TRADE ALERT - Core Portfolio August 2024 (New Investment)

Dear Landlords,

I want to extend a warm welcome to all our new members! We recommend that you start by reading our Welcome Letter by clicking here. It explains why we invest in real estate through REITs and how to get started.  

As a reminder, our most recent "Portfolio Review" was shared with the members of High Yield Landlord on August 7th, 2024, and you can read it by clicking here.

You can also access our three portfolios via Google Sheets by clicking here.

New members can start researching positions marked as Strong Buy and Buy while taking into account the corresponding risk ratings.

If you have any questions or need assistance, please let us know.

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TRADE ALERT - Core Portfolio August 2024 (New Investment)

I have regularly followed Caesars Entertainment (CZR) over the years and there is one main reason for this. 

It is the biggest tenant of our Casino REIT, VICI Properties (VICI), representing nearly 40% of its rental income. 

Therefore, it has been crucial to monitor the health of Caesars to make sure that we take action ahead of any potential tenant issues. I would rather not relive what we went through with Medical Properties Trust (MPW) and its biggest tenant, Steward, which is still in bankruptcy.

But as I have followed Caesars over the years, I have also grown to like its business more and more, and following the recent crash of its share price, I have decided to initiate a position. I just bought 700 shares of the company and it now represents 4% of our Core Portfolio: 

Here is the main reason why it is so intriguing to me: 

Casino REITs have held up quite well over the past years. That's because casino real estate has performed well as an asset class. Rents are typically tied to the CPI, resulting in steady growth, and cap rates have compressed in this sector as more players became interested in casinos. This is particularly true in Las Vegas, which has been on fire lately. 

But Caesars has crashed as if none of this mattered to it, and it has resulted in an exceptionally large disparity in performance relative to Casino REITs in recent years: 

Data by YCharts

This could make sense if Caesars was a struggling casino operator and didn't own any of its real estate. 

But the opposite is true. 

The company is doing well and importantly, it owns a lot of very valuable casinos that are likely to be monetized in the future. 

Let's discuss its business and its performance first, and we will then get to the real estate, and the valuation of the company. 

Business