Good day, ladies and gentlemen. Thank you for standing by. Welcome to the VICI Properties Second Quarter 2021 Earnings Conference Call. [Operator Instructions]. Please note that this conference call is being recorded today, July 29, 2021. 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 second quarter 2021 earnings release and supplemental information. The release and supplemental information can be found on 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, 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 a more detailed discussion of the risks that could impact future operating results and financial condition. During the call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available on our website in our second quarter 2021 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; Dave Wasserman, Chief Accounting Officer; and Danny Valoy, Vice President of Finance. 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.

Thanks, Samantha. Good morning, everybody, and thanks for joining us on today's call. We're excited to talk about our quarter. John will provide an update on the environment for our operating partners, and David will summarize the outstanding growth that our second quarter results represent and briefly address our exciting new financing partnership with Great Wolf Resorts. But first, I want to address the topic. We've talked a lot about at VICI since VICI's emergence in the fall of 2017, and that's the topic of real estate asset class institutionalization. At VICI, we've been saying since day 1 in October of 2017, the gaming real estate deserves to be and we believe is proving to be the next great institutionalization story in American Commercial Real Estate. When we talk about real estate asset class institutionalization, we're talking about the process of institutional capital determining that an asset class is or isn't worthy of their investment. Worthy based on the quality and demand characteristics of the real estate worthy based on the quality of the occupants business and its credit. This determinization process requires learning and learning takes time and hard work. Most active asset management shops do not have a lot of excess analytical capacity or excess time to dig deep on new asset sectors. And there's no question that it's active managers who pioneer investment in the listed equities of new real estate asset classes where active managers go index managers follow. Active institutional real estate investment capital has had to do a lot of new learning over the last 10 years for real estate investment sectors as varied as cell towers, data centers, final mile logistics, single-family rental homes, manufactured housing, medical office and labs and of course, gaming. In some of these asset classes, institutional investors have…

Thanks, Ed, and good morning, everyone. As many of you may recall, in March of this year, we announced the pending acquisition of the real estate of the Venetian Resort and Sam's Expo Center in Las Vegas. Upon closing, this $4 billion acquisition will add $250 million of annualized rent, growing VICI revenue base by nearly 20%, and is expected to be immediately accretive to AFFO per share. We agreed to acquire this iconic world-class asset in the heart of the Las Vegas Strip at a 6.25% cap rate. And just a few weeks ago, another real estate acquisition was announced in Las Vegas with Blackstone agreeing to acquire City Center's real estate from MGM at a 5.5% cap rate. The City Center transaction illustrates what we have been foreshadowing since our company was created. That is, when institutional capital realizes the discount between the incredible quality of gaming real estate and the undemanding valuation relative to other real estate asset classes. The days of the 10% cap rate transactions are over. Our acquisition of the Venetian real estate was announced at a very idiosyncratic time, during which the recovery trajectory in Las Vegas was unclear. We were highly optimistic as reflected in the 6.25% cap rate and prudently structured a transaction that worked for all parties while creating significant value for our shareholders. As those of you who follow the industry closely are undoubtedly aware, visitation, occupancy and consumer spend have continued accelerating in Las Vegas and operating margin expansion has become apparent. Midweek demand has been supported by the early return of meetings and conventions and the outlook for the back half of 2021 and 2022 is very promising. Similar to regional markets, Las Vegas is benefiting from very robust consumer demand and a new, more efficient operating model. As I've said before, the gaming consumer did not find a replacement for the bricks-and-mortar experience through COVID, not in the regional markets, and not in Las Vegas. As you can imagine, underwriting transactions during this time can be challenging. Each market and asset has unique attributes. The EBITDAR you consider underwriting 1 day could be significantly behind real-time performance just a few weeks later. No doubt this makes underwriting and negotiating a potential deal, a fun and creative challenge. We're fortunate our team has the ability and experience to manage this complexity. We thrive on this challenge, and we continue working relentlessly to execute compelling opportunities that deliver the utmost value for our shareholders. I now will turn the call over to David, who will discuss our recent investment outside of gaming and our financial results. David?

