Penn National spinoff GLPI to acquire real property assets of Bally's two Rhode Island casinos for $1B

Gaming and Leisure Properties Inc., a spinoff of Penn National Gaming Inc., is acquiring two Rhode Island casino properties – Bally’s Twin River Lincoln Casino Resort and Bally’s Tiverton Casino & Hotel – from Bally’s Corp. for $1 billion, the parties announced on Tuesday.

The Wyomissing-based real estate investment trust (REIT) has entered into a binding term sheet with Bally’s to acquire the real property assets, subject to customary regulatory approvals, with the Lincoln also subject to lender consent. Under terms of the transaction, Bally’s will immediately lease back both properties and continue to own, control and manage all gaming operations on the facilities.

Total consideration for the acquisition is $1.0 billion, and GLPI expects the transaction to close in late 2022, according to a press release. The company intends to fund the transaction through a mix of debt, equity, and OP units. The transaction is set to be completed at a 7.6% capitalization rate.

Both properties are expected to be added to the existing Bally’s Master Lease between the Penn National corporate spinoff and Bally’s, with incremental rent of $76.3 million. The lease has an initial term of 15 years (with 14 years remaining), followed by four five-year renewals at the tenant’s option.

Interior picture of Bally's Tiverton venue

Normalized rent coverage on the Master Lease – which includes Bally’s Dover Casino Resort, Bally’s Evansville Casino & Hotel, Bally’s Quad Cities Casino & Hotel and Bally’s Black Hawk Casinos – is expected to be 2.0x in the first calendar year following the acquisition of the real property assets of Bally’s Rhode Island properties.

“GLPI is delighted to extend our relationship with Bally’s,” commented Peter Carlino, Chairman and CEO of GLPI. “Bally’s Rhode Island assets have delivered exceptionally strong performance over their lifetime thanks to their attractive location near Providence while planned capital investments at Lincoln offer healthy upside potential.”

The REIT sees an opportunity in this transaction given that Bally’s properties are “currently the only two gaming facilities in Rhode Island,” and the deal would diversify GLPI’s portfolio as the state becomes the company’s 18th U.S. jurisdiction.

“Importantly, this transaction comes with a conservative rent and Master Lease structure that offers GLPI material downside protection while offering our Company an opportunity for additional long-term growth,” Carlino noted.

Bally’s Twin River Lincoln Casino Resort

"Bally's is excited to enter into this transaction with GLPI, further strengthening our growing relationship,” added Bobby Lavan, Chief Financial Officer of Bally's. “The transaction will provide the company with significant, long-term liquidity, ensuring that Bally's is best positioned to continue executing its capital and strategic plan, as well as to capitalize on future opportunities presented in the market."

In connection with the company’s commitment to consummate the acquisitions, GLPI announced it has also agreed to pre-fund, at Bally’s election, a deposit of up to $200 million, which will be credited or repaid to the REIT at the earlier of closing and December 31, 2023, “in either case along with a $9 million transaction fee payable at closing."

If all third-party approvals for the acquisition of the Lincoln property are not timely received, GLPI said it then will instead acquire the real property assets of the Hard Rock Hotel & Casino Biloxi in Mississippi, along with Bally’s Tiverton Casino & Hotel, for total rent of $48.5 million, at the same combined 7.6% capitalization rate with total a payment of $635 million.

Hard Rock Hotel & Casino Biloxi in Mississippi

“In that event, GLPI will also have the option, subject to receipt of required consents, to acquire the real property assets of Lincoln prior to December 31, 2024, for a purchase price of $771 million and additional rent of $58.8 million,” a press release explains.

Gaming and Leisure Properties was formed in 2013 as a corporate spinoff from Penn National Gaming, and touts itself as the nation’s first gaming REIT. The company owns more than 50 casino properties, all of which are leased to other companies. Tenants include Penn National Gaming, Caesars Entertainment, Boyd Gaming Corp., Casino Queen, and Cordish Cos.

In March this year, GLPI completed the acquisition of the two Pennsylvania Live! Casino properties from Cordish in a transaction roughly valued at $674 million. The Penn National spinoff acquired the land and real estate assets of Live! Casino & Hotel Philadelphia and Live! Casino Pittsburgh.