Posted on: August 25, 2024, 03:00h.
Last updated on: August 25, 2024, 01:26h.
Debt issued by casino landlord Gaming and Leisure Properties (NASDAQ: GLPI) looks attractive despite recent new bond issuances.
In a recent client memo, GimmeCredit analyst Kim Noland noted the active summer for the REIT, citing various transactions driving long-term growth but also necessitating new bond offerings. Some of the proceeds will go towards repaying upcoming maturities.
Aside from providing $110 million in financing for Belle of Baton Rouge to move ashore, GLPI revealed a $2.07 billion financing package for Bally’s (NYSE: BALY) to help complete its Chicago gaming venue.
GLPI is supporting tenant growth projects through construction financing, which differ from typical propco/opco transactions and boost adjusted EBITDA,” stated Noland. “This strategy, while riskier, enhances interest income and overall earnings.”
Bally’s and Penn Entertainment (NASDAQ: PENN) are GLPI’s key tenants, with additional casino operators in the mix.
GLPI Bonds Potential Boost From Bally’s Rents
In addition to Chicago funding, GLPI is acquiring the real estate of Bally’s Kansas City and Bally’s Shreveport for $395 million. Expected annual rent from these properties is $32.2 million, reflecting an initial 8.2% cash capitalization rate.
This added rental income, coupled with rental escalations and a potential deal for Bally’s Twin River, can further support GLPI’s debt payments,”
Provision of financing for tenants to develop existing venues is a fresh growth avenue for GLPI and competitors,” Noland noted.
“Consolidated Q2 revenue came in at $381 million (+7%) with adjusted EBITDA at $340 million, up 4.6% year-over-year,” she added. “Despite rising interest costs, minimal capex obligations benefit earning potential.”
Cash Flow, Rates Impacting GLPI Bonds
REITs, like GLPI, are sensitive to rate fluctuations, highlighting the group’s recent underperformance and potential catalysts like Fed rate cuts in September.
GimmeCredit rates GLPI’s maturing debt positively, highlighting the REIT’s cash flow and competitive advantages.
GLPI’s high cash flow visibility and strong ties with gaming operators are driving growth,” Noland concluded. “Rental income diversification lowers tenant risk.”