Hard Rock International’s entry into the property-resale trend brought the tribally owned company to the notice of lead Deutsche Bank gaming analyst Carlo Santarelli. Gaming & Leisure Properties Inc. will obtain the real estate assets of Hard Rock Rockford, Illinois, for $100 million and lease them back to Hard Rock International for $8 million annually.

What makes the deal somewhat novel is that GLPI is purchasing an as-yet-unbuilt building. (A similar deal has been hatched for part of the permanent Bally’s Chicago megaresort.) Presently, Hard Rock Rockford operates out of a temporary structure, which generates annual gaming revenue of $65 million. Santarelli wrote that the temporary casino is functioning “at what we assume is a healthy margin, given the limited amenities inherent in temporary facilities.”

Hard Rock has budgeted $358 million for its permanent Rockford casino, which is expected to open in September of next year. For its part, GLPI is chipping in $150 million of development financing, according to Santarelli, “via a senior secured term loan at a 10% rate on the borrowings.”

Santarelli concluded, “Based on our assumptions around the financing, which we assume is a combination of debt (assuming 5-6x leverage on the $8 mm of incremental rent) and ATM equity proceeds, we estimate the transaction will add $5-$6 mm of AFFO in 2024, or ~$0.04 in AFFO per share, to our 2024 forecasts.”