Great. Thanks, John. I'll discuss our exciting new partnership with Great Wolf and touch briefly on our balance sheet and liquidity and give a summary of our financial results and guidance, all of which is fully detailed in the press release we posted last night. During the quarter, we continued to expand our investments outside of gaming by entering into a mezzanine loan agreement with Great Wolf Resorts, a Blackstone portfolio company. On June 16, we agreed to provide $79.5 million to partially fund the development of the Great Wolf Lodge Maryland, an expansive 48-acre indoor water park resort located in Perryville, Maryland. The loan bears an interest rate of 8% and has an initial term of 3 years with 2 12-month extension options. We will fund our commitment using cash on our balance sheet and expect to fund our entire $79.5 million commitment by mid-2022 in accordance with the construction draw schedule. In addition, we'll have the opportunity for a period up to 5 years to provide up to a total of $300 million of mezzanine financing for the development and construction of Great Wolf's extensive domestic and international indoor water park resort pipeline. We are thrilled to partner with Great Wolf, the leading indoor waterpark resort platform and institutional operator. During the quarter, we entered into a new $1 billion ATM agreement with the added flexibility to sell shares through forward sale agreements under the ATM. We've not sold any shares under the ATM in 2021. Our outstanding debt at quarter end was $6.9 billion with a weighted average interest rate of 4.01%. The weighted average maturity of our debt is approximately 5.6 years, and we have no debt maturing until 2024. As of June 30, our net debt to LTM adjusted EBITDA was approximately 5.0x. We currently…

[Operator Instructions]. Your first question comes from the line of Greg McGinniss with Scotiabank.

It was great to see a new industry enter the fold. But could you provide some context to the size of the addressable market for indoor water park resorts and resiliency of those cash flows?

David?

Yes, Greg, great to talk to you. I'm going to take that in reverse order. I mean we've spent over 2 years studying the indoor waterpark resort sector. And I've just come to be enamored with it. We're thrilled to partner with Great Wolf, who is the leader in the sector and has a phenomenal institutional platform led by Murray and team in Chicago. The cash flows, they're essentially casinos without gaming. There are multiple revenue drivers in terms of the indoor water park component, the family entertainment center, the food and beverage. So we've talked about gaming, multiple levers within a box. And it's not just a box. It's a very complex box. These are very expensive assets to build that have a very, very durable customer base durable customer experience, which we come to love. So high-margin business and similar to gaming, they were shut down during COVID, but they've reopened. The customer has returned and customers returned in droves, and they've opened under a new operating model with higher profitability and higher margins. In terms of addressable market, Great Wolf is the leader. There's 19 Great Wolfs out there. This will be #20. We hope to continue to grow the platform with Great Wolf. And this is a sector that we will continue to kind of study look at and hopefully, over time, convert into real estate ownership if and when the opportunity arises.

Great. And was this a marketed opportunity? Or how are you able to source the deal?

We've - the team with Ed, John, myself, we've got great relationships. Our Chief Accounting Officer came from Blackstone. So we have good relationships with a lot of operators in these - as John has talked about, we've been out meeting with operators since day 1, both in and outside of gaming. And we've developed a relationship with the Great Wolf team and the Blackstone team and we're able to together a very collaborative transaction that worked for both parties.

Great. And then I guess final question, most simply, what's your appetite for additional deals in 2021?

John?

Yes. I mean, look, we haven't changed our plans. I continue to do, as David just said, with a great full team and the Blackstone team and other operators in gaming and outside game and continue to build what those companies are trying to do to grow? Is there a spot for us to help them grow as a partner for the long term? So I don't know what exactly is ahead of us, but we're continuing to be out there and build those relationships.

Your next question comes from the line of Daniel Adams with Loop Capital Markets.

Whether it's Blackstone's real estate investment on the strip or your deal with Apollo at the Venetian or even your recently announced financing deal with Blackstone portfolio company, Great Wolf. It seems increasingly that private equity is looking to partner with or compete directly with the gaming REITs. So I guess looking ahead, do you continue to see private equities involvement in gaming opco and/or real estate assets accelerating, flatlining or declining versus, say, what we've seen over the past 2 years?

