VICI Properties Inc (VICI) — Q2 2025 Earnings Call Transcript

Thank you, operator, and good morning. Everyone should have access to the company's second quarter 2025 earnings release and supplemental information. The release and supplemental information can be found in the Investors section of the VICI Properties website. Some of our comments today will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements, which are usually identified by the use of words such as will, believe, expect, should, guidance, intends, outlook, projects or other similar phrases are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. I refer you to the company's SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition. During the call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available on our website and our second quarter 2025 earnings release, our supplemental information and our filings with the SEC. For additional information with respect to non-GAAP measures of certain tenants and or counterparties discussed on this call, please refer to the respective company's public filings with the SEC. Hosting the call today, we have Ed Pitoniak, Chief Executive Officer; John Payne, President and Chief Operating Officer; David Kieske, Chief Financial Officer; Gabe Wasserman, Chief Accounting Officer; and Moira McCloskey, Senior Vice President of Capital Markets. Ed and team will provide some opening remarks, and then we'll open the call to questions. With that, I'll turn the call over to Ed.

Thank you, Samantha, and good morning, everyone. I'll begin today by going back to what I talked about in my opening remarks during our last earnings call in late April. In those remarks, I spoke of the paramount importance of the VICI dividend in creating value for VICI shareholders. Those remarks struck a chord for many of you, as the feedback we received from our active management owners indicated that the dividend is indeed important, and we're glad you're focused on it. Today, I want to build on those remarks by focusing on what the dividend critically contributes to, and that's total return. Total return is, of course, the function of dividend return plus dependent on valuation and incremental return generated by the capitalization of earnings growth. In a recent note, early in July, the BofA equity strategist, Savita Subramanian, wrote the headline, 'Welcome back to a total return world.' Savita goes on to say, and I quote, 'We expect a rising contribution to total return from dividends. Dividends contributed 40% of total returns from 1936 to 2021 but just over 16% over the past decade. From here, we think the contribution of dividends to returns could rise demonstrably. With aging demographics and sticky inflation risks, the supply-demand argument for inflation-protected income via stocks is, in our view, compelling and bullish.' Savita was recently featured in a Wall Street Journal cover story on this topic of total return and the contribution of dividends to total return. In that article as well as in a podcast, Savita shares analysis of nearly 100 years of total return from the Russell 1000. In that analysis, she finds that the highest total returns over that period have been generated by stocks with higher dividends, specifically by stocks in the second and first quintiles of dividend yield in that order. While stocks with the lowest dividend yields lagged the returns of higher-yielding stocks significantly, nearly 4 times higher return for the second quintile and about 2.5 times for the first quintile versus the fifth quintile, according to the Wall Street Journal. What Savita stresses is that dividend return is a key driver of delivering superior total return along with the capitalization of earnings growth. In the case of VICI, we see our total return building blocks as having three key components: Dividend return; capitalization of same-store earnings growth; and capitalization of new store growth, whether through new acquisitions or property or new loans on property. Our 2025 same and new store growth expectations are embedded in the updated 2025 earnings guidance. David will discuss in detail with you shortly. The midpoint of our revised 2025 guidance now calls for 4.4% growth in AFFO per share versus 2024. We believe this growth rate within the net lease REIT category will put us among the leaders in AFFO per share growth for 2025. To date in 2025, we are generating our earnings growth through a combination of same-store earnings growth and new store external growth. When it comes to same-store earnings growth, VICI's owners benefit from a same-store NOI growth rate that, according to Green Street's latest published net lease research, is over five times higher than the average projected rate of same-store NOI growth for net lease REITs. Our external or new store growth has been funded substantially through the deployment of our retained cash flow, meaning at this point, we are growing our 2025 earnings without significantly growing our share count and without significantly growing our net debt. What you see through this internally funded growth are the advantages of VICI having achieved our current level of scale with more than $600 million a year of retained cash flow available for investment. I will also note that we are converting our revenue growth to earnings growth at a high rate of flow-through given our continuing discipline around our G&A costs, which as percentages of both revenues and assets are among the lowest of large-cap REITs. We believe our current use of our internal funding capability, or what we call capital markets independence, together with exacting cost discipline is a sound strategy for defending our dividend, growing our earnings and creating the conditions that can potentially lead to compelling total return, no matter if external funding windows are open or closed. To be sure, in the quarters and years ahead, we may have to develop investment opportunities that require and also accretively support the issuance of incremental equity and debt in greater size. But for the time being, we believe we are serving our stakeholders well by generating earnings growth and striving for compelling total return without significant reliance on equity and credit markets. Before I turn the call over to John, I'll finish by repeating what Savita said: Welcome back to a total return world. Here at VICI, we always live in a total return world, and that's because we always believe in the power of compounding. Total return is the power source of compounding. No matter what the market does, we never lose faith in that power. And now over to you, John.

