VICI Properties Inc (VICI) — Q2 2023 Earnings Call Transcript

Thank you, everyone. We're excited to talk this morning about our Q2 2023 results featuring a year-over-year AFFO per share growth of 11.9%, which we believe will be among the higher growth rates for S&P 500 REITs for Q2 2023, and yet at one of the lowest price to earnings growth ratios, PEG or PEG plus yield ratios among the S&P 500 REITs. For the course of the call, John will share with you what we're doing strategically to continue our growth, and David will give you details on our liquidity position, our Q2 2023 results and our updated earnings outlook to year-end. I will now spend a few minutes on the exciting news we shared last night with the announcement of our significantly expanded growth partnership with Canyon Ranch, a legendary and leading brand in the place-based wellness sector. Indeed, I'm excited to say that the VICI team is conducting this call from Canyon Ranch Lennox in the beautiful Berkshires in Massachusetts. The key elements of our expanded Canyon Ranch partnership include making up to $150 million preferred equity investment in the Canyon Ranch operating company to support the expansion of the Canyon Ranch operating and digital platforms as well as enhancements to the Tucson and Lenox assets. VICI also intends to provide approximately $150 million of mortgage financing secured by Canyon Ranch Tucson and Canyon Ranch Lenox to refinance Canyon Ranch's existing CMBS debt. With this refinancing serving as a bridge to enhancing VICI's embedded growth pipeline by specifically allowing for VICI's conversion of its existing purchase options on Canyon Ranch Tucson and Canyon Ranch Lenox, which are converting to call rights, whereby VICI can elect to acquire the real estate assets of Canyon Ranch Tucson and Canyon Ranch Lenox in the coming years, subject to certain conditions, with Canyon Ranch continuing to operate the assets under long-term triple net leases. This also includes VICI's previously announced commitment to provide up to $200 million of development funding for Canyon Ranch Austin, which is scheduled to open between 2025 and 2026 with a call right to own the real estate upon stabilization. And finally, the joint development of a strategy of identifying and potentially acquiring conventional resorts that have conversion potential to new Canyon Ranch resorts with Canyon Ranch operating the resorts and VICI owning the resort real estate under a long-term triple net lease. Canyon Ranch has nearly 45 years of operating history. It serves a highly affluent clientele that invest vigorously through all cycles in medical and holistic life enhancement experiences and services. With only 2 established destination resort locations, we believe Canyon Ranch is positioned to significantly expand its clientele and geography domestically and internationally. We are investing in Canyon Ranch to help fund and energize that expansion gaining through our partnership the opportunity to fund the acquisition and integration of new Canyon Ranch Resorts. Under the leadership of CEO, Jeff Kuster, the Canyon Ranch team is poised to grow its brand reach and network breadth, both programmatically and geographically. And of all the elements of our expanded partnership with Canyon Ranch, John Goff, Canyon Ranch's leadership and I are most excited about network expansion in the years ahead. Both John Goff and I believe that the conventional resort sector could see elements of distress in the next few years, less to do with operating performance and more to do with refinancing constriction. As we have pointed out in our transaction deck, which can be found at our website, more than $37 billion of resort and hotel CMBS financing will come due from 2024 through 2028. And I should point out that, that's only a fraction of the overall mortgage financing on U.S. hotels and resorts during this period. We believe that within those billions of dollars, our resorts could meet Canyon Ranch's conversion criteria. The conversion of a conventional resort to a Canyon Ranch Resort has the potential to be transformative thanks to the capital and operating dynamics of the Canyon Ranch economic model. The Canyon Ranch model centers on maximizing the guest experience of space, indoors and out, and maximizing the guest experience of time through Canyon Ranch's holistic wellness and life enhancement offerings. This maximization of experiences leads to a revenue intensity within the Canyon Ranch model that surpasses the economic intensity of a conventional resort, potentially giving Canyon Ranch and VICI competitive advantage in acquiring and realizing value out of resort locations meeting our criteria. I believe our growth opportunity with Canyon Ranch is a generational opportunity in multiple senses of generational. Wellness is a secular growth trend that is multigenerational in its consumer profile and generational in terms of its secular outlook and growth opportunity. And Canyon Ranch Resorts are real estate built to last for generations. At VICI, we invest in partnerships and real estate assets that will preserve and grow value for many generations to come. As you look across the spectrum of S&P 500 REITs, ask yourself is the real estate of high quality and generational durability? And does the real estate enjoy the benefit of cultural and demographic tailwinds that will sustain and grow the value of the real estate for generations to come? With VICI, I believe you get high-quality enduring real estate occupied by operators serving multiple generations of customers for generations to come. We believe our expanded partnership with Canyon Ranch is a superb example of this value proposition. With that, over to you, John Payne.

