Unveiling VICI Properties: The Secret to Beating the Stock Market!

Vici Properties (NYSE: VICI) is a real estate investment trust (REIT) specializing in gaming properties, with a portfolio that includes iconic Las Vegas Strip assets like Caesars Palace, Venetian, MGM Grand, and Mandalay Bay, among others. 

It also boasts a strong collection of regional gaming properties, managed by top companies like Caesars Entertainment (NASDAQ: CZR), MGM Resorts (NYSE: MGM), Hard Rock, and Margaritaville.

While many investors consider REITs as dull income investments, VICI offers a compelling total return investment opportunity. 

Besides dividend income, REITs can enhance shareholder value through various means, such as:

1. **Property Appreciation:** As property values increase, their intrinsic value also grows.

2. **Accretive Acquisitions:** Strategic purchases that boost earnings.

3. **Profitable Development:** Building new properties at costs lower than their future values.

4. **Strategic Asset Sales:** Disposing of assets at a profit.

5. **Leverage Utilization:** Using borrowed capital to amplify profitability.

VICI has excelled in many of these areas, witnessing solid growth in rental income and making strategic acquisitions like the Venetian Resort and MGM Growth Properties, enhancing its funds from operations (FFO) per share. 

While not heavily focused on development and asset sales, VICI owns substantial undeveloped land on and around the Las Vegas Strip. 

Instead of developing properties itself, it has financed development for partners, generating interest income and establishing a future acquisition pipeline.

VICI's advantage lies in its ability to leverage debt at a lower cost compared to peers, thanks to the stable income nature of its properties and their high quality. 

For instance, borrowing at a 5.75% interest rate and lending to partners at 8% to 10% can significantly boost profits, especially in the current high-rate environment that impacts many other REITs.

Since its 2017 spinoff from Caesars Entertainment, VICI has delivered a total return of 134% to investors, surpassing the S&P 500's total return by about 26 percentage points.

Looking ahead, VICI has ample room for growth, especially in its gaming portfolio, with potential opportunities like the right of first refusal on several Caesars-owned Las Vegas properties. 

Additionally, the trend toward legalized gambling in the U.S. could provide a steady pipeline of regional opportunities.

VICI's recent acquisition of 38 Bowlero entertainment centers marks its entry into non-gaming ventures, with call options on properties financed for partners like Cabot Resorts and Margaritaville.

In summary, VICI has demonstrated prudent capital allocation since its spinoff, offering an attractive valuation of less than 13 times forward FFO and a 5.8% dividend yield. 

With its array of value-creation strategies, VICI Properties has the potential to outperform the market, particularly if interest rates decline, creating a more favorable environment for REITs.