Good day, ladies and gentlemen. Thank you for standing by. Welcome to the VICI Properties Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please note that this conference call is being recorded today, October 28, 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 third quarter 2021 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, guidance, intends, 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 conditions. 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 third 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; Gabe 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.

Thank you, Samantha, and good morning, everyone. The third quarter of 2021 was the most active and transformational quarter in our 4-year history at VICI. The highlight of our quarter of our year-to-date, of our history to date was our announcement on August 4 of our acquisition of MGP's market-leading assets and our new long-term partnership with MGM Resorts, who're one of the foremost leisure, hospitality entertainment companies in the world. Together with our March 3rd announcement of our Venetian acquisition, 2021 has been a step change year for VICI. So far in 2021, we've signed over $21 billion of transaction activity, giving us nearly $30 billion of acquisition activity in our first 4 years. And to fund that growth we have over the last 4 years, raised more primary common equity proceeds than any other REIT in America. We have a strong conviction that our energetic and execution-driven strategy over our first 4 years will, over the long term, create significant value for our equity and credit owners. We believe that there are 3 key factors that drive and validate our strategy. Factor 1, invest before others do. As an asset class institutionalizes, investing earlier rather than later, generally will yield opportunities to buy institutional quality assets at pre-institutional pricing. While other investors have begun initiating their mapping of the gaming real estate investment landscape, VICI and I should note, Blackstone have been busy buying great assets at unlevered going-in cash flow yields that are superior in both absolute and risk-adjusted terms than can be found in already institutionalized asset classes. This isn't to say that there aren't compelling investment opportunities still to be had in American gaming real estate. There definitely are as the sector's real estate is still not yet even 40% owned by REITs. But while…

Thanks, Ed, and good morning to everyone. During the third quarter of 2021, we continue to execute the market-leading growth many of you have come to expect from VICI. The announcement of our $17.2 billion acquisition of MGM Growth Properties brings our total investment, as Ed said, to nearly $30 billion in 48 months. As I'm sure many of you can appreciate, this degree of activity does not come without hard work, dedication and relentless desire to succeed. As a management team, we are incredibly thankful for the hard work of our exceptional colleagues at what we call Team VICI, without whom many of our accomplishments to date would not be possible. As I've said before, VICI does not go on vacation or wait for the phone to ring after announcing or closing a transaction. Our primary day-to-day operations consist of sourcing, underwriting and funding accretive acquisitions. To that end, we are as busy as we've ever been building our pipeline and meeting with talented business owners and management teams to discuss how VICI can be an efficient source of capital and play a role in funding their growth plan. As we look forward, we will strive to execute across the many growth pillars we believe will make VICI as a stronger company while driving accretive AFFO per share growth for shareholders. Those growth pillars include executing transactions within our embedded growth pipeline, open market gaming transactions in the United States and internationally, our property growth fund through which we will fund high-return growth projects at our properties for existing tenant partners and leisure and experiential investments as well as continued large-scale M&A. There's never been a more exciting time to be investing across the gaming universe and Las Vegas in particular. Operationally, fundamentals are strong, and the casino operators…

Thanks, John. I want to start with our balance sheet and highlight what was our most significant quarter in terms of advancing our long-term strategic financial goals. As you've heard me say, since emergence, we have maintained a relentless focus on ensuring that we have a capital structure designed to weather all cycles and provide the safety and protection our equity and credit partners deserve. The initiatives we undertook in connection with the MGP acquisition further strengthened our capital structure and position VICI for continued year-in, year-out growth. And in connection with the announcement of the MGP transaction on August 4, we received extremely positive feedback from the rating agencies and just to read a snippet from the report that S&P released. The acquisition will improve VICI's scale and tenant diversity such that it could support a greater level of leverage at a higher rating if the company finances the acquisition with a mix of equity and debt that leads to pro forma leverage of about 6x or below and we could raise our rating to BBB minus. That's great news, and I will touch on leverage in a moment. On September 14, we completed the largest REIT common only equity offering ever, issuing 115 million shares of common stock at an offering price of $29.50 for aggregate proceeds of $3.4 billion. 65 million shares were sold via regular offering, raising $1.9 billion and 50 million shares are subject to forward sale agreements. This offering derisks the equity funding for the MGP transaction and positions the balance sheet to be below the leverage ratios dictated by the rating agencies to migrate the balance sheet to an investment-grade issuer. On September 15, we were thrilled to eliminate all outstanding secured debt in our current capital stack with a repayment of the…

