Q1 2020 Earnings Call
Greetings Lucky to welcome to gaming and leisure properties first quarter 2020, <unk> earnings Conference call.
This time, all participants are not listen only mode. I question answer session will follow the formal presentation.
And what's your acquire operator systems during the conference. Please press Star Zero and your telephone keypad. Please note. This conference is being recorded I would now like to try the conference over to Joe Joe Phony with J.C.I.R.. Thank you you may begin.
Thank you Sherry and good morning, everyone and thank you for joining gaming and leisure properties first quarter 2020, <unk> earnings call and webcast.
The press release distributed yesterday afternoon is available in the Investor Relations section on our website at Www Dot GL.
P.G.O. prop inc. dotcom on todays call management's prepared remarks and answers to your questions may contain forward looking statements as defined in the private Securities Litigation Reform Act like 95.
Forward looking statements addressed matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discuss today forward. Looking statements may include those related to revenue operating income in financial guidance as well as non-GAAP financial measures such as AFFO and AFFO.
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 risk factors and forward looking statements contained in the company's filings with the FCC, including its first quarter 10-Q in earnings release 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 and leisure properties.
Also joining todays call or does right Burke senior Vice President and Chief Accounting Officer.
And in more senior Vice President General Counsel Secretary.
The Latin <unk> senior Vice President and Matthew Demchak Senior VP of investment.
With that it's my pleasure to turn the call over to Peter Carlino. Peter. Please go ahead.
Thank you Joe and good morning, everyone and thank you for joining us today.
With us as Joe indicated is most of our senior management team.
Who are.
Equally available to fill in the Black Swan, Stephen I may Miss something or some detail.
Well, what the outset I wouldn't say the this is not the first quarter call that I expect it to make at the start of this year.
We and our tenants we're off to a terrific start.
Until the I'd imagine impact of the covert 19 virus changed everything.
We have just concluded a tremendously successful 2019 as you would know.
But what a difference a week.
For two can make.
We saw our entire portfolio of assets completely closed.
What's happened virtually overnight.
So we moved quickly to try to understand what this shut down could mean to our tenants and ultimately to us.
Got to figure out how to decisively mitigate any risk to our business.
We recognize it Penn National is our largest had it was critical to our success going forward.
Not knowing how long this crisis might last we made a judgment that we needed a plan that we believe the carrier safely into 2021.
Got several times with depend team the Penn National team to fully understand their situation.
At work the craft a plan that would give us both both companies the ability to outlasted implausible closure period.
To that end again as you would know we purchased the Tropicana Las Vegas on.
He very favorable terms in a transaction where pen receive credit for approximately five months of prepaid rent.
ER and consider that for that property beyond an outright sale, which is it would be perhaps a priority one there maybe a number of attracting attractive options that we might consider.
At the same time, we negotiated a new ground lease it morgantown. It by the way that property is he is under roof stalled now of course like so much else Ah, but it did a terrific location one of the new properties at a cap rate or at a 10 cap.
We've got to lease modification a number of things that we were anxious to to change with with pad, we got master lease renewals at Penn and we struck in a adoption for pen to buy Perryville and just a number of favorable things that came out of this whole package.
This outcome accomplished our original goal is giving us and our lenders and our shareholders visibility and predictability around pens rent payments through the end of this year.
It also ensure that our shareholders would made economically hole, which is a huge focus of ours when they getting we won't give it away something we got to value and I think we've got great value for that that period of time.
We received almost 99% of our overall cash rent in April with payments in full from Penn Eldorado and boy.
Because he though queen is yet to be settled but we have had a constructive dialogue without their ownership group to date, and we believe that that should or could lead to a favorable outcome.
Yeah, what are the most difficult parts of addressing the impact of the cobot outbreak wasn't decision to furlough. The majority of our casino employees in Baton Rouge hasn't Perryville.
Which really was a very very painful, but sadly necessary choice.
We have maintained employee benefits at least through at least through the end of this month and we have retained certain personnel, but help us planned for reopenings as soon as safely possible.
Got it up employees back to work is a huge priority for us.
And we believe as many of you may be seen there'll be news soon that some of our tenants all of our tenants facilities may open as early as of the next couple of weeks, albeit with a initial restrictions that could be tough, we don't know yet and I think we expect that have a lot more.
Clarity or where this is going to go even by the end of this month as states feel increasing pressure to make decisions choices you, we all see it happening.
So for additional insurance you saw that we we drew down I revolver. This quarter and we received approval from our directors to change the composition of our second quarter dividend to 80% stock and 20% cash.
Which is an obvious choice to preserve cash to enhance our liquidity and flexibility given the in possibility of knowing precisely when these facilities will open.
Or how quickly they will ramp.
So the changes made in conjunction with a reset to our quarterly dividend run rate as well.
The election to reduce the quarterly there that dividend was made.
It really in an abundance of caution.
There's no magic to that number a it as a reason carefully thought out number but it's not the final word or we could well adjust a positively or later, but ER. We think that prudent suggested that we take a cautious view these actions along with others, It's Steve side.
It will outline is following comments should see us through.
Our properties are extremely critical to the states, where our tenants do business.
Tax revenue that they generate is extremely important to most of them, especially now.