Thanks, Ed. Good morning, everyone. Ed makes an excellent point on the quality enduring aspects of VICI's portfolio. Our tenants continue to prove their operational excellence and their ability to innovate and evolve their business. And importantly, for VICI, their assets as well. The results that continue to come out of Las Vegas speak to our tenants' operational quality and the operating credit, which we believe accrues to the value of our real estate. I will touch on Las Vegas in the gaming sector shortly. But I wanted to emphasize the type of portfolio we have built and that the team continues to build at VICI. These characteristics are a core focus of our strategy as we meet potential partners in gaming and nongaming experiential sectors, both domestically and internationally. To recap our second quarter and subsequent activity, VICI continued its international expansion into Canada with our announcement of the acquisition of 4 gaming assets from Century Casino in Alberta. We also closed on the acquisition of the Rocky Gap Casino Resort in Maryland this week, again with Century Casinos. Our partnership with Century is a great example of the type of operators we look for as the relationship is a win-win for both businesses as we grow together. Canyon Ranch also exemplifies the type of growth-minded partner with operational excellence and place-based wellness. As described earlier, we are very excited to deepen and expand the relationship into the future. Growing with our partners as they look to enhance and expand their businesses is a core component of our strategy as we develop and deepen our relationships across gaming and the non-gaming sectors. This approach helps VICI continue to grow a more visible pipeline into our future with operators we value and trust. It also allows VICI to build a portfolio of assets with each partner that we believe can meaningfully impact VICI's growth over time. In the gaming sector, we continue to be impressed by our tenants. They exemplify the operational excellence we seek to find as we expand into other sectors. In what other sector right now, can you find a headline that reads 'Another all-time record result, but in line with consensus.' Las Vegas has remained at or near all-time highs in terms of margins and results and is continuing to see record traffic. Regional casinos are performing well as the high-value consumer segment remains quite healthy. We continue to see many domestic real estate opportunities in gaming, including in markets where we do not currently own assets and as the industry expands its footprint into new areas of the United States. We also remain focused on international opportunities with the team traveling the globe this year, meeting new potential partners. As VICI's brand has ascended, the funnel of opportunities has expanded in both gaming and non-gaming. We've added resources to meet the expanded funnel of opportunities. And as always, we work closely with our advisers and those in the VICI network to help force multiply our ability to create and evaluate opportunities. For non-gaming, we are intensely studying various sectors at a category level and operating level and at an asset level. Notably, in the family entertainment and sports categories, we're moving past the evaluation stage and into constructive discussions on how VICI's capital can fit best with our growing relationships. As you know, our relationships at VICI are at the heart of our success, and they take time to cultivate as we aim to find the best solutions that meet the goals of both sides, especially in an ever-evolving economic and capital markets environment. We're excited about how these relationships are developing. The VICI team has been hard at work this year, building relationships and opportunities for a pipeline of growth across multiple sectors and geographies in the years to come. We are focused on partnering with best-in-class growth-minded operators with whom VICI can continue to grow our high-quality and generational real estate portfolio. We worked tirelessly to deliver results to our shareholders, evidenced by the last 5.5 years. Now I will turn the call over to David, who will discuss our financial results. David?

