Gaming and Leisure Properties, Inc. Reports Record Second Quarter 2021 Results

Gaming and Leisure Properties

WYOMISSING, PA — Gaming and Leisure Properties, Inc. (NASDAQ: GLPI) recently announced record financial results for the quarter ended June 30, 2021.

Financial Highlights

  Three Months Ended June 30,
(in millions, except per share data) 2021 2020
Total Revenue $ 317.8 $ 262.0
Income from Operations $ 212.1 $ 180.7
Net Income $ 138.2 $ 112.4
FFO (1) $ 195.1 $ 166.9
AFFO (2) $ 203.8 $ 180.6
Adjusted EBITDA (3) $ 276.2 $ 246.9
Net income, per diluted common share $ 0.59 $ 0.52
FFO, per diluted common share $ 0.83 $ 0.77
AFFO, per diluted common share $ 0.87 $ 0.84

(1)  FFO is net income, excluding gains or losses from sales of property and real estate depreciation as defined by NAREIT.

(2)  AFFO is FFO, excluding stock based compensation expense, the amortization of debt issuance costs, bond premiums and original issuance discounts, other depreciation, amortization of land rights, straight-line rent adjustments and losses on debt extinguishment, reduced by capital maintenance expenditures.

(3)  Adjusted EBITDA is net income, excluding interest, taxes on income, depreciation, gains or losses from sales of property, stock based compensation expense, straight-line rent adjustments, amortization of land rights, and losses on debt extinguishment.

Peter Carlino, Chairman and Chief Executive Officer of GLPI, commented, “GLPI’s record second quarter results and our financial performance over the last year highlight the value of resilient regional gaming markets and our high quality tenant roster that has been further diversified while maintaining a close watch on our capital structure and cost of capital.   As a result, we have established sustained financial stability, capitalized on new growth opportunities with existing and new tenants, and returned capital to shareholders in the form of stock and cash dividends on an uninterrupted basis, despite the challenges presented by the pandemic.

“As we look to the second half of 2021, GLPI remains well positioned to deliver record results as we further expand and diversify our portfolio and benefit from the continued strength in regional gaming markets, with many of the operations at GLPI’s properties recording both record bottom line results and margins, as well as growth in topline performance compared to 2019 (prior to the COVID-19 outbreak). As a result, on May 1, 2021, full rent escalators were achieved with respect to the Amended Pinnacle Master Lease, the Boyd Master Lease and the Belterra Park Lease, which increased annualized rent by $6.1 million. Furthermore, given Penn National Gaming’s strong recent performance, we expect to achieve a full rent escalation with respect to the Penn Master Lease in the fourth quarter that would increase annualized rent by $5.6 million. We expect to continue to invest in existing and new tenant relationships by sourcing portfolio enhancing, accretive growth opportunities. Taken together, these factors support our confidence that the Company is well positioned to extend its long track record of value creation for shareholders.”

