Gambling Analyst Calls Casino REITs Attractive

Global gaming advisory firm Union Gaming has stayed bullish on the casino REIT industry as a wave of consolidation is under way on the regional level and also is creating potential for much more high-value real estate prices in Las Vegas.

Union Gambling analyst John DeCree stated in a recent note that on the Las Vegas Strip alone, there is EBITDAR of greater than $3.5 billion (roughly $1.8 billion worth of lease ) which isn’t owned by REITs and that may represent between $20 billion and $25 billion worth of future real estate value at a 7%-8% cap rate.

The analyst went on this can represent a expansion pipeline for the next five-plus years based on the present casino REITs mergers and acquisitions pace. Mr. DeCree also pointed into the Las Vegas Local marketplace which has nearly remained untapped by REITs. That market has estimated EBITDAR of over $1 billion, according to the Union Gambling pro.

Gambling and Leisure Properties, MGM Growth Properties, and VICI Properties will be the 3 casino REITs Mr. DeCree named as ones which needs to be watched out for their expansion opportunities.

Gambling and Leisure Properties was actually the first REIT structure to be made inside the land-based casino gaming industry. It was established in 2013 when major operator Penn National Gaming divide its own realty to the Gambling and Leisure Properties REIT. MGM Growth Properties has been the second REIT to emerge. It was made in 2015 by Las Vegas gaming and hospitality giant MGM Resorts International together with the aim to invest in large destination resorts.

Following its development of its primary operating unit from bankruptcy at the autumn of 2017, Caesars Entertainment Corp. transferred some of its assets into the VICI Properties REIT to better tap on future expansion opportunities.

REITs’ Potential

Union Gambling has been bullish about the growth potential casinos make to the REIT sector. In prior books on the topic, the company has pointed to the fact that in the United States, brick-and-mortar casinos are currently not threatened by online distribution stations as it is the case in different other industries.

Online gambling is currently legal in four states — Nevada, Delaware, New Jersey, and Pennsylvania. It’s important to note that online gaming operations are yet to be launched in Pennsylvania as these were legalized only last fall. It’s thought that even when Pennsylvania formally joins the country ’s online gaming industry, this will not hamper the expansion and further expansion of its land-based casinos. The US commercial casino industry was worth over $40 billion final year, according to the most recent industry figures report issued from the American Gaming Association.

Additionally, casinos have proved to be “attractive expansion vehicles”, according to the gaming research and advisory residence. In a report from last year, Union Gambling analysts noted that both MGM Growth Properties and Gambling and Leisure Properties listed a growth in their annualized gains of over 10% year-on-year, while some other internet rental REITs saw a mid-single-digit growth in their own dividends.