Gaming Hall of Fame: Peter Carlino built two companies and is still ‘warming up’

October 7, 2018 12:00 AM
  • Howard Stutz, CDC Gaming Reports
October 7, 2018 12:00 AM
  • Howard Stutz, CDC Gaming Reports

Peter Carlino cemented his inclusion in the Gaming Hall of Fame by developing two runaway casino industry success stories, both of which opened new avenues for investment and new markets for expansion.

“We’ve come a long way from a single racetrack,” Carlino, 72, said of casino giant Penn National Gaming. “The goal all along was to create shareholder value and an income stream that rewards value and success.”

Peter Carlino

Carlino has done that twice, with Penn National and with the real estate investment trust Gaming and Leisure Properties.

Penn is the industry’s largest regional company and will have 41 properties in 20 jurisdictions once it completes a $2.8 billion buyout of Pinnacle Entertainment. GLPI, the casino industry’s first-ever REIT, was spun off from Penn in 2013 and quickly created its own path. It owns the real estate of nearly 50 casinos and racetracks covering more than 4,400 acres.

Carlino is chairman of both companies and CEO of GLPI. He gave up the Penn CEO position five years ago.

“Frankly, it kills me not to be involved (in the day-to-day operations of Penn),” he said. “But in the end, it’s good for shareholder value to have two separate companies.”

Carlino is one of four industry leaders who make up the Class of 2018 and will be inducted into the Gaming Hall of Fame on Wednesday at the Global Gaming Expo in Las Vegas.

“I haven’t even warmed up,” Carlino said. “We’re going to keep moving forward. It’s amazing to think that two of most important gaming operations were created in Wyomissing, Pennsylvania.”

He took over Penn National from his father in 1994 when it had just a single racetrack, Penn National Racecourse near Harrisburg. He took the company public and raised $19 million, and then began a series of acquisitions and endeavors that resulted in a broadly diversified gaming operation.

In 1997, Carlino successfully persuaded voters in West Virginia to allow slot machines at the company’s Charles Town Races, a track in the state’s eastern panhandle that drew business from the Baltimore-Washington D.C. area.

Before Penn took on the issue, West Virginia voters twice shot down the idea.

“I think I appeared at every public function imaginable to talk about the issue,” Carlino recalled. “It won in a landslide and it helped change the company.”

That success in West Virginia prepared Carlino for future gaming legalization efforts.

In his home state of Pennsylvania, lawmakers legalized slot machines in 2004 and table games six years later. In Ohio, the company joined with businessman Dan Gilbert – owner of the NBA’s Cleveland Cavaliers – to convince voters in 2009 to approve casinos and racetrack casinos. Four times before that, gaming legalization had failed.

The result gave Penn four gaming establishments in Ohio.

But along the way, two transactions grew Penn National. The company acquired Hollywood Casino Corp. in 2003, which doubled Penn’s size. Two years later, Penn doubled in size once again when it acquired riverboat giant Argosy Gaming for $2.2 billion.

“The Argosy deal was truly transformational for the company,” Carlino recalled.

By 2012, Carlino and his team had developed the idea of spinning off the real estate connected with 21 of Penn National’s casino properties into a REIT, the first time that that model, traditionally associated with the hospitality industry, had been tried in the casino business. GLPI leased the operations back to Penn, except for two that are being managed by GLPI.

The company eventually stuck a deal for an Illinois riverboat and acquired all the Pinnacle resorts, leasing the operations back to the original owners.

“I never really saw it as a risk,” Carlino said. “I saw it as a way of creating a new revenue stream and creating value. It’s worked well for GLPI and it’s worked well for Penn. They truly are two separate companies.”

In addition to Penn National, GLPI has operation lease agreements with Eldorado Resorts and should have a deal in place by the end of the month with Boyd Gaming Corp. on four former Pinnacle Entertainment casinos.

The GLPI model led MGM Resorts International to create its own REIT – MGM Growth Properties – and the development of VICI Properties, which was spun out of the bankruptcy reorganization of Caesars Entertainment.

“We’ve been hugely successful, and the effort now is to work with new partners as we move forward,” Carlino said.

And, after all these years, Carlino still loves horse racing, where his companies got their start.

“Racing has enabled a lot of good things,” he said. “And in Pennsylvania, the horse farms are an important agricultural activity.”

Editor’s note: Last in a series of profiles on the 2018 Gaming Hall of Fame inductees.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.