Good day, ladies and gentlemen. Thank you for standing by, and welcome to the VICI Properties Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please note that today's conference is being recorded today, October 29, 2020. I will 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 third quarter 2020 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 laws. Forward-looking statements, which are usually identified by the use of words such as will, believe, expect, should, intend, project, 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 conditions. During the call, we will discuss 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 in our third quarter 2020 earnings release and our supplemental information. 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 Danny Valoy, Vice President of Finance. Ed and the 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.

Thanks, Samantha. Good morning, everyone, and thank you for joining our third quarter earnings call. As we sit here today, VICI is a few weeks past its third birthday. We've done a lot of work in three years and in quarter three of this year our work over the past three years truly crystallized. In Q3 2020 we executed the following strategic growth activities: we closed on the acquisition of three new properties: Harrah's Atlantic City, Harrah's New Orleans, Harrah's Laughlin. We accretively added incremental rent at our two Las Vegas properties, Caesars Palace and Harrah's Las Vegas. We provided a $400 million mortgage on the Caesars Forum Convention Center, and we made our first investment outside of gaming, with our $80 million financing of Chelsea Piers in New York, of which I'll say more in a moment. These strategic accomplishments in Q3 led to the following financial accomplishments: we grew adjusted EBITDA year-over-year by 41.9%. We grew AFFO year-over-year by 38.4%. We increased our dividend by 10.9%. And not to be taken for granted, since the COVID-19 crisis began, we have collected 100% of our rent through October in cash. All told looking forward, these VICI growth activities in Q3 added annualized rent and income from loans of $288 million and a blended unlevered yield of 7.80%. Granted all American REITs haven't reported yet, but in what we've seen so far few other American REITs have posted these kinds of financial growth numbers in Q3 2020. And this growth for VICI takes place against the COVID-19 backdrop that has significantly degraded the financial results of many American REITs. And if I could just take a moment, I would note that, much of the commentary we've seen so far, we have seen VICI described as having met its expected results for Q3. And on the one hand, we're glad that we were expecting to grow in the way we have, but we hope it is not lost on anybody that the growth we did produce is truly remarkable. And this surge of growth consummated in the third quarter of 2020 comes in our third year of real estate investment management. Over this three-year period on an annualized run rate basis, we have grown our rent since emergence by 100% or $633 million, while significantly lowering our leverage from 8.5 times to the low end of our target range of between 5.0 and 5.5 times. VICI stands here today with a substantially bigger and moreover higher-quality portfolio with much lower leverage and a better laddered debt structure. And as I spoke of a moment ago, in Q3 we also made our first allocation of capital outside of gaming. Chelsea Piers is no doubt well-known to those of you who live and work in New York. For anyone who doesn't know Chelsea Piers well, this morning we uploaded to our website www.viciproperties.com a deck that summarizes the transaction and the asset. So the most valuable elements of the deck are the photos. Only photos, not words, can begin to do justice to the magnitude and experiential diversity of this asset. But here are a few words. Chelsea Piers is a 780,000 square foot facility on the Hudson River in Manhattan's Chelsea neighborhood. It is New York's largest and best-equipped sports and recreation facility. It offers one of New York's biggest and most dramatically situated banquet locations. Finally, and very valuably, in the time of unprecedented film production activity, it offers the largest film production space in Manhattan. Roland Betts, Tom Bernstein and David Tewksbury founded Chelsea Piers in 1995. They remain in charge today. And through their 25 years of ownership and management, they have expertly and energetically steered Chelsea Piers through such past crises as 9/11, the Great Financial Crisis, and Hurricane Sandy. We have confidence that under their continuing leadership, Chelsea Piers will recover strongly as the COVID-19 crisis eventually subsides and as New Yorkers once again return to New York's most spacious place to play and perform. While we're excited about our new financing partnership with Chelsea Piers, a partnership that could become longer-term in nature, we remain very glad and very proud to be principally invested in American gaming real estate, a sector that has arguably performed better than any other place-based experiential sector during this COVID-19 crisis. To tell you more about how our tenants are doing and how we remain focused on gaming growth, I'll now turn the call over to our President and Chief Operating Officer, John Payne.

Thanks. Good morning, everyone. As we continue our work to build the best company in our sector by focusing on the opportunities from accretive transactions and expanding our portfolio of the best-in-class operators. To that end, this includes the Eldorado-Caesars merger originally announced in June 2019.

John, my apologies. Your signal is breaking up quite badly. If you'd like, we could have David read your remarks.

