“Gaming revenue is bulletproof. Write that down.” So spoke Gaming & Leisure Properties Inc. (GLPI) CEO Peter Carlino. His remarks came during the company’s second-quarter earnings call, held July 31.
Carlino’s comments came as a riposte to “a lot of weeping and gnashing of teeth that suggest the regional gaming market is weak.” That is not the case, Carlino said, rather quite the contrary. “Gaming companies are as stable an investment that exists.
“The consumer market is still pretty strong, despite some of the negativity you see in the press,” Carlino insisted. “People don’t give up their entertainments. Demand is extremely strong. We viscerally feel a lot of enthusiasm in the market.”
As for GLPI itself, Carlino said, “We feel the company’s in a terrific position, scarcely ever been better.” Earlier he said, “We’re happy to announce another strong quarter and we anticipate healthy growth in the near and long term.” He said GLPI-financed capital projects for Penn Entertainment were performing “off the charts.”
Even so, GLPI executives were circumspect about the potential for deals with MGM Resorts International and Caesars Entertainment, both in the process of being taken private. They said they had no relationship with MGM and only a modest one with Caesars.
“There’s no reason to believe that there’s definitive M&A that will fall out of those transactions,” opined Chief Development Officer Steven Ladany. “We have a phone. We’re happy to answer if someone calls.”
Ladany was similarly noncommittal about Churchill Downs’s planned divestiture of nine properties. “It’s something that we’re aware of. We’ll definitely take a look,” he said. “There are some assets that are quality assets,” while others were “a little challenging.”
While Ladany expected rival Vici Properties to get involved in the bidding for Churchill Downs’s castoff assets, he did not expect the competition to get much wider, since no premier Las Vegas Strip casinos are involved.
“There’s no deal we have to do,” added Carlino, who expressed a dislike of auctions. “We’re perfectly willing to walk away—and have.”
Although Carlino didn’t rule out the prospect of GLPI stock buybacks, he came close. “That’s when you throw in the towel and the game is kinda over,” he said. “We’re not there yet. We have capabilities that others don’t.”
With regard to projects in progress, Ladany said of $1.2 billion Bally’s Las Vegas, “The stadium is proceeding quite nicely and it will be a spectacular venue. Bally’s is coming close to a concrete plan for some of the infrastructure.” He added that GLPI might invest in some of that infrastructure, but was making no commitments at this time.
Bally’s Corp. has voiced concerns that the legalization of slot routes in Chicago would negatively impact $2 billion Bally’s Chicago. “The VGTs were in our underwriting,” said COO Brandon Moore of the potential risk. He noted that there were already 7,000 sweepstakes in the Windy City area, but a potential racino at the Hawthorne race course wasn’t happening, “so the puts and takes are mostly benign.”
Of $4 billion Bally’s Bronx, Moore observed, “Not much has changed. We remain optimistic,” but he did not see a role for GLPI to get involved on the front end of the project, for which financing remains unresolved. “It’s too early for us to know what kind of a role we can play.”
A recurring theme of the discussion with stock analysts was the low price of shares in gaming stocks and of GLPI itself. Moore theorized that much of the merger-and-acquisition activity seen in the gaming growth was driven by a disconnect between how the companies were performing and how they were seen to be doing.
“Broad-based gaming has been around for 30 years,” Carlino added. “This is an incredibly stable industry,” but it’s a challenge to get Wall Street to recognize that.
Asked whether go-private deals would make GLPI’s transactions easier, Ladany replied that it was difficult to answer. “There’s a wide swath of what it means to be a private gaming company,” ranging from massive firms to family-run outfits. “Things like green field [projects] are definitely easier for the private companies to do,” he said, citing Rush Street Gaming as an exemplar.
As for igaming and its possible menace to terrestrial gambling, Moore took a wait-and-see stance. “It’s all coming under some attack at the state level,” he said, including a focus on the attendant social ills that came with online wagering. “People are either overly optimistic that they can expand igaming or that they can end igaming.”
Still, Moore quantified the effect on brick-and-mortar casinos as “not much.” He thought that igaming might have slowed terrestrial growth, but not impacted its viability. Neither tenants’ desire to pay rent nor their ability to do so had been diminished, he said.
Citing one leading igaming market in which GLPI is heavily invested, Carlino said, “Pennsylvania is the poster child for excess, has limited nothing. In spite of that, the brick-and-mortar properties continue to do well.”
