Gaming and Leisure Properties Eyes Growth Amid Tenant Diversification in Gaming Industry


The increasing diversification of tenants could potentially make the corporate debt issued by Gaming and Leisure Properties (NASDAQ: GLPI) appealing to particular fixed-income investors. However, any upside might be somewhat constrained.

Kim Noland, a Gimme Credit analyst, adopts a constructive stance on the gaming real estate investment trust’s (REIT) corporate debt. Yet, in a recent report, Noland rates the bonds due in 2030 as ‘outperform’, while noting that the prospects for significant capital appreciation from the debt are scant. The bonds currently yield a worst-case scenario of 6.8%.

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Noland expresses concern that partially debt-financed mergers and acquisitions may temporarily increase leverage, which in turn may dissuade rating upgrades. By the second quarter’s conclusion, Gaming and Leisure’s leverage stood at 4.8x. Noland envisions this figure remaining steady in the vicinity of 5x. The REIT’s corporate debt currently holds a BBB- rating from Fitch Ratings, which happens to be the lowest possible investment grade.

In the preceding decade since being spun out of Penn Entertainment (NASDAQ: PENN), Gaming and Leisure has counted the regional casino operator as its top tenant. However, diversification amongst tenants is viewed by investors and analysts alike as integral to the gaming REIT investment narrative. Acknowledging this expectation, Gaming and Leisure has expanded its client roster to include Bally’s, Cordish Cos., and other casino clients.

Last month, a $100 million purchase by the REIT of the real estate connected with the Hard Rock Casino development in Rockford, Illinois, introduced 815 Entertainment, another fresh tenant. Noland adds that Gaming and Leisure’s innovative approach towards financing construction for tenants has fostered diversity in its gaming REIT business. Currently housing the property assets of 59 gaming venues across 18 states, the Hard Rock is due to become the REIT’s sixth Illinois venue.

The city with the highest concentration of casinos in the US, Las Vegas, is where VICI Properties (NYSE: VICI), a GLPI competitor, holds the most significant share of gaming real estate. Amidst its preference for regional casino real estate, GLPI owns assets connected with Tropicana on the Las Vegas Strip, which places it well to potentially benefit from a mooted move to Las Vegas by the Oakland Athletics. The REIT is set to fund up to $175 million in property improvements, in return for a rent increase, should Bally’s, the Tropicana’s operator, agree to this.

The REIT is providing a 9-acre segment of the Tropicana Las Vegas site for the construction of a stadium that shall enhance the Bally’s Tropicana resort,” surmises Noland. “GLPI will fund the construction, contributing $175 million, and receive rents under the terms of the original ground lease, and supplementary rent during development comprising 8.5% of the funded costs. Despite the riskier nature of construction funding, the financial acumen of its partners and governmental support acts to lessen any downside.”

In a similar vein, much like the anticipated new development in Las Vegas, Canada is also experiencing significant growth in the gaming industry. We at West Island Blog have identified a surge in the popularity of online casinos among Canadian players. With increased accessibility, a vast array of options, and impressive potential for revenue, this platform is revolutionizing the face of gaming in the region. We offer our insights on the top online casinos to explore this month, catering to gaming enthusiasts looking to embark on an exciting digital gaming journey.