Cannery Casino Resorts sells Pennsylvania racetrack casino

16 May 2014
LAS VEGAS -- Las Vegas-based Cannery Casino Resorts, LLC has sold its Pennsylvania racetrack casino for $465 million to Penn National Gaming, Inc.’s real estate investment trust spin-off.

The transaction, announced Wednesday, is subject to regulatory approval and expected to close by the end of the year. Cannery operates two Cannery-branded casinos in North Las Vegas and on the Boulder Highway, which were not part of the transaction.

Gaming and Leisure Properties is acquiring The Meadows Racetrack and Casino near Pittsburgh. The casino has 3,317 slot machines, 61 table games and 14 poker tables. A 154-room hotel is under construction at the facility and will be operated by a third party.

“This is a terrific deal for Cannery Casino Resorts, and a great outcome for our employees, partners and customers at the Meadows,” Cannery co-CEO Bill Paulos said in a statement. “All net proceeds from this transaction will be used to reduce our debt.”

The deal marks the second purchase for Gaming and Leisure Properties since the company was spun off from Penn National. Penn, which owns M Resort, spun off of 21 of its 29 casinos and racetracks into the REIT. Penn operates the resorts.

By law, REITs don’t pay federal income taxes. With real estate as their primary source of income, REITs are required to distribute at least 90 percent of their taxable earnings to shareholders.

Gaming and Leisure Properties is expected seek a third party to operate the Meadows, which could be Penn National. Analysts said, however, that Penn could be limited to one-third interest. Pennsylvania has a casino ownership cap and Penn owns 100 percent of Hollywood Casino near Harrisburg.

“This acquisition is a prime example of how we are uniquely able to tailor transactions to suit the specific needs of sellers,” Gaming and Leisure Properties CEO Peter Carlino said in a statement.

Following the spin-off last year, Gaming and Leisure Partners acquired the Casino Queen Hotel in East St. Louis, Ill., for $140 million.

“We expect the Meadows acquisition to appease GLPI investors who have been clamoring for asset acquisition activity to heat up,” Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski told investors. “At this point, asset acquisition and rental income diversification are likely to serve as the primary catalysts to GLPI share price appreciation over the near term.”

Wieczynski told investors the western Pennsylvania gaming market is somewhat oversupplied.

Last year, Meadows reported $254.3 million in gaming revenue, a 7 percent decline, according to the Pennsylvania Gaming Control Board.

Copyright GamingWire. All rights reserved.