The Louisiana Gaming Control Board on April 18 approved allowing Pinnacle Entertainment to sell four Louisiana gaming properties to a REIT.
Pinnacle wants to include its L’Auberge Baton Rouge, L’Auberge Casino Resort in Lake Charles, and Boomtown Casino Hotels in New Orleans and Bossier City among 14 gaming properties it wants to sell to Gaming and Leisure Properties.
Pinnacle then would pay $377 million to lease back the properties and continue operating them, but that requires regulatory approval in Louisiana, among other states.
Penn National Gaming created the Gaming and Leisure Properties REIT in 2013, sold its properties to the REIT and leased them back in a move other casino operators are attempting to emulate, including MGM Resorts International. Penn National continues operating the casinos.
A REIT enables casinos and other owners of large commercial properties to bundle their assets under a trust and sell shares, so long as they repay 90 percent of profits to investors via dividends.
The move helps owners of casinos and resorts to pay down their debts, while pursuing more developments and acquisitions.
If the transaction ultimately occurs, Gaming Leisure Properties would be among the largest triple-net REITs, and the third largest that is traded publicly. Gaming Leisure Properties would own 36 casinos and hotels in 14 states and 17 markets.
Gaming Leisure Properties last year reported $440 million in adjusted EBITDA, which at least one industry analyst expects to grow to $795 million next year.
The move would diversify Gaming Leisure Properties’ revenue base, while roughly equalizing its rental income.
Currently, it receives 98 percent of rents from Penn National. After the transaction, Penn National would pay about 52 percent of rents, and Pinnacle the remaining 48 percent.
Complicating the proposed deal is Gaming Leisure Properties’ ownership of the Hollywood Casino Baton Rouge, and Penn National leased it back and continues operating it. Adding Pinnacle Entertainment’s properties to the REIT could create a gaming monopoly, a critic cautions.
UNITE HERE represents 275,000 casino workers in Canada and the U.S. and says the deal would give Gaming and Leisure ownership of two of the three casinos in Baton Rouge, despite having different operators.
The union also claims REITs charge too much for rent in the leaseback deals, which makes it difficult for casinos to remain profitable over the long run.
Pinnacle’s shareholders in March approved the proposed sale, which would pay about $2.17 billion to Pinnacle’s shareholders, at about $36 per share.
Gaming and Leisure Properties values the proposed deal at $4.1 billion.
