Casino REITs: Winners Of Blackstone Distress

April 20, 2023 | Hoya Capital

Casino REITs: Winners Of Blackstone Distress Sector Report Apr 20 Written By Alex Pettee, CFA 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 ...