Penn National Gaming Announces Intent to Pursue the Separation of Its Real Estate Assets from Its Operating Assets

  Penn National Gaming Announces Intent to Pursue the Separation of Its Real
  Estate Assets from Its Operating Assets

  - First Gaming Company to Split its Businesses into Two Separate Publicly
       Traded Companies, a Gaming Focused REIT and a Gaming Operator -

 - REIT Would Own 17 Casino Facilities Encompassing Over 3,200 Acres of Land,
6.9 Million Square Feet of Building Space and 20,000 Structured Parking Spaces
                                      -

- Establishes 2013 Full Year Guidance for Penn National Gaming as well as Pro
 Forma Guidance for the Operating Entity, Penn National Gaming, and Publicly
                    Traded Real Estate Investment Trust -

Business Wire

WYOMISSING, Penn. -- November 15, 2012

Penn National Gaming, Inc.:

        Conference Call, Webcast & Management PowerPoint Presentation

Conference Call:  Friday, November 16, 2012 at 8:30 a.m. ET
Dial-in number:    212/271-4651
Webcast:           www.pngaming.com (select “Investors” / “Events”)
Presentation:      www.pngaming.com (select “Investors” / “Presentations”)

                        Replay details provided below

Penn National Gaming, Inc. (PENN: Nasdaq) (“PENN”) announced today that it
intends to pursue a plan to separate its gaming operating assets and real
property assets into two publicly traded companies including an operating
entity, Penn National Gaming (“PNG”), and, through a tax-free spin-off of its
real estate assets to holders of PENN common stock, a newly formed, publicly
traded real estate investment trust (“REIT”) (“PropCo”), subject to required
gaming regulatory body approvals.

HIGHLIGHTS

  *Creation of the first gaming focused REIT

       *Initially, rent will equal approximately $450 million, which
         represents approximately half of PNG’s projected 2013 adjusted EBITDA

  *Through a tax-free dividend, PENN shareholders will receive PropCo common
    stock. PropCo will subsequently declare a taxable dividend of
    approximately $1.4 billion of accumulated earnings and profits equivalent
    to approximately $15.40 per PENN share comprised of approximately $487
    million of cash, or an approximately $5.35 cash dividend per PENN share,
    with the remainder comprised of PropCo shares
  *PropCo shareholders to be entitled to ordinary dividend which, based on
    pro forma 2013 guidance, would be $2.36 per PENN share
  *Non-binding agreement reached to exchange $975 million of Series B
    Redeemable Preferred Stock (“Preferred Stock”) at $67 per share into
    approximately 14.6 million non-voting PENN common shares or equivalents

       *Exchange will reduce PENN diluted common shares outstanding by
         approximately 7.1 million shares
       *Following the exchange, PENN has the right to purchase up to an
         estimated $417.5 million of the non-voting PENN common stock or
         equivalents (approximately 6.2 million of the 14.6 million non-voting
         PENN common shares or equivalents at $67 per share) which may reduce
         PENN diluted common shares outstanding by up to approximately 6.2
         million additional shares

  *PENN has received a Private Letter Ruling from the IRS with respect to
    certain tax matters regarding the transaction and the qualification of
    PropCo as a REIT
  *Spin-off of PropCo shares to PENN shareholders expected to occur in the
    second half of 2013 with REIT election effective by January of 2014

TRANSACTION DETAILS

Under the plan, PropCo will initially own substantially all of PENN’s real
property assets and will lease back most of those assets to PNG for use by its
subsidiaries, under a “triple net” 35 year Master Lease agreement (including
extensions). It is expected that PNG would pay approximately $450 million to
PropCo in rent, which would result in a rent coverage ratio of approximately
2.0 times earnings before interest, taxes, depreciation, amortization and rent
(“EBITDAR”). After the proposed separation, PNG would operate the leased
gaming facilities and own and operate other assets, which include a casino
management contract, a 50% joint venture interest in Hollywood Casino at
Kansas Speedway, gaming licenses, seven non-casino racetracks and gaming
equipment.

Based on PENN’s current real estate portfolio, PropCo is expected to initially
own 17 casino facilities, which have a total of over 3,200 acres of land, 6.9
million square feet of building space and 20,000 structured parking spaces, as
well as two new facilities to be constructed in Ohio. Through its rent
structure, which is partially based on the performance of the facilities,
PropCo would expect to grow organically by participating in PNG’s growing
revenue base. In addition, PropCo would focus on expanding its gaming and
leisure sector real estate portfolio through acquisitions, and thereby
diversify its asset base and tenant base over time.