Yes, Daniel, good to talk to you. I'll start out. We - I think the actual starting point and answer your question, isn't narrowly the issue of how much private equity capital will come into gaming, whether the opco or the propco, I think it actually starts with how much capital there is globally hunting free yield in a world where whatever it is today, 60% of ore of sovereign yield is negative. Capital, whether it's private equity capital or direct pension fund investment capital needs to find yield. And in the case of the brilliant deal, Blackstone did on City Center, buying a phenomenal piece of real estate at 555 gap. We must recognize that's not private equity per se. That is actually within their nontraded REIT, we believe. But the larger point is that to echo what John said in his prepared remarks, gaming real estate represents, we believe, the steepest great real estate on the planet on a comparative basis. In a day and age when industrial and even office to this day are trading at cap rates with 3 and 4 handles. Gaming real estate, even at a 5 handle on a comparative basis is of great value, especially for those again who are managing long-dated liabilities. The leases are long. They have escalation. In our case, they have CPI kickers and the capital is concentrated in assets that are absolutely indispensable to the occupant and the occupants are great credits as real estate tenants. And again, you're seeing more and more of this, where you might have seen as an example, that the Cadillac Fairview, the direct investment arm of Ontario Teachers, one of the leading direct investment pension fund complexes in the world has - is going to allocate more and more capital to real estate because they have determined that real assets are where they're going to have to get yield to make up for the lack of it in sovereign yield instruments.

That makes a ton of sense. And then I guess, just with respect to the Great Wolf financing deal, your second such financing transaction with a nongaming operator, I guess looking ahead, do you also see accretive asset acquisition opportunities outside of gaming. In other words, do you see VICI diversifying not just its nongaming investment portfolio but also specifically diversifying its nongaming tenant and asset base over the next, call it, 1 to 2 years?

David?

Yes. Thanks, Dan. Look, just in terms of the loan, I mean, we use the loan - the loan tool kit as a pathway to potential real estate ownership. So we do expect to expand - continue to expand outside of gaming. But as we've been very vocal about, it's not an either or. The majority of our investments will be gaming just as Ed talked about, the magnitude of the assets, the magnitude of the cash flows. But we will look to continue to partner with great operators and owned real estate with great operators to help them grow their portfolios, whether through direct ownership or the continued use of the mortgage financing tool that we've been successful with to date.

And Dan, if I can just add to that as well. Just as a few years ago, when we started BK, you heard me on these calls talk about continuing to work with gaming operators to educate them on how a REIT like ours could help them in their capital stack and how we could help them grow. We're doing a lot of that in the - in some of these nongaming sectors as well as they're getting introduced to our company and our form of financing. And we're spending a lot of time doing that. And hopefully, that will lead to some accretive and exciting opportunities for us in the 1 or 2 years as you mentioned.

Your next question comes from the line of Barry Jonas with Truist Securities.

With PE paying record cap rates for gaming assets and the potential for new entrants, I'm curious to get your perspective to what extent your gaming expertise is an advantage in discussions with operators?

John?

Well, it's definitely - there's no doubt having some expertise in this space is quite important. These are, as David talked about, the nongaming assets being complex, our gaming - our tenants have very complex assets. And really, over the past 18 months, the business has changed dramatically. And so understanding how the business has changed and what is the long-term outlook of the business is critically important. And then understanding how these companies are going to grow by meeting with the C suites is important. And there's no doubt that you've heard us talk about the importance of relationships. These are long-term deals when we do these things. And so it is important to have those relationships and the understanding of the core business and how it's going to perform over the years to come. So I'd say that's a long saying Barry, that it is important. We think it's an important part of the VICI's - our plans.

That's great, John. And then just a follow-up question. We've obviously seen very strong cap rate compression in Las Vegas. Curious to get your thoughts on what we could see in the regionals, maybe what level do you think is reasonable?

Yes. I'll start, Barry. What we will likely see in real estate is the dynamic that you tend to see in other asset classes as an institutional line. As an example, when final mile logistics really started becoming a higher category you tended to see the greatest amount of bidding activity in what were then the epicenters of Final Mile, which was chiefly the Inland Empire of L.A. and Northern New Jersey. And as assets got bid up there and they got bought up in those 2 markets, you began to see capital then seeking return and ownership of assets in other markets. So capital started going to places like Atlanta and Dallas and Chicago and Cleveland. I mean there's an Amazon distribution center across from our Distell asset, outside of Cleveland and a whole lot of capital went into that. And what you will see likely in gaming, is this same, if you will, radiating effect from the current epicenter of gaming real estate investment, which is Las Vegas, right? As the asset class continues to prove itself out. And as opportunities perhaps don't become as numerous in Las Vegas, capital will seek opportunities in other markets. And in regional gaming, they will find assets that are outstanding in their income producing and income resilience characteristics. So it's a matter of time, but that, I believe, is all it is, a matter of time if this is going to be like other institutionalized asset classes.

