Pennsylvania gaming is heading west.
Well, not that far west. And not the entirety of PA gaming either.
But at least one PA-based gaming company is pushing into the Great Lake State.
Penn National has officially inked a deal to purchase Greektown Casino-Hotel in Detroit from Jack Entertainment.
The casino property itself will be sold to VICI Properties.
The full cost?
$1 billion deal for Penn National
Penn National currently owns both the Hollywood Casino, at Penn National Race Course, and the Meadows. Both properties are PA-based.
What’s pushing Penn National to make a run at Michigan?
Money, of course. And opportunity.
At least that’s how Penn National’s Chief Operating Officer Timothy Wilmott, framed it:
“Detroit is undergoing an exciting renaissance as a result of billions of dollars of new investments in the city’s residential, commercial, entertainment and cultural center, all of which are driving new residents, businesses, tourists and employment to the downtown area.”
“Greektown is the only casino in the heart of downtown, and we look forward to welcoming patrons from the many nearby attractions, such as Comerica Park, Ford Field, Little Caesars Arena, the city’s theater district, GM’s Renaissance Center and the Cobo Conference Center. We also look forward to working with JACK Entertainment and VICI to ensure a seamless transition for all of our constituents including customers, employees, vendors, local government and Michigan regulators.”
But it’s not just the existing enterprise and some citywide upgrades that have Penn National so happy to find themselves in their new home.
Sports betting FTW?
If you weren’t paying attention following the recent elections, you might have missed something important.
Specifically, Rep. Brandt Iden, the state’s champion for online gaming legislation, managed to squeak out a victory over his gambling-critical opponent.
This, after the Michigan House of Representatives passed the Lawful Internet Gaming Act earlier this year. The bill currently sits in the Senate, awaiting further updates to language that would include sports betting.
While roadblocks remain, sports betting isn’t as far-fetched as it once was in Michigan. That makes Penn National’s purchase a potentially shrewd one.
But that’s no surprise considering their operating procedure to this point.
They were first to market in West Virginia. They are already operational in Mississippi. Now they are going to be first to market for PA sports betting, too.
The full cost of play
Really, why else shell out $300 million for the rights to the casino, plus another $700 million from VICI for the property, to purchase a casino in a formerly depressed city?
As for other specifics of the Greektown deal, Penn National will enter into a triple-net lease agreement with VICI for the Greektown facility.
The lease includes annual rent of approximately $55.6 million and an initial term of 15 years, along with four 5-year renewal options.
The rent coverage ratio in the first year after closing is expected to be 1.8x.
Penn National will finance the deal with a combination of cash on hand and debt.
Penn National’s big push
With 100,000 square feet of casino space, 2,700 gaming machines, and 60 table games, a poker room, three restaurants, seven fast casual food outlets, four bars and a coffee shop, it’s easy to see what Penn National saw in Greektown.
It probably also won’t surprise you to hear that Detroit’s not the only city seeing some of that PA push.
Penn National is currently wrapping up two other acquisitions, keeping them at the forefront of gaming news.
Just last month, Penn National put the finishing touches on a deal to acquire Bucks County-based Pinnacle Entertainment for a whopping $2.8 billion.
This comes on the heels of the casino conglomerate’s acquisition of Margaritaville Resort Casino in June.
With the Greektown deal now in place, Penn National has staked their claim as one of the preeminent gaming companies, not just in PA, but the US.
And while it will be a long time before we can say anything definitive about the decision to go all-in on Detroit, it seems stockholders are already feeling good about the deal.
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