Good day, ladies and gentlemen. Thank you for standing by. Welcome to the VICI Properties first quarter 2023 earnings conference call. At this time, all participants are in a listen only mode. Please note that this conference call is being recorded today, May 2nd, 2023. I'll now turn the call over to Samantha Gallagher, General Counsel with VICI Properties.
Thank you, operator, and good morning. Everyone should have access to the company's first quarter 2023 earnings release and supplemental information. The release and supplemental information can be found in the Investors Section of the VICI Properties website at www.viciproperties.com. Some of our comments today will be forward-looking statements within the meaning of the federal securities law. Forward-looking statements, which are usually identified by use of the words such as will, believe, expect, should, guidance, intend, 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 more detailed discussion of the risks that could impact future operating results and financial conditions.
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 financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available on our website in our first quarter 2023 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, 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, Gabriel Wasserman, Chief Accounting Officer, and Moira McCloskey, Senior Vice President of Capital Markets. Ed and team will provide some opening remarks, and then we will open the call to questions. With that, I'll turn the call over to Ed.
Thank you, Samantha, and good morning, everyone. Let me start today by telling you how I tend to spend my Saturday mornings, espresso in hand. First, I grab the FT, the old-fashioned print edition, to see what Katie Martin has to say about the state of the equity and credit markets in her Long View column. Katie can be very funny, but the long and short of it is that the market participants she's quoting these days aren't having a lot of fun. I might grab my iPad and catch up on any of Rob Armstrong's unhedged FT columns that I fell behind on during the prior week. Rob's response to current and prospective market conditions is rather Hamlet in character. To be or not to be, to be a bull or to be a bear, or to be neither.
Who is he who is neither bull nor bear? That is the question. In my second espresso, I might see what the two Michaels and one Marko, among others, have had to offer in market commentary and forecasting in the prior few days. Hartnett, Wilson, Kolanovic. I could call them the three Archdukes of Doom, that would be unfair. Well, actually, not that unfair. These folks are formulating a rational response to the current state of the macroeconomy, monetary and fiscal policy, and the markets. Visibility is low, uncertainty is high. In commercial real estate, asset pricing is murky and/or subject to dispute between would-be sellers and would-be buyers. As a result, there's not a whole lot of trading going on.
Commercial real estate trading was down nearly 70% year-over-year in March 2023, and it's not like March 2022 was a barn burner for real estate asset or portfolio trading. What does all this uncertainty and low visibility mean for how we're thinking and what we're doing at VICI? Our thinking and doing starts with our current state of earnings growth and investment activity. As you saw in last night's VICI earnings release, for Q1 2023, we generated year-over-year AFFO growth of 18.6% per share, a rate that we believe will be among the highest for REITs generally, and S&P 500 REITs specifically.
To take a broader view, so far in earnings season, year-over-year Q1 2023 earnings growth for S&P 500 companies of all kinds is running at -4% versus VICI's Q1 AFFO growth, again, at 18.6%. It's not only about growth in current earnings, it's about growing our future earnings. Along that line, even amidst this murky trading environment, within Q1, we allocated a total of $1.6 billion of incremental capital to compelling and accretive experiential property and lending investments, which John will have more detail on in a moment. Even with that $1.6 billion of capital having been newly allocated in Q1, we have approximately $859 million of equity dry powder, thanks to our unsettled foward equity, and approximately $650 million in cash.
Combine that with $2.4 billion of undrawn revolver capacity, we have the funding in place to seize on further opportunity if opportunity presents itself in this current environment. Most of all, during an uncertain time like this, we keep doing what we've done at VICI from the beginning. We are always working on our future, growing relationships that have the potential to grow our business. These relationships don't have to turn into deals tomorrow, as John has noted in the past. In that vein, think about the fact that the AFFO growth VICI expects to produce in 2023 is in good measure the result of relationship building we did many years ago with those who would end up being our partners in our Venetian and MGP transactions, which we announced in 2021.
Thus it is, to reiterate, that much of the work we are doing at VICI in 2023 is about growth in 2024, 2025, and beyond. Yet I don't mean to suggest that we are not jumping on immediate opportunities when those opportunities are compelling, as evidenced again by the $1.6 billion of capital we newly deployed in Q1 2023. Finally, we are working intensely in the present and for our future with one of the lowest G&A loads in American triple net REIT management as a % of revenues or of assets.
Think of our G&A as a form of asset management fee. Our asset management fee, understood in this way, as measured by VICI corporate G&A, runs at about 0.1% of assets under management. That's a fee load you would expect from a passive manager of an index fund. With VICI, for 0.1%, you get very active investment management that has historically produced significant outperformance. I'll now turn the call to John so that he can share with you what kind of activities we have been up to and are up to. John.