Your next question comes from the line of Wes Golladay with Baird.

I just want to maybe follow up on that last question. Are you starting to see capital flow to be the regional assets, whether it's on the debt side or the equity side or is it still primarily concentrated in Vegas?

Well, I mean, we certainly know what we hear, David, right?

Yes. We know - exactly, and it's good to talk to you. And we've mentioned this before that our phones didn't stop ringing during COVID and some of the calls that we got were new entrants looking at gaming. And I think those new entrants are continuing to look at gaming, both within Vegas and outside of Vegas because - and these are primarily private capital sources who have historically invested in leisure, hospitality, entertainment companies, and they're almost through cash burn cycles. They're talking about cash burn, but they're looking at gaming, realizing, wow, how do I get into that sector? How do I potentially partner with somebody in that sector? How do I develop a platform in that sector? So I think you'll see more in the regional markets as time goes on here, just again, given the resiliency and quality of these cash flows.

Okay. And then looking on the debt side of the equation, what are your plans for the financing of the Venetian? And where can you borrow today?

Yes, we've been very consistent. We - as I mentioned in my remarks, we have about $2.4 billion of equity sitting in the forward. So that's - and then we will go to the debt markets later in the fall, unsecured high-yield markets to get to remaining $1.6 billion, $1.7 billion of proceeds to fund our $4 billion commitment for the Venetian. And our 10-year paper or 10-year quotes we've gotten recently is sub-4 kind of 3.5% to 4% range. Obviously, that bounces around a little bit with the markets, but we still feel very confident of our underwriting and the accretion we'll achieve from that transaction.

Okay. And then one on the investment. When you look at investing in incrementally into your assets, what type of annual spend can we see here over the next 2 or 3 years? And do you have any active plans right now?

Yes. Wesley - yes go ahead, John.

Yes. Just to say, Wes, I think you're asking about our current tenants and our current assets. Yes, it's the responsibility of our tenants to do that. We obviously have some visibility to projects that that they're going to - big projects that they're going to put forth. We also have in our leases, some obligations, the size of investment that they make into our assets. But it really is the obligation of the tenant or the operator to make those capital investments.

Right. But I think what was if you're asking about what is the opportunity for us to invest incremental capital under assets, we did just complete a project or I should say, Jack, our operating partners Cleveland just completed a project at Thistle with the help of our capital, a new smoking patio that's proving to be an outstanding success for which we will be getting incremental rent. We are working with our operating partners to help them understand the way in which we can provide capital for expansion improvements, reprogramming especially as they continue to see demand levels that are really just outstanding. I mean, very - a moment ago, mentioned how strong the operating results are and I just can't help looking for an excuse to mention the fact that when Sands announced, I guess it was last week, they reported 98% occupancy in the month of June. No international travel. Not much convention business yet, 98% occupancy. And as you all know, they've got over 7,000 rooms. And at 98%, that means almost 7,000 room nights, a nights sold. Each night in the month of June with again, no international travel and very little citywide convention business yet, and yet that business is coming towards the back end of the year. So our operators are certainly looking at scenarios where they're realizing there can be opportunities for expanding their capacity in one way or another or reprogramming in one way or another to take advantage of what is just outstanding levels of demand.

Got it. And then 1 follow-up to that. You mentioned the smoking at the Jack the facility there. Can you talk about how influential the ability to smoke is that facility? We have looked at the gaming data in Pennsylvania it looks a little soft but it looks like it's partially explainable

John?

Yes, it's been interesting, Wes, as this has been rolled out nationwide, there's been markets that started nonsmoking, Ohio, in particular, is a market that started out and still is nonsmoking. But what you heard Ed mention is the operators have created these outdoor facilities that allow smoking. And I think it's just to meet the demand of particular customer segments that want to smoke while they gamble. There are other states and cities even that are passing nonsmoking just have to monitor if that ultimately affects the business long term. But what Ed was mentioning is Ohio is a state that actually is non-smoking, but we help Jack develop a smoking area that is outside.

