Casino REITs: The House Always Wins
Game On? Casino REITs - the highest dividend-yielding REIT sector - have slumped over the last quarter amid renewed COVID concerns, but continue to provide strong value for income-oriented investors.
VICI Properties plans to acquire MGM Growth Properties, forming one of the world's largest real estate owners and giving the firm a dominant competitive position in the critical Las Vegas market.
Despite their ultra-long term triple net lease structures, casino REITs provide excellent inflation hedging characteristics. VICI Properties, in particular, has one of the most inflation-hedged lease structures of any REIT.
We remain bullish on the Casino REIT sector as a whole, which we view as a more compelling - and perhaps "under the radar" - alternative to other seemingly "cheap" sectors facing stiffer secular headwinds.
Casino REITs - which emerged in the late 2010s - should eventually trade at multiples that are in-line or above their traditional net lease peers and we discuss several catalysts that will drive this re-pricing.