Thanks, Ed. Good morning to everyone. VICI's power source of compounding, our total return, is supported by our disciplined approach to building a high-quality portfolio and cultivating a network of best-in-class operating partners. The investments announced during the second quarter, including Red Rock Resorts as well as Cain International and Eldridge Industries, exemplify the relationship-based nature of our capital and the dynamic operators with whom we seek to partner. As we shared on our first-quarter earnings call, we entered into an agreement to provide up to $510 million for the development of the North Fork Mono Casino Resort, which will be developed and managed by Red Rock Resorts. Red Rock Resorts is a best-in-class gaming developer and operator with decades of experience across commercial and tribal assets. We are thrilled to initiate our partnership through this project, as we have wanted to work with the Red Rock team for years. During the second quarter, we also increased our investment in the mezzanine loan related to the development of One Beverly Hills by $150 million for a total commitment of $450 million. We initially launched our strategic relationship with Cain International and Eldridge Industries through our investment in One Beverly Hills during the first quarter, and our incremental investment is representative of that continued partnership. We look forward to continue to support Cain International and Eldridge Industries on the One Beverly Hills development as they work on their next leg of financing for the project. Cultivating new relationships is key for VICI, but the quality of our existing real estate portfolio and the quality of our operators behind it is the foundation of VICI's sustained growth. While recent headlines around Las Vegas have focused on slowing visitation, dips in gross gaming revenue, and a decrease in Canadian travel, we remain confident in the city's long-term trajectory. As Las Vegas has experienced multiple years of record-breaking growth, it is not unexpected to see a period of normalization, particularly as it laps a Super Bowl year amidst broader economic uncertainty. As Steve Hill, the CEO of the Las Vegas Convention and Visitors Authority, recently noted, the higher-end consumer remains resilient on the Las Vegas Strip with higher-end properties still running at over 90% occupancy levels. The lower-end consumer, who is budget conscious, is the consumer who has declined recently, and the operators of the lower-tier properties are already making adjustments to attract that cohort. From VICI's perspective, our Las Vegas Strip real estate portfolio continues to be well-positioned. Importantly, although these near-term dynamics may impact operator performance, VICI's rental income remains well insulated from cyclical fluctuations in our tenants' finances. That is the value of our model. Long-term leases, 90% of which by rent roll, include corporate guarantees that serve as a powerful mitigant of risk. Guaranteeing rent at the parent level adds cushion to VICI's overall lease coverage, allowing operators to pay rent from the total system, not just brick-and-mortar earnings, thus limiting the idiosyncratic risk of any one geography or asset. This structure has also supported VICI's track record of 100% rent collection in cash on time since inception. Even as Las Vegas experiences what we believe to be temporary moderation, we have conviction in both the staying power of the city as a global entertainment epicenter and in the creativity of our operating partners. A recent article from Las Vegas Weekly discusses how operators are focusing on attracting new generations as millennials overtake Gen X in visitor volume share. The article highlights millennial and Gen Z taste for experiences different from the traditional gambling enjoyed by their parents and grandparents, and experiential innovation is evident on the Las Vegas Strip with the emergence of day club concepts, elevated food and beverage experiences, and the increasing popularity of professional sports. There are also long-term tailwinds for Las Vegas, including the planned construction of the Brightline West high-speed rail line, the extension of the F1 contract through 2027, and the forthcoming addition of the A's Stadium. We feel fortunate to be woven into the fabric of this iconic city and are excited about the opportunities we believe continue to be offered in the years ahead. Now I will turn the call over to David, who will discuss our financial results and guidance. David?