Your next question comes from the line of Smedes Rose with Citi.

It's Michael Bilerman here this morning. I was wondering if you can take us through sort of the discussions you've had on the Chelsea Piers and Great Wolf side. Both of those were loans to start. Obviously, I think Chelsea Piers is on leasehold, which may have driven part of that. But I guess, sort of this risk balancing in terms of going in on the loan side versus going in on the fee and then doing a traditional sale leaseback. How should we think about sort of your incremental expenditure in non-gaming assets? Should we expect it to continue along the mortgage line with drawdowns in the future versus doing something more material in terms of investment?

Yes, Michael, it's a good question and to hear from you. A grounds saying that execution happens at the intersection of opportunity and strategy. And what you've seen from it so far, Michael, in terms of both Chelsea Piers and Great Wolf was seizing on an opportunity. In each case, we did not have at the time we did the deal, the opportunity to buy the real estate either by a leasehold interest, which would be possible. Eventually it's easy peers or buy into the asset, either in a stage of development or fully developed. So we're using the financing vehicle in the way David described is a way to have a seat at the table such that if there is an opportunity to become the real estate owner in the future, we have a ringside seat in order to do so. And again, we're going to continue to tell every field we can really come into contact with. And certainly, our first choice will always be to buy real estate, whether it be simple or buying long-term leasehold interest if it meets our investment criteria. But again, we're not going to be doctrinaire, we're going to be opportunistic if we think the right risk/reward profile is there. And in the case of these 2 opportunities, I mean we just could not be more excited. Chelsea Piers, as you well know, it's just up the street premium as a comparable asset. And I'm not sure it's fully appreciated. It's not only New York's foremost recreation asset, it's Manhattan's best film production studios. And you don't need me to tell you with the news this morning about Hudson Pacific and Blackstone partnering on the development of new studio space in L.A. That is one really hot category right now and likely to stay so for the long term. So again, this is a bit of a long-winded answer, but we're going to use every tool in the toolbox to get a ringside seat for opportunities to grow our portfolio accretively over the long term.

And how do you think about - obviously, on the loan business, right, you get repaid and you don't have long-term ownership of those cash flows and would have to reinvest. Can you talk a little bit about the relationship with Chelsea Piers? It sounds like they drew down the other $15 million. And also on the Great Wolf side, obviously, that company was for sale. You probably spent some time looking at it to figure out some partnership. But how close are you to actually owning fee and doing a traditional deal in both of those cases? When should we expect potentially something to convert now that you've sort of been involved with both of those parties?

Yes. I mean in the case of Chelsea Piers, we couldn't put a highly specific timetable on it. But what I will tell you is that as we work with Chelsea Piers, one of the key things to keep in mind is that we like to partner with companies that are intent on growing and growing requires capital. And that's where we believe we probably can get our best traction over time, Michael. If it was just 1 operator with 1 asset, and that's all they ever wanted, our chances of doing something are what they are. But with operators who want to grow and who will require capital to do so, that's where we think the opportunity is I couldn't put a precise timetable on Chelsea Piers, but we are very excited about their growth ambitions. And in the case of Blackstone and Great Wolf, they've spilled out their growth ambitions. They're very expensive. And as David spoke of in his comments, we have the opportunity to keep funding them for quite a period of time, and hopefully be there with a very compelling offer there's an opportunity to become the owner of the real estate.

Now can they - just in terms of that relationship, you don't have any sort of right to - like right of first offer on assets or right of first refusal if you decide to sell assets. And that loan, is that I mean I don't know how the drawdown works, but could they sort of prepay you completely and walk to another type of lender. I guess what type of clause do you have into that organization? And I recognize you have a strong relationship with [indiscernible], a partner on the gaming side. But just I'm just trying to understand how tied that revenue stream is that could lead to future deals?

Yes. I'll turn that part of the question over to David.