[Operator Instructions]. Your first question comes from the line of Wes Golladay from Baird.

Can you talk about what caused the pushout of the Venetian from, I guess, closing later this year -- or later this year until 1Q '22?

Samantha, you want to take that?

Yes. Hi. As you know, there's regulatory approvals that are required for the operator in connection with that transaction. So the operator, Apollo here is just going through the regulatory process.

Okay. I guess is there any read-through to timing of the MGP transaction?

Did you -- I'm sorry, did you ask if there's any update to the timing? We can...

Well, I guess, is there any read-through -- would there be any issues that are causing the Venetian to be pushed out with those things apply to MGP as well?

No. They are unrelated and we do not expect that to impact our previously disclosed timing for the MGP transaction.

Okay. And then one last one. I guess, can you update us on the Las Vegas master lease, I think, is going to be set in a few days?

David or Danny?

Danny, go ahead.

Yes, Wes, in terms of escalations, we expect that to escalate in with CPI, which was about 5%, so of the 2% floor that's embedded in that lease. So starting November 1 for the next lease year, the Las Vegas master lease will escalate about 5%.

Your next question comes from the line of RJ Milligan from Raymond James.

Can you talk about the JACK lease amendment that was just announced? And do you see any other opportunities for additional amendments dropping the variable rent component for some of the other leases?

David, or Samantha, you want to take that?

Yes, RJ, I can start and Samantha chime in on anything. I mean what we're experiencing and witnessing is just continued -- somewhat of a confirmation or conforming aspect of the leases, right? This sector is only 8 years old with the formation of GLPI in 2013. But as each deal, we and the operators continue to get smarter and understand the best way to document and structure a lease. And so when some of these opportunities arise to remove some of the legacy component, so to speak, of leases that really don't make sense for you as the operator or us as landlord, we work collaboratively together to streamline the leases and continue to move forward to somewhat of a "industry standard". So it's a net-net win for both sides here with between VICI and JACK.

Okay. And then looking into '22, can you give us an update on your thoughts on executing some of the ROFRs or the put call options that you guys have?

John?

So we continue to monitor. I think you're referring to -- first, we have some ROFRs in Las Vegas. Tom Reeg, the CEO of Caesars has indicated that they would be looking to potentially sell one of the assets and we'll be involved in that process and we'll follow his lead on what they're deciding to do. And then the second one, I think you're referring to is our put call that we have that becomes live in January '22 with the 2 large assets in Indianapolis, and we'll continue to monitor those as well. Those assets continue to grow, RJ, since we did this -- created this put call table games have been legalized at the racinos in the State of Indiana, and Caesars has been working on expanding those facilities. And those so -- those facilities are continuing to add amenities, add some space, add table games. And so we'll watch how they continue to grow. And we know that, that put call is good for 3 years starting in January.

Okay. And then my last question is a bigger picture question. But Ed, it seems like there's still a disconnect for regional gaming assets in terms of pricing and we started to see the cap rate compression in Las Vegas for sure. When do you expect or what do you think needs to happen to start seeing cap rate compression in the regional markets?

