As if the world of gaming REITs couldn’t get much more complicated, last week Jonathan Litt, the principal behind Land & Buildings (L&B), tweeted out his efforts to get Gaming & Leisure Properties Inc. (GLPI), the spinoff from Penn National Gaming, to consider some kind of a deal with Vici, the Caesars spinoff REIT.
Litt and L&B have a substantial interests in GLPI (although it hasn’t been confirmed how much) and believe that a tie-up between GLPI and Vici could be a powerhouse.
“A merger between GLPI and VICI could see GLPI have 20-25 percent upside and materially reduce tenant concentration for both companies based on our analysis,” he said on Twitter.
Litt believes that the gaming REIT sector is undervalued and a merger between two of the three companies active in the space (MGM Growth Properties is the third) makes sense. Litt says he’s also been in touch with Vici about his idea.
“We have been engaging with GLPI and think there is a win-win here for both companies,” said Litt. “This thesis aligns with our view that the gaming REIT sector is mispriced, given highly predictable cash flows and growth potential.”
Nomura Instinet analyst Daniel Adam supports Litt’s efforts.
“VICI currently trades at around 14.9x 2020E adjusted funds from operation (AFFO), or more than 2x turns higher than GLPI’s 12.1x multiple, so a deal at current prices would be accretive,” said Adam.