Thanks, John. I'll keep my remarks brief as we want to leave as much time for everyone's questions, but I do want to touch on our liquidity and our updated full year guidance. We are constantly focusing and at times obsessing on the balance sheet as we work to bring our leverage back down to our target range of 5 to 5.5x, while ensuring we have the dry powder to continue to fund accretive growth for our shareholders. We are diligently working with the agencies to improve our credit ratings over time, lower our cost of capital while balancing the right leverage for the company. At quarter end, we had approximately $4 billion in total liquidity, comprised of approximately $740 million in cash, $870 million of net proceeds available under our forward sale agreements and $2.4 billion of availability under the revolving credit facility. Subsequent to quarter end, we settled approximately $190 million in shares under our forward sale agreements to fund the closing of Rocky Gap. In terms of leverage, net debt to annualized Q2 adjusted EBITDA is approximately 5.6x. We have a weighted average interest rate of 4.34% taking into account our hedge portfolio and a weighted average 6.4 years to maturity. Turning to the income statement. AFFO per share was $0.54 for the quarter, an increase of nearly 12% compared to $0.48 for the quarter ended June 30, 2022. Our results once again highlight our highly efficient triple-net model given the increase in adjusted EBITDA as a proportion of the corresponding increase in revenue. Our margins continue to run strong in the high 90% range when eliminating non-cash items. Our G&A was $15 million for the quarter and as a percentage of total revenues was only 1.7%, in line with our full year expectations and one of the lowest ratios in the triple-net sector. Turning to guidance, we are updating AFFO guidance for 2023 in both absolute dollars as well as on a per share basis. AFFO for the year ending December 31, 2023, is now expected to be between $2.13 billion and $2.16 billion or between $2.11 and $2.14 per diluted common share. Just to reiterate, based on the midpoint of our updated guidance, VICI expects to deliver year-over-year AFFO per share growth of 10%, one of the highest growth rates across REIT brands. And as a reminder, our guidance does not include the impact on operating results from any announced but unclosed transactions, interest income from any loans that do not yet have final draw structures, possible future acquisitions or dispositions, capital markets activity or other nonrecurring transactions or items. And as we've discussed with you in the past, we report a non-cash CECL allowance on a quarterly basis due to its inherent unpredictability, which leaves us unable to forecast net income and FFO with accuracy. Accordingly, our guidance is AFFO focused, as we believe AFFO represents the best way of measuring the productivity of our equity investments in evaluating our financial performance and ability to pay dividends. With that, operator, please open the line for questions.

Congratulations on Canyon Ranch. But my first question is actually on Bellagio and news around that, that was out around the quarter. Can you just maybe give us your view on how you would think about a transaction like that or the appetite to do something of that nature?

Yes. Tony, I'll start and John and David can chime in as they wish. I want to answer that question at the level of general principles. We take great care in how we acquire and that care manifests itself in us not attempting to buy what we can accretively pay for. And so we evaluate every situation on the basis of can we create value for our investors straight out of the gate. Our net lease model is a model in which the yield we get at the outset is the yield we're going to live with. I mean, we'll obviously get rent escalation over time and increasing yields based on that. But we are not a category where we can go in and accept a dilutive yield going in on the basis of having an underwriting thesis of asset management that's somehow going to magically transform a dilutive yield into an accretive yield. So we are very careful and very humble in understanding what we can and can't do, and that guides our investment decision-making.

Okay. And then just one question on Canyon Ranch and the pref into the operating platform. Is that something that is currently going to make money, either from a cash flow basis or even from an earnings point of view? And then just also, how you thought about making an investment into one of your partners' operating platform as we think about could that happen going forward and more frequently?

