-
Casinos for you
The $307.5 Million Sale of Sin City’s Tropicana to GLPI is Now Done and Dusted
By Jeff Osienya Apr 21, 2020 IndustryThe Gaming and Leisure Properties has finally closed their purchase of Tropicana Las Vegas from Penn National Gaming. This is a breath of fresh air for Penn’s liquidity in the current crisis.After a lot of back and forth, the Gaming and Leisure Properties Inc (GLPI), announced that it finally closed the deal to purchase Tropicana Las Vegas Casino Hotel Resort from Penn National Gaming. GLPI a renown real estate giant for casino, gaming and entertainment properties at large had first announced their intent to acquire Tropicana late last month. With the acquisition finalized, GLPI is now the owner of all Tropicana assets, complete with the land within which the properties sit.
Based on documents filed yesterday (on Monday, April 20th) with the U.S Securities and Exchange Commission, Penn National Gaming will continue running the Vegas Strip property for the next two years or until the casino and land are sold – whichever comes first. This is under a nominal annual rent agreement for leasing the Tropicana, which is subject to three-year-long extensions should GLPI see fit.
A Lifeline for Tropicana in the Face of Nationwide Shutdowns
Evidently, this arrangement offers Penn National Gaming fighting chance by preserving its liquidity in this period of crisis. The company no longer has revenue streams trickling in given that all its 41 properties are closed down as a result of the shutdowns across the United States. By the end of March, Penn had a little over $700 million of liquidity in cash and cash equivalents.
Last week on Thursday, when the acquisition agreement materialized, GLPI purchased Tropicana for $307.5 million, not in cash or stock but in rent credits. Moreover, according to the contract, the rent credits are going to be applied to the current leases, starting May 1st.
The purchase contract also stipulates that should the Tropicana properties get a viable buyer within the next 12 months, Penn will receive three-quarters of the net proceeds for every cent above the $307.5 million GLPI purchase price plus taxes, costs and expenses. And in case the sale is made in the second year, the operator will get 50% of the net proceeds calculated using the same model above. On the other hand, if the sale occurs beyond the initial 24-month period, 100% of the proceeds will go to GLPI.
A New Penn National Sportsbook is in the Works
While all this is going on, Penn is still poised for launching a mobile sports betting product under the Barstool Sportsbook brand in Q3 2020. Back in January, the company bought a 36% stake of the Barstool brand for $163 million. It was after this acquisition that Penn National declared their plan to partner with the national betting and gaming brand to unveil a mobile sports betting product.
Penn National is uniquely positioned to leverage its 20 million strong loyalty members with Barstool’s social media engagement that tops 66 million visitors every month. Better yet, Chad Beynon, an analyst from Macquarie projected that the current pause in sports has a feasible potential to boosts Barstool’s market share as soon as sports resume. Thus, even with their current woes, Penn will likely bounce back should the sports betting partnership bear fruition as planned.
Jay Snowden, the CEO and Director of Penn National Gaming believes that the geographically diverse portfolio of the company, with properties in 19 states, puts them at an advantageous position in line with President Trump’s ‘Opening Up America Again’ initiative announced last week.
You might also like