Gaming and Leisure Properties Closes on $250 Million Land Acquisition, the Site for Bally’s Future Chicago Flagship Casino

Rhea-AI Summary

Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) has completed its $250 million acquisition of the land for Bally's future Chicago flagship casino from Blue Owl Capital. This purchase is part of a larger agreement with Bally's (NYSE: BALY) announced in July. GLPI will own substantially all of the real estate and improvements related to the Chicago casino and hotel for a total investment of $1.19 billion, resulting in a blended initial cash investment yield of 8.4%. The current lease will be assumed by a GLPI affiliate with an annual rent of $20 million, representing an initial cash yield of 8.0%. Stabilized rent coverage for the lease is expected to be in the range of 2.0x – 2.4x. GLPI's Chairman and CEO, Peter Carlino, highlighted the significance of this acquisition for the development of Bally's Chicago, which aims to be a premier destination in the nation's third-largest metropolitan area.

Positive

• Acquisition of prime real estate for $250 million in Chicago, the third-largest U.S. metropolitan area
• Total investment of $1.19 billion with a blended initial cash investment yield of 8.4%
• Annual rent of $20 million, representing an initial cash yield of 8.0%
• Expected stabilized rent coverage between 2.0x and 2.4x
• Transactions with Bally's expected to be accretive to financial results

Negative

• Large capital investment of $1.19 billion, potentially increasing financial leverage
• Dependency on Bally's success in operating the Chicago casino for stable returns

Financial Analyst

The $250 million land acquisition by Gaming and Leisure Properties (GLPI) marks a significant step in their expansion strategy. With an initial cash yield of 8.0% and a blended initial cash investment yield of 8.4% for the total $1.19 billion investment, this deal appears financially attractive. The expected rent coverage of 2.0x - 2.4x suggests a healthy margin of safety for GLPI's investment.

The transaction's structure, involving a sale-leaseback arrangement, is a common and often beneficial approach in the gaming real estate sector. It allows GLPI to generate steady, long-term cash flows while Bally's can free up capital for operations and development. The 8.3% blended initial cash yield across multiple properties indicates a strong return on investment, potentially boosting GLPI's bottom line and shareholder value.

Market Research Analyst

The Chicago casino project represents a strategic move into a major untapped market. As the third largest metropolitan area in the U.S., Chicago offers significant potential for a high-profile casino resort. The location's promise as a "must-visit destination" could drive substantial foot traffic and revenue.

However, it's important to consider the competitive landscape and regulatory environment in Chicago. The success of this venture will depend on factors such as local reception, tourism trends and potential future competition. The project's ability to attract both local and out-of-town visitors will be key to achieving the projected returns and maintaining the expected rent coverage ratios.

Real Estate Expert

GLPI's acquisition of the Chicago land and assumption of the lease demonstrates a savvy real estate strategy. By owning substantially all of the real estate and improvements related to the casino and hotel, GLPI positions itself to benefit from potential property value appreciation in addition to the steady rental income.

The $20 million annual rent on a $250 million land purchase represents a solid 8% yield, which is attractive in the current real estate market. The structure of this deal, combined with the Kansas City and Shreveport acquisitions, showcases GLPI's ability to diversify its portfolio geographically while maintaining focus on the gaming sector. This approach could help mitigate risks associated with regional economic fluctuations.

WYOMISSING, Pa., Sept. 11, 2024 (GLOBE NEWSWIRE) -- Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) (“GLPI” or “the Company”), announced today that it completed its previously announced $250 million acquisition, from Blue Owl Capital, of the land on which Bally’s Corporation (NYSE: BALY) (“Bally’s”) permanent Chicago Casino will be constructed. The land purchase was one component of GLPI’s broader agreement with Bally’s, announced in July.

