Casino REITs Remain a Safe Bet in Inflationary Times

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When news of inflation started making the rounds, many investors grew concerned about their portfolios. The prevailing wisdom was that real estate investment trusts (REITs) – particularly those focused on casinos – would take a big hit. However, as it turns out, casino REITs have been among the best-performing property sector this year according to the industry’s one most widely-followed research firm.

Real estate investment trusts (REITs) are a type of investment that allows individuals to invest in large-scale commercial or residential properties. Casino REITs are a specialized type of REIT that invests in properties associated with the gaming industry.

Casino REITs Dominate 2022 US Property Sector

It’s been a rocky road for the property sector this year, but casino real estate investment trusts (REITs) have been a notable exception. According to Hoya’s capital research:

“Casino REITs are better protected from inflation than many initially presumed.”

According to recent reports, casino REITs are now the only segment of the US property sector to report positive figures in 2022. While many other sectors of the economy are still struggling to recover, casinos have managed to not only rebound but also post strong growth, just like VICI Properties and Gaming and Leisure Properties (GLPI).

VICI Properties owns more than 40 gaming locations across the US including Borgata and Empire City Casino operated by MGM Resorts. Its strategy to have the highest quality of asset portfolio pays off as it’s experienced a 20% elevation in value during the past year while FTSE Nareit Equity REITs are on a downward trend, falling by around 20% during the same time frame.

On the other hand, GLPI’s portfolio still increased by 0.06% through its 57 locations including several Hollywood Casino and Live! Casino & Hotel.

Hoya added that the gambling REITs’ positive performance benefited from “upward valuation ‘re-rating’ and hard-earned mainstream institutional acceptance after many years of strong operational execution.”

Hoya also noted that Casino REITs are now in legal control of 100 out of the 250-300 ‘investment grade’ commercial casinos in the US which is “one of the highest levels of REIT ownership in any sector”

So far, casino REITs have outperformed the overall real estate market, and this trend is expected to continue in the coming years.

Casino REITs vs Inflation

Recent research concluded that casino REITs are currently the best inflation-hedged assets for investors. Hoya said that

“VICI boasts inflation-linked escalators on 96% of its leases, while GLPI benefits from indirect inflation hedges linked to tenant performance,” Hoya stated.

When faced with rising inflation rates, real estate investing becomes more valuable as it does not rely on short-term capital inflows. REITs have seen their values increase due to the new asset-light strategy from casino giants which prompted MGM Resorts International and Las Vegas Sands to have less asset-heavy properties in Las Vegas and other susceptible markets around America.

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