Penn plans major expansions at four properties

October 10, 2022 1:50 PM

Penn plans major expansions at four properties

Photo: Shutterstock
  • David McKee, CDC Gaming Reports
October 10, 2022 1:50 PM
  • David McKee, CDC Gaming Reports
  • Illinois
  • Nevada
  • Ohio
  • Commercial Casinos

Two new casinos and two hotel towers are in Penn Entertainment’s future, with construction slated to start late next year.

The company announced it will be moving its Empress Joliet and Hollywood Joliet riverboat casinos in Illinois to new onshore facilities. It will also add a first hotel tower to Hollywood Columbus in Ohio and a second tower to M Resort on Las Vegas Boulevard in the south valley. The total price tag for all four projects will be $850 million.

Much of the financing, with $225 million alone earmarked for the Aurora project, will come from real estate partner Gaming & Leisure Properties, to be amortized through a renegotiated lease encompassing seven Penn-branded casino properties with a cap rate of 7.75 percent. GLPI will kick in $350 million toward the Joliet, Columbus, and Las Vegas projects. The Aurora relocation will also receive a $50 million subsidy from the city itself.

The four projects break down as follows.

In Aurora, $360 million is budgeted for adding a 900-slot machine and 50-table game casino, plus poker and baccarat rooms, a Barstool Sportbook, and a hotel with 200 rooms. A spa, dining options, and 10,000 square feet of meeting space are also planned. “Our plan for Aurora is to construct a modern best-in-class casino and hotel in an ideal location off I-88 that will allow us to serve the millions of visitors to the adjacent Simon Premium Outlet Mall,” said Penn CEO Jay Snowden.

The Joliet relocation will cost $185 million and be located in the Rock Run Crossings development, several miles from the current site of Empress Joliet. It will encompass a meeting-and-event center comparable in size to Aurora’s, along with 800 slots and 50 table games, a baccarat room, and another Barstool Sportsbook. “In Joliet, our planned casino will be located in the mixed-use project in close proximity to the I-80 and I-55 interchange, which offers exceptional visibility and accessibility. These two projects will significantly improve our offerings in the highly attractive Chicagoland market, while creating hundreds of new full-time jobs for the local communities,” remarked Snowden.

Hollywood Columbus will gain 180 hotel rooms at a cost of $100 million, along with new food-and-beverage options. “Since opening in 2012, our Columbus property has experienced tremendous growth and the addition of a hotel at the property will create a true regional destination,” Snowden asserted.

M Resort will be augmented with 384 hotel rooms (for a grand total of 774), built at an estimated cost of $206 million. Snowden predicted, “The addition of a second tower will benefit from the strong demand in the Henderson locals market, while providing additional capacity for the group business that is drawn to our market-leading resort and amenities, including our highly successful partnership with the Las Vegas Raiders.”

Wrote GLPI CEO Peter Carlino, “We support the relocation of [Penn’s] riverboat casinos to land-based operations, as we believe this provides a superior guest experience, particularly as the proposed Aurora and Joliet properties are sited to benefit from existing and long-term traffic-driving developments. Further, we believe the creation of a new hotel at Hollywood Casino Columbus will significantly improve the performance of that property and ultimately enable [Penn] to transform it into a regional destination.”

One person who had mixed feelings about the transaction was Deutsche Bank analyst Carlo Santarelli, who characterized the Illinois build-outs as “defensive,” an allusion apparently directed at new casinos in Rockford (Hard Rock International) and Waukegan (Full House Resorts). Full House CEO Dan Lee regularly dismisses the Penn properties in investor calls, describing them as cramped, remote, and outdated.

Penn’s performance in the Land of Lincoln, added Santarelli, was “relatively lackluster” and “we question how investors will receive the addition of an assumed ~$45 mm in new lease debt (~$360 mm of capitalized rent debt), as well as $225-275 mm of incremental spend off PENN’s balance sheet, at a time when gaming balance sheets are under scrutiny.”

Santarelli was more optimistic about the Columbus and Las Vegas initiatives, writing, “We view both … hotel tower projects as front-footed and growth-oriented, as both properties have experienced strong demand and are well positioned within their geographies.”