Q4 2019 Earnings Call
Greetings and welcome to gaming and leisure properties fourth quarter 2019 earnings conference call.
At this time, all participants already listen only mode.
Question answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Now, let's turn the conference over to your host Joe Girardi. Please go ahead.
Thank you Stacy and good morning, everyone and thank you for joining gaming and leisure properties fourth quarter 2019 earnings call and webcast.
The press release distributed yesterday afternoon is available in the Investor Relations section on our website at Www Dot GE L. P.
Yep prop Inc. dotcom.
On today's call management's prepared remarks and answers your questions may contain forward looking statements as defined in the private Securities Litigation Reform Act of 1995.
Forward looking statements dress matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today.
Forward looking statements may include those related to revenue operating income and financial guidance as well as non-GAAP financial measures such as well.
As a reminder, forward looking statements represent management's current estimates and the company assumes no obligation to update any forward looking statements in the future.
We encourage listeners to review the more detailed discussions related to forward looking statements contained in the company's filings with the FCC as well as the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release.
On this morning's call, we're joined by Peter Carlino, Chairman and Chief Executive Officer, and Steve Snyder, Chief Financial Officer Gaming leisure properties.
Also during today's call or Deseret, Burke, Senior Vice President and Chief Accounting Officer brand or more senior Vice President General Counsel in Secretary, Steve would that bought back makes senior Vice President and Matthew I'm, Sorry, Senior Vice President Finance, and Matthew Demchak Senior VP of investments.
With that it's my pleasure trying to call over to Peter Carlino Peter.
Thank you Joe and good morning, everyone.
We are of course delighted to report.
The end of a great quarter at the end of a terrific year.
For GE LPI and its shareholders.
Yeah, we had set as I said a goal in 2019 too.
Do a better job of outreach to.
Our shareholders tell a better story.
Dual more effective job and because I was feeling as Rodney dangerfield used to say a we can't get no respect and I was satisfied that performance was good but clearly people weren't getting it out in the market.
So what's your in our story, most effective or more effectively with all of you win.
Our excellence and actual.
Performance I was satisfied that the market would eventually come to recognize that.
Regional gaming in particular offer some of the most attractive risk adjusted cash flows in the marketplace.
As I like to remind folks that we speak with our properties are 100% occupied today and we expected they will be 100% occupied 10 years from today and 20 years from today.
And.
That's unique.
And.
We also want to make the point that regional gaming has revenue that.
He is inherently more stable than Las Vegas strip revenue I think the market is just beginning to appreciate that the story, we've been telling but I think people have caught come to recognize that he's a pretty serious properties in the markets, where we are in many cases, our properties or market leaders.
And.
And that's just beginning to be appreciated.
For 2020.
We'll continue to refine our outreach to all of you and two others, who may not yet no our story.
We remain totally focused on generating safe and attractive and accretive transactions this year.
As always.
Think we've demonstrated over decades that we can compete on our abilities and not just our cost of capital.
That having been said, though we have.
Work than a two prong attacked it boosts our equity value, you've just heard outreach as part of it.
And on the debt so I continue to look for opportunities to improve our debt profile.
My time at the same time remaining committed to our investment grade rating.
I'd remind you that we are the only a gaming read that holds that those those ratings were going to hang onto it.
I should point out that though our standards are tough and many of you've heard me say that we're not in the monument building business.
But rather disciplined buyers, who manage our ambitions with a goal of building steady permanent cash flow for the future.
Following this philosophy our team has delivered total shareholder return over the last six years of 13, and a half a cent compounded annually.
And by the way does this get.
Plug in for a major tenants a wallet Penn national that was over well over 24% compounded over 20 years.
So I think our record of delivering long term value has been good. So we'll remain aggressive a disciplined and as we look to 2020 <unk> and beyond so with that Steve I'll turn it over to you right. Thanks, Peter and good morning, everyone.
Just a couple of house cleaning matters before I go into a little bit more detail as you've probably seen by now we did file or annual report on FCC form 10-K last evening. It was effective this morning. So that's out there for anyone to the degree you follow up questions. Secondly, you also saw our press release, which we issued this morning.
Reopened.
Outdoor our board call yesterday evening, declaring the first quarter 2000 in 20 dividend at a rate of 70 cents per share which is payable on March twentyth two shareholders of record on March six.
Moving forward as Peter mentioned, it was really a very quiet quarter compared to some of our most recent quarters and that there were no nonrecurring items no unamortized financing fee write offs, no goodwill impairment charges or anything really we in the quarter really hit our stride as.
An operating business and feel strongly that we've set a template for the future opportunities for GLP like we did modestly exceed our revenue and adjusted EBITDA guidance in the quarter and Oh, we actually exceeded our guidance by nearly 1%. So in in by all economic measures. It was.
Very successful quarter for the company for the full year, we actually modestly exceeded the high end of <unk> AFFO guidance, which we established a year ago. When we issued our 2018 yearend earnings report, even though we faced the headwind of not realizing the full escalator, but just a fractional escalator out to the amended pinnacle.
