Penn Entertainment recently announced it will commence four projects totaling $850 million, including building two new casinos in Illinois, a new hotel tower in Ohio and another in Las Vegas. Officials said the Empress Joliet and Hollywood Joliet riverboat casinos will be moved ashore; a hotel tower will be constructed at Hollywood Columbus in Ohio; and a second hotel tower will be built at M Resort on Las Vegas Boulevard in the south valley.
Penn’s real estate partner, Gaming & Leisure Properties (GLPI), will provide significant financing through a renegotiated lease that includes seven Penn-branded casino properties, with a cap rate of 7.75 percent. GLPI will contribute $350 million toward the Joliet, Columbus and Las Vegas projects. The city of Aurora will contribute a $50 million subsidy for the new venue.
This is one of the first times that a gaming REIT and a tenant combine to improve properties to the benefit of each.
The $360 million Aurora project will include a casino with 900 slot machines, 50 table games, poker and baccarat rooms and a Barstool Sportsbook, plus a 200-room hotel with a spa, dining options and 10,000 square feet of meeting space. Penn Chief Executive Officer Jay Snowden said, “Our plan for Aurora is to construct a modern best-in-class casino and hotel in an ideal location off I-88 that will allow us to serve the millions of visitors to the adjacent Simon Premium Outlet Mall.”
The $185 million Joliet relocation, to be located in the Rock Run Crossings development, will include a gaming floor with 800 slots and 50 table games, a baccarat room and a Barstool Sportsbook as well.
Snowden said, “In Joliet, our planned casino will be located in the mixed-use project in close proximity to the I-80 and I-55 interchange, which offers exceptional visibility and accessibility. These two projects will significantly improve our offerings in the highly attractive Chicagoland market, while creating hundreds of new full-time jobs for the local communities.”
With gaming expansion under way in Illinois, Snowden told GGB News in an exclusive interview that the expansion of the properties in that state is both defensive and offensive.
“We’ll have one new competitor close to use in Joliet, so we need to make sure we’re providing the product and the service that our customers expect,” he said.
“And in Aurora, we have incredible support from the mayor and the city to make sure that facility remains state of the art.”
GLPI Chief Executive Officer Peter Carlino commented, “We support the relocation of Penn’s riverboat casinos to land-based operations, as we believe this provides a superior guest experience, particularly as the proposed Aurora and Joliet properties are sited to benefit from existing and long-term traffic-driving developments. Further, we believe the creation of a new hotel at Hollywood Casino Columbus will significantly improve the performance of that property and ultimately enable Penn to transform it into a regional destination.”
Hollywood Columbus’ new $100 million hotel tower will offer 180 rooms and several dining options. Snowden stated, “Since opening in 2012, our Columbus property has experienced tremendous growth and the addition of a hotel at the property will create a true regional destination.”
The new 384-room M Resort hotel tower will bring the total to 774 rooms at a cost of $206 million. Snowden said, “The addition of a second tower will benefit from the strong demand in the Henderson locals market, while providing additional capacity for the group business that is drawn to our market-leading resort and amenities, including our highly successful partnership with the Las Vegas Raiders.”
Deutsche Bank Analyst Carlo Santarelli said Penn’s Illinois strategy was “defensive,” as the Illinois venues will compete with Hard Rock’s Rockford facility and Full House Resort’s Waukegan property. Santarelli added Penn’s overall performance in Illinois is “relatively lackluster.” He said, “We question how investors will receive the addition of an assumed $45 million in new lease debt ($360 million of capitalized rent debt), as well as $225 million to $275 million of incremental spend off Penn’s balance sheet, at a time when gaming balance sheets are under scrutiny.”
However, regarding the Columbus and Las Vegas projects, Santarelli said, “We view both hotel tower projects as front-footed and growth-oriented, as both properties have experienced strong demand and are well positioned within their geographies.”
