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Penn National earnings show effect of spinoff

The former parent company of Hollywood Casino Perryville announced that location’s quarterly revenue for the last time Thursday: $12.5 million.

Hollywood Casino Perryville

Because the casino changed hands on Nov. 1, Penn National got roughly one-third of the quarterly revenue that Hollywood Casino Perryville provided in the fourth quarter of 2013. (The Daily Record / Maximilian Franz)

Effective Nov. 1, Gaming and Leisure Properties Inc. (GLPI), which was formerly a subsidiary of Penn National, became a separate, publicly traded company operating as a real estate investment trust. Penn spun off ownership of the REIT to shareholders.

GLPI now owns and operates Hollywood Casino Perryville and Hollywood Casino Baton Rouge, as well as the sites of 19 Penn National casinos that it now leases to the casino operator.

Federal tax laws require that a real estate investment trust retain an active, operating business following a spinoff, said Eric Schippers, a spokesperson for Penn National, in an email to The Daily Record. Penn saw the Perryville and Baton Rouge locations as ideal for this purpose, he said, based on the lack of a hotel at each location and the length of ownership. The Baton Rouge casino is on a riverboat.

“One added benefit was it also allowed Penn to pursue ownership of the Prince George’s license,” said Schippers. “That was not a deciding factor, just an added benefit.”

The company has no ability to get the casinos back, he explained, now that they belong to a separate company.

“What they’re going to do with the two casinos, including Hollywood Perryville, that they (GLPI) own outright, I don’t know,” said James Karmel, president and chief analyst of Gaming Atlantic, a casino gaming consultancy. “I think there are probably a lot more questions than answers now as far as what’s going to happen with the REIT.”

So Penn National Gaming Inc., based in Wyomissing, Pa., no longer owns nor operates Maryland’s first casino in Perryville. Because the casino changed hands on Nov. 1, Penn National got roughly one-third of the quarterly revenue that Perryville provided in the fourth quarter of 2013. Between that and the Baton Rouge site, Penn saw a dent in its income from cutting out $30.1 million in revenue that it had gotten one year before.

The company also incurred a $1.06 billion non-cash goodwill impairment charge and $14.1 million in spinoff-related expenses to make a separate entity out of GLPI.

“There is much noise in the fourth-quarter results regarding the spin,” said Penn National President and CEO Timothy J. Wilmott, during a conference call with investors Thursday. He emphasized that the transaction “created a lot of shareholder value,” but only mentioned Perryville specifically when summarizing the spinoff transaction and detailing its impacts on revenue.

Perryville aside, delegating the real estate responsibilities to GLPI does allow Penn to focus more on management responsibilities, said David G. Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas. And having two casinos on the books gives GLPI more revenue to work with for acquisitions, he said.

Penn National’s stock closed at $12.01 Thursday, up 6.28 percent. GLPI closed at $35.97, up 4.2 percent.