Cordish cashes in; Scare tactics in Atlantic City; Illinois slumps

Succumbing to the siren song of REITmania, Cordish Gaming has sold the real estate of three of its casinos to Gaming & Leisure Properties Inc. for a grand total of $1.8 billion. The affected casinos are Philadelphia Live, Pittsburgh Live and Maryland Live. The latter is the real prize, Philadelphia Live (pictured) being somewhat of an underachiever. Reported JP Morgan analyst Joseph Greff, “the deal also includes a binding partnership on future Cordish casino developments and potential financing partnerships between GLPI and Cordish in other parts of Cordish’s businesses … We also like that GPLI is adding a new and reputable real estate/gaming partner that potentially could lead to future accretive transactions.” The newfound wealth could also empower Cordish to take on new projects elsewhere. “They’re raising capital without having to get the loan or do some kind of stock offering, because Cordish is still a private company and is more limited,” gaming analyst Jason Karmel observed.

Cordish management won’t be going anywhere anytime soon. The sales come with 39-year leases, with an option for another 21 years. Rent for all three comes to $125 million, which Cordish will have no trouble covering. What’s more, it gets co-investment from GLPI on any new gaming project for the next seven years, as well as 20% capex contributions “throughout the life of the project.” Neither company is wasting any time. “The Maryland transaction is expected to close by year-end 2021, and the Pennsylvania transactions are expected to close in early-2022,” reports Greff. David Cordish, enjoy that victory cigar. You’ve earned it.

Outgoing state Sen. President Stephen Sweeney (D) is trying to frighten fellow legislators into amending PILOT revenue-sharing with the state. The payments in lieu of taxes were originally sold as a Coronavirus-recovery measure, but Sweeney’s plan met with eager skepticism, although it has advanced out of committee. Now he’s got a new bogeyman: “There are four casinos in jeopardy of closing,” he said. “We do not want that to happen. I don’t want to have a situation where it’s, ‘I told you that place was going to close, and it closed.’” Not only do we think the four-casino figure is bushwa but it doesn’t explain why the Sweeney plan would more than double the PILOT obligation on Resorts Atlantic City, one of the most hard-pressed of all the joints in town. What’s more, Snake Oil Sweeney is palming the scare tactics off on the Casino Association of New Jersey, saying they’re the ones doing the fear-mongering.

Hard Rock Atlantic City President Joe Lupo, new head of the Association, spoke vaguely of “grave danger” (not to him, surely), saying “We fully expect to pay our fair share, but we need stability moving forward.” Ironically, Lupo’s casino would be one of the ones hardest hit by Sweeney’s recalculations. Perhaps a yearly kick in the patootie from the state is Lupo’s idea of stability but it’s hardly ours. (Reports the Stamford Advocate, “The new version would reduce the overall amount of payments to $110 million next year, down by about $55 million, although that would be partially offset by other payments.”) One person speaking up for John Q. Taxpayer is new Assemblyman Don Guardian (R), who objected that “With casinos paying less, everyone else will pay more.”

Not even the addition of a new casino—Hard Rock Rockford‘s temporary facility—could stop Illinois gambling revenues from swooning 10% last month. Yes, there’s an indoor mask mandate in the Land of Lincoln but such edicts haven’t dampened casino play in other states. Why should Illinois be any different? The impact of Hard Rock was such ($4 million grossed) that it even stopped Rivers Casino Des Plaines in its tracks, flat at $40 million. All comparisons are to 2019, of course. The only other casino to make a decent showing was Grand Victoria (pictured), down 6% to $12 million. For everyone else it was a case of Look out below! Harrah’s Joliet slipped 19% to $11.5 million, Hollywood Aurora stumbled 20.5% to $8 million and Empress Joliet tumbled 32% to $7 million.

Par-A-Dice was down 17% to $5 million, Bally’s Quad Cities‘ new 24-hour regimen couldn’t prevent a 35% collapse to $3.5 million and Harrah’s Metropolis fell 25% to $4.5 million. In the St. Louis area, Argosy Belle slid 22% to $2.5 million and DraftKings Casino Queen plunged 27% to $6 million. Slot-route numbers won’t be available until later in the month but they should clobber the casinos easily. In other Illinois news, Chicago Mayor Lori Lightfoot (D) feels that a 19% tax on sports betting is hunky-dory. Customary Lightfoot benefactor Neil Bluhm disagrees and counter-argues that non-casino sports betting will help smother the Second City’s casino in its crib. “For every dollar of sports betting you’re losing, you lose about $3 or $4 of casino revenue. … While they’re [in the casino], they walk around and play slot machines. They play roulette. They play blackjack. That’s the big money for both the city and state,” says Bluhm. What’s more, Lightfoot wants taxpayers to subsidize the infrastructure for sports books in or near Chicago’s five sports venues. We feel Bluhm’s outrage—which may cost Chicago two of its five casino proposals.

Is the gaming recovery finally slowing—or at least succumbing to what operators call “seasonality”? Deutsche Bank analyst Carlo Santarelli thinks so. He predicts that the Las Vegas Strip will be only up 2% this month and locals down 15% (gotta spend on Christmas presents sometime), while Louisiana will dip 1.5%, Ohio will climb 8%, Missouri will be 1% higher and Indiana 7% better. So, not really bad news … unless you own a locals casino in Sin City. At least the blow will be softened by month’s-end slot win held over from October.

Finally, something for the season: The Golden Nugget Atlantic City, bedecked in all its Yuletide finery. (Scroll down for Quote of the Day.)

Quote of the Day: “I don’t know if Joe Biden is intentionally screwing Florida but this didn’t have to happen. Their failure to argue it is inconceivable and unacceptable … Joe Biden owes the state of Florida $500 million a year forever.”—state Rep. Randy Fine (R), on the Biden administration’s shambolic defense of the rejected Seminole Tribe compact.