Research Firm Reports Stable Bonds for Gaming and Leisure Properties.
As more people rent different properties, the bonds issued by Gaming and Leisure Properties (GLPI) could be appealing to certain fixed-income investors, but the potential for significant gains might be missing. This is according to an assessment by Gimme Credit analyst Kim Noland, who suggested that GLPI's 2030 bonds should be classified as "outperform," though she mentioned that they're unlikely to result in substantial profits. These bonds are currently yielding around 6.8%.
Noland believes that partly financing mergers and acquisitions can lead to an increase in leverage and might cause ratings upgrades to be avoided.
At the end of the second quarter, GLPI's leverage was 4.8x, and Noland assumes it'll stay around that same level, close to 5x. Fitch Ratings gave the REIT's corporate debt its lowest investment-grade rating of "BBB-".
Tenant Diversification Helping Gaming and Leisure's Position
Gaming and Leisure arrived on the scene as a spin-off from Penn Entertainment a decade ago. While Penn Entertainment has grown into the REIT's principal tenant, investors and analysts view tenant diversification as a crucial aspect of the REIT investment strategy. To meet this demand, Gaming and Leisure has added clients like Bally's, Cordish Cos., and other casinos to its tenant roster. Most recently, in July, the REIT spent $100 million on the real estate related to the Hard Rock Casino development in Rockford, Illinois, which added a new tenant, 815 Entertainment, to its list.
"The 815 deal involves providing construction financing to the tenant, like several other similar deals the company has pursued in recent years. Using these creative REIT solutions for funding has helped GLPI diversify its portfolio of casino-related businesses. It now has seven gaming operator tenants in addition to the original Penn Entertainment," added Noland.
Currently, GLPI owns the property assets for 59 gaming venues across 18 states. The Hard Rock venue in Rockford, which will be the sixth Illinois property in their portfolio, is their latest acquisition.
A Potential Boon for GLPI in Las Vegas
Las Vegas is the largest gambling destination in the country, and it's where GLPI's main competitor, VICI Properties, owns the most gaming real estate.
While GLPI typically targets regional casinos, it does have a stake in the real estate of the Tropicana, a well-known casino situated on the Las Vegas Strip. This could make it well-positioned to potentially profit from speculation that the Oakland Athletics could relocate to Las Vegas. Bally's, the operator of Tropicana and GLPI, has agreed to cover up to $174.95 million of property enhancements in exchange for a rent boost.
"GLPI is providing 9 acres of the Tropicana Las Vegas site for the construction of a baseball stadium that will complement the Bally's Tropicana resort. GLPI will finance construction ($175 million) and receive rent under the original ground lease and an additional rent during the development of 8.5% of funded costs. Although funding construction is riskier, the financial resources of the partners and governmental support help to reduce potential downside," concluded Noland.
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Source: www.casino.org