After the proposed spin-off of PropCo shares to PENN shareholders, PropCo will
declare a dividend to its shareholders to distribute any accumulated earnings
and profits attributable to any pre-REIT years to comply with certain REIT
qualification requirements. PENN estimates that the dividend will total
approximately $1.4 billion. The dividend will be paid in a combination of cash
and PropCo stock, which PENN expects will consist of approximately 35% cash
and 65% PropCo stock. In addition, going forward, PENN expects that PropCo
will distribute at least 90% of its annual taxable income as dividends. Based
on pro forma 2013 guidance (provided below), the dividend would be $2.36 per
share.

PENN has received a private letter ruling from the Internal Revenue Service
(the “IRS”) relating to the tax treatment of the separation and the
qualification of PropCo as a REIT. The private letter ruling is subject to
certain qualifications and based on certain representations and statements
made by PENN. If such representations and statements are untrue or incomplete
in any material respect (including as a result of a material change in the
proposed transaction or other relevant facts), PENN may not be able to rely on
the private letter ruling.

Prior to the spin-off, PENN anticipates refinancing its existing debt
obligations and PNG and PropCo are expected to enter into new credit
facilities.

Peter M. Carlino, Chairman and Chief Executive Officer of Penn National Gaming
commented, “This proposed transaction would be transformational for Penn
National and its shareholders and presents a direct path toward unlocking the
tremendous value of our real estate asset portfolio. Our plan is to create two
well capitalized companies with strong free cash flow that are positioned for
growth in the gaming and REIT sectors. The transaction and new ownership
structure would permit both companies to best address market and growth
opportunities in their respective industries through access to a lower blended
cost of capital, fewer regulatory license ownership restrictions, a new
capital funding source for the gaming industry by creating an industry
specific REIT, and potential opportunities to diversify in the future beyond
the gaming industry. The REIT is a highly efficient vehicle for providing
consistent and growing income distributions to shareholders as PENN generates
substantial and growing free cash flow from existing and future operations.

“The operating entity, PNG, will continue to benefit from its strong and
diversified regional presence, proven management team, property development
capabilities, strong balance sheet, proven operating discipline, highly
regarded Hollywood Casino brand, and robust customer database. PNG will retain
its existing growth pipeline while pursuing additional near- and long-term
domestic and international growth opportunities that can be highly impactful
for its shareholders. In addition, the new structure is expected to allow PNG
to operate additional facilities in certain gaming jurisdictions that have
ownership limitations.

“We have already begun the process of working with gaming regulators and look
forward to updating shareholders on developments related to this value
building transaction which is expected to be completed in 2013.”

PENN anticipates filing a registration statement relating to the proposed
transaction with the U.S. Securities and Exchange Commission in the second
quarter of 2013. The completion of the proposed transaction is contingent on
receipt of regulatory approvals, which PENN anticipates could occur over the
next nine to twelve months, the receipt of final approval by the Penn National
Gaming Board of Directors, execution of definitive documentation and approval
of the transaction by certain holders of the Preferred Stock, the receipt of
legal and accounting opinions, and other customary conditions. PENN may, at
any time and for any reason until the proposed separation is complete, abandon
the separation or modify or change the terms of the separation.

RE-ALIGNMENT OF INVESTMENTS BY FORTRESS INVESTMENT GROUP AND CARLINO FAMILY TO
SATISFY CERTAIN REIT QUALIFICATION REQUIREMENTS

In general, amounts received by a REIT from any person in which the REIT owns
directly, indirectly or constructively 10% or more of the total combined
voting power or value do not qualify as “rents from real property” for
purposes of the REIT qualification requirements (the “Related-Party Rent
Rule”). Absent a re-alignment of the investments by Fortress Investment Group
and the Carlino Family, PropCo would be deemed to own constructively 10% or
more of the voting power or value of PNG following the spin-off for the
purposes of the Related-Party Rent Rule. Although Fortress Investment Group
and the Carlino Family have each entered into non-binding agreements to
re-align their investments to ensure compliance with the Related-Party Rent
Rule, there can be no assurance that they will execute the required definitive
agreements.