Thanks, Ed. Good morning to everyone. Ed quoted Shakespeare's Hamlet when describing current market conditions. I thought it would be appropriate to quote another great, Ted Lasso, when describing how the VICI team has functioned through the last five years of a rather volatile market. Coach Lasso said, "The harder you work, the luckier you get." We saw the results of that work come together in 2022, which was a transformational year for VICI in which we doubled our size and scale, becoming one of the largest triple net REITs. 2023, as Ed just noted, is the year in which we are laying the groundwork for VICI's next phase of expansion, domestically and globally across gaming and many other experiential sectors.
In the first quarter, VICI closed on its first international transaction with PURE Canadian Gaming in Alberta, Canada, one of Canada's top gaming markets. We are thrilled that our first international transaction was in Canada, as we believe the Canadian gaming industry presents a great opportunity for VICI as it is an established industry with many similarities to the U.S. gaming industry. This transaction will be the first of many international investments that the VICI team continues to explore across the globe. We also completed the acquisition of the remaining 49.9% stake in our Mandalay Bay MGM Grand joint venture with Blackstone. This real estate consolidation was a great example of our high-functioning partnership with Blackstone, as we both accomplished important goals with this transaction, and VICI now owns 100% of two additional Class A resorts on the Las Vegas Strip.
To spend a moment on Las Vegas, in February, over 4 million people traveled through Harry Reid Airport for the first time ever, which is 25% above February of 2022. Our operating partners continue to set all-time records. Volumes in all segments continue to remain strong. Our operating partners continue to see very strong hotel occupancy and are also experiencing a nice recovery in the group and convention business. These strong operating numbers are the result of tremendous innovation and capital deployment by our tenants. Their work is making Las Vegas the gaming, sports, and entertainment capital of the world. We're also proud to expand our relationship with Tribal Nations, adding Cherokee Nation Businesses of Oklahoma to our tenant roster as they enter into the lease agreement related to the Gold Strike Casino & Resort in Tunica, Mississippi.
We are also supporting our partners at Hard Rock in the redevelopment of Hard Rock Ottawa in Canada by purchasing a portion of the senior secured notes funding this exciting new project. The American Tribal Nations are some of the best gaming operators, and we look forward to continue to find ways to help support their growth as they expand into commercial gaming across the country. Within non-gaming experiential industries, the team is intensely studying sectors we believe fit well with our VICI investment criteria. We continue to meet and build relationships with owners and operators in many sectors, including health and wellness, youth, collegiate, and professional sports, various forms of family entertainment, theme parks, holiday parks, and other destination-based experiences.
The team is forging foundational relationships with the market leaders who have ambitions to grow and see VICI as a preferred capital partner for their businesses, similar to those we helped Cabot Golf and Canyon Ranch. For this quarter, we expanded our indoor water park presence with our fourth loan to Great Wolf Lodge to fund the development of their location in Connecticut and in partnership with the Foxwoods Resort.
The VICI team will make the most of this year by continuing to build a pipeline of partnerships that we believe will help us achieve our future growth goals, while at the same time expecting to deliver at least 10% of AFFO per share growth in 2023. As you've observed over the past five years, our team does not rest very often, as we're laser-focused on building the highest quality experiential REIT in the world. Now I will turn the call over to David, who will discuss our financial results. David?
Thanks, John. 2023 started off with several very exciting transactions. Our ability to move quickly and close these acquisitions at the start of the year is a result of the liquidity we have maintained and balance sheet that we have built over the years in an effort to be nimble and act on attractive opportunities as they come before us. We will continue to focus on the balance sheet as it is important to ensure that we have a capital structure designed to weather all cycles and provide the safety and protection our equity and credit partners deserve.
As John mentioned, we closed on the acquisition of the four PURE Canadian Gaming assets in Alberta, Canada, the 49.9% interest we previously did not own in the MGM Grand Mandalay Bay JV, and we purchased $85 million of senior secured notes issued by Hard Rock Ottawa LP. This is an exciting transaction for VICI as we partnered with a large financial institution to provide Hard Rock with a complete financing solution for the redevelopment of what will become the Hard Rock Ottawa in Canada.
In addition, we announced a $287.9 million construction loan for the development of a Great Wolf Lodge, which sits on land owned by the Mashantucket Pequot Tribal Nation next to the Foxwoods Resort Casino. This transaction represents our fourth loan with Great Wolf for a total capital commitment of approximately $550 million to support Great Wolf's development pipeline. In January, we rebolstered our liquidity, raising approximately $965 million of available net equity proceeds through the sale of 30.3 million shares via forward sale agreements. On April 4th, we physically settled 3.2 million of these shares for net proceeds of approximately $101.5 million. As we sit here today, we have approximately $3.9 billion in total liquidity.
