Analysts are constructive on Gaming and Leisure Properties (NASDAQ:GLPI) shopping for two Rhode Island casinos and leasing these venues again to operator Bally’s (NYSE:BALY) — a transaction that was introduced late Tuesday.
Shares of the gaming actual property funding belief (REIT) are decrease by 1% in late buying and selling. That’s after the corporate priced a share sale of roughly $308.8 million. That was accomplished partially to fund the $1 billion buy of the property belongings of Bally’s Twin River Lincoln On line casino Resort and Bally’s Tiverton On line casino & Lodge.
Nonetheless, analysts are bullish on the deal, saying it can add to GLP’s acquired funds from operations (AFFO), although the cap charge of seven.6% is greater than the 6.9% the REIT has on a latest transaction with Cordish Firms.
We attribute virtually all of the delta in cap charge to the elevated value of capital, because the yield on the 10-year Treasury has doubled since December,” writes CBRE analyst John DeCree in a word to purchasers.
He provides the Rhode Island on line casino sale leaseback with add seven cents to GLP’s AFFO. The analyst charges the inventory a “purchase” with a $55 worth goal. That suggests upside of 19.5% from present ranges.
Win-Win for GLP
Final week, holders of $1.9 billion value of Bally’s debt employed attorneys, indicating they will not be open to altering a credit score settlement with the gaming firm that might set the stage for the sale of the Rhode Island casinos to GLP. The excellent news for the REIT is that danger on that entrance is proscribed, as a result of there’s already a backup plan in place.
“If all third-party consents and approvals for the acquisition of Lincoln will not be well timed obtained, then GLP will as an alternative purchase the true property belongings of the Onerous Rock Lodge & On line casino Biloxi in Mississippi, together with Tiverton for complete consideration of $635 million and a mixed annual lease for Tiverton and Biloxi of $48.5 million,” in line with a press release.
CBRE’s DeCree mentioned that transaction may truly work in GLP’s favor, as a result of it will be extra accretive to AFFO and has a decrease capital requirement. Meaning the REIT can extra simply fund the debt portion of the deal with out issuing high-yield bonds.
Underneath the phrases of that settlement, GLP may purchase Bally’s Twin River Lincoln previous to Dec. 31, 2024 for $771 million.
‘Main Constructive’ for GLP
Morgan Stanley analyst Ronald Kamdem referred to as the sale-leaseback transaction “a significant optimistic” for the on line casino landlord.
Bally’s Twin River Lincoln On line casino Resort and Bally’s Tiverton On line casino are Rhode Island’s solely casinos, and are two of the better-performing belongings within the Bally’s portfolio.
With the transfer into Rhode Island, GLP would have a footprint in 18 states. As Kamdem notes, the deal construction is conservative, with draw back safety for the REIT. He has an “obese” ranking on the shares.