Fortress Investment Group, owners of approximately $975 million or 79.4% of
the outstanding Series B Redeemable Preferred Stock (“Preferred Stock”), has
entered into a non-binding agreement to reduce their aggregate interest in
PENN prior to the spin-off such that Fortress Investment Group would own in
the aggregate less than a 10% interest in PropCo following the spin-off.
Pursuant to the non-binding agreement, PENN has agreed with Fortress
Investment Group to exchange their Preferred Stock for non-voting PENN common
stock or equivalents at a price of $67 per share or 14.6 million non-voting
common shares or equivalents. The non-voting common shares or equivalents
would convert to PENN voting common shares upon sale to a third party.

Prior to the spin-off, the timing of the exchange into non-voting common
shares or equivalents at $67 per share will be at Fortress’ discretion. If
Fortress doesn’t fully exercise the exchange right prior to the spin-off, any
remaining Preferred Stock will automatically be converted into PENN non-voting
common shares or equivalents. The effect of the above would reduce PENN’s
diluted share count by at least 7.1 million shares.

Following the exchange, Fortress Investment Group may either divest 6.2
million of the 14.6 million non-voting PENN common shares or equivalents prior
to the spin-off, or, if it does not, PENN has the right to repurchase the
undisposed shares for $67 per share. This agreement may further reduce PENN’s
diluted share count by up to 6.2 million shares. In total, reflecting the
exchange and potential repurchase and assuming Fortress Investment Group does
not divest any of its non-voting common shares or equivalents to third
parties, PENN would reduce its diluted share count by up to 13.3 million
shares.

Current Series B Redeemable Preferred Stock Ownership
($ in millions)
Fortress                          $975.0
Others                            252.5
Total Preferred Stock             $1,227.5

Impact on Diluted Share Count of Fortress Agreement to Convert Preferred Stock
to PENN Non-
Voting Common Shares or Equivalents and Agreement to Repurchase a Portion of
Fortress’ Common Stock Ownership
(in millions, except conversion/exchange price)
                              Impact of                     
                               Exchange of
                               Fortress                         Reduction in
                               Preferred                        PENN
                              Stock for PENN   Impact of       Diluted Common
                                                PENN            Share
                               Non-Voting       Share           Count Assuming
                                                Repurchase
                               Common Shares    Agreement       Fortress
                                                with            Exchange and
                             or Equivalents  Fortress (2)   Share
                               (1)                              Repurchase
Fortress Preferred Stock      $975.0          $(417.5)       $557.5
Balance
Conversion/Exchange Price     $67.00          $67.00         $67.00
Fortress Holdings of
Non-Voting PENN               14.6            (6.2)          8.4
Common Shares or Equivalents
Post Exchange
Current Impact of Fortress                                     
Preferred Stock Ownership on                               
PENN Diluted Share Count       21.7                             21.7
Reduction in PENN Diluted     (7.1)           (6.2)          (13.3)
Share Count

(1)  Would occur prior to the spin-off.
      Would occur if PENN purchases all of Fortress’s shares in excess of 9.9%
(2)   ownership at $67.00. Such reductions will not occur if Fortress sells
      the excess shares to a third party.

Holders of the remaining Preferred Stock will have the option to retain their
Preferred Stock positions or convert their Preferred Stock to PENN non-voting
common shares or equivalents at $67 per share. In the spin-off, holders of
Preferred Stock will receive a distribution of PropCo common stock on an
as-converted basis at the $67 ceiling price contemplated by the original terms
of the Preferred Stock.

The Carlino Family group has agreed to receive a non-pro rata distribution as
part of the PropCo spin-off, whereby they would receive additional shares of
PropCo stock in the spin-off in exchange for PENN stock, based on the fair
value of PENN and PropCo stock. As a result, to ensure compliance with the
Related Party Rent Rule, the Carlino Family will re-align their investment so
that they would collectively own no more than 9.9% of PNG following the
spin-off.

SHAREHOLDERS AND EMPLOYEES

As currently contemplated, PENN common shareholders will receive one share of
PropCo stock for every PENN share owned on the record date of the spin-off.
PENN employees who currently hold employee stock options in PENN will receive
one option in PropCo for every option they own in PENN with no change in the
option’s intrinsic value.

