Bally and GLPI Play Ball With the Oakland Athletics
GLPI is betting on baseball in general and the ability to make money from an influx of tourists rather than a land sale.
It wasn’t a straightforward deal of one party selling to another. Instead, call it a curve ball deal. Bally’s, the casino operator, with Gaming & Leisure Properties, Inc. entered into a binding agreement to allow Major League Baseball’s Oakland Athletics to put their new ballpark on part of the Tropicana Las Vegas property.
The deal’s complicated. “Bally’s and GLPI will assign approximately nine acres of the 35-acre site located on Las Vegas Boulevard and Tropicana Avenue to the Oakland Athletics or a related stadium authority,” the companies announced.
The new ballpark will accommodate approximately 30,000 fans and will supposedly see 2.5 million fans and visitors annually. The organizations involved say the arrangement should provide a number of benefits. They include the expected increased value of the rest of the development, flexibility to develop in a phased approach with “disciplined capital employment,” potential for global brands to market to the heavily trafficked area, and “transformational impact for the evolution of Bally’s database further solidifying its global omni-channel strategy.”
GLPI will fund up to $175 million toward shared improvements in exchange for a “commensurate rent increase.”
Bally can assign the rights “to all aspects of this development and has received material interest from development partners.”
One complication is that Bally’s doesn’t own the land, GLPI does. According to a Green Street analysis, GLPI isn’t getting direct compensation for the land, but it continues to receive the full ground lease payment from Bally’s, which is $10.5 million a year, even though it is no longer for the full 35 acres.
Also, the deal depends on legislation passing for public financing and “related agreements” and approval by Major League Baseball of the team’s relocation.
“Bally’s acquired the building and operations of the Tropicana Las Vegas from GLPI in September 2022 as part of a $148 million transaction,” the release said. “As part of the transaction, Bally’s entered into a 50-year ground lease with GLPI, with the ability to extend to 99-years upon achieving key investment milestones. Bally’s intends to continue the operations of the Tropicana Las Vegas for the foreseeable future while evaluating all available options for a broader redevelopment of the remainder of the site that will be adjacent to the new ballpark.”
For this to work out for GLPI, Green Street says that the remaining 26 acres would have to increase in value by about 35% for the deal to be even value neutral. But the market seems skeptical of that extra value, according to the firm, because gaming REIT peer VICI outperformed GLPI today by about 50 basis points.