Penn National Gaming’s sale of the Tropicana Las Vegas has bought the regional gaming giant some financial maneuverability in the midst of the Covid-19 crisis that has shuttered its entire portfolio of 41 properties in 19 states.
The sale to Gaming and Leisure Properties (GLPI), announced at the end of last month, was concluded for $337.5 million in rental credits, effectively eliminating five months of rents Penn would have owed to the real estate investment trust under two master leases covering the 30 Penn casinos owned by GLPI. Prior to the deal, Penn’s payments to GLPI were expected to total around $900 million for the year.
“We don’t believe this is a deal that happens in a normal operating environment, but ultimately it buys Penn more time to survive and pay its rental obligations to GLPI, in this anything but normal environment,” SunTrust Bank gaming analyst Barry Jonas said.
“In a sense, this is ‘found money,’ or, in this case, savings,” said Deutsche Bank’s Carlo Santarelli.
Macquarie Securities has said Penn is spending $6.4 million a day to maintain its portfolio, including wages and benefits over the two weeks since the shutdown went into force nationwide three weeks ago.
The company, however, is furloughing roughly 26,000 employees nationwide and cutting management salaries as part of a plan to keep the company afloat with less than 850 workers. Those laid off will continue to receive medical benefits through the end of June.
The sale of the Tropicana, the company’s only Las Vegas Strip resort, was not a surprise. Penn has discussed selling the aging 1,500-room property for months.
Under the deal with GLPI, Penn will operate the resort under a cancelable lease with “nominal rent.” GLPI said it “plans to explore all options with respect to the Tropicana Las Vegas” and Penn would receive a share of any sale if it’s sold within 24 months.
Penn is also selling an under-construction casino in Morgantown, Pennsylvania to GLPI and has an option to acquire the operations of GLPI’s Hollywood Casino Perryville in Maryland.
