Penn National Spin-Off to Acquire Three Cordish Casinos in $1.81bn Deal

  • Penn National spin-off GLPI is acquiring three casinos from The Cordish Companies
  • Upon the deal’s completion, GLPI will immediately lease back the properties to Cordish
  • The casinos are in Maryland and Pennsylvania, with annual rent starting at $125m
  • The firms will also work together on future casino developments and financing deals
  • Cordish is transitioning to an asset-light business model like other US operators
Lease agreement
The GLPI REIT has agreed to buy the real estate assets of three casinos from The Cordish Companies for $1.81bn. [Image:]

Long-term leases

Gaming and Leisure Properties Inc. (GLPI), a real estate investment trust (REIT), has agreed to acquire three casino properties from The Cordish Companies in a deal worth $1.81bn. The Pennsylvania-based Penn National Gaming spin-off announced the deal on Monday.

Cordish will pay a starting rent of $125m

Following completion of the deal, Cordish will lease back the properties immediately and continue to operate the gaming floors at the Live! Casino Pittsburgh, Live! Casino & Hotel Philadelphia, and the Live! Casino & Hotel Maryland. The initial leases carry a term of 39 years, with a maximum term of 60 years possible. Cordish will pay a starting rent of $125m, which will rise annually by 1.75% beginning on the second anniversary of the lease.

The expected deadline for completion of the Maryland side of the deal is by the end of 2021. The Pennsylvania transactions are set to close early next year. All the transactions are subject to various closing conditions, financing, and regulatory approval.

A commitment to work together

According to Monday’s statement, the deal will also create a binding partnership between GLPI and Cordish for the latter’s future casino developments. This could include financing partnerships between the two parties.

To finance the deal for the three casino properties, GLPI will utilize qualified debt assumption, cash, as well as $323m worth of new units in the operating partnership with GLPI.

GLPI CEO and chairman Peter Carlino welcomed the new deal. He said: “A crucial aspect of our transaction was Cordish’s continued commitment to operating with the same team, approach, and standard of excellence that has brought their casinos so much success.” Carlino labeled the deal an ideal way to expand the REIT’s current portfolio and add further diversification.

The Cordish Companies operates other gaming properties not included in the deal, including the Hard Rock Hotel & Casino Tampa and the Hard Rock Hotel & Casino Hollywood.

Cordish chairman David Cordish also lauded GLPI for its success to date. He believes the partnership will prove a big success and create many synergies.

An asset-light approach

Global Market Advisors partner Brendan Bussman commented on the deal, noting that Cordish is transitioning from a family-run operation to an asset-light type of business model. Other companies that have recently followed a similar route include Caesars Entertainment and MGM Resorts International.

GLPI was the first REIT in the US to focus on leasing assets to gaming operators. It currently has 50 gaming assets under its umbrella across 17 states. Some of its current tenants include Bally’s Corporation, Boyd Gaming, Caesars Entertainment, and Penn National Gaming.

In the third quarter of 2021, GLPI’s revenue fell 3% year-on-year to $298.7m. The vast majority of this revenue came through rental income. The other $15.5m came from the only casino that GLPI operates – the Hollywood Casino Baton Rouge. GLPI’s net income reached $149.1m.

On December 6, GLPI announced the public offering of 7.7 million shares of common stock. Part of the net proceeds from this offering will help to finance the three transactions with The Cordish Companies.

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