Please go ahead. I apologize for the interruption. I'm in New Orleans, and we experienced a hurricane last night. So, Ed, why don't you take over?

Yes. Sorry about that, everybody. As John was saying and I think he broke up. To that end, as many of you know, on July 20, we completed our transformative transaction as part of the Eldorado-Caesars merger, originally announced in June 2019. We acquired Harrah's Atlantic City, Harrah's Laughlin, and Harrah's New Orleans and modified our existing leases with Caesars for total consideration of $3.2 billion. This transaction added $253 million of incremental annual rent for VICI, strengthened the terms of our leases with Caesars and restocked our embedded growth pipeline through ROFRs on two Las Vegas strip assets, a put-call agreement on Harrah's Hoosier Park and Indiana Grand in Indianapolis and a ROFR on Horseshoe, Baltimore. Additionally, in July, we agreed to fund the $18 million expansion at JACK Thistledown in exchange for incremental rent at a 10% cap rate. We also quickly and efficiently partnered with JACK Entertainment by providing them access to incremental liquidity. This demonstrates some of the benefits of having VICI as a capital partner, as we support our tenants in ways that preserve and create long-term value for all parties. Finally, as Ed highlighted during the quarter, we executed on an $80 million loan transaction with Chelsea Piers in New York City. We are very excited to announce this transaction involving an incomparable experiential asset in an incomparable city. Importantly, we believe this investment represents a meaningful partnership and potentially provides VICI a path to a longer-term relationship with Chelsea Piers, potentially adding sector and geographic diversification to our real estate portfolio over time. As we said before, we believe the transaction market within gaming is robust and will likely dwarf transactions that we may pursue outside of gaming just given the sheer magnitude and financial productivity of gaming assets. Despite over $8.2 billion of transaction activity since we started VICI three years ago, our growth story remains in the very early innings and we're excited about what is to come. You have seen us shift from defense to offense by announcing multiple transactions over the past two quarters. We always strive to do fair deals and we believe this is part of what has driven our success. We are often asked if we are going to slow down for a while, or take a break as others do. Given all the transactions we have done in a short period of time, the answer is a resounding no. You should expect us to consider participating in any fair process for an asset sale within gaming. Given our broad investment spectrum, we continue to believe that a bid that includes refinancing is likely to yield the greatest amount of proceeds for the seller of an asset and their stakeholders, giving our business the greatest prospects for growth. With respect to the operating environment, we are very proud of the way our tenants have reopened and managed our properties in the current operating environment. Despite many of the restrictions and challenges imposed on properties across the nation, our assets continue to showcase superiority relative to many other real estate sectors, as the brick-and-mortar casino experience continues to prove its durability. John has personally visited numerous assets across regional markets and was in Las Vegas earlier this week and has been quite impressed with many of the unique operational changes that the operators have done to improve and protect the guest experience, many of which have enhanced profitability. We are extremely proud to be invested primarily in gaming and we stand ready to support the growth initiatives of our tenants and other operators through fair lease terms, integrity, and flexible long-term capital. I'll now touch on the balance sheet and run through our financial results. Just turning to the income statement. Total GAAP revenues in Q3, '20 increased 52.6% over Q3, 2019 to $339.7 million. GAAP revenues included $26.2 million of non-cash items. Accordingly, total cash revenues in Q3, '20 were $313.5 million, an increase of 39.3% over Q3, '19. These year-over-year increases were the result of adding $88 million of rent and income from the loans during the quarter primarily as a result of closing the Eldorado transaction; the Caesars Forum mortgage; the Hard Rock Cincinnati and Century acquisitions which closed in late 2019; and the JACK Cleveland Thistledown acquisition and related loan which closed in January of 2020. AFFO was $227.9 million or $0.43 per diluted share for the quarter. Total AFFO increased 38.4% over Q3, 2019 and AFFO per share increased 22.9% over Q3, 2019. Our fully diluted share count increased approximately 15%, primarily as a result of the settlement of our June 2019 forward sale agreements in June 2020, which added 65 million shares to our balance sheet in advance of closing on our portion of the Eldorado-Caesars transaction. Our results once again highlight our highly efficient triple-net model, as flow-through was 100.3% for the quarter and margins expanded further into the high-90% range. Our G&A was $8 million for the quarter and as a percentage of total revenues was just 2.4%, which is in line with our full year projections and represents one of the lowest ratios in the triple-net sector. I'd like to just highlight two items on the income statement. The first is our ongoing CECL allowance. In the third quarter, the non-cash CECL allowance was $177.1 million, which is primarily related to the new investments we made during the quarter. As a reminder, when new investments close, we record an initial CECL allowance through the P&L. Second is the $333.4 million gain upon lease modification. When we modified our leases as part of the Eldorado transaction, we were required to reassess our lease classification. And accordingly, we reclassified all of our Caesars leases to sales-type leases under ASC 842 and marked them to market resulting in a onetime gain. These items are both non-cash. As such, there is no impact to AFFO or AFFO per share. We continue to point investors to AFFO and AFFO per share, as we believe that should be the primary metric used to evaluate our financial performance and our ability to pay dividends. Just touching on the balance sheet and our capital markets activity. On September 28, we settled three million shares from the June 2020 forward sale agreement, realizing net proceeds of $63 million of cash on to our balance sheet. On September 18, we closed on the $400 million Caesars Forum Convention Center mortgage with Caesars, utilizing cash on our balance sheet. And then as has been mentioned, on October 31, we closed on the $80 million mortgage with Chelsea Piers, of which we funded an initial $65 million term loan with cash on our balance sheet and the remaining $15 million remains undrawn. This loan came about through a combination of a refinancing process Chelsea Piers undertook this summer, as well as a long-term relationship with the principals. The loan has an interest rate of 7%, a term of seven years and is the only loan in the cap stack of what is truly an amazing and irreplaceable asset in New York. And as we've spoken about on July 20, we closed on our portion of the Eldorado-Caesars transaction, adding $253 million of annual rent to our portfolio through the acquisition of three Harrah's assets and the acquisition of incremental rent from our Caesars Palace and Harrah's Las Vegas asset for total consideration of approximately $3.2 billion in cash. We utilized the proceeds from the settlement of the June 2019 forward sale agreements, as well as the $2 billion of proceeds from the February bond offering that were previously held in escrow to fund the transaction. Our total outstanding debt at quarter-end was $6.9 billion with a weighted average interest rate of 4.18%. The weighted average maturity of our debt is approximately 6.4 years and we have no debt maturing until 2024. As of September 30, our net debt to actual LTM-adjusted EBITDA was approximately 6.5 times. This ratio is not reflective of our true leverage, as it does not include a full 12 months of income from the Eldorado transaction, and therefore does not represent our true run rate leverage levels, which is well within our stated range of maintaining net leverage between five and 5.5 times. We currently have approximately $1.7 billion in available liquidity comprised of approximately $144.1 million in cash on hand, $20 million in short-term investments, and $1 billion of availability under our revolving credit facility, which is undrawn. And then, in addition, the company has access to approximately $557 million in proceeds from the future settlement of the 26.9 million shares that are subject to the June 2020 forward sale agreement. During the third quarter, we paid a dividend of $0.33 based on the annualized dividend of $1.32 per share. This represented an increase in the dividend of 10.9%, one of the highest increases from any REIT during 2020. Our AFFO payout ratio for the third quarter was 76.7%, in line with our long-range target of 75%. With that, operator, please open the line for questions.