PropCo and PNG would have independent executive management teams. Peter M.
Carlino, who presently serves as PENN’s Chairman and Chief Executive Officer,
would assume those same roles at PropCo and will serve as Chairman of the
Board at PNG. Tim Wilmott, who currently serves as President and Chief
Operating Officer at PENN, would assume the position and responsibilities of
Chief Executive Officer at PNG.

Tim Wilmott commented, “In its eighteen years as a public company, Penn
National Gaming has established a proven record for acquiring and developing
leading gaming assets, driving efficiencies and generating growing financial
results. The transaction creates a structure whereby Penn National Gaming can
compete even more effectively for new opportunities including strategic
acquisitions and greenfield developments. Penn National Gaming’s customers
will continue to enjoy our market leading amenities driven by our employees’
commitment to deliver quality guest services.”

2013 FINANCIAL GUIDANCE FOR PENN NATIONAL GAMING, INC. (PENN)

The following table sets forth guidance targets for 2013 full year financial
results, based on the following assumptions:

  *Excludes costs associated with the proposed transaction (including tender
    costs, financing fees and consulting fees, which are estimated to be less
    than $125 million, with the majority still to be incurred);
  *A full year of Harrah’s St. Louis operations (currently being re-branded
    as Hollywood Casino St. Louis), inclusive of the proposed property tax
    increase of approximately $7.7 million;
  *New video lottery terminal operations in Dayton and Youngstown, Ohio do
    not open until 2014;
  *Horseshoe Cincinnati opens in the first quarter of 2013;
  *Operators in Maryland begin offering table games in April of 2013;
  *No disruptions to Penn National’s Argosy Casino Sioux City facility
    arising from the ongoing negotiations with the City of Sioux City or the
    facility’s charitable sponsor or any related litigation or regulatory
    proceedings;
  *Depreciation and amortization charges in 2012 of $250.0 million and $306.0
    million in 2013;
  *Estimated non-cash stock compensation expenses of $29.4 million for 2012
    and $30.6 million in 2013;
  *LIBOR is based on the forward curve;
  *A blended 2012 and 2013 income tax rate of 39%;
  *A diluted share count of approximately 105.8 million and 107.4 million
    shares for the full year 2012 and 2013, respectively, which does not
    assume a reduction of the fully diluted weighted average shares related to
    the terms of the Preferred Stock if Penn National Gaming’s stock price
    exceeds $45; and
  *There will be no material changes in applicable legislation, regulatory
    environment, world events, weather, recent consumer trends, economic
    conditions, or other circumstances beyond our control that may adversely
    affect the Company’s results of operations.

Penn National Gaming, Inc. (PENN)
(in millions, except per share       Full Year Ending December 31,
data)
                                     2013         2012 Current  2011
                                    Guidance     Guidance*     Actual
Net revenues                         $ 3,201.6   $  2,938.1   $ 2,742.3 
Adjusted EBITDA (1)                   905.1       741.5      730.2   
Less: Impact of stock compensation,
insurance
recoveries and deductible charges,
depreciation and amortization,
gain/loss on
disposal of assets, interest
expense - net,
income taxes, loss on early
extinguishment of
debt, and other expenses              (624.0  )    (514.6  )   (487.8  )
Net income                           $ 281.1     $  226.9     $ 242.4   
Diluted earnings per common share    $ 2.62      $  2.15      $ 2.26    

    Penn National Gaming’s 2012 adjusted EBITDA, net income and diluted
*  earnings per share guidance includes Maryland lobbying costs in the 2012
    fourth quarter of $23.8 million. The company’s prior guidance disclosed on
    October 18, 2012 excluded Maryland lobbying costs.

      Adjusted EBITDA is income (loss) from operations, excluding the impact
(1)  of stock compensation, insurance recoveries and deductible charges,
      depreciation and amortization, and gain or loss on disposal of assets,
      and is inclusive of gain or loss from unconsolidated affiliates.