As Ed mentioned, this is comprised of approximately $650 million in cash, $859 million of net proceeds available from the January forward sale agreements, and $2.4 billion of availability under the revolving credit facility. In terms of the leverage, our total debt is currently $17.1 billion, which reflects the consolidation of the full $3 billion of CMBS debt that encumbers the MGM Grand Mandalay Bay JV. Our net debt to Adjusted EBITDA is approximately 5.7x today. We have a weighted average interest rate of 4.34%, taking into account our hedge portfolio and a weighted average 6.6 years to maturity. Turning to the income statement, AFFO was $528.6 million for the quarter, an increase of 73% over Q1 2022.
AFFO per share was $0.53 for the quarter, an increase of 18.6% compared to the $0.44 for the quarter ended March 31, 2022. As a reminder, the disparity between our overall AFFO growth and AFFO per share growth is due to an increase in our share count, which increased primarily from equity raise and shares issued to fund our acquisition of the MGM Grand and Mandalay Bay JV this quarter and to consummate our acquisitions of MGP during Q2 and the Venetian Resort during Q1 of last year. Our results once again highlight our highly efficient triple net model, given the significant increase in Adjusted EBITDA as a proportion of the corresponding increase in revenue and 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, 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 reaffirming 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 expected to be between $2.115 billion and $2.155 billion or between $2.10 and $2.13 per diluted common share. 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 schedules, possible future acquisitions or dispositions, capital markets activity or other non-recurring transactions.
As a reminder, we record a non-cash CECL charge on a quarterly basis, which, due to its inherent unpredictability, 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 and evaluating our financial performance and ability to pay dividends. With that, Elliot, please open the line for questions.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question today comes from Anthony Paolone from JPMorgan. Your line is open.
Great. Thank you and good morning. My first question relates to your discussion around building relationships for the future pipeline. I was wondering if you can comment on whether or not there's a certain type deal size that's emerging as a sweet spot for the different things you're looking at or even a region perhaps in the world where sort of the deal flow seems to be pointing.
Yeah, Tony, I'll start and then John.
You want me to take that, Ed?
Well, John, I just want-
Ed, you're pretty faint.
To take Ed's comment. What? Sorry. Can you hear me now?
Yeah, you're better.
If not, go ahead, John.
Yes.
We can hear you, Ed.
Yeah, I was just gonna say, Tony, I apologize for that. you know, when we, when we work on relationships, we're obviously working on new ones all the time, but we also work very hard to make sure our existing relationships are as strong and productive, mutually productive as they can be. we were rather honored that Jonathan Halkyard, the CFO, at MGM m ade reference in his earnings call last night to VICI being a fantastic partner of ours. That's a very big focus in terms of where future growth can come from, which is to say with our existing tenants. In terms of the other relationships we're building, I'll turn it over to John. John?
Yeah. Tony, I won't go into specifics about the relationships we're building. We are studying these industry countries around the world. We've been asked since we started the company about would we look at something that's, you know, the size and how small. I mean, I'll just use the example of a Century Casinos. We did one deal. We then announced the deal in Maryland with them, and we'll hopefully over time, we'll continue to build that relationship. We really think that there are times that a smaller deal by itself may "look small," but over the lifetime of a partnership or of a relationship, it will get larger. We are chalking up miles, meeting folks face-to-face and traveling the world to find opportunities, for our company and for our shareholders that are accretive.
Okay. Thanks. John, just as a follow-up, maybe if capital markets have been volatile the last few months or quarters, like, can you maybe give us a sense as to what the brackets are on yields for the things you're considering right now?
Well, that would've been an easier question back five years ago, I think, Tony, when we were just looking at gaming opportunities domestically, right? We could probably take the rest of the call as we look at different sectors. I'll let David talk about how, you know, thoughtful we are in understanding our cost to capital and getting spreads when we're making investments or creating term sheets. We're looking at a wide variety of sectors, countries, in gaming and non-gaming. David, you wanna touch a little bit on that as well?
Yeah, happy to John, and Tony, good to talk to you. I mean, as you saw during the quarter, we partnered with a large financial institution and put out some capital at 11% rate. Now, I'm not here to say that every deal we're gonna do is gonna be at 11%, but we are focused on a blended, you know, a blended spread to our cost of capital. You know, our share price has held in. Our financing cost, just to get ahead of that question, is for a 10-year piece of paper, is probably right around 6% today. You know, we're very cognizant of deploying capital on a risk-adjusted basis that generates, you know, spread investing over the time, while adding just phenomenal real estate, phenomenal relationships and growth partners like we've done in the past with Cabot and Canyon, and, you know, we're confident there's more to come.
Great. Thanks for the time.
Thanks, Tony.
Our next question comes from Smedes Rose from Citi. Your line is open.
Thanks. It's actually Nick Joseph here with Smedes. Maybe following up on that last comment, how do you think about the competitiveness of your cost of capital relative to more traditional sources of capital as you look to deploy it?
