Gaming and Leisure Properties Set to Seal $105 Million Acquisition of Strategic Gaming Management Assets

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Gaming and Leisure Properties (GLPI), revealed on Thursday that they are in the midst of completing a $105 million acquisition deal for the property assets of three casinos under Strategic Gaming Management, LLC.

The Pennsylvania-based real estate investment trust (REIT) is set to acquire Baldini’s Casino situated in Sparks, Nevada; and two South Dakota properties: Silverado Franklin Hotel & Gaming Complex and the Deadwood Mountain Grand. As a part of the deal, GLPI and associates of Strategic Gaming Management, will undertake two cross-defaulted triple-net lease agreements, each extending for a starting 25-year term with the opportunity for two ten-year renewal periods. As a part of the closing transactions, GLPI has also dedicated $5 million to go towards capital improvement, bringing their total investment to a lofty $110 million.

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The ongoing acquisition is the second of such significant purchases made by GLPI in this calendar year. Just last February, the REIT announced its $175 million purchase of the property assets of the Tioga Downs Casino Resort in Nichols, New York.

Original owners and operators of the real estate assets of 62 gaming locations crafted across 19 states, GLPI further bolsters its portfolio while also keeping true to its strategic business model of sidestepping volatile gaming markets. Instead, the company has fixed its focus on niche regions often omitted by competitors. For instance, GLPI’s presence in Las Vegas thrives modestly on the real estate of the now dormant Tropicana on the Strip and M Resort in Henderson. In addition to property assets of Tropicana Laughlin, the acquisition of Baldini’s will mark GLPI’s first foray into the Reno-Sparks market and potentially see it expand its Nevada portfolio to four.

In expanding their reach to South Dakota via the purchases of the Silverado Franklin Hotel and Gaming Complex and the Deadwood Mountain Grand, they are stepping onto the South Dakotan terrain for the very first time.

Interestingly, a significant quarter of the $32 million investment undertaken by Silverado since its inception, in buffet renovations, new eateries, and casino remodels, is expected to be used in a hotel refurbishment starting 2024. This capital project will be financed through a fraction of the $5 million of capital improvement proceeds funded by GLPI during the closing of the purchase.

As the buying spree resolves, GLPI is postured to swell its portfolio to 65 properties, further adding to its growing tenant roster, which will culminate to a sizable nine.

Moreover, GLPI secures refusal rights on offerings from other gaming properties Strategic Management might be contemplating to sell, anticipated to be “until Strategic’s adjusted earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs related to GLPI owned assets reaches $40 million annualized.”

Strategic’s first yearly rent payment to GLPI sits at a rate of $9.2 million, predicting a cap rate equivalent to 8.2%, with a 2% yearly increase commencing on the third anniversary, and an inflation-tied escalator beginning after a hiatus of 11 years.