Yes. So I'll take the second part of your question and the first, and then David can answer the first part of your question. In terms of will we be doing a lot more of this? I would say generally, no. I wouldn't rule it out, but I think there's idiosyncrasies, beneficial idiosyncrasies to the Canyon Ranch situation, Tony, that gave us high conviction that this was the right thing to do in this situation, investing in the Canyon Ranch operating platform. Insofar as we look across experiential sectors, we're particularly intrigued with the degree to which wellness is a globally magnificent business in terms of its economics and its scale. As we pointed out in our transaction deck, McKinsey estimates that wellness, as manifested in the Canyon Ranch model, is a $1.5 trillion global industry. And yet, we think it's one of the least consolidated experiential sectors, especially in relation to its magnitude globally. And so we believe Canyon Ranch has a unique growth opportunity that deserved a unique solution in terms of VICI providing growth capital into the operating platform in this particular situation. And then David, do you want to take the first part?

Yes. Tony, I mean, it goes to Ed's comments around, it's a holistic solution where we obviously provided the pref and then we'll fund the loan here in the not-too-distant future. But it all goes to the opportunity that Ed and John talked about on CNBC last night, that this was a much greater opportunity than just the pref. The pref itself is accretive to us. It does make money. We funded $90 million yesterday, and we will have a delayed draw funding schedule that will happen over the next 3 or 4 quarters. So it's a phenomenal tool to be partners with the organization and grow together.

Small technical question. David, what is implicit CPI in your guidance for the balance of the year? What are you assuming on lease escalations, I guess, on a blended basis?

Yes, Jim, we just assume the base rates. If we had a crystal ball, we could predict CPI, but we don't. For some of the regional areas, it's obviously 1.5%, but it's simply the base rates in our guidance.

Great. What are your plans regarding that? And then for John, you mentioned the addition of resources to explore new verticals. Could you provide more details on that? Are you referring to personnel or something else? What might the associated costs be?

We have been adding resources. About a year ago, we appointed a new Chief Investment Officer, and we have been expanding David and Aaron's team to dive deeper into the segments we are examining. This is essential because there are limited places I can be and only so much that a small number of us can explore. We recognized the need to bring in additional resources to enhance our productivity.

As we think about this growth beyond gaming in vehicles that are not the same kind of lease structures you have, right, loans, et cetera. Obviously, the risk profile on those are a bit different, but you're getting paid for that risk. If you could just update us or talk through how you think about that risk and the payment for that risk, it would be helpful.

Yes. So I think when it comes to VICI's credit activities, we do, as you suggested, David, we take great care in the underwriting. I think one of the key elements of our underwriting is that when it comes to absolute bottom line risk, it would be an asset we would be very happy to own if we ended up needing to own it. We don't want to lend against assets we would never want to own. That for us is absolutely existential. And obviously, we want to make sure we're putting money behind not only a really good asset, but a really good operator in whose credit we can be confident whether they are developing or operating. So in this particular time, I would also say that it is a very accretive deployment of our capital insofar as the overall real estate transaction market continues to be really depressed in terms of activity. I believe the last month that was reported on it was down about 60%, 70% year-over-year. So credit does give us an opportunity to deploy capital accretively in a period in which the transaction market is still somewhat stalled, especially based upon would-be sellers and would-be buyers not having high conviction around how assets should be valued.

Ed, can I add something to that?

Sure.

Just because we've been focusing on nongaming, we should not overlook that we continue to explore gaming assets globally. While much of our discussion revolves around the exciting new partnerships we've established in the experiential sectors, we remain committed to the casino business. We are actively investing resources to identify unique opportunities throughout the United States and worldwide.

I just wanted to ask, it looks like the Venetian Palazzo is going to unionize, and I'm just wondering, I know it probably doesn't change your rents, but do you think it meaningfully changes the tenant's coverage ratios as they move to that more structured workforce?

Look, it's hard for us to quantify that. That's probably a question for the operator. But I will remind you, and you know this well, and you've heard me say this many a time, whether the business is up 5%, 10%, or down 5%, VICI and its 5.5 years has collected 100% of its rent from all of its operators. So this is an operator decision that the Palazzo team made, and I think they feel very good about the workforce there.