So we expect rate pressure for states to open their properties as quickly as they think safely possible.
And then finally thinking about this as I.
Talk to you all this morning.
So I've been at this business and its predecessors for a very long time.
I was Penn National's President when it opened the 1972 and I, let our public offering and 1994.
Through the years I have wizard weathered many many challenges, though this what I must say he is like no other but we have a highly talented team here gaming and these are properties, who are more than up to successfully navigating through this crisis.
So we do all that we must to ensure that when this all ends what our way to being bigger.
Better and stronger than ever.
So.
We believe that there will likely be much greater opportunity for favorite favorable asset purchases as we begin to return to normalcy.
And that the journey to regain our previous success will be both gradual but certain.
And through this all you can expect us to maintain the same focus discipline for which we have long been admired.
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Same company, we always wherever it very careful so with that Steve.
Thank you Peter and good morning, everybody. Recognizing these are very unique circumstances that we find ourselves in that but let me just one house cleaning thing out of the way first we did file our quarterly report on FCC form 10-Q last evening with the Securities and Exchange Commission. So there's a exhaustive detail in that 10.
You to the degree there are both questions. After this call.
Obviously this is a very unique earnings call and that the quarter were reporting even though it was reasonably strong and we achieved really all of our objectives. In spite of our business is being closed for two weeks during the quarter. This quarter really isn't the focus the focus is on the steps we've taken to preserve value in light of the as.
We ended velocity in depth of the disruption to the economy that has resulted in significant impacts on our in our tenants businesses.
Cobot 19 has affected everyone and as a company we must look at the current circumstances through the lens of its impact on our employees, our tenants and their employees the communities in which our facilities operate our creditors and all of our stakeholders as we rapidly adapt to world that's evolving more quickly than we could ever imagined.
Historically, the cadence of earnings calls has been to follow our public tenants.
After they've provided us with four wall coverages for the completed quarter to incorporate that critical measure of four wall coverage into our release.
In an effort to provide more timely transparency, we felt it better to not wait given the impact this year old revenue months have in the near term on the coverages of our tenants lease obligations. We'll continue to work with all of our tenants to forebear covenant default, resulting from these closures as long as a collaborative dialogue.
Good news with our tenants.
To highlight some of the steps that we've taken and Peter mentioned a few of these we've done extensive scenario analysis in had frequent discussions with all of our tenants as well as with all of our credit group you saw from the pen transactions. The series of transactions that were announced we had prior to announcing that transaction gotten.
<unk> cooperation of our banks in amending our credit facility agreement to allow us to recognize non cash receipts as cash revenue for purposes of all covenant calculations.
We also withdrew our guidance given the lack of predictability relating to our monthly variable rent at our Columbus, Ohio, I said, the upcoming variable rent resets that we will be seeing under our master leases.
The lack of escalator realizations here in light of the covert 19 pandemic and the Trs performance due to the duration of closings in reopening trajectory of our facilities.
We drew the amounts available under our revolving credit facility to provide enhanced liquidity, providing a quarter in cash position of nearly $560 million, which has been enhanced by the receipt of cash rents in April.
Finally, as Peter mentioned, we made the very difficult decision to furlough nearly 550 of our Trs employees, which was a very difficult decision to make but what we've done is we've continued to pay their benefits we've committed to paying their benefits through the end of May and we'll evaluate this as may progress.
As as we gain hopefully greater visibility as to the timing of the Reopenings. We've maintained the minimum staffing levels for security purposes, but also maintaining staffing levels to prepare for the reopening of these facilities and to provide for the appropriate sanitary in hygiene protocols.
To be prepared for the safe opening of these businesses for both our employees and our customers.
Lastly, we outlined in detailed <unk>, the financial impact to the company of of zero facility revenue months.
And the impact on the contractual rent adjustments just from the standpoint of our expense structure. Obviously, you all know our average monthly interest expense is about 23 and a half million.
We've taken the DNA and the company down below 2 million per month and as disclosed in the press release, we've reduced the expenses in our taxable REIT subsidiary to under $1 million per month. So our total monthly cash burn on average is just over $26 million a real quick portfolio update.
Peter mentioned that the casino Queen did not pay its April rent.
As you'll recall they had an item pending in front of the in Illinois Gaming control Board in January for a change in ownership of that business.
Third rent agreement as part of the recapitalization of that business as it proceeds forward once that facility does reopened.
In Ohio, we were fortunate to get the Ohio Racing Commission to give approval to our ownership of the Belterra Park real estate and we're working with boy to complete the transaction to include that real estate as owned real estate on our portfolio rather than the mortgage.
For the current quarter as Peter mentioned, our board approved yesterday, a dividend policy that reflects the impact of the current closures on the business. We're also changing as Peter mentioned the composition of our second quarter dividend to be paid 80% in stock to provide for a matching of our non cash distributions to non cash rent receipts.
The temporary step also provides a reasonable cushion to maintain or leverage targets and provide future balance sheet flexibility.
Finally, the goal and taking these steps is to both strengthen our current position, while also providing value enhancing opportunities in the future among things like evaluating alternatives with respect to our own acreage as a result of the pen transaction.