With the completion of GLPI’s purchase of the Chicago land, the current lease in place with Blue Owl Capital will be assumed by an affiliate of GLPI and amended to reflect the negotiated annual rent of $20 million, representing an initial cash yield of 8.0%. GLPI will own substantially all of the real estate and improvements related to the Chicago casino and hotel for a total investment of $1.19 billion resulting in a blended initial cash investment yield of 8.4%. Stabilized rent coverage for the lease is expected to be in the range of 2.0x – 2.4x.

Peter Carlino, Chairman and CEO of GLPI commented, “The completion of the Chicago land purchase is a significant milestone toward the development of Bally’s Chicago, which promises to be a must-visit destination casino resort property in the heart of Chicago. Our transactions with Bally’s related to Chicago and our real estate acquisitions at Bally’s Kansas City Casino and Bally’s Shreveport Casino & Hotel will be accretive to our financial results, resulting in an 8.3% blended initial cash yield and conservative rent coverage. We are pleased to be working with the Bally’s team, the host community and various stakeholders in Chicago to deliver a world-class entertainment center in the nation’s third largest metropolitan area.”

About Gaming and Leisure Properties, Inc.
GLPI is engaged in the business of acquiring, financing, and owning real estate property to be leased to gaming operators in triple-net lease arrangements, pursuant to which the tenant is responsible for all facility maintenance, insurance required in connection with the leased properties and the business conducted on the leased properties, taxes levied on or with respect to the leased properties and all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.

Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including our expectations regarding the benefits of the transaction to our shareholders. Forward-looking statements can be identified by the use of forward-looking terminology such as “expects,” “believes,” “estimates,” “intends,” “may,” “will,” “should” or “anticipates” or the negative or other variation of these or similar words, or by discussions of future events, strategies or risks and uncertainties. Such forward-looking statements are inherently subject to risks, uncertainties and assumptions about GLPI and its subsidiaries, including risks related to the following: GLPI’s ability to successfully consummate the announced transactions with Bally’s, including the ability of the parties to satisfy the various conditions to advancing loan proceeds, including receipt of all required regulatory approvals and other approvals and consents, or other delays or impediments to completing the proposed transactions; the potential negative impact of recent high levels of inflation (which have been exacerbated by the armed conflict between Russia and Ukraine) on our tenants' operations; GLPI's ability to maintain its status as a REIT; our ability to access capital through debt and equity markets in amounts and at rates and costs acceptable to GLPI; the impact of our substantial indebtedness on our future operations; changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs or to the gaming or lodging industries; and other factors described in GLPI’s Annual Report on Form 10-K for the year ended December 31, 2023, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each as filed with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to GLPI or persons acting on GLPI’s behalf are expressly qualified in their entirety by the cautionary statements included in this press release. GLPI undertakes no obligation to publicly update or revise any forward-looking statements contained or incorporated by reference herein, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this press release may not occur as presented or at all.

Contact:
Gaming and Leisure Properties, Inc.	Investor Relations
Matthew Demchyk, Chief Investment Office	Joseph Jaffoni, Richard Land, James Leahy at JCIR
610/401-2900	212/835-8500
investorinquiries@glpropinc.com	glpi@jcir.com

FAQ

What is the value of GLPI's land acquisition for Bally's Chicago casino?

GLPI acquired the land for Bally's future Chicago flagship casino for $250 million from Blue Owl Capital.

What is GLPI's total investment in the Chicago casino project?

GLPI's total investment in the Chicago casino and hotel project is $1.19 billion, which includes substantially all of the real estate and improvements.

What is the expected initial cash investment yield for GLPI's Chicago casino investment?

The blended initial cash investment yield for GLPI's Chicago casino investment is expected to be 8.4%.

What is the annual rent GLPI will receive for the Chicago casino property?

GLPI will receive an annual rent of $20 million for the Chicago casino property, representing an initial cash yield of 8.0%.

What is the expected rent coverage for GLPI's lease with Bally's for the Chicago casino?

The stabilized rent coverage for the lease is expected to be in the range of 2.0x to 2.4x.