Gaming & Leisure Properties, Inc. — FY2020 Form 10-K
Reporting period: Year ended December 31, 2020; filed February 19, 2021. This is an annual report, not a standalone fourth-quarter filing.
Business context
GLPI is a Pennsylvania REIT focused on owning gaming real estate and leasing it to operators, primarily through long-term triple-net leases. At year-end, its portfolio included interests in 48 gaming and related facilities across 16 states, was 100% occupied, and comprised approximately 24.3 million square feet. Its major tenants were Penn, Caesars and Boyd; the TRS segment included Hollywood Casino Baton Rouge, Hollywood Casino Perryville and the real estate of Tropicana Las Vegas.
Financial performance
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Total revenue | $1,153.2 million | $1,153.5 million | Essentially flat |
| Income from operations | $809.3 million | $717.4 million | +12.8% |
| Net income | $505.7 million | $390.9 million | +29.4% |
| Diluted EPS | $2.30 | $1.81 | +27.1% |
| Operating cash flow | $428.1 million | $750.3 million | −43.0% |
| Adjusted EBITDA | $1,035.5 million | $1,040.3 million | −0.5% |
| AFFO | $757.4 million | $743.2 million | +1.9% |
Operating margin rose to approximately 70.2% from 62.2%; net margin rose to approximately 43.8% from 33.9%. Rental income increased 3.5% to $1,031.0 million, while TRS gaming, food, beverage and other revenue declined 19.8% to $103.0 million amid pandemic closures. GLPI reported $3.9 million of income tax expense and a 0.8% effective tax rate, reflecting its REIT structure and taxable TRS operations.
Cash and cash equivalents were $486.5 million at year-end, versus $26.8 million a year earlier. Total debt was approximately $5.8 billion, including $5.375 billion of senior notes and $424.0 million under the term loan facility; no revolving borrowings were outstanding. The company reported $1,174.6 million of available revolver capacity and compliance with its debt covenants. Net real estate investments were $7.287 billion, and total assets were $9.034 billion.
Material changes and unusual items
- Revenue was nearly unchanged despite COVID-related operating interruptions. Real estate income grew 2.4%, while TRS revenue fell; both TRS casinos closed in mid-March and reopened with restrictions in May and June.
- Net income benefited from lower interest expense and a $41.4 million non-cash gain on the exchange of Tropicana Evansville real estate for Waterloo and Bettendorf. Lower expenses also reflected a $13.0 million Casino Queen loan impairment recorded in 2019 and prior-year closure-related charges.
- Operating cash flow fell substantially, partly because $337.5 million of rent credits related to the Tropicana Las Vegas and Morgantown transactions were recognized as rental income but were non-cash. The filing also cites pandemic-related effects on receipts and TRS operations.
- GLPI refinanced or repaid near-term debt and issued $700 million of 4.00% senior notes due 2031. It recorded $18.1 million of debt-extinguishment losses in 2020. Debt maturities are concentrated from 2023 onward; the filing identifies no significant obligations due before 2023.
- Quarterly dividends were reduced from $0.70 in Q1 to $0.60 in each of Q2–Q4. The latter three distributions were primarily paid in shares; total distributions were $2.50 per share for 2020 versus $2.74 in 2019.
Outlook, commentary and risks
Management said cash from operations, cash on hand and revolver availability were expected to cover anticipated debt service, capital expenditures, working capital and dividends. It expects future growth mainly from acquisitions, which could require further debt or equity issuance. No quantitative earnings or revenue guidance was provided.
Pending transactions included the planned mid-2021 acquisition of Tropicana Evansville and Dover Downs real estate for approximately $340 million and $144 million, respectively, with anticipated annual rent of $40 million under a new Bally’s master lease. GLPI also expected to convert its Baton Rouge and Perryville casino operations to third-party leases following announced sales of the operating businesses, subject to regulatory approvals and closing conditions. The filing also describes a planned landside development at Baton Rouge.
Key risks include continued COVID-19 effects on tenant operations and variable rent, high tenant concentration (approximately 78% of 2020 income from real estate was attributable to Penn), tenant credit and lease-performance risk, gaming regulation, acquisition execution and financing access, substantial leverage, interest-rate exposure and the transition from LIBOR. GLPI also cautioned that the value realization and timing for Tropicana Las Vegas are uncertain. It reported no off-balance-sheet arrangements and stated that ordinary-course legal proceedings were not expected to have a material adverse effect. The financial statements received an unqualified audit opinion; management and the auditor reported effective internal control over financial reporting.
Investor verification priorities
- Reconcile reported rental income and cash collections, especially the $337.5 million of non-cash rent credits, and assess normalized operating cash flow.
- Review tenant-level liquidity, rent coverage and concentration—particularly Penn—and the durability of variable rent after pandemic-related resets.
- Confirm completion, regulatory approvals, purchase funding and lease economics for the Bally’s, Baton Rouge and Perryville transactions.
- Assess debt maturities, covenant headroom, refinancing needs and exposure to LIBOR transition; distinguish stated debt from net carrying value.
- Evaluate dividend sustainability given the reduced, partly stock-paid distributions, REIT distribution requirements and the gap between AFFO and cash available for distribution.
- Track the Tropicana Las Vegas sale process and proceeds allocation, as well as development costs and rent yield for the Baton Rouge project.