We consider the current environment to be a temporary interruption in an asset class that as Peter mentioned is essential to the state and local governments in which these facilities operate given the significant tax generation unemployment provided by these facilities, we're very confident that the regional markets and our tenants will lead the way in the recovery of these assets.
When they do reopened social distancing in the form of virtual weddings, or virtual happy hours or a virtual NFL draft well not become the new norm. It simply the current norm, which when our tenants are planning for it activity will return to these casino floors.
Finally, before I turn it over to you operator for questions and answers I want to call out our team members are the folks at GLP Guy and in our taxable REIT subsidiary have really stood up and have shown their dedication and talent through these very trying circumstances, our property management implementing the furloughs our property management.
Team working with our affected team members and seeking to support that's available out there, making donations of food and beverage to the local food bank down in Baton Rouge, we've taken significant steps to help all of us try and get through these uncertain times, because there will be another side to this so what.
That operator, I would turn it over to you for questions and answers.
Thank you if he would like to ask your question. Please press star one I knew telephone keypad. It's tough for me. She told my indicate your line is in the question kill you May Press star to if he would like to remove your question friendly Kip and for a purchase did using sneaker equipment and may be necessary to pick up your handset before pressing the star he is.
Our first question is from Carlo Santarelli with Deutsche Bank. Please proceed.
Ah Hey, Peter and Steve Thank very much for all the color.
If I could just start with those guys thinks about the transaction that you've already made with time I just think about the go forward from here and clearly you know there's a range of outcomes that are very difficult. The caps on just about any perspective, but acknowledging you know properties will start could reopen here and in the coming weeks.
How are you guys speaking about the ramp and potentially.
What levers there our last with some of your primary tenets are larger tenants in the event that we do experience a eight actually slower ramp.
That doesn't necessarily translate to positive cash flows or cost slowness that exceed the ability to kind of make rent payments down the road or other levers left to pool or other types of creative transactions, but you guys are actually contemplating.
Well, let you had to actually a multipart question [laughter], let's start first with the Tropicana transaction itself and what we got for it I mean, it's a 35 acre site and probably you know main and main if you will in Las Vegas.
I think location and you know MDM and doing a lot of stuff around it that we think it but the value they're it. They pennant said previously that they were looking to.
Sell that property, so that's not a new ideas and though they were in active discussions with a number of people about that before all this happened.
At by the way significantly higher prices and what we're talking about today now, but doesn't necessarily mean anything for the future, but we think that we got more than fair value.
The number that we've identified.
And we're gonna have to play it out.
There maybe some other things that I won't get into today that we could do with that property. The point is we own it be control it oh and by the way simple sale would be fine.
In the end, we we what paid we think we got paid we now have they'd have to monetize that.
In the form of hard cash rent. So that's about all I can say at the moment other than the what did you add yeah. Karlovy. Obviously your question is what what's left on the shelf, if theres something necessary and no. One has visibility on when and nobody has any visibility clear visibility on how these facilities will ramp back.
Yup.
We are in a constant dialogue with all of our major tenant with all of our tenants and we recognize none of our tenants plan their balance sheets for zero revenue months, none of our tenants came into 2020 with a business plan for a for a series of zero revenue months. So we will continue the.
I love with all of our tenants, we will look at and evaluate any and all alternatives that they would like us to consider a but clearly the discussion is going to be if there is any kind of short term compromised.
With long term gain.
Because we do it at the end of the day, we own these facilities we own. These britt these bricks and mortar and we do feel we have a portfolio of really the best operators in the business in terms of realizing the maximum opportunity that exists in this asset class. So I I'm not trying to avoid your question. It's one that doesn't have occurred.
Your answers you can imagine all we can do share with you the thought process. Yeah. Let me Oh. This is you asked about the ramp question that is of course its office.
Answer to provide because the truth is another so you have announcements like yesterday.
The Governor in Illinois said.
Hey, guys out there for casino simply said Ah you know somewhere down the road, we'll we'll we'll talk about it so indefinite.
You have others of course looking to open by as much sooner and then the next question is with what kind of restrictions.
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50%.
All these things are unknown and they're going to differ from state to state.
But then consider something like West Virginia, We though is a very anxious to get opened at the word hugely important industry in that state.
That might put pressure on our governor here in Pennsylvania as an example to get this show on the road a lot faster that at this is that it seems he will so all this is a trip into the I've known I.
Confident that all these places are going to get up and running.
Rather than later.
And the only unknown is just how slowly where they come back we don't though it was there a pretty active.
People are locked up and their houses.
I suspect there going to come in and faster numbers I mean like first the bad So that's my best there and only answer to that.
[laughter] Carly this is Matt I'd also add on the topic I mean, our operators are obviously, a lot better solvency positions across the board than they were just a few weeks ago pen in large part due to this transaction, but they've taken meaningful steps.
So really addressed a circumstance isn't it.
Their cash burn to an important and comfortable place, but I'd also point out to add to Steve's comments. I mean, you can look at a few signposts that were really relevant in the 10 deal and continue to be relevant for us to appreciate how we're thinking of it was really getting to a point of economic columnist for our shareholders with an opportunity for us.
Upside that were really obligated to get for our shareholders wherever possible for any deviation from the norm and the Bottomline question and all these.
Decisions for US is the company's long term value more or less after the decision is made versus before and with pad that we were very confident that that answer is yes, and so I hope that gets a little extra color I would think about things.