Nick, good to hear from you. By traditional source of capital, are you referring to, the debt and equity financing available to the asset controller?
Exactly.
Yeah. Clearly, a lot of the experiential landscape is made up of operators who tend to be high-yield credits. As you well know, the high-yield market has been really quite dormant for quite a while now, going well back into last year and continuing into this year. The access to credit is somewhat limited, and the cost of it obviously has widened. You know, the cost of equity for many of them has at best gone sideways.
As we look at the maturity walls that many debtors are facing, 2024, 2025 and onward, we do think, as we talked about in the past, that we can be a virtuous source of funding, you know, through sale-leaseback structures when it comes to either refinancing debt or perhaps even more compellingly, financing expansion for good operators who may have expansion opportunities, roll-up opportunities in the next few years, should other operators come under any kind of refinancing pressure.
Thank you. Just on international expansion, obviously, Canada is generally pretty similar to the U.S., but as you think about other further expansion, how do you think about pricing regulatory and political risks from different geographies or countries?
David?
Yeah. Thanks, Ed. Nick, good to talk to you. We're spending time, you know, across the globe looking where, you know, where others have gone and where, you know, there's REIT-friendly jurisdiction, favorable tax regimes, favorable political regimes, favorable currency, favorable funding markets. You're absolutely right. As we spent time in Canada and got our training wheels on, so to speak, with Canada, you know, the team developed a lot of institutional learnings and list a lot of institutional knowledge around how to set up structures, how to set up, minimize tax leakage and ensure that we have the right protection for our income that we will, you know, potentially generate abroad.
It goes into, you know, the black box, so to speak, and we would need to make sure that we generate significant spreads to the cost of capital because there is tax leakage, there is some risk, and so not every deal is the same, but we'll make sure that we are, you know, partnering with the right folks and underwriting the credit and the real estate quality and the future earnings growth of these potential opportunities that may come abroad.
Thank you very much.
Thank you, Nick.
Our next question comes from David Katz from Jefferies. Your line is open.
Hi. Morning, everyone.
Hello, David.
Thanks for taking my question. Hello? Look, I, you know, I think we've talked to a bunch of our companies so far, all, you know, all of them over the past several months looking for some, you know, perspective that may indicate some kind of a turn in the consumer economy or in the business economy. I think you may have a unique perspective because you stay, you know, close to your tenants. And I just wonder, you know, what your, you know, what you're hearing and seeing. I know John travels around quite a bit, you know, is engaged on the gaming side. You know, if there's anything outside of gaming that we can talk about. You know, what is your sort of economic view?
Yeah. Well turn it over to John Payne just to reiterate the strength we're seeing in gaming. You know, we can say, for example, that our partners at businesses like Cabot, like Canyon Ranch, like Great Wolf, are seeing, continuing to see very, very strong demand. Some of it, David, is obviously, you know, the COVID pent-up demand factor still exercising itself.
As you've heard us talk about in the past, you know, we also believe we're seeing the evidence of the secular trends we've talked about at VICI, which is aging baby boomers moving into years in which they have more leisure time, and millennials moving into family formation, which is obviously benefiting a business like Great Wolf. I think, David and John, it's fair to say that our non-gaming operators are feeling every bit as confident in their outlooks as we are hearing and seeing in gaming. Correct, John and David?
Absolutely, couldn't agree more with that. I did wanna take the opportunity 'cause David asked about our Vegas operators and us staying in touch with them, as well as our regional operators. David, we're very blessed to now today have 11 tenants, right? We get a really good view of the entire industry, and our tenants are willing to do what we would call informal reviews with us on a quarterly basis to share with us their views on how things are going. It's not in our leases. They do this because we form these partnerships, and it helps us have better discussions about how we can help them grow. Across the gaming sector, I mean, it's really amazing to hear the results.
MGM released yesterday or earlier today, 36% growth in same-store Adjusted EBITDA, right, in Las Vegas. I mean, that's an incredible number. When I do these meetings with our team, we ask the question: Where are you seeing slowness in your business, in your operating business? There's very little slowness in any of the sectors. In fact, there's still growth in almost all of them. It's a really interesting business. Forward booking are still robust in Las Vegas. The regional markets continue to show steadiness across many of their sectors. It's exciting to have these partners who continue to innovate, continue to deploy capital. Many of them are seeing a really nice return on the capital that they're deploying, whether it's new restaurants, fixing hotel rooms that needed upgrades, et cetera.
Understood. Appreciate it. As my follow-up, you know, just reading this morning and following very closely some of the more regional lenders out there that account for, you know, according to some of the press, right, 80% of commercial, you know, real estate mortgages. Is there any strategy or way for you to approach and position yourselves to participate, you know, productively and, you know, pools of smaller deals or anything like that? Given the circumstances, is there some opportunity for you to get in there, and become an alternative lender?
