Gaming and Leisure Properties to acquire real estate assets of three Cordish Live! casinos for $1.81 billion Buck Wargo, CDC Gaming Reports · December 6, 2021 at 7:03 pm Gaming and Leisure Properties, Inc., a Pennsylvania-based real estate investment trust spun off from Penn National Gaming, has agreed to acquire the real estate assets of three of The Cordish Companies’ Live! casino properties for $1.81 billion, further expanding its portfolio. In return, Cordish will immediately lease back the properties and continue to control and manage the gaming operations at Live! Casino & Hotel Maryland, Live! Casino & Hotel Philadelphia, and Live! Casino Pittsburgh. The news was greeted positively by Wall Street analysts and viewed as the ongoing trend by industry observers. “It’s a continued shift in the casino model and for Cordish, a change in direction from a family-run business to the asset-light model that other major companies have embraced thoroughly (including MGM Resorts International and Caesars Entertainment),” said Brendan Bussmann, a partner with Global Market Advisors. The Maryland transaction is expected to close by the end of the year and the Pennsylvania transactions are expected to close in early 2022, all subject to regulatory approvals, financing, and other closing conditions. The transaction includes not only the existing real-estate assets, but also a binding partnership on future Cordish casino developments, as well as a potential financing partnerships between GLPI and Cordish in other areas of Cordish’s real estate and operating businesses. GLPI, the nation’s first RETI focused on assets leased to gaming operators, has 50 gaming assets in 17 states. Its tenants include Penn National Gaming, Caesars Entertainment, Boyd Gaming, Casino Queen, and Bally’s. Earlier this year, Bally’s agreed to purchase the Tropicana Las Vegas from GLPI for $308 million. The three-property real estate transactions will comprise a mix of qualified debt assumption to be satisfied by GLPI, cash, and $323 million of newly issued partnership units, or OP units, in GLPI’s operating partnership. Officials said that economically aligns both groups for future collaboration and partnership. Deutsche Bank had a positive take on the transaction when it sent a note to investors Monday night. “This evening, post market close, GLPI announced that it intends to acquire the real estate assets of Cordish Live! for $1.81 billion, which implies a multiple of 14.5x initial rent (6.9% cap rate). Based on our analysis of the transaction, which is expected to close, at least in part, by year’s end, we believe the transaction represents adjusted funds from operations per share accretion of 4% to 5%, on our 2022 estimate, which, at the current trading multiple, implies about $2 per share in present equity value. As such, we view the deal favorably.” In its note to investors, J.P. Morgan said, “We estimate, on a pro forma basis, this transaction is 4% accretive to 2022 AFFO per share, so a nice positive. We also like that GPLI is adding a new and reputable real estate/gaming partner that potentially could lead to future accretive transactions.” Simultaneous with the closing of these transactions, GLPI will enter into a new triple-net master lease with Cordish for Live! Casino & Hotel Philadelphia and Live! Casino Pittsburgh, as well a single-asset lease for Live! Casino & Hotel Maryland, officials said. The master and single-asset leases will have an initial term of 39 years, with a maximum term of 60 years inclusive of tenant-renewal options. The initial annual rent for all three properties will be $125 million, with a 1.75% fixed yearly escalator on the entirety of the rent commencing on the leases’ second anniversary. Peter Carlino, chairman and CEO of GLPI, said they’re excited to establish a relationship with The Cordish Companies, which he called one of the country’s preeminent developers of large-scale experiential real estate projects, casinos, hospitality, and entertainment districts. “We have long admired Cordish for their creation of the highly successful Live! brand across these entertainment, gaming, and hospitality districts,” Carlino 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. These new leases are expected to have strong rent coverage at an accretive cap rate, while further expanding and diversifying our portfolio and marking a continuation of our strategy to build an industry-leading, high-quality, tenant roster.” In addition to the real estate transaction, Carlino said they’re excited to partner with Cordish on a range of future strategic opportunities that can leverage the financial and real estate development strengths and resources of both companies. “The OP unit portion of the transaction consideration aligns our interests with the goal of building new value for our constituents,” Carlino said. David Cordish, chairman of The Cordish Companies, echoed Carlino in saying his company has long admired GLPI’s pioneering structure and accomplishments as a public platform. He added that this range of transactions align two recognized leaders in their respective industries. “Live! is an iconic brand and our commitment to our customers, team members, and local communities as top priorities will continue unabated,” Cordish said. “Our election to receive a significant portion of our consideration in GLPI OP units stands testament to our recognition of GLPI’s significant underlying value and quality as a company, and the synergies we see between the two companies.” GLPI said it expects to fund the total cash consideration using cash on hand, borrowings under its revolving credit facility, and/or with funds from additional financing arrangements, expected to include issuances of debt and equity securities. The sources of financing used will depend on a variety of factors, including market conditions. In addition to the real estate and potential for collaboration, GLPI and Cordish have agreed to collaborate on a range of future real estate and development opportunities, including a casino- development co-investment partnership. For seven years following the closing of the transaction for the Pennsylvania properties, GLPI will co-invest with Cordish on any new gaming-development project, excluding those involving currently owned Cordish properties or existing gaming facilities. GLPI will invest in 20% of Cordish’s portion of the equity in the project throughout the life of the project, officials said. For five years following the closing of the transaction for the Pennsylvania properties, GLPI will have a right of first offer and right of first refusal on any sale-leaseback (or similar) transaction that Cordish pursues, in whole or in part, related to a specifically identified Cordish Live! Entertainment District property.