That sounds like you guys. Thanks for all the color I could just ask one follow up which I think will be a much simpler question.
The monthly resets in Columbus, and Toledo with the Greektown deal there is a floor under Toledo little less than 50% of the of the monthly ran I believe they get from those two assets.
How much lower is that slower than kind of where where you were trending saying in 2019 with respect to just that the monthly rent on the Toledo pieces that disclose somewhere or is that something you guys could provide it is it's it's in the Q, it's 22.9 million as the floor.
And on anyways, the door for for <unk> I'm sorry.
Great. Thank you.
Thank you Carl stay safe.
Our next question is from Nick.
Leeco with Scotia Bank. Please proceed.
Thanks, Good morning, everyone I just want to go to touch on the on the dividend. Peter you didn't mention that you could maybe adjust the dividend positively later you didn't mention negatively. So you just can't give us a feel for how you got how the board thought.
About adjusting the dividend.
You know in light of obviously, you had already the pen transaction, but if there's any other you know rent relief you might have to give to your other operators. How should we think about that your comfort level or well of course, the answer to any of those questions.
Let's see walk through.
The logic that got us to that number we selected we just took a conservative you know used to say what I've read and.
We are not in the gambling business.
Our customers, maybe we're not that's certainly applies on the gaming and leisure side of things you know.
Not going to.
We try to be open we try to me extra transparent and all that you've seen over the years, you've followed us.
So we just look at the logic and say well that.
Going up any any too quickly, let's let's look at a number that looks sustainable.
Under almost all measures all those into your other point could it be worse, well sure I mean, if nobody opens and it goes on forever I mean, those will happen so.
Not taken that view, we're much more optimistic.
Take a look in Pennsylvania.
Our two properties in Pennsylvania provide over $250 million. This thing and that's before income taxes as before corporate tax that before everything so the he those two properties in the balance.
Right almost $2 billion for the state of Pennsylvania, you can bet somewhere out there and the Governor's office, they're thinking about how they get this back so that's what we rely on ultimately, but just how it's going to play out God knows I and Nick just a follow up on on your question a little bit in dealing with our board in presenting this to our board we basically.
Looked at what the contractual impact is going to be on our business. As a result of these these months of negative EBITDAR and what that meant in terms of coverages what that means in terms of the resets of our leases what it means for the operating performance in our taxable REIT subsidiary. So we think we arrived at a.
Set as a point for our dividend that is reasonable in light of district current circumstances and will allow us to get back to a growth trajectory in terms of returning capital to shareholders in light of where the balance sheet is because at the end of the quarter you see.
The we got well below five and a half times net leverage which has been our target. So were inside of our target ranges. We've got a very solid relationship with our bank credit group and we think this messaging to all of our constituents signifies our willingness to make difficult to say.
Visions and really an approach that allows us a nice runway going forward to get back to the trajectory, but we all need to wait and see exactly when these things open and how they open before we can arrive at a conclusion and tell you with certainty that this is it no more.
Okay, I appreciate that and and just my second question has to do with you know your other operators Boyd Eldorado have you had any conversations with them about rent deferrals and do you expect to receive full may rent from them.
At this point in time, we certainly do hope it to receive full may rent. Since we are now it may 1st everyone is certainly focused on maintaining the flexibility to get reopened and get reopened as quickly as possible and therefore, they don't want a trip any covenants I'm. So you saw a pen.
Covenant relief when they announced our transaction as you can imagine if someone fails to pay rent and there's a default under a lease that is likely to be a cross default under existing credit documents. So everyone is very focused on not allowing for a default that would cause an acceleration of a.
Patient or cause acceleration of any credit facilities that they currently have so at this point in time, we're in a constant dialogue with all of our tenants, but really as it relates to may everybody is really now focusing more on opening and obviously to open you've got to pay occupancy cost.
Alright, thank thank you Stephen theater.
Thank you.
Our next question is from Thomas Allen with Morgan Stanley You May proceed.
Thank you good morning, I'm, sorry, Peter you know this industry, but other than anyone else probably.
What do you think the outcome will be from a state by state perspective are you know the weaker state budget.
But central more state legislation.
Oh by the new state legislation are you thinking taxes.
Well I mean taxes, an expansion no shift to online I mean, how you're thinking about oh.
Again.
You know as much as I do about what's out there when possible and frankly anything is possible I hate, giving vague answers, but this is what type of my life, where I habit of reaching close.
And of where this is all going to go and then I think it's going to be very different.
They stayed I mean, I'll make one observation that the those states.
Led by Republican governors seem to be a little bit more ambitious.
Conclusion about that to get these places up and running than some others and it's fair to some of the northeast Asia that harder hit.
And than some of the western and southern states. So it's going to be all over the life. Some states are big trouble, Illinois. For example, just said they don't know where they're going to open and offered no guidance yet there as they visited one of the worst.
Conditions in the U.S. So this is just an unknown, but Thomas to to your question I I do think Internet wagering I do think sports wagering I think things that were being contemplated before cobot 19 are going to be accelerated.
I don't think that anybody expects the taxes will jump tax rates will jump because obviously the operators have been significantly impacted by this event, so raising taxes on an industry. That's already been impacted is negatively feels like in a sort of an attempt to get blood from a stone.
