In a strategic move within the gaming sector, Gaming and Leisure Properties (GLPI) announced the acquisition of the real estate assets of two South Dakota casinos and one Nevada casino for a total of $105 million. The acquired properties include the Silverado Franklin Hotel & Gaming Complex and the Deadwood Mountain Grand Casino in Deadwood, South Dakota, and Baldini’s Casino in Sparks, Nevada.
Lease agreements and investment:
Simultaneously with the acquisition, GLPI and Strategic Gaming Management will enter into two cross-defaulted triple-net lease agreements, each for an initial 25-year term with two 10-year renewal periods. GLPI has allocated $5 million for capital improvements, bringing the total investment to $110 million.
The new leases entail an initial aggregate annual rent of $9.2 million, inclusive of capital-improvement funding, representing an 8.4% capitalization rate. Rent will undergo a fixed 2% annual escalation starting in year three, with a CPI-based annual escalation beginning in year 11 of the greater of 2% or CPI capped at 2.5.
Peter Carlino, GLPI’s chairman and CEO, expressed enthusiasm about the acquisition, stating, “With our acquisition of the Silverado, DMG, and Baldini’s, we further diversify our portfolio, while expanding our tenant roster through our new relationship with Strategic, a dynamic and growing gaming operator.” The addition of Strategic’s properties brings GLPI’s portfolio to 65 properties in 20 states.
Strategic’s perspective:
As the source reports, CEO J. Grant Lincoln of Strategic Gaming Management emphasized the strategic fit between the two companies, stating, “As we explored the options for a sale-leaseback partner, GLPI rose above the rest, given their unique approach and emphasis on partnership, as well as their experience as gaming operators.” Lincoln highlighted Strategic’s commitment to bottom-line results and ongoing growth in competitive gaming markets.
Silverado Franklin, a pioneering gaming property in South Dakota since its opening in 1990, boasts 245 slots, 16 table games, two restaurants, four bars, and a 68-room hotel. With a planned hotel renovation in 2024, funded by GLPI’s capital improvement proceeds, Silverado Franklin continues its legacy of excellence.
Deadwood Mountain Grand (DMG), established in 2011, offers a diverse gaming experience with 141 slots, 8 table games, two food and beverage locations, a 208-space parking garage, a sportsbook, and an event center, all sprawled across an 11-acre property in Deadwood.
Baldini’s, located in Sparks, Nevada, features 492 slot machines in a 43,000-square-foot casino that opened its doors in 1988. The property also includes a sportsbook, restaurants, bars, ample parking, and additional office and support space, contributing to its appeal as a local gaming destination.
Financial advisory:
Citizens JMP Securities acted as the financial advisor to Gaming and Leisure Properties, while CBRE Securities served as the financial advisor to Strategic Gaming Management.
In summary, GLPI’s acquisition of the real estate assets of Silverado Franklin, Deadwood Mountain Grand, and Baldini’s Casino underscores its strategic expansion and commitment to fostering mutually beneficial partnerships within the gaming industry. As GLPI continues to evolve its portfolio and explore growth opportunities, the acquisition marks a significant milestone in its journey towards sustained success and innovation.
