GLPI - Gaming and Leisure Properties Enters into Sale Leaseback and Development Funding Transactions with Bally's Corporation Totaling $1.585 Billion at Blended 8.3% Initial Cash Yield | Benzinga
Multi-Faceted Transaction Further Expands and Diversifies GLPI's Industry-Leading Regional Property Portfolio; Provides Bally's with Financing for its Highly-Anticipated Flagship Chicago Casino Facility
WYOMISSING, Pa., July 12, 2024 (GLOBE NEWSWIRE) -- Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) ("GLPI" or "the Company"), announced today that it has entered into a binding term sheet with Bally's Corporation (NYSE:BALY) ("Bally's") pursuant to which the Company intends to acquire the real property assets of Bally's Kansas City Casino ("Bally's Kansas City") and Bally's Shreveport Casino & Hotel ("Bally's Shreveport") as well as the land under Bally's permanent Chicago casino, and provide construction financing for the Bally's Chicago Casino Resort ("Bally's Chicago") for aggregate consideration of approximately $1.585 billion representing a blended 8.3% initial cash yield. In addition, GLPI secured adjustments to improve the purchase price and related cap rate related to the existing, previously announced, contingent purchase option for Bally's Lincoln Casino Resort ("Bally's Lincoln"), as well as the addition of a right for GLPI to call the asset beginning on October 1, 2026.
$1.19 Billion Chicago Flagship Casino Development Investment
GLPI intends to fund construction hard costs of up to $940 million at an 8.5% initial cash yield with the remainder to be funded by Bally's with the sale leaseback proceeds related to Bally's Kansas City and Bally's Shreveport along with other funding sources such as Bally's Chicago's planned initial public offering and cash flows from operations. Funding is expected to occur from August 2024 through December 2026. GLPI will own all funded improvements, which will be leased to Bally's with rent commencing at a rate of 8.5% as advances are made. The total project's costs are currently expected to be approximately $1.8 billion, inclusive of construction, land, and rent.
In addition to the development funding of hard costs, GLPI also intends to acquire the Chicago land for approximately $250 million before development begins. Upon GLPI's purchase of the Chicago land, rent will commence under a new lease carrying a 15-year initial term with an initial cash yield of 8.0%. The new lease will be cross-defaulted with the construction development funding agreement. Upon completion of the improvements and acquisition of the land, GLPI will own substantially all of the real estate land and improvements related to the Chicago casino and hotel for a total investment of $1.19 billion and blended initial cash investment yield of 8.4%. Upon stabilization of the property's operations, the rent coverage for the lease is expected to be in the range of 2.0x – 2.4x.
$395 Million Kansas City and Shreveport Sale Leaseback Investment
GLPI will purchase the real property assets of both Bally's Kansas City and Bally's Shreveport for total consideration of $395 million. The two properties will be in a new Bally's Master Lease that will be cross-defaulted with the existing Bally's Master Lease with initial cash rent pursuant to the agreement for the two new properties of $32.2 million, representing an 8.2% initial cash capitalization rate. Total rent coverage on the Kansas City and Shreveport assets is expected to be 2.2x in the initial year post acquisition. The Company expects to close on the proposed Bally's Kansas City and Bally's Shreveport sale leaseback transactions as early as Q4 2024 subject to customary regulatory and other approvals.
In total, the Chicago, Kansas City, and Shreveport transactions represent a blended 8.3% yield and are expected to be funded on a staggered basis with cash on hand, retained operational cash flow, availability on GLPI's revolving credit facility, and proceeds from potential capital markets activity.
The transactions are subject to several conditions as well as certain third-party consents and regulatory approvals. Key conditions include but are not limited to: (a) valid assignment of the current ground lease to GLPI or acquisition by GLPI of the fee interest in Chicago; (b) the final structure and pro forma capitalization of Bally's following the proposed Standard ...