Gaming and Leisure Properties Paying $175M for Tioga Downs Real Estate

Posted on: February 6, 2024, 05:44h. 

Last updated on: February 7, 2024, 08:32h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Gaming and Leisure Properties (NASDAQ: GLPI) said Tuesday that it’s paying $175 million for the property assets of Tioga Downs Casino Resort in Nichols, N.Y.

Tioga Downs
Tioga Downs Casino Resort in Nichols, NY. Casino REIT Gaming and Leisure Properties is paying $175 million for the venue’s real estate. (Image: Tioga Downs)

Privately held American Racing & Entertainment, LLC is selling the land to the Pennsylvania-based real estate investment trust (REIT). Related to the sale, the two sides are entering into a new, 30-year, triple-net lease with an initial annual rent of $14.5 million at a capitalization rate of 8.3%.

The initial annualized rent coverage ratio for the lease is expected to be over 2.3x. Rent associated with the lease is subject to a fixed 1.75% annual escalation beginning with the first anniversary and a fixed annual escalation of 2.0% beginning in year fifteen of the lease and carrying forward through the balance of its term,” according to a statement.

Before the deal for Tioga Downs, GLPI owned the real estate assets of 61 gaming venues in 18 states. The REIT is entering New York for the first time through the transaction announced Tuesday.

Inside Tioga Downs

Tioga Downs sits on 162 acres and is home to a 32,600-square-foot casino featuring 895 slot machines and 29 table games. The venue also has a FanDuel sportsbook, a 160-room hotel, a 5/8-mile harness horse track, seven eateries, and an 18-hole golf course.

GLPI’s purchase of the racino’s real estate may be well-timed because the operator already allocated $130 million to enhance the property, having done so in 2016 when New York regulators granted it a Class III gaming permit.

Sale-leaseback deals, or SLBs, are commonplace in the gaming industry and often viewed as win-wins for casino operators and real estate companies. Through these agreements, a gaming company can monetize land assets, often garnering large, upfront sums of cash to use for anything, including more acquisitions, shareholder rewards, such as buybacks and dividends, or to reduce debt.

GLPI funded the acquisition of the Tioga Downs real estate with cash on hand and $20 million in equity. Citizens JMP Securities advised the REIT on the deal.

For GLPI, Prudent Move Into New York

With the purchase of Tioga Downs real estate, GLPI adds a new tenant — its ninth — and exposure to another state.

The acquisition jibes with GLPI’s track record of adding casino real estate in less volatile markets and areas where the acquired venue faces little nearby competition. Tioga Downs checks both boxes, and that’s something to consider as New York pursues gaming expansion in the downstate region.

“Our locals-oriented property has a well-protected feeder market with no competition within 85 miles and a very loyal following. Its location largely insulates it from gaming expansion in the downstate New York region,” said American Racing CEO Jeff Gural in the statement.