Gaming and Leisure Properties, the real estate investment trust and landlord to most Penn National Gaming and Pinnacle Entertainment properties, reported second quarter revenue growth of nearly 18 percent and announced it would increase its third quarter dividend to $0.63 Thursday morning.
The boost in revenue was due to the acquisition of two new properties in Tunica, Mississippi in late spring and the addition of a $5.8 million annual escalator to the company’s master lease with Pinnacle.
“On May 1, 2017, we completed the acquisition of the Bally’s Casino Tunica and Resorts Casino Tunica for $82.9 million. These assets were added to the master lease with Penn National Gaming and will generate $9 million of incremental annual rent,” said Peter M. Carlino, chief executive officer.
Because of the Tunica acquisitions and the escalator, Carlino explained, a $0.01 increase in the quarterly dividend payout was approved by GLPI’s board of directors.
“Our quarterly dividend has grown at a compounded annual rate of 6.6 percent in the last three years, with five dividend increases during that period,” he said.
For the quarter, adjusted funds from operations – a REIT-specific financial metric that includes net income minus losses from sales of property, real estate depreciation, debt issuance amortization and other items – grew year-over-year from $135.1 million to $167.8 million, slightly ahead of company guidance and analyst expectations.
Net revenues increased from $207.4 million to $243.4 million and adjusted EBITDA grew from $180.4 million to $222.2 million – both in-line with company guidance.
“For the quarter, adjusted EBITDA exceeded guidance primarily as the result of solid performance at our TRS Properties, Hollywood Casino Baton Rouge and Hollywood Casino Perryville, as well as incremental rent from Hollywood Casino Toledo, which is managed by Penn National Gaming,” Carlino continued.
On its earnings call Thursday morning, Penn National said that it was exploring further merger and acquisition activity, a prospect that would benefit GLPI moving forward.
“They indicated that they were looking at deals, which caused them to focus capital deployment on debt paydown rather than buybacks. GLPI generally serves as PENN’s capital partner. So, a PENN deal could be a growth opportunity for GLPI,” wrote Patrick Scholes, an analyst with SunTrust, in a note.
Net income for GLPI was up from $73.3 million to $96.3 million and earnings per share grew from $0.39 to $0.45.
“Our business model promotes stability through long-term master leases with large fixed components and highly respected operators with market-leading assets. With this structure, as demonstrated by our second quarter results, we are able to consistently deliver reliable cash flow for our investors,” said Carlino.
In all, the results were slightly ahead of Wall Street expectations as analysts continue to view the company more favorably.
“GLPI’s results continue to reflect the consistency and predictability associated with the triple-net model. Furthermore, we believe generally improved regional gaming trends could help ease investors’ concerns regarding rent quality in the near term,” wrote Steven Wieczynski, an analyst with Stifel Nicolaus, in a note.
Wieczynski added that investors could take increased interest in the company because of its stable cash flow as other types of REITS – such as those that own shopping malls – come under financial pressure.
“Looking ahead, 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,” he added.
GLPI shares were down Thursday morning as low as $37.62 after closing trading on Wednesday at $38.29.
Aaron Stanley
https://www.clippings.me/aaronstanley
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