The Cordish Cos., the Baltimore-based developer behind Live! Casino & Hotel Maryland and Power Plant Live!, will sell its three casino properties to a real estate investment trust that specializes in gaming sites.
The deal with Gaming and Leisure Properties, announced Monday, is valued at as much as $1.8 billion, according to a news release sent by the Pennsylvania-headquartered firm. Cordish will relinquish ownership of the real estate at its casinos at Arundel Mills in Hanover and in Philadelphia and Pittsburgh but will lease back the properties and “continue uninterrupted to own, control and manage all the gaming operations of the facilities,” the release said.
Such a sale-and-lease-back transaction could provide Cordish with cash to finance new projects or expand current ones, experts in the gaming and real estate industries said, and has occurred among other casino operators in the country.
“It gives the gaming firm the advantage of still profiting but spinning off the real estate of it,” said James Karmel, a casino gaming analyst and author of “Gambling on the American Dream: Atlantic City and the Casino Era.”
“They’re raising capital without having to get the loan or do some kind of stock offering, because Cordish is still a private company and is more limited,” Karmel said.
The partnership between Cordish and Gaming and Leisure Properties will extend past the closing of the deals: The two have agreed to a co-investment partnership for seven years after closing on the Pennsylvania properties, in which Gaming and Leisure Properties will join Cordish on “any new gaming development project” and will invest in 20% of Cordish’s equity through the project’s life span.
Gaming and Leisure Properties also will have a right of first offer or refusal for any future sale-lease-back deals, or similarly structured deals, that Cordish pursues in the next five years, according to the release.
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“We look forward to continue delivering quality entertainment experiences in the markets we serve now, and collaborating and partnering with [Gaming and Leisure Properties] on opportunities to grow the Live! brand in the future,” said David Cordish, chairman of the Cordish Cos., in a statement.
The sale of the Maryland property is expected to close by the end of this year while the Pennsylvania transaction is set to finalize in early 2022, according to the companies. The sales are subject to necessary approvals by state gambling regulators.
In taking over the casino real estate, Gaming and Leisure Properties will assume some of the debt associated with the properties and pay Cordish an undisclosed amount of cash as well as grant the Baltimore development firm $323 million of newly issued operating partnership units in the Wyomissing, Pennsylvania-based real estate investment trust.
Cordish will lease the casinos initially for 39 years with renewal options that would extend that to a maximum of 60 years. The rent for all three starts at $125 million a year and will increase 1.75% a year after the second year.
“We are excited to establish a relationship with The Cordish Companies, one of the country’s preeminent developers of large-scale experiential real estate projects, casinos, hospitality and entertainment districts,” said Peter Carlino, Gaming and Leisure Properties’ chairman and CEO.
Cordish’s portfolio includes casinos and hotels as well as shopping centers, apartment buildings and office space. Its work includes Johns Hopkins University’s Hopkins Square, Towson Square, the Ocean City outlets and Spark Baltimore, a co-working space adjacent to Power Plant Live! near the Inner Harbor. It has similar entertainment developments in Atlanta; Kansas City, Missouri; Philadelphia; Arlington, Texas; and elsewhere.
Its other casino properties are located in Tampa, Florida, and Hollywood, Florida, and it runs a Bally Sports Live entertainment complex in St. Louis. The company did not say where else it is pursuing casino or gaming operations. The company was attempting to develop a casino in Richmond, Virginia, but voters there just voted down a referendum to allow a casino in the city.