It's a really good question, David, and we are digging into it and need to dig into it deeper. I would say that based on what we've seen so far, you know, regional banks in their commercial real estate lending are generally lending to asset categories like office, like multi-res, and other categories, retail, that we won't invest in. So I'm not sure that there's a direct opportunity to get involved in categories that regional banking lenders have tended to focus on. I do think there's an indirect opportunity in that we are seeing evidence, as is everyone, of further tightening of credit. So I do believe there is going to be enhanced opportunity for us. I'm not sure it's going to be directly from the tightening of credit by regional lenders to the conventional real estate asset classes.
I do think, David, we're very confident that we are already seeing, as evidenced by the work David and the team have done on Hard Rock Ottawa, Fontainebleau, and other credit opportunities, that we're going to continue to see both enhanced credit opportunity and enhanced real estate acquisition opportunities because of the tightening for credit. David Kieske, anything to add?
No, I think you touched on it perfectly, and I echo that, you know, we are seeing, you know, opportunities to potentially lend capital. When we think about o ur strategic lending book, we want to ensure it's with the right partners where it could lead to future growth opportunities. I think at the regional level, less opportunity for us. Look, that will trickle up to the bigger banks, right? That will have an impact on JPMorgan and the BofA and the Citi lending across the board. That could create opportunities for us around the experiential categories.
Got it. Thank you very much.
Our next question comes from Todd Thomas, from KeyBanc Capital Markets. Your line is open.
Hi. Thanks. Good morning. First question, David, you mentioned that the company's incremental cost of debt today, I think is around 6%. You said, your cost of equity capital continues to improve and is in that range depending on how you look at it, and the stock's up nearly 6% year- to- date, so that's improving. Does that change the way that you think about capitalizing new investments vis-a-vis rising debt costs in the near term?
Todd. Good to talk to you. And just to be clear, that 6% is, you know, for a 10-year piece of paper, so obviously different tenors have different rates. You know, post the MGP acquisition, we've been highly focused on continuing to delever the balance sheet. We obviously elevated leverage a little bit to bring in that phenomenal portfolio that we added to our company and to transform our company. As you've seen us do throughout 2022 and into 2023, is going to over-equitize transactions. As we sit here today and, you know, May 2nd, we have a maturity coming up in roughly one year. It's due May 1st of 2024. We'll continue to use the equity, use our free cash flow to fund transactions and then things of potentially larger transactions look to add those to the balance sheet on a leverage neutral basis.
Okay. As you look ahead at, you know, all of the various investment opportunities and different, you know, sort of categories and industries that you're underwriting, you know, relative to your cost of capital, do you expect that the spread that you're investing at will improve as you look out at the pipeline over the next few quarters relative to, you know, sort of the spread that you've locked in on more recent investments here over the last couple of quarters?
I mean, I can start others chime in. I mean, Todd, each deal is different obviously, you know, we have this debate internally a lot. Sure, we'd love to, you know, say we can print a 300-400 basis point spread to our cost of capital. You know, the intrinsic value of some pieces of real estate that just have, you know, will trade at lower cap rates and lending opportunities could be at slightly higher yields. As we look to balance our, you know, the overall yield that we generate on our capital over the long term, we wanna, you know, ensure that we are generating a 100-150 basis point spread in a blended basis based on the capital that we deploy on a quarterly and annual basis.
While there's the hope that we can deploy capital at higher spreads, sometimes real estate is worth, you know, what it's worth. To get a deal done, it might take a slightly tighter spread to ensure that we can build the partnerships and the relationships and the growth pipeline that we, you know, want to deliver over time here.
Okay. All right. Thank you.
Our next question comes from Barry Jonas, from Truist Securities. Your line is open.
Hey. Hey, guys. Good morning. When you think about leaning more into new international markets, how do you think about supporting greenfield developments through, say, construction loans versus sale-leaseback of existing assets?
Yeah. Hey, Barry, I'll take that as the start, and then David can add in. I would say that our confidence around funding development internationally, it needs to be basically in line with the confidence that we need to have to fund development domestically with added caveats that if it is international, we need to have even more compensating factors in place to compensate for the risks associated with currency and tax. But, you know, at the end of the day, we're really underwriting the credibility and the credit of the developer/operating partner. So again, you know, whether we're talking about Europe, Japan, or other jurisdictions, we won't by any means say a priori, no, we won't do it. But the underwriting will have to be even that much more rigorous. David, I don't know if you want to add to that.
No, I think you did it perfectly.
That's great. Just as a follow-up, you know, John, appreciate the comments on the consumer and your tenants. MGM did talk last night about seeing maybe more growth at its luxury properties. I'm just curious if you're seeing consistent trends from a coverage perspective across your portfolio. You know, maybe to what extent does this or any other dynamic influence your M&A strategy?