Thanks, John. Greatly appreciate you all joining us today. Starting with the balance sheet and recent activity. In April, we closed our bond offering, where we issued $400 million of 3-year notes at a coupon of 4.75% and $900 million of 10-year notes at a coupon of 5.625% for a blended coupon of 5.34%, including the impact of our hedging program. We now have no debt coming due until the second half of 2026, where we have September and December maturities, which we plan to address next year. Subsequent to the quarter end, we settled approximately 9.7 million shares under our forward equity ATM program for $296 million of net proceeds, which were partially used to repay $175 million that was outstanding on our revolving credit facility and to fund the incremental One Beverly Hills investment. Taking this activity into account, we have approximately $2.9 billion in total liquidity comprised of $325.6 million of estimated proceeds now available under our outstanding forwards, $2.4 billion of availability under our revolving credit facility, and approximately $233 million in cash as of quarter end. Touching on leverage, when we account for the revolver repayment, our total debt is $17.1 billion, and our net debt to annualized second quarter adjusted EBITDA is approximately 5.1x, well within our target leverage range of 5 to 5.5x. We have a weighted average interest rate of 4.47% as adjusted to account for our hedge activity and a weighted average of 6.5 years to maturity. Our constant focus on managing our cost of capital, balance sheet, and liquidity profile through volatile markets allows our team to remain opportunistic in an effort to continue pursuing our sustained and sustainable return goals for our shareholders. Moving to the income statement, FFO per share was $0.60 for the quarter, an increase of 4.9% compared to $0.57 for the quarter ended June 30, 2024, and our results 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 $14.6 million for the quarter, and as Ed mentioned, as a percentage of total revenue, it was only 1.5%, which continues to be one of the lowest ratios in not only the triple net sector but across all REITs. Finally, moving to guidance, as we announced last night, we are raising our AFFO guidance for 2025 in both absolute dollars as well as on a per share basis. AFFO for the year ending December 31, 2025, is now expected to be between $2.5 billion and $2.52 billion, or between $2.35 and $2.37 per diluted common share compared to our prior AFFO per share guidance of $2.33 to $2.36. The raise represents an increase at both ends of the range by $0.02 on the bottom and $0.01 on the top end. Based on the midpoint of our raised 2025 guidance, VICI now expects to deliver year-over-year AFFO per share growth of 4.4%. Just as a reminder, our guidance does not include the impact on operating results from any transactions that have not closed, interest income from any loans that do not yet have final draw structures, possible future acquisitions, dispositions, capital markets activities, or other nonrecurring transactions or items. With that, operator, please open the line for questions.

This is Cheryl on for John. What drove the decision to increase your mezzanine loan investment on the One Beverly Hills by $150 million? Just curious to know your thoughts.

Yes, this is David, I can start. As we talked about the original announcement, this is part of a bigger financing that Cain and Eldridge are undertaking to develop what is upwards of a $6 billion, $7 billion, $8 billion project in Beverly Hills. Our commitment to the project will likely increase over time as they work on implementing the construction financing to finish the project. Right now, this is a combination of a bank financing and an SBL financing that we are entering into. This has a maturity in March of 2026, and Cain and again, Eldridge, are working on broader construction financing that is in process and will be able to take the project to completion in '27.

Got you. That's helpful. And we've seen a handful of loan and mezzanine opportunities recently. Are you seeing or expecting any fee simple opportunities to come from these relationships?

Yes. In certain cases, yes. It will take time for those to realize themselves. But certainly, in the case of Cain and Eldridge, as an example, given the breadth and depth of their investments across the experiential spectrum, we would very much anticipate participating with them in the acquisition of real estate, which was indeed at the heart of what Todd Boehly and Jonathan Goldstein said in the release we put out back in February about our forming a strategic alliance with Cain and Eldridge around that very topic.

Maybe broadly speaking, how have deal discussions been as of late for either sales leaseback or other loans? Any major differences in the last 90 days, either gaming, nongaming, existing tenants, or potential new tenants? Just curious at a high level how trends have been?

Yes, Barry, it's great to hear from you. There hasn't been much difference from quarter to quarter. We started the company eight years ago focused solely on gaming. Over the past six or seven years, we've diversified into other sectors. As we expand our opportunities, we naturally have more discussions. As Ed mentioned, we've also leveraged our credit book to form new relationships with those who may not have been inclined to sell their real estate. To answer your question, we are quite busy. We're exploring a variety of sectors, and there have been no changes whatsoever in the past 90 days.