Master lease with Penn National Gaming.
Just to touch on the portfolio real quickly.
During the quarter, we did anniversary our lease relationships with both Boyd and Eldorado resorts.
And those relationships have been very attractive both sides. They they've been mutually beneficial for both parties I think you're you're going to start to see some more of those mutual benefits as time unfolds. The first one that you're going to see and would hit upon it in their earnings call last night.
We did just recently get approval to move the Belterra Park facility into our owned real estate category, you'll recall, we used a bridge financing a mortgage financing mechanism in order to satisfy concerns that were expressed at the time by the Ohio Racing Commission a in January this year the.
Hi Racing Commission I'm I'm happy to report did approve the transfer of that from a mortgage facility to an owned facility highlighting that the mutual benefit in the cooperation that exists with with we and the Boyd folks.
Also as it relates to avoid assets very encouraged by their comments on their earnings call last night as they commented on their desire to invest capital one room refresh projects in into over assets, the Ameristar, Kansas City, and the Belterra resort properties. So its evidences to us the continued.
Performance and the continued interest in and the continued benefit of the Boyd management approach to that for property portfolio.
As it relates to Eldorado, we are continuing our discussions with Eldorado on finding a replacement for the linear property, where we're in the real estate ownership business, we extended alone to El Dorado to satisfy the Missouri regulators that loan was for the purchase of real estate as required by the Missouri regular.
Later during the quarter, we did release the mortgage on that facility and or as I said actively working with Eldorado as you can imagine they've had some other pressing you matters in front of them over these last couple of months, but they do remain engaged in a constructive dialogue on the replacement of the Leumi Air property.
Into the Tropicana Master lease.
This move removal of the.
Master <unk> the removal of the mortgage on the Leumi Air property in conjunction with the removal of the resorts casino in tunica from the pen Master lease I'll point out did result in a reduction in the property count that you're seeing in our earnings release and that you're going to see in our 10-K by two properties.
With no impact whatsoever on any of our rental stream or income stream or anything else I just pointed out so that those of you are used to our 46 property count aren't surprise, but what you see.
During the quarter, we realized the full escalator on the pen master lease as it Anniversaried in November we realized the full anniversary of the medical Meadows Master lease the meadows lease as well as the catch up payment for the partial escalator under the amended pinnacle Master lease, which we brought to your attention and shared with you on our last quarterly call.
In spite of the fact that there've been some significant construction disruptions at the meadows, which as you heard from Penn are now behind them. They they invested a great deal of capital in our facility in renovating and replacing the food Court as well is building a new center bar Sports bar Sportsbook concept that has been.
Very well received by patrons of the facility moving on a casino Queen has continued to pay their occupancy costs. There. There are no issues with respect to payment as you know they have been below their default coverage ratio. We continue to monitor the situation closely we bring to your attention the fact.
At the January Thirtyth meeting of the Illinois Gaming Board there wasn't agenda item for to request of transferred the transfer of the ownership of the casino Queens. So that the entity that we describe to you in the past has become much more active in the management and in the future will become much more active in the ownership.
Oh, the casino Queen we're encouraged by the performance that we saw in the fourth quarter in terms of the revenue reports that Illinois Gaming Commission did issue I'm seeing pretty significant year over year improvements from a revenue standpoint, we did just earlier this week received a preliminary coverage calculations under that lease.
Which we are now in the process of drilling down on because it doesn't appear that the flow through is there based on those revenue growth realizations that they did see during the quarter of so we will be working with the new management team at casino Queen to get a better understanding of what's going on there.
Finally on the Trs our management team and the taxable REIT subsidiary bolt in Perryville and Baton Rouge, Matt has high school and gene Magna fro. They continue to do a great job managing their businesses managing expenses or their businesses and the Trs was a very pleasant outperform or during the quarter you see.
Beating our guidance by nearly $800000. We are in the process of looking at potential modest investment you know landside move in Baton Rouge, now that the Louisiana regulators have proof have approved the landside move.
And we'll inform you as those plans developed over the coming quarters on the balance sheet you saw in our earnings release that we closed the quarter with 46 million drawn on the revolver.
We had gross leverage net of unamortized issuance costs of 5.5 times trailing 12 months EBITDA at 12 31, we had net leverage of 5.49 times trailing 12 months EBITDA at the end of the quarter. We did have not just under 9% of our debt was floating rate I will bring to your attention. The fact that we have.
Recently called for the early redemption in March of our 215 million for and seven H. notes due in November of this year and the 400000, Oh excuse me the 400 million for in three <unk> notes due in April of next year.
I I would point out for people on the call that even if we fund that on the revolver, which is not our current anticipation we will be reducing interest expense and extending the duration of our debt. So there are tremendous opportunities for the company for continued rationalization and continued improvement.
