Penn National Gaming announced that it has agreed to sell the Tropicana Las Vegas to Gaming and Leisure Properties, Inc. (GLPI). The deal for the casino on the south end of the Strip is for $337.5 million.
Interestingly, the $337.5 million will not be paid in cash, but rather in a “non-cash rent payment.” The way it works is that Penn National will continue to operate the Tropicana, so unless GLPI makes significant changes, visitors (once there are visitors) will likely not see much of a difference. GLPI will take on the costs of ownership, leasing the property back to Penn National.
The “non-cash rent payment” will go toward paying that lease. Penn National is effectively getting a rent credit.
Penn National made this move to help the company’s liquidity, as all of its casinos are closed as the world tries to slow the spread of the novel coronavirus. One of the unfortunate consequences of this is that it is furloughing 26,000 employees without pay starting April 1st. Jay Snowden, President and Chief Executive Officer of Penn National said in a letter to team members:
This decision was extremely difficult to make for all of us at Penn. Penn National is a family, and we deeply regret the hardship this will place on you and your loved ones. We are extremely motivated and focused on re-opening our properties as soon as it is safe and legal to do so. To try to help ease some of the burden, we’re maintaining your medical benefits through June 30, for those team members who are currently enrolled in our health plans.
As part of the deal, GLPI has also given Penn National the option to acquire the operations of Hollywood Casino in Perryville, Maryland. Additionally, the two companies have agreed to a lease for Penn National’s planned casino in Morgantown, Pennsylvania.
“We greatly appreciate the cooperation, creativity and partnership shown by GLPI during this challenging time,” said Snowden. “While this transaction will help to relieve liquidity pressure in terms of rent obligations, we are committed to taking further steps to reduce our ongoing operating expenses in order to ensure we have a healthy business to return to when we are able to re-open our doors.”
Some of those steps include:
Meaningful pay cuts for the CEO and remaining property and corporate leadership teams effective April 1 until such time as the Company determines that its properties have substantially returned to normal operations;
The Board of Directors have elected to forgo any of their cash compensation effective April 1 until such time as the Company determines that its properties have substantially returned to normal operations;
The majority of Corporate team members will also be furloughed, and the Company will be operating with a minimum, mission critical staffing of less than 850 team members companywide during the closures.
The company has created a COVID-19 Emergency Relief Fund as part of the Penn National Gaming Foundation to help employees and local relief organizations. The company has raised $1.2 million for the fund and Snowden and other executives have contributed $425,000.
Photo credit: Jared via Flickr