Gaming and Leisure Properties, Inc. (GLPI) announced on Monday that it has completed the acquisition of the Tropicana Las Vegas from Penn National Gaming. The deal was originally said to be worth $337.5 million, but the final tally is now $307.5 million.

The two companies came to their agreement in March, shortly after Nevada Governor Steve Sisolak ordered all of the state’s casinos to close to try to slow the spread of COVID-19. All commercial casinos in the country have since shut down and Sisolak’s order is extended through at least the end of April.

Penn National will not actually be getting any cash for the sale of the south-Strip property. Instead, the entire $307.5 million is in the form of rent credits.

As GLPI detailed in a press release, at the same time it acquired the Tropicana, it entered into a deal to lease it back to Penn National. This type of practice is common in the gaming industry – companies sell their casinos to generate immediate cash flow and then continue to operate them under a lease agreement. The buyer receives rent payments and adds real estate to their portfolio, while the seller keeps making money from operations.

In this case, though, Penn National is not getting that cash infusion. Instead, the $307.5 million will be used to pay its rent for May, June, July, August, October, and part of November 2020. No word on what happened to September.

That is correct. Penn National was so hard up that it sold a casino for a few months’ rent. Then again, it might not be the worst thing in the world, as who the hell knows when casinos will have much cash flow again?

Penn National will operate the Tropicana for two years with the possibility of three one-year extensions at GLPI’s option.

In the meantime, it sounds like GLPI may try to turn around and sell the property. In the agreement, if GLPI sells the Tropicana within the first year, Penn National Gaming will get 75 percent of the proceeds above the $307.5 million it sold the Trop to GLPI for in the first place. If it is sold in the second year, Penn National will receive 50 percent of the proceeds. After two years, the entire sale goes to GLPI.

Penn National’s operation of the Tropicana will end if the property is sold. Of course, there is always the possibility that the new owner could want Penn National to remain in that role, but those details would have to be agreed upon all over again.

Penn National furloughed 26,000 employees starting April 1st, including most of its corporate office. Company executives have taken “meaningful” pay cuts and Board members are not getting paid. Staff members that were furloughed are still receiving medical benefits through June 30th.

Lead photo credit: Jared via Flickr

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