Real estate investment trust Gaming and Leisure Properties, Inc. (GLPI) last week completed the acquisition of Tropicana Las Vegas Casino Hotel Resort from Penn National Gaming.
News about the transaction first emerged in March following months of speculations that a sale of the Las Vegas Strip resort might be under way.
GLPI acquired the real estate assets associated with Tropicana from Penn National in exchange for rent credits totaling $307.5 million. The rent credits are set to be applied to rent due under the two companies’ existing leases for May, June, July, August, October, and part of November.
GLPI was spun off from the Pennsylvania-based regional casino operator in 2013 as a real estate investment trust.
Under the terms of the recently closed transaction, GLPI will conduct a sale process for Tropicana, including the property’s casino and hotel business.
If GLPI finds a buyer and enters into a definitive agreement for the resort’s sale during the first year of the sale process, Penn National will receive 75% of the net proceeds above $307.5 million plus certain taxes, expenses, and costs.
If GLPI enters into a definitive agreement during the second year of the sale process, Penn National will receive 50% of the net proceeds above $307.5 million plus certain taxes, expenses, and costs.
Penn National would not be entitled to any net proceeds, if a sale of the property occurs after the initial two years.
Penn National Will Retain Control Over Day-to-day Operations
Penn National will remain in charge of Tropicana’s day-to-day operations, under the casino operator’s agreement with GLPI.
Simultaneous with the closure of the property’s acquisition, GLPI entered into a lease agreement with Penn National for the Strip resort for nominal annual rent. The casino operator will continue to manage the property for an initial period of two years with the option for up to three one-year extensions, or until Tropicana is sold.
The lease agreement constitutes a triple net lease that relieves GLPI from carrying any other costs at the Las Vegas casino complex during the lease term.
Penn National acquired Tropicana in 2015 in a $360 million deal. During the casino operator’s third-quarter earnings call last fall, the company’s President and CEO Jay Snowden said that they had received several unsolicited bids for the Strip resort and that they were evaluating those.
Mr. Snowden also noted the property’s sale was not imminent at the time but they were encouraged by some of the conversations that had taken place and some of the bids they had received.
After news that GLPI would acquire Tropicana emerged last month, Mr. Snowden said that the transaction would help Penn National “relieve liquidity pressure in terms of rent obligations” and reduce ongoing operating expenses.
With more than 40 casinos and racetracks around the US, Penn National is one of the largest regional operators in the country. The company also runs digital gambling operations, including the HollywoodCasino.com brand.