Ione Band, GLPI could reshape tribal financing with new framework
Groundbreaking Financing Agreement: A New Era for Tribal Gaming Projects
In a significant advancement for the tribal gaming sector, a pioneering financing agreement has been established between the Ione Band of Miwok Indians and Gaming and Leisure Properties Inc. (GLPI). This collaboration could pave the way for innovative capital sources for tribal gaming projects, particularly in an era characterized by evolving financial models.
On April 1, during a panel discussion at the Indian Gaming Tradeshow and Convention, notable figures involved in this landmark deal shared insights into its implications. The panel was moderated by Colin Mansfield, head of credit research at CBRE, and featured three key stakeholders:
- Sarah Dutschke, Chair, Ione Band of Miwok Indians
- Brandon Moore, President and COO, Gaming and Leisure Properties Inc.
- William Newby, President, TFA Capital Partners
The agreement marks the first financing arrangement between a tribal entity and a real estate investment trust (REIT). Established in September, this deal involves a $110 million (£85.1 million/€101.9 million) delayed draw term loan to support the construction of the Ione Band’s Acorn Ridge Casino project, strategically located near Sacramento.
Notably, the structure of this financing agreement was tailored to uphold tribal sovereignty, a critical factor that distinguishes it from typical REIT financing structures. According to a GLPI statement, “At the conclusion of the loan term, the Ione Band has the option to satisfy the loan obligation by converting the outstanding principal into a long-term lease with an initial term of twenty-five years and a maximum term of forty-five years.”
The National Indian Gaming Commission (NIGC) ultimately approved the loan, which features a five-year term with an interest rate of 11%. TFA Capital Partners served as the advisory conduit for this significant financial transaction. Colin Mansfield characterized this agreement as a “monumental” development within the tribal gaming industry.
GLPI: Open for Future Tribal Financing Initiatives
Throughout the panel discussion, Brandon Moore highlighted that GLPI had been engaged in the pursuit of such a partnership for nearly a decade. The missing piece was finding the right collaboration with a tribe that possessed a viable project. The Ione Band emerged as that ideal partner. When probed about the potential for future tribal financing agreements, Moore asserted GLPI’s readiness to explore additional opportunities.
“We have engaged in discussions regarding this model with several tribes and are eager to proceed with further transactions,” Moore remarked. “If the underwriting parameters align, and the project presents a solid opportunity, we are open to financing significant amounts, even several hundred million dollars.”
This shift comes as traditional REITs, known for their conservative and stable investment strategies, seek new avenues for growth amidst a scarcity of legacy casino assets. The tribal gaming market is emerging as a promising sector for investment. “We have the capital and the balance sheet,” Moore emphasized. “If tribes can demonstrate a sound usage for the funds that benefits their enterprise, we will be ready to provide the necessary capital.”
NIGC Approval: A Critical Benchmark
The successful arrangement is expected to garner interest among other tribes exploring similar financing avenues. The securing of NIGC approval is pivotal for various compelling reasons. Under the Indian Gaming Regulatory Act (IGRA), tribes must maintain exclusive proprietary interests in their gaming operations, which mandates a rigorous review of any agreements involving third-party management.
Historically, traditional REIT financing structures did not comply with the proprietary interests stipulated by IGRA. However, the Ione Band’s agreement offers the tribe requisite flexibility and opt-out provisions that satisfy NIGC scrutiny. Dutschke noted that, while the agreement’s complexity extended the negotiation period to about a year—significantly longer than the typical three to six months—the unified approach from both stakeholders significantly alleviated concerns. “GLPI was commendable in allowing the tribe to take the lead in this process, which was essential to demonstrating to the NIGC that these were the tribe’s decisions, supported by GLPI,” Dutschke commented.
Empowering Smaller Tribes with Innovative Financing Models
Since the implementation of IGRA in 1988, the tribal gaming industry has burgeoned into a multibillion-dollar enterprise. While some tribes have acquired substantial wealth and influence, less-resourced tribes may be the greatest beneficiaries of this novel REIT financing model. The lease component intrinsic to such agreements serves as a unique monetization vehicle, enabling tribes to secure funding while maintaining sovereignty over their lands.
William Newby of TFA Capital Partners elucidated the limitations tribes face in capital generation, as they are unable to issue stock like commercial gaming operators. Instead, the approved lease conditions can effectively substitute equity issuance. “The long-term lease structure serves as an avenue for tribal nations to acquire growth capital and diversify their economic portfolios,” he articulated. “This represents a compelling option for tribes.”
As echoed by Sarah Dutschke, access to financial resources is a persistent challenge for tribes like the Ione Band, which strives to provide adequate resources for its community members. This innovative financing model offers a pathway to invest in revenue-generating projects while retaining crucial control over their ancestral lands. “We have uncovered a strategy to monetize our trust lands in a pioneering way, allowing us to capitalize on resources without ceding control,” Dutschke affirmed.
