triple-net lease REIT and are primarily located at our corporate headquarters in New York, New York. Our remaining 134 employees are employed at our TRS, VICI Golf, in support of our owned and operated golf courses. Our VICI Golf employees are located across our four golf course locations in Laconia, Indiana; Saucier, Mississippi; Henderson, Nevada; and Boulder City, Nevada.
Corporate Culture and Engagement. We are committed to creating and sustaining a positive work environment and corporate culture that fosters diversity and inclusion, and employee engagement, through the instillation of our core values, as well as competitive benefit programs, training and internal development opportunities, tuition reimbursement, and community service events. To assist in fulfilling that commitment, we measure our organizational culture, degree of inclusion and employee engagement through, among other things, an annual, independent third-party employee satisfaction survey, which provides management with insights regarding key issues and priorities to maintain and improve the health, well-being and satisfaction of our employees.
Board Oversight. Our management reports to the board of directors on a regular basis to periodically review our human capital management programs, including those relating to our diversity and inclusion efforts (led by our Diversity and Inclusion Task Force formed in 2020), employee compensation and benefits, and related matters, such as training and recruiting, retention and hiring practices.
Diversity. As of December 31, 2021, 43% of our directors (and 50% of our independent directors), 50% of our board of director leaders (comprised of the Chairs of the board of directors and each committee), 50% of our corporate employees and 25% of our executive officers were female. In addition, 14% of our directors and 39% of our corporate employees identified as a member of an ethnic and/or racial minority group.
Compensation and Benefits. We offer a comprehensive employee benefits package, including a 401(k) plan, medical, dental and vision insurance, disability insurance, life insurance, paid maternity/paternity leave for birth and foster/adoption placements, and access to an employee assistance program. We continually evaluate existing benefits and explore additional or new benefits to be responsive to our employee feedback and meaningfully enhance employee benefits. For example, acting on recommendations provided by our Diversity and Inclusion Task Force, we implemented certain expanded benefits to our corporate team in January 2022, including an enhanced paid-time off policy, a parenthood pursuit program, expanded parental leave, and supplemental individual disability insurance.
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Education, Training and Development. We invest in employee education, training and development by conducting regular training programs to educate and advance our employees’ understanding of concepts relevant to our business, as well as with respect to issues such as diversity and harassment and other matters outlined in our Code of Business Conduct. In order to support our commitment to maintaining a diverse and inclusive workplace, in 2021, we augmented our training program to include ongoing workshops focused on diversity, inclusion, implicit/unconscious bias and related topics. We also encourage our employees to pursue professional development through external education and certifications through a broadly applicable and flexible tuition reimbursement policy, as well as a similar professional development program.
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 arm’s length transactions.
Gaming laws and regulations primarily 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 business and the businesses of our tenants 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, labor and employees, anti-discrimination, 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 certain of our indebtedness, and cross-default provisions in our debt agreements could cause an event of default under one debt agreement to trigger an event of default under our other debt agreements. As a result, violations by us of applicable gaming laws could have a material adverse effect on us.
Review and Approval of Transactions. Substantially all material loans, leases, sales of securities and similar financing transactions by us and our subsidiaries must be reported to and, in some cases, approved by gaming authorities. Neither we nor any of our subsidiaries may make a public offering of securities without the prior approval of certain gaming authorities. Changes in control through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or otherwise are subject to receipt of prior approval of gaming authorities. Entities seeking to acquire control of us or one of our subsidiaries must satisfy gaming authorities with respect to a variety of stringent standards prior to assuming control.
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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 their 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 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, our properties to be acquired subject to pending transactions, 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 and continue to pursue tenant engagement initiatives designed to assist us in understanding the environmental impact of our leased properties and to gather environmental sustainability data 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 revenue objectives, and generally do not permit us to require the collection or reporting of environmental sustainability data (subject to relevant provisions in certain of our more recent leases and lease amendments). Although not contractually required, certain of our tenants report 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 through a third-party service provider to facilitate the monitoring of utility data at our owned and operated golf courses in order to more fully understand the environmental impact of our operations, key drivers and trends with respect to utility usage at each of our courses. Following analysis of the collected data and in consultation with our third-party sustainability advisor, we expect to have a better understanding of our performance which will help inform our ability to set meaningful performance and improvement targets in future years. 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, Harvey’s, Horseshoe, 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, Seminole Hard Rock, Century Casinos, JACK Entertainment, EBCI and Venetian Tenant, we are reliant on these parties 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.

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Investment Policies
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 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.
Investment in Real Estate or Interests in Real Estate. Our business is focused primarily on gaming, hospitality, entertainment and leisure sector properties and activities directly related thereto, which we refer to as “experiential assets”. We believe there are significant, ongoing opportunities to acquire or invest in additional gaming, hospitality, entertainment and leisure assets, both domestically and internationally. 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 opportunities to provide mortgage or mezzanine financing, preferred equity investments or other forms of financing for investment in certain situations where such structure significantly replicates the economics of our leases, provides for strategic growth opportunities and/or partnerships, and may provide the potential to convert our investment into the ownership of the underlying real estate in a future period.
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. We have made, and may continue to make, investments in mortgages or other forms of real estate-related 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. These investments are generally made for strategic purposes including (i) the potential to convert our investment into the ownership of the underlying real estate in a future period, (ii) the opportunity to develop relationships with owners and operators that may lead to other investments and (iii) the ability to make initial investments in experiential asset classes outside of gaming with the goal of increasing our investment activity in these asset classes over time. 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. 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, subject to the asset tests and gross income tests necessary for REIT qualification. 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 may 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.
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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 potentially become more highly leveraged, resulting in an increased risk of default on our obligations and a related increase in debt service requirements that could adversely affect our financial condition, liquidity and results of operations and our ability to make distributions to our stockholders. To the extent that our board of directors or management determines that it is necessary to raise additional capital, we may, without stockholder approval, borrow money under our Revolving Credit Facility, issue debt or equity securities, including securities senior to our shares, retain earnings (subject to the REIT distribution requirements for U.S. federal income tax purposes), assume indebtedness, obtain mortgage financing on a portion of our owned properties, engage in a joint venture, or employ a combination of these methods.
Corporate Information
We were initially organized as a limited liability company in the State of Delaware on July 5, 2016 as a wholly owned subsidiary of CEOC. On May 5, 2017, we subsequently converted to a corporation under the laws of the State of Maryland and issued shares of common stock to CEOC as part of our formation transactions, which shares were subsequently transferred by CEOC to its creditors as part of the Third Amended Joint Plan of Reorganization of Caesars Entertainment Operating Company, Inc. et. al. (the “Plan of Reorganization”) confirmed by the United States Bankruptcy Court for the Northern District of Illinois (Chicago) on January 17, 2017.
Our principal executive offices are located at 535 Madison Avenue, 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 federal securities law. Forward-looking statements are based on our current plans, expectations and projections about future events. We therefore caution you 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.
Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the impact of the COVID-19 pandemic on our and our tenants’ financial condition, results of operations, cash flows and performance. The extent to which the COVID-19 pandemic continues to adversely affect our tenants, and ultimately impacts our business and financial condition, depends on future developments which cannot be predicted with confidence, including:
the impact of the actions taken to contain the pandemic or mitigate its impact, including the availability, distribution, public acceptance and efficacy of approved vaccines, new or mutated variants of COVID-19 (including vaccine-resistant variants) or a similar virus;
the direct and indirect economic effects of the pandemic and containment measures on our tenants;
the ability of our tenants to successfully operate their businesses, including the costs of complying with regulatory requirements necessary to keep their respective facilities open, such as reduced capacity requirements;
the need to close any of the facilities as a result of the COVID-19 pandemic; and
the effects of the negotiated capital expenditure reductions and other amendments to the Lease Agreements that we agreed to with certain tenants in response to the COVID-19 pandemic.
Each of the foregoing could have a material adverse effect on our tenants’ ability to satisfy their obligations under their Lease Agreements with us, including their continued ability to pay rent in a timely manner, or at all, and/or to fund capital expenditures or make other payments required under their leases. Investors are cautioned to interpret many of the risks identified under the section entitled “Risk Factors” in this Annual Report on Form 10-K as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic.
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:
risks associated with the pending MGP Transactions, including our ability or failure to complete the pending MGP Transactions and to realize the anticipated benefits of the MGP Transactions, including as a result of delay in completing the pending MGP Transactions;
the impact of changes in general economic conditions and market developments, including rising inflation, consumer confidence, supply chain disruptions, unemployment levels and depressed real estate prices resulting from the severity and duration of any downturn in the U.S. or global economy;
our dependence on our tenants (including, following the completion of the pending MGP Transactions, MGM) as tenants of our properties and their guarantors (including, following the completion of the pending MGP Transactions, MGM) as guarantors of the lease payments and the negative consequences any material adverse effect on their respective businesses could have on us;
the anticipated benefits of the Partner Property Growth Fund;
our borrowers’ ability to repay their outstanding loan obligations to 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
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and that we distribute 100% of our REIT taxable income in order to avoid current entity-level U.S. federal income taxes;
our inability to maintain our qualification for taxation as a REIT;
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 and the completion of our pending transactions on a timely basis, or at all, or the imposition of conditions to such regulatory approvals;
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;
our tenants and any guarantors’ historical results may not be a reliable indicator of their future results;
our substantial amount of indebtedness, including indebtedness to be assumed and incurred by us upon consummation of the pending MGP Transactions, and ability to service, refinance and otherwise fulfill our obligations under such indebtedness;
our historical financial information may not be reliable indicators of our future results of operations, financial condition and cash flows;
the impact of a rise in interest rates on us;
our inability to successfully pursue investments in, and acquisitions of, additional properties;
our ability to obtain the financing necessary to complete our pending acquisitions or related transactions on the terms we currently expect in a timely manner, or at all;
the possibility that our pending transactions may not be completed or that completion may be unduly delayed, and the potential adverse impact on our business, operations and stock price;
the possibility that we identify significant environmental, tax, legal or other issues that materially and adversely impact the value of assets acquired or secured as collateral (or other benefits we expect to receive) in any of our pending or recently completed transactions;
the effects of our pending and recently completed transactions on us, including the future impact on our financial condition, financial and operating results, cash flows, strategy and plans;
the impact of changes to the U.S. federal income tax laws;
the impact and outcome of previous and potential future litigation relating to the pending MGP Transactions, including the possibility that any adverse judgment may prevent the pending MGP Transactions from being consummated on a timely basis, or at all;
the possibility of adverse tax consequences as a result of our pending transactions; increased volatility in our stock price as a result of our pending transactions;
the impact of climate change, 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 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;
our reliance on distributions received from the Operating Partnership to make distributions to our stockholders;
the potential impact on the amount of our cash distributions 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 transaction opportunities, including from other REITs, investment companies, private equity firms and hedge funds, 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 and listed from time to time as “Risk Factors” in our filings with the SEC, including without limitation, in our subsequent reports on Form 10-K, Form 10-Q and Form 8-K.
Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements. All forward-looking statements are made as of the date of this Annual Report on
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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.
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 always be significantly dependent on our tenants for our revenues. An event that has a material adverse effect on any of our significant tenants’ 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. Currently, a significant percentage of our revenue comes from Caesars, comprising 84% of our total revenues for the year ended December 31, 2021 (and, following the closing of the Venetian Acquisition and the completion of the pending MGP Transactions, from Caesars and MGM, with Caesars representing approximately 42% of total estimated annualized cash rent and MGM representing approximately 36% of total estimated annualized cash rent, after taking into account MGM’s pending sale of the operations of The Mirage Hotel & Casino in Las Vegas). Because the leases are triple-net leases, in addition to the rent payment obligations for these tenants, we will depend on these 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. There can be no assurance that our significant 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.
Our tenants rely on the properties they or their respective subsidiaries own and/or operate for income to satisfy their obligations, including their debt service requirements and rental and other payments due to us or others. For example, Caesars relies on our properties, the Caesars Forum Convention Center and their other operations to satisfy their payment obligations under the Caesars Lease Agreements and the Forum Convention Center Mortgage Loan. If income at these properties were to decline for any reason, including as a result of the COVID-19 pandemic, or if a tenant’s debt service requirements were to increase or if their creditworthiness were to become impaired for any reason, a tenant or the applicable guarantor may become unable or unwilling to satisfy its payment and other obligations under their leases or other agreements with us. The inability or unwillingness of a significant tenant to meet its payment or other obligations under a lease or other payment obligation with us 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, an expansion of gaming in existing jurisdictions or 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 significant tenants.
Due to our dependence on rental and other payments from our significant tenants as our primary source of revenue, we may be limited in our ability to enforce our rights under our leases or other agreements with our significant tenants or terminate such
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other agreements or, due to our predominantly master lease structure, certain leases with respect to any particular property. Failure by our significant 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 result in, among other things, the termination of an applicable ground lease, requiring us to find another tenant for such property, to the extent possible, and there could be a decrease or cessation of rental payments by such tenants, as the case may be. In such event, we may lose our interest in a property subject to an applicable ground lease or be unable to locate a suitable, creditworthy 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.
The COVID-19 pandemic has adversely impacted our tenants’ operations and financial performance, as well as global and U.S. economic activity and market performance, which could have a material adverse impact on our business, financial condition, liquidity, results of operations and prospects.
Since the emergence of the COVID-19 pandemic in early 2020, COVID-19 has spread globally and created considerable health risks in the United States and around the world, resulting in severely adversely impacted global, national and regional economic activity. Several countries, including the United States, have instituted and continue to institute various restrictions on travel and large gatherings. In connection with these actions, state governments and/or regulatory authorities issued various directives, mandates, orders or similar actions, which resulted in temporary closures of our tenants’ operations at all of our properties and our golf course operations. Relevant authorities may issue additional directives, mandates, orders or similar actions, which could result in additional closures of our tenants’ operations and our golf course operations.
In addition, our tenants have experienced a substantial number of cancellations and reductions in events and reservations in connection with the ongoing pandemic, including as a result of the most recent emergence of new variants, and may in the future experience similar cancellations and reductions. This reduced customer activity adversely affected our tenants’ financial performance, and any similar future impacts could be material to us depending on the ultimate duration of the pandemic and the magnitude of any future reductions in our tenants’ customer activity and engagement.
Although all of our leased properties and our golf courses are currently open and operating, without restriction in some jurisdictions, they remain subject to any current or future operating limitations, restrictions or closures imposed by state and local governments and/or regulatory authorities. While our tenants’ recent performance at many of our leased properties has been at or above pre-pandemic levels, our tenants may continue to face additional challenges and uncertainty due to the impact of the COVID-19 pandemic, such as complying with operational and capacity restrictions, ensuring sufficient employee staffing and service levels, and maintaining improved operating margins and financial performance. The ongoing nature of the pandemic, including the impact of emerging variants, may further adversely affect our tenants’ businesses and, accordingly, our business and financial performance could be adversely affected in the future.
