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Both the Deadwood Mountain Grand Casino and the Silverado Casino in Deadwood, S.D., are part of the $105M sale.

Deadwood casinos sell as part of $105 million deal

DEADWOOD, S.D. – Gaming and Leisure Properties, Inc. (GLPI) has acquired the real estate assets of two South Dakota casinos and one Nevada casino for $105 million. The properties are the Silverado Franklin Hotel & Gaming Complex and the Deadwood Mountain Grand Casino in Deadwood, South Dakota, and Baldini’s Casino in Sparks, Nevada.

In expanding their reach to South Dakota via the purchases of the Silverado Franklin Hotel and Gaming Complex and the Deadwood Mountain Grand, they are stepping onto the South Dakotan terrain for the very first time.

Simultaneous with the acquisition, GLPI and Strategic Gaming Management will enter into two cross-defaulted triple-net lease agreements, each for an initial 25-year term with two 10-year renewal periods. GLPI also provided $5 million for capital improvements for a total investment of $110 million.

The initial aggregate annual rent for the new leases is $9.2 million, inclusive of capital-improvement funding, and represents an 8.4% capitalization rate. Rent is subject to a fixed 2% annual escalation beginning in year three and a CPI-based annual escalation beginning in year 11 of the greater of 2% or CPI capped at 2.5.

GLPI also secured a right of first refusal on the real estate related to future acquisitions until Strategic’s adjusted EBITDAR related to GLPI-owned assets reaches $40 million annualized.

“With our acquisition of the Silverado, DMG, and Baldini’s, we further diversify our portfolio, while expanding our tenant roster through our new relationship with Strategic, a dynamic and growing gaming operator,” said Peter Carlino, GLPI’s chairman and CEO.

The addition of Strategic’s properties expands the portfolio to 65 properties in 20 states.

Strategic is led by CEO J. Grant Lincoln, who formed the company in 2009. Under Grant’s stewardship, Strategic operates three properties. “Initiatives to expand our portfolio remain active in the current environment, as our reputation as the gaming landlord of choice is further strengthened and reinforced by this transaction,” Carlino said.

“Our operating approach, informed by decades of successful experience in competitive gaming markets, is laser focused on bottom-line results,” Lincoln said. “Our platform is well positioned for thoughtful ongoing growth. As we explored the options for a sale-leaseback partner, GLPI rose above the rest, given their unique approach and emphasis on partnership, as well as their experience as gaming operators.”

Silverado was one of the first gaming properties in South Dakota when it opened in 1990 and is one of the largest casinos in the state, with 245 slots, 16 table games, two restaurants, four bars, and a 68-room hotel. Silverado has completed over $32 million of capital projects since its inception to maintain and enhance its offerings, including buffet renovations, new restaurant openings, and casino remodels. Silverado is expected to begin construction on a hotel renovation in 2024, using a portion of the $5 million in capital improvement proceeds funded by GLPI at the closing of the transactions.

Also located in Deadwood, DMG is an 11-acre gaming property that offers 141 slots, 8 table games, two food and beverage locations, a 208-space parking garage, a 67-seat sportsbook, and a 13,500-square-foot event center. The property opened in 2011.

Located in Sparks, Baldini’s is an approximately 9-acre gaming property that offers 492 slot machines in a 43,000-square-foot casino that opened in 1988. The locals property offers a 2,000-square-foot sportsbook, restaurants, bars, 37,000 square feet of additional office and support space, 600 parking spaces, and 37,000 square feet of additional office and support space.

Citizens JMP Securities acted as financial advisor to Gaming and Leisure Properties. CBRE Securities served as the financial advisor to Strategic.

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