Projected Gaming Real Estate Investment Trust (REIT) activities for 2025 predict a surge in deals
Deutsche Bank has released an analyst's note to investors, highlighting its differing ratings for two prominent gaming 'game' real estate investment trusts (REITs) heading into 2025. The bank has a 'Buy' rating for GLPI and a 'Hold' rating for VICI.
Over the past few years, the average annual variance between the two 'game' REITs has been approximately 270 basis points. However, the year 2024 was deemed 'uneventful' from a gaming 'game' REIT perspective, with limited volatility in the shares of both GLPI and VICI, and transaction volume being limited due to the interest-rate environment.
The note mentions that Deutsche Bank anticipates increased deal activity in the gaming 'game' REIT sector in 2025. In the absence of large sale-leaseback deals, analyst Carlo Santarelli expects further loan-financing transactions as REITs seek AFFO (adjusted funds from operators) growth in a challenging acquisition environment.
Santarelli believes that gaming 'game' REITs will 'ebb and flow' in 2025 based on interest rates. He suggests that a potential recession in 2025 could stimulate deal activity due to operators' increased willingness to sell and lower interest rates making accretion more appealing for gaming 'game' REITs.
The note also points out that the spread between AFFO yields for VICI and GLPI, relative to the 10-year treasury yield, is near historical lows. Given VICI's financing commitments and what is believed to be a stronger pipeline for GLPI, some differentiation can take place in 2025.
The GLPI pipeline is expected to be stronger than VICI's pipeline, due to potential transactions with Penn Entertainment, the funding of Bally's Chicago, the potential Bally's Lincoln transaction, and ongoing discussions with tribal-management teams. Future transactions may include GLPI and VICI Properties potentially acquiring casinos or real estate assets as part of Penn Entertainment's planned sale or spin-off of 'game' assets, aiming to expand their portfolios in the gaming and hospitality sectors.
However, the note does not provide specific details about the financing commitments of VICI, the nature of GLPI's stronger pipeline, the cooling of rates or how it would affect the acquisition environment for gaming 'game' REITs, the interest-rate environment or how it affects accretion for gaming 'game' REITs, the AFFO growth that Santarelli expects in the absence of large sale-leaseback deals, or the potential Penn Entertainment transactions, the funding of Bally's Chicago, the potential Bally's Lincoln transaction, or the ongoing discussions with tribal-management teams.
The article also does not mention the website associated with Buck Wargo, a name mentioned in the note.
In 2024, GLPI announced a series of sale-leaseback deals with Strategic Management Group and Bally's, and the balance of activity in the sector was primarily related to financing and loan transactions. If 2025 were to bring about a cooling of rates, Santarelli expects the gaming 'game' REITs to act well.
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