Gaming And Leisure Properties: No Longer In VICI Properties' Shadow

There is an old expression that says someone "lives in another person's shadow." This expression means that when one person’s achievements and abilities are so great, another person close to them, like a friend, family member, or colleague, may go unnoticed or remain undervalued, no matter what merits they achieve independently.

First baseman Lou Gehrig of the 1920s-30s New York Yankees was a prime example. Gehrig was a great hitter but spent most of his career in the shadow of the more famous and popular Yankee ballplayer, Babe Ruth.

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Companies can live in the shadow of another firm as well. One example is Avis Budget Group Inc. CAR. Avis was the second largest car rental company, behind Hertz Global Holdings Inc. HTZ for many years. However, Avis ran a television ad during the 1970s, acknowledging this but proclaiming, "We Try Harder" and "When you're only No. 2, you try harder." These commercials became so popular that, over time, Avis outperformed Hertz and even became the top rental car company in Europe.

A similar theme exists among two real estate investment trusts (REITs). Take a look:

Gaming and Leisure Properties

Gaming and Leisure Properties Inc. GLPI is a Specialty REIT in Wyomissing, PA, that owns and triple-net leases 29.3 million square feet in 65 gaming properties across 20 states. It has 15,100 hotel rooms and owns or leases 6,355 acres of land. Gaming and Leisure Properties has a market cap of $12.71 billion.

Gaming and Leisure Properties’ tenants include PENN Entertainment, Caesars Entertainment, and Boyd Gaming Corporation. However, for many years, it has lived in the shadows of fellow diversified experiential REIT VICI Properties Inc. VICI.

VICI Properties

VICI Properties is a New York City-based member of the S&P 500 that owns 93 assets totaling 127 million square feet, including 54 gaming properties and 39 other experiential properties across the U.S. and Canada. VICI has over 500 restaurants, bars, clubs and sportsbooks. It's much larger than Gaming and Leisure, with a $30.67 billion market cap.

VICI Properties became a REIT in 2017. It was a spin off from Caesars Entertainment Operating Company as part of a Chapter 11 reorganization. VICI held its IPO on Feb. 1, 2018.   

Its triple-net portfolio includes well-known Las Vegas hotels such as Caesars Palace, MGM Grand and the Venetian Resort.

In August 2020, during the worst COVID-19 pandemic, Gaming and Leisure Properties was forced to cut its dividend from $0.70 to $0.60 per share. By contrast, VICI increased its dividend from $0.30 to $0.33 per share. Both REITs have since increased dividends a few more times, but the dividend cut marred Gaming and Leisure Properties' share value versus VICI properties. Between March 1, 2020, and March 1, 2021, Gaming and Leisure's total return was only 0.26%, while VICI Properties' total return was 22.17%.

But since March 2021, Gaming and Leisure have outperformed VICI Properties, with total returns of 29.24% and 20.26%, respectively. Gaming and Leisure Properties has no plans to rest on its laurels and has been on an acquisition spree over the last few months.

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This week, Gaming and Leisure Properties inked a binding term sheet with Bally's Corporation in a $1.585 billion deal to buy Bally's Kansas City, MO casino, the Shreveport, LA casino and the land below Bally's permanent Chicago casino.

Furthermore, Gaming and Leisure Properties secured adjustments to improve the purchase price and cap rate to a previously announced contingent purchase option on Bally's Lincoln Casino Resort and the right to call the asset as of Oct. 1, 2026.

In early June, Gaming and Leisure Properties announced an agreement with Queen Casino & Entertainment Inc. to fund and oversee a landside move and hotel renovation of the Belle of Baton Rouge in Baton Rouge, LA. Total project costs may exceed $141 million. Gaming and Leisure will own the new facility by September 2025 and Queen Casino & Entertainment will become its new tenant. 

In mid-May, Gaming and Leisure acquired three Casino resorts in South Dakota and Nevada for a purchase price of $105 million. Gaming also provided $5 million at closing for capital improvements for a total purchase price of $110 million. In return, Strategic Gaming Management, LLC will enter into two cross-defaulted triple-net lease agreements with initial 25-year terms and two 10-year renewal periods. The lease deal represents an 8.4% cap rate.

VICI Properties has not been as recently active but did announce on May 1 that it would provide $700 million in capital for Venetian Resort Las Vegas through VICI's Partner Property Growth Fund strategy (aka the "Venetian Capital Investment"). In return, the Venetian Resort’s annual rent will increase with annual 2.0% escalations.

VICI also originated a $250 million mezzanine loan for Great Wolf Resorts, Inc., with nine Great Wolf Lodge resorts totaling 695,000 exterior and 80,000 interior square feet acting as collateral.

Of course, VICI's acquisition of Bowlero Corp BOWL in 2023 was controversial but fairly popular with investors. 

Nevertheless, with its recent acquisitions, Gaming and Leisure is establishing itself as an aggressive competitor with VICI Properties and is beginning to step out of VICI's shadow. Since the dividend cut in 2020, Gaming and Leisure has raised its dividend seven times and paid special dividends several times as well. VICI Properties has raised its dividend four times.

Morgan Stanley analyst Ronald Kamdem has an Overweight position on Gaming and Leisure with a $53 price target and the same analyst rates VICI as Equal-Weight, with a $33 price target. 

It would seem that Gaming and Leisure Properties is what Avis was to Hertz before eventually surpassing them. Lou Gehrig also thrived for a few more years after the Babe retired. Perhaps it's the nature of being number two for so long that, eventually, the tide turns.

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