Certainly. At this time, we'd like to take any questions you may have. Your first question is from Rich Hightower with Evercore. Your line is open.

And John, if you're listening, all the best with storm cleanup down there.

I'm on, I don't know if you can hear me now. I've moved locations and tried again.

Yes, the cell towers seem to be functioning well. I understand what that's like. I appreciate the background you've provided on the Chelsea Piers loan. Could you clarify the credit underwriting for a moment? Can you explain the security behind VICI's loan? Does the owner possess the land under the facility, or just the improvements? You mentioned that VICI's loan is the only one in the capital stack. Could you help us understand the implied equity beneath VICI and where the loan fits in terms of EBITDA or similar metrics? Please provide some details if possible.

Yes, thank you, Rich. There is a ground lease, even though some of the piers are located in the river under the Hudson Park Trust, which owns the piers and the improvements on 28 acres with 780,000 square feet. The financial metrics are not public, but the loan-to-value ratio is very low when considering the location, size of the assets, and the significant EBITDA. This asset has a 25-year operating history, and as Ed mentioned, it has withstood events like 9/11, Hurricane Sandy, and the Great Financial Crisis. The ability of this asset to consistently generate high EBITDA for the past 25 years contributes to our excitement about it and our support for Chelsea Piers. While New York faced challenges due to COVID, leading to temporary business closures, most are reopening now. The asset continues to generate productive EBITDA, and the film studio business is thriving, driven by the global demand for content. We are enthusiastic about the potential of this asset and what the future may hold.

