The GLPI, Pinnacle Marriage

By Barbra Murray, Contributing Editor

Anthony Sanfilippo, Pinnacle Entertainment

After being courted by Gaming and Leisure Properties Inc. over the last few months, Pinnacle Entertainment Inc. finally says yes. A deal has been made for GLPI to acquire substantially all of Pinnacle’s real estate assets in an all-stock transaction that gives the resulting company an enterprise value of nearly $4.8 billion and the title of the third largest publicly traded triple-net REIT.

It all began in March of this year, when GLPI presented Pinnacle with an unsolicited offer to acquire Pinnacle’s real estate assets as part of a taxable separation arrangement. After a revised proposal, a deal was struck.

Per terms of the definitive agreement, Pinnacle’s operating business and Belterra Park Gaming & Entertainment, a 122-acre entertainment complex in Cincinnati will be combined to create a separately traded public company, OpCo. Pinnacle will then acquire the real estate assets of the remaining company, PropCo. In exchange, Pinnacle shareholders will take 0.85 common shares of GLPI per Pinnacle share for PropCo, and one share of OpCo common stock per Pinnacle share.

It’s a good deal. “It is highly unlikely Pinnacle could have seen a $40 price without taking the offer from GLPI so in that case it is a positive for Pinnacle shareholders,” Brian McGill, research analyst & managing director, Janney Capital Markets, told Commercial Property Executive. Pinnacle shares closed at $40 per share the day of the announcement.

When all is said and done, the combined REIT will boast a 14-state portfolio of 35 casino and hotel properties, eight of which will be leased to Penn National Gaming, 14 to Pinnacle and one to Casino Queen in East St. Louis, Ill.  A GLPI subsidiary will retain ownership of two properties in Baton Rouge and Perryville, Md.  GLPI will pocket an estimated $377 million in initial rent revenues in the first year following completion of the transaction.

If all goes as planned, the deal will close during the first quarter of 2016.  It could be the start of something big for GLPI.

“I would expect GLPI to consider other potential gaming acquisitions as a way to grow further,” McGill added. “With the size of GLPI, it will now demand more attention from the REIT investor community.”