Meadows license, gaming assets sold for $138M

March 30, 2016

Paul Gough
Pittsburgh Business Times

The soon-to-be-owner of the Meadows Racetrack and Casino has reached a $138 million deal with a Las Vegas-based casino operator for the gaming licenses and gaming-related assets of the North Strabane attraction.

The entire Meadows, real estate and all, is being sold to Gaming and Leisure Properties Inc. (Nasdaq: GLPI) by its longtime owner, Cannery Casino Resorts LLC, for $440 million. But all along, the plan was for GLPI to retain the real estate but sell off the casino's operating assets and licenses to a third party, which would run the casino. GLPI would then hold the Meadows' land and buildings as a real estate investment trust.

Under the $138 million deal between GLPI and Pinnacle Entertainment Inc. (Nasdaq: PNK), GLPI will continue as planned to own the Meadows' real estate and will receive $25.5 million in rent from Pinnacle in the first year of the 10-year deal and will receive increases that will top out at $31 million a year, according to GLPI. As a triple net lease, Pinnacle will also pay all the maintenance, taxes and insurance, Pinnacle said in a statement.

The sale of the Meadows to GLPI and the sale of the operating assets from GLPI to Pinnacle are scheduled to take place the same day sometime in the third quarter after approvals from the Pennsylvania Gaming Control Board and the Pennsylvania Harness Racing Commission, the state regulators for the casino and the racetrack, are received.

Pinnacle is no stranger to the casino business. It owns 15 regional casinos in 10 states.

“As a premier operator of high-quality regional gaming assets, Pinnacle is well suited to maximize the operating potential of The Meadows, while the escalator provisions in the lease enable GLPI to participate in the long-term success of the property," said GLPI Chairman and CEO Peter M. Carlino in a statement. "This transaction allows us to unlock value in the asset while growing and diversifying our rental income."

The complex transaction is just the latest twist in the life of the Meadows, which started out decades ago as a racetrack but became one of Pennsylvania's first casinos in 2007. Cannery, the founding owner and operator, built the casino's business but decided to sell to GLPI in May 2014. But the deal was later caught up in an October 2014 lawsuit over disclosures that threw the entire sale into doubt. That lawsuit and the sale were settled in December 2015 with a lower purchase price.

The Meadows is one of the biggest employers in Washington County, and through local revenue sharing one of the biggest funders of community and economic development projects as well. The property includes 3,170 gaming machines, 74 table games, 11 poker tables, 11 restaurants and bars, a bowling center, and the long-standing 5/8-mile race track. There's also a hotel that is attached by skyway, although that is not part of the deal.

"We are excited to announce this compelling acquisition and look forward to welcoming the team members and guests of the Meadows into the Pinnacle Entertainment family," Pinnacle Entertainment CEO Anthony Sanfilippo said in a statement. "The Meadows is an attractive gaming entertainment business, with a broad base of operations and high-quality gaming and non-gaming amenities. The Meadows will complement our existing collection of terrific properties and provide additional operational scale, geographic distribution, and another wonderful location, the greater Pittsburgh area, for guests of Pinnacle Entertainment to visit."

This isn't the first time that GLPI and Pinnacle Entertainment have worked together. GLPI announced in July 2015 it would buy the real estate assets of Pinnacle in a $4.75 billion all cash deal to create a casino industry REIT. Both companies said the Meadows deal doesn't depend on the overall deal being completed, and the leases are separate.

Back