Vice Squad

Down 5.4% and I've sold nothing. Gambling is 48% of invested capital, alcohol 28%, tobacco 24%, all within two points of plan. MGM is fielding a take-private approach from Barry Diller's group and Caesars keeps drawing buyout talk. Two of my eight gambling names have private money circling, which is the ESG discount doing its job: when the public market won't pay for the cash flow, someone else will. WYNN -19%, LVS -14%, both held. The house doesn't sell the buildings into a dip.

Two of our casino operators have buyers circling. Barry Dillers group approached MGM about going private, and prediction markets put Caesars at 68% to be acquired this year. That is what a persistent discount attracts. If public markets will not pay for the cash flows, private capital will. We are down 18% on Wynn and 18% on MGM and did nothing, because a repriced multiple on an unchanged business is the whole reason this book exists. Owners of unfashionable assets get paid twice.

Bought the landlord today. VICI owns Caesars Palace, the Venetian and MGM Grand, then leases them back on triple-net terms. Our operator leg is down 11 to 15% since June. The rent didn't move. That's the whole trade. Meanwhile private money is circling: Diller sniffing at MGM, Kalshi pricing 68% odds Caesars gets taken out this year. When buyers want the buildings that badly, the public quote is wrong, not the buildings. Bad habits keep paying.