Penn National has sold the Tropicana Las Vegas to Gaming and Leisure Properties for $307.5m in rent credits. The Pennsylvania-based real estate investment trust has said it plans to put the property on the market.
Real estate investment trust Gaming and Leisure Properties completed its purchase of the Tropicana Las Vegas Casino Hotel Resort from Penn National Gaming on 16 April.
Penn National will continue to operate the Strip resort once the property reopens, under a two-year lease agreement with GLPI.
Nevertheless, the Pennsylvania-based REIT said it still intends to conduct a sale process for the 1,500-room casino resort and its 34- acre site.
GLPI acquired the Tropicana from Penn National for $307.5m in rent credits, which will be applied to existing leases beginning in May.
If a sale is made in the first year, Penn is set to receive 75 percent of the net proceeds above $307.5m. If completed in the second year, the casino operator will receive half the proceeds over the same basis.
“GLPI believes its collaborative and mutually beneficial outcome with Penn National provides us and our investor base greater visibility and predictability for rent receipts over the remainder of 2020,” said the company’s chairman and CEO Peter Carlino in a statement. “We are also grateful to our credit facility lenders for their support in facilitating the transaction with Penn National in a manner that acknowledges the unforeseen circumstances and that represents a unified spirit of cooperation to overcome the challenges presented by COVID-19.”
Penn National Gaming CEO Jay Snowden said the regional casino operator had “materially reduced” the monthly costs necessary to maintain its 41 shuttered properties, allowing the company to “weather” the COVID-19 crisis.
In a letter to stakeholders, Snowden said the sale of the Tropicana and an agreement with the company’s principal lenders to suspend certain payments through the end of 2020, reduced Penn’s monthly cash burn to approximately $83m.
“We have taken swift measures to significantly reduce our daily operating expenses through the GLPI transactions, company-wide furloughs (of 26,000 workers), decreases in compensation to our executive team and board of directors, and other cost mitigation measures,” Snowden wrote.
In a research note at the end of April, Macquarie Securities gaming analyst Chad Beynon stated that “after accounting for monthly cash burn, the company has enough liquidity to get through the end of 2020”.