It's a very good question, Barry. Again, just kind of reiterating what I said about having 11 different tenants, so you get different views. I think we've tried to build a portfolio where we have the Luxury segment, and then we have the kind of the middle sectors and properties that cater to them. They all seem to be continuing to perform quite well. Obviously, if a higher end property, there's a seller who wants to move on that transaction, we're gonna be prepared due to David and his team's work, to go after that. If there is a regional asset that fits our portfolio where we don't have exposure, we'll be able to go after that as well.
As it pertains to the operating business, Barry, we continue to ask the questions where, you know, where are you seeing weakness? We get most of the answers, where are we seeing strength? So it's, we're gonna continue to monitor. I know we've been talking on this call a lot about non-gaming and experiential and itself, and Kellan Florio joined us as our chief investment officer a year ago, are out looking at these different sectors. It's, it is important to reiterate that, you know, we continue to love the casino business. We continue to be amazed each quarter with the results that are delivered by our partners and hopefully some future partners as well.
You know, Barry, I'll just add on to that.
That's great. Thank you, John.
Oh, yeah, Barry, I was just gonna add to that.
Yeah.
That, you know, clearly you're seeing across so many consumer sectors, the strength of luxury. You know, based where we are, in Midtown Manhattan, our neighborhood effectively feels like it's being taken over by LVMH. That's simply because there is so much spending happening globally in these luxury categories. It's one of the reasons our partners, like Cabot and Canyon Ranch, are doing so well right now, being luxury brands within their respective categories of destination golf and wellness.
That's great.
Our next question comes from James Kammert from Evercore ISI. Your line is open.
Hi. Good morning. Thank you. When you think about looking into these other experiential real estate sectors, is it fair to say that there might be fewer bidders or providers of capital on the debt and equity side, such as VICI, compared to other mainstream real estate? I'm just curious if that gives you a little bit of an advantage in terms of, you know, risk adjustment and how you structure the lease, et cetera, for the benefit of VICI.
Well, first of all, Jim, welcome to Evercore. Good to be talking to you. I'll turn it over to John in just a moment, but yes, you're absolutely right. What we are really undertaking is to prove out our hypothesis that there's a significant landscape of what we'll call experiential white space across the globe of really dynamic experiential operating businesses that have never been visited by a REIT before and have never considered before a REIT as a source of growth capital. With that, I'll turn it over to John because he's having so many of these conversations in which he is told pretty much at the outset, "Wow, we've never talked to a REIT before." John?
Yeah, you nailed it, Jim. That's exactly right. In many of these areas, whether it's in health and wellness, youth, collegiate and professional sports, certain forms of family entertainment, we're the first ones that have come to them with a thoughtful approach about how our capital could help them grow in many different ways. So we literally spend two, three, four different meetings a day explaining who we are, what we've done, how we can help them.
Again, to our opening remarks, it doesn't mean a transaction has to happen at the first meal we have together. It's about building a depth of incredible operators in real estate that over a period of time we can hopefully transact and build a partnership. You've hit on it where there just haven't been a lot of others that have taken on this task because it's not easy work, and it takes a lot of time and effort and calls and emails and all of that. We're happy to do it because we see the incredible amount of white space as you know.
Interesting. Where were they getting their capital before, or you just think this is as they visit their growth and future plans, they're just thinking more constructively about how they can monetize real estate? I'm just curious how that plays in.
Yeah. Well, maybe I can offer Canyon Ranch as an example, Jim, whereby when we began, you know, talking with John Goff and the Canyon Ranch team back in early 2022, you know, the conversations they'd principally been having when it came to growth capital were with private equity partners. What they were concerned about with those private equity partners was, number one, the cost of the capital, given the cost that PE funding partners tend to assign to their own capital. Number two, the investment horizon of perhaps only five to 7 years. When, when Canyon Ranch looked at our offering and looked at both our cost of capital and the fact that we wanna be their capital partner forever, it was a pretty compelling alternative to conventional private equity.
Got it. Thank you very much for your time.
Our next question comes from Wes Golladay from Baird. Your line is open.
Hey. Yeah, good morning, everyone. I just got a quick question about the VICI Property Fund. Do you expect more of those projects to kick off in a recessionary environment, being that Vegas is so strong? More particularly, the focus I have on the question would be the Mirage project that was recently approved with the guitar on the Strip.
John?
Yeah. Good to talk to you, Wes. Yeah, the Mirage project that the Hard Rock team is taking on is spectacular. I think we've seen the footage of it, not only the guitar tower, but the refurbishment of the whole properties. You'd have to talk directly with the Hard Rock team, but I think you'd hear from them, they're thinking through different ways that they can finance the project without... As they sit on our land, into our building, we'd love to be a source of financing for that project longer term as they think through the details of it.