Yes, RJ. It is, I believe -- or I think it will prove to be a dynamic that we've seen in other asset classes that have gone through institutionalization as an example, a category that I spent time in final mile logistics. When there began to be an institutionalization of that industrial sub-asset class, the greatest amount of investment focused initially was in markets like the Inland Empire outside of L.A. and Northern New Jersey. And as the category really began to prove itself that as the secular trends behind the category continue to grow, what you began to see was a radiating out of investment activity from those epicenters. As an example, across the street from our JACK Thistledown asset outside of Cleveland, on a site that once how, I guess, a Class B mall is now an Amazon distribution center of amazing scale. And again, that's Cleveland. So you can see that kind of radiating taking place in other asset classes. I believe you're going to see it as well in regional gaming. There are, of course, certain friction points in some jurisdictions. The gaming real estate owner does require licensing. But we think at the end of the day, that will be a friction point that becomes less of a factor in how people make their decisions when they realize that some of these regional assets are so strong and have such a comparable scale and quality. And just to belabor the point in a moment, RJ, it was on this very call, the Q3 earnings call, I believe it was 2 years ago in 2019, that I made at the time that rather outlandish claim -- this was right after the Bellagio announcement, I made the rather outlandish claim that I would argue that National Harbor, which MGM obviously occupies and MGP owned at that point, deserve to trade at a cap rate at least as tight as Bellagio, given it's under scarcity as an asset of that magnitude of quality in a 24-hour city like Washington, D.C. So I do think it will come, RJ. It will, as is required in every other asset class it will take time, but it will happen.

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

I -- look, you've had a lot of success diversifying the company over the years, but I'm wondering if there's any longer-term optimal mix you would target, whether that's tenant, geography or maybe gaming versus non-gaming?

John, do you want to start?

Well, good morning, Barry. As we’ve been talking in the past 4 years, the key to it all is continuing to diversify our tenant base. And like you said, we've gone from 1 tenant to 8 tenants in gaming. As David mentioned in his remarks, we obviously have started diversifying into nongaming. I don't think we have an exact percentage of how much we're going to own in gaming and how much we're going to own in non-gaming, how many tenants we're ultimately going to have. But I think you've seen us continue to add high quality of, Ed said in his remarks, tenants to our portfolio, as well in gaming as well as in non-gaming. And so I don't have a percentage today. I think we've clearly said 45% of our rent after the MGP deal will come from Las Vegas and 55% of our rent will come from regional assets. So we still have a wide opportunity to diversify over the years, and we'll continue to look for unique opportunities with most importantly, high-quality tenants with great real estate. So no specific numbers today, Barry.

Got it. And then just as a follow-up, I think there's a lot of debate out there longer term, how iGaming will -- if it will cannibalize land-based gaming to any degree. I'm curious how you think about this and if it influences your longer-term strategy at all?

Yes, I'll start, Barry. And obviously, we need to take care to distinguish as I know you are between iGaming and sports betting. And I think it remains to be seen the degree to which iGaming becomes its own ecosystem that does not create a new customer who also then acquires through iGaming, a desire to visit the brick-and-mortar casino. You've heard us talk before about how bullish we are about sports betting as being a very powerful secular audience expansion tailwind for gaming. iGaming remains more of a question. And I do think there are some very interesting points to be made as to the implications of iGaming in a manifest number of different perspectives. And I believe there was a panel -- oh, no, you wrote about it. The panel you wrote about Barry yesterday, I think, some people like David Cordish were making some very interesting points about the jurisdictions taking care that iGaming not end up sacrificing the jobs and the economic vitality that go with brick-and-mortar gaming. So again, we'll see over time. I would say, though, that I am much less worried about iGaming than I am excited about sports betting and the way sports betting is changing the marketing paradigm of American Gaming in such a way that American Gaming can participate in the Great American sports conversation. And if you had told me when I first started getting involved with VICI 4 years ago, which was my introduction to American Gaming, with Kenny Mayne and Trey Wingo of ESPN would join folks like John Payne and David and Samantha and me in the business of American Gaming, I would not have foreseen that.

Your next question comes from the line of Neil Malkin from Capital One.

Ed, first off, I'm not sure you meant by that comment about the logistics facility in Cleveland. Cleveland is probably the best city in the United States. So we're talking about...

It is.