Okay, that's helpful, David. And then just as far as that sort of longer-term potential there. I mean, should we infer that a sale/leaseback transaction is at least somewhat plausible in the near to medium term, or is it too early to make that assumption?

Yes, Rich, this is Ed. I think it'd be too early to make that assumption with any kind of utter certainty, but it's a relationship we've worked very hard to develop. It is a company that is expanding its footprint throughout at least the New York region. So, we're very eager, as we are with all of our partners, to focus on growing our relationships over the long term.

Okay, got it. And then maybe just a quick one in a bit of a different direction. But look, there's been a lot of investment on the part of the operators around online sports betting. That's been obviously a pretty high-profile phenomenon lately. Would you see a chance for deal flow to VICI to increase specifically based on that? In other words where VICI would be a capital provider in the form of a sale/leaseback on a land-based facility, but where the proceeds would specifically be put towards sort of a non-land-based growth opportunity for the operator? And how do you sort of feel about trends in that area right now?

Yes, I’ll start and then pass it over to John. I think this is one of the most exciting developments in our industry right now. There’s a lot of attention on the total addressable market and the potential revenue and profit that gaming companies can generate from iGaming and sports betting. These could be significant new sources of revenue and profit for our tenants, enhancing their financial stability for us in the future. However, what stands out to me is that technology is currently boosting gaming and, by extension, gaming real estate. We are in a phase where real estate asset classes can either thrive or struggle due to technology. For instance, data centers and cell towers are benefiting, while malls are facing challenges. In this scenario, technology is providing a positive impact for gaming and, consequently, for gaming REITs. A key aspect of this boost is that it aids gaming companies in attracting the next generation of customers. Every sector needs to consider where their future customers will come from. Since consumer discretionary sectors rely on generation preferences, this is a crucial factor. In simple terms, this represents a strong method to engage younger audiences and turn them into future customers, which we believe is highly beneficial for the long-term success and stability of our assets. Now, I’ll turn it over to John to discuss our perspective and our willingness to support our tenants with additional capital.

Yes. I don't have much to add beyond saying, Rich, I think you will see over our three years that we have been quite creative in working on deals and wanting to help our tenants grow. I want to reiterate how proud our company is of our tenants' performance. It sometimes gets overlooked while many in the hospitality sector discuss cash burn. We have operators in this space reporting record EBITDA and margins up 1,000 points. I want to emphasize that this achievement is remarkable given the current environment and reflects the creativity of the operators. So, Rich, those are our comments on that question.

Okay. Thank you, guys.

Your next question is from Smedes Rose with Citi. Your line is open.

Hi. I wanted to ask if there are any notable regulatory issues on the ballot this year, such as introducing casinos in cities like Virginia or setting limits in Colorado. Do you think any of these outcomes could make certain regions more or less appealing?

John?

Yes, I'll jump in here. It’s always interesting to see what is on the ballots. Virginia seems to have some potential opportunities. We will find out what happens in a few days, but I believe that it may lead to commercial gaming in that state and new developments, which could create opportunities for us or strengthen a tenant. We'll need to monitor the situation in Nebraska as I’m uncertain about its progress. Regarding sports betting, several states are working to move that forward, and we’ll see how it unfolds. In Colorado, they are normalizing the casino environment by increasing debt limits, which will benefit the operators there. Overall, it looks like things should be positive, but I am paying close attention to Virginia.

I wanted to go back to your significant initial investment in a non-gaming entity. John has extensive connections in the gaming industry. Looking ahead, how will you pursue non-gaming opportunities? You mentioned a long-term relationship with Chelsea Piers; could you share more about this partnership and what led you to engage with them during their recapitalization process?

Yes, I have had a long-term relationship with the founders of Chelsea Piers. More generally, at VICI, we plan to leverage the extensive experience of our management team and Board in various experiential real estate asset classes. We will utilize these relationships similar to how we've benefited from John's unmatched connections in American gaming. From the start, we established VICI as an experiential real estate investment trust, guided by the principle that superior long-term returns in real estate management come from owning top-quality properties. Our main focus is to determine whether a specific piece of real estate is truly exceptional in its market and whether its investment and operational characteristics indicate the potential for superior long-term returns. Chelsea Piers meets all these criteria, and we are confident we will identify more opportunities like this in different experiential sectors over time.

Okay. Thank you.

Your next question is from Greg McGinniss from Scotiabank. Your line is open.

Hi, everyone.

Hey, Greg.

On the transaction front, Caesars still needs to sell those two Indiana assets that you guys own together whether you own and they operate. Can you just remind us what the process may look like for when they try to sell those operations and how that's going to impact the master lease?

