Gaming & Leisure Properties agrees to new master lease with PENN Entertainment

10 October 2022
(PRESS RELEASE) -- Gaming & Leisure Properties, Inc. announced today that it agreed to create a new master lease with PENN Entertainment, Inc. for seven of PENN’s current properties. The companies have also agreed to a funding mechanism to support PENN’s pursuit of relocation and development opportunities at several of the properties included in the new master lease. The transaction, including the creation of the new master lease, is subject to customary regulatory approvals and is expected to be effective January 1, 2023.

Pursuant to the terms agreed upon by the parties, the current PENN master lease will be amended to remove PENN’s properties: Hollywood Casino - Aurora and Hollywood Casino - Joliet in Illinois; Hollywood Casino - Columbus and Hollywood Casino - Toledo in Ohio; and Henderson, M Resort in Nevada and those properties will be added to the new master lease. In addition, the existing leases for the Hollywood Casino at The Meadows in Pennsylvania and Hollywood Casino Perryville in Maryland will terminate and these properties will be transferred into the new master lease. GLPI has agreed to fund up to $225 million for the relocation of PENN’s riverboat casino in Aurora at a 7.75% cap rate and to fund up to $350 million for the relocation of the Hollywood Casino Joliet as well as the construction of hotels at Hollywood Casino Columbus and a second hotel tower at M Resort Spa Casino at then current market rates.

The new master lease and GLPI’s funding commitment will allow PENN to pursue several growth projects including the planned projects in Aurora and Joliet, Illinois; Columbus, Ohio; and Henderson, Nevada.

“Our ongoing support of our roster of leading regional gaming operator tenants through innovative transaction structures has proven to be mutually beneficial and we are confident that this new master lease with PENN Entertainment will extend our record of success on this front,” said Peter Carlino, Chief Executive Officer of Gaming & Leisure Properties.

“Throughout its 28 years as a public company, PENN Entertainment has emerged as the industry’s pre-eminent developer of regional gaming assets. GLPI is excited to structure a new master lease with our long-term tenant that includes a funding option to allow PENN to extend its legacy of growth through development by pursuing attractive opportunities in Illinois, Ohio and Nevada. 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. Finally, as with every transaction we pursue at GLPI, this new master lease structure comes with attractive rent and financing terms for both parties under a proven master lease structure that offers GLPI material downside protection while offering us an opportunity to benefit from PENN’s long-term growth.”

The terms of the new master lease and the amended PENN master lease are expected to be substantially similar to the current PENN master lease with the following key differences:
The new master lease will be cross-defaulted, cross-collateralized and co-terminus with the existing PENN master lease

  • The initial term of the new master lease will expire on 10/31/2033, with three 5-year extensions at PENN’s option (consistent with the term remaining on the current Penn master lease)

  • All rent in the new master lease will be fixed with annual escalation of 1.50%, with the first escalation occurring for the lease year beginning on November 1, 2023

  • The rent for the new lease will be $232.2 million in base rent. The rent for the original PENN master lease will be $284.1 million, consisting of $208.2 million of Building Base Rent, $43.0 million of land base rent, and $32.9 million of percentage rent