We cannot predict with confidence whether government or regulatory orders, or travel and other restrictions, including orders and restrictions re-imposed in connection with the increase in the COVID-19 infection rate that began in late 2021 and early 2022 as a result of an emerging variant, will end or whether such regulations and restrictions will affect our tenants’ performance. In addition, due to the current volatility in the debt and equity markets, we may be unable to obtain financing for future acquisitions on satisfactory terms, or at all. Increased disruption and instability in the global financial markets or a deterioration in credit and financing conditions may affect our access to debt and equity capital in order to fund business operations, if necessary, or address maturing liabilities on a timely basis, as well as our tenants’ ability to fund their business operations, meet their obligations to us, and secure financing for any future or pending transactions.
The full extent to which our business and results of operations will ultimately be affected by the COVID-19 pandemic and any resulting negative economic impacts, and the extent to which such factors continue to adversely affect our tenants, will largely depend on future developments, including the duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, including the availability, distribution and efficacy of one or more vaccines, new or mutated strains of COVID-19 or a similar virus (including vaccine-resistant strains), and the direct and indirect economic effects of the pandemic and containment measures on our tenants, including the length of time our tenants’ operations at our properties remain restricted or whether the properties are required to partially or fully close again in the future, and our tenants’ financial performance while open and during any such closures. In addition, new information may continue to emerge concerning the COVID-19 pandemic, and actions required or recommended to be undertaken to contain the COVID-19 pandemic or address its future impact, including the response of the U.S. and global economies and the short- and long-term impact of the COVID-19 pandemic on our tenants’ operations at our properties, could further materially and adversely impact our business and results and operations.
The occurrence of any of the foregoing events or any other related matters could materially and adversely affect our business, financial condition, liquidity, results of operations, prospects and the value of our common stock.
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Because a concentrated portion of our revenues are generated from the Las Vegas Strip, we are subject to greater risks than a company that is more geographically diversified.
Our properties on the Las Vegas Strip generated approximately 32% of our total revenues for the year ended December 31, 2021 (and subsequent to the Venetian Acquisition and MGP Transactions, are expected to generate approximately 45% of our total estimated annualized cash rent) and we expect this concentration to continue in the foreseeable future. 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, including the impact of measures implemented to address the COVID-19 pandemic, can adversely affect the business of our tenants. We cannot control the number or frequency of flights to or from Las Vegas, but our largest tenant, Caesars, relies on air traffic for a significant portion of their visitors to these properties. Reductions in flights by major airlines as a result of higher fuel prices, lower demand, labor shortages or public health considerations, including as a result of the COVID-19 pandemic, has impacted and may continue to 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 on the Las Vegas Strip reside. Any limitations on travel from Southern California to our properties on the Las Vegas Strip, such as 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 three properties (and, following the completion of the pending MGP Transactions, ten properties) on the Las Vegas 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, including as a result of climate change, should such developments occur in or nearby Las Vegas. In addition, a material adverse impact on Caesars (and, following the completion of the pending MGP Transactions, MGM), even unrelated to their operations in Las Vegas, that negatively affects their financial condition, could materially and adversely affect us, given our reliance on their performance as tenants in our properties on the Las Vegas Strip.
Our significant tenants and their subsidiaries 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, our respective Lease Agreements and loan and other agreements with them, as well as interest payments on their outstanding indebtedness, which could adversely affect our significant tenants’ business and operating condition, as well as their ability to satisfy their contractual payment obligations to us.
Our significant tenants are obligated to pay us rent under our Lease Agreements for the duration of the respective terms. For example, Caesars, which is our largest tenant (and, subsequent to the MGP Transactions, will be one of our largest tenants with MGM), is obligated to pay us in the aggregate approximately $5.7 billion in fixed annual rents under the Caesars Lease Agreements, payments under the Forum Convention Center Mortgage Loan and golf course membership fees under the Golf Course Use Agreement over the next five years, subject to certain escalators and adjustments under the applicable agreements.
In addition, annual rent escalations under our Lease Agreements over specified periods will continue to apply regardless of the amount of cash flows generated by the properties that are subject to such Lease Agreements. Through our Partner Property Growth Fund, we may also agree with our tenants to fund capital improvements in exchange for increased rent under the applicable Lease Agreement, which would increase the amount of such tenant’s rent obligations to us in accordance with the terms of the funding. Accordingly, if the cash flows generated by such properties decrease, do not increase at the same rate as the rent escalations, or do not increase as anticipated in connection with any such capital improvements, the rents payable under such Lease Agreements will comprise a higher percentage of the cash flows generated by the applicable tenant and its subsidiaries, which could make it more difficult for the applicable subsidiaries to meet their payment obligations to us under the Lease Agreements and could ultimately adversely affect the applicable guarantor’s ability to satisfy their respective obligations to us under the related guarantees. See Item 1 “Business-Our Lease Agreements and Item 1 “Business-Our Relationship with Caesars for additional information regarding such agreements. If our significant tenants’ businesses and properties fail to generate sufficient earnings, they may be unable to satisfy their (or their subsidiaries’) obligations under their respective Lease Agreements and loan and other agreements, including related guarantees.
Additionally, these obligations may limit our significant tenants’ ability to fund their operations or development projects, raise capital, make acquisitions, and otherwise respond to competitive and economic changes by making investments to maintain and grow their portfolio of businesses and properties, which may adversely affect their competitiveness and the ability of their applicable subsidiaries and guarantors to satisfy their obligations to us under the applicable Lease Agreements and the related guarantees, respectively. Moreover, given the importance of our significant tenants to our business, a failure on the part of a significant tenant to maintain its business performance or experience any deterioration of its creditworthiness could materially and adversely affect us, even in the absence of a default under our agreements with such tenant.
In addition, our significant tenants’ indebtedness and the fact that a significant portion of their cash flow may be used to make interest payments could adversely affect their ability to satisfy their obligations to us under the applicable Lease Agreements and other agreements. For example, as disclosed in Caesars’ Quarterly Report on Form 10-Q for the quarter ended September
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30, 2021, Caesars’ consolidated estimated debt service (including principal and interest) for 2022 will be approximately $880 million and $17.8 billion thereafter to maturity. As a result, a significant portion of Caesars’ 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 and borrower to satisfy their respective obligations to us under the applicable Lease Agreements and other agreements with us, such as the Forum Convention Center Mortgage Loan, and the ability of the guarantors of our significant tenants to satisfy their obligations under the related guarantees.
We are dependent on the gaming industry and may be susceptible to the risks associated with it, including due to the impact of the COVID-19 pandemic, which could materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.
As the landlord and owner 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, including the ongoing effects of the COVID-19 pandemic, such as labor shortages, travel restrictions, supply chain disruptions and property closures. As we are subject to risks inherent in substantial investments in a single industry, a decrease in the gaming business would likely have a greater adverse effect on us than if we owned a more diversified real estate portfolio, particularly because a component of the rent under the Lease Agreements will be based, over time, on the performance of the gaming facilities operated by our tenants on our properties and such effect could be material and adverse to our business, financial condition, liquidity, results of operations and prospects.
The gaming industry is characterized by a high degree of competition among a large number of participants, including land-based casinos, riverboat casinos, dockside casinos, video lottery, sweepstakes and poker machines not located in casinos, Native American gaming, emerging varieties of internet gaming, sports betting and other forms of gaming in the United States 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 in various jurisdictions. As competing properties and new markets are opened, we may be negatively impacted.
In addition, the COVID-19 pandemic has had a severe and unprecedented impact on the gaming industry. During this period, many gaming companies have faced heightened financial uncertainty or generated substantially reduced revenue and have sought or taken measures intended to maintain liquidity and solvency, including employee furloughs and layoffs, reduced operating and capital expenditure budgets, and contractual relief or other accommodations sought with creditors, lenders and other counterparties. There is no guarantee that existing government-imposed restrictions on travel and social gatherings, including restrictions imposed in late 2021 in response to an emerging variant, will be lifted in the near term, that additional government-imposed restrictions will not be implemented, or that previous restrictions that were lifted or modified will not be reinstated. Moreover, the ultimate impact of the COVID-19 pandemic on the gaming industry, the timing and extent of government-imposed restrictions and the performance of gaming facilities is highly uncertain and cannot be predicted with confidence.
Historically, economic indicators such as GDP growth, consumer confidence and employment are correlated with demand for gaming, entertainment and leisure properties, such as casinos and racetracks, and economic recessions, contractions or slowdowns have generally led to a decrease in discretionary spending on associated leisure activities. Long-term impacts of the COVID-19 pandemic, such as decreases in discretionary spending or changing consumer preferences brought about by global public health concerns and instability in global, national and regional economic activity and financial markets, could have a long-term material adverse effect on leisure and business travel, discretionary spending and other areas of economic behavior that directly impact the gaming industry. Additionally, decreases in discretionary consumer spending brought about by weakened general economic conditions such as, but not limited to, the impact of the COVID-19 pandemic, lackluster recoveries from recessions, contractions, high unemployment levels, higher income taxes, inflation, 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. Because we are dependent on the gaming industry, the immediate and long-term effects of the COVID-19 pandemic on the gaming industry could be material and adverse to our business, financial condition, liquidity, results of operations and prospects.
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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 by one or more gaming authorities in each applicable jurisdiction where gaming and racing facilities are permitted. 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 principal, 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 such person or entity’s suitability determined by gaming authorities. Gaming authorities have very broad discretion in determining whether a stockholder is required to file an application and 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:
pay that person any distribution or interest upon any of our 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 securities, including, if necessary, the immediate redemption of such securities in accordance with our charter.
Many jurisdictions also require any person who acquires beneficial ownership of more than a certain percentage of voting securities of a gaming company and, in some jurisdictions, non-voting securities, typically 5% of a publicly traded company, to report the acquisition to gaming authorities, and gaming authorities may require such holders to apply for qualification, licensure or a finding of suitability, subject to limited exceptions for “institutional investors” that hold a company’s 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 and apply for qualification, licensure, finding of suitability, or an institutional investor waiver, as applicable. Some jurisdictions may also limit the number of gaming licenses in which a person may hold an ownership or a controlling interest.
Further, certain of our directors, officers, key employees and investors in our shares must meet approval standards of certain gaming regulatory authorities depending on the jurisdiction. 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 by our tenants could result in the cessation of operations at one or more of the facilities we lease to such tenants. The loss of gaming licenses by us could result in an event of default under 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,
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which may include a public offering of certain securities. 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 an ownership or a controlling interest in us or one of our subsidiaries (and certain of our affiliates) and/or require the entities to divest such interest.
Required regulatory approvals can delay or prohibit transfers of our gaming properties or the consummation of other pending transactions, including consummation of the Mergers, which could result in periods in which we are unable to receive rent for such properties or otherwise realize the benefits of such transactions, which may have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
Our tenants are (and any pending and 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. In addition, given the highly regulated nature of the gaming industry, any future transactions we enter into are likely to be subject to regulatory approval in one or more jurisdictions, including with respect to any transfers in ownership, operating licensure or other regulatory considerations. If the consummation of a pending transaction (including with respect to the future entry into a new lease agreement), such as the consummation of the Mergers, is delayed or prohibited by regulatory authorities, we may be limited or otherwise unable to realize the benefits of the proposed transaction.
Consummation of the Mergers is conditioned on the receipt of approvals from a number of gaming regulatory authorities. Such gaming regulatory authorities may impose conditions on the granting of such approvals and findings. Such conditions and the process of obtaining such regulatory approvals could have the effect of delaying or impeding consummation of the Mergers or of imposing additional costs or limitations on us following the Mergers. In addition, to the extent any of our officers or a member of our board of directors is found unsuitable, we would need to find a replacement, which may take time and could adversely impact our financial and operational performance, including our ability to successfully consummate the Mergers and integrate MGP into VICI. Any such finding of unsuitability by regulatory authorities and resulting resignation or removal of an officer of VICI or a member of our board of directors could also impact our governance structure following the Mergers.
Our long-term, triple-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 and a substantial majority of our total revenue is generated from the Lease Agreements, which are long-term 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 sublease certain 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, consistent with typical net leases, our Lease Agreements 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 long-term triple net leases. Inflation in December 2021 was at its highest level in approximately 40 years. While certain of our Lease Agreements contain escalation provisions that are tied to changes in the consumer price index (“CPI”), these escalators in some cases do not apply until the future. For example, under the Regional Master Lease Agreement, the escalator is 1.5% for the second through fifth years of the lease and for the remainder of the term, the escalator is CPI subject to a 2.0% floor. Certain of these escalators are subject to a maximum cap, which could result in lower rent escalation than any such CPI increase in a single year or over a longer period. 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 long-term triple net leases.
Tenants may choose not to renew the Lease Agreements.
We enter into long-term lease agreements with our tenants, consisting of an initial lease term with the potential for the tenant to extend for multiple additional terms, which may be subject to additional terms and conditions. For example, each of the Caesars
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Lease Agreements has an initial lease term of 15 years with the potential for up to four additional five-year term extensions thereafter (with the initial lease term under each of the Caesars Lease Agreements extended in connection with the Eldorado Transaction to expire in July 2035). With respect to the properties under the Regional Master Lease Agreement, the aggregate lease term, including renewals, may be cut back to the extent it would otherwise exceed 80% of the remaining useful life of the applicable leased property, solely at the option of the tenants. At the expiration of the initial lease term or of any additional renewal term thereafter, our tenants may choose not to renew the applicable Lease Agreement. If a Lease Agreement expires without renewal and we are not able to find suitable, credit-worthy tenants to replace the previous tenants 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. In particular with respect to the coterminous nature of the Caesars Lease Agreements, this risk would be exacerbated if Caesars elected not to renew all such lease agreements at any one time.
Our ability to sell or dispose of our properties may be limited by the contractual terms of our Lease Agreements or other agreements with our tenants, or otherwise impacted by matters relating to our real estate ownership.
Our ability to sell or dispose of our properties may be hindered by, among other things, 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.
In connection with the MGP Transactions, we have agreed with MGM to enter into the MGM Tax Protection Agreement upon consummation of such transactions, pursuant to which we have agreed, subject to certain exceptions, to indemnify MGM and certain other parties for certain tax liabilities resulting from, among other things, the sale, transfer, exchange or other disposition of certain properties during a specified period. In addition, the BREIT JV previously entered into a tax protection agreement with MGM with respect to built-in gain and debt maintenance related to MGM Grand Las Vegas and Mandalay Bay, which is effective through mid-2029, and by acquiring MGP, we will bear MGP’s approximate 50.1% proportionate share in the BREIT JV of any indemnity under this existing tax protection agreement. In the event that we breach restrictions in these agreements, we will be liable for grossed-up tax amounts associated with the income or gain recognized as a result of such breach. Therefore, although it may be in the best interests of our stockholders for us to sell a certain property, it may be economically prohibitive for us to do so during the specified period because of these indemnity obligations. See “—Risks Related to an Investment in VICI Following the MGP Transactions—The MGM Tax Protection Agreement, during its term, imposes certain limits on our operations and could require New VICI Operating Company to indemnify MGM for certain tax liabilities.”
