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Filip Mishevski December 7, 2021 5 min read
GLPI Purchases Three Cordish Live! Assets for a Price of $1.81B
Pennsylvania-based Gaming and Leisure Properties, Inc makes a massive move as it agrees to purchase a total of three The Cordish Companies’ Live! casino assets for a price of $1.81 billion. Wall Street analysts greeted the developments as the purchase will allow Gaming and Leisure Properties to expand its portfolio.
Transactions are Set to Be Finalized by Early 2022
The transactions between Cordish and Gaming Leisure Properties will be finalized at different times of the year in 2022. All of them will be subject to financing, regulatory approvals, and other closing conditions. With that being said, the Maryland transaction is set to be finalized by the end of 2021, while the Pennsylvania transaction is set to be finalized at the start of 2022.
Cordish will lease the properties right away and continue to manage gaming operations at Live! Casino Pittsburgh, Live! Casino & Hotel Maryland and Live! Casino & Hotel Philadelphia.
Brendan Bussmann, a Global Market Advisors partner, stated that the change from a “family-run business to the asset-light model” is something that Cordish and other major brands such as Caesars Entertainment and MGM International have embraced.
Apart from the existing properties, the transactions include binding partnerships on future casino developments by Cordish and a financing partnership between Cordish and GLPI in other areas, not just casinos.
GLPI is the first RETI in the nation and is focused on leased assets to gaming operators. Some of its tenants include Penn National Gaming, Boyd Gaming, Caesars Entertainment, Casino Queen, and Bally’s. Gaming and Leisure properties is a spin-off company from Penn National Gaming. Moreover, GLPI has a total of 50 gaming assets in 17 US states. As for Bally’s, the company acquired Tropicana Las Vegas from GLPI for $308 million earlier this year.
Deutsche Bank Was Pleased With the Transaction
Deutsche Bank sent a note to its investors in which it outlined the positive take of the transaction. The note, which was sent on Monday, stated that GLPI is looking to purchase Cordish Live! ’ss assets for a price of $1.81 billion, and that implies a“multiple of 14.5x the initial rate.”
As the analysis by Deutsche Bank explains, at least one part of the transaction will be completed by the end of 2021, and it represents adjusted operation funds “per share accretion of 4% to 5,” and at the current trading multiple, it results in a price of $2 per share in the equity value at present. That is why the bank sees the deal as favorable.
J.P Morgan also issued a note to its investors in which it stated that the transaction has a 4% per share accretion to 2022 AFFO, meaning that it is a nice positive. The company also saluted the fact that GLPI opens the door to future accretive transactions by adding a gaming and real estate partner.
As officials state, with the closure of these transactions, GLPI will enter a single-asset lease for the Live! Casino & Hotel in Maryland, but it will also dive in a triple-net master lease with the properties of Cordish in Pittsburgh and Philadelphia.
The initial term of both the single and master lease will be 39 years, and it can be as long as 60 years with tenant-renewal options. All three properties will come at an initial annual rate of $125 million and a fixed yearly escalator of 1.75% on the whole rent from its second year.
GLPI’s CEO and chairman, Peter Carlino, said that the company is looking forward to building a fruitful relationship with all companies from Cordish as he sees Cordish as a preeminent developer of massive experimental projects such as hospitality and entertainment districts, as well as casinos.
Carlino added that one of the crucial aspects of the transaction was the fact that Cordish has a commitment to work with the same team, which is a standard and approach that allowed it to grow extensively. The new leases will have a “strong rent coverage at an accretive cap rate” and, at the same time, expand the GLPI portfolio and thus, allowing it to create an industry leader when it comes to the tenant roster.
Future Opportunities Lie Ahead for Both Companies
Apart from the newest transaction, Carlino has stated that GLPI is looking forward to partnering with Cordish on other future opportunities which can be beneficial for both companies. He added that the OP unit portion aligns with the company’s interests in building new values.
One of those future opportunities is a co-investment partnership on casino development. After the Pennsylvania properties are closed off in terms of completing the transactions, GLPI will co-invest on all gaming properties with Cordish in the next seven years. During the life of the project, GLPI will invest 20% of the portion of Cordish in the project, as officials state.
Five years after the transaction of the Pennsylvania properties is closed, GLPI will have a right to refuse (partly or in whole) a sale-leaseback transaction of Cordish and a right to first offer. This right is tied to a property by Cordish Live! Entertainment District.
The chairman of Cordish, David Cordish, stated that he admired the accomplishments of GLPI and noted that the transaction combines the common interests of these two industry leaders. He also added that Live! is a massive brand whose commitment to customers will remain a top priority.
As GLPI expects, the total cash needed will be funded with cash on hand, credit facility borrowings as well as funds from other financial agreements (if needed). The financing sources depend on many factors, such as market conditions.