Real estate investment trust Gaming and Leisure Properties said gains from recent real estate transactions and prudent balance sheet management led to record first-quarter revenue. But the result fell short of analysts’ forecasts, though a key cash flow measure was in line.
In a statement issued Monday after stock markets closed, Wyomissing, Pennsylvania-based Gaming and Leisure, spun off from Penn National Gaming in 2013, said its adjusted funds from operation were $183 million, or 85 cents per diluted share, for the three months ended March 31, up from $168.7 million, or 79 cents per diluted share a year earlier. As mentioned, the latest result matched the forecast of analysts polled by Zacks Investment Research.
Funds from operation, which take net income and adds back depreciation and amortization, are a key fiscal yardstick for real estate investment trusts.
Net income in the quarter fell to $93 million, or 43 cents per diluted share, from $96.8 million, or 45 cents per diluted share, a year earlier.
Revenue rose 17.9 percent to $287.9 million from $244.1 million and missed the $290.4 million estimate of Zacks-polled analysts.
The company said it benefited from a full quarter of contributions from properties acquired in its $1.85 billion deal with Eldorado Resorts for Tropicana Entertainment’s assets from corporate raider Carl Icahn’s Icahn Enterprises.
Gaming and Leisure paid $1.21 billion for five properties — Tropicana Atlantic City in Atlantic City, New Jersey; Tropicana Evansville, in Evansville, Indiana; Tropicana Laughlin, in Laughlin, Nevada; Trop Casino Greenville in Greenville, Mississippi; and the Belle of Baton Rouge in Baton Rouge, Louisiana.
Reno-based Eldorado Resorts paid $640 million and operates the Tropicana properties and lease the real estate from Gaming and Leisure for 15 years at $110 million a year, followed by four five-year renewal periods.
All of those deals closed in 2018’s fourth quarter.
Gaming and Leisure declining operating results of the Casino Queen in East St. Louis, Illinois, in the first quarter caused a potential buyer to withdraw from the sales process. Subsequent offers declined and the company said sale proceeds won’t be enough to repay the property’s creditors. Gaming and Leisure recorded an impairment charge of $13 million for the quarter to reflect the write-off of the Casino Queen loan.
SunTrust gaming analyst Barry Jonas said GLPI management, “Is hopeful a new operator could help jumpstart the declining asset. We note Casino Queen’s current situation marks uncharted territory for the relatively new gaming triple net lease asset class.”
As of March 31, Gaming and Leisure’s portfolio consisted of interests in 46 gaming and related facilities. And CEO Peter Carlino said the REIT realized almost $255 million in income from real estate in the first quarter and constantly considers ways to add more.
“We are as focused and motivated as ever in our thoughtful pursuit of portfolio enhancing, accretive transactions,” Carlino said in a statement accompanying the results. “Our tenants represent the industry’s leading regional gaming operators. These relationships position GLPI to participate in additional accretive transaction opportunities alongside our tenants while we simultaneously pursue transactions for assets owned and operated by entrepreneurs and others who can benefit from a relationship with GLPI.”
Carlino amplified that thought during the conference call.
“There is a lot of activity this quarter and we are probably as busy as we have ever been,” he said. “We’ll see what shakes out from that, but I think we do need to highlight that, as I’ve said over many, many years if it’s alive and breathing you can imagine that we’re looking at it and — and aggressively so.”
Carlino said Penn National’s decision to close the Resorts Casino in Tunica, Mississippi, a Gaming and Leisure tenant, will not affect rental income under the REIT’s master lease with Penn National. The hotel-casino, which Penn acquired in 2017, will close June 30.
On Tuesday morning, Zacks wrote that Gaming and Leisure stands poised for growth. For example, Zacks wrote, although Gaming and Leisure’s historical earnings-per-share growth rate is 6.8 percent, this year’s earnings per share growth is pegged at 8 percent. The industry average, Zacks notes in 1.4 percent.
Also, Zacks wrote, Gaming and Leisure is well positioned from a sales-growth perspective. The REIT’s sales are expected to grow 9.6 percent this year, Zacks said, which would far outpace the 2.2 percent industry average.
Gaming and Leisure Properties shares fell $1.21, or 2.98 percent, Tuesday to close at $39.33 on the Nasdaq. The share price had risen 13.9 percent in the past 12 months.
Follow Matthew Crowley on Twitter @copyjockey