Any improvements to a property could also cause mechanic’s liens or similar liens to attach to, and constitute liens on, our interests in the properties. To the extent that such liens are recorded against any of our current or future properties, they may restrict our ability to sell or dispose of such properties while they remain in place. In addition, the holders of such liens may enforce them by court action and courts may cause the applicable 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.
If Caesars 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 Caesars 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 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 affiliates of Caesars and their creditors under this scenario might have the ability to restructure the terms, including the amount owed to us under the applicable 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 acquired 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, Harrah’s, Harvey’s, Horseshoe, 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 one of our tenants could also have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
We may not be able to purchase properties pursuant to our rights under certain agreements, including put-call and right of first refusal agreements, if we are unable to obtain additional financing. In addition, pursuant to one such agreement, we may be forced to dispose of Harrah’s Las Vegas to Caesars, possibly on disadvantageous terms.
Pursuant to the A&R Convention Center Put-Call Agreement, the Caesars Indianapolis Put-Call Agreement, the Las Vegas Strip Assets ROFR Agreement, the Horseshoe Baltimore ROFR Agreement and the Danville ROFR Agreement, we have certain rights to purchase the properties subject to these agreements, subject to the terms and conditions included in each agreement with respect to each property. In order to exercise these rights and any similar rights we obtain in the future or to fulfill our obligations with respect to certain put 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, including the Caesars Forum Convention Center, or to fulfill our obligations with respect to certain put rights. Even if financing with acceptable terms is available to us, there can be no assurance that we will exercise any of these rights. Further, each of the transactions remains subject to the terms and conditions of the applicable agreements, including with respect to due diligence, applicable regulatory approvals and customary closing conditions.
These agreements are subject to additional terms and conditions that may impact our ability to acquire such properties. For example, the A&R Convention Center Put-Call Agreement also provides that if Caesars exercises the Convention Center Put Right and, among other things, the sale of the Caesars Forum Convention Center to us does not close, under certain circumstances, a repurchase right in favor of Caesars, which, if exercised, would result in the sale of the Harrah’s Las Vegas property by us to Caesars. Such a sale may be at disadvantageous terms and could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
The bankruptcy or insolvency of any tenant, borrower or guarantor could result in the termination of the Lease Agreements, the related guarantees or loan agreements and material losses to us.
We are subject to the credit risk of our tenants and borrowers. We cannot provide assurances that our tenants and borrowers will not default on their obligations and fail to make payments to us. In particular, disruptions in the financial and credit markets, local economic conditions and other factors affecting the gaming industry, including the COVID-19 pandemic, may affect our tenants’ and borrowers’ ability to obtain financing to operate their businesses or continue to profitability execute their business plans. This, in turn, may cause our tenants and borrowers to be unable to meet their financial obligations, including making rental or loan payments to us, as applicable, which may result in their bankruptcy or insolvency. In addition, in the event of a bankruptcy of our tenants, borrowers or their respective guarantors, any claim for damages under the applicable lease, loan agreement or guarantee may not be paid in full. For these and other reasons, the bankruptcy of one or more of our tenants, borrowers or their respective guarantors could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
Furthermore, with respect to tenants whose obligations are guaranteed by a single guarantor (including Caesars and, following the closing of the MGP Transactions, MGM), although the tenants’ performance and payments are guaranteed, a default by the applicable tenant, or by the guarantor with regard to its guarantee, may cause a default under certain circumstances with regard to the entire portfolio covered by the respective Lease Agreements. In event of such a default, there can be no assurances that the tenants or the guarantor would assume the applicable Lease Agreements or the related guarantees, and if such Lease Agreements or guarantees were rejected, the tenant or the guarantor, as applicable, may not have sufficient funds to pay the
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damages that would be owed to us as a result of the rejection and we might not be able to find a replacement tenant on the same or better terms.
Our pursuit of investments in, and acquisitions of, additional properties and other strategic opportunities may be unsuccessful or fail to meet our expectations.
We intend to continue to pursue acquisitions of additional properties and seek acquisitions, investments and other strategic opportunities. Accordingly, we may often be engaged in evaluating potential transactions and other strategic alternatives, including through discussions with potential counterparties that may result in one or more transactions. In addition, from time to time, we have entered, and may in the future enter, into strategic arrangements with counterparties, which arrangements may be non-binding or subject to conditions, including the negotiation of definitive documentation. Although there is uncertainty that any of these discussions or arrangements will result in definitive agreements, the completion of any transaction, or the realization of the anticipated benefits 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 firms and hedge funds, 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 or make investments in 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, as well as investments in our existing properties through our Partner Property Growth Fund, 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. In addition, we may not realize the benefits of our Partner Property Growth Fund opportunities on a timely basis, or at all, and such opportunities may be dependent upon independent decisions made by our tenants with respect to any capital improvement projects and the source of funds for such projects, as well as the total funding ultimately requested under such arrangements. In addition, our Partner Property Growth Fund opportunities may be subject to the negotiation of definitive documentation or other conditions, or additional terms and conditions pursuant to our existing Lease Agreements or separate agreements we may enter into with our tenants with respect to such opportunities.
Further, even if we were able to acquire or invest in additional properties in the future, there is no guarantee that such properties would be able to maintain their historical performance or achieve their projected 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 or our borrowers to fulfill their payment obligations under the applicable agreement. In addition, our financing of these acquisitions and investments 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. Due to market considerations and in light of the timing typically required to obtain regulatory approvals for gaming transactions, any such financing may take place substantially in advance of closing of such transaction (and the receipt of rent or other payments under a lease or other applicable agreement) and negatively impact our operating results during such period. In addition, we cannot make assurances 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 or invest in 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.
We may sell or divest different properties or assets after an evaluation of our portfolio of businesses. Such sales or divestitures could 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. For example, in 2020 and 2021, we, together with Caesars, sold Harrah’s Reno, Bally’s Atlantic City and Harrah’s Louisiana Downs. These sales or divestitures could affect our costs, revenues, results of operations, financial condition, liquidity and our ability to comply with financial covenants. Divestitures
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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 and the properties securing our loans are subject to risks from climate change, natural disasters, such as earthquakes, hurricanes and other extreme weather conditions, and terrorist attacks or other acts of violence, the occurrence of which may adversely affect our results of operations, financial condition and liquidity.
Our properties and our borrowers’ properties secured as collateral are located in areas that may be subject to climate change and other natural disasters, such as earthquakes, and extreme weather conditions, including, but not limited to, hurricanes and flooding. 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 located in such regions. Although the tenants and borrowers, as applicable, 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 make assurances that we or our tenants will be able to fully insure such losses or fully collect, if at all, on claims resulting from such climate change, natural disasters and extreme weather conditions. While the Lease Agreements and loan agreements require, and new lease agreements and loan agreements are expected to require, that comprehensive insurance and hazard insurance be maintained by the tenants and borrowers, as applicable, 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. Furthermore, under such circumstances we may be required under the terms of our debt financing agreements to contribute all or a portion of insurance proceeds to the repayment of such debt, which may prevent us from restoring such properties to their prior state. If the insurance 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 the 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.
Additionally, changes to applicable building and zoning laws, ordinances and codes since the initial construction of our properties 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.
Terrorist attacks or other acts of violence may result in declining economic activity, which could harm the demand for services offered by our tenants and the value of our properties or collateral, either generally or with respect to a specific region or property, and might adversely affect the value of an investment in our common stock. Such a resulting decrease in 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 or borrowers are affected by future terrorist attacks or violence, its business similarly could be adversely affected, including the ability of our tenants or borrowers 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.
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In addition, the Regional Master Lease Agreement and the Las Vegas Master Lease Agreement allow the tenant to remove a property from such lease agreement, and each of our other Lease Agreements may be terminated by the applicable tenant, if: (i) a casualty event occurs (a) in the case of the Caesars Lease Agreements, 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, the JACK Cleveland/Thistledown Lease Agreement and the EBCI 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 and the EBCI 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, (i) the applicable tenants may remove the property from the Regional Master Lease Agreement and may terminate the Las Vegas Master Lease Agreement, the Joliet 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, and (ii) the EBCI Lease Agreement shall terminate as of the date before the date of such condemnation. 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 Regional Master Lease Agreement or if the Las Vegas Master Lease Agreement, the Joliet Lease Agreement, the Penn National Lease Agreements, the Hard Rock Cincinnati Lease Agreement, the Century Portfolio Lease Agreement, the JACK Thistledown/Cleveland Lease Agreement, or the EBCI 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.
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. For example, we own a number of assets in low-lying areas close to sea level, making those assets susceptible to damage or other negative effects resulting from a rise in sea level or acute extreme weather events, such as storms or floods. We also currently own three properties in Las Vegas (and, following the completion of the pending MGP Transactions, will own ten properties in Las Vegas), which are susceptible to any droughts, water shortages or similar conditions that may arise in the region. If either of these or other relevant eventualities were to occur, we may incur material costs to address these conditions and protect such 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, or at all. Furthermore, our insurance premiums may increase as a result of 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 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 or that serve as collateral under our loan agreements are, and properties that we may acquire or lend against 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, enforce our rights as a lender and otherwise realize additional value from these properties. Such property restrictions could include the following: limitations on alterations, changes, expansions, or reconfiguration of properties; limitations on use of properties; limitations affecting parking requirements; or restrictions on exterior or interior signage or facades. In certain cases, consent of the other party or parties to such agreements may be required when altering, reconfiguring, expanding or redeveloping. Failure to secure such consents when necessary may harm our ability to execute leasing strategies, which could adversely affect us.
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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. In addition, 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, which could materially and adversely affect our financial condition, liquidity, results of operations and prospects.
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, as they are subject to triple-net leases, 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 they cause, the amount of such liabilities could exceed the financial ability of the applicable tenants or guarantors 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.
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.
In connection with our separation from CEOC in 2017, the IRS issued a private letter ruling with respect to certain relevant issues, 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.
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Risks Related to Our Indebtedness and Financing
We have a substantial amount of indebtedness, and expect to incur additional indebtedness in the future (including in connection with the consummation of the MGP Transactions). 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, 2021, we had approximately $4.75 billion in long-term indebtedness, consisting of:
$750.0 million of outstanding 2025 Notes;
$1.25 billion of outstanding 2026 Notes;
$750.0 million of outstanding 2027 Notes;
$1.0 billion of outstanding 2029 Notes; and
$1.0 billion of outstanding 2030 Notes.
In connection with the MGP Transactions, we have agreed to assume approximately $5.7 billion of MGP’s outstanding indebtedness upon closing of the transaction, including the $1.5 billion pro rata share of the BREIT JV’s outstanding indebtedness. We also anticipate incurring approximately $4.4 billion in debt in connection with the redemption of a majority of New VICI Operating Company units held by MGM and/or its subsidiaries in connection with the closing of the MGP Transactions. See “Risks Related to the Company Following the MGP Transactions – Our anticipated level of indebtedness will increase upon completion of the MGP Transactions and will increase the related risks we now face.”
As of December 31, 2021, we also had $1.0 billion of available capacity to borrow under our Secured Revolving Credit Facility. Subsequent to year end, on February 8, 2022, we terminated the Secured Revolving Credit Facility and entered into the Revolving Credit Facility in an amount of $2.5 billion, which matures on March 31, 2026, and the Delayed Draw Term Loan in the amount of $1.0 billion, which matures on March 31, 2025. On February 18, 2022, we drew on the Revolving Credit Facility in the amount of $600.0 million to fund a portion of the purchase price of the Venetian Acquisition. In addition, the Credit Facilities include the option to increase commitments by up to $1.0 billion in the aggregate, for both the Revolving Credit Facility and Delayed Draw Term Loan, to the extent that any one or more lenders (from the syndicate or otherwise) agree to provide such additional credit extensions.
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, including as a result of COVID-19, 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;
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 or 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
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, pay distributions to our stockholders or refinancing
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existing or future indebtedness 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.
Adverse changes in our credit rating may affect our borrowing capacity and borrowing terms.
Our outstanding debt is periodically rated by nationally recognized credit rating agencies. The credit ratings are based upon our operating performance, liquidity and leverage ratios, overall financial condition, and other factors viewed by the credit rating agencies as relevant to both our industry and the economic outlook. Our credit rating may affect the amount of capital we can access, as well as the terms of any financing we obtain. Because we rely in part on debt financing to fund growth, the absence of an investment grade credit rating or any credit rating downgrade or negative outlook may have a negative effect on our future growth by increasing our financing costs or limiting our access to financing sources. In the event that we are rated investment grade by one or more nationally recognized credit rating agencies, there is no guarantee that we will realize increased access to capital or improved terms with respect to any financing we obtain, or that we will be able to maintain such investment grade credit rating.
We will have future capital needs and may not be able to obtain additional financing on favorable terms, if at all.
We expect to incur additional indebtedness in the future to refinance our existing indebtedness, to finance newly acquired assets or investments in our existing properties through our Partner Property Growth Fund, 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, industry or economic conditions, limit our ability to access the capital markets to refinance maturing debt or to fund acquisitions or emerging businesses, make us more vulnerable to general adverse economic and industry conditions, including interest rate increases, 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. The impact of any of these potential adverse consequences could have a material adverse effect on our results of operations, financial condition and liquidity
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.
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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. 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, our debt holders could elect to declare all outstanding debt under such agreements to be immediately due and payable. 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.
In 2022, interest rates are expected to rise from historic lows. 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. This risk can be managed or mitigated by utilizing interest rate protection products including interest rate swaps and forward starting interest rate swaps. Although we have previously used and currently use such products with respect to a portion of our indebtedness, there is no assurance that we will use such products in the future, we will utilize any of these products effectively 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 or investment 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 (i.e., the annualized distributions per share of our common stock as a percentage of the market price per share of our 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. In addition, 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.
We have engaged and may engage in hedging or other derivative transactions that may limit gains or result in losses.
We use derivatives from time to time to hedge certain of our liabilities and anticipated liabilities. Although the counterparties of these arrangements are major financial institutions, 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. Any such reduced gains or losses from these derivatives may adversely affect our business or financial condition.
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.