PRO FORMA 2013 FINANCIAL GUIDANCE FOR PROPCO REIT

Reflecting the assumptions below and the 2013 financial guidance for PENN
above, PropCo is expected to generate adjusted EBITDA of $459.1 million and
Adjusted Funds From Operations (AFFO) of $269.2 million:

  *PropCo to receive rent payments under the Master Lease equal to
    approximately $450 million in 2013;
  *The rent payments from the Master Lease agreement with PNG, with the
    exception of Hollywood Casino Toledo and Hollywood Casino Columbus, are
    fixed for five years. The rent for Hollywood Casino Toledo and Hollywood
    Casino Columbus is 20% of annual net revenue;

       *The planned Dayton and Youngstown video lottery terminal facilities
         are subject to the Master Lease;
       *The Master Lease includes a building rent escalator of 2.0% annually
         subject to minimum rent coverage of 1.8 times;
       *The Master Lease contains standard covenants that are designed
         prevent either party from taking action that impairs either entity’s
         financial viability;

  *Overhead, including corporate expenses and land lease payments, of
    approximately $25 million;

       *These costs are inclusive of costs pursuant to a two year transition
         services agreement with PNG;

  *PropCo will make a one-time payment of accumulated earnings and profits
    equivalent to $1.4 billion comprised of cash and stock;
  *For a three year period, PropCo will make annual payments of approximately
    $38.5 million, in lieu of dividends on employee options;
  *PropCo expects to establish a capital structure comprised of bank debt and
    subordinated debt;
  *Following the spin-off and after the initial dividend distribution by
    PropCo, PropCo will have total leverage (total debt to EBITDA) of
    approximately 5.5x; and
  *95.9 million fully diluted common shares outstanding (for both 2012 and
    2013), which excludes the impact of the pro rata share distribution
    associated with the one-time dividend to shareholders of accumulated
    earnings and profits and assumes Fortress sells the exchanged 6.2 million
    of non-voting common stock to PENN.

PropCo
(in millions, except per share data)     Full Year Ending December 31,
                                                      2012     
                                            2013       Current      
                                        Guidance    Guidance    % Variance
Net revenues                             $ 608.3    $ 556.2    9.4    %
Adjusted EBITDA (1)                       459.1     376.8    21.8   %
Less: Interest Expense and maintenance
CAPEX,
Option holder payments and income taxes   (189.9 )   (199.6 )  (4.9   %)
AFFO (2)                                  269.2     177.2    51.9   %
Less: Impact of stock compensation,
depreciation and amortization
Plus: Add-back of maintenance cap-ex      (157.0 )   (130.6 )  20.2   %
Net income                               $ 112.2    $ 46.6     140.8  %
                                                              
Diluted earnings per common share        $ 1.17     $ 0.49     138.8  %
                                                              
Dividend Per Outstanding Share           $ 2.36     $ 1.56     51.3   %

      Adjusted EBITDA is income (loss) from operations, excluding the impact
(1)  of stock compensation, insurance recoveries and deductible charges,
      depreciation and amortization, and gain or loss on disposal of assets,
      and is inclusive of gain or loss from unconsolidated affiliates.
      AFFO, or Adjusted Funds From Operations is net income, excluding gains
(2)   or losses from sales of property, adding back depreciation and stock
      compensation expense and subtracting maintenance capex

PRO FORMA 2013 FINANCIAL GUIDANCE FOR PENN NATIONAL GAMING (PNG) POST SPIN-OFF

Reflecting the assumptions below and the 2013 financial guidance for PENN
above:

  *PNG will generate approximately $432.1 million of EBITDA in 2013;
  *PNG’s rent coverage ratio will be approximately 2.0x EBITDAR with actual
    total leverage (total debt to adjusted EBITDA) of approximately 2.9x and
    implied total adjusted debt leverage (inclusive of PNG’s obligation under
    the Master Lease) of 5.5x;
  *PNG expects to establish a capital structure comprised of bank debt and
    subordinated debt;
  *All existing outstanding debt of PENN will be redeemed at the consummation
    of the proposed transaction;
  *The $1.2275 billion Preferred Stock will be reduced by $975 million due to
    the Fortress exchange for common shares. In addition, the guidance assumes
    Fortress did not divest any of the 6.2 million of the 14.6 million
    non-voting PENN common shares or equivalents and PENN repurchased them for
    $67 per share prior to the spin-off to ensure that Fortress’ ownership in
    PropCo is less than 10%. Centerbridge Partners LP and Wells Fargo
    Securities, LLC, the holders of the remaining $252.5 million of Preferred
    Stock, will have a right to exchange their holdings for PENN common stock
    at $67 per share. If Centerbridge Partners LP and Wells Fargo Securities,
    LLC elect to retain their Preferred Stock holdings, the liquidation value
    of the instrument will be reduced by the PropCo share distribution
    multiplied by the PropCo stock price;

