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Tropicana Las Vegas on Market, Gaming and Leisure Could Explore Leaseback, Outright Sale

Gaming and Leisure Properties — the owner of the property assets of the Tropicana Las Vegas — is reportedly shopping the iconic Strip venue and is considering a sale-leaseback transaction or an outright sale.

An article in the Las Vegas Review-Journal confirms the gaming property is for sale, capping months of speculation regarding the fate of the venue that’s been situated at the Tropicana-Las Vegas Boulevard intersection since 1957.

Less than two weeks after the coronavirus shutdown crippled the US gaming industry in March, Gaming and Leisure reached a deal with Penn National Gaming, the operator of the Tropicana, to acquire that real estate and the ground lease of an asset in Morgantown, Pa. for $337.5 million in rent credits.

At the time, the transaction was viewed as pivotal to ensuring Penn’s ability to survive in a zero-revenue climate. But that $337.5 million in lease credits is below the $360 million Penn paid for the Tropicana in 2015, and well-off the $700 million some analysts forecast the property could fetch.

Fire Sale Prices

Following a spate of high price tag Strip real estate deals last year and comments by Penn CEO Jay Snowden that the operator received unsolicited interest in the Tropicana, it was widely expected that the property would be the first on the Strip to be sold this year.

Then along came the coronavirus pandemic, a scenario that ground gaming real estate activity to a near halt because potential sellers didn’t want to part with assets at fire sale prices. The transactions that took place thus far in 2020, including GLPI’s Tropicana deal, are at depressed prices. For example, Twin River Worldwide Holdings (NYSEARCA: TRWH) recently scooped up three casinos, including Bally’s Atlantic City, for just $180 million.

The venue should be able to at least command the $360 million it swapped for in August 2015, Michael Parks of CBRE Group’s global gaming group, listing broker for the Tropicana, told the Review-Journal. That would be a decent profit for GLPI, but also a price point indicative of the rough gaming real estate climate. That’s because it implies zero appreciation over the past five years.

The gaming real estate investment trust (REIT) is open to an outright divestment or a sale-leaseback transaction, according to the Review-Journal. In the latter, GLPI would retain the property and lease it to a gaming company, with the operator being responsible for rent and enhancements to the venue.

Tropicana is expected to reopen on Sept. 1, making it one of the lengthier temporary closures in Las Vegas.

Buyer Speculation

Potential buyers for the Tropicana haven’t been mentioned as of yet, something that’s been the case since rumors of a sale kicked up late last year.

Given the damage wrought on industry balance sheets by the COVID-19 pandemic, the field of buyers for gaming properties, at least over the near-term, could be shallow.

Golden Nugget owner Tilman Fertitta is rumored to be interested in Strip assets. Companies with strong balance sheets and sound management teams that could make a run at the Tropicana include TRWH and Monarch Casino & Resort. But neither has publicly expressed an interest in the venue.

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