Upon the consummation of the MGP Transactions, we anticipate incurring approximately $4.4 billion in debt in connection with the redemption of a majority of New VICI Operating Company units held by MGM and/or its subsidiaries, as a result of which we anticipate that our total pro forma consolidated indebtedness will be, after consummation of the MGP Transactions, approximately $15.5 billion, inclusive of $1.5 billion of our pro rata share of indebtedness of BREIT JV. We may in the future 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 future developments, 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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Risks Related to the Company Following the MGP Transactions
Our anticipated level of indebtedness will increase upon completion of the MGP Transactions and will increase the related risks we now face.
Contemporaneously with the execution of the MGP Master Transaction Agreement, we entered into the MGP Transactions Commitment Letter with the MGP Transactions Bridge Lender pursuant to which it has committed to provide the Operating Partnership with bridge financing for the MGP Transactions in the amount of $5.0 billion, after taking into account the termination of $4.2 billion in committed financing representing the second tranche of the MGP Transactions Bridge Facility in accordance with the terms of the MGP Transactions Commitment Letter. In connection with the MGP Transactions, we will also assume and/or refinance approximately $5.7 billion of outstanding indebtedness of MGP, including its pro rata share of $1.5 billion in indebtedness of BREIT JV. Upon the consummation of the MGP Transactions, we also anticipate incurring approximately $4.4 billion in debt in connection with the redemption of a majority of New VICI Operating Company units held by MGM and/or its subsidiaries, and as a result, we anticipate that our total pro forma consolidated indebtedness will be, after consummation of the MGP Transactions, approximately $15.5 billion, inclusive of our pro rata share of $1.5 billion in indebtedness of BREIT JV, and we will be subject to increased risks associated with debt financing, including an increased risk that our cash flow could be insufficient to meet required payments on our debt.
Our increased indebtedness could have important consequences to holders of our common stock, including:
increasing our vulnerability to general adverse economic and industry conditions;
limiting our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements;
with respect to floating rate indebtedness, risks associated with increases in interest rates;
requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements;
limiting our ability to pay dividends to our stockholders;
limiting our flexibility in planning for, or reacting to, changes in our business and our industry; and
putting us at a disadvantage compared to our competitors with less indebtedness.
Following the Mergers, we may be unable to realize the anticipated benefits of the MGP Transactions or do so within the anticipated timeframe.
In connection with the MGP Transactions, the Mergers involve the cessation of MGP as an independent public company and the integration of MGP’s assets into our existing operations. We are expected to benefit from the elimination of duplicative costs associated with general and administrative expenses, including those related to supporting a public company platform and the leveraging of technology and systems. However, we will be required to devote significant management attention and resources to integrating the assets and asset management functions of MGP into VICI. Potential difficulties we may encounter in the integration process include, among others, the following:
the inability to successfully integrate the assets, and associated management oversight of such assets, of MGP in a manner that permits us to realize the anticipated benefits of the MGP Transactions in the timeframe currently anticipated or at all;
the additional complexities of increasing the number of properties owned by us, all of which are operated by a new tenant, including additional time and attention required by management;
failure to retain key employees of VICI; and
additional complexities of integrating two companies with different histories, regulatory restrictions, markets and tenants.
For all these reasons, it is possible that the integration process could result in the distraction of our management, the disruption of our ongoing business or inconsistencies in our operations, services, standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with tenants, partners, borrowers, and employees or to achieve the anticipated benefits of the Mergers, could otherwise adversely affect our business and financial results and may cause the market price of our stock to decline.
In addition, we have incurred and expect to incur substantial expenses in completing the MGP Transactions and integrating the assets, business, operations and systems of MGP with our own. While we have assumed that a certain level of expenses would
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be incurred, there are a number of factors beyond our control that could affect the total amount or the timing of the expenses relating to the completion of the MGP Transactions and the integration of our and MGP’s operations. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. As a result, the expenses associated with the MGP Transactions could, particularly in the near term, reduce the savings that we expect to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings following the completion of the MGP Transactions and impact our business and operations and the market price of our common stock.
Counterparties to certain significant agreements with MGP may exercise contractual rights under such agreements in connection with the Mergers.
MGP is a party to certain agreements that give the applicable counterparty certain rights following a “change in control,” such as debt instruments and derivative arrangements. In certain of these agreements, such rights may be triggered upon the closing of the Mergers and may trigger a consent or the right to terminate the agreement. It is not a condition to completion of the Mergers that the counterparties consent to the Mergers or waive their contractual rights. Certain counterparties may also require modifications to their respective agreements or the execution of new agreements as a condition to granting a waiver or consent under their agreement. The pursuit of such rights by the counterparties may result in us suffering a loss of potential future revenue or incurring liabilities and may result in the loss or modification of rights that are material to our business. There can be no assurances that such counterparties will not exercise their rights under these agreements, including termination rights where available, or that the exercise of any such rights under, or modification of, these agreements will not adversely affect our business or operations.
Risks Related to an Investment in VICI Following the MGP Transactions
Following the MGP Transactions, we may not continue to pay dividends at or above the rate we currently pay.
Following the MGP Transactions, our stockholders may not receive dividends at the same rate they received dividends as our stockholders prior to the MGP Transactions for various reasons, including the following:
we may not have enough cash to pay such dividends due to changes in our cash requirements, capital spending plans, cash flow or financial position;
decisions on whether, when and in which amounts to make any future distributions will remain at all times entirely at the discretion of our board of directors, which reserves the right to change our current dividend practices at any time and for any reason;
we may desire to retain cash to maintain or improve our credit ratings; and
the amount of dividends that our subsidiaries may distribute to us may be subject to restrictions imposed by state law and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur.
Our stockholders will have no contractual or other legal right to dividends that have not been declared by our board of directors.
The MGM Tax Protection Agreement, during its term, imposes certain limits on our operations and could require New VICI Operating Company to indemnify MGM for certain tax liabilities.
We have agreed with MGM to enter into the MGM Tax Protection Agreement pursuant to which New VICI Operating Company will agree, subject to certain exceptions, to indemnify the Protected Parties (as defined in the MGM Tax Protection Agreement) for certain tax liabilities resulting from, during the Protected Period (as defined in the MGM Tax Protection Agreement), (1) the sale, transfer, exchange or other disposition of Protected Property (as defined in the MGM Tax Protection Agreement), (2) a merger, consolidation, or transfer of all of the assets of, or certain other transactions undertaken by, New VICI Operating Company pursuant to which the ownership interests of the Protected Parties in New VICI Operating Company are required to be exchanged in whole or in part for cash or other property, (3) the failure of New VICI Operating Company to maintain approximately $8.5 billion of nonrecourse indebtedness allocable to the Protected Parties, which amount may be reduced over time in accordance with the MGM Tax Protection Agreement, and (4) the failure of New VICI Operating Company or us to comply with certain tax covenants that would impact the tax liabilities of the Protected Parties. In the event that we or New VICI Operating Company breach restrictions in the MGM Tax Protection Agreement, New VICI Operating Company will be liable for grossed-up tax amounts (based on an assumed effective tax rate) associated with the income or gain recognized as a result of such breach. In addition, the BREIT JV previously entered into a tax protection agreement with MGM with respect to built-in gain and debt maintenance related to MGM Grand Las Vegas and Mandalay Bay, which is effective
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through mid-2029, and by acquiring MGP, we will bear MGP’s approximate 50.1% proportionate share in the BREIT JV of any indemnity under this existing tax protection agreement.
Therefore, although it may be in the best interests of our stockholders for us to sell a Protected Property, enter into certain significant transactions involving New VICI Operating Company, reduce nonrecourse indebtedness of New VICI Operating Company allocable to MGM or otherwise not comply with certain tax covenants, it may be economically prohibitive for us to do so during the Protected Period because of these indemnity obligations.
Risks Related to the Mergers
Failure to complete the Mergers in a timely manner or at all could adversely affect our business and operations and negatively affect our stock price.
Under the MGP Master Transaction Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Mergers. These restrictions, the waiver of which are subject to the written consent of the other party, and subject to certain exceptions and qualifications, may prevent us from pursuing certain strategic transactions, acquiring and disposing of assets, undertaking certain capital expenditure projects, undertaking certain financing transactions and otherwise pursuing other actions that are not in the ordinary course of business, even if such actions could prove beneficial. Additionally, the pendency of the Mergers may cause distractions from our strategies and day-to-day operations for employees and management.
Delays in completing the Mergers or the failure to complete the Mergers at all could adversely affect our business and operations, and, in that event, the market price of shares of our common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the Mergers will be completed. If the Mergers are not completed for any reason, we will not achieve the expected benefits thereof. In addition, we will be required to pay certain costs relating to the Mergers, whether or not the Mergers are completed.
The Exchange Ratio is fixed and will not be adjusted in the event of any change in the stock price of either us or MGP.
At the effective time of the REIT Merger, each outstanding MGP Common Share (other than shares held by MGP or any wholly-owned subsidiary of MGP) will be converted into the right to receive the REIT Merger Consideration, consisting of 1.366 shares of our common stock, plus the right, if any, to receive cash in lieu of fractional shares of our common stock into which such MGP Common Shares would have been converted pursuant to the terms and subject to the conditions set forth in the MGP Master Transaction Agreement.
The Exchange Ratio of 1.366 shares of our common stock per MGP Common Share was fixed in the MGP Master Transaction Agreement and, except for certain adjustments on account of changes in the capitalization of us or MGP, or the payment of certain dividends by us or MGP that are necessary to maintain our or MGP’s respective status as a REIT, will not be adjusted for changes in the market prices of our common stock or MGP Common Shares. Changes in the market price of shares of our common stock prior to the Mergers will affect the market value of the REIT Merger Consideration that MGP shareholders will be entitled to receive on the closing date of the Mergers. Stock price changes may result from a variety of factors (many of which are beyond the control of us and MGP), including the following:
changes in the respective businesses, operations, assets, liabilities and prospects of us and MGP;
changes in market assessments of the business, operations, financial position and prospects of us or MGP;
market assessments of the likelihood that the Mergers will be completed;
interest rates, general market and economic conditions and other factors generally affecting the market prices of our common stock and MGP Common Shares;
federal, state and local legislation, governmental regulation and legal developments in the business in which we and MGP operate; and
other factors, including those described or referred to elsewhere under this Item 1A “Risk Factors.”
The market price of our common stock at the closing of the Mergers may vary from its price on the date the MGP Master Transaction Agreement was executed and on the date of the special meeting of our stockholders in connection with the Mergers, which was held on October 29, 2021, and may be greater than, less than or the same as the price per share of our common stock at each of the aforementioned times. As a result, the market value of the REIT Merger Consideration represented by the Exchange Ratio will also vary.
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Because the Exchange Ratio is fixed:
if the price of our common stock increases between the date the MGP Master Transaction Agreement was executed and the closing of the Mergers, MGP shareholders will receive shares of our common stock that have a market value upon completion of the Mergers that is greater than the market value of such shares calculated pursuant to the Exchange Ratio on the date the MGP Master Transaction Agreement was executed; and
if the price of our common stock declines between the date the MGP Master Transaction Agreement was executed and the closing of the Mergers, MGP shareholders will receive shares of our common stock that have a market value upon the completion of the Mergers that is less than the market value of such shares calculated pursuant to the Exchange Ratio on the date the MGP Master Transaction Agreement was executed.
Therefore, while the number of shares of our common stock to be issued per MGP Common Share is fixed, VICI stockholders cannot be sure of the market value of the REIT Merger Consideration that MGP shareholders will receive upon the closing of the REIT Merger. The market price of our common stock is subject to general price fluctuations in the market for publicly traded equity securities and has experienced volatility in the past.
There may be unexpected delays in the completion of the Mergers or the Mergers may not be completed at all.
The Mergers are currently expected to close in the first half of 2022, assuming that all of the conditions in the MGP Master Transaction Agreement are either satisfied or waived. The MGP Master Transaction Agreement provides that either we or MGP may terminate the MGP Master Transaction Agreement, subject to certain conditions set forth in the MGP Master Transaction Agreement, if the Mergers have not occurred on or before the fifteen month anniversary of the date of the MGP Master Transaction Agreement, which is November 4, 2022 (the “Outside Date”). Certain events may delay the completion of the Mergers or result in a termination of the MGP Master Transaction Agreement. Some of these events are outside the control of VICI and MGP.
We may incur significant additional costs in connection with any delay in completing the Mergers or the termination of the MGP Master Transaction Agreement, in addition to significant transaction costs, including legal, financial advisory, accounting and other costs we have already incurred. In addition, if the Mergers are terminated under certain circumstances specified in the MGP Master Transaction Agreement, we will be required to pay to MGP a termination fee of up to $709.0 million. We cannot make assurances that the conditions to the completion of the MGP Master Transaction Agreement will be satisfied or waived or that any adverse change, effect, event, circumstance, occurrence or state of facts that could give rise to the termination of the MGP Master Transaction Agreement will not occur.
Our stockholders will have a substantially smaller ownership and voting interest in VICI upon completion of the Mergers, compared to their ownership and voting interest in VICI prior to the Mergers.
Upon completion of the Mergers, based on the number of MGP Common Shares and shares of our common stock outstanding on December 31, 2021, we estimate that, after giving effect to the settlement of the March 2021 Forward Sale Agreements and the September 2021 Forward Sale Agreements (each as defined in Note 11 - Stockholders Equity) on February 18, 2022, continuing stockholders will own approximately 78% of the issued and outstanding shares of our common stock, and former MGP shareholders will own approximately 22% of the issued and outstanding shares of our common stock. Accordingly, our current stockholders will exercise significantly less influence over us after the Mergers relative to their influence over us prior to the Mergers, and thus will have a less significant impact on the approval or rejection of our future proposals submitted to a stockholder vote.
There can be no assurance that we will be able to secure the financing in connection with the Redemption on acceptable terms, in a timely manner, or at all, and therefore may be compelled to consummate the MGP Transactions without obtaining financing on attractive terms.
We are required to finance the cash required in connection with the Redemption with long-term debt financing or proceeds from the MGP Transactions Bridge Facility in accordance with the terms of the MGP Transactions Commitment Letter. The MGP Transactions Commitment Letter provides for funding to the Operating Partnership of up to $5,008.0 million, which can be used to fund the Redemption and pay transaction costs, following the termination of $4,242.0 million in committed financing representing the second tranche of the MGP Transactions Bridge Facility in accordance with the terms of the MGP Transactions Commitment Letter. Additionally, we may continue to evaluate alternative financing structures and amounts based on our needs and capital markets conditions. The availability of the borrowings under the MGP Transactions Bridge Facility is subject to the satisfaction of certain customary conditions, including the substantially concurrent consummation of the Mergers.
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The consummation of the MGP Transactions is not conditioned on our ability to obtain financing or on the consummation of the transactions contemplated by the MGP Transactions Commitment Letter. If we are unable to obtain funding contemplated by the MGP Transactions Commitment Letter from our financing sources for the cash required in connection with the Redemption, we may be compelled to specifically perform our obligations to consummate the MGP Transactions with financing that is not on attractive terms or could otherwise be subject to claims under the MGP Master Transaction Agreement, each of which could have a material adverse effect on us.