All of our capital structure as a result of the flexibility that weve.
Provided ourselves with the call for the early redemption of those nodes are there was in the quarter really at quarter end, an immaterial amount of activity on the ATM part of that was just because of settlement date convention from an accounting standpoint.
But we wanted to let everyone know that we do know how to use the <unk> the at the market equity program and have evidenced that.
Finally, we have established art guidance for the first quarter of 2020 as well as a full year guidance for 2020.
Our guidance reflects the biennial variable rent resets in the four leases that are subject to variable rent resets in 2020, those being the amended pinnacle master lease the Boyd mass release, both of which will be in may and the El Dorado and the pen Meadows Master lease which will be in October I'm. So we've made.
Good estimates based on input that we've gotten from our tenants as well as the data that we follow with respect to the monthly performance are those properties. So that we feel we conservatively reflected what those variable rent reset impacts will be for the company in 2020.
The last point I'd make on the guidance.
We've given a range for the year the ranges on the low side inclusive of the Eldorado escalator, which is has a default trigger a 1.2 times. So we're very comfortable will get on realized that escalator and on the high end of the range. We've included escalators to depend master lease in Nova.
Remember the Boyd Master lease when it hits its lease anniversary in May the El Dorado Master lease of course, and then finally, the metals master lease that are the metals leased in October so with that operator, I would turn it over for questions to the assembled group.
Thank you we will now be conducting a question answer session. If he would like to ask a question. Please press star one on your telephone keypad. They confirmation till I will indicate your line is and the question Q you May Press Star too if you would like to remove your question from the Q for participants using speaker equipment, it may be necessary to pick up here.
Has that before pressing the star keys.
Our first question comes from Niko Yulico, What Scotia Bank. Please go ahead.
Hey, this is Karen mcginnis on with Nick.
Good morning, everyone.
Steve all else being equal if you were to find a sizable acquisition that actually fit your strict underwriting process in the near future. How would you think about funding that deal what's the availability of financing GLP today and is there a target leverage metric that you may try to hit for the company through deal financing.
Thanks, Greg and good morning.
Look we do have leveraged guidelines that the board has set and that we have adhere to as Peter mentioned in his comments, it's taken us it took us four and a half years to get through a crossover investment grade issue or we're not gonna give that up we certainly we're comfortable going into the closing on the fourth quarter 2008 transactions funding them with all leverage.
Taking our leverage up at the time to something north of 5.7.
But as we said at the time, we saw a glide path, which we've achieved of getting down below five and they have so leverage of five to five and a half is where we're comfortable with with the comfort level of stretching slightly up to six as we've presented to the rating agencies for the REIT transaction depend.
Being on what the market opportunities are at the time.
We've been a beneficiary.
Peter mentioned the equity value impact that we've seen throughout calendar 2019, as a result of the engagement weve entered into with you our shareholders. You're also seeing see substantial improvements in our credit spreads our long dated 2030 maturities, we're now down to treasuries plus about one.
Hundred 75, depending on which deal are you look at.
So the credit markets have been good to us the equity markets have been good to US you should think of US looking at every acquisition financing on as accretive and as leverage neutral a basis as possible.
All right. Thank you very much Steve and then Peter I'm, just curious have you spoken with a land and buildings. After their initial public commentary and then and what are your thoughts regarding that a potential merger suggestion with Ah Beachy [laughter] well, yes, I mean, what we did I think we've said that we had a conversation with.
Those folks and understood what they were interested in I think frankly look our performance has been so terrific that.
That kinda took the air out of out of that balloon for now but look.
Shareholders are always pressing for us to do something that is in their interest Oh I see no particular advantage to.
Transaction with BG.
Look they have their plans we have hours my argument would always be if you like with those guys are doing.
<unk>.
If you like we are and what we're doing a hold us.
And look the in the end it's all about.
Producing more value for for.
Our shareholders and I guess the bottom line is certainly as we sit today I see no advantage at all to that and we've had no further discussion with them and what we maintain a that you I think you've maintained a healthy dialogue.
Yeah, I think Greg at the end of the day, what what's really been clear over this last 12 months since we've really been talking with people is that we've got a differentiated approach and that ultimately to Peters earlier comments. When you think about the value inherent in our portfolio that unique amongst the three public companies and amongst all.
Gaming reach structures.
There's more ground to be covered it more upside as people appreciate the merits of regional assets and put appropriate multiples on them for us arguably than anyone and then back to Peters. Other point when you think about the platform value and the scarcity value inherent you get with our company yeah.
With the management team at that track record and ask that you couldn't you can duplicate I think that we Atlanta billings, both would agree that there's a lot of upside in the stock and I think thats. The case, they originally made whether or not the transaction helps us get there.
Doesn't seem like as necessary. If you look at the performance year to date.
I would like very much.
Our next question comes some Joe Greff with JP Morgan. Please go ahead.
