Alex Pettee, CFA
Casino REITs: Vegas Is Back, Baby
One of the best-performing REIT sectors since the start of the pandemic, Casino REITs have proven to be surprisingly resilient despite the intense struggles faced by the broader leisure industry.
Sold-Out Vegas: Earnings reports from Casino REITs and operators painted a particularly bright picture for the tourism recovery. Caesars noted that "weekends in Vegas are sold-out for the foreseeable future."
Fueled by spotless rent collection and accretive acquisitions, these REITs reported strong momentum in early 2021 with AFFO growth averaging nearly 9% in Q1. VICI projects 12.5% growth this year.
Casino REITs own properties under a long-term net lease structure, leaving most of the operational risk to their tenants. This "bond-like" structure does result in elevated risks from inflation and interest rates.
With an average dividend yield above 5%, we view casino REITs as a more compelling - and perhaps "under the radar" - alternative to other high-yielding sectors facing stiffer secular headwinds.
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