The MGP Master Transaction Agreement contains provisions that could discourage a potential acquirer of the Company from making a favorable proposal, could result in any such proposal being at a lower price than it might otherwise be and, in specified circumstances, could require us to make a substantial termination payment to MGP.
Pursuant to the MGP Master Transaction Agreement, we and MGP have, subject to certain exceptions, agreed not to (i) solicit proposals relating to certain alternative transactions, (ii) enter into discussions or negotiations or provide non-public information concerning proposals relating to an alternative business combination transaction, (iii) approve or recommend any agreements providing for any such alternative business combination transaction, (iv) enter into any letter of intent, agreement in principle, merger agreement or other similar definitive agreements related to an alternative business combination transaction, (v) grant any waiver, amendment or release of any standstill under any standstill or confidentiality agreement or any takeover statute, or (vi) agree to do any of the foregoing. The MGP Master Transaction Agreement also provides that, in connection with the termination of the MGP Master Transaction Agreement by us under certain specified circumstances, we will be required to pay to MGP a termination fee of up to $709.0 million. These provisions could discourage a potential acquirer that might have an interest in acquiring all or a significant part of the Company from considering or proposing such an acquisition, or might result in a potential acquirer proposing to pay a lower per share value than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the MGP Master Transaction Agreement.
If the Mergers are not consummated by the Outside Date, either we or MGP may terminate the MGP Master Transaction Agreement.
Either we or MGP may terminate the MGP Master Transaction Agreement if the Mergers have not been consummated by the Outside Date, which is November 4, 2022. However, this termination right will not be available to a party if that party’s failure to comply with any provision of the MGP Master Transaction Agreement has been the principal cause of, or resulted in, the failure of the Mergers to occur by the Outside Date. In the event the MGP Master Transaction Agreement is terminated by either party due to the failure of the Mergers to close by the Outside Date, we will have incurred significant costs and will have diverted significant management focus and resources from other strategic opportunities without realizing the anticipated benefits of the Mergers.
An adverse judgment in any litigation challenging the Mergers may prevent the Mergers from becoming effective or from becoming effective within the expected timeframe.
Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into merger agreements or other agreements similar to the MGP Master Transaction Agreement. As of the date of this Annual Report on Form 10-K, three lawsuits were filed by purported MGP shareholders and six lawsuits were filed by purported VICI stockholders challenging the disclosures made, as applicable, in the Registration Statement on Form S-4 filed on September 8, 2021 and the Prospectus filed on September 23, 2021, each in connection with the Mergers. Additional lawsuits arising out of the Mergers may be filed in the future. For a more detailed description of this litigation, see “Item 3 – Legal Proceedings” and “Litigation” in Note 10 - Commitments and Contingent Liabilities to our Financial Statements included in this Annual Report.
Although these nine lawsuits have each been dismissed, the parties have not resolved plaintiffs’ requests for attorneys’ fees, and thus we cannot make assurances as to the ultimate outcome of these lawsuits, or any other lawsuits that may be filed, including the amount of costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation of these claims. If any of the plaintiffs in future lawsuits are successful in obtaining an injunction prohibiting the parties from completing the MGP Transactions on the agreed-upon terms, such an injunction may delay the consummation of the MGP Transactions in the expected timeframe, or could indefinitely enjoin the MGP Transactions from being consummated altogether. Whether or not any plaintiff’s claim is successful, this type of litigation may result in significant costs and divert management’s attention and resources, which could adversely affect the operation of our business.
If the REIT Merger does not qualify as a reorganization there may be adverse tax consequences.
The parties intend that the REIT Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code, and it is a condition to the consummation of the Mergers that we and MGP receive opinions from Hogan Lovells US LLP and
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Weil, Gotshal & Manges LLP, respectively, to the effect that, for U.S. federal income tax purposes, the REIT Merger will constitute a reorganization within the meaning of Section 368(a) of the Code. These tax opinions represent the legal judgment of counsel rendering the opinion and are not binding on the Internal Revenue Service (the “IRS”) or the courts. If the REIT Merger were to fail to qualify as a reorganization, U.S. holders of MGP Common Shares generally would recognize gain or loss, as applicable, equal to the difference between (i) the sum of the fair market value of our common stock and the cash in lieu of fraction shares, if any, received by such holder in the REIT Merger; and (ii) such holder’s adjusted tax basis in its MGP Common Shares.
Risks Related to our Status as a REIT
We may incur adverse tax consequences if we have failed or fail (or, after consummation of the MGP Transactions, MGP has failed), to qualify as a REIT for U.S. federal income tax purposes.
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.
We have operated in a manner that we believe has allowed us to qualify as a REIT for U.S. federal income tax purposes under the Code and intend to continue to do so through the time of the REIT Merger. Furthermore, we intend to operate in a manner that we believe allows us to qualify as a REIT after the REIT Merger. Neither we nor MGP have requested or plan to request a ruling from the IRS that we or MGP qualify as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The complexity of these provisions and of the applicable treasury regulations that have been promulgated under the Code is greater in the case of a REIT that holds its assets through a partnership (such as we will after the Mergers). The determination of various factual matters and circumstances not entirely within the control of us or MGP may affect its ability to qualify as a REIT. In order to qualify as a REIT, each of us and MGP must satisfy a number of requirements, including requirements regarding the ownership of its stock and the composition of its gross income and assets. Also, a REIT must make distributions to stockholders aggregating annually at least 90% of its net taxable income, excluding any net capital gains.
If we lose our REIT status, or are determined to have lost our REIT status in a prior year, such loss or failure would have a material and adverse effect on us. Additionally, we will face material tax consequences that would substantially reduce our cash available for distribution, including cash available to pay dividends to our stockholders, because:
we would be subject to U.S. federal income tax and state and local income taxes on our net income at regular corporate rates for the years we did not qualify for taxation as a REIT (and, for such years, would not be allowed a deduction for dividends paid to stockholders in computing our taxable income);
unless we are entitled to relief under applicable statutory provisions, neither we nor any “successor” corporation, trust or association could elect to be taxed as a REIT until the fifth taxable year following the year during which we were disqualified;
if we were to re-elect REIT status, we would have to distribute all earnings and profits from non-REIT years before the end of the first new REIT taxable year; and
for the five years following re-election of REIT status, upon a taxable disposition of an asset owned as of such re-election, we would be subject to corporate-level tax with respect to any built-in gain inherent in such asset at the time of re-election.
Even if we retain our REIT status, if MGP loses its REIT status for a taxable year ending on or before the effective time of the REIT Merger, we would be subject to adverse tax consequences that would substantially reduce our cash available for distribution, including cash available to pay dividends to our stockholders, because:
unless we are entitled to relief under applicable statutory provisions, VICI, as the “successor” by merger to MGP for U.S. federal income tax purposes, could not elect to be taxed as a REIT until the fifth taxable year following the year during which MGP was disqualified;
VICI, as the successor by merger to MGP, would be subject to any corporate income tax liabilities of MGP, including penalties and interest;
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assuming that we otherwise maintained our REIT qualification, we would be subject to corporate-level tax on the built-in gain in each asset of MGP existing at the time of the REIT Merger if we were to dispose of such MGP asset during the five-year period following the REIT Merger; and
assuming that we otherwise maintained our REIT qualification, we would succeed to any earnings and profits accumulated by MGP for taxable periods that it did not qualify as a REIT, and we would have to pay a special dividend and/or employ applicable deficiency dividend procedures (including interest payments to the IRS) to eliminate such earnings and profits (or if we do not timely distribute those earnings and profits, we could fail to qualify as a REIT).
In addition, if there is an adjustment to MGP’s taxable income or dividends paid deductions, we could elect to use the deficiency dividend procedure in order to maintain MGP’s REIT status. That deficiency dividend procedure could require us to make significant distributions to our stockholders and to pay significant interest to the IRS.
As a result of these factors, our failure (before or after the REIT Merger) or MGP’s failure (before the REIT Merger) to qualify as a REIT could impair our ability after the REIT Merger to expand our business and raise capital, and would materially adversely affect the market value of our common stock.
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.
Changes to the U.S. federal income tax laws, including the 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. Changes to the U.S. federal income tax laws, including the possibility of major tax legislation, could have a material and adverse effect on us or our stockholders. We cannot predict whether, when, to what extent or with what effective dates 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.
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. The complexity of these provisions of the Code and of the applicable treasury regulations that have been promulgated under the Code is greater in the case of a REIT that holds its assets through a
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partnership (such as we will after the Mergers). 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 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
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stockholders and the ownership of our stock. We may also be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution.
As a REIT, we must ensure that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and “real estate assets” (as defined in the Code), including certain mortgage loans and securities. The remainder of our investments (other than government securities, qualified real estate assets and securities issued by a taxable REIT subsidiary) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than government securities, qualified real estate assets and securities issued by a taxable REIT subsidiary) can consist of the securities of any one issuer, and no more than 20% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries. In addition, not more than 25% of our total assets may be represented by debt instruments issued by publicly offered REITs that are “nonqualified” debt instruments. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio, or contribute 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, except that such losses could theoretically be carried back or forward against past or future taxable income of the taxable REIT subsidiary.
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If we are required to make a purging distribution, we may pay such purging distribution in a combination of 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 make assurances 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 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 a forward sale agreement is unclear and could jeopardize our ability to meet the REIT qualification requirements.
We enter into forward sale agreements from time to time and, subject to certain conditions, we have the right to elect physical, cash or net share settlement under these agreements at any time and from time to time, in part or in full. In the event that we elect to settle a forward sale agreement for cash and the settlement price is below the forward sale price, we would be entitled to receive a cash payment from the applicable forward purchaser(s). 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
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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 “securities futures contracts,” 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 of a forward sale agreement, 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 to be taxed as a REIT.
Risks Related to Our Organizational Structure
VICI is a holding company with no direct operations and relies on distributions received from the Operating Partnership to make distributions to its stockholders.
VICI is a holding company and conducts its operations through subsidiaries, including the Operating Partnership and VICI Golf. VICI does not have, apart from the units that it owns in the Operating Partnership and VICI Golf, any independent operations. As a result, VICI relies on distributions from its Operating Partnership to make any distributions to its stockholders it might declare on its common stock and to meet any of its obligations, including any tax liability on taxable income allocated to it from the Operating Partnership (which might not be able to make distributions to VICI equal to the tax on such allocated taxable income). In turn, the ability of subsidiaries of the Operating Partnership to make distributions to the Operating Partnership, and therefore, the ability of the Operating Partnership to make distributions to VICI, depends on the operating results of these subsidiaries and the Operating Partnership and on the terms of any financing arrangements they have entered into. In addition, because VICI is a holding company, claims of common stockholders of VICI are structurally subordinated to all existing and future liabilities and other obligations (whether or not for borrowed money) and any preferred equity of the Operating Partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, VICI’s assets and those of the Operating Partnership and its subsidiaries will be available to satisfy the claims of VICI common stockholders only after all of VICI’s, the Operating Partnership’s and its subsidiaries’ liabilities and other obligations and any preferred equity of any of them have been paid in full.
The Operating Partnership may, in connection with its acquisition of additional properties or otherwise, issue additional common units or preferred units to third parties. Such issuances would reduce VICI’s ownership in the Operating Partnership. Because stockholders of VICI do not directly own common units or preferred units of the Operating Partnership, they do not have any voting rights with respect to any such issuances or other partnership level activities of the Operating Partnership.
Our rights and the rights of our stockholders to take action against our directors and officers are limited.
The Maryland General Corporation Law (the “MGCL”) provides that a director has no liability in any action based on an act of the director if he or she has acted in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. As permitted by the MGCL, our charter limits the liability of our directors and officers to our company and our stockholders for money damages, to the maximum extent permitted by Maryland law. Under Maryland law, our present directors and officers will not have any liability to us or our stockholders for money damages other than liability resulting from:
actual receipt of an improper benefit or profit in money, property or services; or
a final judgment based upon a finding that his or her action or failure to act was the result of active and deliberate dishonesty by the director or officer and was material to the cause of action adjudicated.
Our charter provides that we have the power to obligate ourselves, and our amended and restated bylaws obligate us, to indemnify our directors and officers for actions taken by them in those capacities and to pay or reimburse their reasonable expenses in advance of final disposition of a proceeding to the maximum extent permitted by Maryland law. In addition, we have entered into indemnification agreements with our directors and executive officers that provide for indemnification and 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 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.
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In order for us to qualify as a REIT, no more than 50% of the value of outstanding shares of our stock may be owned, beneficially or constructively, by five or fewer individuals (or certain other persons) at any time during the last half of each taxable year (“closely held”). Subject to certain exceptions, our charter prohibits any stockholder from owning beneficially or constructively, with respect to any class or series of our capital stock, more than 9.8% (in value or by number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of such class or series of our capital stock.
The constructive ownership rules under the Code are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of 9.8% or less of the outstanding shares of a class or series of our stock by an individual or entity could cause that individual or entity or another individual or entity to own constructively in excess of the relevant ownership limits.
Among other restrictions on ownership and transfer of shares, our charter also prohibits any person from owning shares of our stock that would result in our being “closely held” under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT. Any attempt to own or transfer shares of our common stock or of any of our other capital stock in violation of these restrictions may result in the shares being automatically transferred to a charitable trust or may be void.
Our charter provides that our board may grant exceptions to the 9.8% ownership limit, subject in each case to certain initial and ongoing conditions designed to protect our status as a REIT. These ownership limits may prevent a third-party from acquiring control of us if our board of directors does not grant an exemption from the ownership limits, even if our stockholders believe the change in control is in their best interests. An exemption from the 9.8% ownership limit has previously been granted to certain stockholders, and our board may in the future provide exceptions to the ownership limit for other stockholders, subject to the aforementioned 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
“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
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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.
General Risk Factors
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, including due to increased remote access and operations of our employees and our service providers due to the impact of the COVID-19 pandemic. 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, among other things, 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 such unauthorized parties could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; require significant management attention and resources to address or 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.
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 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 make assurances that the market price of our common stock will not fluctuate or decline significantly in the future. If the market price or trading volume of our common stock declines, you may be unable to resell your shares at a profit, or at all.
