Penn National Gaming said this morning that its acquisition of the Tropicana will cost $360 million.
The day after the sale was first reported by VEGAS INC, Penn began to shed light on its vision for the classic property. Penn, a regional gaming company that operates the M Resort in Henderson, reiterated in a statement that it had long wanted to break into the Strip market and laid out a two-part plan for the Tropicana.
Timothy Wilmott, Penn’s president and CEO, said in the statement that the acquisition was a “prudent transaction” that would allow Penn to run a “premier Strip asset at an attractive price of entry.”
“Given our goal of leveraging Penn National’s database of nearly 3 million active regional gaming customers, we have spent the past several years reviewing an acquisition of numerous gaming assets in Las Vegas,” Wilmott said.
“The Tropicana is a quality facility that can serve as an attractive destination offering for current Penn National customers, which further enhances our strong competitive position in the regional gaming markets in which we operate across the United States,” he said.
Wilmott said the two-part plan should be carried out over the next three to five years.
In the first phase, the company intends to invest about $20 million in property improvements and “integration activities.”
That will include using Penn’s nationwide customer database to boost visitation and upgrading Tropicana technology to bring it in line with the company’s existing systems, Wilmott said. Penn plans to launch its loyalty program — Marquee Rewards — at the Tropicana.
In the second phase, Penn will consider “other potential facility enhancements,” such as adding more shopping, restaurants, casino enhancements and hotel rooms.
“The scope, budget and timing of any such expansion and improvements will be determined based upon Penn National’s initial operation of the property and customer demand for additional amenities,” Wilmott said.
Wilmott also provided fresh insight as to why Penn chose to buy the Tropicana instead of entering the Strip via a different property acquisition.
He noted that the Tropicana, located at the southeast corner of Tropicana Avenue and Las Vegas Boulevard, is situated on “one of the busiest and most famous intersections in Las Vegas.” It also stands to gain from the opening of the new arena near New York-New York, he said.
A report from Union Gaming Group today called the Tropicana acquisition a “transformative transaction” that concludes Penn’s “saga to find an outpost on Las Vegas Boulevard.” The report also looked favorably on the valuation of the deal, calling it “an attractive entry price” for the Strip.
Penn spun off most of its properties, including the M Resort, into a real estate investment trust in 2013. Penn now leases them back from a company called Gaming and Leisure Properties.
A Penn spokesperson said via email today that Gaming and Leisure “has no involvement in this transaction whatsoever.”
Penn plans to fund the Tropicana purchase with an expansion of existing credit facilities and cash on hand. It expects the sale, which will require regulatory approval, to close by the end of the year.