You guys just two quick questions. Thank you for all the information in both the releasing a andys prepared comments I'm kind of a first question no tried and true question. If you can you talk about what some of the things that might be in your pipeline broadly how that pipeline might be.
In terms of size an activity wise, how does that compare to last a couple of quarters and then just said my second question I point of clarification, Steve on your guidance. It doesn't appear to us that you're factoring in any benefit from my calling in those two pieces of debt just to clarify that that's all for me. Thank you.
Yeah, Joe <unk>, let me start with the latter Youre absolutely correct. We are being I think reasonably conservative in our guidance as it relates to interest expense.
We're we're obviously watching the capital markets were seeing tenors that seem to be available to issuers, including ourselves that probably a year or two ago. We would have never thought about or even considered but given the long duration of our assets, we're really looking.
It all options with respect to financing on a more permanent basis, obviously that in the revolver.
Redemption of the of four in seven eight some four and three age that we've called so.
You are correct in terms of the guidance. Your earlier question in terms of the pipeline.
Look I commend everyone on this phone call everyone has a in ever more creative way of asking the same question.
And you'll get the same response from US I mean, we look at as Peter said, we look at everything that moves.
We have tremendous relationships with the leading regional gaming operators pen Eldorado and void in the United States.
This is an industry that is continuing to consolidate in spite of what Josh and and keep my to sit on their phone call in terms of their their focus on the operating leverage that comes with sale leaseback financing transactions. The experience that we've had with that management team over the year plus now that they've been a tenant in our bill.
Buildings has proven to them that we are a facilitator [laughter], we're not an obstacle that we really are a business partner and it facilitator in helping them grow their business and I expect them to continue to see those opportunities and explore those opportunities. So I I would leave you with the thought that that.
Theres really nothing different obviously cap rates have compressed for us than our peers, that's our ability to pay has grown.
And you should assume that operators and sellers are aware that.
Thank you for your thoughts.
Thanks, Joe.
Our next question comes from David Katz with Jefferies. Please go ahead.
Hi, good morning, everyone.
Got it.
So two questions. If I may you don't first since you know since the.
The last quarterly conference call. We've seen some deals that have occurred and you know we frequently asked whether strip assets or larger scale assets would be of interests and you know the answer is usually at a price. If we look at a couple of those deals and you can surmise that I'm speaking specifically about things like.
Blasio.
Are the occurrence of those deals are those.
Or are those positive for you are those good.
You know for the business model and are they good for you.
Well, let me take a quick shot at that I know, there's some opinions around the table that I encourage others on our team to speak up but look I think it's terrific.
What it underscores is that an institutional source of capital.
Has looked at these unique in that case belies yogurts unique property to be sure and made a judgment that that's a highly valuable asset that makes sense for the long term and I think we all sort of sort of stand in the reflected light. If you will have that transaction look I think this has always been UBS.
Yeah.
From the time, we started this this market segment a a gaming read it was always about getting the market do appreciate that these are special assets with long term enduring safe.
Value and anything that happens in our space that suggests that.
These are important is helpful. So we're we're delighted.
I can't say we would.
Fade with those folks paid but look it makes sense its unique Matt do you want to comment because I didnt spend time with this lot. Yeah. I think you put a really well Peter and I, just add I mean, theres a validation of the asset class for sure.
And I think as people dig in more on the institutional side over the years I mean, they're trying to solve for indoor and cash flow and put price on that.
And when you dig into the merits of a portfolio like ours. Ultimately, there's clearly the case to be made that lower volatility a cash flow is more valuable overtime and also that this concept the scarcity value. It was really relevant in other parts and real estate, it's extremely important that barriers to entry and that's one thing don't have as much of.
In Las Vegas, there's a high land costs, but you can build with capital some of our assets you I mean look at the state of Ohio, and the fact that the meats and bounds of those actual locations around the state constitution. There's some enduring value there that ultimately as people. They again will be recognized and this is a step along that path how long it takes to get to enter that path, we don't know but.
Good sign post for sure Yeah, David the short answer to your question is it those transactions are absolutely beneficial to our asset class. There is no question in my mind that is institutional capital continues to look at opportunities as Matt mentioned and as Peter mentioned there will continue.
It will be a greater and greater appreciation.
The basically the toll bridge nature of these regional gaming facilities and what they mean for state governments. So everybody gets caught up first thing fit and finish right a pretty does the thing look and then secondly, how does it perform and we've always been on the performance side.
Alright, and my second thank you for that and my My second question certainly the stock performance there shouldn't be lost and they want it certainly not lost on me and hard earned on your part <unk>. There is still somewhat of a differential and sort of youre trading level I believe.
You know relative to the two others.
Why you know what's your opinion as to why that exists and what you intend to know what strategies or thoughts you have about how you can continue to close that gap.
Yeah, I I need to correct you.
I I do think we are with the middle of the pack, we're not at the head of the class, but I think based on the performance that we've been able to post over the course of calendar 2019 in here in June 2020.
