Gaming & Leisure Properties (NASDAQ: GLPI) is dismissing a decline in lease coverage at its regional casinos run by Caesars during the first quarter. The REIT stated that its interests would probably be unaffected by a possible acquisition of Caesars Entertainment (NASDAQ: CZR).

Gaming and Leisure Properties owns a substantial portion of the operator's regional property, even though VICI Properties (NYSE: VICI) is most frequently linked to Caesars' flagship real estate.

Rent coverage on those properties fell to 1.69x in the first three months of this year from 1.77x a year earlier, but GLPI isn't too concerned, suggesting that the real estate investment trust (REIT) is less impacted by deterioration at some Caesars regional locations than competitor VICI is.

"Management thinks coverage is still solid and is not overly concerned. Management noted that there were some one-time items in Q4, including bad hold in Atlantic City and some room renovation,” notes Truist Securities analyst Barry Jonas.

Two Caesars casinos in Iowa, one in Missouri, Tropicana Laughlin, and the Tropicana on the Atlantic City, New Jersey Boardwalk are all owned by the REIT.

 

The Potential Impact of Caesars' Takeover on GLPI

Caesars is a takeover target, as has been well publicized, and is apparently being chased by several bidders; nonetheless, it seems the firm would prefer to engage with Tilman Fertitta.

Fertitta is the owner of the Golden Nugget casinos and the real estate that surrounds them. It is stated that he would prefer to own the property where his hotels and casinos are located, but this hasn't stopped him from allegedly pursuing Caesars.

It's unclear how the privatization of Caesars would impact gaming and leisure properties, but the REIT had a generally neutral opinion on the deal.

“I think our conversations with Caesars on this topic have been relatively few, but we have a close relationship with that management team,” said GLPI President Brandon Moore on a Friday conference call with analysts.

“And if that transaction does go through, and that management team survives. I think overall, we view that as a neutral transaction to us. It could be positive if there are things that fall out of it, but I don’t think we’re overly concerned about it. But the impact on our leases, I would say, is to be determined at the moment.”

As Jonas notes, it's unclear if any potential buyer of Caesars would require GLPI's approval for the transaction, but the buyer would need to be "qualified" by the REIT.

 

Update on Tropicana Las Vegas

The future of the location that had housed the Tropicana Las Vegas was discussed, as is frequently the case on GLPI earnings calls. The land is owned by the REIT, and Bally's has the right to operate a gaming facility there.

"I think we're getting to the point where Bally's will have some decisions to make about how much they want to do and how they're going to do it," Moore stated on the call regarding the development of the adjacent Major League Baseball stadium.

He mentioned that GLPI has promised Bally's $125 million in funding for the Tropicana location, but whether or not that package is enlarged "is to be determined."