Penn National Gaming said Friday it was selling the Tropicana Las Vegas resort and a planned casino in Pennsylvania to its primary real estate investment trust partner to help mitigate the casino operator’s financial impact from the COVID-19 coronavirus pandemic.
The regional gaming company, which has 41 properties in 19 states, also said it will implement unpaid furloughs impacting approximately 26,000 employees companywide on Wednesday. Penn’s entire casino portfolio has been closed for nearly two weeks as state-ordered shutdowns sought to mitigate the spread of the virus.
Penn National CEO Jay Snowden said the company will pay its employees wages and benefits through March 31. However, several states have announced extensions of temporary closure orders he expects other states will soon follow suit.
Snowden said the uncertainty on the duration of the pandemic and “no meaningful revenue for the foreseeable future” forced the company’s outcome.
“This decision was extremely difficult to make for all of us at Penn,” Snowden said in a letter to Penn employees. “Penn National is a family, and we deeply regret the hardship this will place on you and your loved ones. We are extremely motivated and focused on re-opening our properties as soon as it is safe and legal to do so.”
Snowden said Penn will maintain medical benefits for its workers through June 30 for those employees enrolled in the company’s health plans.
Penn National had approximately 28,300 full-time and part-time employees as of Dec. 31, according to the company’s 10K filing with the Securities and Exchange Commission.
The sale of the Tropicana, the company’s only resort on the Las Vegas Strip, was not a surprise. Penn has discussed selling the Rat Pack era casino during its quarterly earnings conference calls. In February, Snowden said the Tropicana’s 34-acre parcel on the Strip’s southern end that houses the 1,500-room resort is attracting active “unsolicited” interest.
In a deal with Gaming and Leisure Properties, Penn will sell the Tropicana land – Penn will continue to operate the hotel-casino – and an under-construction “mini-casino” in Morgantown, Pennsylvania for “$337.5 million in rent credits.”
Ten days ago, Penn halted construction of the $111 million Hollywood Casino Morgantown and a second mini-casino due to the pandemic. The Morgantown property was expected to open in November.
The deal also includes Penn having the option to acquire the operations of GLPI’s wholly-owned and operated Hollywood Casino in Perryville, Maryland at a future date.
“We greatly appreciate the cooperation, creativity, and partnership shown by GLPI during this challenging time,” Snowden said in a statement. “While this transaction will help to relieve liquidity pressure in terms of rent obligations, we are committed to taking further steps to reduce our ongoing operating expenses in order to ensure we have a healthy business to return to when we are able to re-open our doors.”
Macquarie Securities last week said Penn National was spending $6.4 million a day during the shutdown and would run out money in five months.
In a separate statement, GLPI said it Penn will pay $3 million in annual rent for the Pennsylvania site. Penn National also agreed to an early renewal for both its master leases with GLPI, which extends the current terms by five years.
As for the Tropicana, Penn will operate the resort under a cancelable lease with “nominal rent.” GLPI said it “plans to explore all options with respect to the Tropicana Las Vegas” and Penn would receive a share of sale net if the Strip resort is sold within 24 months.
“This is a win-win agreement that significantly enhances GLPI’s certainty from the master leases with Penn National,” GLPI CEO Peter Carlino said in a statement. “It assists Penn National in meeting its GLPI rent obligations while helping to create a stronger liquidity roadmap for Penn.”
The casino operator established a special COVID-19 Emergency Relief Fund under the company’s foundation to aid employees and local relief organizations.
Penn has already raised more than $1.2 million in employee relief funds, including more than $425,000 in personal contributions Snowden, the senior management team, the company’s board, and property general managers.
Snowden and the remaining property and corporate leadership teams will take “meaningful pay cuts” starting April 1 until the company returns to normal operations. The board will also forego cash compensation.
Shares of Penn, traded on the Nasdaq, closed at $11.77 Friday, down $1.49 or 11.24%. GLPI closed at $26.76, down 82 cents or 2.97%.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
