Gaming and Leisure Properties, VICI Are Safe Ways to Own Gaming Space, Says Analyst

With reenforcement from surging cyberspace gambling casino operations, gaming tangible acres investiture trusts (REITs) Gaming and Leisure Properties (NASDAQ:GLPI) and VICI Properties (NYSE:VICI) are “safe” avenues for investors considering the industry.

That’s the sentiment of Macquarie analyst Hashemite Kingdom of Jordan Bender. In a mention to clients today, Bender downgrades MGM Growth Properties (NYSE:MGP) to “neutral” from “outperform” to calculate for the pending acquisition of that companion by challenger VICI. In August, Caesars Palace possessor VICI proclaimed a $17.2 1000000000000 all-stock takeover of MGP — a business deal creating the largest property owner on the Las Vegas Strip.

Bender notes the outgrowth of iGaming and sports wagering as possible hard cash generators in the hereafter is efficacious for the REITs. That’s because those pursuits could live additive to operators’ finances, bolstering split coverage in the process.

While the REITs don’t hold direct exposure to online gaming markets, several of their tenants get formed strategies to compete,” notes Bender. “Although this won’t welfare REIT financials, it testament improve underlying split coverages and fortify the incorporated warrantee for the assets in the leases.”

When the VICI/MGP dealing closes inward the 1st half of next year, the combined troupe will enumeration MGM Resorts International (NYSE:MGM) and Caesars Entertainment (NASDAQ:CZR) as its ii biggest tenants. BetMGM and Caesars Sportsbook combine for nearly a 3rd of the US online sports betting market, according to Macquarie estimates.

For GLPI, VICI, Rent Coverage Matters

Gaming REITs control as toll route businesses. They have the belongings assets of some of the most iconic house servant gaming venues, such as Caesars Palace and Mandalay Bay, but aren’t mired in the day-to-day operations.

Nor are the landlords responsible for enhancements to the venues. Those obligations go to the operating companies. Coupled that with take responsibilities, the financial integrity of tenants is intact to the gaming REIT investment thesis.

That says rent insurance coverage is life-sustaining in assessing the value of a company such as GLPI or VICI. During the darkest days of the cassino shutdown caused past the coronavirus pandemic lastly year, in that location were concerns most the ability of some casino operators to receive take obligations in a lengthy zero-revenue climate. Fortunately, that ne'er became a material issue, as operators were able to access code capital letter markets and the REITs gathered nearly all owed rent during the shutdown.

In gain to Caesars, VICI’s other tenants include Century Casinos Inc., Hard John Rock International, JACK Entertainment, and Penn National Gaming. GLPI’s marquee tenants include Bally’s and Penn, among others.

More Rent Coverage Coming

While operators are proving adept at boosting margins at land-based casinos inward the backwash of the pandemic, to a greater extent border financial backing could live derived from iGaming.

We wait the margin profiles testament live inwards the 25-35 percent reach at matureness (depending on tech stacks), and this could translate to an incremental $3.8 one million million of online earnings before interest, taxes, depreciation and amortisation (EBITDA) for PENN, CZR, MGM, Boyd Gaming and Bally’s combined below our market place divvy up assumptions,” says Macquarie’s Bender.

He adds that the incremental EBITDA from online casinos and sports wagering could extend operators’ charter responsibilities.