We're on the same lap with everybody [laughter], we're not quite at the same cap rates as one of our competitors, but we're on top of and depending on what metric you use actually through one of our other competitors.
So I think you are starting to see the benefits of what Peter mentioned, which is really the significant engagement that we've undertaken with respect to investors both on the equity capital markets and on the debt capital markets side. So I.
I would disagree a little bit with your your conclusion, but your point is well take and it's it's not it's not over its a work in progress and it's a work that we continue to be focused on day in day out in terms of continuing to educate investors on the value of the.
Cash flows that these regional told bridges produce in these markets.
Thank you our next question.
Kind of sort of rich Anderson. Please go ahead.
Hey, Thanks, and good morning happy to join the call. So.
When I think given what's going on the game and reach space I feel as though you and others are basically exploiting inefficiency in exporting comes with a negative connotation I don't mean, it that way, but there's a wide spread between cap rates in cost of capital you're able to create accretion. It reminds me of a long time ago and the REIT space me being a read guy not a gaming guy.
Where you had this spread investing opportunity, which ultimately went away and now rights are having to develop or do other things to create accretion. So my question is.
If you close your eyes envision a similar chain events happening here cap rates coming down property values up all good but your stock price and interest rate environment don't adjusted the commensurate pace what would you be inclined to do would you let the portfolio Marinate would you adjust your underwriting would you look to other asset classes could you redevelop and scale I'm just curious if.
Something you're thinking about now or if it's something we're just not worried about today and we'll worry about it when that time comps.
Well, we're always looking ahead and he suggested that somehow were asleep and you're not implying that of course, but no look we're always looking at what the future might hold.
Hard to react to something that has not yet occurred we get the question constantly what else might you guys do not look we're going to stick with gaming as long as gaming is where we can be a and I think there's still significant runway over the next years before we really have to worry about being someplace else I really do there are.
Some states that May approved gaming I know a Georgia is one for example, we'd love to be players in that field as an example, and we maintain and I'm looking down to the table it Steve Ladny and Steve burning the midnight oil around various possibilities things that we're looking at.
Hi to determine what we could make work that's a daily process. So I think we're a good bit away from thrown in the talent I imagine any we've got.
What do you think Steve Yeah, Rich first of all welcome you NJ to our coverage universe and welcome you to our asset class. Thanks for all that the effort in energy you put into moving up the learning curve I meet the answer your question. It is pretty easy it's really all of what you would numerated our responsibility as a man.
Women team is first and foremost to prudently manage the balance sheet and efficiently and a creatively deploy capital [laughter].
It is easy is that and given the stakes that we all have in terms of ownership here in the company, particularly Peter and his family as you've heard me refer to them as our shareholder in chief <unk> as opposed to our chairman or Chief Executive you can rest assured that that same discipline is going to be a play.
Right.
All of the alternatives that you mentioned developing or enhancing the existing portfolio look it up or just looking at opportunities.
Beyond regional gaming looking at opportunities for development as this asset class continues to mature.
Well I had made the point or two if I can just on and that that were very aggressive folks and those who have followed us for years, but we're not in the mine that building business. That's why I said that there's no deal we have to do so that that in the end, it's simply about building value value value, Steve said, it and that's true.
I'm a shareholder before I mean anything else.
Shepherding, our investments being smart is all that matters to me and isn't the next deal. It simply is not trying to look good we get a bonus because we you know added three more properties that added nothing to the cash flow and nothing too and maybe even increased the risk profile. We're just not in that business the phone.
So generally stick with us or people who value what we do in value our investment philosophy, so for better for worse, that's what we sell.
Great Great returns.
Okay second for me is.
ER launch report, we kind of mentioned sports betting and online gambling is sort of a courtesy to you know pretend like we know what we're talking about and I don't know that.
It's playing a major role in the underlying business or the bricks and mortar operations of your of your operators and you can correct me if I'm wrong on that but [noise], but then you have the pen barstool, a you know kind of connection in the term omni channel was brought up.
And I'm just wondering you know what's the next generation.
Phase of the business do you do you think online gambling in sports betting becomes a bigger part of the conversation over the next several years and is that a good thing or a bad thing from the standpoint of your operators in what is GLP I.
Willing to do to participate or adjust.
I think Steve no rich first of all from a sports betting perspective every one of the operators that have reported to date and I'm sure. The report the operators that have not yet reported are going to talk about the lift that they've seen in their buildings as a result of sports betting where its entitled a whether it's the incremental food and beverage sales whether or not it's just.
The incremental visitation incremental gain play the incremental table game slot play that comes from more people and a newer demographic coming into the building. So the impact of sports betting in those markets, where it's been approved in Pennsylvania, and Indiana in Mississippi in West, Virginia in New Jersey, It really has been a.
Nice uplift for these businesses in terms of of the Internet piece or the Internet piece as we talked in the past I mean, the first state to approve online casinos has been new Jersey now others have followed Pennsylvania in particular, but in the New Jersey model those operators of the all in.
