Gaming and Leisure Properties Enters into Sale Leaseback and Development Funding Transactions with Bally’s Corporation Totaling $1.585 Billion at Blended 8.3% Initial Cash Yield
Gaming and Leisure Properties (GLPI) has entered into a $1.585 billion transaction with Bally's , acquiring properties and funding the construction of a flagship casino in Chicago. The deal includes the acquisition of Bally's Kansas City Casino and Bally's Shreveport Casino & Hotel, and the land for Bally's Chicago Casino Resort. GLPI will fund up to $940 million of construction costs at an 8.5% yield, with total investments reaching $1.19 billion. The transaction also includes a $395 million sale-leaseback of Kansas City and Shreveport properties, with an 8.2% yield. Additionally, GLPI's purchase option for Bally's Lincoln Casino Resort has been adjusted for a favorable yield. These transactions will expand GLPI's portfolio and deliver an 8.3% blended initial cash yield.
- GLPI's acquisition of properties and construction funding totaling $1.585 billion expands its portfolio.
- The transaction includes an 8.3% blended initial cash yield, beneficial for shareholders.
- The construction funding of up to $940 million for Bally's Chicago Casino Resort at an 8.5% yield.
- GLPI's favorable adjustment in the purchase option for Bally's Lincoln Casino Resort, increasing the yield from 7.6% to 8.0%.
- The transactions are subject to several regulatory and third-party approvals, which may delay or impede the process.
Insights
The $1.585 billion transaction between GLPI and Bally’s Corporation represents a significant capital allocation toward expanding GLPI's real estate portfolio. The 8.3% blended initial cash yield indicates a relatively high return on investment, particularly in the current interest rate environment. Investors should note the conservative rent coverage projections, which range between 2.0x and 2.4x for the Chicago property and 2.2x for Kansas City and Shreveport. These figures suggest strong rental income relative to the property operating expenses, enhancing the security of the investment. Additionally, the call right for Bally’s Lincoln with a favorable purchase price adjustment further increases GLPI's flexibility and potential for future growth. However, investors should be aware of the dependence on regulatory approvals and third-party consents, which introduce a layer of uncertainty.
GLPI's strategy to acquire high-profile properties and engage in sale-leaseback transactions is a solid approach to diversifying its real estate portfolio. The deal includes acquiring properties in Kansas City and Shreveport, as well as the land for Bally’s flagship casino in Chicago. These assets, positioned in strategically significant locations, will likely provide substantial long-term value. The 15-year lease term for the Chicago property, along with cross-default clauses, ensures a long-term revenue stream while mitigating risk through contractual protections. The $250 million land acquisition before development and the $940 million construction funding, both with high initial yields, demonstrate GLPI's ability to secure investments under favorable terms. However, the urban setting of the Chicago casino presents potential challenges such as higher operational costs and competitive pressures from existing entertainment options.
This transaction highlights the strategic importance of metropolitan areas like Chicago for gaming companies. The development of a flagship casino in such a high-profile location is likely to attract significant foot traffic and increase Bally’s brand recognition. The projected $1.8 billion total cost reflects the scale and expected impact of this project. Importantly, the anticipated rent coverage ratios indicate robust expected performance, which aligns with the increased capital expenditure. The diversification of GLPI’s portfolio across different regions and property types can also be seen as a defensive move in a volatile market, spreading risk across multiple revenue streams. The partnership with Bally’s, a well-known player in the gaming industry, further strengthens GLPI's position and makes it an attractive investment option in the real estate and gaming sectors.
Multi-Faceted Transaction Further Expands and Diversifies GLPI’s Industry-Leading Regional Property Portfolio; Provides Bally’s with Financing for its Highly-Anticipated Flagship Chicago Casino Facility
WYOMISSING, Pa., July 12, 2024 (GLOBE NEWSWIRE) -- Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) (“GLPI” or “the Company”), announced today that it has entered into a binding term sheet with Bally’s Corporation (NYSE: BALY) (“Bally’s”) pursuant to which the Company intends to acquire the real property assets of Bally’s Kansas City Casino (“Bally’s Kansas City”) and Bally’s Shreveport Casino & Hotel (“Bally’s Shreveport”) as well as the land under Bally’s permanent Chicago casino, and provide construction financing for the Bally’s Chicago Casino Resort (“Bally’s Chicago”) for aggregate consideration of approximately
GLPI intends to fund construction hard costs of up to
In addition to the development funding of hard costs, GLPI also intends to acquire the Chicago land for approximately
GLPI will purchase the real property assets of both Bally’s Kansas City and Bally’s Shreveport for total consideration of
In total, the Chicago, Kansas City, and Shreveport transactions represent a blended
The transactions are subject to several conditions as well as certain third-party consents and regulatory approvals. Key conditions include but are not limited to: (a) valid assignment of the current ground lease to GLPI or acquisition by GLPI of the fee interest in Chicago; (b) the final structure and pro forma capitalization of Bally’s following the proposed Standard General acquisition, or similar transaction, in the event any agreement is reached with the board of directors of Bally’s; (c) completion of customary due diligence on the Chicago site; and (d) receipt of all necessary gaming regulatory and other third party approvals.
