GLPI's proposed acquisition of Pinnacle Entertainment's casinos violates Indiana law, says UNITE HERE

INDIANAPOLIS--(BUSINESS WIRE)--

UNITE HERE representatives and their attorney appeared before the Indiana Gaming Commission last Thursday in support of a petition to intervene in GLPI's proposed acquisition of Pinnacle Entertainment's Indiana casinos, which UNITE HERE believes would violate Indiana gaming law.

Noah Carson-Nelson, a representative of UNITE HERE Local 1, testified in opposition to the proposed transfer of two Indiana casinos from Pinnacle Entertainment PNK to Gaming and Leisure Properties, Inc. GLPI.

Indiana law limits any one casino owner to a maximum of two licensed casinos. In its petition, UNITE HERE argues the proposed purchase would cause GLPI to exceed that ownership limit, since GLPI already owns the Hollywood Casino in Lawrenceburg and the acquisition of the two Pinnacle casinos would give GLPI ownership of three Indiana casinos.

UNITE HERE further argues that the Indiana Gaming Commission should refuse approval for these ownership changes because the proposed lease will saddle Pinnacle Entertainment with excessive fixed rent that could make it difficult for casino operators to adequately maintain the properties, provide quality wages and benefits to workers, and remain viable. Pinnacle anticipates paying approximately 60% of its EBITDAR to GLPI in rent.

GLPI was spun-off from Penn National Gaming in 2013, in part to avoid state and federal regulatory constraints limiting the ability of one company to own multiple casinos in a single jurisdiction.

Indiana was one of several states that licensed GLPI in 2013 as a "supplier," even though, according to the Union's petition, the company owns the casinos, does not meet the statutory definition of "supplier," and exerts considerable influence over the casino managers through a master lease agreement that gives the REIT extraordinary powers, including veto power over management's ability to expand on-site or develop new properties.

After the IGC meeting, the trade newsletter Indiana Gaming Insight concluded "at a minimum there is a big question of statutory interpretation — and perhaps also a major public policy decision at stake here as well that doesn't make this as simple a transaction as the Hollywood GLPI spin-off."

Indiana Gaming Insight also reported: "While GLPI and Pinnacle officials might have expected a decision to be made Thursday, Commission members certainly did not intend to be rushed into anything without fully reviewing the implications — legal, political, and economic. Commission staff have already brought legislative leadership into the loop with a memo outlining the issues involved here, as well as the lack of certainty within the law as to how a REIT (a vehicle which didn't even exist in the industry when the law expanding ownership was enacted more than a decade ago) should be treated and what it might mean in a practical sense for expanded ownership opportunities and attendant complications (including the fact that interpreting the law as GLPI seeks could mean the company could technically end up having a major financial interest [in] every Indiana property."

Earlier this month, attorneys on behalf of UNITE HERE Local 1 filed a formal complaint with the Indiana Gaming Commission objecting to the proposed transfer of Pinnacle Entertainment's casinos to GLPI. In addition to petitioning for leave to intervene in the Indiana transfer proceedings, UNITE HERE is providing information to gaming regulators in other states where UNITE HERE believes the company has been misclassified as a supplier instead of an owner.

In Indiana, GLPI is attempting to acquire the Ameristar Casino in East Chicago and the Belterra Casino in Florence. GLPI would then lease back the properties to an operating company to be spun-off from Pinnacle Entertainment. Pinnacle has applied to the Indiana Gaming Commission for permission to transfer licenses between subsidiaries in connection with this transaction.

The Indiana Gaming Commission did not vote last Thursday on Pinnacle's request. The next regularly scheduled meeting is in March 2016.

UNITE HERE represents 1,500 casino workers in Indiana and 100,000 casino workers across the United States. Learn more at www.unitehere.org.

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