Company would lease its own casinos
Pinnacle Entertainment is moving ahead to place some of its regional casino properties into a real estate investment trust, or REIT, the company confirmed last week. In a conference call with analysts, Pinnacle CEO Anthony Sanfilippo said the REIT would enable the company to diversify its portfolio beyond gaming and develop other forms of entertainment, reported the Las Vegas Review-Journal.
The decision followed pressure from “activist investor” Orange Capital LLC, according to Bloomberg News. The New York-based hedge fund cofounded by Daniel Lewis lobbied for the REIT. Orange had a stake of about 4.1 percent in late July.
If the transaction moves forward, the parent company would become the operator and manager of 15 casinos in eight states through lease agreements. Last year Pinnacle acquired regional gaming rival Ameristar Casinos for $2.8 billion, effectively doubling its size.
Share values fell about 10 percent in the aftermath of the announcement, reported Bloomberg. And both Standard & Poor’s and Fitch Ratings downgraded Pinnacle’s debt to negative from stable. They said the company would have a greater risk for higher leverage with the transaction and continued weakness in the company’s regional markets.
“It is difficult to take a positive stance given so many unknowns,” said analyst Felicia Hendrix of Barclays in New York.
By law, REITs don’t pay federal income taxes, and must distribute at least 90 percent of their taxable earnings to shareholders.