Okay. So first one from me. You talked about 45% of your rent comes from Vegas. And obviously, it's going gangbusters. It's fantastic. But given the Venetian and your pending merger of MGP, alongside the 2 ROFRs you have there and your land parcels, are you comfortable with your exposure there? Might we see a move -- a potential property sale just to kind of mitigate the exposure going a lot higher?

Yes. I'll start, Neil, and then I'll turn it over to John. But I think as a starting point, Neil, what certainly I have come to learn, I think, along with David and Samantha, those of us who the you are new to gaming, is that Las Vegas is almost unlike any other place on earth, the nearest place I can think of it is like Las Vegas is Orlando, right? And so -- and as VICI thinks about geez, how much exposure is the right exposure in -- sorry, in Las Vegas, it's like Disney thing about what's the right exposure in Orlando. Well, Orlando is an ecosystem unto itself. And it has an infrastructure that has taken decades to build and is unrivaled in the world in the way Las Vegas is infrastructure, tourism infrastructure is unrivaled. It's tourism, it's convention, it's conference, it's tradeshow infrastructure. So when you have an ecosystem as utterly distinct and one of a kind as Las Vegas. I do think you have to think about asset concentration or portfolio concentration in a very different way than you would in so many other asset classes in which not to be flip about it, but one 24-hour city is sort of like another 24-hour city. John, if you wanted to add to that?

No, Ed, I think you touched on it. Neil, I mean we -- if you've been following us since we started the company, there are other REITs that weren't as bullish as we are on Las Vegas, but we are very excited from the day we started the company. We're even more excited today about what's taking place in Las Vegas. The operators are here in Las Vegas are the most dynamic creative operators. There are -- they'll continue to reinvent the business when something doesn't work. And what's also been made perfectly clear after the closing of the facilities due to the pandemic as they reopen, the consumer clearly has not found a substitute for Las Vegas. They're returning in record numbers, and that's without the amount of airlift, that's without international travel, and that's without necessarily MICE business that's going to come back as well. So we're excited today about it, and we're going to be even more excited over coming years as those segments of our customers return to Las Vegas, to our tenants.

And we [love even 2], Neil.

Yes. I appreciate that. The other one for me, maybe bigger picture, obviously, the move to iGaming or digitization, whatever you want to call that, is going to be a fulsome and wholesome endeavor by a lot of the big gaming guys, operators. I'm just wondering if you can comment on how you think about how the investments and dollars needed to make those moves and to add that to part of their ecosystem or platform, how will that have an impact on potential assets coming to market as they look to raise -- raise money either on the Strip or regionally and potential impacts for you guys or new operators coming in?

John?

Yes, it's a good question, Neil. Exciting time in the space. I mean, I'll just talk about what's taking place today with our top tenant Caesars. And I don't think it's either/or. If you look at their investment in the bricks-and-mortar facilities right now, and there's more than I know. I know about the $300 million going into New Orleans, the $400 million that's going into Atlantic City, the numerous hotel, Nobu Hotels that are being built around their facilities, the reformation of the entrance to Caesars Palace, I could go on and on about the massive investment that our top 10 is putting in their bricks and mortar. At the same time, you can obviously just turn on your TV or your radio and see the large investments that they're making into Caesars sports book. So the beauty of this is their strategy as well as our other tenant strategy of connecting the dots or building a world-class omni-channel marketing capabilities where they can talk to consumers, not only digitally, but they can talk to consumers at their bricks-and-mortar facilities and continue to attract people across their platform. And that's what's so exciting about the gaming space. And again, if someone is who's old these days and has been around for over 25 years, there has not been a more dynamic and exciting time in the casino gambling space.

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

You all mentioned opportunity...

Stephen, you cut out.

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

So John, I appreciate you highlighting VICI's pillars of growth in your opening comments. But I think one of the key questions from investors is how to think about how deep those pools are given the diminishing benefit to earnings growth from each sizable deal that you guys are doing. Would you be able to provide some context on the potential size of each of those buckets?

