11/05/2020 | by
Sarah Borchersen-Keto

Green Street’s Spenser Allaway says gaming REITs to benefit from improved tenant credit profile.



Gaming REITs whose tenants are investing in online gaming (iGaming) platforms are expected to benefit from increased downside protection, according to Spenser Allaway, an analyst on Green Street’s research team and sector head of net lease, gaming, and self-storage.

Speaking on the REIT Report, Allaway said downside protection for the gaming REITs will be in the form of improved underlying tenant credit.

The three primary gaming REIT tenants are: Penn National Gaming, a tenant of Gaming and Leisure Properties, Inc. (Nasdaq: GLPI); Caesars Entertainment, the operator for VICI Properties Inc. (NYSE: VICI); and MGM Resorts, a key tenant of MGM Growth Properties LLC (NYSE: MGP).

“All of these tenants have made sizeable investments to establish an online presence,” Allaway said.

The three gaming REITs each have significant single tenant exposure, with one operator accounting for 80% of net operating income, on average, according to Green Street.

“Given the single tenant risk, the most important attribute to relative value in the gaming REIT sector is tenant credit. We think that the growth in the iGaming segment should ultimately improve tenant credit across the sector,” Allaway said.

Furthermore, “iGaming will ultimately prove to be additive to the gaming revenue pie rather than be cannibalistic. The ancillary revenue from the online segment should also help bolster operators’ rent coverage ratios,” Allaway said.