John?

Yes. So we have a put-call on the two Indianapolis assets. David will have to remind me of the exact dates when they're active. So it's not a ROFR. It's very clear. We do have a put-call on that. And we love those assets. I actually was in Indianapolis about six weeks ago at those facilities. Great business, great performance and we'll be excited. They will be added into what we're now calling our regional master lease. And David, I don't know if you want to add a little bit of the details on the put-call and the timing on that?

Yes, Greg, I believe you are inquiring about Southern Indiana and Hammond. The put-call arrangement starts in 2022 and continues until the end of 2024. Regarding Southern Indiana and Hammond, you are correct that as part of the Eldorado merger, Caesars was required to sell three OpCos: Evansville, Southern Indiana, and Hammond. We hold the real estate for both Southern Indiana and Hammond. Caesars is managing those processes, and we are not involved. If there is a sale of the OpCo, regarding your question about how rent will be affected in the master lease, our total rent would not change, but it would present opportunities for tenant diversification. We'll wait to see how this develops and how the bidding processes align with Caesars' obligations in Indiana.

Okay. So we're not going to see a similar transaction deal that GLPI employed with Tropicana Evansville then? It's just going to be a transfer to the operator most likely?

Yeah, I think – yeah, that's the great assumption, Greg. And just to be clear, the rent within the master lease might change with a new operator in either one of those two assets, but our total rent would not change. And we're very confident Caesars is running the process in such a way that we're going to be very happy with whoever ends up being our new tenants in those assets.

Okay. Thanks. And then just a final question from me. Just curious what changed regarding the undeveloped land parcel acquisition by the forums and why are you no longer pursuing that one?

Yeah. So in a period of due diligence, Greg, what we discovered is that there are various entitlement and permitting issues surrounding that land that especially relate to Caesars' parking obligations. And it was not going to be easy to unwind those quickly. And given the magnitude of activity that Caesars is currently engaged in, in terms of integrating after the merger and undertaking the various activities, we agreed that it was best for both of us. For the meantime, we put that initiative aside and then perhaps return to it at a time when the dust has settled a bit post-merger.

Okay. Thanks. Appreciate the color.

Your next question is from Jared Shojaian with Wolfe Research. Your line is open.

Thanks for taking my question. Can you just talk about your appetite for underwriting additional real estate on the strip right now? And how do you think about how terms would compare today in this depressed environment versus pre-COVID?

John?

Do you want me to touch on that? Sure. Well, I was just out in Las Vegas as David said this week. So I had an opportunity to be on the strip and meet with operators throughout the whole city. So we continue to be excited about this market long term. Clearly Las Vegas has to get over not having meeting business right now and some international business, but we believe that that will come back. It really is amazing to think about the United States right now. And Las Vegas is down from its 2019 numbers, obviously, but there's still a lot of visitation going to Las Vegas. When you compare that to other U.S. cities like New York, Chicago, Miami, San Francisco, there's no comparison that the consumer has not found a substitute for their travel patterns to a place like Las Vegas. So that's a long way of saying, we believe in this market. We're long-term investors. Would we do a transaction here in the short-term? I think the operators are more likely to get some more of the operations under their belt after COVID and better understand what the true run rate of EBITDA is going to be. But if you're asking do we still believe in Las Vegas, I think the answer is a resounding yes.

I think my question arises from recent media reports and your perspective on underwriting for Las Vegas right now. Would you consider pursuing something at a significant discount compared to what you might have paid in January? That’s essentially the basis of my question.

And media reported. Go ahead, Ed. Go ahead.

I was going to mention, Jared, that this situation requires us to navigate through what everyone agrees is a temporary crisis that will eventually come to an end, revealing true long-term value. Sellers who want or need to sell during such a crisis must also consider long-term value just as buyers do. Therefore, it’s quite difficult to determine a general guideline for what kind of discount should be applied, particularly because we are discussing real estate. Our intention is to hold onto our assets for decades. So, the question arises as to how much a temporary crisis should affect the lasting value of an asset. I wish I could provide a clear and concise answer, but it will ultimately be highly specific to any transactions that might occur during this temporary uncertainty. John, do you have anything to add?

No. I also think it's important that if we ever make a transaction, having an operating partner is critical. Most importantly, the going-in cap rate needs to be accretive. I assume you're referring to a large asset on the Las Vegas Strip. As I mentioned, we're always interested in hearing about strong gaming assets in markets like Las Vegas.

