During Gaming and Leisure Properties’ fourth-quarter earnings call in February, analysts wondered who might buy the Tropicana Las Vegas from Gaming and Leisure Properties and when it might sell.
On Friday, analysts could reflect on the answer. Rhode Island-based Bally’s Corp. said it would pay $308 million on April 13 for the Rat Pack-era resort.
But the discussion with executives contemplated the real estate investment trust’s other recent deals.
The deal for the two-tower, opened-in-1957 Tropicana is expected to close in early 2022. The deal also involves a sale-and-leaseback related to Bally’s Black Hawk, Colorado and Rock Island, Illinois, casinos.
As part of the Tropicana transaction, Bally’s will pay $150 million to Penn National Gaming for the Strip resort’s nonland assets and will lease the land under the hotel-casino. Gaming and Leisure will continue to own the land and collect $10.5 million in initial annual rent under a 50-year lease.
Under a leaseback provision, Gaming and Leisure will pay $150 million and $12 million in initial annual fixed rent for Bally’s Black Hawk, Colorado, and Rock Island, Illinois, properties. Gaming and Leisure said the properties would be added to a master lease that will include the Bally’s owned Tropicana Evansville, and the Dover Downs in Delaware.
In its earnings statement, Gaming and Leisure said it also agreed to provide capital for Bally’s proposed $2.7 billion acquisition of Gamesys Group, a United Kingdom online gaming and gambling platform.
“The relationship with Bally’s is very important. That probably was a driving part of this,” Gaming and Leisure Chairman and CEO Peter Carlino said during a conference call with analysts and journalists. “There was a lot of interest in the range of … what we had invested. Maybe you could have made a couple of dollars. But I think we took the long view here to create an earning asset, after all, that’s the business we’re in.”
In addition to those deals, Gaming and Leisure said Bally’s granted the REIT a right of first refusal to fund property acquisition or development project costs for potential future Bally’s transactions in Michigan, Maryland, New York, and Virginia through sale-leaseback or similar transactions. That deal is for seven years.
“(Bally’s has) been acquisitive, they are aggressive,” Gaming and Leisure Chief Development Officer Steve Ladany said. “And we would like to be their partners in any transaction, whether that’s a development project, or (an) existing casino property.”
J.P. Morgan gaming analyst Joe Greff, in a note to investors, said the transactions with Bally’s help Gaming and Leisure, “establish a relationship with another tenant, creating a pipeline of potential future growth.”
Amid the activity, Gaming and Leisure reported funds from operation per share that were in line with Wall Street forecasts and revenue that steamed past them.
In a statement, Pennsylvania-based Gaming and Leisure said funds from operation were $183.6 million, or 79 cents per share, for the three months ended March 31, up from $151.2 million, or 70 cents per share, a year earlier.
The latest per-share results massed the average prediction of analysts surveyed by Seeking Alpha. Funds from operation, which take net income and add back depreciation and amortization, are a closely watched fiscal yardstick for real estate investment trusts.
Net income increased to $127.2 million, or 54 cents per share, from $96.9 million, or 45 cents per share, a year earlier.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, rose 3% to $266.6 million from $258.8 million.
Revenue rose 6.2% to $301.5 million from $283.5 million and topped the $296.3 million forecast by Seeking Alpha-polled analysts.
Gaming and Leisure Properties shares fell 36 cents, or 0.77%, Friday to close at $46.49 on the Nasdaq. The shares have fallen 12.6% in 2021.
Follow Matthew Crowley on Twitter @copyjockey