And we know that all of our operators in the entire industry is certainly lobbying heavily to make sure that the industry comes back and gets back to where it was in 2019, so I see opportunities for enhancements I don't see a real risk immediate.
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A wide expansion of additional facilities in states or anything like that only because I I do believe that these state legislatures will first try and protect their legacy industries, and then of course try and get them back as quickly as possible.
Well that's helpful. Thank you and this is a follow up hasn't to expand change your thinking about your long term leveraged targets at all.
[laughter].
Look that's a great question <unk>, given how benign the interest rate environment had been and I do think the interest rate environment is gonna be pretty favorable going forward I mean, with a 10 year treasury at 60 basis points.
I, obviously people made the argument should you have leverage and clearly financial leverage is something that we as a read are going to him employ what is the right leverage level, we felt quite comfortable the rating agencies felt quite comfortable our creditors felt quite comfortable with where we were at.
And I I look at this again as a temporary interruption in really just a very sound underlying business. So we have that's that's a discussion that was had with the board as part of the dividend policy and the dividend policy does preserve the flexibility to migrate further and.
Further down the leverage scale as you can imagine.
Thank you.
Thank you.
Our next question is from Barry Jonas with Suntrust. Please proceed.
Good morning, guys I'm, just wondering go deeper into the Tropicana <unk>, maybe it's too soon but can you talk about the level of interest you're seeing here from potential buyers and I guess with that how are you thinking about timing, if you're gonna salad kit and you'll keep more proceeds the longer it takes.
Well.
[laughter].
Anyway.
First order business as we get paid.
For what we have to cash.
So there was on going to raise that as I said and was actively working though not mentioned the broker who's involved but I had an agreement to represent.
Property for sale there was.
Yes.
At a much much higher price and where we are and we of course of now full control of what that disposition gets to be we insisted that and keep it up and operating that's kind of hard to sell out.
And ER and they've agreed to do that.
And we.
They cover all expenses of the carry costs that we have to deal with wallboard Bye bye.
It's it's really hard to know I don't think there's somebody tomorrow, although there may be there maybe for all or part of that property I remember a lot of interest in the frontage. There. So we're just exploring that it's just too early to say, we've got a bigger concerns and that's getting there.
Working with it.
Copies of and get our properties over there.
With that.
But.
We see that there's a forward momentum with Aspen.
Thanks Bye.
We will and we've been talking to those folks, but we'll make the all important press we can sell it early.
I think that's.
Yeah, Barry let me just add to that I mean by any metric in a normal market environment looking at comps that are in Las Vegas, whether it's off script properties like the Rio or the hard rock that have traded in recent years.
Given our basis in this asset at under $9 million an acre for 35 acres of land that is at the corner of Las Vegas Boulevard, and Tropicana Boulevard and the hotel rooms in the amenities that are on that facility. We feel that we've got a very significant cushion to.
I realize incremental value as a result to the transaction at an appropriate time.
Just that right now [laughter] as you can imagine everybody is waiting to see where things are going to go so to Peter's point, it's not like you should expect anything to show up Tomorrow, you should expect us to look for value maximizing opportunities with respect to though those holdings.
Well take a good offer to bobs.
Let me make one.
But I think they said it very well.
Got it and then just.
Second for me you know how does this crisis kinda influence your thoughts about additional M&A within gaining and and I guess does that influence your thoughts on eventually doing something outside of gaming as well.
Yeah from a geography within gaming, I guess, where I'm going to [noise].
Well, it's hard to know what's going to shake lose I mean, I don't think it changes our ambitions.
Yeah.
And buried look I'm anxious as we all are obviously to get to the other side. It is but I I think people will come to appreciate the stability that exists in the cash flows from these regional gaming assets once they do reopened and once they do get back to a more normalized.
Operating environment.
So again.
Weve spoken in the past is pretty high hurdle in terms of finding other assets that have the same characteristics and have the same cash flow quality as the portfolio that we have been able to build so it's a high standards, but we will continue to be focused on increasing shareholder value as we.
Continue to grow our business.
Great. Thanks, so much thank you.
Our next question as from Joe Grace with JP Morgan. Please proceed.
Good morning, everybody.
At the peak Peter does it because it makes sense to use some of your liquidity to invest new equity.
And your tenants you can think of it is and insurance policy that has depreciation potential.
Are there any restrictions for GM tried to do that.
I know Joe you there are related party tenant issues that would limit us to owning up to 10% of a tenant. It. It's an interesting thought one that we've had discussions about in the past its not one that we have taken action on at this point in time.
But suffice it to say it is a component of any discussion that we've had with with Penn as an example in discussing any kind of or the or the transaction that you saw us print.
So looking at those kinds of opportunities taking advantage of the liquidity that we do have are certainly things that we would consider subject to the read constraints that exist.
Great. So I mean look you can always assume we're thinking about everything.
I've made for many many years, if it's a light reading we're looking at it.
Yeah.
And this cases you bet afraid that question should we looked at it.
You should have stepped up when the price it hit bottom. This the short while ago happily is going back in a better direction, but.
Are you all things are possible if it makes sense for our company.
