Comparing Gaming REITs

Q2 2024, United States REITs raised $16.6 billion through secondary offers, predominately from $12.5 billioGaming REITs have historically provided investors with stable and predictable income streams through long term leases with gaming properties such as casinos and entertainment venues. They have proven to be resilient even during economic downturns. The rising popularity of the sector is shown to double its market cap from $23 billion at the end of 2020 to $46 billion by July 2024[2].

REIT’s in the gaming industry are currently expanding into new regions and markets. The Gaming REIT leases are structured for rent escalations and built-in long-term growth. These REITs additionally engage in strategic acquisitions and sale leaseback transactions, enhancing their total portfolio and potential revenue.

Per Nareit,

“In 2023, gaming REITs generated $3.5 billion in funds from operations and paid $2.5 billion in dividends…From 2021: Q1–2024: Q1, gaming REITs were net acquirers of properties, with approximately $14.7 billion in properties.”

The stability of these returns has been driven by long-term net lease arrangements. Further, these tend to offer richer yields as they reflect the relatively weaker credit of the underlying tenants.

There are essentially only two gaming focused REITs: Gaming & Leisure Properties (GLPI) and VICI (VICI). Gaming & Leisure Properties ($13.5 billion market capitalization) holds regional casinos and leisure facilities around the United States. Specifically, GLPI holds the ground lease of Tropicana Las Vegas and owns the M Resort Spa Casino in Las Vegas which totals around 912,000 square feet in Las Vegas of their 29.3 million square feet national total.

VICI is the larger of the two. VICI’s ($33 billion market capitalization) focuses typically on mainstream destinations such as Las Vegas and Edmonton, AB. VICI’s Las Vegas portfolio consists of ten locations in Las Vegas, NV, accounting for over 52% of their 18 million square foot portfolio.

 Despite their similar business models these companies trade quite differently. While they are comparable from a Price-to-Funds from Operations perspective, GLPI uses more leverage, enhancing returns on equity but also comes with greater volatility.

[2]: https://www.reit.com/news/articles/gaming-reits-provide-stability-predictability-in-income