Got it. Thank you. And then maybe just one more for me. How do you guys think about a possible investment-grade credit rating and how that potentially could be helpful to your cost of capital in any way? I mean I think just in your leverage and liquidity and the resiliency of your rental strength throughout this pandemic, what do you think the rating agencies would want to see to make that move? And would that be helpful?

Thanks for the question, Jared. The answer is a clear yes, it would be beneficial. It would lower our cost of capital and significantly enhance our access to capital. This year, the volume of investment-grade bonds is four times that of high-yield bonds, which are having a record year. For us, the main issue is eliminating the term loan, which is secured by nearly all our assets and prevents us from having a traditional unencumbered asset pool. This is the key factor that the agency is looking for, which would allow us to transition to an investment-grade status. We credit GLPI for reaching this point and highlighting that tenant concentration is not necessarily a barrier. Our rent from Caesars is comparable to what they collect from Penn, indicating a viable path forward. Ultimately, it hinges on repaying that term loan, which we aim to accomplish in the upcoming months and years.

Okay. Thank you very much.

Your next question is from Barry Jonas with Truist Securities. Your line is open.

Hi, Barry.

Pre-COVID, we had Blackstone enter the space. We had another triple-net about to enter the gaming REIT space. Given the operating results operators are seeing now I'm curious if you expect more activity from some of those newer REITs to reemerge anytime soon?

If they are paying attention, you would certainly think so, Barry. If you look across various real estate asset classes right now and ask how the tenants are performing, it’s difficult to find any examples, other than perhaps data centers and cell towers, where tenants are doing better than ours in terms of profitability. This is particularly true in regional markets. I believe, as we saw last week, there will be positive surprises from large strip operators regarding their relative performance. Therefore, there should be significantly increased interest in gaming real estate, especially considering how it has been validated through this crisis. When John, David, and I, along with the VICI team, began sharing our narrative three years ago, we often faced the question: 'Will a crisis be necessary for people to recognize the resilience of this real estate and its income streams?' We stated that we didn’t think a crisis was required, but we experienced one anyway. We are extremely pleased with how our tenants have performed. This crisis has shown, Barry, that gaming real estate is not commodity real estate. In many real estate sectors, properties can be relatively interchangeable. For instance, if I run a coffee shop or a gym, I can pressure my landlord by suggesting I could move to another similar location nearby. However, these are not generic properties; they are unique and hard to replace. The nature of high-value, institutional-quality real estate is that it isn’t easily substituted, and the businesses occupying these spaces are fundamentally strong. Our tenants are operating exceptionally well.

Great. And then just curious if you looked at Tropicana Evansville or if your exposure in that stake just made it less appealing from the start?

Yes. Well it's an odd situation. It was owned by a gaming REIT and it's now still owned by a gaming REIT. And I believe there was even an agreement that it could not be sold to another REIT. So it's a really good piece of real estate. I think GLPI has to be very glad they're going to continue to own it. They're going to own it with a good tenant. And we wish them the very best. And to your point, Barry, we do obviously have very nice exposure already in Indiana with Southern Indiana and Hammond. And but we will be able to increase our exposure with what we think are two of the best assets in the state with the so-called Centaur assets.

Great. Thanks so much, guys.

Our next question is from Carlo Santarelli with Deutsche Bank. Your line is open.

Hey everyone, I hope you're doing well. Thank you for allowing me to ask my question. I wanted to follow up on an earlier inquiry regarding the large asset in Las Vegas. This is more of a broad question, and I would appreciate your insight on this matter. Given the current situation, it appears that a traditional sale/leaseback structure for a substantial asset in that market could be challenging, mainly due to the costs associated with meeting rental obligations in the short term while the asset increases in value over time, reflected by its expected EBITDA. In a scenario where the buyer may need to take a longer view, can you think of any alternative structures that might facilitate the transaction without placing the full burden on the operator to manage a significant rental stream in the near term, while also considering your own financial contributions to the asset?

Yes. I'll start with my thoughts and then let John and David weigh in. Is it possible to create structures that would tackle the challenge you mentioned? Yes, we can certainly develop such structures, although they may be complex. Complex structures can sometimes fail under their own complexity, but it is definitely achievable with the right parties involved. There are innovative ways to address these temporary revenue or valuation issues. As John has already mentioned, we are more than willing to be creative with financing structures when the opportunity arises. John, David, do you have anything to add?

You did a very good job, Ed. I would like to add that we have the advantage of viewing real estate with a long-term perspective, and hopefully, in the next 30 years, we will look back at 2020 as just a minor event. Ed has addressed your specific questions, but I believe one of our strengths is that we won't be evaluated based on what happens in the business over the next month or quarter.

