In a move that hints at a keen insight into the flourishing gaming industry, Gaming and Leisure Properties (NASDAQ: GLPI) has today unveiled the staggering $175 million purchase of the property assets of the Tioga Downs Casino Resort nestled in Nichols, NY. This corporate maneuver sees the ownership baton passing from American Racing & Entertainment, LLC, a firm that has privately helmed the property, to a titan in real estate investment trust, the Pennsylvania-based GLPI.
In a remarkable symbiosis, the transaction births a new, multi-decade, triple-net lease, initiating an annual rental of $14.5 million with an attractive capitalization rate of 8.3%. The intricacies of the agreement detail an annual rent coverage ratio expected to exceed 2.3 times. Furthermore, rent increments are set firm: 1.75% each year following the anniversary, and a solid 2% escalation from the fifteenth year onward.
Tioga Downs is a true jewel of Nichols, claiming 162 acres of terrain. At its heart lies a 32,600-square-foot casino, a sanctuary of gambling with 895 slot machines and 29 table games. Beyond these alluring distractions, a FanDuel sportsbook awaits, as does a 160-room hotel. An opulent setting for both sports fans and holidaymakers alike. The grounds are embellished with a 5/8-mile harness horse track, a collection of seven diverse eateries, and the pièce de résistance, an 18-hole golf course, catering to all manner of luxury and sport.
Prior to this accord, GLPI’s portfolio was indeed impressive, boasting the real estate assets of 61 gaming venues across 18 states. With the acquisition of Tioga Downs, the REIT has ventured into the New York territory for the first time, suggesting a strategic expansion into fresh, potentially lucrative markets.
The estate’s value has been significantly elevated with a generous $130 million investment in property enhancements back in 2016, granting Tioga Downs a Class III gaming license—a sage decision that arguably makes GLPI’s new stake a timely and astute investment.
Sale-leaseback deals, such as this one, are not uncommon in the gaming dominion. They unveil a pathway for casino operators to transform their tangible land assets into liquid capital, a shrewd technique to secure hefty sums that may be redirected towards other acquisitions, enriching shareholder equity, or scaling back on debt.
To weave this new asset into its portfolio, GLPI marshaled finance through its cash reserves complemented by $20 million in equity. The guiding hand of Citizens JMP Securities was instrumental in navigating the intricacies of this substantial transaction.
This calculated venture into New York is in sync with GLPI’s history of cherry-picking casino real estate in robust, competitive-light markets. Tioga Downs represents just this sort of opportunity, mostly immune to market rivulets due to its insulated location and the prospect of New York’s appetite for gaming expansion in the downstate region.
A sentiment echoed by American Racing CEO Jeff Gural, who paints a picture of Tioga Downs as a bastion of local support with an “well-protected feeder market with no competition within 85 miles and a very loyal following.”
GLPI’s acquisition of Tioga Downs stands not just as a powerful financial move, but also as a beacon, signaling the company’s prowess and discernment in strategically positioned gaming industry assets.
