Penn National Gaming ($PENN) did some Christmas shopping, but instead of an iPad, socks and air fryer they bought three Live! Casino properties for $1.81 billion. The Philadelphia Business Journal reported that Gaming and Leisure Properties, a spinoff of Penn National Gaming, purchased assets including long-term leases of three Cordish casino properties:
- Live! Casino and Hotel Philadelphia
- Live! Casino and Hotel Maryland
- The mini-casino, Live! Casino Pittsburgh
Cordish is going to lease back all the properties and continue running day-to-day casino operations. Customers shouldn’t expect much, if anything, to change. Cordish will continue to solely own its Gaming Division and operate all the Live! Casinos.
Cordish and Gaming and Leisure Properties reach deal
The transactions for the two PA properties are expected to close in early 2022 and Maryland should be completed by the end of December 2021. All are pending regulatory approvals.
In a statement, chairman the Cordish Companies, David Cordish, said they are looking forward to collaborating with Gaming and Leisure Properties (GLPI) on “opportunities to grow the Live! brand.”
“Our election to receive a significant portion of our consideration in GLPI [operating partnership] units stands testament to our recognition of GLPI’s significant underlying value and quality as a company, and the synergies we see between the two companies.”
More details of Penn National Gaming and Cordish transaction
- The leases for all three properties have a 39-year term with a maximum 60-year term contingent upon tenant renewal options.
- According to the companies, annual cash rent will be $125 million for all 3 locations with a 1.75% fixed yearly escalator starting the second year, representing an implied capitalization rate of 6.9%
- Possible financing partnerships on other real estate and operating businesses in Cordish’s portfolio. Seven years following the close of the transaction for PA properties, GLPI will co-invest with Cordish on any new gaming development project (but not currently owned Cordish properties or existing gaming licensed facilities). GLPI will invest in 20% of Cordish’s portion of the equity in the project throughout the life of the project.
- Right of first refusal: Five years after closing (for PA locations), GLPI will have a right of first offer and right of first refusal on any sale-leaseback (or similar) transaction which Cordish pursues related to a specifically identified Cordish Live! Entertainment District property.
Gaming and Leisure Properties
Gaming and Leisure Properties is the first real estate investment trust in the U.S. that acquires property assets leased to gaming operators. It was formed as a spin-off of Wyomissing, PA-based Penn National Gaming in Nov. 2013 to increase investor returns by taking advantage of the lack of federal income taxes on REITs. GLP’s current profile includes 50 gaming and hospitality facilities across 17 states.
Peter Carlino, CEO at Gaming and Leisure Properties Inc., said in a statement:
“These new leases are expected to have strong rent coverage at an accretive cap rate while further expanding and diversifying our portfolio and marking a continuation of our strategy to build an industry leading, high quality tenant roster. In addition to the real estate transaction for the three properties, we are excited to partner with Cordish on a range of future strategic opportunities that can leverage the financial and real estate development strengths and resources of both companies.”
Cordish properties in PA
The $700 million Live! Casino Philadelphia opened in Feb. 2021. It has 208 hotel rooms, a recently opened 15,000-square-foot event center and a FanDuel Sportsbook. In PA, it also has an online casino, PlayLive, and Betway online sportsbook operates in the state through it’s partnership with Live!
Live Casino Philadelphia revenue (July 2021- October 2021)
- Gross slot revenue: 42.7 million
- Gross table games revenue: $34.5 million
- Retail sports betting revenue: 1.8 million
Live! Casino Pittsburgh, a mini-casino in Westmoreland County, opened in late Nov. 2020. The 100,000 square-foot facility moved into the space formerly occupied by a Bon-Ton store and is also home to a FanDuel Sportsbook.
Live! Casino Pittsburgh (July 2021- October 2021)
- Gross slot revenue: $32 million
- Gross table games revenue: 5.3 million
- Retail sports betting: $637,189
Matthew Timpane, Sr. Market Strategist at Schaeffer’s Investment Research, provided his insight on $GLPI stock.
“While failing to break above its pre-covid highs in September, it’s potentially setting up for a bullish short-term trade as it tries to find a bottom. Today, we’re seeing GLPI t’s breaking above the 20-day moving average, and one would target the $50 level. However, it doesn’t bode well seasonally over the next few months, so it would be prudent to keep this in mind. An investor with long-term thoughts might want to start accumulating over the next few months as the stock deals with the seasonal headwinds and prior to entering the seasonally strong period between mid-March through mid-June, which oddly enough coincides around monthly options expiration dates. On average, it sees a +15.7% gain through this time period.
“From a valuation standpoint, GLPI is fairly valued at a Price-to-Sales ratio of 9.07 but slightly undervalued from a Price-to-Earnings perspective, trading near 18.32 versus its 5-year average of 20.37. Revenue expectations are flat over the next 2-years, but if this acquisition proves to be accreditive, GLPI can beat on revenue and earnings and force analysts to raise their target expectations.”
Lead photo by photo by Katie Kohler.