In a strategic play, Gaming and Leisure Properties Inc., a key player on the national real estate investment stage, has announced its acquisition of the field assets of the distinguished Tioga Downs Casino Resort for a handsome sum of $175 million. This property, nestled in the welcoming town of Nichols, New York, is the latest addition to their formidable portfolio.
The transaction materialized between Gaming and Leisure Properties and American Racing & Entertainment, LLC, the latter of which agreed to pass the land onto the Pennsylvania-based real estate investment trust (REIT). In tandem with this sale, both entities have crafted a new, enduring relationship through a 30-year triple-net lease. The lease inaugurates with an annual rent set at $14.5 million, corresponding to a capitalization rate that is a robust 8.3%.
“The initial annualized rent coverage ratio for the lease is expected to be over 2.3x. Rent associated with the lease is subject to a fixed 1.75% annual escalation commencing with the first anniversary and a fixed annual escalation of 2.0% starting in the fifteenth year of the lease, thus extending throughout the remainder of the term,” revealed the statement.
Prior to this deal, Gaming and Leisure Properties boasted ownership of the underlying real estate for 61 gaming havens spread over 18 states. Their entrance into the New York market is marked by this acquisition, setting a new precedent for their expanding influence.
Tioga Downs, occupying 162 acres of prime land, is celebrated for its vibrant casino that spans 32,600 square feet, housing 895 slot machines, 29 table games, and the much-touted FanDuel sportsbook. Complementing the gaming experience is a luxurious 160-room hotel, a 5/8-mile harness horse track, seven dining venues, and an 18-hole golf course that promises to entice and entertain.
The strategic timing of GLPI’s real estate purchase of the racino is notable. It follows the property’s significant $130 million enhancement, a project that reached fruition in 2016 following the awarding of a Class III gaming license by New York regulators.
Sale-leaseback deals are notably beneficial transactions in the gaming industry. Such arrangements provide a thriving mechanism for casino operators to liquidate their land assets, enabling them to harvest considerable upfront capital. These funds have diverse applications, producing opportunities for acquisitions, enhanced shareholder value through buybacks and dividends, and debt reduction strategies.
The funding for acquiring Tioga Downs’ real estate came from Gaming and Leisure Properties’ cash reserves complemented by an equity infusion of $20 million. Citizens JMP Securities played a pivotal role in advising the REIT throughout the transaction.
For Gaming and Leisure Properties, the prudent decision to move into New York market signals a strategic expansion, adding both a new tenant—its ninth—and diversifying geographical engagement. GLPI is known for strategic positioning of casino real estate in markets less prone to volatility and regions where the acquired establishments operate with minimal competition. Tioga Downs aligns seamlessly with this philosophy, a valuable consideration especially as New York looks to broaden its gaming horizons in the downstate area.
“Our locals-oriented property has a staunch customer base, devoid of competition for 85 miles. Its strategic location fortifies it against the rippling effects of gaming expansion in the downstate New York region,” Jeff Gural, CEO of American Racing, affirmed.
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