And Smedes, let me just add, while generally, we do not, for very good reasons, disclose asset level 4-wall rent coverage or EBITDAR, EBITDA before rent, the Venetian did go before the Nevada Gaming Board back in November and did disclose at that time what they expected to achieve for 2022 EBITDAR at the resort and they disclosed they are on track for $650 million of EBITDA before rent. And you know that in our first year, we were collecting $250 million of rent. So there is a lot of coverage at the Venetian.

Yes, fair enough. You mentioned that there is more clarity on the family entertainment and sports area you are exploring. Is that something you hope to announce within this year? Could you provide a bit more detail on those comments?

John?

Yes, Smedes, I can't predict when we will make announcements. I believe we are currently exploring two sectors and are in the evaluation stage, considering how we can effectively use our capital to support the growth of family entertainment companies or those in the sports category. I cannot specify when or if a deal will occur. I just wanted to emphasize that we are currently examining these two sectors more closely.

First question, Ed, your comments in response to a previous question, the company is very focused on AFFO growth and investing on an accretive basis relative to your cost of capital. But how do you weigh asset quality relative to the initial yield and AFFO accretion that an investment may generate? And is there a situation where you could justify making an investment that commands a lower initial yield, but maybe meaningfully improve portfolio quality and it's relatively NAV neutral, but again, may weigh on the company's AFFO growth initially?

Yes. It's a really good question to ask, Todd. And the way we think about it is that we absolutely do recognize the value of quality. And we can find ourselves in situations where we're willing to accept a lower yield on the highest quality real estate. We still want it to be an accretive yield. We can't accept a dilutive yield in the name of quality. But at the end of the day, we are solving for a blended yield across our investment activity. And so if we can buy great real estate at a thinner but still accretive yield, and match that with an investment in good real estate at higher yields, and end up with a blended yield that creates real value for our shareholders, that's how we are, and that's how we will run the business.

Okay. Are you able to provide some details about the pricing for the preferred equity investment and the mortgage financing related to Canyon Ranch?

Yes, Todd, it's David. It's good to speak with you. We are not providing specific details about deals like we have in the past due to the competitive nature of capital and the relationships involved. As I mentioned, our focus is on achieving a blended yield that enhances our cost of capital. Therefore, we are confident in our investment strategy.

We do. And Todd, this is a great way of elaborating on the first question you asked. I mean we are sitting here in a mansion in the Berkshires. It is the definition of high-quality real estate built to last for generations. And you can be confident that when you put all this together, we are achieving accretion for our shareholders.

Congrats on the deal with Canyon Ranch. Maybe this is for Ed. But longer term, what would you like to see the mix of rent between gaming and nongaming tenants?

Yes, Barry. I’m not sure if I wish we had a precise answer. The reality is we don’t have a highly precise answer. It will largely depend on what we can source globally in both gaming and non-gaming. However, I believe it’s safe to say that gaming will continue to be the majority of our rental income given the significant economic benefits derived from gaming assets both domestically and internationally. We won’t impose an arbitrary division on our rent to specify how much should come from gaming versus non-gaming. Our focus will be on achieving growth in value and quality rather than managing by those specific figures.

Understood. And then just as a follow-up, as I guess we think about the pipeline of gaming opportunities, you could kind of put it in 2 buckets or probably more, but for one, there are operators that you've worked with out there and have good relationships and opportunities for follow-up deals. But then there's also a number of large operators who really haven't done much sale leaseback or any. I'm curious to get your thoughts on the path or the catalyst from here to get some of those players over the fence.

John?

I mean, we are following the same plans that we have since we started the company, continuing to build relationships, like you said, with our existing operators, and meeting the operators that we've not been fortunate yet to do business with, educating them on how our capital can work, how we can help them grow, once we're partners, how we can use a property growth fund to help them grow, traveling not only domestically as we started the company but now as you can see, we've been in Canada and acquired some real estate in Canada, and we're traveling the world to find other unique opportunities that are out there. So it's just about building relationships and letting them know that should there be a time they want to monetize their real estate or they want to acquire another company or an asset, that we're there to be a good partner.