Got it. That's helpful. And then your closest competitor has taken a stand, perhaps, a bit against iGaming proliferation. I'm not sure if you've recently addressed your views on a public call. Just curious to hear what they may be at this time.

Go ahead, John.

No, I think you're probably talking about our closest competitor. I assume you said GLPI has taken a stance on iGaming. Obviously, it's something that we continue to monitor. It is important to many of our tenants to their overall credit. As I talked in my opening remarks, we look at our tenants across not only the bricks and mortar but also their iGaming portfolio. It is something that we'll continue to monitor. We're aware of what's going on around the United States at this point.

Barry, I'll just add. So I live in a state, Rhode Island, where the motto is the lively experiment. I would say that American Gaming is engaged right now in a lively experiment on how the sector will continue to evolve both brick-and-mortar and digital. In the case of digital, both online sports betting and iGaming are included. Regulators and state legislatures have a lot of decisions to make on how they will manage the interactivity of those various categories of gaming in a way that best serves their economy and state treasuries but also job growth and sustainment, as brick-and-mortar casinos employ a lot more people in any given jurisdiction than either iGaming or online sports betting do.

My first question relates to just making debt investments versus straight property investments. I know there's some sensitivity around the debt book because of the shorter duration. But if you wanted to bring it up to, say, 10% of the balance sheet or something, do you think there are good opportunities out there that you're seeing that you're just being sensitive to because of the size of the book? Or do you feel like you're doing what you want to do there? Just wondering about the broader opportunity set there.

We are very focused on the cadence of capital as it goes out the door and obviously, the return of capital to us and how we will manage earnings flow. Right now, we are in a time when credit is getting a lot of attention, and there does seem to be generally more credit opportunity than real estate transaction opportunity. This is not specific to VICI.

Okay. And my second question is on the income statement in the quarter. I think you had about $7 million of transaction costs. It just seemed a bit high for a quarter that was fairly quiet. I was wondering if you can elaborate on what drove that?

We're constantly active in looking at value opportunities. Sometimes, things get to the goal line, and sometimes they don't. We wrote off some costs that were pursuit costs from prior quarters that are no longer pursuit costs.

John, in your prepared remarks, you talked a little about your views on Las Vegas and some of the thoughts about the summer, and the long-term exciting stuff happening there, and we agree. But curious, given your experience, the regional gaming markets have seen a nice uptick lately, and we're hearing that as well. I’m wondering if you could provide any kind of industry insights on how you're feeling about that market? I think it certainly highlights the value of the diversified portfolio of your tenants and your business. But curious if you think that's some real life that we're seeing in the regional markets and how you're feeling about that industry overall?

Yes. Well, John, good to talk to you. We continue to be very excited about the industry as a whole. We love to break it up as there's Las Vegas and everyone else. We break the regions, as you know, and there's so many different regions. That's the beauty of our portfolio, right? We've got all these different regional markets, and there are different reasons why we are seeing upticks in revenues and EBITDA in the regional market. Ultimately, we still really like the gaming business. We are heavily invested and have a diversified portfolio in both areas. We think we can grow in both areas and are excited to see operators continuing to be creative to drive revenues in the regional markets. As I said in my opening remarks, this is just a temporary issue in Las Vegas. When you look at the forward booking for group business in Q4 and the first two quarters of 2026, business is going to be strong. It's a credit to the operators in regional gaming that they've had years where they're a bit down, but they're being more creative and adding assets. A lot of capital deployment has been put into our assets in regional markets, and it's exciting to see that those operators are getting results.

Maybe to switch gears, John or Ed, this one might be for you. The amount of volume and capital that your tenants are investing in your assets is kind of unique to the gaming industry and to your business. We've heard about this week, whether it's New Orleans or MGM Grand. Obviously, Venetian has been a big one. It seems like that kind of gets overlooked a lot in the value of your stock price. You think about ways to highlight that value or crystallize it? I mean, are there opportunities to do more buying investments from your tenants that are committing significant capital like that? Just curious your thoughts on that opportunity.

