Property acquisitions from October helped boost second-quarter financial performance for Gaming and Leisure properties. The real estate investment trust posted increases in funds from operation (which beat Wall Street forecasts) and revenue (which missed).
During a conference call with analysts and journalists Thursday, Wyomissing, Pennsylvania-based Gaming and Leisure’s CEO, Peter Carlino, was noncommittal about whether Strip casinos that could come up for sale because of the Caesars Entertainment Corp.-Eldorado Resorts merger would be acquisition targets.
Gaming and Leisure said last Wednesday that its adjusted funds from operation of $185 million, or 86 cents per share, for the three months ended June 30, up from $169.2 million, or 79 cents per share, a year earlier.
Adjusted funds from operation, a closely watched fiscal yardstick for real estate investment trusts, takes net income, adds back depreciation and amortization and filters out nonrecurring costs.
Wall Street analysts surveyed by Zacks Investment Research had, on average, expected 76 cents per share in adjusted funds from operation.
Net income in the period was $93 million, or 43 cents per share, up from $92 million, or 43 cents per share, a year earlier.
Gaming and Leisure said the October 2018 acquisitions of real property assets operated by Boyd Gaming Corp., Eldorado Resorts and Penn National Gaming helped boost earnings.
Revenue rose 13.7 percent to $289 million from $254.2 million. Zacks-polled analysts had expected earnings of $289.6 million.
To unpack the earnings-boosting October transactions, Gaming and Leisure Properties acquired property and modified leases with Penn National Gaming, Pinnacle Entertainment and Boyd Gaming accommodate Penn’s $2.8 billion acquisition of Pinnacle.
Gaming and Leisure amended its master lease with Pinnacle to enable Boyd Gaming to buy operating assets of Ameristar Casino Hotel Kansas City (Missouri), Ameristar Casino Resort Spa St. Charles (Missouri) and Belterra Casino Resort in Cincinnati.
After that deal, Boyd Gaming entered a new master lease with Gaming and Leisure with initial annual rent of about $97.2 million. Annual rent at the remaining properties in Pinnacle’s master lease was set at about $290.3 million.
Gaming and Leisure also acquired the property assets at Plainridge Park Casino in Plainville, Massachusetts, for $250 million from Penn National. Plainridge Park was added to the Pinnacle master lease with annual rent of $25 million.
Boyd Gaming acquired Belterra Park in Cincinnati from Pinnacle helped by a $57.7 million mortgage loan from Gaming and Leisure. Initial annual interest payments on the loan was $6.4 million. Gaming and Leisure’s master lease with Pinnacle was amended to include an additional $13.9 million of annual fixed rent.
During Thursday’s question-and-answer period, Scotia Bank analyst Nick Yulico asked Carlino about some of the Strip hotel-casinos that the $17.3 billion Eldorado Resorts-Caesars Entertainment deal might make available.
Eldorado CEO Tom Reeg has suggested some of the nine Caesars-operated Strip hotel-casinos may be sold.
Carlino said the REIT is watching closely.
“I describe it internally as us kind of following the bread truck, keeping an eye on whether a couple of loaves fall of the back, and we would be there to catch them … we’re paying very, very close attention to that,” he said. “Our rapid focus is really on safety, accretion … and there’s nothing that’s imminent, but I can tell you that we’re pretty actively looking at a number of modest transactions that move the needle forward.”
Carlino gave no further details about the “modest transactions.”
Gaming and Leisure shares rose 18 cents, or 0.48 percent, to close at $37.80 on the Nasdaq. The share price has risen 17.5 percent in 2019.
Follow Matthew Crowley on Twitter @copyjockey
