Casino REIT Stocks Set for Growth Despite Stable Interest Rates
Shares of VICI Properties and Gaming and Leisure Properties, two major casino landlords, have seen a decline of 11.27% so far this year, while the S&P 500 is up by 16.69%. However, analysts are optimistic about the potential future performance of gaming real estate investment trusts (REITs).
Truist Securities analyst Barry Jonas pointed out that high-interest rates have been a major factor affecting the stock prices of VICI and GLPI in the first half of 2024. Real estate is particularly sensitive to interest rates, and with the Federal Reserve yet to reduce borrowing costs, REITs have faced challenges. However, recent slight declines in 10-year Treasury yields could indicate a period of rate stability, which might benefit casino REITs.
Jonas highlighted VICI Properties as being well-positioned for upcoming non-gaming and international transactions, while also expressing optimism about Gaming and Leisure Properties. Despite the impact of high-interest rates, both companies have been actively engaging in transactions that could benefit long-term investors.
GLPI recently acquired the property assets of Tioga Downs Casino Resort in New York for $175 million, adding to its portfolio in less volatile markets with limited competition nearby. Similarly, VICI has received praise for its involvement in financing $1 billion in upgrades at the Venetian and Palazzo on the Las Vegas Strip.
There have been rumors of a potential takeover of Penn Entertainment, which could have implications for both casino REITs, particularly GLPI, as Penn is its largest tenant. Jonas noted that GLPI’s master lease with Penn includes provisions for change of control, giving the REIT a say in any future transactions involving Penn.
Overall, while high-interest rates have posed challenges for casino REIT stocks, ongoing transactions and strategic moves by companies like VICI Properties and Gaming and Leisure Properties could lead to growth opportunities in the future. Investors are advised to keep an eye on these developments as the market continues to evolve.