Michael, good to talk to you. As it relates to Gray Wolf, we do have a similar ROFO in place with Great Wolf in the event they like to sell. So similar as they talked about with Chelsea Piers, they may or may not like to sell single assets. But it's - what this does is gives us a seat at the table. And we will get monthly reporting information. We'll have - we have a very good dialogue with Murray and team, who runs Great Wolf, and we have a very good dialogue with the Blackstone team that will ultimately look to monetize this. So being in the mix and being in that flow keeps us close to the opportunity to secure long-term real estate. And part of our ability, part of what we bring to the table is that next slug of capital. There is - it's Great Wolf put out in our press release, JPMorgan has the senior loan on this Perryville development. And as you know, or you can talk to colleagues in the rest of the Citi Group organization, construction financing is not a deep bucket of financing. So for us to be able to provide the mezzanine component for this asset and a handful of many more. That's a very attractive piece of capital, especially when Great Wolf is out talking to securing future sites and being able to demonstrate that they have the capital and ready to go for future development. So there is a 5-year term, obviously, on the mezzanine piece, but we don't have - we don't believe it will be repaid quickly, and it will take 2 years to develop and then a little bit of time to stabilize. So while it's not a 35-year lease. We do like the investment and we do like what it opens up for us.

Yes. One thing I just want to add, Michael, is that one thing that our embedded growth pipeline does give us the ability to do is invest time and energy in the developing of relationships that may not pay off for years. But nonetheless, we want to do that. An example of that was when John Payne started calling on Rob Goldstein, the CEO of Las Vegas Sands a couple of years ago with some of us going, yes, okay, go ahead, John. We're not sure that ever going to pay off. And obviously, it has. And similarly, whether it be in gaming or nongaming, our business model allows us to invest time into relationships that if we grow those relationships successfully, they represent our future growth in the years to come. And if we're investing time in a relationship here in 2021 that pays off in 2025, we feel we're actually doing our jobs right. But again, our business model allows us to do that in a way that some of the REIT management teams may not enjoy.

And so how deep is that list? Is it 10 different types of experiential investments in terms of asset categories? Or is it more limited to like 2 or 3? I guess where are you placing how many different types of bets are you placing across industry verticals rather than within a vertical?

Yes. I think we're into double digits, John and David. I mean we're in the categories day by day that frankly, we weren't even on our radar 2 years ago. But as we evaluate them, we see the 4 things we most want, which is low cyclicality, no secular threat, healthy supply-demand balance and a durable end user experience. It's again, proven its durability for decades going backwards and promises to be durable for decades going forward. And there's a lot of white space out there, Michael, that the opco propco model has not pioneered that we think has the potential to be pioneered, especially within experiential sectors that have demographic tailwinds behind them for the next 10, 20 years that promise real growth opportunity to the operator, which will require capital, which we are so thrilled to provide.

Your next question comes from the line of Stephen Grambling with Goldman Sachs.

I know that you provided the rent contribution from some of the outstanding transactions that you've discussed. But could you actually maybe put a range around the AFFO per share post all these transactions that have kind of been announced and are pending at this point?

David.

It's David. Look, as I talked about, we reiterated our guidance of $1.82 to $1.87. John touched on the fact we'll get $250 million of incremental rent. And we think with an additional $1.5 billion of debt in and around 4%, you could probably - you can get pretty close to the AFFO impact there.

Got it. And then I guess one other follow-up is just unrelated to that. Just as you've been looking at the strength of Las Vegas and the regional markets here, and I know you kind of talked to this in some of the remarks and the questions, but are you, at this point, starting to see either in bid processes or even in your own underwriting a shift away from underwriting to 2019 and now being willing to kind of think about a normalized run rate that is above that or even at the levels that we've been seeing?

Stephen, it's John. It's a great question. I'll start by saying, boy, a lot of props to the operators in the gaming business right now. I mean our tenants - our public tenants have not announced their earnings, but you saw the earnings at Boyd and Red Rock and Monarch and Churchill and Sam's and others out there. And you do have to say, kudos to them for reinventing their business during this very tough time and showing incredible operating margins. I'll answer the question by saying, you really have to take an asset by asset, Stephen. You really have to go through and understand if there's an asset that's seeing considerable growth through the 2019 numbers, where are they getting and what segments they're getting and what margin are they getting it? How did they increase their margin? And this goes to my opening remarks by saying having expertise in our organization to be able to dig in, it allows you, if you are going to do a deal and do underwrite during this unique time to get a real good number that you're comfortable with on the EBITDAR level. And those are the type of things we'll do if there's an opportunity.