I just want to go back to the Canyon Ranch opportunity. You did mention there's a lot of room for growth, both domestically and internationally. I guess maybe looking at the next 5 to 10 years, how big can this get? And what do you think is an average acquisition volume price? Would $100 million unit be a good estimate?

I believe you're on the right track, Wes. The optimal size for Canyon Ranches is generally between 100 and 150 rooms. However, the number of rooms is just one aspect; the surrounding facilities are what truly set Canyon Ranch apart. John Goff mentioned on CNBC last night that he envisions this becoming a $2 billion relationship in the coming years, which is encouraging to hear. Considering the $1.5 trillion global industry that McKinsey predicts will grow at a compound rate of 5% to 10% annually, we believe there are significant growth opportunities for the Canyon Ranch brand both in North America and internationally. Additionally, I want to reiterate something related to Barry's earlier question: we pursue partnerships rather than simply transactions. It's clear that if Canyon Ranch had opted to sell the real estate to a traditional hotel REIT, they would have received impressive pricing and low cap rates for such esteemed real estate. However, the reason for our approach is that from the very beginning, we took a comprehensive view of Canyon Ranch's operations and capital requirements, leading us to develop solutions that extend beyond a typical real estate deal.

Got it. And then maybe one for the balance sheet. I did notice you settled some shares and you just carrying the cash balance. What are you thinking there?

No, as we settled 6 million shares, about $190 million to fund the Rocky Gap transaction that closed 2 days ago.

Okay. But you still have like about $700 million, I guess, you want to carry a larger cash balance maybe over the near term?

The cash on specifically, right. That's a result. Remember, we got repaid on the Caesars Forum Convention mortgage back on April 1. So that elevated the cash balance a little bit, but this obviously gives us additional liquidity and dry powder to continue to grow.

Just quick ones. So all the leverage at the end of the quarter at 5.6 came down nicely. Where does that trend to at the end of the year? And sort of the corollary to that is maybe what's the updated thoughts on the Horseshoe Park in Indianapolis? What are some of the things you're looking at to potentially move on that?

Yes, Ron, I appreciate your notice on that. I mean, it will continue to trend down to the 5.5 range, maybe just slightly north of that. But as I stated in my remarks, right, we're very focused on getting sub-5.5 and continuing to improve our credit profile.

John?

And Ronald, as it pertains to the two wonderful assets in Indianapolis, the owner of the assets and the operator Caesars continues to do a fabulous job adding capital to the facilities, implementing the table games that the law passed a couple of years ago and growing that business. We continue to monitor those two assets with them. We do have a put-call agreement with Caesars that lasts until the end of December '24, and we continue to evaluate that opportunity.

My second question is about the $26 million to $27 million in student loan payments starting. When you speak with the operators, is that something they're considering as a potential challenge?

We start, John, and I have an additional point I wanted to make.

No, go ahead, go ahead, and then I'll jump in.

Yes. Ron, Moira and I were discussing recently the significant level of infrastructure spending currently occurring in the U.S. Moira, if you have the figure available, there's a tremendous amount of economic and job growth linked to this infrastructure investment underway in the U.S. right now. I believe that the impact of student loan repayments might be more than offset by the economic vitality generated by the ongoing infrastructure spending, particularly among the workforce that tends to engage more in gaming. Overall, we would be quite optimistic about the potential economic vitality in the U.S. in the coming year or more and what it could mean for the experiential sector and gaming specifically. John, do you have anything to add?

No, Ron and Ed, I wanted to mention Las Vegas. We continue to receive a significant portion of our rent from the operators in the buildings there. Every day, I seem to come across articles highlighting this. I don't know if you noticed, Ronald, but June set an all-time record at the airport in Las Vegas, with a 48% growth in international business. The industry in Las Vegas and the surrounding region is demonstrating strong consumer acceptance and growth in many of these areas.

