Gaming and Leisure Properties reported first quarter 2017 earnings above both company guidance and analyst expectations Thursday morning and declared a second quarter dividend of $0.62 per share.
The gaming-focused real estate investment trust rode strong performances in Ohio and Louisiana to post adjusted EBITDA of $219 million, net revenues of $243 million and adjusted funds from operations of $166 million. Net income checked in at $94 million, while earnings per diluted share were $0.45.
These figures were all between 1-2.5 percent above previously issued company guidance.
“Our first quarter results exceeded expectations largely as the result of out-performance at our managed property, Hollywood Casino Baton Rouge, which grew net revenue by 9 percent over the prior year, and at the PENN operated Hollywood Casino Toledo and Hollywood Casino Columbus properties,” said Peter M. Carlino, chief executive officer.
“These property level results are indicative of the healthy regional gaming markets in which the company and our tenants operate. We expect to continue to generate secure and predictable cash flow for our investors, while we pursue strategic acquisitions that achieve our goals of stability, diversification and accretion,” continued Carlino.
GLPI’s big news from the first quarter was an announced deal to acquire the underlying real estate assets of Bally’s Casino Tunica and Resorts Casino Tunica for $82.6 million. Upon the expected closing date of May 1, the REIT will then lease those properties to Penn National Gaming.
“We are excited to partner with Penn National Gaming, Inc. …on this transaction as these assets will be added to the existing PENN master lease and will produce $9.0 million of incremental annual rent,” said Carlino. “We appreciate the expedient review completed by the Mississippi Gaming Commission, which approved the transaction on April 20, 2017. This acquisition demonstrates our steadfast focus on accretive growth for our shareholders.”
“[Penn National was] the only clear choice from our perspective. They were very familiar with the Tunica market” said Bill Clifford, chief financial officer, adding that the deal was the right mix of value combined with a motivated seller. “The only way we’re going to get a transaction done is when we have individuals in the counterpary who are motivated to do a transaction.”
With the transaction, GLPI will have acquired the real estate assets of 17 casinos in 8 different states that generate rental income of $411 million. The company now owns more than 4,300 acres of land and 15 million square feet of building space – all of which is completely occupied. At first quarter’s end, GLPI owned the real estate underlying 36 casinos – 18 of which are leased to Penn National.
While many observers regard Tunica and Mississippi more broadly as saturated markets, Carlino said that from his vantage point the deal is a value-add.
“We do pride ourselves in bringing a unique underwriting ability to gaming assets so we can look objectively and carefully at a market like Tunica,” said Carlino on a conference call with investors.
GLPI issued second quarter guidance of $244 million in revenue, $96 million in net income, $167 million in AFFO and adjusted EBITDA of $221 million.
“GLPI’s results continue to reflect the consistency and predictability associated with the triple-net model,” wrote Steven M. Wieczynski an analyst with Stifel. “All told, though we are believers in the dedicated gaming REIT concept as stewarded by GLPI’s capable management team over the longer term, we believe incremental acquisition activity of size could be limited in the near term.”
Carlino added that his team continues to be aggressive in scouting out new acquisition opportunities as a means to growing the dividend returned to shareholders.
“There’s a handful of properties around the country we remain focused on. I think we’ve stepped up the pace at which we’re looking at other opportunities,” he said. “I think we’re bound to explore every possibility as we develop this biz going forward.