In the fund in general, we've talked to many operators, you know, throughout our 11 tenants of how we can help them grow with larger projects on their existing assets or how we can help monetize a certain asset and help them buy someone else. We continue to have those conversations as well.
Okay. If I could just get a follow-up. I guess the A's are gonna move a little bit down the street from your land parcel, at least that's what the reports are. Do you have any, I guess, updated plans for potential monetization of your land parcel on the strip?
John?
It's exciting where the A's are thinking about putting the stadium. The two most exciting companies, I guess, when they heard it announced was MGM and VICI, that it's gonna sit right across from many of the resorts that we own and MGM operates. We'll continue to see how that plays out. It sure is helping Las Vegas become the sports capital of the world now by adding another team. Super Bowl is coming next year, F1 is coming later in the year. We couldn't be more excited. You're asking, does it make our land and our resorts more valuable? We think it certainly does, and will provide opportunities for the current properties that sit next to the new stadium that's going to be built, as well as the undeveloped land that we have throughout the city.
Great. Thanks for the time, everyone.
Thank you.
Our next question comes from John DeCree from CBRE. Your line is open.
Good morning, everyone. Thank you for taking all the questions. maybe just one for me. We've covered quite a bit of ground. David, probably for you, I think, you know, I read a footnote in the presentation that the Caesars Forum loan was repaid in May. I was wondering if you could confirm that, and does that impact the put call on that property at all? I guess, you know, part three is, can you let us know how much in commitments that you have unfunded, outstanding for various loans?
Yeah. John, good to talk to you. Yeah, Caesars repaid that loan actually yesterday, $400 million principal. It doesn't change the put call. We actually extended the outside date to 2028 when we could call the Caesars Forum Convention Center. This was all part of Caesars deleveraging, so that continues to make our tenants stronger, and we're happy to get that capital back. The total commitments, I don't have that right in front of me, but happy to follow up with you. Or Gabe, if you have that handy, but otherwise, yeah, we can follow up with you.
Yeah. Future funding commitments are about $970 million as of March 31st.
Okay. That's great. Thanks, everybody.
Thanks, John.
Our next question comes from Haendel St. Juste from Mizuho. Your line is open.
Hey, good morning. Thanks for taking my question. First one is, I guess I'd like to know what the current house view on further investing in tribal today is, and how you get comfortable, if you can't own the land. Perhaps how much more meaningful could you get involved there? Thanks.
John?
Yeah. I'll take that question. It's important to understand that today our relationships with the three tribal nations are on commercial gaming properties, whether that's in Cincinnati, in Tunica, and Southern Indiana. I think your question is around is there ultimately going to be an opportunity with these partners or with another partner on their tribal land for us to make investments? It's something we've talked to partners about before, and it potentially could be. But at this time we've not made any of those investments. We really have enjoyed and will continue to build our relationships with tribal nations because they're amazing casino operators. They're looking to deploy the capital that they've earned in their tribal nation casinos onto commercial gaming. We're here to help them think through that if they're interested.
That's helpful. Thanks. Yes, I should have made that distinction there. One more. Read that MGM recently was approved to build Japan's first casino in Osaka. I guess, given your relationship there, what's the likelihood of your interest in getting involved, and what sort of risk premium perhaps would you require? Thanks.
Well, Haendel, it is a very big project. There's a lot of parties involved. They are obviously financing this in a credit market, Japan, that is quite low cost. MGM knows we're always here to help them. If we can be of help, we will be. I'd say we're a long way off at this point from knowing if we can help them, and if so, how we would help them.
Great. Thank you.
Our next question comes from Ronald Kamdem from Morgan Stanley. Your line is open.
Two quick ones. Just one on the guidance. Can you just remind us what's the organic growth implied to get to that FFO growth number? On the balance sheet, you know, I see the 5.9 debt to EBITDA. Where is that gonna trend to by the end of the year, assuming no more deals?
David?
Hey, Ron, it's Dave. Yep. Ron, it's Dave. Good to talk to you. In terms of guidance, we just have our base escalation. 2% for Caesars, you know, 1.5% for some of the other tenants. We do not make any assumptions around CPI bumps or, you know, other potential economic changes if that's what you're asking. In terms of the balance sheet, you know, we're actually 5.7 today because the cash that came in from Caesars yesterday. We're 5.9 at quarter end. That was just due to a little bit of a lower cash balance at quarter end. That's trending to about 5.6x, 5.5x by year-end based on where we see the business trending.
Great. Thanks. Then just the last one, just, a lot more questions on theme parks. You guys have sort of talked about, you know, being open to all experiential. Is there a way to sort of dig in deeper and just sort of highlight what is attractive, what is not attractive, what markets, geographies, deal structure, anything, would be helpful? Thanks.