Maybe big picture, Ed or John, you kind of addressed part of this a little earlier in some of the talent that you've hired recently. But as you push into new verticals and expand your tenant base, new categories, what are some of the challenges that you face or are facing as you grow in this direction? I kind of ask in the context of some of the early-day challenges you've had in the casino space with educating investors or even just educating operators into using your source of financing. So curious kind of what you're facing now as you keep pushing.

John?

Yes, John, nice to talk to you. I actually wouldn't describe them as challenges. I'd describe them as being quite fun, particularly in the experiential sector where there hasn't been a lot of companies like ours, taking the time to explain how our capital can help these experiential companies grow. And it is, for me, having resources and folks around me that we're out again, traveling the world and spending time with these very unique and interesting operators, whether that's in health and fitness or in the events business or many of the other things that we continue to explore, it has been really gratifying to explain how our company and our capital can help them grow. So I wouldn't describe it as a challenge. I just describe it as a way of helping them understand the different ways we can become partners.

Fair enough. A simpler question regarding the Bellagio as a potential opportunity. How do you view the possibility of owning all or part of an asset? I heard there might be discussions about a partial sale or a minority stake. Would that be something you consider, and how does that influence VICI's investment decisions, whether concerning the Bellagio or any future assets?

Well, John, one of the strategic motivators for doing the deal we did back in late November, early December, was to consolidate what had been a joint venture with MGM Grand Mandalay Bay. So generally speaking, while we do not rule out joint ventures, generally speaking, we are obviously going to prefer complete ownership of our assets, both in gaming and non-gaming. Again, we're not absolutely dogmatic, but it is our preference, and I think there is significance and meaning in the fact that our most recent deal in Las Vegas was the consolidation of what had been a joint venture, not the creation of a new joint venture.

John, I appreciate your commentary on the fact that you're kind of globetrotting here trying to educate and find new investment opportunities. Are you able to provide any context in terms of maybe what the investable global gaming market is, so meaning like the total number of assets that you'd even be willing to buy globally because I know you've talked specifically about certain countries you're willing to invest in. But just curious in terms of potential investable dollars.

Yes. I don't have the specific numbers right now, Greg. We continue to work on that and look across, as you mentioned, all the different countries where we potentially could place investments. But I don't have a specific number for you right now.

Greg, I'll just add, given your representatives of Scotiabank, I'll give you a little Canadian data, and that is that the absolute size is not always as important and meaningful as per capita size. As an example, the GGR in Canada, the commercial GGR in Canada is about $12 billion a year, and that compares to combined Las Vegas and regional commercial GGR in the U.S., if I believe, $70 million to $80 million. So on a per capita basis, with Canada having about one-tenth of the population of the U.S., obviously, Canadians show a higher propensity to game. And so that's one of the three real characteristics we look at as we evaluate gaming globally. It's not only the absolute size of the market, but the propensity to game and the degree to which gaming is woven into the consumer economy in those countries.

Okay. And then I guess just on domestically, what are your thoughts on Downtown Las Vegas? Are owners there just thus far resistant to sale-leaseback financing? Or is there just no need there?

I wouldn't say that, Greg. I would say that, as I've mentioned a couple of times on this call, we're continuing to build relationships and educate how our capital can work. I think you're asking if we are interested in owning real estate in that market. There are some excellent operators in the downtown market of Las Vegas that we are not currently partnered with, but we would love to collaborate with them, not just on their assets in Downtown Las Vegas, but also to explore ways we could grow together across the United States or even globally. Additionally, we currently do not have a presence in the regional Las Vegas market, where we would like to own real estate over time. As you've seen in our first five years, some of these opportunities arise quickly while others take longer. We are committed to the long-term approach, getting to know the owners and operators with the hope that, in time, a deal will come our way.

And just a final one for me. Just given the house view on the health and wellness sector, should we expect to see investments with other operators outside of Canyon Ranch?

