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Gaming and Leisure to sell Meadows Racetrack and Casino to Pinnacle Entertainment for $138 million

4 April 2016

(PRESS RELEASE) -- Gaming and Leisure Properties, Inc. (GLPI) has announced that the company has entered into an agreement to sell the entities holding the gaming licenses and operating assets of The Meadows Racetrack and Casino located in Washington, Pennsylvania, a suburb of Pittsburgh, Pennsylvania, to Pinnacle Entertainment, Inc. for $138 million.

"As a premier operator of high quality regional gaming assets, Pinnacle is well suited to maximize the operating potential of The Meadows while the escalator provisions in the lease enable GLPI to participate in the long-term success of the property," said Gaming and Leisure Properties Chairmand and CEO Peter M. Carlino. "This transaction allows us to unlock value in the asset while growing and diversifying our rental income."

The 180,000 square foot casino, which opened in 2007, contains 3,170 slot machines, 74 table games and 11 poker tables. In addition to the casino, the property includes 11 casual and fine dining restaurants, bars and lounges, a 24-lane bowling alley and a 5/8 mile racetrack with a 500-seat grandstand. Additionally, a 155-room hotel, which is owned and operated by a third party operator, opened in April 2015 and is located adjacent to the casino.

At closing, the company and Pinnacle will enter into a triple-net lease for The Meadows real estate assets with initial annual rent of $25.5 million, comprised of approximately $14.0 million base rent and approximately $11.5 million percentage rent. The initial term of the lease is 10 years, with the option to renew for three successive five year terms and a four year term. The lease contains an annual escalator provision for up to 5% of the base rent, with rent coverage thresholds of 1.8 in year one, 1.9 in year two and 2.0 in year three and thereafter. The escalator remains at 5% for ten years or until total rent is $31 million, at which point the escalator will be reduced to 2% annually thereafter. The percentage rent is adjusted every two years by 4% of the amount by which average property net revenue increases or decreases from the prior period. This lease is separate from the Master Lease agreed to by the two companies in GLPI's proposed acquisition of substantially all of Pinnacle's real estate assets and is not conditioned on successful completion of that acquisition. The sale price of the operating assets represents a multiple of approximately 6.4 times the property's LTM operating EBITDA.

On Dec. 16, 2015 the company announced an amended agreement to acquire The Meadows Racetrack and Casino from Cannery Casino Resorts, LLC for $440 million, inclusive of $10 million previously paid and subject to certain adjustments. The company intends to fund the transaction, net of proceeds received from the sale of the operating assets to Pinnacle, through a combination of debt and equity. The company expects the acquisition of The Meadows and the sale of the entities holding the gaming licenses and operating assets to occur on the same business day. Both transactions are subject to and require approval from the Pennsylvania Gaming Control Board and the Pennsylvania Harness Racing Commission and are expected to close in the late third quarter of 2016.

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