       *The new floor and ceiling price of the Preferred Stock will be $67.00
         and $45.00, respectively, less the price of PropCo common stock over
         the same measurement period;
       *PNG will redeem any remaining shares of Preferred Stock with shares
         of PNG common stock in 2015;
       *The diluted share count will be reduced by 13.3 million shares from
         the pre-announcement level assuming the Fortress exchange and PENN’s
         repurchase of the 6.2 million non-voting PENN common shares or
         equivalents;
       *89.3 million fully diluted common shares outstanding; and

  *Pursuant to the Master Lease, PNG will lease and operate all of the real
    property now wholly-owned by PENN (other than Hollywood Casino Baton Rouge
    and Hollywood Casino Perryville) that will be owned by PropCo immediately
    after the proposed transaction.

Penn National Gaming (PNG)
(in millions, except per share data)   Full Year Ending December 31,
                                       2013         2012        
                                      Guidance     Guidance     Variance %
Net revenues                           $ 3,042.6   $ 2,724.2   11.7   %
Adjusted EBITDAR (2)                    881.4      693.7     27.1   %
Rent Expense                            (449.3  )   (342.3  )  31.2   %
Adjusted EBITDA (1)                     432.1      351.4     23.0   %
Less: Impact of stock compensation,
insurance
recoveries and deductible charges,
depreciation and amortization,
gain/loss on
disposal of assets, interest expense
- net,
income taxes, loss on early
extinguishment of
debt, and other expenses                (316.5  )   (262.6  )  20.5   %
Net income                             $ 115.6     $ 88.8      30.2   %
                                                              
Diluted earnings per common share      $ 1.29      $ 1.00      29.0   %

      Adjusted EBITDA is income (loss) from operations, excluding the impact
(1)  of stock compensation, insurance recoveries and deductible charges,
      depreciation and amortization, and gain or loss on disposal of assets,
      and is inclusive of gain or loss from unconsolidated affiliates.
(2)   Adjusted EBITDAR is adjusted EBITDA less rent.
      

SUPPLEMENTAL INFORMATION
Pro Forma Property Information

                 PROPERTIES OWNED BY PROPCO AND LEASED TO PNG

Property                                        Location
Hollywood Casino at Charles Town Races            Charles Town, WV
Hollywood Casino Lawrenceburg                     Lawrenceburg, IN
Hollywood Casino at Penn National Race Course     Grantville, PA
Hollywood Casino Aurora                           Aurora, IL
Hollywood Casino Joliet                           Joliet, IL
Argosy Casino Alton                               Alton, IL
Argosy Casino Riverside                           Riverside, MO
Hollywood Casino Tunica                           Tunica, MS
Hollywood Casino Bay St. Louis                    Bay St. Louis, MS
Boomtown Biloxi                                   Biloxi, MS
Argosy Casino Sioux City                          Sioux City, IA
Hollywood Slots Hotel and Raceway                 Bangor, ME
Zia Park Casino                                   Hobbs, NM
M Resort                                          Henderson, NV
Hollywood Casino Toledo                           Toledo, OH
Hollywood Casino Columbus                         Columbus, OH
Hollywood Casino St. Louis                        St. Louis, MO
Youngstown development (pending approval)         Youngstown, OH
Dayton development (pending approval)             Dayton, OH

       PROPERTIES OWNED BY PROPCO AND HELD IN A TAXABLE REIT SUBSIDIARY

Property                       Location
Hollywood Casino Baton Rouge     Baton Rouge, LA
Hollywood Casino Perryville      Perryville, MD

                     PROPERTIES / INTERESTS OWNED BY PNG

Property                                           Location
Sanford-Orlando Kennel Club                          Longwood, FL
Rosecroft Raceway                                    Oxon Hill, MD
Bullwhackers Casino                                  Black Hawk, CO
Casino Rama management contract                      Orillia, Ontario (Canada)
Freehold Raceway (joint venture)                     Freehold, NJ
Sam Houston Race Park (joint venture)                Houston, TX
Valley Race Park (joint venture)                     Harlingen, TX
Hollywood Casino at Kansas Speedway (joint           Kansas City, KS
venture)

