If you heard Gaming and Leisure Properties officials humming “Hooray for Hollywood,” it probably related to the real estate investment trust’s third-quarter results.
Hollywood Casinos in Baton Rouge, Louisiana, and Perryville, Maryland, roared from their coronavirus pandemic shutdowns to lift the REIT’s operations during the three-month period.
All arrows pointed upward in the earnings report. A key cash flow measure and record revenue both topped Wall Street forecasts.
However, the day’s bigger headlines for Gaming and Leisure were the $480 million acquisition of Tropicana Evansville In Indiana from Caesars Entertainment and the $144.0 million acquisition of the Dover Downs hotel-casino assets in Delaware from Twin River Worldwide Holdings, which will continue to operate the property and pay GLPI $12 million a year in rent.
GLPI is paying $340 million for the Tropicana Evansville’s real estate and buildings. Twin River will pay Caesars $140 million for the operations of the Evansville casino and pay GLPI $28 million a year in rent. Caesars agreed to sell Tropicana Evansville as a condition with Indiana gaming regulators of the company’s $17.3 billion merger with Eldorado Resorts.
Macquarie Securities gaming analyst Joran Bender said the new master lease will account for less than 5% percent of GLPI’s total rental revenue but having Twin River as a new tenant will ease any investor fears of “tenant concentration.”
Truist Securities gaming analyst Barry Jonas also saw the deals as a positive move by GLPI.
“We like the deal as it answers critics concerned over (mergers and acquisitions) and open Twin River as a new partner for additional transactions,” Jonas said.
In a Tuesday statement, Wyomissing Pennsylvania-based Gaming and Leisure said its funds from operation were $182.2 million, or 83 cents per share, for the three months ended Sept. 30, up from $145.6 million, or 68 cents per share, a year earlier.
The latest result topped the 81 cents-per-share average forecast of analysts polled by Seeking Alpha. Funds from operation are a closely watched fiscal yardstick for real estate investment trusts that take net income and add back depreciation and amortization.
Net income rose to $127.1 million, or 58 cents per share, from $90.5 million, or 42 cents per share, a year earlier. And adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, were $265.2 million, or 89 cents per share for the quarter, up from $260.5 million, or 87 cents per share, a year earlier.
The aforementioned Hollywood properties helped.
Year-to-year third-quarter net revenues and adjusted EBITDA rose by $2.8 million at Hollywood Casino Baton Rouge. which reopened in May, and $3.3 million, at Hollywood Casino Perryville, which reopened in June. Gaming and Leisure received approval from the Louisiana Gaming and Control Board to move the Hollywood Casino Baton Rouge’s gaming operations to a land-based facility.
The project, expected to be completed in early 2022 with a cost of $21 million to $25 million, will add 38,000 square feet and include a 250-seat entertainment venue and sportsbook.
Third-quarter revenue for GLPI rose 7% to $307.6 million from $287.6 million, topping the $283 million forecast of Seeking Alpha-polled analysts.
But investors were underwhelmed. The REIT’s stock fell 79 cents, or 2.07% to close at $37.31 on the Nasdaq.
In its statement, Gaming and Leisure said it collected more than 99% of its contractual rents year to date from its 46 properties, 45 of which have reopened from their coronavirus infection curve-flattening shutdowns.
GLPI Chairman and CEO Peter Carlino said the results reflected sound asset management and foresight — the company issued an additional $200 million of 4% senior unsecured notes to repay term loan debt. The notes mature in 2031 at an effective yield of 3.548%.
“As a result,” Carlino said, “we have no debt maturities before May 2023.”
The deals for Tropicana Evansville and Dover Downs, which are expected to close in mid-2021, will mark a new operating tenant for GLPI, which owns the land and buildings associated with gaming properties by Boyd Gaming Corp. and Penn National Gaming.
Follow Matthew Crowley on Twitter @copyjockey