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;
the annual yield from distributions on our common stock as compared to yields on other financial instruments;
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changes in our earnings, revenues or adjusted funds from operations per share estimates;
the ongoing adverse impact of the COVID-19 pandemic and responses thereto on us and our tenants;
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 or a decrease in our distributions to stockholders that may cause purchasers of our shares to demand a higher 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 operating performance and the performance of other similar companies;
our failure to achieve the anticipated benefits of future and pending acquisitions and other transactions, including the pending transactions described herein within the timeframe or to the extent anticipated by financial or industry analysts;
additions or departures of key personnel;
changes to major corporate policies made by our board of directors without stockholder approval;
failure to achieve the perceived benefits of the MGP Transactions as anticipated;
the issuance of common stock in connection with the consummation of the Mergers;
risks relating to any existing or future forward sale agreements;
equity issuances by us, or future sales of substantial amounts of our common stock by our existing or future stockholders, or the perception that such issuances or future sales may occur;
our stockholders after the consummation of the MGP Transactions may be different than our stockholders prior to consummation;
other actions by institutional stockholders;
securities class action litigation which could result in substantial costs and divert our management’s attention and resources;
strategic actions taken by us or our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy;
speculation in the press or investment community about us, our tenants, our industry or the economy in general;
publication of research reports about us or our industry by securities analysts;
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;
failure to qualify as a REIT for U.S. federal income tax purposes;
failure to satisfy the listing requirements of the NYSE or the requirements of the Sarbanes Oxley Act of 2002, as amended;
adverse conditions in the financial markets or general U.S. or international economic conditions, including those unrelated to our performance and those resulting from war, acts of terrorism, public health crises, and responses to such events; and
the occurrence of any of the other risk factors presented in this Annual Report on Form 10-K or our other SEC filings.
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ITEM 1B.Unresolved Staff Comments
None.
ITEM 2.Properties
Our geographically diverse portfolio consists of 28 market-leading properties, including Caesars Palace Las Vegas, Harrah’s Las Vegas and the Venetian Resort, three 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.
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, 2021, 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.
In connection with the Mergers, three lawsuits were filed by purported MGP shareholders and six lawsuits were filed by purported VICI stockholders challenging the disclosures made, as applicable, in the Registration Statement on Form S-4 filed on September 8, 2021 and the Prospectus filed on September 23, 2021. The plaintiffs in each action sought, among other things, to enjoin the Mergers and the transactions contemplated by the MGP Master Transaction Agreement and an award of costs and attorneys’ fees. Each of the lawsuits has been dismissed pursuant to applicable litigation procedure, although additional lawsuits arising out of the MGP Transactions may be filed in the future.
ITEM 4.
Mine Safety Disclosures
Not applicable.
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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 22, 2022, there were 748,390,629 shares of common stock issued and outstanding that were held by 120 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 make assurances 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, 2021.
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Issuer Repurchases of Equity Securities
During the three months ended December 31, 2021, certain employees surrendered shares of common stock owned by them to us to satisfy their statutory minimum federal and state income tax obligations associated with the vesting of shares of restricted common stock issued under our 2017 Stock Incentive Plan.
The following table summarizes such common stock repurchases during the three months ended December 31, 2021:
PeriodTotal 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
October 1, 2021 through October 31, 2021— $— — — 
November 1, 2021 through November 30, 20213,123 27.81 — — 
December 1, 2021 through December 31, 2021— — — — 
Total3,123 $27.81   
(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.
We did not otherwise repurchase any equity securities registered pursuant to Section 12 of the Exchange Act during the three months ended December 31, 2021.
Registered Offering of Securities - Use of Proceeds
Not applicable.
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Stock Performance Graph
The graph below compares our cumulative total stockholder return for the period from October 18, 2017 to December 31, 2021 on our 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 until December 31, 2021. 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.
vici-20211231_g1.jpg
Company / Index10/18/1712/31/1712/31/1812/31/1912/31/2012/31/21
VICI Properties Inc.$100.0 $110.8 $106.8 $152.9 $162.0 $200.5 
MSCI US REIT Index$100.0 $99.9 $95.4 $120.1 $111.0 $158.9 
S&P 500$100.0 $104.8 $100.2 $131.7 $156.0 $200.7 
ITEM 6.Selected Financial Data
[Reserved.]
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ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited consolidated Financial Statements and notes thereto of VICI Properties Inc. 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 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, Harrah’s Las Vegas and the Venetian Resort, three 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 over 62 million square feet, our well-maintained properties are currently located across urban, destination and drive-to markets in twelve states, contain approximately 25,000 hotel rooms and feature over 250 restaurants, bars and nightclubs. Subsequent to the closing of the MGP Transactions, which we anticipate will occur in the first half of 2022, we will have 43 market leading properties, 10 of which will be located on the Las Vegas Strip, consisting of 117 million square feet, 57,500 hotel rooms and featuring over 730 restaurants, bars and nightclubs across our portfolio.
Our portfolio also includes three real estate loans, which we have originated for strategic reasons in connection with transactions that may provide the potential to convert our investment into the ownership of certain of the underlying real estate in the future. In addition, we own 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 conduct our operations as a 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 believe our election of REIT status, combined with the income generation from the Lease Agreements, will enhance our ability to make distributions to our stockholders, providing investors with current income as well as long-term growth, subject to the macroeconomic impact of the COVID-19 pandemic and market conditions more broadly. We conduct our real property business through our Operating Partnership and our golf course business through a TRS, VICI Golf.
Impact of the COVID-19 Pandemic on Our Business
Since the emergence of the COVID-19 pandemic in early 2020, among the broader public health, societal and global impacts, the pandemic has resulted in governmental and/or regulatory actions imposing temporary closures or restrictions from time to time on our tenants’ operations at our properties and our golf course operations. Although all of our leased properties and our golf courses are currently open and operating, without restriction in some jurisdictions, they remain subject to any current or future operating limitations, restrictions or closures imposed by governments and/or regulatory authorities. While our tenants’ recent performance at many of our leased properties has been at or above pre-pandemic levels, our tenants may continue to face challenges and additional uncertainty due to the impact of the COVID-19 pandemic, such as complying with operational and capacity restrictions and ensuring sufficient employee staffing and service levels, and the sustainability of maintaining improved operating margins and financial performance. The ongoing nature of the pandemic, including the impact of emerging variants, may further adversely affect our tenants’ businesses and, accordingly, our business and financial performance could be adversely affected in the future.
All of our tenants have fulfilled their rent obligations through February 2022 and we regularly engage with our tenants in connection with their business performance, operations, liquidity and financial results. As a triple-net lessor, we believe we are generally in a strong creditor position and structurally insulated from operational and performance impacts of our tenants, both positive and negative. However, the full extent to which the COVID-19 pandemic continues to adversely affect our tenants, and ultimately impacts us, depends on future developments which cannot be predicted with confidence, including the actions taken to contain the pandemic or mitigate its impact, including the availability, distribution, public acceptance and efficacy of
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approved vaccines, new or mutated variants of COVID-19 (including vaccine-resistant variants) or a similar virus, the direct and indirect economic effects of the pandemic and containment measures on our tenants, our tenants’ financial performance and any future operating limitations or closures. For more information, refer to “Part I – Item 1A. Risk Factors” included in this Annual Report on Form 10-K.
Key 2021 Highlights
Operating Results
Collected 100% of rent in cash.
Total revenues increased 23.2% year-over-year to $1.5 billion.
Net income attributable to common stockholders was $1,013.9 million, or $1.76 per diluted share.
AFFO increased 25.3% year-over-year to $1,047.4 million and AFFO per diluted share increased 11.0% to $1.82.
Significant Achievements
Announced over $21.3 billion in transaction activity, including:
The MGP Transactions for approximately $17.2 billion, which upon closing will add $1,009.0 million of annualized rent to our portfolio;
The Venetian Acquisition for total consideration of $4.0 billion, which upon closing on February 23, 2022, added $250.0 million of annualized rent to our portfolio; and
The Great Wolf Mezzanine Loan, with a total commitment of $79.5 million and interest rate of 8.0%.
Announced an increase in our quarterly cash dividend to $0.36 per share (or $1.44 per share on an annualized basis), representing a 9.1% increase compared to our previous quarterly dividend.
Completed two equity offerings with an aggregate offering value of $5.4 billion.
Settled the remaining 26,900,000 shares of the June 2020 Forward Sale Agreement for net proceeds of approximately $526.9 million.
Used the proceeds from the September 2021 equity offering and settlement of the June 2020 Forward Sale Agreement to repay in full the $2.1 billion secured Term Loan B Facility and settle the outstanding interest rate swap agreements.

SUMMARY OF SIGNIFICANT 2021 ACTIVITIES
Acquisition and Investment Activity
MGP Transactions. On August 4, 2021, we, MGP and MGM, MGP’s controlling shareholder, announced that we entered into the MGP Master Transaction Agreement, pursuant to which we will acquire MGP for total consideration of $17.2 billion, inclusive of the assumption of approximately $5.7 billion of debt. MGP is a publicly traded gaming REIT and the transaction will add $1,009.0 million of annualized rent to our portfolio from 15 Class A entertainment casino resort properties (including the Mirage) spread across nine regions and comprising 33,000 hotel rooms, 3.6 million square feet of meeting and convention space and hundreds of food, beverage and entertainment venues. Under the terms of the MGP Master Transaction Agreement, holders of MGP Common Shares will receive 1.366 shares of our newly issued common stock in exchange for each Class A common share of MGP. The fixed Exchange Ratio represents an agreed upon price of $43.00 per share of MGP Class A common shares based on our trailing 5-day volume weighted average price of $31.47 as of July 30, 2021. MGM will receive $43.00 per unit in cash for the redemption of the majority of its MGP Operating Partnership units that it holds for total cash consideration of approximately $4.404 billion and will also retain approximately 12.0 million units in a newly formed operating partnership of VICI Properties. The MGP Class B share that is held by MGM will be cancelled and cease to exist.
Simultaneous with the closing of the transaction, we will enter into the MGM Master Lease Agreement with MGM. The MGM Master Lease Agreement will have an initial term of 25 years, with three 10-year tenant renewal options and will have an initial total annual rent of $860.0 million, which will be reduced by $90.0 million to $770.0 million, subject to the pending sale of the Mirage (although, in connection with such sale, we agreed to enter into a new separate lease with Hard Rock related to the land and real estate assets of the Mirage which will have initial annual base rent of $90.0 million with other economic terms substantially similar to the MGM Master Lease Agreement, as further described below). Rent under the MGM Master Lease Agreement will escalate at a rate of 2.0% per annum for the first 10 years and thereafter at the greater of 2.0% per annum and the annual increase in the CPI, subject to a 3.0% cap. Additionally, we will retain MGP’s existing 50.1% ownership stake in the BREIT JV, which owns the real estate
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assets of MGM Grand Las Vegas and Mandalay Bay. The BREIT JV lease will remain unchanged and provides for current annual base rent of approximately $298.0 million, of which approximately $149.0 million is attributable to MGP’s investment in the BREIT JV, and an initial term of 30 years, with two 10-year tenant renewal options. Rent under the BREIT JV lease escalates at a rate of 2.0% per annum for the first 15 years and thereafter at the greater of 2.0% per annum and the annual increase in CPI, subject to a 3.0% cap. On a combined basis, the MGM Master Lease Agreement and BREIT JV lease will deliver initial attributable rent to us of approximately $1,009.0 million (which will be reduced to approximately $919.0 million upon closing of the sale of the Mirage). The tenant’s obligations under the MGM Master Lease and BREIT JV lease will continue to be guaranteed by MGM.
We expect the MGP Transactions, subject to regulatory approvals and customary closing conditions, to be completed in the first half of 2022. However, we can provide no assurances that the MGP Transactions will close in the anticipated timeframe, on the contemplated terms or at all.
Venetian Acquisition. Subsequent to year end, on February 23, 2022, we closed on the previously announced transaction to acquire all of the land and real estate assets associated with the Venetian Resort from LVS for $4.0 billion in cash, and the Venetian Tenant acquired the operating assets of the Venetian Resort for $2.25 billion, of which $1.2 billion is in the form of a secured term loan from LVS and the remainder was paid in cash. We funded the Venetian Acquisition with (i) $3.2 billion in net proceeds from the physical settlement of the March 2021 Forward Sale Agreements and the September 2021 Forward Sale Agreements, (ii) an initial draw on the Revolving Credit Facility of $600.0 million, and (iii) cash on hand. Simultaneous with the closing of the Venetian Acquisition, we entered into the Venetian Lease Agreement with the Venetian Tenant. The Venetian Lease Agreement has an initial total annual rent of $250.0 million and an initial term of 30 years, with two ten-year tenant renewal options. The annual rent is subject to escalation equal to the greater of 2.0% and the increase in the CPI, capped at 3.0%, beginning in the earlier of (i) the beginning of the third lease year, and (ii) the month following the month in which the net revenue generated by the Venetian Resort returns to its 2019 level (the year immediately prior to the onset of the COVID-19 pandemic) on a trailing twelve-month basis.
In connection with the Venetian Acquisition, we entered into a Property Growth Fund Agreement (“Venetian PGFA”) with the Venetian Tenant. Under the Venetian PGFA, we agreed to provide up to $1.0 billion for various development and construction projects affecting the Venetian Resort to be identified by the Venetian Tenant and that satisfy certain criteria more particularly set forth in the Venetian PGFA, in consideration of additional incremental rent to be paid by the Venetian Tenant under the Venetian Lease Agreement and calculated in accordance with a formula set forth in the Venetian PGFA.
In addition, LVS agreed with the Venetian Tenant pursuant to an agreement (the “Contingent Lease Support Agreement”) entered into simultaneously with the closing of the Venetian Acquisition to provide lease payment support designed to guarantee the Venetian Tenant’s rent obligations under the Venetian Lease Agreement through 2023, subject to early termination if EBITDAR (as defined in such agreement) generated by the Venetian Resort in 2022 equals or exceeds $550.0 million, or a tenant change of control occurs. We are a third-party beneficiary of the Contingent Lease Support Agreement and have certain enforcement rights pursuant thereto. The Contingent Lease Support Agreement is limited to coverage of the Venetian Tenant’s rent obligations and does not cover any environmental expenses, litigation claims, or any cure or enforcement costs. The obligations of the Venetian Tenant under the Venetian Lease Agreement are not guaranteed by Apollo or any of its affiliates. After the termination of the Contingent Lease Support Agreement, the Venetian Tenant will be required to provide a letter of credit to secure seven and one-half months of the rent, real estate taxes and assessments and insurance obligations of the Venetian Tenant if the operating results from the Venetian Resort do not exceed certain thresholds.
BigShots Strategic Arrangement. On September 15, 2021, we and ClubCorp Holdings, Inc. (“ClubCorp”), a portfolio company of Apollo, announced that we entered into a strategic arrangement to grow their BigShots golf subsidiary (“BigShots Golf”), whereby we may provide up to $80.0 million of mortgage financing for the construction of up to 5 new BigShots Golf facilities throughout the United States. As part of the non-binding arrangement, we will have a call right to acquire the real estate assets associated with any BigShots Golf facility financed by us, which transaction will be structured as a sale leaseback. In addition, for so long as the mortgage financing remains outstanding and we continue to hold a majority interest therein, we will have a right of first offer on any additional mortgage, mezzanine, preferred equity, or other similar financing that is treated as debt to be obtained by BigShots Golf (or any of its affiliates) for any multisite financing related to the development of BigShots Golf’s extensive existing and growing pipeline of facilities. Pursuant to the non-binding letter agreement, the terms and conditions of any transaction between the parties will be set forth in definitive documentation.
