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Penn National Gaming spin-off creates huge mortgage filing

It’s not every day you see a $1.25 billion mortgage filed in two local courthouses in the same week.

But that’s what turned up in both Dauphin and Lebanon counties in March, a product of a complicated company spin-off for Berks County-based Penn National Gaming Inc.

In November, the company spun off Gaming and Leisure Properties Inc. as a separate, publicly traded, tax-free real estate investment trust to own much of the land where the company’s 28 properties sit.

Both mortgages filed locally were for the Hollywood Casino at Penn National Race Course property, which straddles the two counties in the Grantville area.

The spin-off took almost a year from the time it was announced in November 2012, but its birth can be traced to Penn National’s failed sale in 2007.

How it happened

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According to Gaming and Leisure Properties’ investor presentation in February, when the company failed to complete its sale to Fortress Investment Group and Centerbridge Partners in 2008, it decided to search for different ways “to increase shareholder value.”

As a result of the deal dying, Penn National Gaming received a $225 million termination fee and affiliates of the four equity purchase partners — Fortress, Centerbridge, Wachovia Bank and Deutsche Bank — purchased $1.25 billion of the company’s redeemable preferred equity.

In the investor presentation, Penn National said it repurchased the $1.25 billion in preferred equity which would have been redeemed in July 2015.

That investment became the company’s real estate investment trust, which typically tempts investors with high levels of continuing current income and long-term growth, according to the National Association of Real Estate Investment Trusts’s website.

It is the only real estate investment trust in the gaming industry, according to the new company, which trades on the Nasdaq under the ticker symbol GLPI.

Michael Sadowski

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