Your next question comes from the line of John DeCree with CBRE.

Maybe 1 for John or David, on the put call with Hosur Park and Indiana Grand racing. I think the window opens in about 6 months. Can you talk a little bit about your strategy and kind of managing the pipeline and what might convince you to exercise that sooner than later or hold off?

Before John - before John and David answered that question, John DeCree, I just wanted to point out, but everyone's benefit, the name of the firm that you are now associated with. Union Gaming, having become part of CBRE, I think is evidence of the fact that real estate - gaming real estate is in the institutionalization process when a company of the stature in global commercial real estate of CBRE besides this is the game that need to start playing in. So anyway, congratulations, John, and over to you, John Payne and David Kieske.

Thanks Ed, I appreciate that. We're excited.

Yes. Congrats, John. And John, to your question about the 2 Indiana tracks and casinos in Indianapolis. Our tenant has done a great job in taking those businesses over. You've probably been tracking the revenue levels there. They've also committed to large capital projects to both of those assets as table games has started at those 2 assets. There wasn't table games before that. Those construction projects continue. The business will take a little bit of time to stabilize after they get the capital projects in place. As you mentioned, the put call becomes active. It's 6 months from now. So we'll continue to watch these assets, see them grow. Obviously, we're partners with Caesars. The operator will continue to talk to Tom Reeg and Bret Yunker and understand what's going on there, and then we'll see how it ultimately plays out with the put call on the timing.

And maybe 1 for Ed on his favorite topic today and 1 that's near and dear to us on the institution of casino real estate. One of the questions we've dealt with over the past several years, Ed, as you have as well is some of the holdouts on casino real estate, some of the operators who've been a little bit more reluctant. But since probably 1 of those camps as we would have looked at and as you suggested earlier, but as cap rates continue to compress, I think the opportunity just gets more and more compelling for operators to consider you as a financing source. So my question, Ed, is at this current trajectory, do you think that over time, the majority or vast majority of casino real estate will be owned away from operators like some of the other real estate asset classes over time.

It's a good - maybe hard to answer question, John. I do think so much of the answer comes down to what would the recipient of the proceeds do with the proceeds, right? And I think what you're seeing so far, John, is that the propco model, the participation of a REIT is really valuable when an operator wants to grow and/or when an owner of an asset wants to exit entirely. You've not seen a whole lot of sale leasebacks undertaken for the sheer sake of financial engineering at this point, right? Which is probably healthy and sound. I mean, this should be done when an operator has a compelling use for the proceeds, whether to reinvest in their business, to grow their business, or otherwise achieve liquidity or for partners who need that liquidity. There is no question, John, that the fullest value of an asset will be realized with an opco propco model. It's really going to be up to the owners of the assets as to how they want to crystallize their value and when they want to. And to be honest with you, selfishly, if this is a process that takes years to unfold that's better. Because if it unfolds over many years to come, which I think is actually probably the likely bet, it produces a more sustained growth pipeline and gaming real estate.

Your next question comes from the line of John Massocca with Landenburg.

So it was notable that the Great Wolf asset you're providing the construction lending floor was next to a casino property, albeit when you don't own. In your discussions with Great Wolf, was that proximity an important factor in why they chose that location? And I guess, with the read-through for VICI, could you utilize the excess land in your regional casino portfolio to maybe do more deals with Great Wolf? I mean, especially now that you have this kind of financing agreement or understanding is that something that was kind of part of the conversation as you were [indiscernible]?

David?

John, good to talk to you. The proximity of the Perryville Colocation was not part of the discussion. I think what it does is create a very - such to create an experiential entertainment center, which will be great both for the Great Wolf asset as well as PEM and GLPI who owned that real estate. But Great Wolf was able to secure the site. It's right off of 95. It's - as you've seen with the indoor water park resorts over time, closer to the core as this sector has become more institutionalized, you go back several years. They were further away from urban areas and cheaper land in areas that were a little bit cheaper to build. So this is just a continued institutionalization of the indoor water park sector. As it relates to our lands, if there's an opportunity with 1 of our tenants to put into a water park on [indiscernible] we would be happy to provide capital for.

