Penn National Spinoff Buys Live! Casinos in PA, MD for $1.8 Billion

The deal calls for Cordish Companies to lease back each property and continue to control gaming operations.
Penn National Spinoff Buys Live! Casinos in PA, MD for $1.8 Billion
December 11, 2021

As 2021 draws to a close, Penn National Gaming is looking to make some big New Year’s purchases. Through its real estate spinoff Gaming and Leisure Properties (GLP), the gaming company has purchased two Live! casinos in Pennsylvania and one in Maryland for $1.8 billion.

According to reports, the company acquired:

  • Live! Casino and Hotel Philadelphia
  • Live! Casino and Hotel Maryland
  • A mini-casino, Live! Casino Pittsburgh

The deal is not expected to lead to an operational change. Cordish plans to lease back all the properties from GLP after the sale and continue running daily casino operations. From a customer perspective, the gaming experience is unlikely to change much.

New Properties for a New Year

The latest deal will see the GLP assume ownership of the three Live! Casino properties from Cordish. GLP was spun off from Penn National in 2013 and designed as a vehicle for taking advantage of advantageous tax laws in the US relating to Real Estate Investment Trusts (REITs).

The new deal with Cordish will see GLP add the three new casinos to its already long list of more than 50 casino and hotel properties in 17 states.

“These new leases are expected to have strong rent coverage at an accretive cap rate while further expanding and diversifying our portfolio and marking a continuation of our strategy to build an industry-leading, high-quality tenant roster,” said Peter Carlino, CEO of GLP.

“In addition to the real estate transaction for the three properties, we are excited to partner with Cordish on a range of future strategic opportunities that can leverage the financial and real estate development strengths and resources of both companies.”

The deal includes a 39-year lease on the new properties, with renewal options up to 60 years. GLP will lease the properties back to Cordish for rent of $125 million for the three properties with a fixed yearly escalator starting in the second year of 1.75% for an implied capitalization of 6.9%.

The deal also includes possible future partnerships on other endeavors Cordish undertakes. In the current deal, after seven years GLP pledges to co-invest with Cordish on new project developments. GLP kick in 20% for new Cordish developments through the lifetime of the projects for equivalent equity.

Finally, the deal includes a right of first refusal for GLP on any sale-leaseback deals Cordish undertakes. The deal relates to a specifically identified Cordish Live! Entertainment District property and is in effect five years after the closing date on the Pennsylvania transaction.

It is expected that the Pennsylvania deals will close in early 2022, while the Maryland property is expected to be secured by GLP before the end of 2021, though it should be noted that all three sales are still subject to regulatory approval.

The latest move signals an intent by Penn National to increase their holdings in the Pennsylvania casino market, as well as elsewhere.

The deal gives Penn National two new Live! Casino facilities in PA (plus one more in MD) for their portfolio, and includes existing arrangements in the new casinos, such as the existing retail sportsbooks in the PA casinos from FanDuel, as well as an online sportsbook through Valley Forge, and an online casino through PlayLive!.

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