In line casinos the online sports books are tied to the casino facilities as we said in the past their tied to the casino facilities, because it's already in infrastructure that can be regulated it's an infrastructure that is easier to tax and it's also an infrastructure and more of the real estate investors on this.
Paul will come to appreciate this.
Gaming regulators and gaming operators do recognize a social responsibility because there is a small portion of the population the gambles beyond their means and responsible gaming is an issue in every state in every jurisdiction and keeping gaming whether it's on the internet worrying about.
Brick and mortar facility with those people that have those experiences that had those databases that have those backgrounds in terms of kyi seeing no. Your customer are always going to be the lead as these new states come online. So I I don't foresee <unk> if I.
I heard you correctly you are asking the question is there an Amazon risk in our business correct. There is not from two respects. One is the regulatory framework I just mentioned and two is gaming does remain a very social and a very interactive activity.
And I think new Jersey has proven that as the longest dated now online casino facility and it is proving a tool to identify and attract incremental customers to draw into the physical facility.
Okay, Great and I think my colleague Jay has one follow up question.
Hi, guys. Thanks for taking the question just real quick.
Does the 1.77 rent coverage for the Pinnacle. These include the accounting adjustment that was discussed with Penn last quarter, which rose the coverage above the escalator threshold or is this summer not inclusive of that.
No that number would that number would be flowing through that on a trailing 12 basis based on the escalator. When it was realized in April may and end of April of 2090.
Okay all right. Thank you.
Georgia question comes for Robin Farley with you, but yes. Please go ahead.
Great. Thanks, I'm I've two questions that are kind of related topics, you've already covered but just a little bit of a different angle. What is a first is are there other transactions that we've seen out there and in the last year four months are they at multiples that that are so high that they're actually you're raising seller expectations too.
A point that it would make it harder for you to do something that you might have been able to do six months ago.
Oh look Robyn I I don't think I can't speak for anybody and I'm not gonna stereotype, but I I think if there any people on the planet that compare their real estate to the velocity on the Las Vegas strip I would hope I could count them on the digits of one hand I. These are very.
<unk> unique assets. These are very unique circumstances. Both of these partnerships a that yes sellers will try more importantly, bankers [laughter], we'll try and convince sellers that if they are retained as their bank or they can get them those multiples.
But I I would not look at the price discovery from biologic go is being illustrative of the next two or three transactions by any stretch of the imagination I'll say flatly, we're not seeing that yet I mean it.
Things were looking at what we are not seen that kind of reactive.
Okay, Great and how that's helpful. Thanks. My other question is also related to the pen deal with par sold but I guess, what I want to ask it is yeah, we've kind of seen a precedent with park MGM and NN, GP, where improvements or expansions like non gaming elements are then kind of.
So to a gaming read right sort of monetizing that does additional pieces. So I'm wondering if the the physical part of the deal with parcel, where they're talking about adding restaurants bars and.
That creates additional cash flow is there opportunity then for her kill cancer by that in the way we've seen that no precedent non gaming deal as you know when a properties expanded their renovated is there opportunity for that with the personal feeling.
Yeah Roberts for you I know, it's it's a fair question I would not by any stretch the imagination compare the conversion of the Monte Carlo into the park MGM and anything that we would ever see in the regional markets, where anything that the barstool amount announcement would precipitate at.
And.
What we have seen from them I mentioned in my my earlier comments, a they've been rolling out new food courts, now I think they're up to their fifth they just open to the new eatery out at the meadows and they are continuing to invest in their businesses. We have had congress.
Stations with them and I know they've acknowledged it in the past as well.
To look at opportunities to maybe grow these businesses by adding hotels, where there aren't hotels by adding RV parks, where there's excess land.
Those are opportunities for us to put capital to work, but quite frankly, we become the indirect beneficiary when they do invest in their businesses and that's why I commented after listening to the Boyd call last night.
By going back in and doing room renovations in the hotel at Ameristar, Kansas City in the hotel at Belterra resort in Indiana, a wheel overtime will be the beneficiary. They obviously will be the biggest beneficiary, where they wouldn't be undertaking those projects they see value, there, which will in order to them and ultimately to us.
I think part of the answer is they're not going to anything they can fund internally of this relatively modest stuff there they're going to do a hotel something of that magnitude. We are at we have had those kinda conversations we are looking at some of the excess land in various markets.
That's sort of thing does make some sense, but I think they'll continue to.
Makes us very happy as Steve said, they were put money in our properties God bless them.
No if barstool becomes a universal studios kind of brand then they started to expanding massively would they with barstool branded hotels or those kinds of things we can all aspire.
That's a pretty evident [laughter] around barstools, so anything is possible.
Yeah interesting okay, great. Thank you thanks Robert.
Next question comes there Spencer Alloway with Green Street Advisors. Please go ahead.