Recent Developments

  • As of July 29, 2021, all of GLPI’s 50 properties, (including Hollywood Casino Baton Rouge which is owned and operated by the Company’s taxable REIT subsidiary and has been contracted for sale, as described below) are open to the public.
  • On April 13, 2021, GLPI announced an expansion of its relationship with Bally’s Corporation (NYSE: BALY) (“Bally’s”) to acquire the real estate assets of Bally’s casino properties in Rock Island, Illinois and Black Hawk, Colorado, for total consideration of $150 million. The parties expect to add the properties to the master lease created in connection with Bally’s acquisition of Tropicana Evansville and Dover Downs Hotel & Casino (the “Bally’s Master Lease”) (described more fully below). This transaction is expected to generate incremental annualized rent of $12.0 million, with a normalized rent coverage of 2.25x in the first calendar year post-acquisition. The acquisitions of the real estate assets of Bally’s properties in Rock Island and Black Hawk are expected to close in early 2022.
  • Bally’s also granted GLPI a right of first refusal to fund the real property acquisition or development project costs associated with all potential future transactions in Michigan, Maryland, Virginia and New York through one or more sale-leaseback or similar transactions for a term of seven years. Furthermore, both GLPI and Bally’s committed to a structure whereby GLPI had the potential to acquire additional assets in sale-leaseback transactions to the extent Bally’s elects to utilize GLPI’s capital as a funding source for their proposed acquisition of Gamesys Group plc (“Gamesys”). The $500 million commitment was intended to provide Bally’s alternative financing, which, at GLPI’s sole discretion could be funded in the form of equity, additional prepaid sale-leaseback transactions or secured loans. On July 26, 2021, Bally’s announced that as a result of better than expected operating performance at its land-based retail casinos and interactive businesses, it does not plan to draw on the Company’s commitment to fund the Gamesys acquisition.
  • Bally’s agreed to acquire both GLPI’s non-land real estate assets and Penn National Gaming, Inc.’s (NASDAQ: PENN) (“Penn”) outstanding equity interests in Tropicana Las Vegas Hotel and Casino, Inc. for an aggregate cash acquisition price of $150 million. GLPI will retain ownership of the land and concurrently enter into a 50-year ground lease with Bally’s for an initial annual rent of $10.5 million. The ground lease will be supported by a Bally’s corporate guarantee and cross-defaulted with the Bally’s Master Lease. This transaction is expected to close in early 2022.
  • On December 15, 2020, the Company announced an agreement to sell the operations of Hollywood Casino Baton Rouge (“HCBR”) to Casino Queen for $28.2 million. GLPI will continue to own the real estate and will enter into an amended master lease with Casino Queen, which will include both their current DraftKings at Casino Queen property in East St. Louis and the HCBR facility, for annual cash rent of $21.4 million with a new initial term of 15 years and four 5-year extensions. This rental amount will be increased annually by 0.5% for the first six years. Beginning with the seventh lease year through the remainder of the lease term, if the Consumer Price Index (“CPI”) increases by at least 0.25% for any lease year, then annual rent shall be increased by 1.25%, and if the CPI increase is less than 0.25%, then rent will remain unchanged for such lease year. GLPI will complete the previously announced landside development project at HCBR and the rent under the master lease will be adjusted upon completion to reflect a yield of 8.25% on our project costs. GLPI will also have a right of first refusal with Casino Queen for other sale leaseback transactions for up to an incremental $50 million of rent over the next 2 years. Finally, upon the closing of the transaction, which is expected in the second half of 2021, subject to regulatory approvals and customary closing conditions, GLPI will receive a one-time cash payment of $4 million in satisfaction of the outstanding loan to Casino Queen.
  • In accordance with the rent deferral agreement that was signed in 2020 with Casino Queen, $2.1 million of rent was deferred due to the property’s temporary closure in the first quarter of 2021. GLPI anticipates this amount will be collected at the closing of the HCBR transaction.
  • On December 15, 2020, the Company announced that Penn exercised its option to acquire the operations of Hollywood Casino Perryville for $31.1 million in cash. This transaction closed on July 1, 2021. GLPI entered into a new lease with Penn with an initial term of 20 years, with three 5-year renewal options, for the real estate assets associated with the property for an initial annual cash rent of $7.77 million, $5.83 million of which will be subject to escalation provisions beginning in the second lease year through the fourth lease year, increasing by 1.50% during such period and then increasing by 1.25% for the remaining lease term. The escalation provisions beginning in the fifth lease year are subject to CPI being at least 0.5% for the preceding lease year.
  • Since re-opening in May 2020 and June 2020, respectively, HCBR (the operations of which are anticipated to be divested in the second half of 2021) and Hollywood Casino Perryville (the operations of which were divested on July 1, 2021), the gaming properties GLPI owns and operates through its taxable REIT subsidiary, have generated strong financial results. Second quarter 2021 net revenues and adjusted EBITDA from these properties exceeded comparable 2019 levels (prior to the COVID-19 outbreak), increasing by $10.4 million, or 31.3%, and $6.7 million, or 78.4%, respectively.
  • On October 27, 2020, the Company entered into a series of definitive agreements pursuant to which a subsidiary of Bally’s acquired 100% of the equity interests in the Caesars Entertainment, Inc. (NASDAQ: CZR) (“Caesars”) subsidiary that operated Tropicana Evansville and the Company reacquired the real property assets of Tropicana Evansville from Caesars for a cash purchase price of approximately $340.0 million. The Company also entered into a real estate purchase agreement with Bally’s pursuant to which it acquired the real estate assets of the Dover Downs Hotel & Casino, located in Dover, Delaware, which is currently operated by Bally’s, for a cash purchase price of approximately $144.0 million. These transactions closed on June 3, 2021 and the Tropicana Evansville and Dover Downs Hotel & Casino facilities were added to the new Bally’s Master Lease. The Bally’s Master Lease has an initial term of 15 years, with no purchase option, followed by four five-year renewal options (exercisable by Bally’s) on the same terms and conditions. Rent under the Bally’s Master Lease is $40.0 million annually, subject to an annual escalator of up to 2% determined in relation to the annual increase in the CPI.
  • The Company’s leases contain variable rent that are reset on varying schedules depending on the lease. In the aggregate, the portion of cash rents that are variable represented approximately 15% of GLPI’s 2020 full year cash rental income. Of that 15% variable rent, approximately 29% resets every five years which is associated with the Penn Master Lease and the Casino Queen lease, 41% resets every two years and 30% resets monthly which is associated with the Penn Master Lease (of which approximately 51% is subject to a floor or $22.9 million annually for Hollywood Casino Toledo). The Company does not have any variable rent resets until 2022.
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Dividend  

On May 20, 2021, the Company’s Board of Directors declared a second quarter cash dividend of $0.67 per share on the Company’s common stock. The dividend was paid on June 25, 2021 to shareholders of record on June 11, 2021.

Portfolio Update

GLPI’s primary business consists of acquiring, financing, and owning real estate property to be leased to gaming operators in triple-net lease arrangements. As of June 30, 2021, GLPI’s portfolio consisted of interests in 50 gaming and related facilities, including approximately 35 acres of real estate at Tropicana Las Vegas and the Company’s wholly-owned and operated Hollywood Casino Baton Rouge and Hollywood Casino Perryville, which are referred to as the “TRS Segment”, the real property associated with 33 gaming and related facilities operated by Penn (excluding the Tropicana Las Vegas), the real property associated with 7 gaming and related facilities operated by Caesars, the real property associated with 4 gaming and related facilities operated by Boyd Gaming Corporation (NYSE: BYD), the real property associated with 2 gaming and related facilities operated by Bally’s and the real property associated with the Casino Queen in East St. Louis, Illinois. These facilities are geographically diversified across 17 states and contain approximately 25.3 million square feet of improvements.

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