Penn National announces virus mitigation deal
Penn National Gaming Inc. said Friday afternoon that it has reached a real estate deal with Gaming & Leisure Properties Inc. to help with the financial impact of the coronavirus pandemic.
The transaction includes the Hollywood Casino Morgantown, which is currently under construction in Caernarvon Township.
Jay Snowden, president and
CEO of the Wyomissing-based company, said the real estate assets for the Tropicana Las Vegas are being sold to Gaming & Leisure though Penn National will continue to operate it. Also, the Hollywood Casino Morgantown will get a new ground lease and Penn National will have the option of acquiring the Hollywood Casino Perryville in Maryland at a future date.
In return, Penn National will get $337.5 million in rent credits from Gaming & Leisure, a
Wyomissing-based real estate investment trust spun off from Penn National in 2013.
“As the global COVID-19 health crisis continues to evolve, we are navigating through this unprecedented time for our company, our industry and our nation,” Snowden said in a press release. “With all of our 41 properties in 19 states temporarily shuttered, like many others in the gaming and hospitality sector, we are making difficult decisions to help preserve our liquidity and ensure a brighter future for our company’s team members, customers, shareholders and other key stakeholders.”
Snowden said he was grateful for Gaming & Leisure’s help.
“We greatly appreciate the cooperation, creativity and partnership shown by
GLPI during this challenging time,” he said. “While this transaction will help to relieve liquidity pressure in terms of rent obligations, we are committed to taking further steps to reduce our ongoing operating expenses in order to ensure we have a healthy business to return to when we are able to reopen our doors.”
In its own release, Gaming & Leisure said the Morgantown land will generate $3 million of initial annual cash rent. The project is scheduled to be completed in the fall, but is on hiatus during the pandemic.
Gaming & Leisure Chairman and CEO Peter Carlino called the deal a “win-win” for the companies.
“Given the rapid onset of closures related to COVID-19, these agreements are structured in a manner that allows both companies to achieve their longer term objectives once the virus and its associated impacts abate,” Carlino said in a statement.
Penn National will continue
to pay its employees full wages and benefits through March 31. However, several states have announced extensions of their temporary closure orders and the company said it will be implementing unpaid furloughs impacting approximately 26,000 employees company-wide beginning April 1. Medical benefits will continue through June 30.
In addition, Penn National has established a special COVID-19 Emergency Relief Fund under the Penn National Gaming Foundation to provide assistance to team members and local relief organizations in communities served by the company. The company said it has already raised more than $1.2 million in funds, including more than $425,000 in personal contributions from Snowden and other senior managers, the company’s board of directors, and property general managers.
For more information about the COVID-19 Emergency Relief Fund or to
make a donation, visit: www.pngaming.com/community.
Other steps Penn National is taking during the closures include:
• Pay cuts for the CEO and remaining property and corporate leadership teams effective April 1.
• The board of directors have elected to forgo any of their cash compensation effective April 1.
• The majority of corporate employees will also be furloughed, and the company will be operating with a minimum, mission critical staffing of less than 850 company-wide during the closures.
In light of the COVID-19 outbreak and ongoing uncertainty regarding its magnitude and duration, Penn National is withdrawing its 2020 financial guidance provided on Feb. 6.
Penn National said it will provide a financial and operational update in connection with its first quarter 2020 earnings announcement planned for May 7.