Yes. I'll start. But before I do, I just want to apologize to those listening that our responses are, in some cases, evidently cutting in and out. We apologize for that. This is a very good question, John. From what we've been able to determine, I have to qualify this; I'm sitting next to our GC, who always wants to make sure I qualify everything I say. We cannot identify another commercial real estate category where tenants invest more into the building than ours do, with possibly the exception of data centers, where obviously the tenant invests a lot into the asset, but it is a different kind of investment. We are very happy when our partners invest in our buildings and thereby de facto increase the value of our buildings. If there is the opportunity for us to contribute capital, we're obviously very excited and honored to do that in partnership with them. There's no question that the capital invested in our buildings, which John now runs into the billions, is significant.

I do, John. I think longer-term, over the years, we will have opportunities to continue to use our capital to help accelerate the growth of our tenants' business, particularly in the large boxes that we see in Las Vegas. It's why it's a market that's unique. There's nothing like it, where one of our boxes, Venetian, is what, 17 million, 18 million square feet. We hope that continues to be a pillar of growth for our company in years to come.

I do want to follow that up, and it's similar but a different angle. Some of your tenants and partners have begun talking to us about the effects of the new tax regulations. If I'm getting the drift properly, and I'll ask for your confirmation of that, it appears to induce them to invest in the properties, either expand, renovate, add amenities, et cetera. It also seems to induce them to continue doing that ongoing to capture the bonus depreciation and therefore the tax benefit. Have you looked at it? Am I reading that correctly? Given that I think this is part of the investment case that you've been making, have you begun to talk to your tenants about it? What kind of conversations are you having?

Yes. Yes. David, you're absolutely right. There were a number of elements of the new tax bill that are beneficial. We're very glad of the fact that the REIT dividend deduction was maintained along with a number of other features that are beneficial to REITs. In the case you're talking about the bonus depreciation, yes, it is a powerful factor for our operating partners when it comes to investing in their buildings. I would point out, David, and I know you cover hotels as well. Bonus depreciation is beneficial, but you still need the capital to make the funding. The gaming business creates economic headroom that allows for that incremental capital investment. What will sustain and increase the competitiveness of Las Vegas over the coming years is the ability to continually reinvest, especially on the group side. The U.S. convention center and convention hotel landscape has seen significant under-investment in the last 10, 15, or 20 years going back to even the GFC. The ability for Vegas to continually invest in its main convention center, Mandalay Bay, Venetian, and MGM Grand, with all the big boxes, is a competitive advantage.

If I can just follow that up, I'm curious about the comment on convention facilities you feel are being under-invested. Could you elaborate on that? Why do you think that to be the case?

It's tied to the financial crisis, David, and you've seen especially urban hotel landscapes that have not been invested in, whether it be through hotel REITs or other owners of big-box convention hotels. There's a lot of tired full-service convention-serving hotel product across major American cities. It doesn't give me pleasure to say this, but there's a significant lack of investment compared to Las Vegas, whether again at the main convention center or Mandalay Bay, which is just one example.

The other thing that happened during COVID is that many cities cut their sales teams for selling conventions. Las Vegas did not do that. There has been an uptick of visitation of groups to Las Vegas, and the fact that they can visit brand-new facilities with the latest in technology has helped accelerate the growth of group business in Las Vegas. We own many facilities with great meeting and convention space, and we're excited about that.

I guess this is probably just a reminder, but as New York inches closer to issuing gaming licenses, I think, successfully by the end of the year, if MGM were to get one at the Yonkers facility, are they obligated to use you as a source of financing for their expansion there? Or do they just have the option to do that?

It's the latter. They have the option to use our capital. We're monitoring the situation. I don't think anyone knows at this time where the three licenses are going to go. To answer your question, they have the option to use our financing.

Okay. And then just presumably, there will be a third license issued. Would you guys be able to participate in that if you wanted to? Or is there some sort of restriction on only working with MGM in the New York market?

There's no restriction on the New York license. Yes, Smedes, sorry, I might have been cut off. There's no restriction at all for us.

You all have the eight Canadian properties, and we've heard about the decline in visitation to Las Vegas from Canada. When you talk to those Canadian operators, are they seeing a benefit from less outbound traffic to the U.S. this year?

That's a great question, Dan. We have been very pleased with the performance of the assets in Canada. I think it's still a little too early to say why they're seeing an uptick, but I think you're onto something that more Canadians are staying at home, visiting local assets. The performance from those assets has been quite good this year.