That’s great guys. Thank you very much.

Your next question comes from David Katz with Jefferies. Your line is open.

Hi, Thanks for taking my question. I think that this actually fits in some regard with the question you just answered. You have engaged more and more with traditional loans. They've been seemingly done as a purpose pitch. But in looking through the accounting last night it appears that they actually bear less risk than some of the core lease revenue streams that you have. I'm interested to hear you talk about how you think about those streams in terms of value and how you would have us think about them in terms of value particularly given the prior question is that, they could be used as part of a structure with a purpose.

Yes, I'll turn it over to David in a moment David Katz. And the loan business can be a very effective tool for REITs at giving itself exposure to sectors it may be new to and gives them an opportunity to acquire and learn in if you will a less risky way for the absolute long term. I would say we're generally going to be biased toward using loans to put ourselves in a position to eventually we would hope acquire either the underlying real estate tied to that loan or otherwise acquire real estate within that sector because we are a REIT that's being engineered to last for decades and decades and decades. Loans obviously come due, they get repaid. And then if capital gets returned you've got to go find another thing to do with it. So David I don't know if you want to add to that, David Kieske?

Yes. No Ed, I think you covered it well. And David Katz I like the perfect pitch, the corporate path to long-term ownership, there will likely be some small percentage of our total investment base that we can utilize in the REIT structure to deploy capital in very safe, low LTV scenarios that may lead to a path of estate ownership over the long term. So that's something we're excited about and excited about continuing to use our capital accretively.

Got it. Thank you.

Your next question is from Jordan Bender with Macquarie. Your line is open.

Good morning. Thank you for taking my question. With regional revenues potentially lower due to a decline in non-gaming, I wonder if EBITDA might increase in the future. I would like to know how you plan to structure your future escalators and resets, especially regarding whether they will be linked to revenue or EBITDA.

John, you want to take a first crack at that?

No, it's a great question. We actually have not been asked that question, but it's something that we will consider moving forward. I thought the question was going to be whether those revenues are going to come back. I believe the operators have discovered through their analytics that some of that revenue simply had no margin. My initial response was going to be that it's not coming back. However, regarding your question on how we approach leases and escalators differently, we are always flexible in creating new leases if there is a fair solution for both sides. If there's a way to adjust our escalators based on certain numbers, we will definitely consider that. Good question.

Thanks. And then, with some of that non-gaming, that might not be coming back and then access land at some of the properties, I was wondering your thoughts on possibly repurposing some of the way maybe something that's not in the gaming sector?

It's an interesting question, Jordan. I think we’re mainly discussing interior space, specifically focusing on repurposing that space. As sports betting evolves, it will be fascinating to see how the sportsbook experience changes in response to potential increased demand. John was in Las Vegas this week for the opening at a D. John, for those who weren’t there, could you share some insights about the importance of the sportsbook and sports bar experience at this new venue?

Yeah. The Circa asset opened on Tuesday and very focused on the Gate and the sports betting and just a wonderful new facility in Downtown Las Vegas and centered as I said around the gambler. Now, back to your first question about operators and extra space, hypothetically, if they're not going to reopen their buffet, how will they reposition that and add other amenities? That's the beauty about our tenants. And they see opportunities to improve revenues or drive a different consumer to build in. They'll change what that space is used for. And I think you're going to see that happen over the coming years as they realize they were operating restaurants or other outlets that drove revenue, but weren't driving trips and weren't driving profitability. And how do they fill that space with new amenities that do that? And one could be larger sportsbooks as Ed mentioned. Very good question.

Awesome. Thanks, guys.

Your next question comes from Shaun Kelley with Bank of America. Your line is open.

Hi. Good morning, everybody. I wanted to ask briefly about how you've approached the margins and changes happening at the regional properties. At a high level, do you think this affects cap rates? With some of the fundamentals we are beginning to observe, is there a way to possibly project growth or normalization quicker than we have in the past? How do you view the impact of these fundamental changes on what you're willing to pay?

And Shaun, just so we're clear when you speak of the growth that we would be underwriting you mean the growth in tenant EBITDAR?

Correct. Exactly, Ed. So the higher margins today are around 1,000 basis points. Is there a portion of this that you can underwrite, or do you need to see a lot more stability before doing so?

