Gaming and Leisure Draws Praise for Rhode Island Casino Buy
Analysts are constructive on Gaming and Leisure Properties (NASDAQ:GLPI) purchasing II Rhode Island casinos and leasing those venues rearward to operator Bally’s (NYSE:BALY) — a dealing that was announced tardily Tuesday.
Shares of the gaming existent land investment funds trust (REIT) are bring down by 1% inward tardily trading. That’s after the troupe priced a portion out sales event of close to $308.8 million. That was done in part to monetary fund the $1 one million million purchase of the holding assets of Bally’s Twin River President Abraham Lincoln Casino Resort and Bally’s Tiverton Casino & Hotel.
Still, analysts are bullish on the deal, saying it testament supply to GLP’s acquired cash in hand from trading operations (AFFO), though the crest value of 7.6% is higher than the 6.9% the REIT has on a recent dealings with Cordish Companies.
We attribute almost all the delta in crest rate to the increased cost of capital, as the give in on the 10-year First Lord of the Treasury has doubled since December,” writes CBRE analyst St. John the Apostle DeCree in a line to clients.
He adds the Rhode Island casino sale leaseback with add together sevener cents to GLP’s AFFO. The analyst rates the gunstock a “buy” with a $55 damage target. That implies upside of 19.5% from electric current levels.
Win-Win for GLP
Last week, holders of $1.9 one thousand million worth of Bally’s debt hired lawyers, indicating they may not be undetermined to altering a credit entry agreement with the gaming accompany that would set the leg for the sales event of the Rhode Island casinos to GLP. The serious intelligence for the REIT is that peril on that front is limited, because there’s already a computer backup plan inward place.
“If all third-party consents and approvals for the acquisition of Lincoln are not timely received, then GLP testament instead acquire the existent attribute assets of the Hard John Rock Hotel & Casino Biloxi in Mississippi, on with Tiverton for sum up considerateness of $635 zillion and a combined yearbook lease for Tiverton and Biloxi of $48.5 million,” according to a statement.
CBRE’s DeCree said that dealings could really piece of work inwards GLP’s favor, because it would follow more accretive to AFFO and has a get down capital requirement. That way the REIT tin more easy fund the debt portion of the sell without issuing high-yield bonds.
Under the terms of that agreement, GLP could win Bally’s Twin Falls River Abraham Lincoln prior to Dec. 31, 2024 for $771 million.
‘Major Positive’ for GLP
Morgan Francis Edgar Stanley analyst Ronald Kamdem called the sale-leaseback transaction “a major positive” for the casino landlord.
Bally’s Twin River capital of Nebraska Casino Resort and Bally’s Tiverton Casino are Rhode Island’s only casinos, and are deuce of the better-performing assets inward the Bally’s portfolio.
With the relocation into Rhode Island, GLP would hold a footmark inwards 18 states. As Kamdem notes, the business deal construction is conservative, with downside trade protection for the REIT. He has an “overweight” rating on the shares.