Gaming and Leisure Properties Lauded as Lower-Risk Casino Real Estate Play

Posted on: April 1, 2021, 09:31h. 

Last updated on: June 30, 2021, 10:03h.

Gaming and Leisure Properties (NASDAQ:GLPI) stock is higher by more than two percent Thursday following an endorsement from a sell-side analyst.

GLPI stock
The exterior of GLPI’s Ameristar in Black Hawk, Colo, pictured above. An analyst is positive on the gaming REIT. (Image: Visit Denver)

Initiating coverage of the gaming real estate investment trust (REIT), Mizuho Securities USA analyst Haendel St. Juste rates GLPI stock a “buy” with a $47 price target. That’s slightly below the Wall Street consensus of $48 and implies upside of more than 11 percent from the March 31 close. He’s the fifteenth analyst covering the stock and the eleventh with a very bullish rating on the name.

“GLPI (offers) strong underlying tenant credit and structural lease enhancements (i.e., master leases), resulting in a lower-risk platform that we believe is under-appreciated by the market and has been key to GLPI’s (and peers’) streak of 100 percent rent collections since GLPI’s inception,” said the analyst in a note to clients.

The company’s most direct competitors are MGM Growth Properties (NYSE:MGP) and VICI Properties (NYSE:VICI).

GLPI Stock Steady Idea in Steady Group

Following the initial wave of coronavirus cases in the US, the gaming REITs were punished alongside their operator tenants, as investors fretted about rent collection and the specter of possible foreclosures.

Ultimately, names such as GLPI proved resilient, not only among gaming equities, but relative to the broader universe of real estate stocks. While hotel, mall, and office REITs were repudiated at the hands of the pandemic, GLPI and rivals delivered stellar rent collection even as tenants dealt with multi-month shutdowns across the country.

Ultimately, foreclosure fears proved unfounded, helping GLPI stock to a gain of 55 percent over the past year — far ahead of the 31.51 percent returned by the MSCI US Investable Market Real Estate 25/50 Index.

St. Juste, the Mizuho analyst, says GLPI and its peers are “winners in the recovery of the US economy, as consumer spending and gaming revenues recover/grow.”

GLPI owns the property assets of 48 gaming venues across 16 states. Its largest tenant is Penn National Gaming (NASDAQ:PENN) though it leases properties to some smaller operators as well.

Conservative Idea

As St. Juste notes, GLPI has a lower risk portfolio of assets. That’s by design, as executives previously voiced preferences for regional gaming real estate, opting to eschewing the volatility associated with Las Vegas and other destination markets.

Currently, the REIT owns just three venues in Southern Nevada, and it’s shopping Tropicana Las Vegas. Earlier this year, GLPI management said there’s plenty of interest in that integrated resort. But many prospective buyers lack the financial resources to make adequate offers.

That scenario could change as the economy improves and as the Strip shakes off the effects of COVID-19. In the meantime, GLPI isn’t in a hurry to sell the Tropicana, indicating it can wait for more compelling offers.