Okay. But it sounds like developable land right of 95 is kind of a premium. And so the reason why it was a good place to put a casino there is also why it's a good place to put in your water park.

Exactly

Yes. And John, if I were going to on [indiscernible], which maybe a weakness for, I would say that the power center of the future won't be retail, it will be experiential. And as John Payne could attest to, it's actually American tribal gaming operators who are really the first in gaming to realize that they have the opportunity to create experiential power centers around so many of the amazing assets that they've developed and are operating.

Okay. And then another kind of bigger picture question. You talked before about the potential for the frontage space in front us, can you just tell us right there on the strip, given the announcement from Caesars earlier this month that they're kind of going to renovate the main entrance to Caesars Palace, does that impact your outlook for that space at all the potential for development there? I mean could it accelerate it? Could it maybe reduce it given what [indiscernible] is trying to do with its main entrance? Just any kind of outlook there?

We're very excited about what Tom Reeg and Bret and Anthony Cronto announced about our marquee asset and addressing the entrants and making it more welcoming. I think that's going to be a fantastic project. I think you're talking about the acreage that we own that's part of the Las Vegas lease in front of Caesars Palace. And I think that, that is just a great piece of real estate that I know my partners at Caesars continue to look at what is the most appropriate development that goes there for the long term of Las Vegas and bring that casino out to the strip. And I know they're continuing to look at it. So I'm not sure there's a connection between the making the front entrance right now more accessible and the new development. But I do know that, over time, it's a great piece of real estate that could be developed into just some world-class opportunity to attract more customers to that building.

Your next question comes from the line of Jay Kornreich with SMBC.

As gaming cap rate compression specifically in Vegas, may make it harder to find accretive deals, is this environment motivating you to look further into nongaming investments?

I don't...

Go ahead, John.

Yes. I don't think it's - I was going to stress earlier when we were talking a lot about the nongaming opportunity as we're clearly spending time doing that. It's not an either or David talked about this earlier, and we've been talking about this for a couple of years is we've got capacity to do both. We see a nice runway in gaming. We're going to continue to build relationships in gaming, which should lead as it has for 3.5 years to accretive gaming deals. But we have the capacity now to look in other sectors and other opportunities that fit within our portfolio and that would work for our shareholders. So it's important to know it's not it's not an either where we have the ability to do both, and we're going to continue to do both.

Got it. And then just regarding the remaining up to $300 million of capital for the Great Wolf Resorts, do you have any guidance on potential timing of how they would call that down?

Jay, it's David. We don't have any guidance. I have to ask Great Wolf. But we do know that they've got a very robust pipeline. And as I mentioned, their customer continued to want to visit the water parks even and get back out and they've seen a very big resurgence in their bookings and their activity at their assets. So they're seeing a great opportunity to expand the platform here, and we excited to partner with them on that.

Your next question comes from the line of Todd Thomas with KeyBanc.

This is Ravi Baby on the line for Todd Thomas. You guys weathered the pandemic well with perfect collections. Can you comment on the impact of the Delta variant and the Nevada announcement earlier this seams being required in public places what impact could this have to casino traffic and activity?

John?

Yes, it's a good question, and we'll continue to monitor. I think you know when the casinos opened in Las Vegas and had tremendous demand at the beginning when they open, they did require a mask for employees and for customers. And then it's been over the past couple of months where masks have been removed. And as you said, Clark County is saying that the mass need to come back for the operators, for the employees and the guests. So we'll continue to monitor it as the entire United States is. But as we saw when the casinos opened up, there still is a tremendous amount of demand for Las Vegas and for the assets that we own the real estate for our operators. So just more to come, but they have gone through this before the end of 2020 and the beginning of '21 and they're prepared, and I'm sure there'll be another opportunity where mask will be removed, but we'll monitor that accordingly.

Thank you. That does conclude the Q&A portion. I will turn the call back over to Ed Pitoniak for closing remarks.

Yes. Thank you, operator, and thanks, everybody. We're excited about the continuing institutionalization of gaming as a real estate asset class and believe we are well positioned to continue driving spirit shareholder - superior shareholder value. Again, thanks and good health to all. Bye for now.

Thank you. This does conclude today's conference call. You may now disconnect.