Got it and then Steve well looking back at last year for Columbus and Toledo.
The mass that I have worked Columbus rent last year is about 25 mining lead l., it's something like low 20.
That sort of.
Yeah, the floor, which set based on 2018, the floors 22.9 as disclosed in the Q.
Correct and then in terms of those specific property right contributions last year, yes on the based on the percentages that were get lost in the press release, yes.
Great.
Thank you.
They say.
Our next question is from Jay Cornish.
S M. B C. Please proceed.
Hi, Thanks for taking the question I'm, just a follow up on the sports betting as as pets and ties.
Into sports betting with Barstool sports and I'll just other players.
Goods are beating you had said no touch qiming going toward her the recovery, that's the way to worry about social to something.
So the question is what.
What we see is the potential or where do you think it.
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No yeah, it's more.
Yeah, Hi, it's.
If I understand your question correctly, it basically do disease the remote yeah, because I I think your question was not unique to sports betting, but was more about internet wagering or am I wrong.
Yes, both of them.
Yeah, and and and clearly all of our tenants are looking at Internet platforms for both their sports wagering as well as in Pennsylvania, and New Jersey full blown casino gaming and each of them has basically identified that as a real source of customer ideal customer acquisition and customer retention.
So it would feed the real estate would feed that the internet business would feed our bricks and mortar business.
They continue to develop that internet presence, because they're able to identify people at relatively low crossed that they might not otherwise have identified and be able to drive them into the facility. So.
If the question is we'll sports wagering grow, yes, well Internet wagering grow yes, what impact will it have on our real estate, we expect overtime. It becomes a value driver for our tenants in terms of driving incremental traffic into our buildings, and therefore, increasing and improving the Peru.
Mormons under our leases.
Got it that's helpful. And then just one follow up with pens the option to buy that Harry they'll operations at least the real estate for $7.7 million.
I'm just curious if you guys go or announced the cap rate that got you to that 7.77 million.
No we haven't what we've done in the discussions that we had with Penn we're really around what the performance of Perry will will look like impacted by the category for licensed facilities here in Pennsylvania, when they open.
So the the it's really a question. It's two question what's the multiple on the Opco right at the 31 plus million dollars that we're selling the opco for and then what is the cap rate on the underlying lease and those are going to be determined as we get closer to closing based on <unk> the x.
<unk> performance of the other of the facility.
Yeah remember, both more has had and yard or within range of a formula.
So something we have to account for they have to account for.
What we'd okay. Thanks very much.
Thank you.
Our next question is from David Katz with Jefferies. Please proceed.
Hi, good morning, and thank you for all the detail I do want to go back to a couple of the prior questions and and just go a little bit father quite frankly, you know because I find it would be one of the more philosophical banished can change about US right. We do consider this to be.
Temporary set 'em conditions.
But you know it's like you know in many events, whether its personally or Corporately, we would have to be changed on the other side in some way.
Right and how do we answer the question of you know how the company preparers or positions itself for the next pandemic or for a potential potential resurgence you know that may or may not occur hopefully not obviously in September.
And you know front, specifically from how you look at a tenant and tenant coverage and more specifically how do you think about leverage I know you touched on it with Barrys question, but you know is a four to five the new five to six.
And that's ultimately what I'd I'd love to hear your perspectives on.
The first part.
<unk>.
Good luck.
I am often said to those you see me, how the road or come and visit US here that through many years of this and the racing business and so forth being through many ups and downs that you got to consider that.
Vaslov's hierarchy of needs as I'd like to say, it's food and shelter and it's again, it's all those that.
Back to every recession that we've had over the years.
But for O eightnine timeframe.
We actually went up during that period of time fab relief and entertainment and so forth and I have absolutely confident we'll get back to full shoulder to shoulder playing in time, what I can't get that and how long is it going to take that people have confidence the do it my bet is gonna be shorter than many.
Thing, but it's going to take awhile.
Got to take awhile, but a lot of fear so sold out there lot made dependent with state, which place what the risk level is people intuitively know that so I'm going to be very optimistic about ultimate performance, but what I just can't.
Speculate on is how long it isn't going to take to get there I look David you're asking the right questions right does this affect our decision making in the future and it has to [laughter].
In the bottom line living through an experience like this he's going to affect everyone's decision, making in the future or are we going to materially modified the way. We approached this business look we own the buildings at the end of the day. These buildings are key revenue drivers for the states in which they operate.
So we're very comfortable that there's an alignment of interest between the states. The regulators are operators and ourselves in bringing these businesses back as soon and as on as it accelerated a performance level as possible, but yeah. I mean, all that being said are we going to be.
The better prepared for the next shut down I don't know that this is going to cause us to plan for future shutdowns, but time will tell.
Okay. Appreciate that thanks very much thank you.
Our next question is from Shaun Kelley with Bank of America. Please proceed.
Hi, good morning, everybody.
Too I just had a couple of its more specific ones too. There was the first one is just on the stock versus cash dividend, Steve on I I think there was a sentence in there that said something about on you only planning to pay the stock dividend and periods when you're realizing noncash rent payment.
Can you just elaborate a little bit on exactly what that means yeah, no as I said in my comments, Sean I mean distributing cash in distributions when we're not receiving cash rents. Obviously is a levering transaction and that's something we did not want to go that's a path we did not want to go down.
