Union asks Missouri to block REIT’s bid for Pinnacle Casinos

Gaming & Leisure’s proposal would give the Wyomissing, Pennsylvania-based company ownership of five of the six casinos in the St. Louis market, making up 86 percent of gross revenue, the union said in a March 23 letter to Missouri Gaming Commission Chairman Leland Shurin. Pinnacle has said it is studying the US$ 4.1 billion Gaming & Leisure offer.

In the Kansas City market, Gaming & Leisure and Penn National Gaming, the casino operator it was split off from in 2013, would control three of five properties and 65 percent of revenue, according to the letter from Kevin McNatt, president of Unite Here Local 74 in St. Louis.  “We believe these outcomes would have a material negative competitive impact and would not be in the best interest of the state of Missouri,” McNatt said in the letter, provided to Bloomberg by the union.

LeAnn McCarthy, a spokeswoman for the Missouri regulators, said the chairman received the letter but was traveling and couldn’t be reached. Representatives of Pinnacle and Gaming & Leisure said they had no immediate comment.

Union Concern
Casino operators including Caesars Entertainment and MGM Resorts International are considering converting their properties into REITs, which can trade at higher stock values because they don’t pay federal income taxes. Penn National's split, which created Gaming & Leisure, was the first of such conversions. Pinnacle, based in Las Vegas, said it would pursue a similar arrangement in November. GLPI made its unsolicited offer to buy Pinnacle’s real estate this month.

The casino industry’s move toward REITs is a concern for unions, according to Marty Leary, deputy director of research at Unite Here. A similar shift in the hotel industry disrupted relations between labor and the owners and managers of the properties, he said, and Unite Here is worried the same will happen with casinos. “In order to win organizing rights you have to persuade the operator and the owner,” Leary said. REITs “care less about labor relations,” he said. “The operators lost power.”

Unite Here represents about 275,000 hospitality workers nationally, about a third of them in casinos. The union is asking Pinnacle investors to consider proposals in the wake of its decision to create a REIT, including electing directors annually at both companies and preserving the right of shareholders to call for a special meeting.

The union is involved in a contract dispute at Pinnacle’s Ameristar East Chicago casino in Indiana.