Confirming the whimsy that the existent estate sector is a salutary localise to follow when rising prices is high, as is the vitrine today, Gaming and Leisure Properties (NASDAQ:GLPI) and VICI Properties (NYSE:VICI) are both crisply outperforming the S&P 500, as easily as the MSCI US Investable Market Real Estate 25/50 Index this year.
Following VICI’s of late completed $17.2 1000000000000 purchase of MGM Growth Properties, the Caesars Palace proprietor the GLPI and VICI are the only if ii in public traded gambling casino existent landed estate investment funds trusts (REITs) on the market place today.
Casino REITs make been among the best-performing property sectors this twelvemonth as the positive degree tailwinds from the leisure time demand retrieval – in particular inwards the decisive Las Vegas market place — get offset rising prices headwinds and economical growth concerns,” according to a young describe by Hoya Capital.
While the universe of discourse of dedicated cassino REITs is small, to a greater extent diversified dimension companies are entering this space. For example, Realty Income (NYSE:O) proclaimed inwards February it’s acquiring the prop assets of Encore Beantown Harbor for $1.7 billion, marking its initial raid into gaming existent estate.
Casino REITs: All About Fighting Inflation
GLPI and VICI are what’s known as triple-net REITs, meaning the term of a contract terms they mark with clients are usually far thirster than what’s seen inwards other commercial message existent landed estate segments.
As such, market place participants tend to do by triple-net REITs on par with longer-dated bonds, significance these stocks put up live vulnerable to rising interest group rates. This year, however, investors are focusing more on the inflation-fighting advantages offered by GLPI and VICI. The latter is confirming on a year-to-date basis, patch the former’s 2022 deprivation is small relation to the broader market.
The Florida key to GLPI’s and VICI’s success inward inflationary environments is derived from pricing power and inflation-linked rip increases that are built into renter contracts. Take the instance of VICI’s undertake with MGM, which is at present one of the REIT’s largest tenants followers the MGP acquisition.
The initial charter term with MGM, which started inward tardily April, is 25 years, with three 10-year renter renewal options and an initial sum yearbook lease of $860 million. Under the terms of that agreement, rip put up increment 2% a year for the first of all decade, and at a value of 2% to 3% yearly thereafter, indicating VICI investors are gaining more rising prices protection.
More Casino REIT Consolidation
While VICI’s purchase of MGP qualifies as mammoth inwards the casino REIT space, Hoya Washington believes more purchases in the gaming tangible estate landscape painting are possible.
“The M&A surroundings remains fertile. VICI Properties closed on its $17.2 1000000000000 acquisition of MGM Properties, gift the keep company a dominant share of the Las Vegas strip,” notes the plus manager.
Since 2016, GLPI, MGP and VICI acquired nearly 30 gaming properties, and that doesn’t include VICI’s outright acquisition of MGM Growth.
With some operators stock-still owning all or to the highest degree of their real estate, it’s possible some look to constituent with a dimension or 2 to wage increase immediate payment to finance other endeavors. That could undecided the door for GLPI and VICI to supply to their portfolios.
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