Summary of Master Lease Terms

                         *“Triple Net” Master Lease: PNG will be responsible
                           for maintenance capital expenditures, property
                           taxes, insurance and other expenses
                         *All properties subject to the lease will be
Lease Structure:           cross-defaulted / guaranteed
                         *PNG will remain responsible for acquisition,
                           maintenance, operation and disposition of all
                           (including gaming) FF&E and personal property
                           required for operations
                         *15 years, with four 5-year extensions at PNG’s
                           option
                         *Causes for termination by lessor include lease
                           payment default, bankruptcy and/or loss of gaming
                           licenses
Term and Termination:    *At the end of lease term, PNG will be required to
                           transfer the gaming assets (including the gaming
                           licenses) to successor tenant for fair market
                           value, subject to regulatory approval
                         *Provisions for orderly auction-based transition to
                           new operator at the end of the lease term if not
                           extended
                         *Fixed base rent component with annual escalators
                           (subject to minimum rent coverage of 1.8x) plus:
                         *Fixed percentage rent component for the facilities
                           (other than Hollywood Casino Toledo and Hollywood
                           Casino Columbus) reset every 5 years to equal 4% of
Rent:                      the excess (if any) of the average net revenue for
                           such facilities for the trailing 5 years over a
                           baseline
                         *Ohio’s (Toledo and Columbus) performance components
                           will be established monthly with land rent set at
                           20% of monthly net revenues
                         *PNG will be required to maintain properties and
                           spend a minimum of 1% of net revenues on
Maintenance; Capital       maintenance capital (including FF&E and capitalized
Expenditures:              personal property required for operations) annually
                         *Structural projects will generally require PropCo
                           consent
                         *Obligations under the Master Lease will be
Other:                     guaranteed by PNG and certain of its subsidiaries
                         *Certain rights of first refusal / first offer as
                           well as radius restrictions on competition

Wells Fargo Securities and Banc of America Merrill Lynch are serving as
financial advisors to Penn National Gaming in the transaction. Wachtell,
Lipton, Rosen & Katz is serving as legal advisor to Penn National Gaming and
Skadden, Arps, Slate, Meagher & Flom LLP is also advising with respect to
certain tax matters.

Definitions and Reconciliation of Non-GAAP Measures to GAAP

Adjusted EBITDA, or earnings before interest, taxes, stock compensation,
insurance recoveries and deductible charges, depreciation and amortization,
gain or loss on disposal of assets, and other income or expenses, and
inclusive of gain or loss from unconsolidated affiliates, is not a measure of
performance or liquidity calculated in accordance with GAAP. Adjusted EBITDA
information is presented as a supplemental disclosure, as management believes
that it is a widely used measure of performance in the gaming industry. In
addition, management uses adjusted EBITDA as the primary measure of the
operating performance of its segments, including the evaluation of operating
personnel. Adjusted EBITDA should not be construed as an alternative to
operating income, as an indicator of the Company's operating performance, as
an alternative to cash flows from operating activities, as a measure of
liquidity, or as any other measure of performance determined in accordance
with GAAP. The Company has significant uses of cash flows, including capital
expenditures, interest payments, taxes and debt principal repayments, which
are not reflected in adjusted EBITDA. It should also be noted that other
gaming companies that report adjusted EBITDA information may calculate
adjusted EBITDA in a different manner than the Company. Adjusted EBITDA is
presented as a supplemental disclosure, as management believes that it is a
principal basis for the valuation of gaming companies, as this measure is
considered by many to be a better indicator of the Company’s operating results
than diluted net income (loss) per GAAP. A reconciliation of the Company’s
adjusted EBITDA to net income (loss) per GAAP, as well as the Company’s
adjusted EBITDA to income (loss) from operations per GAAP, is included in the
accompanying financial schedules.

Adjusted EBITDAR is adjusted EBITDA less rent expense.

Funds From Operations (“FFO”), is defined by NAREIT (the National Association
of Real Estate Investment Trusts, the trade organization for REITs) as “the
most commonly accepted and reported measure of REIT operating performance.”
FFO is equal to net income, excluding gains or losses from sales of property,
adding back depreciation and stock compensation expense. Adjusted Funds From
Operations (“AFFO”) is defined as FFO less maintenance capex. A reconciliation
of FFO and AFFO to net income (loss) per GAAP is included in the accompanying
financial schedules. Notwithstanding the foregoing, PropCo’s measures of
adjusted EBITDA, adjusted EBITDAR, FFO and AFFO may not be comparable to
similarly titled measures used by other companies.

