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  • Alex Pettee, CFA

Casino REITs: New King Of Vegas

  • VICI Properties is the new King of Vegas following a blockbuster $17B acquisition of fellow casino REIT MGM Growth Properties, combining to form one of the world's largest real estate owners.

  • The mega-merger will give the combined firm a dominant competitive position in the critical Las Vegas market and appears to be a win-win for both VICI and MGP shareholders.

  • Despite their strong returns since emerging in the mid-2010s and steady performance throughout the pandemic, casino REITs have traded at persistent discounts relative to their net lease REIT peers.

  • Thriving in a "lower for longer" environment, casino REITs' "bond-like" lease structure does result in elevated risks from inflation and interest rates, and the sector is not entirely immune from COVID risks.

  • With an average dividend yield above 5%, we view casino REITs as a more compelling - and perhaps "under the radar" - alternative to other seemingly "cheap" sectors facing stiffer secular headwinds.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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Hoya Capital Research & Index Innovations is an affiliated index provider and research firm that builds custom indexes tracking U.S. commercial and residential real estate sectors, including indexes tracked by exchange-traded funds (ETFs). 

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