More time brings increased confidence and certainty. I am truly amazed by what Red Rock has reported and what Penn announced today. These are remarkable figures, and generating them during this crisis showcases the strength of our tenants. As I mentioned in our Q2 call, much of the value in real estate is tied to the quality of the tenant businesses. Our tenants’ operations are being validated, unlike many others, except for a few sectors like data centers and cell towers. It’s challenging to purchase a data center for less than a cap rate of around 3.75%. We need to assess our investments in relation to our cost of capital, and that is non-negotiable. However, we believe that as the market recognizes the quality and security of our real estate and its cash flows, our cost of capital will improve accordingly. This could enable us to pay more for these high-quality assets, and we'd be happy to do so. But we must remain cautious about our cost of capital.

And Shaun, I'll just add to that real quick. Ed explained it well. But part of the reason why I'm out and about and meeting not only with our tenants but every operator is to continue to study the magnificent performance that these operators are delivering, so that as we do underwrite we have an understanding of what is going to remain and what part of that margin may be getting back. So I'll just add that little tidbit.

Great. Thank you.

Your next question is from Thomas Allen with Morgan Stanley. Your line is open.

Thank you. So earlier this year, I think the commentary was that the transaction market for gaming assets was stalled because of operators focused on kind of resuming their businesses. Now that operators have resumed their businesses and trends are going well has there been a pickup in the kind of transaction pipeline? Thank you.

Yes. I'll answer this. I'll start and then turn it over to John. Thomas, I think that what we're seeing is – well, there's two key factors in play: how well gaming has performed and recovering from the COVID crisis and this – the excitement around iGaming and sports betting. And because of those two key factors, you've got incumbent players who want to grow their store counts simply to grow their businesses and do so accretively. But also because I think Thomas, and you covered this very well, there's a bit of a land rush mentality in American gaming with the proliferation of sports betting such that people want to put more pins in the map and expose themselves to more jurisdictions for sports betting. So you've got the incumbent players who want to grow and you've got new capital that wants to come in and start to establish footprints and grow as well. And that is going to create a sense among owners of existing assets to, hey, my assets are pretty liquid and they might be quite valuable right now. So I don't think it's going to be so much a case of existing operators saying, hey, I'm going to do a sale/leaseback in order to just financially engineer my own business. It's going to be potentially existing owners who go: 'I sweated it through COVID. I'm really glad to still be alive and doing well. But maybe I actually ought to take an offer from these guys who would so love to own my casino an operator and a gaming REIT like VICI.' So I think you're going to see increased liquidity based upon the excitement around the sector. And John you can talk about what you're seeing and hearing in your travel.

No. I think you described it well, and I think there's this excitement around this sector that we've not seen in years for all the reasons you talked about. Again, don't underestimate the operating business as they're putting up record numbers and margins and a lot of the other hospitality industries continue to talk about how much cash they're burning or hoping to get places open. So, it's really been I think what the operators have done.

Thank you both.

We have time for one final question. Our final question will be from John DeCree with Union Gaming. Your line is open.

Good morning everyone, and thank you for taking my question. I have just one. We've been discussing how your underwriting criteria for assets may evolve post-pandemic. Given that it's only been a few months since reopening and there hasn't been a lot of deal activity, how are you observing your operating company or partners adapting their criteria for transactions with you in light of the previous shutdown? Are you noticing any areas where they might be more flexible, or aspects they are particularly cautious about? I'm curious about any insights you've gained from potential tenants regarding their views on leases and entering into transactions that may have changed.

John?

Yes, it's good to speak with you. I don't see a significant change. We have been clear about our underwriting process and how we've adapted our approach to deals based on the lessons learned during COVID. In the past few quarters, I've mentioned that operators now have a better grasp of how a REIT like VICI can support their growth, which is essential. Our first three years were focused on ensuring they understood our role as a partner. As you noted, there haven't been many deals recently. GLPI announced a deal yesterday, and we will continue to engage. If there are aspects of the lease that make the operating company uncomfortable, we are open to discussions. We aim for both parties to leave the negotiation feeling that the deals are equitable. We are willing to make adjustments, but we haven't reached that point yet.

Thanks, John. Thanks everybody.

Yes. Thank you operator. Please let me reiterate our thanks to all of you for being on today's call. The number one takeaway from this call should be that the growth we produced this quarter in our revenue in our AFFO and in our dividend has been fueled by the economic power and resilience of our tenants' businesses. We are grateful, very grateful to our tenants and our tenants' customers for this resilience. We believe we're well positioned to continue growing our portfolio and driving superior shareholder value into the future. Again, thank you and good health to all. That will do it operator. Thank you.

This concludes today's conference call and you may now disconnect.