Thank you obviously you guys touched upon in your prepared remarks guidance assumes a range of outcomes regarding nobody says that are subject to the rent resets. The 20, but can you provide a little bit more color on your confidence in achieving those rent resets based on the operator, so today the farm Tony.
Yeah, Good morning, Spencer and welcome you as well to our coverage universe, you've invested a lot of timing and you vis visited several of our properties and and we thank you for it and appreciate those efforts.
In terms of the the the escalators the the resets are quite frankly, that's why we disclose the coverages on a four wall basis. It's one of the many reasons I should say why we disclose the four wall coverages.
We do for each of our leases so that everyone. On this phone call can sort of make their own value judgment based on where they're trending what the likelihood is you saw us last year incorporate guidance, which on the low and had no escalators on the high end had all of the escalators.
Weve moderated that a bit this year just based on the performance of one particular master lease I'm. So I think the answer will lie somewhere in between but we feel very comfortable that the bounce that we've set with the high and the low estimate are reflective of the likelihood of realizing.
Those bumps.
Okay, and then maybe just going back to an earlier question on land and building a position and your stock can you I have side of M&A, but maybe can you just talk about any potential changes to governing body composition and aren't DNA that may have been discussed or suggested but after that.
Yeah, there's nothing that.
I'm just trying to think is there anything no really no change is anticipated in any area.
And we just made.
Yes, there are no specific gas somebody that's probably the best answer.
It's been <unk> one in Peters opening remarks. He he commented on the engagement that we've had throughout 2019 with all investors.
So there is nothing unique to land and buildings, we do interact with and we very much appreciate the dialogue that we've had with a very an ever growing number of investors and really factor everything into account and use that dialogue as an opportunity to be.
Better informed as we continue to manage this business.
You would ask about governance really there's nothing that has been requested.
Actually I think and most measures we are pretty well rated.
For governance ER.
We don't have any significant issues anywhere do we Randy I'm looking at our general counsel.
No I don't think we have any specific governance issues that have been raised by shareholders to us in the past quarter. One of the holes that we did have I think was with the lack of a female on our board, which which because of the regulated nature of what it takes to be a director on our board. It took us quite some time to find quality qualified candidates, but we recently did at a female.
Director to our board and very excited about data that was the biggest.
Request that we have from shareholders will be mouth filled.
Hi, Thank you.
Thank you Spencer next question comes from Barry Jonas Suntrust. Please go ahead.
Hi, guys. This is Jeff on for Barry Thanks for taking my questions.
First off you guys have been fairly disciplined in terms of setting the terms of your leases for future deals can you maybe just walk us through what areas, you're you're maybe more flexible on and what's your less so.
[noise] looked very it every lease is a unique negotiation is a unique dialogue because we want to be the landlord of choice, we wouldn't be the business partner of choice for our tenants I'm. So it's it's difficult to stereotype I would.
Back to my earlier comment.
Anything that we do needs to be accretive it if it's going to be of a lesser credit quality, because obviously now we've gotten a portfolio of tenants with multi billions of dollars in equity market cap and in most cases, not all but certainly with the master leases.
Anything that we do if we're going to move out on the risk spectrum, we're gonna be we're going to expect to be compensated for it so.
It you're you're asking a hypothetical that really is impossible to comment on the I'll just add area. If you look at what we've done historically and you apply it to the current time.
Our goal is really to get the highest IR possible and there are a win win ways. We can tweak aspects of the lease that we and our tenant when we'll be happy to do them, but it all comes out of the economics like Steve said.
Great. Thanks.
And then lastly from US you've you've mentioned some international opportunities in the past is that still something you're considering.
Yes, I mean bottom line as we look at <unk> as I said earlier, we look at any opportunity to accretively deploy our shareholders our capital.
Great. Thanks, that's all for US appreciate all the guys.
Thank you.
Next question comes from John to create with you didn't gave me. Please go ahead.
Hey, everyone. Thanks for taking my questions and I think you've you've addressed them all at least twice, but just to pile in here on a kind of Las Vegas strip versus <unk>.
Final question appear you've kind of spoken at length about.
That the less cyclicality and more resilience of regionals.
And when we look at kind of valuation for the Las Vegas strip I'm, just kind of wanted to get some clarity or your thoughts.
If if there was an opportunity in Las Vegas strip was accretive how would you be interested in moving in there or stay focused on regionals and then I guess, it's kind of a risk reward question would you approach kind of Las Vegas strip.
With a little bit more stringent underwriting standards.
Given given the kind of resilience you've already happened here kind of existing regional portfolio.
Look I think you've answered it with a lot more caution and remember it's one thing to operate a spectacular property, which we built and have and say Toledo, Ohio, or Columbus, Ohio, No hotels.
As compared to say, a 4000 room hotel property along with other entertainment as you know nightclubs and everything that goes with it.
You can imagine the.
We need much much more coverage.