I can do sub of it, and Danny can do some of it as well. So Greg, we've laid this out a couple of different ways. But the short answer is there are a lot of opportunities still out there. When you just think of -- I'll take gaming and then Danny or David can jump in on nongame. And I'll take 1 of the 6 pillars because we -- I don't want to take up the rest of the call going through all 6 pillars. But I'll take one of them, which is the expansion of gaming. And just domestically, I want to even touch on the international opportunities that we see in Canada and Australia, potentially in Singapore, potentially in Japan. So just domestic gaming. If you think of our opportunities, Greg, we still have -- do not own real estate in any downtown facility in Las Vegas. We still don't own real estate in Las Vegas in the regional markets, which are both very healthy and growing markets. We don't have Reno, Colorado, Rhode Island, Pittsburgh, [like] Charles, parts of Massachusetts. So we have an analysis that shows the depth and the amount of rent and the amount of EBITDA that is still available with assets that are not necessarily in the REIT pool right now. So that's 1 of 6 pillars. We see tremendous opportunity to grow in gaming domestically as well as the other 5 pillars that I don't know if David or Danny want to touch on quickly as well.

Yes. I'll just add. This is Danny. On the gaming side, Greg, we still continue to work on transactions in any given week or month where the total value exceeds well over $50 billion. So that's not necessarily a TAM, but hopefully, that just gives you some insight into the number and different sizes of opportunities that we continue to work on, discuss, evaluate and target. Another piece going forward is going to be the VICI Partner Property Growth Fund. If you think about the size of our assets, a little over 2 million square feet on average at each property. There are high ROI projects, where we're partnering with our existing tenants and funding those pretty efficiently in exchange for incremental rent. Hard to say exactly -- hard to quantify that because it ultimately depends on the individual operator strategies, but that's something that could reach into the hundreds of millions of total investments. And then international, it's really hard to size or quantify, it's dependent on the jurisdiction, the individual assets within those jurisdictions. But as we talked about, we've spent a lot of time understanding the tax implications, currency risk, regulatory hurdles. So that is an area where you'll see us expand over time.

I would just add, Greg, this is Ed, that we have a certain amount of confidence that we can figure out how to do what others have successfully done before us. When you crystallize the issue as you just did very well, which is once you get to a certain size, the math obviously does become more challenging. But at the same time, strategic resources can become more ample. So we look at what companies like Realty Income and Prologis have done in facing the mathematical challenge of growing, when you get really big. And we get full marks to meet and the Realty Income team for what they have done as an example, in the U.K. and now in Spain when it comes to increasing their exposure to European grocery. European grocery is not a category that we'd be interested in. But there is European experiential we'd be very interested in. And in fact, categories in Europe, they don't even really exist in the U.S., experiences like center parks, as an example. So we would look at what Realty Income has done. We would look at what Prologis has done internationally and domestically and especially through their strategic capital activities. So we're confident that if we learn from the best, we stand a good chance of achieving at least some of what they have done, and we're very excited about that opportunity in the years to come.

All right. Shifting gears slightly here, just regarding the call right on the big shot facilities. Have you worked out how you'll be valuing the real estate in the event that you're able to turn that financing arrangement in the permanent property ownership? And also, if you could provide any context on what you view as the opportunity or growth potential within this kind of entertainment base driving range space and maybe big shots specifically, that'd be appreciated.

David?

Yes, Greg, it's David. Good to talk you. The financing is -- will be done at a 10% interest rate. And then the call rate will be at competitive 8 cap if we elect to enter into a sale leaseback on any of those facilities. We're excited to partner with the ClubCorp team, the Big Shot's team. They've got a very good development pipeline. They're going to mimic going to secondary markets, some markets where we can't -- don't currently -- or can't own gaming real estate just because it's not legal in those jurisdictions and they're invigorated to grow that pipeline to grow that platform, and we're thrilled to partner with them. So we'll see what the future holds with that opportunity between VICI and Big Shots.

