Vici Properties experienced a stellar start to the year, posting an impressive growth of 11.7% in the first quarter, which stands out even more given the broader challenges in the market. While the S&P 500 index struggled, recording a 4.6% drop—its steepest decline since the bear market of 2022—Vici managed to buck that trend. Let’s dive into the factors behind this strong performance and explore what might lie ahead for this REIT.
### An Active Investment and Capital-Raising Strategy
The first few months of the year were notably eventful for Vici Properties. Mid-February saw the company unveil its fourth-quarter and full-year results for 2024, showcasing steady progress. The REIT saw a mid-single-digit increase in its adjusted funds from operations (FFO) per share, with a 3.6% rise in the fourth quarter and a 5.1% increase for the full year. These gains were fueled in part by inflation-linked rental hikes within its leases and some shrewd new investments.
Last year, Vici committed over $1 billion across various projects, including financing expansions at The Venetian Resort Las Vegas, supporting the construction of a Margaritaville resort with Homefield, and adding to its investments in Great Wolf Resorts. The momentum continued into this year with the formation of a strategic partnership with Cain International and Eldridge Industries. Their initial venture involved a $300 million mezzanine loan aimed at the ambitious One Beverly Hills luxury development.
Adding to its financial arsenal, Vici announced a new $2.5 billion credit facility slated to mature in 2029. On top of that, $1.3 billion of senior unsecured notes were issued late in the first quarter, comprising $400 million of 4.75% notes due in 2028 and $900 million of 5.625% notes due in 2035. This capital will be used to manage current debts, specifically $500 million of 4.375% notes and $800 million of 4.625% notes maturing this year.
While the newly issued debt carries a slightly higher interest rate, it’s relatively favorable when considering the historical context of declining interest rates. For example, the yield on the U.S. 10-year Treasury dipped from nearly 5% to around 4.25% by the end of the first quarter.
The trends in the 10-year Treasury are particularly relevant for the commercial real estate sector. A drop in yield makes it more economical for REITs like Vici to take on debt for refinancing and acquisitions, while also typically enhancing property valuations—a dynamic that played well for Vici as its stock price appreciated.
### Looking Ahead for Vici Properties
As we moved into the second quarter, interest rates showed further downward movement amid economic concerns related to tariffs. The 10-year note fell to below 4%, suggesting that continued rate cuts might further benefit REITs. For Vici Properties, this scenario would likely mean higher property values and lower borrowing expenses, providing a favorable backdrop for future growth.
