Gaming and Leisure Properties CEO Peter Carlino was game to field as many what-if acquisition queries as analysts wanted to hurl at him Friday. And there were a bunch.
Would his real estate investment trust pull the trigger and sell the Tropicana Las Vegas, as it’s reportedly been contemplating for months? Would it buy something else on the Strip — Wynn Las Vegas, perhaps?
Carlino gave no definite answers during the call, which was supposed to center on earnings. But he said any move would be carefully analyzed and executed.
GLPI Chairman and CEO Peter Carlino
“As I’ve said for many, many years if it’s alive and breathing, we’re looking at it,” he said. “What’s doable is always another matter.”
Gaming and Leisure became the third casino-oriented REIT this week to collect all 2020 rents from tenants despite the coronavirus pandemic. (VICI Properties and MGM Growth Properties also achieved the feat.) A key cash Gaming and Leisure cash flow measure surpassed Wall Street forecasts while revenue matched.
Analysts couldn’t resist asking about the Tropicana Las Vegas. Last March, Penn National Gaming sold the Strip resort to GLPI and leased back the operations. GLPI said at the time it planned to explore all options with the 34-acre site, including a sale.
Carlino acknowledged GLPI wants a cash buyer for the Tropicana, and there had been “a shocking number” of potential suitors. He didn’t name any and gave no hint that a deal was close.
Union Gaming Group analyst John DeCree told investors in a research note that he expects GLPI will “unload” the Tropicana this year.
“While the bid/ask is a little wide for Las Vegas Strip assets today given the current state of visitation, we believe there is no shortage of demand for real estate in and around the Las Vegas Strip given the scarcity value,” DeCree said.
J.P. Morgan gaming analyst Joe Greff noted the recent sale of the unfinished Fontainebleau-Drew project on the Strip for an undisclosed price offered an encouraging sign for the sale of Tropicana Las Vegas.
“(GLPI) is heartened by the level of interest in 2021 from real buyers, though it would like to see a further loosening of debt markets,” Greff said.
During the conference call, Scotiabank analyst Greg McGinniss asked if GLPI was contemplating a big acquisition, maybe on the Strip, Carlino said the REIT was open to the possibility but wasn’t more specific.
“If you were to go out now and say what’s for sale, well, I think I can find that property is on the Strip you could probably buy, but these things evolve as they do,” he said. “And our job frankly is just to be ready prepared financially.”
Quarterly earnings
In a statement, Gaming and Leisure said adjusted funds from operation, a cash flow measure that excludes one-time costs, were $264.6 million, or 85 cents per share, for the three months ended Dec. 31, up from of $260.5 million, or 87 cents per share, a year earlier.
Analysts polled by Seeking Alpha had, on average, expected 81 cents per share in funds from operation, a closely watched fiscal yardstick for real estate investment trusts that take net income and add back depreciation and amortization.
Net income was $169.3 million, or 74 cents per share, up from $114.3 million, or 78 cents per share, a year earlier. Quarterly revenue rose 3.8% to $300.2 million from $289 million, in line with Zacks-polled analysts’ estimate.
Gaming and Leisure closed 2020 with a flurry of regional gaming-oriented deals.
On Dec. 18, the REIT closed a deal to acquire the real estate of the Isle Waterloo and the Isle Bettendorf hotel-casinos in Iowa in exchange for transferring the Tropicana Evansville’s (Indiana) property assets and $5.7 million in cash to Caesars Entertainment. The deal yielded a $41.4 million non-cash gain for Gaming and Leisure that didn’t figure in adjusted funds from operation.
On Dec. 15, Gaming and Leisure agreed to sell the Hollywood Casino Baton Rouge’s operations to Casino Queen for $28.2 million. Gaming and Leisure will continue to own the real estate and will enter an amended master lease with Casino Queen, to include both the DraftKings at Casino Queen property in East St. Louis (Missouri) and the Hollywood Casino Baton Rouge (Louisiana). The lease will yield $21.4 million in annual cash rent, a new initial 15 -year term with four five-year extensions.
Also on Dec. 15, Gaming and Leisure said Penn National exercised its option to acquire the operations of the Hollywood Casino Perryville in Perryville, Maryland, for $31.1 million in cash. Gaming and Leisure will enter a new lease with Penn National with an initial 20-year term with three five-year renewal options, and an initial annual cash rent of $7.77 million; $5.83 million of that total will be subject to escalation.
“2020 was a bizarre year … for all of us,” Carlino said “But, we in many respects, had one of the most successful — if not the most successful – year we have had in since our spin into GLPI. The part of the good news is that we have proved what we’ve been saying all along that the real strength of gaming is in the regions, not in Las Vegas.”
Gaming and Leisure posted full-year funds from operation of $1.04 billion, or $3.45 per share, virtually even with the previous year’s $1.04 billion, or $3.44 per share. Full-year net income rose to $505.7 million, or $2.30 per share, from $390.9 million, or $1.81 per share.
Twelve-month revenue was virtually unchanged at $1.15 billion.
Gaming and Leisure shares fell 26 cents, or 0.6%, Friday to close at $43.11 on the Nasdaq.
Follow Matthew Crowley on Twitter @copyjockey
