The real estate arm of Penn National Gaming has cut a nearly half-billion-dollar deal to buy The Meadows Racetrack and Casino in Washington County.
Wyomissing, Pa.-based Gaming and Leisure Properties Inc. announced Wednesday that it had reached an agreement to acquire the 180,000-square-foot casino, the harness racing track, and other amenities from Cannery Casino Resorts LLC for $465 million.
The transaction, if approved by the Pennsylvania Gaming Control Board and Pennsylvania Racing Commission, would represent the third casino to change hands in the commonwealth since the first gambling venues opened in 2006.
It comes eight years after Las Vegas-based Cannery Casino plunked down $200 million to buy the Meadows racetrack from Magna Entertainment Corp. of Ontario with the intent of adding a casino, as all Pennsylvania racetracks were permitted to do at the time.
The new deal was cut after Cannery Casino recently spent some $3 million upgrading restaurants and other amenities at the North Strabane venue. But William Paulos, Cannery's co-CEO, said the firm had not been marketing the property for sale and that GLPI's offer arrived unsolicited.
"An offer was made, and we pondered it long and hard. When we took all of the factors into account, it was a very good offer for us and a very good deal for them," he said.
While The Meadows casino built a steady clientele after its debut in 2007, its market share started to erode after the Rivers Casino opened on the North Shore two years later. It also has been facing increased competition from Ohio casinos and the recently opened Lady Luck Casino at Nemacolin Woodlands Resort in Farmington.
But Mr. Paulos said the competition, particularly from Nemacolin, was not a "determining factor" in the decision to sell.
"We really believe there is a good future in that area. You've got the gas find. That's a 30- to 50-year growth scenario. All of the sudden, you're seeing residential homes built," he said. "It's a growth market. There's no question about it. It's just what's good for our company at this time. That's really how it came about."
Frank Legato, editor of Global Gaming Business, a leading casino industry trade journal, saw the sale as "basically a debt move" for Cannery, although he added competition from yet another prospective casino, this one in Lawrence County, also may have been a factor.
"I think it was just an opportunity that presented itself to Cannery. It was a good deal for shareholders and they could pay down their debt and not deal with more competition," he said.
Mr. Paulos said net proceeds would be used to reduce Cannery's debt.
GLPI representatives could not be reached for comment.
In a press release on the sale, Peter M. Carlino, GLPI's chairman and CEO, said the acquisition "represents another step in the execution of our strategy to grow our company into the leading owner of high quality assets in key regional gaming markets."
GLPI was incorporated last year as a wholly owned subsidiary of Penn National Gaming, which owns the Hollywood Casino at Penn National Race Course near Harrisburg. The Meadows sale marks the real estate investment trust's second purchase since it was created last year. It also holds the assets and liabilities associated with the real property interests and real estate development business related to Penn's gambling operations.
Mr. Legato said $465 million was a "decent price" for the casino, which includes 3,317 slot machines, 61 table games and 14 poker tables. The property also features 11 restaurants, bars and lounges; a 24-lane bowling alley; and the 5/8-mile racetrack with a 500-seat grandstand.
In addition to paying $200 million for the racetrack in 2006, Cannery spent about another $250 million building the casino, Mr. Legato said.
"Plus, it's got a dedicated customer base," Mr. Legato said, "which is very important."
While GLPI will own The Meadows, it will not operate the casino. The operator has not been determined. While the natural prospect would be Penn National, Mr. Paulos said that would not be the case.
Asked if Cannery had an interest in staying on as operator, he replied, "We're interested in everything."
He added that the transaction would have no impact on employees right now. "Zero changes. Right now everything is the same, except we have an agreement to sell," he said, adding he does not expect GLPI to make major changes once it secures the property.
The sale must be approved by the Gaming Control Board, which has yet to receive a formal petition for a transfer, said spokesman Richard McGarvey. GLPI and Cannery officials expect the sale to close next year.
The sale would be the third of a casino in Pennsylvania. The late Don Barden was forced to sell the Rivers Casino to a group led by Chicago billionaire Neil Bluhm after running into financial problems building it. Scranton-area businessman Louis DeNaples also transferred ownership of the Mount Airy Casino to his children as part of a deal with state regulators two years ago.
In Washington County, meanwhile, commission Chairman Larry Maggi said he was notified by casino manager Sean Sullivan on Wednesday morning about the impending sale.
"We were a little surprised, but we were assured by management that nothing was going to change," he said. "They said that at the local level, you aren't going to see any differences."
Mr. Maggi said he hopes the new owners maintain the current management team, which has worked closely with the county since Cannery purchased the facility in 2006.
"You always worry a little bit about things like that, but the management team has always been square shooters with us and upfront and transparent," he said. "We have no reason to think it won't be the same."
As for the county's local share of gaming revenues -- it netted more than $40 million for local projects in the past several years -- Mr. Maggi isn't concerned so far.
"I don't believe any of the gaming money will be affected, because that's all regulated by the state," he said.
According to an economic impact report released by the casino in March, it distributed more than $230 million statewide in 2013 in taxes, vendors, supplies and other expenses. It spent another $51 million in payroll for its 1,400 employees.
Mark Belko: email@example.com or 412-263-1262. Janice Crompton: firstname.lastname@example.org or 412-263-1159. First Published May 14, 2014 12:14 PM