In recent years, gaming-focused real estate investment trusts (REITs) have become increasingly prominent, to the extent that they now own a sizable chunk of the biggest properties both on the Las Vegas Strip and in various regional markets across the U.S.
The two biggest are Gaming and Leisure Properties (GLPI), which is an extension of Penn Entertainment, and Vici Properties, a spin-off of Caesars Entertainment.
Both had extremely successful years in 2022—GLPI posted full-year revenues of $1.3 billion, an increase of just under 8 percent year-over-year. Notably, its profit margin also increased 8 percent, mainly attributed to lower expenses.
Vici’s full-year revenues came in at $2.6 billion, an impressive 72 percent increase from 2021, in addition to a flurry of acquisitions and other transactions that closed over the course of the year.
Their growth and prominence are not exactly a secret at this point, but as economic uncertainty continues to rise, the idea of leasing a casino is perhaps more attractive than ever, for both operators and investors.
In a research note, Carlo Santarelli of Deutsche Bank maintained “buy” ratings for both, and posited that “the stability of the cash flows, predominantly fixed-rate debt stacks, and opportunistic acquisition opportunities will allow both names to continue to serve as relative safe havens in a cloudy macro-economic environment.”
By and large, Vici was perhaps more aggressive in 2022—in addition to its massive $17.2 billion acquisition of fellow REIT MGM Growth Properties, Vici also threw a $350 million investment at the under-construction Fontainebleau Las Vegas and made its first international splash by acquiring four properties from Great Canadian Gaming for just over $200 million, among other moves.
GLPI, for its part, dished out $1 billion for two Bally’s Rhode Island casinos and benefitted from several rent escalators.
Both have expressed interest in investing in tribal offerings, but haven’t yet figured out how to go about it, due to the fact that the traditional sale-leaseback model doesn’t work for tribal lands, which are considered sovereign.
Even so, the sector is becoming increasingly hard to ignore, having posted $39 billion in revenue in 2021 and an estimated $40-plus billion in 2022.
When asked about the prospect of tribal investments by Jeffries analyst David Katz while on a recent fourth-quarter earnings call, GLPI COO Brandon Moore said that while there are “some obvious challenges” in facilitating a deal, it’s “a prudent research and development project to see if there’s a way that we could finance or otherwise invest in some of these commercial developments.”
Vici President John Payne told Katz that his company is “building relationships with commercial operators [and] we’re getting out and meeting with many Native American nations just to let them understand who we are [and] how we could help them grow in the commercial opportunities.”
