Gaming & Leisure Properties, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Unaudited interim results. GLPI is a REIT focused on owning gaming real estate and leasing it primarily to operators under triple-net leases. At quarter-end, its portfolio included 57 gaming and related facilities across 17 states and was 100% occupied.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $333.8 million | $298.7 million | $975.3 million | $918.0 million |
| Income from operations | $317.6 million | $225.1 million | $754.5 million | $637.3 million |
| Net income | $226.2 million | $149.1 million | $503.7 million | $414.5 million |
| Net income attributable to common shareholders | $220.0 million | $149.1 million | $490.5 million | $414.5 million |
| Diluted EPS | $0.85 | $0.63 | $1.95 | $1.77 |
| Adjusted EBITDA | $308.8 million | $276.7 million | $909.7 million | $819.4 million |
| AFFO | $235.0 million | $207.2 million | $685.2 million | $606.7 million |
Revenue growth reflected new and expanded leases, including Cordish, Bally’s and Casino Queen properties, lease escalations, and income from financing receivables. Results also included a $67.4 million pretax gain on the Tropicana Las Vegas building sale. That one-time gain materially lifted reported operating income and net income; the filing does not present a comparable standardized operating margin.
For the first nine months, cash from operations was $699.5 million, versus $616.0 million in 2021. Investing activities used $347.0 million; financing activities used $1.018 billion, including $586.9 million of dividends and $1.271 billion of debt repayments. Cash fell to $59.0 million from $724.6 million at year-end 2021.
Debt, liquidity and distributions
- Long-term debt was $6.126 billion net of issuance costs and discounts ($6.176 billion principal), down from $6.552 billion net at December 31, 2021. Senior notes carry fixed rates and mature from 2023 through 2032; $500 million of notes mature in November 2023.
- The $1.75 billion revolving credit facility had no borrowings at quarter-end and approximately $1.750 billion available, net of letters of credit. GLPI reported compliance with required debt covenants.
- A $600 million delayed-draw term loan facility was established for eligible Bally’s acquisitions, subject to conditions. Its rates are SOFR- or base-rate-based; unused commitments terminate August 31, 2023.
- Quarterly common dividends were $0.705 per share. GLPI stated that operating cash flow, cash on hand and revolving-credit availability were expected to meet anticipated debt service, capital expenditure, working capital and dividend needs.
Material developments and outlook
- GLPI sold the Tropicana Las Vegas building to Bally’s for approximately $145 million net of fees, recognizing the $67.4 million pretax gain. It retained the land and entered a 50-year ground lease, with initial annual rent of $10.5 million.
- GLPI completed the $150 million acquisition of Bally’s Black Hawk and Quad Cities real estate, adding $12 million of annual rent. It also funded a $200 million deposit toward pending Bally’s property acquisitions. The announced transaction contemplated Lincoln and Tiverton for $1.0 billion and $76.3 million incremental rent, subject to approvals and lender consent; an alternative Biloxi-and-Tiverton structure was also described.
- After quarter-end, GLPI and PENN agreed to create a new master lease for seven properties, expected to take effect January 1, 2023, subject to regulatory approvals. The new lease was expected to have $232.2 million of base rent, fixed 1.5% annual escalations, and a coordinated amendment to the existing PENN lease. GLPI also agreed to specified potential funding for PENN relocations and development projects.
- Credit-loss provision was $28.9 million for the nine-month period, principally related to the Pennsylvania Live! financing lease. The allowance was $41.1 million at quarter-end, or 2.14% of the financing receivables balance. Management cited tenant forecasts and economic assumptions as drivers of possible future provision or recovery changes.
- Key risks include tenant ability to meet lease obligations, concentration of rent exposure to PENN and other gaming operators, inflation and weaker discretionary spending, rising interest rates and refinancing costs, COVID-19 or other disruptions, acquisition approvals and funding needs, and maintaining REIT qualification. Management noted no material change to previously disclosed risk factors.
Most important facts for investors to verify
- Whether pending Bally’s acquisitions close as anticipated, and their final purchase price, funding mix, rent and approvals.
- Whether the PENN lease restructuring and proposed funding commitments become effective on the announced terms.
- Tenant rent coverage and credit quality, particularly for Pennsylvania Live!, and any changes to the $41.1 million credit-loss allowance.
- Liquidity after the substantial cash decline, upcoming 2023 debt maturity, and the cost and availability of refinancing in a higher-rate environment.
- Underlying earnings and cash generation excluding the Tropicana sale gain, and the sustainability of dividends alongside acquisition spending.