Gaming & Leisure Properties Inc. (GLPI) announced a $225 million high-interest loan to the Dry Creek Rancheria of Pomo Indians early on September 2. The loan carries a 12.8 percent interest rate and comes in two tranches.
The first tranche, carrying a rate of 12.5 percent, is for $180 million. The second, at 14 percent interest, represents the $45 million balance. Citizens Bank acted as intermediary and GLPI was advised on the deal by TFA Capital Partners.
The purpose of the two loans is to supersede the current River Rock Casino, in Sonoma County, California, near Healdsburg. It will be supplanted by a Caesars Republic-branded casino, announced August 2 at a projected cost of $300 million.
When the loans mature in 2031, the Rancheria is obligated to lease the casino to a GLPI affiliate for 45 years, at a price of at least $112.5 million. GLPI will then sublease the casino back to the tribe. Rent paid by the Dry Creek Rancheria will be capped at 9.8 percent.
In tandem with the tribe, Caesars Entertainment broke ground on Caesars Republic last month. When finished, the property will hold 1,000 slot machines and 28 table games, a 100-room hotel, four restaurants, three bars, a luxury spa, pool, and fitness center. Completion is expected in 2027.
In a formal statement, GLPI CEO Peter Carlino said, “We are proud to be supporting Dry Creek Rancheria and initiating a relationship with the tribe in our role as the lead real estate financing partner for Caesars Republic Sonoma County.”
Continued Carlino, “The unique transaction structure that GLPI was able to provide delivers a lower-cost financing option to Dry Creek, while ensuring a long-term lease guarantee for GLPI. Second, it leverages our multi-property relationship with Caesars Entertainment, which shares a similar commitment to tribal casino relationships.
“This project further validates the tribal opportunity for GLPI, beyond just new greenfield developments, to include re-development and re-branding. Finally, it provides GLPI with a unique opportunity to expand our presence in the California market, in a prime location,” concluded the CEO.
Channeling Billy Joel, Truist Securities analyst Barry Jonas headlined his reaction, “Bottle of Red, Bottle of White.” He noted that this would be GLPI’s second tribal deal and likely not its last.
Jonas thought the arrangement compared well with GLPI’s previous transaction with the Ione Band of Miwok Indians, who were charged 11 percent interest. He also cited Vici Properties’s commitment of $510 million to a casino project for the North Fork Rancheria of Mono Indians of California, which carries an 11.4 percent interest rate.
The analyst found it of interest that rent and lease were capped at 9.8 percent. “GLPI’s deal with the Ione Band of Miwok Indians didn’t include an agreed upon cap rate for a sale leaseback, with GLPI only noting their expectation that sale leaseback terms could be better than 11% loan,” he explained.
Jonas also voiced concern about mounting competition in the area. Graton Resort & Casino is plowing $1 billion into an expansion, also expected for 2027.
Nearer still, the Koi Tribe of Pomo has been green-lit for commencement of Shiloh Resort & Casino. When finished, it will be a 538,000-square-foot casino holding 2,750 slot machines and a 400-room hotel, plus 5,000 parking spaces.
Shiloh Resort will be roughly 20 miles from Caesars Republic. “That said, we also note multiple tribes have all filed a lawsuit challenging the Koi Tribe project, and this could take several years to resolve,” Jonas concluded.