Conference Call, Webcast and Replay Details

Penn National Gaming is hosting a conference call and simultaneous webcast
with a management presentation on Friday, November 16, at 8:30 a.m. ET, both
of which are open to the general public. The conference call number is
212/271-4651; please call five minutes in advance to ensure that you are
connected prior to the presentation. Questions will be reserved for call-in
analysts and investors. Interested parties may also access the live call on
the Internet at www.pngaming.com  (select “Investors” / “Events”); allow 15
minutes to register and download and install any necessary software. During
the conference call and webcast, management will review a presentation
summarizing the proposed transaction which can be accessed at www.pngaming.com
(select “Investors” / “Presentations”). A replay of the call can be accessed
for thirty days at www.pngaming.com.

This press release, which includes financial information to be discussed by
management during the conference call and disclosure and reconciliation of
non-GAAP financial measures, is available on the Company’s web site,
www.pngaming.com in the “Investors” section (select link for “Press
Releases”).

About Penn National Gaming

Penn National Gaming owns, operates or has ownership interests in gaming and
racing facilities with a focus on slot machine entertainment. The company
presently operates twenty-nine facilities in nineteen jurisdictions, including
Colorado, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine,
Maryland, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio,
Pennsylvania, Texas, West Virginia, and Ontario. In aggregate, Penn National's
operated facilities currently feature approximately 36,800 gaming machines,
approximately 850 table games, 2,900 hotel rooms and approximately 1.6 million
square feet of gaming floor space.

Forward-looking Statements

This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Actual results may vary
materially from expectations. Although Penn National Gaming, Inc. and its
subsidiaries (collectively, the “Company” or “PENN”) believe that our
expectations are based on reasonable assumptions within the bounds of our
knowledge of our business and operations, there can be no assurance that
actual results will not differ materially from our expectations. Meaningful
factors that could cause actual results to differ from expectations include,
but are not limited to, risks related to the following: the proposed
separation of PropCo from PENN, including our ability to receive, or delays in
obtaining, all necessary consents and approvals, the anticipated timing of the
proposed separation, the expected tax treatment of the proposed transaction,
the ability of each of the Company (post-spin) and PropCo to conduct and
expand their respective businesses following the proposed spin-off, and the
diversion of management’s attention from regular business concerns; our
ability to receive, or delays in obtaining, the regulatory approvals required
to own, develop and/or operate our facilities, or other delays or impediments
to completing our planned acquisitions or projects, including favorable
resolution of any related litigation, including the recent appeal by the Ohio
Roundtable addressing the legality of video lottery terminals in Ohio; our
ability to secure state and local permits and approvals necessary for
construction; construction factors, including delays, unexpected remediation
costs, local opposition and increased cost of labor and materials; our ability
to successfully integrate Harrah’s St. Louis into our existing business; our
ability to reach agreements with the thoroughbred and harness horseman in Ohio
and to otherwise maintain agreements with our horseman, pari-mutuel clerks and
other organized labor groups; the passage of state, federal or local
legislation (including referenda) that would expand, restrict, further tax,
prevent or negatively impact operations in or adjacent to the jurisdictions in
which we do or seek to do business (such as a smoking ban at any of our
facilities); the effects of local and national economic, credit, capital
market, housing, and energy conditions on the economy in general and on the
gaming and lodging industries in particular; the activities of our competitors
and the emergence of new competitors (traditional and internet based);
increases in the effective rate of taxation at any of our properties or at the
corporate level; our ability to identify attractive acquisition and
development opportunities and to agree to terms with partners for such
transactions; the costs and risks involved in the pursuit of such
opportunities and our ability to complete the acquisition or development of,
and achieve the expected returns from, such opportunities; our expectations
for the continued availability and cost of capital; the outcome of pending
legal proceedings; changes in accounting standards; our dependence on key
personnel; the impact of terrorism and other international hostilities; the
impact of weather; and other factors as discussed in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2011, subsequent Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K as filed with the SEC.
The Company does not intend to update publicly any forward-looking statements
except as required by law.

Contact:

Penn National Gaming, Inc.
William J. Clifford, 610-373-2400
Chief Financial Officer
or
JCIR
Joseph N. Jaffoni, Richard Land
212-835-8500
penn@jcir.com