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Eldorado extends lease with Gaming and Leisure Properties

News

Eldorado Resorts and Gaming and Leisure Properties (GLPI), from which Eldorado leases its Tropicana-branded properties and Belle of Baton Rouge venue in Louisiana, have agreed to extend their lease agreement and freeze rent on these properties for 2020 and 2021.

The lease – for Tropicana Evansville in Indiana, Tropicana Atlantic City in New Jersey, Tropicana Greenville in Mississippi and Tropicana Laughlin in Nevada – has been extended to 20 years, ending on 30 September, 2038, plus a renewal option for a further 20 years.

Eldorado and GLPI explained that, due to the impact of novel coronavirus (Covid-19), rent would not be escalated for 2020 or 2021.

After this, rent will rise by 1.25% from the current rate, on 1 October 2022 and 2023, then by 1.75% on that date in 2024 and 2025, and 2.0% from 2026 onward.

Peter Carlino, chief executive officer of Gaming and Leisure Properties, which was formed in November 2013 as a spin-off of Penn National Gaming, said the deal was beneficial for both businesses.

“This mutually beneficial agreement demonstrates our continued commitment to improve the durability and predictability of our rental cash flows,” Carlino said. “The elimination of variable rent volatility from our master lease with Eldorado as well as the extension of the initial term are noteworthy accomplishments in our proposed agreement with Eldorado. 

In addition, the Evansville or Greenville properties, or both, may be replaced on the lease with one or more other Eldorado properites, provided the value of these new venues is equal to the value of the properties they replace.

The agreement comes as Eldorado closes in on completion of a merger with Caesars Entertainment. In February, Eldorado secured approval from the Mississippi Gaming Commission to proceed with the deal, while shareholders of both operators backed the merger in November 2019.

Eldorado will acquire all of the outstanding shares in Caesars for a total consideration of around $17.3bn.

Should the deal go ahead as expected, the combined Eldorado-Caesars business would run around 60 casino resorts and gaming facilities across 16 states in the US.

“The amended master lease will also create flexibility should Eldorado pursue portfolio realignment following the completion of their pending merger transaction with Caesars Entertainment,” Carlino said.

“We believe the proposed modifications will further enhance our long-term cash flow visibility and more closely align our interests with the Eldorado team as they move towards completion of their transformative Caesars transaction.”

In related news, Eldorado has also agreed to enter into a five year, $400 million mortgage with VICI Properties for the Caesars Forum Convention Center in Las Vegas. The mortgage carries a 7.7% interest rate. The deal is conditional upon the closing of the merger.

Tom Reeg, chief executive officer of Eldorado, said the move would help provide additional liquidity for the operator.