We are very focused on Canyon Ranch due to their market leadership and growth opportunities. However, we are open to other investments within the broader wellness sector. We can already see that with Great Wolf, which could be seen as a Canyon Ranch for kids.

The slide in the deck that showed the CMBS maturities over the next few years, your potential to partner with Canyon Ranch to reposition. How many locations have you kind of identified that are real candidates for this? Have you guys gone through that process already? Just trying to get a sense of the sizing.

Yes, Nate, we've just started that process. I want to highlight that John Goff feels like he’s getting the opportunity to replicate his past success with Richard Rainwater in the early '90s, when they built Crescent Real Estate largely from the wind-up of the Resolution Trust and developed an impressive resort portfolio by taking advantage of the market distress at that time. David has already made significant progress in developing inventories. However, our initial focus will be identifying which regions of North America Canyon Ranch is currently not in and could really benefit from entering. After that, we will look for resorts that align with Canyon Ranch's criteria within those specific areas.

That's helpful. I understand you mentioned it's accretive. Can you provide more details on how accretive it is? Is it consistent with your average spreads over the historical cost of capital? I know it's sensitive, but do you have any guidance on that?

Yes. I mean Nate, good to talk to you. Directionally, that's accurate. Again, it's $150 million. We funded a little bit, $90 million this week to draw down a schedule that will happen over the next 3 or 4 quarters. So it's directionally that's in line.

And what I will tell you Nate, is that our blended yield for real estate of this quality is very compelling.

Related to Canyon Ranch, can you give us a sense of the historic cyclicality of the business there, maybe relative to traditional resorts or maybe the overall hospitality business? And then assuming you do exercise some of the call options there over time, what do you think is the right level of rent coverage relative to maybe your gaming portfolio?

Yes. So Chris, Canyon Ranch has been in operation for just about 45 years. And what they have shown through all cycles is a resilience that is far stronger than conventional luxury resorts. And so much of that has to do with Canyon Ranch being for so much of its clientele a ritual, not even just necessarily an annual ritual but in some cases, a quarterly ritual. So the commitment to Canyon Ranch on the part of the consumer is stronger than the purely discretionary commitment that you get in most luxury resorts, which I know you cover. Based on that, we do not feel we need inordinately high coverage. And yet what is very comforting is the fact that the economic intensity of these properties does create economic headroom above the rent that gives us very, very great comfort in the level of coverage.

That's really helpful color. I appreciate it. And then maybe switching gears for a second question. When you announced Rocky Gap last year, rent coverage was pretty skinny at the time. I think it was about 1.7x, if I'm right. I recognize that property has been folded into the broader master lease Century now, but would still be curious to understand what current coverage levels look like, assuming you're willing to share?

Yes, Chris, it's David. Good to talk to you. We set the coverage lower on Rocky Gap because it was entering a strong master lease. Century is an exceptional operator that enhances coverage from previous levels, as seen with the three-pack we originally acquired with them in 2019. While we can't disclose asset-level coverage due to their policy, the coverage coming from those assets is very healthy, and we are excited to integrate both that and the Alberta assets into the master lease.

Just one for me. Ed, in February, you mentioned that the debt environment back then could result in the greatest advantages to some of the biggest REITs with access to capital. I know a lot has happened since then, but is that advantage playing out the way that you thought? And do you still see that as an advantage continuing for the next few years?

Yes. I very much think so, Dan. I think that could be true in both gaming and nongaming as I think I might have mentioned on that call, Dan. We look on a weekly basis on what the yields to worst are on gaming and other leisure credits, and you're still seeing yields to worse even with the recent tightening of spreads that make sale leasebacks a very compelling alternative when it comes to refinancing the debt that will come due in the coming years in both gaming and non-gaming.

Yes. I just want to thank everybody on the call today, both the analysts who asked very good questions and all of our investors who are also on the line. We thank you for your time, and we're excited to talk to you again in a few months. Bye for now.