Operator, do we have Stephen available again?

Yes, we have Stephen Grambling from Goldman Sachs.

Great. Can you hear me?

Yes.

So you mentioned opportunities to fund high-return growth projects for existing tenant partners. How much the economics of these types of investments compare and contrast versus the traditional sale leasebacks?

They should mirror them very closely, Stephen. Obviously, they need to be a sufficient return such that you could take the incremental return on the incremental capital and divide it in half at least, and each party is getting what they need and deserve. In other words, we would get a sufficient return through incremental rent on our investment, and the operator would get a sufficient return on the brand and intellectual capital and operating investments that they have made. So it should very much mirror our conventional economics. And again, if we can get growth capital out the door in whatever form we get it out the door as long as it's in the proper risk framework, we're going to be very happy to do so. And I will just reiterate what Danny said, our assets are of a scale and of a quality fit and finish level that you really only find an office and a mall. And as an example of that, our average asset is over 2 million square feet. It sits on dozens of acres. That's in contrast to your conventional triple net commodity box, which is 17,000 square feet and sits on an acre or [2], right? Our assets present incremental investment opportunities that really are hard to find in almost any other asset class.

That makes sense. And maybe 1 more for you. Just on reconsolidation, obviously, with MGP, you made a first-mover advantage there as well. How do you think about scale and index inclusion like influence the potential for future REIT consolidation perhaps beyond just gaming.

Yes. I think, obviously, 1 key determinant would be the degree to which we would not only be getting access to property with getting access to talent to a management platform that could be of great value to us in helping us grow not only beyond the acquisition of the portfolio of properties that might come with the M&A, but with the talent and the operating experience and reach that would come with it. We don't see that as an immediate priority. We think we have enough in front of us in terms of our existing categories that frankly represent triple-net white space that we believe we're uniquely qualified to pioneer in. But we are certainly mindful of the way in which adjacent M&A can be an effective way to continue to grow value.

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

Just first question, in terms of expanding on the non-gaming side, you completed loan programs or established loan programs with Great Wolf, Chelsea Piers, ClubCorp now. Is that the path toward ownership that we should continue to expect as you look toward adding exposure to non-gaming? Or could we see you move into non-gaming in a more meaningful way without sort of establishing an initial loan program? And then also, how important is it to have an investment-grade rating to invest more meaningfully in nongaming and expand the portfolio towards some of those other types of assets?

David?

Todd, good to talk. I hope you will. Look, I wouldn't say that the path that you should expect. The situations with Chelsea Piers, Great Wolf and Big Shots, called for financing, each of them were somewhat unique and specific and why they call for financing. But as you saw with Big Shots, we do have a call right to enter into a sale leaseback, so we do have a path to ownership, and you hit the nail on the head. These all lead -- ideally lead to a path to ownership. There may or may not be a sale of Chelsea Piers that may or may not be a sale of Great Wolf where we have the opportunity to buy the real estate. But if there is a transaction, we'll have a seat at the table and be able to compete for that opportunity. Ideally, our -- if we had -- if we could dial it up on a whiteboard, we'd have -- we'd entered into a sale leaseback day 1. But just again, the niceness of these circumstances is why there's they are mortgages today. And then in terms of the path to investment grade, ultimately at the end of the day, our cost of capital is what matters and allows us to compete. And so as our cost of capital goes lower, we feel that the funnel widens and we will be able to compete for more things, both within gaming and outside of gaming. So we're thrilled to be on the doorstep of achieving an investment-grade rating here in the near term.

Okay. And then just circling back to the discussion around asset pricing. Ed, one of the pillars you discussed was the importance of being early investing at pre-institutional pricing. And we've seen pricing improve on recent deals and cap rates have come in quite a bit. John, you touched on City Center and the Cosmopolitan pricing. But is there still room for cap rate compression in gaming and in Las Vegas on the Strip in particular and which might have implications on sort of regional asset pricing as well? Or do you think that assets are more fairly valued on a risk-adjusted basis today? How do you just think about valuation in the current environment, I guess, more broadly?

