- One of the top-performing property sectors last year, Casino REITs delivered surprisingly steady performance in 2020 despite the temporary closure and dramatically reduced usage of casino facilities throughout the pandemic.
- Unlike hotel REITs, casino REITs typically own properties under a long-term, triple-net master lease structure, leaving most of the financial and operational risk to their tenants - the casino operators.
- Owing to this lease structure, rent collection and occupancy rates have remained essentially spotless throughout the pandemic and one REIT - VICI - actually increased its dividend payouts last year.
- With an average dividend yield above 5%, we view the casino REIT sector as a compelling alternative to other more troubled property sectors. Selectivity is critical, and we prefer the "destination" casinos and tenant operators with a solid foothold into the online gaming ecosystem.
- The "bond-like" characteristics of cash flows, heavy tenant concentration, and potential disintermediation from online gambling present risks. Interest rates will have to rise for the "right reasons" for these REITs to outperform.
For further details see:
Casino REITs: Rolling The Dice