Casino REITs: Winners Of Blackstone Distress
A success story of the "Modern REIT Era," Casino REITs have been the best-performing property sector since their emergence in the mid-2010s, honing the competitive advantages of the public REIT model.
Casino REITs were the lone property sector to finish in positive territory in 2022, benefiting from their attractive “inflation-hedging” lease structure, strength in Las Vegas travel demand, and broader institutional acceptance.
Fittingly, Casino REITs - exemplars in shareholder-friendly governance - have been beneficiaries of distress felt across the darker underbelly of the real estate industry, including Blackstone’s non-traded REIT ("NTR") platform.
Increasingly desperate to raise capital to meet redemptions - a function of its overstated self-reported NAV valuation - Blackstone's NTR sold its $5.5B stake in two Vegas casinos last December to VICI, and we predict the Bellagio and Cosmopolitan are likely next.
Access to longer-term fixed-rate capital has proven to be a significant competitive advantage for public REITs. These REITs' impressive track record in capital deployment and shareholder-friendly governance justifies our willingness to “pay up” at moderately elevated multiples.
One of several success stories of the "Modern REIT Era" alongside other outperforming entrants, including Single-Family Rentals, Cell Towers, and Data centers, Casino REITs have been the single-best-performing property sector since their emergence in the mid-2010s, honing the competitive advantages of the public REIT model with precision. Within the Hoya Capital Casino REIT Index, we track the two casino REITs: VICI Properties (VICI) - which owns a dominant share of the Las Vegas casino market, and Gaming and Leisure Properties (GLPI) - which owns the largest portfolio of regional casinos. These two casino REITs together account for $46B in market value and own 100 casinos and entertainment facilities across the United States.
The best-performing property sector last year, Casino REITs have continued their impressive run of performance, benefiting from broader institutional investor acceptance and an upward valuation re-rating, which in turn has given these REITs the capital "firepower" to rapidly consolidate the casino industry. Casino REITs now command a dominant share of the U.S. casino real estate ownership market. These two Casino REITs have acquired roughly $60 billion in assets since the start of 2016, including VICI's acquisition of former REIT MGM Growth Properties and its purchase of The Venetian from Las Vegas Sands in 2021, along with its deals to acquire the MGM Grand and Mandalay Bay from Blackstone (BX) in 2022. As we bid farewell to one REIT, another player emerged onto the casino scene last year with Realty Income (O) - the largest net lease REIT - acquiring Encore Boston Harbor from Wynn Resorts and indicating that it will be an active player in the casino business.