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Great Wolf Mezzanine Loan. On June 16, 2021, we entered into a mezzanine loan agreement (the “Great Wolf Mezzanine Loan”) with an affiliate of Great Wolf Resorts, Inc. (“Great Wolf”) to provide up to $79.5 million to partially fund the development of the Great Wolf Lodge Maryland, a 48-acre indoor water park resort located in Perryville, MD. The Great Wolf Mezzanine Loan bears interest at a rate of 8.0% per annum and has an initial term of 3 years with two successive 12-month extension options, subject to certain conditions. Our commitment will be funded subject to customary terms and conditions in disbursements to the borrower based upon construction of the development and, as of December 31, 2021, approximately $33.6 million of funds have been disbursed. We expect to fund our entire $79.5 million commitment by mid-2022.
In addition, pursuant to a non-binding letter agreement, we will have the opportunity for a period of up to five years to provide up to a total of $300.0 million of mezzanine financing, inclusive of the $79.5 million related to the Great Wolf Lodge Maryland, for the development and construction of Great Wolf’s extensive domestic and international indoor water park resort pipeline.
Disposition Activity
Sale of Louisiana Downs. On November 1, 2021, we and Caesars closed on the previously announced transaction to sell Harrah’s Louisiana Downs to Rubico Acquisition Corp. for proceeds of $5.5 million to us. The annual base rent payments under the Regional Master Lease Agreement remained unchanged following completion of the disposition.
Other Portfolio Activity
Mirage Severance Lease. On December 13, 2021, we announced that in connection with MGM’s agreement to sell the operations of the Mirage Hotel & Casino to Hard Rock, we agreed to enter into a new separate lease with Hard Rock related to the land and real estate assets of the Mirage (the “Mirage Lease”), and enter into an amendment to the MGM Master Lease Agreement to reflect the sale of the Mirage. The Mirage Lease will have initial annual base rent of $90.0 million with other economic terms substantially similar to the MGM Master Lease Agreement, including a base term of 25 years with three 10-year tenant renewal options, escalation of 2.0% per annum (with escalation of the greater of 2.0% and the increase in the CPI, capped at 3.0%, beginning in lease year 11) and minimum capital expenditure requirements of 1.0% of annual net revenue. Upon closing of the transaction, the MGM Master Lease Agreement will be amended to account for MGM’s divestiture of the Mirage operations and will result in a reduction of the initial annual base rent under the MGM Master Lease Agreement by $90.0 million. We expect these transactions to be completed in the second half of 2022, and they remain subject to customary closing conditions, regulatory approvals and the closing of the MGP Transactions. Additionally, subject to certain conditions, we may fund up to $1.5 billion of improvements for the Mirage through our Partner Property Growth Fund in connection with Hard Rock’s redevelopment plan if Hard Rock elects to seek third-party financing for such redevelopment. Specific terms of the redevelopment and related funding remain under discussion and subject to final documentation.
Caesars Southern Indiana Lease Agreement. On September 3, 2021, in connection and concurrent with EBCI’s acquisition of the operations of Caesars Southern Indiana from Caesars, we entered into the EBCI Lease Agreement with a subsidiary of EBCI with respect to the real property associated with Caesars Southern Indiana. Initial total annual rent under the lease with EBCI is $32.5 million. The lease has an initial term of 15 years, with four 5-year tenant renewal options. The tenant’s obligations under the lease are guaranteed by EBCI. Annual base rent payments under the Regional Master Lease Agreement were reduced by $32.5 million upon completion of EBCI’s acquisition of the operations of Caesars Southern Indiana and the execution of the EBCI Lease between us and the tenant. In addition, as part of the transaction, we, EBCI and Caesars entered into the Danville ROFR Agreement pursuant to which we have the first right to enter into a sale leaseback transaction with respect to the real property associated with the development of a new casino resort in Danville, Virginia.
Financing and Capital Markets Activity
Entry into New Unsecured Credit Agreement. Subsequent to year end, on February 8, 2022, we entered into the Credit Facilities pursuant to the Credit Agreement, comprised of (i) the Revolving Credit Facility in the amount of $2.5 billion scheduled to mature on March 31, 2026 and (ii) the Delayed Draw Term Loan in the amount of $1.0 billion scheduled to mature on March 31, 2025. Concurrently, we terminated our Secured Revolving Credit Facility (including the first priority lien on substantially all of VICI PropCo’s and its existing and subsequently acquired wholly owned material domestic restricted subsidiaries’ material assets) and Existing Credit Agreement (as defined in Note 7 - Debt). The Credit Facilities include the option to increase the revolving loan commitments by up to $1.0 billion in the aggregate and increase the delayed draw term loan commitments or add one or more new tranches of term loans by up to $1.0 billion in the aggregate, in each case, to the extent that any one or more lenders (from the syndicate or otherwise) agree to provide such additional credit extensions. Borrowings under the Credit Facilities will
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bear interest, at the Operating Partnership’s option, (i) with respect to the Revolving Credit Facility, at a rate based on SOFR (including a credit spread adjustment) plus a margin ranging from 0.775% to 1.325% or a base rate plus a margin ranging from 0.00% to 0.325%, in each case, with the actual margin determined according to the Operating Partnership’s debt ratings, and (ii) with respect to the Delayed Draw Term Loan, at a rate based on SOFR (including a credit spread adjustment) plus a margin ranging from 0.85% to 1.60% or a base rate plus a margin ranging from 0.00% to 0.60%, in each case, with the actual margin determined according to the Operating Partnership’s debt ratings. On February 18, 2022, we drew on the Revolving Credit Facility in the amount of $600.0 million to fund a portion of the purchase price of the Venetian Acquisition.
Entry into Forward-Starting Interest Rate Swap Agreement. On December 23, 2021, we entered into a forward-starting interest rate swap agreement with a third-party financial institution having an aggregate notional amount of $500.0 million. Subsequent to year end, we have entered into three additional forward-starting interest rate swap agreements with third-party financial institutions having an aggregate notional amount of $1.5 billion. The interest rate swap transactions are intended to reduce the variability in the forecasted interest expense related to the fixed-rate debt we expect to incur in connection with closing the MGP Transactions.
Exchange Offers and Consent Solicitations. On September 27, 2021, we announced the successful early tender and participation results of the Exchange Offers and Consent Solicitations (each, as defined in Note 3 - Property Transactions). Following the successful Consent Solicitations, the MGP Issuers executed the MGP OP Supplemental Indentures to each of the MGP OP Notes Indentures in order to, among other things, eliminate or modify certain of the covenants, restrictions, provisions and events of default in each of the indentures. The MGP OP Supplemental Indentures will become operative upon settlement of the Exchange Offers and the Consent Solicitations, which are expected to occur on or about the closing date of the MGP Transactions.
Repayment of Term Loan B Facility and Settlement of Interest Rate Swaps. On September 15, 2021, we used $2,102.5 million of proceeds from the September 2021 equity offering and settlement of the June 2020 Forward Sale Agreement (as defined in Note 11 - Stockholders Equity) to repay in full the Term Loan B Facility. In connection with the payoff of the Term Loan B Facility, the related interest rate swap agreements were unwound and settled and VICI PropCo incurred swap breakage costs of approximately $64.2 million and an accrued interest payment of approximately $2.7 million.
September 2021 Equity Offering. On September 14, 2021, we completed a primary follow-on offering of 115,000,000 shares of common stock consisting of (i) 65,000,000 shares of common stock (inclusive of 15,000,000 shares sold pursuant to the exercise in full of the underwriters’ option to purchase additional common stock) and (ii) 50,000,000 shares of common stock that are subject to forward sale agreements (the “September 2021 Forward Sale Agreements”) to be settled by September 9, 2022, in each case at a public offering price of $29.50 per share for an aggregate offering value of $3.4 billion. We received net proceeds of $1,859.0 million from the sale of the 65,000,000 shares and did not initially receive any proceeds from the sale of the 50,000,000 shares subject to the September 2021 Forward Sale Agreements, which were sold to the underwriters by the forward purchasers or their respective affiliates. On February 18, 2022, we physically settled the September 2021 Forward Sale Agreements in exchange for total net proceeds of approximately $1,390.6 million, which were used to pay for a portion of the purchase price of the Venetian Acquisition.
Settlement of June 2020 Forward Sale Agreement. On September 9, 2021, we fully settled the remaining shares outstanding under the June 2020 Forward Sale Agreement by delivering 26,900,000 shares of our common stock to the forward purchaser in exchange for total net proceeds of approximately $526.9 million.
March 2021 Equity Offering. On March 4, 2021, we completed a primary follow-on offering of 69,000,000 shares of common stock (inclusive of 9,000,000 shares sold pursuant to the exercise in full of the underwriters’ option to purchase additional common stock) at a public offering price of $29.00 per share for an aggregate offering value of $2,001.0 million, all of which are subject to forward sale agreements (the “March 2021 Forward Sale Agreements”) to be settled by March 4, 2022. We did not initially receive any proceeds from the sale of the shares of common stock in the offering, which were sold to the underwriters by the forward purchasers or their respective affiliates. On February 18, 2022, we physically settled the March 2021 Forward Sale Agreements in exchange for total net proceeds of approximately $1,828.6 million, which were used to pay for a portion of the purchase price of the Venetian Acquisition.
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KEY TRENDS THAT MAY AFFECT OUR BUSINESS
Subsidiaries of Caesars, Penn National, Seminole Hard Rock, Century Casino, JACK Entertainment, and EBCI are the lessees of all of our properties pursuant to the Lease Agreements, and Caesars, Penn National, Seminole Hard Rock, Century Casinos, Rock Ohio Ventures LLC and EBCI guarantee the obligations of their respective subsidiary tenants under the Lease Agreements. The Lease Agreements account for a substantial majority 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, such as the ongoing COVID-19 pandemic, 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.”. For a full discussion on the impact of the COVID-19 Pandemic on our business see Item 1 - “Business—Impact of the COVID-19 Pandemic on Our Business.”
We actively seek to grow our portfolio through acquisitions of, and investments in, experiential real estate in geographically diverse dynamic markets spanning hospitality, entertainment, food and beverage, leisure and gaming properties. We expect to grow our portfolio through a mix of acquisitions with new tenants and by pursuing opportunities to execute sale leaseback transactions with our existing tenants pursuant to our right of first refusal agreements and put-call agreements, as well as the funding of “same store” capital improvements with certain of our tenants at our leased properties in exchange for increased rent pursuant to the terms of our existing Lease Agreements with such tenants through our Partner Property Growth Fund. Finally, we believe the approximately 34 acres of undeveloped or underdeveloped land on and adjacent to the Las Vegas Strip that we own may provide attractive opportunities for potential future expansion and development. In pursuing external growth initiatives, we will generally seek to acquire or invest in properties that can generate stable revenue through long-term leases with tenants with established operating histories, and we will consider various factors when evaluating acquisitions and other investments, 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, as well as broader macroeconomic and other conditions that affect our tenants’ operating and financial performance, including the impact of the COVID-19 pandemic, such as inflation, labor shortages, travel restrictions and supply chain disruptions. We can provide no assurance that we will exercise any of our contractual rights to purchase one or more properties from Caesars, that Caesars or EBCI, as applicable, will trigger the rights of first offer under the Las Vegas Strip ROFR Agreement, Horseshoe Baltimore ROFR Agreement or Danville ROFR Agreement, as applicable, that we will otherwise be successful in acquiring any properties (whether subject to the Las Vegas Strip ROFR Agreement, the Horseshoe Baltimore ROFR Agreement, the Danville ROFR Agreement, or otherwise), or that our tenants will utilize any available financing opportunities under the Partner Property Growth Fund. Additionally, our ability to successfully implement our acquisition and investment strategy will depend upon the availability and terms of financing, including debt and equity capital. Further, the pricing of any acquisitions or other investments we may consummate and the terms of any leases that we may enter into will significantly impact our future results. Competition to enter into transactions, including sale leaseback transactions, with attractive properties and desirable tenants is intense, and we can provide no assurance that any future acquisitions, investments or leases will be on terms as favorable to us as those relating to recent or historical 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 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 to 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.
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DISCUSSION OF OPERATING RESULTS
Results of Operations for the Years Ended December 31, 2021 and December 31, 2020
(In thousands)20212020Variance
Revenues
Income from sales-type and direct financing leases$1,167,972 $1,007,508 $160,464 
Income from operating leases— 25,464 (25,464)
Income from lease financing receivables and loans283,242 153,017 130,225 
Other income27,808 15,793 12,015 
Golf revenues30,546 23,792 6,754 
Total revenues1,509,568 1,225,574 283,994 
Operating expenses
General and administrative33,122 30,661 2,461 
Depreciation3,091 3,731 (640)
Other expenses27,808 15,793 12,015 
Golf expenses20,762 17,632 3,130 
Change in allowance for credit losses(19,554)244,517 (264,071)
Transaction and acquisition expenses10,402 8,684 1,718 
Total operating expenses75,631 321,018 (245,387)
Interest expense(392,390)(308,605)(83,785)
Interest income120 6,795 (6,675)
Loss from extinguishment of debt(15,622)(39,059)23,437 
Gain upon lease modification— 333,352 (333,352)
Income before income taxes1,026,045 897,039 129,006 
Income tax expense(2,887)(831)(2,056)
Net income1,023,158 896,208 126,950 
Less: Net income attributable to non-controlling interest(9,307)(4,534)(4,773)
Net income attributable to common stockholders$1,013,851 $891,674 $122,177 
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Revenue

For the years ended December 31, 2021 and 2020, our revenue was comprised of the following items:
(In thousands)20212020Variance
Leasing revenue$1,410,980 $1,170,316 $240,664 
Income from loans40,234 15,673 24,561 
Other income27,808 15,793 12,015 
Golf revenues30,546 23,792 6,754 
     Total revenues$1,509,568 $1,225,574 $283,994 
Leasing Revenue
The following table details the components of our income from sales-type, direct financing, operating and financing receivables leases:
(In thousands)20212020Variance
Income from sales-type and direct financing leases$1,167,972 $1,007,508 $160,464 
Income from operating leases (1)
— 25,464 (25,464)
Income from lease financing receivables (2)
243,008 137,344 
Total leasing revenue1,410,980 1,170,316 240,664 
Non-cash adjustment (3)
(119,790)(39,883)(79,907)
Total contractual leasing revenue$1,291,190 $1,130,433 $160,757 
____________________
(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 Regional Master Lease Agreement. Upon the consummation of the Eldorado Transaction on July 20, 2020, the land component of Caesars Palace Las Vegas and certain operating land parcels were reassessed for lease classification and determined to be a sales-type lease. Accordingly, subsequent to July 20, 2020, such income is recognized as Income from sales-type and direct financing leases.