I appreciate that. As a follow-up to an earlier question, some of the loan investment maturities are coming up, and the principal balances will get paid down. Do you have that potential capital inflow earmarked for certain investments or projects? If the investment environment isn't right at that time to deploy, what would you expect to do with that excess capital?

Yes. Our apologies, folks, Gabe. I just began to answer the question that Dan had asked about the use of regained proceeds. Gabe?

Yes. Apologies if I repeat myself, not sure when we got cut out, but we're actively working with all our partners to understand when loans may be repaid, and then working internally on evaluating alternative investment options when that capital comes back, or alternatively talking with them about refinancing options. The Great Wolf Perryville loan is a great example. Last year, that loan matured and was part of a pool that the Blackstone and Great Wolf team securitized and refinanced; we participated in that refinancing. There are opportunities to reinvest with our partners and keep that capital outstanding. It's something we monitor very actively internally and always think about what we're going to do when that money comes back.

Just circling back to the iGaming conversation. As you think about states where iGaming currently exists or may be legalized over time, to what extent will this impact how you underwrite either incremental capital deployment or maybe new casino sale leasebacks relative to jurisdictions without any near-term sightline for iGaming?

Chris, it’s a great question. When we started the company, there were no states that had iGaming. Some of our leases and underwriting do not take that into account. Obviously, now we have a few years of states that have online sports betting, bricks and mortar, and iGaming. We now better understand the impact of all three pillars. It’s definitely a factor in how we underwrite. We also keep up with states that may not have iGaming today but are continuing discussions about iGaming and what could the potential impact be, both positively and negatively, on the asset we would be underwriting in that state. It is top of mind, and we continue to learn as it goes.

Yes. To reiterate, investors should always be selective in how and where and when investments are made in any investment category. I think we need to take care in investing selectively in the regional gaming landscape, particularly given trends around iGaming and supply growth trends in certain jurisdictions. In that respect, we will continue to monitor each regional gaming investment opportunity with particular rigor.

Got it. That’s all helpful thoughts. Appreciate it. I also want to circle back to the conversation around Vegas, a little bit of a softer backdrop. You're on record saying you feel this is more of a temporary phenomenon. Given the softer backdrop, I wonder whether your tenants or perhaps other owners are thinking about new capital investment opportunities they may be deciding whether or not to move forward with. Are you seeing any impacts to any extent?

Not at all. I think everyone is aligned that this happens at times. It’s a blip. You look at group business forward bookings, and attendance expected in the sports facilities being built is strong. We have not had one of our tenants talk about this short-term blip impacting long-term capital investment. In fact, just walk down the Strip right now, you see a lot of capital investment happening at our assets and others. It continues to be a city we're bullish on, albeit experiencing a slow summer.

Yes. Our Las Vegas operators benefit from longer-term booking visibility, especially thanks to the group segment that gives them greater confidence in investing capital. I believe you cover Ryman, and our Las Vegas operators enjoy that same forward booking visibility that significantly derisks the business.

This is Jenny on for Ron. First, regarding the Caesars Forum convention center call option you have in September, I'm just curious about your latest thoughts on the deal and if you would like to exercise the call options?

Jenny, it's David. Thanks for the question. As we've talked about with our other calls in the past, we like the optionality we have around that. If we think about that asset in particular, it sits next to a couple of assets that we already own. It's a very attractive asset. We obviously just talked about the conviction we have around Las Vegas. We'll assess that opportunity. It opens up here in September and goes for a couple of years. So we've got a little bit of time to figure out what we might do with that asset.

Nice. We know there are about 33 acres of undeveloped or underdeveloped land around the Vegas Strip that seems currently leased to Caesars. I'm just curious about your plans to potentially monetize or develop those assets, maybe together with Caesars. Just curious about your latest thoughts on that.

Yes. We think of that as a land bank. We have no current plans, nor does Caesars have any current plan that we are aware of to develop that land. However, it definitely does have value as a land bank as we look ahead over the coming decades. As Vegas continues to achieve what we think is an unrivaled position globally as hospitality, entertainment, and increasingly a sports destination, that land should increase in value over time.

