Gaming and Leisure Properties, Inc. announced the completion of the previously announced acquisition of Tropicana Las Vegas Casino Hotel Resort, and provided an update on the collection of April 2020 rents for its portfolio of the real estate for 44 gaming and related facilities.
On April 16, the company and certain of its subsidiaries acquired the real property associated with the Tropicana from Penn National Gaming, Inc., in exchange for rent credits of $307.5 million, which will be applied to rent due under the parties’ existing leases for the months of May, June, July, August, October and a portion of November 2020.
Pursuant to the terms of the transaction with Penn National, GLPI will conduct a sale process with respect to the Tropicana Las Vegas (including the casino and hotel business). If a definitive agreement for the sale is entered into during the first year of the sale process, Penn National Gaming will receive 75 percent of the net proceeds above $307.5 million plus certain taxes, expenses and costs.
If a definitive agreement is entered into during the second year of the sale process ,Penn National Gaming will receive 50 percent of the proceeds above $307.5 million plus certain taxes, expenses and costs, in each case, subject to the terms and conditions in the Tropicana Purchase Agreement. GLPI will receive all proceeds from any sale occurring after the initial two years.
Simultaneous with GLPI’s acquisition of the Tropicana, the company entered into a lease with Penn National for the Tropicana for nominal annual rent, and Penn National will continue to operate the property for two years (subject to three one-year extensions at GLPI’s option) or until the Tropicana is sold, whichever is earlier. The lease is a triple net lease relieving the company from carrying and other costs at the property during the lease term.
While all of GLPI’s tenants’ properties as well as the company’s two TRS properties were closed in mid-March as a result of Covid-19-related precautions, the company collected 98.6 percent of contractual April rent, including amounts paid by Penn National.
“GLPI believes its collaborative and mutually beneficial outcome with Penn National provides us and our investor base greater visibility and predictability for rent receipts over the remainder of 2020,” said GLPI Chairman and Chief Executive Officer Peter Carlino. “We are also grateful to our credit facility lenders for their support in facilitating the transaction with Penn National in a manner that acknowledges the unforeseen circumstances and that represents a unified spirit of cooperation to overcome the challenges presented by Covid-19.”
Meanwhile, Penn National CEO Jay Snowden said in a note to shareholders that the Tropicana sale will combine with new agreements with the operator’s lenders to provide liquidity that will sustain the operator through the current Covid-19 shutdown.
“We have taken swift measures to significantly reduce our daily operating expenses through the GLPI transactions, company-wide furloughs (of 26,000 workers), decreases in compensation to our executive team and board of directors, and other cost mitigation measures,” Snowden wrote.
“After accounting for monthly cash burn, the company has enough liquidity to get through the end of 2020,” Macquarie Securities gaming analyst Chad Beynon told investors in a research note Monday. “That said, management is seeing a light at the end of the tunnel.”