You know from the disclosures that the pen agreement provides for cash non cash rent credits in the months that are outline May June July August October and November. So there are impacts in each of the next three quarters. The current one in the next.
To based on those non cash rent receipts. So that that was the point with that statement that we're aligning the distribution of equity with the receipt of non cash rents.
And obviously for US what that does then is that creates a tremendous amount of flexibility for the company when we do realize the value in Tropicana.
Because we're going to take that onto the balance sheet or have taken that onto the balance sheet as a non income producing asset at this point in time and will amortize its value in those non cash rent receipts are non cash rent credits over these months.
To see what would that will allow you to do exactly we would that you up for the possibility of like a one time special dividend to to return some of those proceeds to catch back up if Tropicana was actually monetize appreciate you know we've already talked about the circumstances actually do that could take awhile, but is that the sort of underlying application.
Look that that that is an alternative obviously, if it's a liquidity event and we've got substantial liquidity from a sale will evaluate at that point in time based on market conditions. The best deployment of that capital, whether it's for value enhancing transactions de leveraging or returning it to shareholders.
Helpful. Thank you and then.
Just one other follow up at sort of also more on the technical side would be on you know the broader liquidity profile. So obviously you've drawn down the line you've given your your cash balances and you're able to preserve a lot to the dividend move bite on I believe you know the credit facility does come due in April of next year. She could just talk about that and any other flexibility allows.
As you have on the liquidity front end, specifically you could comment on an ATM program do you have one in and is it something how do you think about using it if you do yeah just to clarify the $1.175 billion revolver is not due until 2023 may there is a 449 million dollar term loan a one maturity in April of next year.
Sure.
So obviously given the continued contractual payments of rents.
There is no liquidity issue, yes, there is a liquidity issue we have only unsecured debt. So there's an ability to incur secured debt. We do have an accordion feature under our existing secure a unsecured credit facility with the bank group that allows for up to $2.5 billion under that.
Accordion feature and as you saw from the amendments that the banks agreed to in anticipation of the pen transaction. We've stayed in constant dialogue with our bank group and they are well aware of our situation and quite supportive of us as a company. So we think we're gonna have there.
There there are no liquidity issues on the horizon, even with that $449 million maturity in April of next year.
Let me add one small parts of that.
Just a simple thought and that is this as you measure use of cash in capital.
In the six years that we have fun from pad, Ivan particularly pleased with the dividend growth that we've added a each and every year.
As we got.
The last quarter last year at a at 70 cents a quarter.
As one of the largest shareholders in this company that is do you know wildly enthused about that I want to get back there as quickly as we possibly can so cash dividends need a lot to me.
That having been said the stability and safety of this company matters more making sure that we maintain the spending the engine. So I'm not even say that maintaining proper leverage is probably.
The larger driving force and if we take care that do it properly dividends will be fine.
That's somewhat philosophical point of view I'd share that way.
Thank you for one.
Thanks, Sean.
Our next question is from Jordan vendor with Macquarie. Please proceed.
Morning, guys. Thanks for taking my question in terms of but did bid and I think you guys typically target paying out roughly 80% if you're a so our somewhere in that range over the next couple of quarters do you plan on staying within that range. Thanks.
Jordan given the uncertainty that exists in the world today, we've set the 60 cents at a lower payout ratio than historical norms based on our internal modeling. We just think it's the prudent approach to take at this point in time.
So we need to get through these next couple of quarters, but we are and that has been set at a more conservative approach than historical 80% of AFFO payout ratio.
Okay. Thanks, guys.
Thanks.
Our next question is from Robin Farley E. B S. Please proceed.
Craig on lot of my question to pass or any I guess.
Talking about how that pandemic me kind of limit for a while the opportunity.
For others to sell real estate <unk>, because you know EBITDA and therefore rent levels would be so.
I guess it in the past others have suggested that maybe a combination with other gaming reach what makes sense I guess I just I'm wondering.
In this environment with maybe some.
Kind of a change in and what opportunities might be out there.
You have any thoughts on that they're different now.
[laughter] <unk>.
<unk>.
Oh, we use a lot of that [laughter] question by simply saying that it's kinda too early to though maybe by a two quarters from now I'll have a good answer or better answer for that but we're just focused right now getting this company back on firmed from ground again, and that's our driving force.
There's really nothing else. It is important to me anyway, Steve No <unk> Robin you you're asking are obviously the appropriate question and later the her current circumstances goal number one is obviously to preserve and and protect the assets of the company goal number two is to look for creative ways to enhance <unk>.
Older value and you can rest assured as I've said in the past we will always look at any opportunity that is a shareholder value enhancing.
Okay, great. Thank you very much.
Our next question is from John Decree with Union Gaming. Please proceed.
Good morning, everyone. Thanks for taking my questions I think well touched on not just about all of them but.
At the ask about some other dialogues that you may have had a with casino operators, rather whether it be or tenants or.
Partners, you haven't yet reached an agreement with and rates being a new to the space relatively speaking as a as a financing partner and we've seen a lot of markets with pretty wide spreads, particularly for smaller operators has anyone approach you have you had discussions about.
