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Health & Fitness

Penn Gaming (GLPI) will not have an Ownership Stake in the Milford Casino

 In an effort to make sense yesterday’s announcement that Crossroads (Foxwoods MA) had identified a financing partner, Penn Gaming’s spinoff (GLPI),  I took a look at the testimony that Crossroads gave to the Mass Gaming Commission last week.  By all appearances Crossroads is engaging in the second financing alternative that they described to the commission, a “Sale, Leaseback” arrangement.  First, GLPI is a recently formed Real Estate Investment trust – basically a portfolio of properties owned by a  set of shareholders.  Think of it as a mutual fund for real estate.    In a Sale Leaseback arrangement, GLPI will loan the funds to Crossroads needed to build the casino.  Crossroads will then sell the property back to GPLI, presumably to pay off the loan.   As part of the deal, Crossroads will agree to lease the facility back from GLPI. 

Again, this is my best guess based on Crossroads testimony to the Mass Gaming Commission.  Assuming this is accurate, there are a couple open questions

 1) Who owns Crossroads (Foxwoods, MA)?  We know GLPI & Crossroads signed a letter of intent.  The details of this arrangement are unknown.  Did GLPI agree to loan the funds needed to build the casino to the current Crossroads owners, or is the deal conditional on Crossroads finding a 55% owner (much the way a bank might agree to give you a loan, if you get a co-signor).  I honestly have no idea.  If it’s the former, I would assume that each of the current owners of Crossroads would assume a larger stake in the firm (the Pequot’s stake would go from 10% to 22%, for example).  If it’s the latter, the financing for the casino is far from settled.   

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2) Who guarantees the annual payments to Milford?  If Crossroads does not make good on its agreement with the town, it’s highly unlikely GLPI will honor the commitment, as they will rightly claim that they are not party to the town’s agreement with Crossroads. Thus, the town would need to hold Crossroads accountable.  After engaging in this agreement with GLPI, it’s unlikely Crossroads would have enough money to make a lawsuit worthwhile.  Any good attorney knows to “follow the money” & not waste time suing companies with no assets.  In addition, the town would not be able go after the casino property itself, because the property would be owned by an entity (GLPI) that did not violate any agreement with the town.

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