Gaming and Leisure Properties Expands Racino Assets with $184 Million New Mexico Acquisition

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Gaming and Leisure Properties Expands Portfolio with $184 Million Acquisition of New Mexico Racino Assets

Gaming and Leisure Properties (NASDAQ: GLPI) has officially announced its strategic expansion into southern New Mexico through the planned acquisition of Sunland Park Racetrack & Casino. This move underscores GLPIs focus on acquiring high-value racino assets, with the deal valued at an acquisition price of $183.75 million and an initial capitalization rate of 8.2%.

Racetrack casino
Image by samuil0501 from Pixabay

Not only is this acquisition a significant milestone for Gaming and Leisure, but it also signifies an expanded relationship with Strategic Gaming Management, the operator of the facility. The new lease will see a 2% annual rent increase, positively influencing the funds from operations (AFFO)—a key metric for investors assessing the health of a Real Estate Investment Trust (REIT).

About Sunland Park Racetrack & Casino

  • Established in 1959, Sunland Park spans approximately 157 acres.
  • The venue features 738 slot machines and 12 electronic gaming tables within a spacious 25,000 square foot gaming area.
  • It includes a 1.6 km thoroughbred racetrack complete with seating for 733 spectators.
  • Facilities also comprise a ballroom with a capacity of 600 people, a simulcast betting area, and a third-party hotel with 78 rooms.
  • Significant potential for expansion exists on the underutilized land surrounding the venue.

The initial lease term is set for 25 years, with two 10-year renewal options available.

Strategic Gaming Management Partnership

This acquisition marks the fourth property that Gaming and Leisure Properties has acquired under the operation of Strategic Gaming. Previously, the REIT agreed to pay $105 million for assets pertaining to Baldini’s Casino in Sparks, Nevada, and both the Silverado Franklin Hotel & Gaming Complex and the Deadwood Mountain Grand in South Dakota.

With this new buy, Sunland Park Racetrack becomes the second property owned by GLPI in New Mexico, the first being Zia Park Casino Hotel & Racetrack located in Hobbs.

Location and Market Potential

Sunland Park benefits from its geographical advantages, being positioned in the Borderplex region, which includes El Paso, Texas, and Las Cruces, New Mexico. The area boasts a large adult population of approximately 2 million residents and an increasing median household income. According to Barry Jonas, an analyst at Truist Securities, Sunland Park faces minimal competition, with the closest competitor located over 32 km away. Furthermore, no commercial casinos are anticipated within an 885 km radius.

Why This Acquisition Aligns with GLPI’s Strategy

This recent purchase aligns perfectly with GLPI’s strategic focus. While owning numerous casinos across the United States, the company often seeks out properties in “remote” regions, opting to avoid exposure to heavily saturated markets like Las Vegas. This operational strategy was evident when GLPI secured a funding agreement worth $225 million with Caesars Entertainment (NASDAQ: CZR) for the Caesars Republic Sonoma County project recently.

In conclusion, the acquisition of Sunland Park signifies not only a hefty investment by Gaming and Leisure Properties but also a strategically aligned move to strengthen its foothold in the gaming industry while aiming for an enhanced portfolio and investor returns.