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Cordish to sell 3 casino properties for $1.8B, then lease them back

David Cordish

The Cordish Companies is selling three of its casino properties — including Live! Casino & Hotel in Hanover — for $1.81 billion and then leasing them back, an increasingly popular arrangement in the gaming industry.

The buyer is Gaming and Leisure Properties, Inc. of Wyomissing, Pennsylvania. The other two properties in the transaction are Live! Casino & Hotel in Philadelphia and Live! Casino Pittsburgh, the companies said in a joint news release.

Baltimore-based Cordish will immediately lease back all the properties and continue to own and operate their gaming operations. The transaction includes not only the existing real estate but also a partnership on future Cordish casino developments and potential financing collaborations between GLPI and Cordish in other areas.

The three-property transaction will be financed through a mix of qualified debt assumption, cash, and $323 million of newly issued operating partnership units in GLPI’s operating partnership.

“We have long admired GLPI’s pioneering structure and accomplishments as a public platform,” said David Cordish, chairman of The Cordish Companies. “Cordish is delighted to be partnering with GLPI on this range of transactions, which align two recognized leaders in their respective industries.”

The Hanover transaction is expected to close by the end of this year and the Pennsylvania ones in early 2022, subject to regulatory approvals, financing and other closing conditions.

The sale-leaseback arrangement is one that has become increasingly common in the casino industry. The arrangement allows the seller to cash in on the value of the real estate while, through the leaseback, maintaining the ability to reap gaming revenues.

MGM Resorts has engaged in several sales and leasebacks for its Las Vegas hotel and casino properties, including a $4.2 billion deal in 2019 involving its Bellagio properties.

That year, the Las Vegas Review-Journal, citing a study from Macquarie Research, reported that 90 casino properties across the U.S. had been involved in about $22 billion of real estate investment trust transactions over the previous seven years.

Under the agreement announced Monday, Cordish’s lease for the properties will have an initial term of 39 years, with a maximum term of 60 years, inclusive of tenant renewal options.

The initial annual cash rent for all three properties will be $125 million, with a 1.75% fixed yearly escalator on the entirety of the rent, starting on the leases’ second anniversary.

In addition to the deal for the three casino properties, GLPI and Cordish said they would collaborate on a range of real estate and development opportunities.

For seven years following the close of the Pennsylvania transactions, GLPI will co-invest with Cordish on any new gaming development project, excluding those involving currently owned Cordish properties or existing gaming facilities. GLPI will invest in 20% of Cordish’s portion of the equity in the project throughout the life of the project.

Also, GLPI will have the right of first refusal, for five years following the Pennsylvania closing, on any sale-leaseback of Cordish Live! Entertainment District properties.

For The Cordish Companies, the transaction is the latest evolution in a family-operated business that goes back to 1910 and through four generations. Cordish has grown into a national player in commercial real estate, entertainment districts, sports-anchored developments, casinos, coworking spaces and private equity.

The company has projects throughout the U.S., including in Houston, Tampa, Atlanta, St. Louis and other major cities. Cordish still owns and operates most of the businesses and projects it launched.