Yes, Todd. So I think the quick answer is yes. I think there's more room to run. I think one of the key things to keep in mind -- and this came up in a conversation that I was having with our partner at Blackstone, Tyler Henritze a few weeks ago, which he said, I think we should stop talking about cap rates, when it comes to gaming real estate. If we could just talk about unlevered cash flow going in unlevered cash flow yield because that's what we're getting, right? When we -- VICI buy at a 6.25% cap rate on the Venetian, we're getting 6.25% unlevered free cash flow yield out of the gate, right? And a number of you have written about the transparency and the predictability, the integrity of triple net cash flows versus so many other REIT categories where the supposed cap rate really is only a notional number that hardly ever resembles actual reality once you account for all CapEx and other forms of leakage from net free cash flow. So I think as investors look at gaming, they will look at the fact that you're getting true free cash flow in what you buy. And I think that could have a compressive effect. When you look at what other Class A categories, life office like every other category that is so big disguise right now, industrial and others, you're often looking at cap rates that don't actually reflect true free cash flow. In gaming, that's what you get and I think it will have a continuing effect on the compressing of our cap rates. And as long as our cost of capital continues to improve and a velocity equal to the velocity of cap recompression, we can very much stay in the game and David and his team and what they're doing with their balance sheet are making sure we do keep pace.

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

As 2 of your nongaming investments have been with portfolio companies of PE funds that you also have relationships with on the casino side upon pending those closing just curious how important you feel those PE relationships are for nongaming investments and the opportunities that they provide?

David?

Yes, Jay, good to talk to you. I mean part of it just stems from the magnitude of capital these institutions have, right? The amount of companies that private equity is investing in. And if we can play a role alongside some of the best real estate leisure hospitality investors in the world, we are thrilled to do that. So we look at a lot of opportunities. We have a lot of opportunities, and we continue to work with and understand other sectors out there, but these just happen to be with 2 folks that are also invested in real estate because they have institutions that are invested across all asset classes. And again, if we can find ways to partner with our existing partners and future partners in private equity, we will absolutely do so.

Sure. And then there's a lot of -- there's several credit and liquidity enhancing opportunities in front of you, like we have discussed. Is if you can provide any sort of time line when you expect them to occur, such as the credit rating improvement potentially getting listed on the S&P 500, refinancing debt, such that you're incurring from MGP, any sort of time line when all those things kind of fall?

Well, it all stems around the timing of the MGP closing, as Samantha alluded to, that's still on track for the first half of next year. And we would expect to issue the $4.4 billion of debt that we need to fund, again, the MGM Op unit redemption into the investment-grade market. We've worked very closely, led by Erin Ferreri on our team with the rating agencies to highlight the timing, highlight the transactions, highlight our funding and make sure that they are a lockstep with us. And so as S&P alluded to, if we keep leverage below 6x, we'll get a BBB minus rating. Well, with the equity raise that we did in September, and we are a pro forma balance sheet being projected to target, we're below that number. So we feel very confident that we'll achieve that investment-grade rating sometime in the first half of 2022, again, connection with the MGP transaction. And then the other part of your question was the refinancing of the MGP debt. That will occur at or near the time of those maturities. The MGP bonds are all bullet bonds, but we feel very good about the incremental accretion that we'll pick up from the interest expense savings as we start to refinance that debt, which I think the first one comes due in 2024, if I'm not mistaken, in 2025. So over the years, we'll have incremental AFFO pickup from that -- from those refinancing opportunities of the MGP bonds as well as the VICI bonds that are in place today.

And if I could just sneak one more in. Just when we think about potential external growth internationally, do you see an opportunity to partner with your new MGM relationship to consider opportunities in Macau or the potential MGM Japan Casino development?

Yes, Jay, I would say that Macau not likely, but Japan would be very intriguing.

