LAS VEGAS—In an effort to maximize long-term shareholder value, the board of directors of Pinnacle Entertainment Inc. has green-lighted the firm's plan to split its operating and real estate assets into two publicly traded companies. According to a Bloomberg report, the decision was driven in part by pressure from Orange Capital LLC, an activist investor in PNK.
To facilitate the separation, Pinnacle will create a newly formed, publicly traded REIT that will be distributed to PNK stockholders in a tax-free spin-off. PNK, meanwhile will remain as the operating entity. Pinnacle owns and operates 15 gaming entertainment properties in Colorado, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nevada and Ohio. It also holds a majority interest in the racing license owner, as well as a management contract, for Retama Park Racetrack outside of San Antonio, TX.
While a “significant” amount work remains to be done to complete the spinoff, the move will provide a lower weighted average cost of capital and an attractive financial platform to take advantage of future opportunities in both the casino gaming industry and the broader leisure and entertainment sector, relates Pinnacle CEO Anthony M. Sanfilippo.
“We are focused on pursuing this plan and expect little disruption to result from the REIT separation on our day to day operations, for our guests and for our team members,” he added. “As we work to execute the REIT transaction, we will remain focused on completing the Ameristar integration and fully leveraging the financial and scale benefits of that transaction, while also maintaining our focus on operational excellence to maximize our financial performance.”
According to the terms of the plan, the property company will initially own the real estate assets of PNK, while they will be leased back to the operating company to be used by its subsidiaries under a triple-net master lease agreement, the terms of which are still being hammered out. Meanwhile, the property company will look to grow through property acquisitions, namely in the gaming, leisure and entertainment industries.
The spinoff is still subject to a variety of factors, including approval from the IRS, appointment of senior executive leadership for the property company, gaming regulatory approvals, firming up the maser lease agreement and financing. The spin-off is slated for completion in 2016.
In conjunction with the spin-off, Pinnacle will seek to obtain $1 billion in equity financing to reduce its balance sheet leverage and for general corporate purposes, which would be subject to a separate SEC filing process.
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Sule Aygoren
Aygoren oversees the editorial direction and content for ALM’s Real Estate Media Group, including Real Estate Forum and GlobeSt.com. In her tenure with ALM, she’s held roles of increasing responsibility, including Managing Editor. Aygoren has received several awards for her coverage including Best Trade Magazine Report from the National Association of Real Estate Editors and the James D. Carper Award for Young Journalists. Under her direction, Forum has received four national NAREE awards for Best Commercial Real Estate Trade Magazine.
