Casino operator Penn National Gaming announced on Friday the sale of Tropicana Las Vegas to its real estate investment trust Gaming and Leisure Properties Inc. to keep the business healthy amid the unfolding coronavirus crisis.
Penn National confirmed the sale of the Strip hotel and casino resort, which first opened doors in the 1950s, just a couple of months after reports emerged that the regional gaming and hospitality operator had accepted an unsolicited offer for the 1,400-room property that valued it at around $700 million.
Penn National also said that it is set to furlough 26,000 employees as all of its 41 casinos and racetracks around the US are closed as part of a number of measures invoked by federal and state governments to help contain the spread of the coronavirus.
Several states have extended the temporary closure orders affecting all non-essential businesses and other states are expected to soon follow suit.
Tropicana Las Vegas Gets New Owner
Penn National announced that it has agreed to sell the iconic Las Vegas Strip property to Gaming and Leisure Properties, the REIT that was spun off from the casino operator in 2013.
The transaction includes the Tropicana Las Vegas real estate assets as well as a new ground lease for Penn National’s planned mini-casino in Morgantown, Pennsylvania in exchange for $337.5 million in rent credits.
The deal also provides Penn National with the opportunity to acquire the operations of Gaming and Leisure Properties’ Hollywood Casino in Perryville, Maryland at some point in future.
The casino operator said that the transaction will help them “relieve liquidity pressure in terms of rent obligations”, but also noted that it is further committed to “taking further steps to reduce our ongoing operating expenses in order to ensure we have a healthy business to return to when we are able to re-open our doors.”
It should be noted that Penn National will continue to operate Tropicana Las Vegas after the sale.
During Penn National’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 pointed out that a sale was not imminent at the time. However, they were encouraged by some of the conversations that had taken place and some of the bids they had received.
Penn National Furloughs 26,000 Casino Workers amid Covid-19 Crisis
The operator said Friday that it will place approximately 26,000 employees on unpaid furlough beginning April 1. The company previously announced that it would pay its team members their full wages and benefits through the end of March.
Penn National will maintain medical benefits to those furloughed employees who are enrolled in its health plans through June 30.
In a letter to team members, Mr. Snowden said that the decision that affects the company’s nearly entire workforce “was extremely difficult to make” but the company is “motivated and focused” on reopening its properties around the nation as soon it is “safe and legal to do so.”
With more than 100,000 confirmed coronavirus cases, the US is the worst affected country in the world. The nation has tallied more than 1,700 deaths from the dangerous virus.