Providing some liquidity whether it's through through loans are buying call options or anything a little bit more creative and then outright asset sounds like I guess the short question is our casino operators in this environment looking to you as adds more refinancing partner than they have in the past in terms of just out right asset sales and it's something like that interesting.
You know John it's a great question and obviously on.
The the depth of the disruption that we're all facing does create opportunity for us and we will look at and continued to be engaged in dialogues with folks.
That are looking to extend their liquidity runways right now everybody is still going through the shock for lack of better term of what this dislocation has meant they are more focused on working with their existing creditors their existing stakeholders whomever it might be.
Even the small private operators or rather than looking at just outright asset sales, but I I think thats just a matter of time before those discussions accelerate and really tied an increase in frequency.
Thanks, Steve I appreciate the color.
Thank you.
Our next question is from John Massocca Ladenburg thousand. Please proceed.
Good morning.
Page for it.
[laughter] think about the withdrawal of guidance I mean, I guess, what would you potentially need to see in the kind of market on a macro economic basis to two or even within your portfolio can you kind of comfortable reinstituting, a a new guidance.
Yeah. They book, it's it's a great question <unk> we.
I'd like to think were more transparent in almost anyone else in the triple net space given that we've got almost all public company tenants that you can read through and we are pretty elaborate in terms of spelling out all of the terms of our leases. So I I think everyone can model pretty effectively our business given.
The the moving parts that are in our business in terms of returning to issuing guidance look we're gonna we're gonna be going through a couple of quarters here, where our tenants coverages as I mentioned or or implied in my opening comments are going to be below thresholds that are required under our.
Leases. So I think we've got to get back to a much more normalized operation. So I wouldn't want you to take away from this phone call that as soon as these facilities reopen we're gonna be reinstituting guidance, we just need to see where things first open then stabilize and ultimately normally.
Lies before we are probably going to feel comfortable given what we've just lived through yeah. Let me say this as well that.
These rollouts are going to be very very very different state to state and that's the problem.
We just have to see how it evolves, but I I guarantee you that not all states will be like that Allstate for move with equal speed that all states will be will bring customers back as quickly as some others.
So I guess, we scratch our head here, what what do we say what we don't want to do is get misleading information so we'd rather be silent for them all but until we actually have something we think we can firmly tell you.
Understood and then maybe kind of longer term philosophically as you kind of come out of the current economic situation in understanding that the terryville option that was granted depend was part of a larger.
Transaction I mean, how has your view on having Trs properties change at all because of whats occurred over the last couple of months means is that you agreement with Penn maybe an indication of some willingness there it could potentially divest of those assets.
We've always had that willingness if it made sense if it made sense a look we're not operators that was never goal number what it was part of the requirement for our spend that having been said if it makes sense Weve I think said publicly before to facilitate a transaction to bring another opco backend.
The day after let's say peripheral as it goes to Ben we would do that so we have no we kinda like having their fingers and the gaming side working with people keep it are you know remembering the gaming write down underlies our entire business. So I don't necessarily want to lose touch we just think it's the right move to get us back.
Back to a pure rate status today, but we'll have no hesitation to do something else in the future and John that that goes both ways and maybe people haven't focused on it but we're actually bringing the tropicana into our Trs because it is non income producing and because it's not we're bringing in not necessary.
Finally, with an expectation of owning it for a long period of time, so moving assets out of moving assets into operating or real assets into the Trs are going to continue to be tools that we will employ.
Just a clarification on my last comment that you're not liable for any of that.
And is going to essentially take all the risks associated with.
The actual EBITDA that property right absolutely.
Okay, so to make sure.
Hey, there [laughter] eat electric or you name it all taxes God Bless America, it's all theirs.
Just just wanted to make sure and then one last clarification, you kind of alluded to it a little bit with some of the earlier question.
In the press release, but they are right credits are not going to flow through an AFFO Oh, no dogmatic frankly, no. So they are they are because they're flowing through the the income statement [laughter] and so therefore, there they're going to be flowing through the income statement and as I mentioned and as is disclosed.
In in the press release, we did get agreement from our credit facility providers to treat those as the equivalent of cash since GAAP requires us to.
No I am it's essentially the cash impact Oh, let's not having that cash rent is not going to be reflected in and so.
<unk> or will it be reflected an even though.
And it will be the <unk> it will be reflected in a AFFO as a cash equivalents.
Yeah. That's my question.
Thank you much that's it for me Thank you John ticket.
And our final question is from Spencer Hollaway with Green Street Advisors. Please proceed.
Hi, good morning, guys.
It appears report in a notable and tax on the current expected credit credit losses accounting standards, you haven't taken de bookings similar allowance or potential credit losses or.
Right down in the value of any of your real estate. This year well, we did we evaluated our loans, we unlike the party that you're referencing treat our leases as operating leases.
So it was only on the loan portfolio and given the short duration of the loan portfolio, we didn't see an impact that was material enough.
For that rose to a level of materiality excuse me.
Okay perfect. Thank you.
Good.
And that concludes my question and answer session I'd like to turn the call back over to Peter Carlino for closing remarks, well make I'm sure I I again want to thank you all for dialing in today is a very interesting times, but we here at GLP I.
Our very optimistic about the future. Thank.
Thank you very much.
<unk>.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.