Just one question for me. John, I want to dig in a bit more on the expanded funnel that you talked about. So besides gaming, which areas do you see right now as having potentially the most investment opportunity for VICI, or which industries are you more excited about today? And for both that industry and gaming, what do you think actually gets new operators interested in pursuing sale-leaseback funding, so we can see maybe more acquisitions in the future?

Yes, Greg, great question. We've talked about many of the sectors that we've been spending time in, including theme parks, indoor water parks, ski resorts, and we've been spending a lot of time in sports. You've heard us discuss this at the professional level and the collegiate level. We've also made a sizable investment in the youth sports area. We're excited about the growth there. In many of these sectors, it comes down to how our capital can work and how it can help accelerate growth for a resort or a team. I can’t tell you exactly which ones will pop but we are spending extensive time educating folks about VICI, how we think about partnership, and that we can do one transaction but in the long term, be a partner.

Greg, I would just add that our ability to do sale-leasebacks and to get capital out the door depends primarily on serving the needs of growth-minded operators, particularly those looking to expand their store counts in gaming or other experiential categories. We are coming through a period where the ambition levels to grow store count have not necessarily been as high as in the past, but it is interesting to explore who is trading well. For instance, our partners at Red Rock are actively growing store counts.

This is Jeremy Kuhl for Calin. Circling back on a topic earlier in the call, given supply in regional markets, which regional markets are you most interested in?

Again, our apologies, folks, and we appreciate your patience. It seems we are experiencing Wi-Fi issues. We're now on Ace's phone. As for Jeremy's question about which regional markets might be attractive, I would say Las Vegas is our number one regional market. It continues to be strong with world-class assets. Markets like Reno have some wonderful assets that we’re not involved in. New markets like Virginia, for example, could also hold potential. I could go through many similar markets, but you get the idea.

Great. A quick follow-up. I saw on the news that Lucky Strike, a tenant of VICI, recently did a reverse like sale-leaseback. Does that impact VICI at all? Are there concerns that any other tenants could do something similar?

Jeremy, it's David. To answer your question, it does not impact VICI. We've got a great relationship with Tom and Bobby at Lucky Strike. You may have seen this morning that they announced some acquisitions, including outdoor water parks. They continue to grow their business, and how they choose to capitalize that over the long term is up to them. But they are an example of what Ed just discussed, being an operator growing their store count, and there could be future opportunities with them.

I wanted to ask about the Red Rock deal. Has any capital been drawn down for that deal thus far? Can you broadly describe the opportunity going forward? You mentioned interest in the locals market in Las Vegas. I think Red Rock owns a little less than 500 acres in that area. Is that something that you'd be interested in partnering with and further expanding that relationship?

Yes, Ravi, it's David. We put out just under $80 million on the initial drop when we announced that loan development. The way the funding cadence works, there's a little pause following the initial drop, but the draw schedule will pick back up later this year. If you listened to Red Rock's call from just two days ago, their leadership emphasized the strong relationship they have with VICI and stated that nothing is off the table. There's no imminent opportunities for sale-leasebacks, but as we discussed on this call, when you do good things with your partners, opportunities may arise in the future. Their team is excited about expanding their store count, and we're thrilled to partner with them on this.

Great. Thanks for taking the follow-up from our team. I want to return to the bonus depreciation discussion. This could lead to a significant wave of spending here, lots of projects that likely need tenant CapEx which, based on previous comments, sounds like a good situation for you. How much time do you expect before real shifts in your investment attention based on the larger-scale CapEx projects that will require capital?

Given that this new bill just passed, the bonus depreciation component may not cause immediate spending. What we're likely to see over the next year is planning based on the benefits of bonus depreciation. Those plans could be executed in the next one to three years, and the capital investments made during that period should lead to increased asset value. However, I'm not implying a shift away from our traditional focus on gaming or experiential investments.

But regarding dividend composition, how much of the cash flow would you want from debt investments versus fee simple equity investments?

We don't necessarily decompose the dividend in that manner. What we look at is how we grow AFFO per share over time and how we can utilize retained and regained capital to continue to grow our AFFO per share and thus grow our dividend. We don’t break down the AFFO in a way that drives dividend policy.

I want to again apologize to everybody for the technical difficulties today. I appreciate your patience and look forward to speaking with you next time. We are determined to resolve these issues.