Gaming and Leisure Properties Inc (GLPI), the gambling industry’s first real estate investment trust (REIT), will acquire all of Pinnacle Entertainment’s real estate’s assets in an all-stock transaction that values the holdings at $4.74 billion.
Pinnacle rebuffed a GLPI offer in March worth $4.1 billion.
Under the terms of the deal, Pinnacle’s operating unit and the real property of Belterra Park Gaming & Entertainment will be spun off into a separately traded public company known as OpCo, while GLPI will acquire the real estate assets of the remaining company, PopCo.
Pinnacle shareholders will own roughly 27 percent of the combined company and 100 percent of OpCo.
The enlarged group will form a powerhouse real estate investment trust that will own 35 casino and hotel facilities in 14 states, the third-largest publicly traded triple-net REIT in the world.
Pinnacle traces its history back to 1938, when Jack L Warner opened the Hollywood Park Racetrack.
Today it owns 15 casino properties across the US and also has a 26 percent stake in Asian Coast Development Ltd, the owner and developer of the Ho Tram Strip in Vietnam.
The company changed its name from Hollywood Park Inc to Pinnacle Entertainment when the racetrack was sold to Churchill Downs in 2000.
In 2013 Pinnacle acquired Ameristar Casinos for $869 million and $1.9 billion of assumed debt, adding nine new properties to its portfolio and essentially doubling in size.
“Pinnacle’s real estate portfolio brings great properties to GLPI and adds one of the leading gaming operators as a new tenant,” said Peter Carlino, Chairman and CEO of GLPI. “Pinnacle’s proven track record of continued improving operating performance will make GLPI even stronger as we pursue long-term growth.”
The REIT Stuff
A REIT is a company that purchases property through combined investment. It works like a mutual fund, allowing both large and small investors to own a shares of real estate.
But because they receive special tax considerations, REITS can trade at higher stock market prices, and so typically offer investors high yields.
GLPI, formed in November 2013, is a spin-off of Penn National Gaming and owns 21 casino and racino properties across the US, including the Penn National Race Course in Grantville, Pennsylvania. It currently trades on the NASDAQ.
“This is a compelling transaction that unlocks the value of Pinnacle’s real estate assets and delivers substantial value to our shareholders,” said Anthony Sanfilippo, CEO of Pinnacle Entertainment.
“In addition, Pinnacle shareholders will have the opportunity to benefit from owning a larger, more diversified REIT. As a premier operator of casino, resort and entertainment properties, Pinnacle will continue to improve its operating efficiency, expand property level margins and pursue growth opportunities that leverage the Company’s proven management and development skills.”