By Mark Iovanisci CoStar Research
The Cordish Cos. has agreed to sell three of its casinos to Gaming and Leisure Properties in a $1.81 billion deal it said will also establish a binding partnership between the two firms on future casino developments.
The Baltimore company behind the Live Casino brand, Cordish said it will sell Live Casino & Hotel Maryland, Live Casino & Hotel Philadelphia and Live Casino Pittsburgh, as well as the long-term ground leases, to GLPI.
Concurrent with the sales, Cordish will lease back the properties and continue to own, control and manage all gaming operations at each casino, the company said. Cordish will enter into a new triple-net master lease for Live Casino & Hotel Philadelphia and Live Casino Pittsburgh, and a single-asset lease for Live Casino & Hotel Maryland.
The Maryland sale is expected to close by year end, while the Pennsylvania transactions are expected to close early next year. All three deals still must receive state regulatory approvals and clear other financing and closing hurdles before being finalized.
David Cordish, chairman of the global real estate development firm that dates back to 1910, said the partnership will provide opportunities for Cordish to grow the Live brand while aligning two recognized leaders in their respective industries. The firm has developed and operates destination resorts and entertainment spots across the country including the Hard Rock Hotel & Casino Hollywood, Hard Rock Hotel & Casino Tampa, Power Plant Live in Baltimore and Bally Sports Live in St. Louis.
For GLPI, the pending acquisitions and subsequent leases will provide strong rent coverage at an accretive capitalization rate, or rate of return, while continuing to expand and diversify its portfolio, Peter Carlino, chairman and CEO of Pennsylvania-based GLPI, said in a statement.
GLPI disclosed in a separate release on Monday that it plans to sell 7.7 million shares of common stock that has been valued at about $344.6 million to partially finance the purchase of the three casinos, though it will use the proceeds as working capital, including to buy and develop other properties, if the Cordish deal were to fall through.
The deal will include $323 million in newly issued operating partnership units that GLPI said will economically align the two companies for future collaboration and potential financial partnerships in other areas of Cordish’s property and business portfolio.
The awaiting transactions set up a larger partnership between the two companies after the firms agreed to collaborate on a range of future real estate and development opportunities. That includes a partnership where GLPI would co-invest with Cordish on any new gaming development project for a period of seven years following the sale of the two Pennsylvania properties. As part of the agreement, GLPI would invest in 20% of Cordish’s portion of the equity in the project throughout the life of the development.
Additionally, GLPI would also have a right of first offer and right of first refusal on any sale-leaseback or similar transactions that Cordish pursues.
Following the sale of the three casinos, Cordish will enter into the new leases that are set to have an initial term of 39 years with a maximum term of 60 years. The initial annual rent for all three properties will be $125 million, representing an implied capitalization rate of 6.9%, GLPI said. The leases also have a 1.75% fixed yearly escalator that will start in the second year.
Wells Fargo Securities is acting as financial adviser to GLPI on the transaction.
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