To be satisfied that we'd be safe in a downturn and we know that the downtime will have a profoundly larger effect and the Las Vegas strip property than it would a in your neighborhood store that's been demonstrated its pretty clear and ER. So yes, I mean, we'd be thrilled to look at a good property, but again.
It would be with eyes wide open and with I would like to think some sensible underwriting approach, but no we will look at anything.
I I, sometimes say, many or call, but fewer chosen.
[laughter] very true that's it for me Teriparatide additional color on that one thanks, a lot as you.
Our next question comes from John Misaka with Ladenburg Thalmann. Please go ahead.
Good morning.
Yeah.
<unk>.
So you mentioned in your prepared remarks that did you would want to fund any potential future acquisition activity on a leveraged neutral basis, but I guess given the recent performance in your stock. So what does not make sense, maybe to kind of over equitize any transaction to kind of bring leverage.
You kind of well below target levels.
John and that was in response to an earlier question. It wasn't in the opening remarks, but.
Your point is well taken the bottom line is we are at leverage levels for the company given the cash flows that our assets produced that we're very comfortable with I. I don't lose any sleep at night over the balance sheet of GE LPI. So we.
Your point about over Equitizing look everything is a facts and circumstances determination based on what market environment exist at the time and right now as I did say in some of my opening remarks, you're looking at long dated opportunities in that capital markets that if you'd asked.
Me two years ago might be available to GLP I would have looked at <unk> looked at you like you're crazy I'm. So you should.
Assume that we will look at all capital structures with respect to both the existing balance sheet as well as prospective acquisitions.
Okay, and then I'm just one quick detail question can you maybe quantify the variable what changed assumptions that are baked into 2020 guidance.
We <unk>, we have not drill down we're we're not disclosing that only because we do not want to front run our tenants and more importantly, we don't want to say something that our tenants come back and suggest that we should not to disclose so what we've guided people too is there our monthly.
Revenue reports by property in every market in which our portfolio is located except for Nevada, Mississippi, and Colorado that you can get a very good sense of what the resulting variable rent resets will be a we do maintain a database for each.
Lease looking at the monthly revenues and feel that we have very good insight into those but again prefer not to front run our tenants.
Okay, but just just to clarify that is some some level of changes baked into your guidance.
I'm, sorry, yes, absolutely.
That's it for me. Thank you very much thanks.
Our next question comes from Daniel I don't with Nomura. Please go ahead.
Hi, Good morning, everyone money most my questions have been answered.
But if I could just ask one on the Trs properties.
I'm wondering if you have a sports betting strategy in place should Maryland, and or Louisiana passed legislation. My sense is that Maryland in particular could have draft regulations approved before November of this year.
Thanks, so much.
Thanks, Daniel the answer in Maryland, any expansion and gaming has to go to the voters [laughter]. So right now there is a bill in the legislature in Maryland that would change that but to date any change in gaming must go to the voters. If this were the referendum question that were on the ballot.
It would allow for regulatory.
Approval of sports wagering in the future.
So it's not as cut and dry disease. Your comments may have suggested.
But the answer to your question is absolutely with respect to both of our Trs assets, Louisiana, and Maryland. As you can imagine are on on very different tax what happens in Baton Rouge is not the same as what happens in Annapolis with respect to enabling legislation for sports wagering, but we have had several does.
Cautions our property management teams at both locations have been engaged as you can imagine a because <unk> number of the vendors are very actively out there looking at what stage will be next thing how they can participate.
Okay, Great I appreciate the color.
Thanks, Dan.
Our next question comes from Jordan Bad There with Macquarie Group. Please go ahead.
Good morning, Thanks for taking my question. So we saw GB form during the quarter in this space and you guys had mentioned that you don't need a larger out said, but if there's value is this something that you would entertain without flexing up the balance sheet.
And then it's my follow up could you quantify the investing for the move told my hand.
Great. Thanks.
Yeah, I'll I'll take the the latter question. We've told the people that are involved in it that it's got to be under $20 million.
Because there's no real revenue growth opportunity, it's really all a matter of being more efficient and how we deliver services down there coming off of a three storey riverboat to a purpose built land based facility. So that that's an easy question, yeah, the definable cost savings, but but they're limited.
[music].
No not insignificant, but but but that's all we see no no revenue growth going landside nothing material.
As to the joint venture notion.
Yeah, I'd say historically this is Matt historically, we've been creative with our acquisitions.
And the structure could play a role in the future if it made sense, but we certainly would underwrite things with an appreciation for look through leverage I think.
Point your question and also with an appreciation of any appropriate complexity discount or other kind of incidentals that would come with that for for our structure.
But it is an interesting is an interesting avenue for a potential transactions in the future.
I mean, the bottom line is we've talked about it.
Hi, guys. Thanks, guys.
Thanks Stuart.
Thank you we've come to the end of the key where they session.
Well, that's pretty finite and sudden but I hope this has been helpful to all and we'll.
Look forward to speaking with you all again next quarter. Thank you so much.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.