Momentum from closing a big Maryland acquisition and declaring a special dividend pushed Gaming and Leisure Properties into its fourth-quarter earnings call Thursday. But the real estate investment trust had a key cash flow measure drop year to year and miss Wall Street forecasts. Revenue fell slightly, but topped forecasts.
In a statement, Wyomissing, Pennsylvania-based Gaming and Leisure said funds from operation were $178 million, or 74 cents per diluted share, for the three months ended Dec. 31, down from $184.1 million, or 81 cents per diluted share, a year earlier.
The latest result missed the 83-cents-per-diluted-share funds-from-operation forecast of analysts surveyed by Seeking Alpha. Funds from operation, a closely watched fiscal yardstick for real estate investment trusts, take net income and adds back depreciation and amortization.
Adjusted earnings before interest, taxes, depreciation, and amortization, a different cash flow measure that excludes one-time costs, rose 4.8% to $277.2 million from $264.6 million.
Revenue fell 0.6% to $298.3 million from $300.2 million and topped Seeking Alpha-polled analysts’ $295.1 million forecast.
Gaming and Leisure shares rose 13 cents, or 0.29%, Friday to close at $44.96 on the Nasdaq. The shares sank 96 cents, or 2.14%, to settle at $44 after hours.
On Dec. 30, Gaming and Leisure closed its $1.14 billion purchase of Live! Maryland, a Hanover, Maryland, hotel-casino, for $1.14 billion from Baltimore-based Cordish Cos. Also under the deal, Gaming and Leisure may pursue financing partnerships with Cordish Cos.
Gaming and Leisure also entered into a triple-net lease with Cordish in which Cordish continues owning, controlling, and managing Live! Maryland. The lease has initial annual rent of $75 million and a 39-year initial term.
Gaming and Leisure, spun off from Penn National Gaming in 2013, is on track to complete a previously announced deal for the land assets of Live! Philadelphia and Live! Pittsburgh in this year’s first half.
“With Cordish and Bally’s … we believe that there is an additional path to growth … that could also include some of our existing tenants as we talk to Penn about a variety of investments that they may want to make going forward,” Gaming and Leisure Chief Executive Officer Peter Carlino said in a conference call with analysts and journalists.
“So,” he said, “we see 2022 is already off to a great start.”
On Dec. 17, Gaming and Leisure completed its previously announced $28.2 million sale of Hollywood Casino Baton Rouge’s operations to Casino Queen Holding Co.
When asked whether Gaming and Leisure would invest outside the casino industry, Carlino and Chief Investment Officer Matt Demchyk said the REIT always considers options, but will be cautious.
“We don’t want to put our money into much more volatile income streams that cost a lot more than the gaming assets,” Demchyk said, “I’ll also point out, we don’t feel that we need to do something outside of gaming to prove that we can do something outside of gaming. … The first deal we do is going to be because it crosses the threshold of making sense on a risk-adjusted basis.”
Bank of America on Jan. 10 downgraded Gaming and Leisure to “underperform” from “buy,” wary of how higher interest rates may affect 10-year-or-longer rental contracts. Bank of America analyst Shaun Kelley told Seeking Alpha that Gaming and Leisure also has fewer guaranteed rent escalators and less contractual consumer-price-index protection than VICI Properties.
For the 12 months ended Dec. 31, Gaming and Leisure had $756.7 million, or $3.24 per share in funds from operation, up from $684.4 million, or $3.11 per share, a year earlier.
Twelve-month revenue rose 6.1% to $1.22 billion from $1.15 billion.
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