GLPI Unlikely to Fully Finance Bally’s Bronx Casino

Bally's $4 billion casino project in the Bronx, New York, has attracted the interest of Gaming and Leisure Properties (NASDAQ: GLPI), but the landlord is not willing to go to great lengths to be involved in the process and has admitted that the gaming operator has other possibilities.

On Friday, February 20, during the company's fourth-quarter earnings conference, executives of the real estate investment trust (REIT) made remarks to that effect. Bally's main landlord is already Gaming and Leisure, and the REIT has given the regional casino operator vital funding, particularly for its Chicago casino hotel.

"I think the ability to raise capital unique to the New York project will result in a very competitive field of suitors for capital, and we won’t do anything dilutive,” said GLPI COO and President Brandon Moore on the call. “So what I think you won’t see us do is compete down to a cap rate that’s not accretive to GLPI. That won’t be of interest to us.”

In December, Bally's received one of three gaming licenses for the New York City area.

The majority of financing for Bronx Casino is unlikely to come from GLPI

The REIT is "in constant discussion with" Bally's and is "monitoring the process," according to GLPI Chief Development Officer Stephen Ladany. However, he stated that he is unsure whether the casino operator will require GLPI funding.

“I guess to put it frank, I think to dispel any notions that may exist, we view it very unlikely that we would end up providing the majority of the capital for a $4 billion project there,” he said on the call. “We’re going to continue to evaluate the process and the project, and we’ll look to try to be as strategic as possible with respect to any involvement.”

Other creditors and real estate firms would be keen to assist Bally's because of the attraction of the Bronx site, which was one of the first conventional casinos in the five boroughs. It is undeniable that the corporation has junk credit ratings, which indicates that the New York project will have a high cost of capital. Bally's has not disclosed their financial choices to the public.

Additionally, the Rhode Island-based casino business must pay the Trump Organization $115 million. Bally's acquired the lease rights to Trump Golf Links at Ferry Point, the property where the casino will be constructed, as part of that agreement.

It's likely that GLPI wants to own a portion of the Bronx Casino Land

Financing partners and tenants is a common practice for REITs, including those in the gaming sector. However, this capital extension is frequently linked to assets that the landlord already owns or provides a way for the REIT to acquire all or part of the real estate. Ladany stated that GLPI would prefer to use that model.

“I would think that any discussions we have with any of the other parties involved would be under the same type of guise that we have to have a path to owning real estate or a piece of ownership of real estate to start with,” he said on the call.

Given that Bally's does not own the Bronx casino land, that might be challenging. So does the city of New York.