(2) Represents the Harrah’s Original Call Properties and the JACK Cleveland/Thistledown Lease Agreement, both of which were sale leaseback transactions. In accordance with ASC 842, since the lease agreements were determined to meet the definition of a sales-type lease and control of the asset is not considered to have transferred to us, such lease agreements are accounted for as financings under ASC 310.
(3) Amounts represent the non-cash adjustment to income from sales-type leases, direct financing leases and lease financing receivables 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 $240.7 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. Total contractual leasing revenue increased $160.8 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase was primarily driven by the addition of the Harrah’s Original Call Properties to our real estate portfolio in July 2020, as well as the CPLV Additional Rent Acquisition and the HLV Additional Rent Acquisition in July 2020.
Income From Loans
Income from loans increased $24.6 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase was driven by the addition to our investment portfolio of the Amended and Restated ROV Loan in July 2020, the Chelsea Piers Mortgage Loan in August 2020, the Forum Convention Center Mortgage Loan in September 2020 and the Great Wolf Mezzanine Loan in June 2021.
Other Income
Other income increased $12.0 million during the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by the additional income and offsetting expense as a result of the assumption of the HNO Ground Lease as part of the Harrah’s Original Call Properties Acquisitions in July 2020. Refer to Note 3 - Property Transactions for further description of the HNO Ground Lease.
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Golf Revenues
Revenues from golf operations increased $6.8 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. The change was primarily driven by (i) an increase in green fees and rounds played at the golf courses, (ii) the closure of our golf courses in mid-March 2020 until early to mid-May 2020 as a result of the COVID-19 pandemic and (iii) an increase in the contractual fees paid to us by Caesars for the use of our golf courses pursuant to the Golf Course Use Agreement.
Operating Expenses
For the years ended December 31, 2021 and 2020, our operating expenses were comprised of the following items:
(In thousands)20212020Variance
General and administrative$33,122 $30,661 $2,461 
Depreciation3,091 3,731 (640)
Other expenses27,808 15,793 12,015 
Golf expenses20,762 17,632 3,130 
Change in allowance for credit losses(19,554)244,517 (264,071)
Transaction and acquisition expenses10,402 8,684 1,718 
Total operating expenses$75,631 $321,018 $(245,387)
General and Administrative Expenses
General and administrative expenses increased $2.5 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase was primarily driven by an increase in compensation, including stock-based compensation.
Other Expenses
Other expenses increased $12.0 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase was driven primarily by the additional income and offsetting expense as a result of the assumption of the HNO Ground Lease as part of the Harrah’s Original Call Properties Acquisitions in July 2020. Refer to Note 3 - Property Transactions for further description of the HNO Ground Lease.
Golf Expenses
Expenses from golf operations increased $3.1 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. The change was primarily driven by an increase in rounds of golf played across our golf courses. Additionally, even though our courses were closed from mid-March 2020 until early to mid-May as a result of the COVID-19 pandemic, we continued to pay all of our golf course employees their full salaries and benefits for a period of time and, accordingly, the change in our golf course operating revenues during this time was not proportionately offset by the change in golf course operating expenses.
In addition, $3.1 million and $3.7 million of depreciation expense was incurred primarily by the golf business during the year ended December 31, 2021 and 2020, respectively.
Change in Allowance for Credit Losses
Under ASU No. 2016-13 - Financial Instruments-Credit Losses (Topic 326), we are required to record an estimated credit loss for our (i) Investments in leases - sales-type, (ii) Investments in leases - financing receivables and (iii) Investments in loans. During the year ended December 31, 2021, we recognized a $19.6 million decrease in our allowance for credit losses primarily driven by (i) the decrease in the reasonable and supportable period probability of default of our tenants or borrowers and their parent guarantors as a result of an improvement in their economic outlook due to the reopening of all of their gaming operations and relative performance of such operations during 2021, (ii) the decrease in the long term period probability of default due to an upgrade of the credit rating of the senior secured debt used to determine the long term period probability of default for one of our tenants during 2021 and (iii) the decrease in the reasonable and supportable period probability of default and loss given default as a result of standard annual updates that were made to the inputs and assumptions in the model that we utilize to estimate our CECL allowance. This decrease was partially offset by an increase in the existing amortized cost balances subject to the CECL allowance.
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During the year ended December 31, 2020, we recognized a $244.5 million increase in our allowance for credit losses primarily driven by the increase in investment balances subject to CECL. Specifically, the increase was primarily attributable to (i) the increase in investment balances resulting from the Eldorado Transaction, which includes (A) an initial CECL allowance on our $1.8 billion investment in the Harrah’s Original Call Properties, (B) an additional CECL allowance on our aggregate $1.4 billion increased investment in the Las Vegas Master Lease Agreement as a result of the CPLV Additional Rent Acquisition and HLV Additional Rent Acquisition and (C) an additional CECL allowance on the $333.4 million increased balance of our existing Caesars Lease Agreements as a result of the mark to fair value in connection with the reassessment of lease classification, (ii) an increase related to our initial investment in JACK Cleveland/Thistledown and the ROV Loan in January 2020, (iii) an increase in the short-term probability of default of Caesars as a result of the Eldorado/Caesars Merger and (iv) an increase in the long-term probability of default of our tenants due to downgrades on certain of the credit ratings of our tenants’ senior secured debt in connection with the COVID-19 pandemic. Refer to Note 5 - Allowance for Credit Losses for further details.
Transaction and Acquisition Expenses
Transaction and acquisition costs increased $1.7 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. Changes in transaction and acquisition expenses are related to fluctuations in (i) costs incurred for investments during the period that are not capitalizable under GAAP and (ii) costs incurred for investments that we are no longer pursuing.
Non-Operating Income and Expenses
For the years ended December 31, 2021 and 2020, our non-operating income and expenses were comprised of the following items:
(In thousands)20212020Variance
Interest expense$(392,390)$(308,605)$(83,785)
Interest income120 6,795 (6,675)
Loss from extinguishment of debt(15,622)(39,059)23,437 
Gain upon lease modification— 333,352 (333,352)
Interest Expense
Interest expense increased $83.8 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase is primarily driven by (i) the $64.2 million payment in connection with the early settlement of the outstanding interest rate swap agreements, (ii) the amortization of the commitment fees associated with the Venetian Acquisition Bridge Facility and the MGP Transactions Bridge Facility and (iii) the increase in aggregate debt of $2.5 billion from the February 2020 Senior Unsecured Notes offering.
Additionally, the above increase was partially offset by (i) the redemption of the Second Lien Notes in February 2020, (ii) the full repayment of the Term Loan B Facility in September 2021 and (iii) a decrease in the weighted average annualized interest rate of our debt to 4.04% during the year ended December 31, 2021 from 4.47% during the year ended December 31, 2020 as a result of (a) the weighted average interest rate on the February 2020 Senior Unsecured Notes being lower than the weighted average interest rate of the Second Lien Notes and (b) a decrease in LIBOR on the $600.0 million portion of our variable rate debt that was not hedged for the portion of the period the Term Loan B Facility was still outstanding.
Interest Income
Interest income decreased $6.7 million during the year ended December 31, 2021 compared to the year ended December 31, 2020. The decrease was primarily driven by an overall decrease in our cash on hand throughout the current year as compared to the prior year, coupled with a decrease in the interest rates earned on our excess cash.
Loss on Extinguishment of Debt
During the year ended December 31, 2021, we recognized a loss on extinguishment of debt of $15.6 million resulting from the write-off of the unamortized deferred financing fees in connection with the full repayment of our Term Loan B Facility in September 2021. During the year ended December 31, 2020, we recognized a loss on extinguishment of debt of $39.1 million resulting from the full redemption of our Second Lien Notes in February 2020.
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Gain Upon Lease Modification
In 2020, in connection with the Eldorado Transaction and as required under ASC 842, we reassessed the lease classification of the Las Vegas Master Lease Agreement, Regional Master Lease Agreement and Joliet Lease Agreement and determined the leases meet the definition of a sales-type lease, including the land component of Caesars Palace Las Vegas. As a result of the reclassifications of the Caesars Lease Agreements from direct financing and operating leases to sales-type leases, in 2020, we recorded the investments at their estimated fair values as of the modification date and recognized a net gain equal to the difference in fair value of the assets and their carrying values immediately prior to the modification. No such similar transaction occurred in the current year.
Results of Operations for the Years Ended December 31, 2020 and 2019
For a comparison of our results of operations for the fiscal years ended December 31, 2020 and 2019, 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, 2020, filed with the SEC on February 18, 2021 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 (Nareit), we define FFO as net income (or loss) attributable to common stockholders (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 non-cash leasing and financing adjustments, non-cash change in allowance for credit losses, non-cash stock-based compensation expense, transaction costs incurred in connection with the acquisition of real estate investments, 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, gains (or losses) on debt extinguishment and interest rate swap settlements, other non-recurring non-cash transactions (such as non-cash gain upon lease modification) and non-cash adjustments attributable to non-controlling interest with respect to certain of the foregoing.
We calculate Adjusted EBITDA by adding or subtracting from AFFO contractual 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 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.
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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)Year Ended December 31, 2021Year Ended December 31, 2020
Net income attributable to common stockholders$1,013,851 $891,674 
Real estate depreciation— — 
FFO1,013,851 891,674 
Non-cash leasing and financing adjustments(119,426)(39,803)
Non-cash change in allowance for credit losses(19,554)244,517 
Non-cash stock-based compensation9,371 7,388 
Transaction and acquisition expenses10,402 8,684 
Amortization of debt issuance costs and original issue discount71,452 19,872 
Other depreciation2,970 3,615 
Capital expenditures(2,490)(2,200)
Loss on extinguishment of debt and interest rate swap settlements (1)
79,861 39,059 
Non-cash gain upon lease modification— (333,352)
Non-cash adjustments attributable to non-controlling interest1,000 (3,650)
AFFO1,047,437 835,804 
Interest expense, net256,579 281,938 
Income tax expense2,887 831 
Adjusted EBITDA$1,306,903 $1,118,573 
Net income per common share
Basic$1.80 $1.76 
Diluted$1.76 $1.75 
FFO per common share
Basic$1.80 $1.76 
Diluted$1.76 $1.75 
AFFO per common share
Basic$1.86 $1.65 
Diluted$1.82 $1.64 
Weighted average number of common shares outstanding
     Basic564,467,362 506,140,642 
     Diluted577,066,292 510,908,755 
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(1) Includes swap breakage costs of approximately $64.2 million incurred by VICI PropCo on September 15, 2021 in connection with the early settlement of the outstanding interest rate swap agreements.
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LIQUIDITY AND CAPITAL RESOURCES
Liquidity
As of December 31, 2021, our available cash balances, capacity under our Secured Revolving Credit Facility and additional available proceeds were as follows:
(In thousands)December 31, 2021
Cash and cash equivalents$739,614 
Capacity under the Secured Revolving Credit Facility (1)
1,000,000 
Proceeds available from settlement of the September 2021 Forward Sale Agreements and March 2021 Forward Sale Agreements (2)
3,222,142 
Total$4,961,756 
____________________
(1)Subsequent to year end, on February 8, 2022, we entered into the Credit Agreement providing for the Credit Facilities, comprised of the Revolving Credit Facility in the amount of $2.5 billion and the Delayed Draw Term Loan in the amount of $1.0 billion, and concurrently terminated our Secured Revolving Credit Facility (including the first priority lien on substantially all of VICI PropCo’s and its existing and subsequently acquired wholly owned material domestic restricted subsidiaries’ material assets) and Existing Credit Agreement. The Credit Facilities include the option to increase the revolving loan commitments by up to $1.0 billion and increase the delayed draw term loan commitments or add one or more new tranches of term loans by up to $1.0 billion in the aggregate, in each case, to the extent that any one or more lenders (from the syndicate or otherwise) agree to provide such additional credit extensions.
(2)Assumes the physical settlement of the 50,000,000 and 69,000,000 shares under the September 2021 Forward Sale Agreements and March 2021 Forward Sale Agreements, respectively, at the forward sale price of $27.84 and $26.53, respectively, calculated as of December 31, 2021. Subsequent to year end, on February 18, 2022, we physically settled the September 2021 Forward Sale Agreements and March 2021 Forward Sale Agreements for total net proceeds of $3,219.2 million based on the forward sale prices as of the date of settlement. The proceeds from the settlement were used to pay for a portion of the purchase price of the Venetian Acquisition.
We believe that we have sufficient liquidity to meet our material cash requirements, including our contractual obligations and commitments as well as our additional funding requirements, primarily through currently available cash and cash equivalents, cash received under our Lease Agreements, existing borrowings from banks, including our Delayed Draw Term Loan and undrawn capacity under our Revolving Credit Facility, and proceeds from future issuances of debt and equity securities (including issuances under our ATM Agreement (as defined below)) for the next 12 months and in future periods.
All of the Lease Agreements call for an initial term of between fifteen and thirty years with additional tenant renewal options and are designed to provide us with a reliable and predictable long-term revenue stream. However, the COVID-19 pandemic has adversely impacted our tenants and their financial condition, and may continue to do so, due to the impact of operating restrictions and limitations imposed from time to time, as well as potential property reclosures. In the event our tenants are unable to make all of their contractual rent payments as provided by the Lease Agreements, we believe we have sufficient liquidity from the other sources discussed above to meet all of our contractual obligations for a significant period of time. Additionally, we do not have any debt maturities until 2025. For more information, refer to the risk factors in Part I. Item 1A. Risk Factors.
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, including as a result of the COVID-19 pandemic. In particular, in connection with the COVID-19 pandemic and its impact on our tenants’ operations and financial performance, 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, current or future adverse economic conditions. In addition, any such tenant default or failure to make full rental payments could impact our operating performance and result in us not satisfying the financial covenants applicable to our outstanding indebtedness, which could result in us not being able to incur additional debt, or result in a default. Further, current or future economic conditions could impact our tenants’ ability to meet capital improvement requirements or other obligations required in our Lease Agreements that could result in a decrease in the value of our properties.
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, uncertainties related to COVID-19 and the impact of our response and our tenants’ responses to COVID-19, general economic conditions, general market conditions for REITs, market perceptions and the trading price of our stock. We will continue to analyze which sources of capital are most advantageous to us at any particular point in time, but the capital markets may not be consistently available on terms we deem attractive, or at all.
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