Gaming Property Landlord Grows Cash Flow Despite Profit Drop

Gaming and Leisure Properties Inc. (GLPI), a real estate investment trust (REIT) focused on gaming properties, reported a 4.4% increase in Adjusted Funds From Operations (AFFO) to $276.1 million in the second quarter of 2025. The growth was driven by escalator clauses in lease agreements and improved performance from regional tenants. However, the company's net income dropped 27.1% to $156.2 million, underlining a widening gap between operational cash flow and accounting profitability.

Adjusted EBITDA—a key measure of profitability—rose 6.2% to $361.5 million. Total revenue climbed 3.8% year-over-year to $394.9 million. But despite these gains, income from operations fell 17.5%, and net income per diluted share declined from $0.77 to $0.54. Funds From Operations (FFO), another widely used REIT benchmark, decreased by 19.4% to $224.9 million.

Bally’s Acquisition Expands Footprint and Affirms Strategy

In a major strategic move, GLPI closed a $1.585 billion deal with Bally’s Corporation during the quarter. The acquisition includes real estate assets in Kansas City and Shreveport, as well as land for Bally’s planned $1.8 billion Chicago casino development. The deal is structured with a blended 8.3% yield and includes a 15-year lease with guarantees from Bally’s subsidiaries.

GLPI will also finance up to $940 million in construction costs for the Chicago project at an 8.5% return, underscoring its commitment to tenant-backed, yield-generating projects. With this transaction, GLPI now owns 68 properties across 20 U.S. states.

The Bally’s deal follows earlier Q1 2025 initiatives, including $18.4 million toward the Acorn Ridge tribal casino in California and lease extensions with Boyd Gaming and Belterra Park. GLPI also committed to funding up to $150 million in upgrades to PENN Entertainment’s Ameristar Casino in Iowa.

GLPI paid a quarterly dividend of $0.78 per share in late June, fully covered by AFFO. On an annual basis, this represents a payout of $3.12 per share, up from $3.04 last year. The dividend yield stood at 6.68%, slightly below the previous year’s 6.72% but still outperforming the REIT sector average of around 5.8%.

AFFO per share in Q2 2025 rose modestly to $0.96 from $0.94, while FFO per share declined to $0.79 from $1.00, signaling that while operational cash flow remained stable, GAAP earnings were more affected by rising costs and interest expenses.

Capital Structure

GLPI continues to manage its debt proactively. The company redeemed $850 million in 5.25% senior notes in June, reducing its long-term interest obligations. As of quarter-end, the company had $1.2 billion in available liquidity and reported a weighted average interest rate of 5.064%. However, its debt-to-EBITDA ratio remains elevated at 19.1x, reflecting the capital-intensive nature of recent acquisitions.

Credit ratings remain stable, with S&P and Fitch assigning a BBB– investment-grade rating, and Moody’s giving a Ba1. Tenant lease coverage ratios also remained healthy: Bally’s reported 2.01x and PENN 2.17x, suggesting that the risk of rent defaults remains low for now.

The market response to GLPI’s results has been mixed. Investment bank Stifel downgraded the stock to “Hold” in July, while Barclays and Citizens JMP maintained their “Buy” ratings. Analysts’ average price target is $54.65—representing a 17.2% upside from the quarter-end share price of $46.63.

GLPI’s triple-net lease structure, which places maintenance and tax obligations on tenants, along with its geographically diversified portfolio and long-term contracts, are seen as key advantages in a high-interest-rate environment. Still, the REIT’s high leverage and declining net income remain points of concern for some investors.

Despite short-term earnings pressure, our growing cash flow and strategic Bally’s acquisition position GLPI for long-term stability and income growth.

Outlook

Q2’s results echo trends seen in Q1 2025: moderate revenue and AFFO growth alongside a decline in net income. With ongoing tenant-driven projects, predictable lease income, and consistent dividend coverage, GLPI is positioning itself as a reliable income-generating REIT—even as rising debt costs and margin pressure continue to weigh on profitability.

Whether the Bally’s acquisition pays off in long-term returns could determine how the market views GLPI’s strategy going forward. For now, the company is betting on size, structure, and scale to deliver value.