Adjustments to Improve Bally’s Lincoln Purchase Option
GLPI and Bally’s have further agreed to adjust GLPI’s existing contingent purchase option for Bally’s Lincoln to reflect a purchase price of
Peter Carlino, Chairman and CEO of GLPI commented, “We are delighted to partner again with Bally’s on this series of highly attractive transactions that will benefit our shareholders and represent a win-win for both parties. These transactions will be accretive to our financial results, delivering an
Soo Kim, Chairman of Bally’s, added, “GLPI has been a great partner for many years. We are excited to expand our relationship as we leverage their development and financing expertise to grow Bally’s with the world class Chicago casino development. Chicago is a vitally important market for our company and our permanent downtown facility will become our company’s flagship property when it opens in late 2026. We are thrilled to have the investment from GLPI as we begin construction of Bally’s Chicago, and we are confident that this critical project funding milestone will be well-received by our host community and the various stakeholders in Chicago.”
Wells Fargo acted as financial advisor to Gaming and Leisure Properties. Goodwin Procter LLP acted as legal advisor to Gaming and Leisure Properties.
About Bally’s Transaction Related Properties
Bally’s Chicago will be a nearly 1 million square-foot casino resort located on the Chicago River, roughly 1.5 miles from the temporary Bally’s casino site. The single-level, 178,000 square-foot casino will feature approximately 3,300 slot machines and 173 table games (including poker). Once fully completed, the property will feature a 500-room hotel with a portion of the rooms above the casino and the remainder in an adjacent 27-floor tower. The hotel will include a full-service spa, fitness center and pool, along with a rooftop bar. Bally’s Chicago will offer a premium steakhouse, noodle bar, nightclub, food hall and other bars and lounges. It will also include more than 100,000 square feet of event and meeting space and nearly 3,000 valet and self-park parking spaces. The property will also have more than two acres of public green space and a riverwalk for casino patrons and the community to enjoy.
Bally’s Kansas City is located on the Missouri River in Kansas City, Missouri and recently completed a
Bally’s Shreveport is located along the Red River in downtown Shreveport, Louisiana. The property features a 30,000 square foot casino with more than 950 slot machines, over 50 table games, a poker room and a Bally Bet Sportsbook. It has a 400-room hotel with full-service spa, three on-site restaurants including an award-winning fine dining steakhouse and a noodle bar, event spaces, live entertainment and two on-site nightclubs.
Bally’s Lincoln is located in Lincoln, Rhode Island and recently completed a roughly
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.
About Bally’s Corporation
Bally's Corporation is a global casino-entertainment company with a growing omni-channel presence. It currently owns and manages 15 casinos across 10 states, a golf course in New York, a horse racetrack in Colorado, and has access to OSB licenses in 18 states. It also owns Bally's Interactive International, formerly Gamesys Group, a leading, global, online gaming operator, Bally Bet, a first-in-class sports betting platform, and Bally Casino, a growing iCasino platform.
With 10,600 employees, the Company's casino operations include approximately 15,300 slot machines, 580 table games and 3,800 hotel rooms. Upon completing the construction of a permanent casino facility in Chicago, IL, and a land-based casino near the Nittany Mall in State College, PA, Bally's will own and/or manage 16 casinos across 11 states. Bally’s also has rights to developable land in Las Vegas. It shares trade on the New York Stock Exchange under the ticker symbol "BALY".
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. Matthew Demchyk, Chief Investment Officer 610/401-2900 investorinquiries@glpropinc.com | Investor Relations Joseph Jaffoni, Richard Land, James Leahy at JCIR 212/835-8500 glpi@jcir.com |
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