Yeah. I think when it comes to theme parks generically, Ron, what's appealing about them is what's frankly appealing about our large Las Vegas assets and frankly a lot of our large regional assets as well, which is they are big, complex physical plants with big, complex P&Ls that have high economic productivity in relation to the capital value of the asset. You know, we believe that theme parks tick the four boxes that we look at in any investment category we're looking at, which is lower than average cyclicality for consumer discretionary at large. Theme parks are very often an affordable luxury even in times of recession, not unlike ski resorts, which I used to work in.
There is generally an absence of secular threats since people are not generally building roller coasters in their backyards or having Amazon deliver them to them. There's a healthy supply-demand balance because people are generally not building a whole lot of new theme parks. Finally, Number 4, they've obviously proven their durability over frankly more than a century going back to the big exhibitions and fairs of the late 1800s. A lot to recommend the category. John and Kellan and the team continue to work on getting to know the players, their needs, their capital needs and opportunities. We'll hopefully someday be able to invest in that category.
Thanks so much.
Thank you, Ron.
Our final question today comes from Chris Darling from Green Street. Your line is open.
Thanks. Good morning. I recognize that VICI is focused really on growing accretively, but I'd like to better understand how you evaluate the long-term profile of some of your existing assets. Can you talk a little bit about how you think about that aspect? When you look across your regional gaming portfolio, are there any markets or assets that maybe you're less comfortable owning for the long term?
Chris, I'll have John answer the back half of that question because we have since our beginnings, even though our beginning is only five and a half years ago, we have actually engaged in portfolio optimization in terms of disposals. It's a really good question to ask because we, you know, we've contended for a while now that, you know, we are the first REIT to bring the net lease structure to what is genuinely Class A real estate in terms of scale, quality of fit and finish, and economic magnitude and durability.
You know, you look at, for instance, our first marquee asset, Caesars Palace Las Vegas, it's over 60 years old, and as John will tell you in a moment, it had its best year ever last year. You know, we've got weighted average lease term of around 40 years. When we look at our Las Vegas assets, when we look at great regional assets like the Number 1 regional asset in America, MGM National Harbor, you know, we have very high confidence that these assets will be economically productive and grow in value, in part because of our same store NOI growth, which Green Street has written about better than anybody. These assets will continue to appreciate in value for decades to come. John, do you wanna talk about the approach we take at making sure neither we nor our tenants are in assets we don't wanna be in anymore?
Yeah. Chris, it's a very, it's a very good question. As Ed touched on, we constantly talk to our tenants or operating partners about optimizing their portfolio. As Ed alluded to, you know, since we started VICI five years ago, we've had a tenant come to us, Reno, track in Louisiana that said, "Look, this is doesn't fit our portfolio. You own it." We've worked together to sell the asset. There's been other situations where the tenant wanted out, but we wanted to keep the real estate and buildings, and we've transferred and found another high quality tenant. We'll continue to do that throughout our lives running this business.
If there's a tenant that doesn't wanna be in the business, we should work with them to either say, "Hey, let's sell this as a OpCo , or let's just find another tenant that wants to run the business." The other thing we do is continue to look in markets to diversify our portfolio. Where, what cities, what states are we not currently in gaming as an example, where we'd love to own real estate? There's many markets throughout the United States we are not in. We have 50 properties today, but there is a lot of opportunity in markets we're not in. There's other markets where, boy, it'd be nice to have another asset. We continue to do that. Very good question. It's something that's top of mind, that we have with our tenants and we'll continue to optimize our portfolio over the coming years.
Got it. That's very helpful. Maybe second question for me, just curious if you've had any recent conversations with Caesars regarding the ground-up development, I believe in Danville, Virginia, just given that that project, I think, has broken ground now?
Yeah.
Yeah.
They just got approval. They'll be opening a temporary facility at that asset run by Caesars. It's also in a partnership with our other partners, the Eastern Band of the Cherokee Nation. They're partners there as well. We do have conversations with Caesars about a variety of things. Would that ultimately be an asset we would be interested over time if the ownership wanted to monetize the real estate and the buildings? Yes, we would be very interested in that. We'll just first let Caesars get it up and running, get it stabilized, be incredibly successful, and if there's a time to have that conversation, we'd love to have it.
All right. Thank you.
Thank you, Chris.
This concludes our Q&A. I'm gonna hand back to Ed Pitoniak, CEO, for any final remarks.
Well, thanks for your time today, everybody. I'll go back to what I stressed on our last earnings call back at the end of February, and that is when you take the midpoint of our guidance for AFFO growth for 2023, which is 10%, combine that with our dividend yield, which is currently around 4.5, a little higher than that, you get 14.5 points of potential total return. I would just compare that again to what you're seeing reach generally, and more, even more generally, the S&P 500, which is certainly not shaping up to be a year combining 10% earnings growth and 4.5% dividend yield. With that, we'll thank you for your time today and look forward to seeing you again in late July. Bye for now.
Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.