Your next question comes from the line of Thomas Allen from Morgan Stanley.

Question for John, putting your operator hat on, John, you mentioned earlier how well the Venetian did in the third quarter, $132 million of EBITDA. Any updated thinking about long-term performance of that tenant?

Yes. So Thomas, I apologize. John had to race to the airport to get to Cincinnati for the grand opening of our Hard Rock Cincinnati asset in partnership with Hard Rock. So between me and Danny, we'll do our best. But we're obviously very excited to see those quarter 3 results without international travel, without the convention conference and trade show having fully come back. And I'll now turn it over to Danny, who I think can give you a quick summary of our confidence that this is the kind of performance that Apollo can inherit and continue to grow upon. Danny?

Yes. Tom, as we've talked about, there's a lot of opportunity there in the existing asset. One of the things we found interesting was just the margin differential between the Venetian and then other assets on the Las Vegas Strip. We can't speak for Apollo and their strategy, but we would expect the existing team to run forward and execute on a lot of the projects and initiatives that they've created and have been evaluating for a long period of time. So look, I still think it's really early in the Venetian in their trajectory. I think there is a lot of opportunity there. Some of it's low-hanging fruit, some will take a little bit longer to execute on, but we're really excited, and we're looking forward to closing on that asset.

Perfect. And then just on -- well, first of all, respecting that you've done a ton of deals, I'm still going to ask a question about future deals, even though it's a little unfair given how much you've done. But most of your more experiential focused deals have been on the smaller side, are you prepared to do like a much larger deal? Or is the interest to kind of continue to kind of eat into that sub space?

Yes. I would say, Thomas, there's nothing that would prevent us strategically or financially from doing bigger deals outside of gaming. You are right, so far what we've done has been on a generally smaller scale. Although I will say that assets like Chelsea Piers do qualify as we like to say, as casinos without gaming. The P&L at Chelsea Piers is actually very significant. So that's not entirely borne out. Obviously, when we only do a mortgage loan. But these assets do have some heft to them. Great Wolf Resorts, also have heft to them. So while our participation so far is only on the financing side, when the day comes when we're successful as we believe we will be, in becoming real estate owners of assets like this, we will be buying assets that have a lot of economic throwaway.

Your last question comes from the line of Daniel Adam from Loop Capital Markets.

Just one for me on the anticipated funding requirements for the $4.4 billion cash consideration to MGM. In the 10-Q that was filed last night, I noticed that you expect to fund that portion of the deal with long-term debt, not equity, am I correct in thinking that you initially intended to use a combination of debt and equity when the transaction was first announced? And if so, does that change your accretion expectations at all for MGP?

Dan, it's David. Good to talk here. Our intention from day 1 was always to fund -- our attention and our requirement, frankly, was to fund that $4.4 billion in debt. There's tax reasons why that has to be funded in debt and why that has to be funded really at the time of all conditions to the merger being satisfied. So the punchline is no. The accretion doesn't change. We'd always anticipated issuing equity, paying down the term loan and then essentially relevering at a point in the future once we go to the market to raise that $4.4 billion of debt.

Okay. Great. And the timing around the funding of that? I imagine that will be close to when you expect the deal to close?

Yes. We're often asked if we would put that into escrow, we take advantage of the markets ahead of closing. And again, the way that the agreements are laid out, the way that the tax requirements, what we need to satisfy for tax reasons. Again, we will not issue that debt until all conditions to the merger are satisfied, and we have a 30-day window under the agreement to issue that debt sometime in the first half of next year, we'd expect.

There are no further questions at this time. I'll now turn the conference back to Ed Pitoniak.

Yes. Thank you, operator. So let me reiterate our thanks to all of you for being on today's call. We believe our shareholders are going to be very well served by VICI growing quickly and energetically in a newly institutionalizing asset class with great partners during what has been an uncertain period. We believe as well that we are well positioned to continue growing our portfolio accretively while driving superior shareholder value. Again, thank you, and good health to all.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.