VICI Properties, a real estate investment trust that owns Caesars Palace on the Las Vegas Strip, recently received an investment-grade credit rating upgrade from Moody’s Investors Service. This upgrade is a positive development for VICI, as it signifies improved access to capital markets for the REIT, which is crucial for financing acquisitions.
With the upgrade to a “Baa3” rating from Moody’s, VICI now holds investment-grade ratings from all three major ratings agencies, including Fitch Ratings and S&P Global Ratings. This is significant because companies with investment-grade ratings typically benefit from lower financing costs compared to those with junk ratings. As VICI’s credit rating improves, its interest rates on borrowings, such as corporate bonds, are expected to decrease.
Moody’s highlighted VICI’s efforts to reduce its net debt/EBITDA ratio, emphasizing the REIT’s strong financial profile, including its size, scale, operating cash flow, liquidity, and financial discipline. VICI’s fixed charge coverage of 4.5x and Moody’s-adjusted Net Debt/EBITDA ratio of 4.7x demonstrate the company’s financial strength and stability.
However, Moody’s also mentioned the challenge of tenant concentration for VICI, with Caesars Entertainment, Inc. and MGM Resorts International accounting for a significant portion of the REIT’s total annual cash rent. While VICI generates revenue and AFFO primarily from the Las Vegas Strip through its relationships with these tenants, the company has expressed interest in diversifying its portfolio through acquisitions outside of Las Vegas and investments in non-gaming leisure properties across the US.
Overall, the Moody’s upgrade for VICI Properties signifies a positive trajectory for the REIT, as it solidifies the company’s investment-grade status and reflects its ongoing efforts to strengthen its financial position and diversify its tenant base. This development is expected to have long-term benefits for VICI in terms of lower financing costs and increased financial stability in the real estate investment market.
