Q1 2021 Gaming and Leisure Properties Inc Earnings Call
Greetings and welcome to gaming and Leisure properties, Inc. First quarter 2041 earnings conference call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
And it's now my pleasure to introduce your host Joe as you flow any investor relations. Thank you you may begin.
Thank you Darby and good morning, everyone and thank you for joining gaming and leisure properties first quarter 2021 earnings call and webcast.
The press release distributed yesterday afternoon, and is available on the Investor Relations section of the company's website at Www Dot GL property and Inc. Dot com.
On today's call management's prepared remarks and answers to your questions may contain forward looking statements as defined in the private Securities Litigation Reform Act of 1995.
Forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially 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 SFO and <unk> and.
A reminder, forward looking statements represent management's current estimates and the company assumes no obligation to update any forward looking statements and 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 SEC, including its first quarter 10-Q, and and the earnings release as well as the definitions and reconciliations of non-GAAP financial measures contained and the company's earnings release.
On this morning's call. We are joined by Peter Carlino, Chairman and Chief Executive Officer of gaming and leisure properties also joining today's call are Deseret Burke Senior Vice President and Chief Accounting Officer, and Treasurer, Brandon Moore Executive Vice President General Counsel and Secretary.
Gladly Senior Vice President and Chief Development Officer, and Matthew Kim check Senior Vice President and Chief Investment Officer.
With that it's my pleasure to turn the call over to Peter Peter Carlino. Peter. Please go ahead.
Well, Thank you Joe and good morning, everyone. Thank you for joining us this morning.
We are of course pleased to announce another strong and I think eventful quarter.
Notably we have continued to diversify our tenant roster with the significant addition of.
Multiple transactions with valleys.
Part of which.
Includes a 50 year ground lease and the Tropicana property and.
And just wanted to note that that kind of brings full circle here.
Pretty I think bold and decisive choice to.
And ill provide a.
Liquidity to Penn National Bank, and a very very dark hour.
The result for them and and I clearly for us as well has been evident.
There are many other significant events that we've highlighted in our press release, there's a lot of detail here as always so it's it's a it's all day actually when I take a look at it.
And where here of course with our team to answer your questions.
Obviously, too we had a strong financial performance this quarter and.
And let me ask Deseret Burke to go through.
And just some numbers that you'd like to highlight.
Thanks, Peter and good morning, our and first quarter results were strong and we are ahead of the first quarter of 2000, and 'twenty and several metrics, primarily the variable items and our business to summarize our first quarter REIT segment, and our rental income increased by $7.1 million compared to the quarter a year ago, that's primarily.
And two non cash rent adjustments of nine and a half million dollars higher percentage rents from our Penn Master lease of $3 $2 million relating to the Ohio monthly results Morgantown ran and $750000 relating to the lease that we had with pad and that became effective and a fourth quarter of 2000 and money those items and start.
Partially offset by lower percentage relative to plant 1 million on our amended pinnacle lease there and boy at least and meadows lease.
Lower cash rental income from Caesars and 700000 and as you might recall, we entered into an amendment with them and July of last year, which provides for fixed escalation and the future lower rental income from casino, Queen and which is related to our deferred rental agreement with them and their temporary closure during the quarter.
And we do expect this amount to be called back there and upon closing of our Hollywood Casino Baton Rouge transaction with casino, Queen, which as expected and the latter half of this year.
And they're each segment also benefited from lower interest expense this quarter and getting the refinancing activities, which we heard from 2020.
And then lastly, our Trs had strong performance with net revenues and adjusted EBITDA and exceeding the prior year and by $10 9 million and revenue and $6 $8 million and EBITDA.
And with the theme that we're seeing across all regional gaming spend per visitation and it continues to be strong and we began to experience an increase and visitation throughout the quarter as well. So we have spend up as well as and designation, which is a very positive sign for average Trs operations with that brief summary, I'll turn it.
Back to Peter Thanks, very much.
Matt you wanted to highlight some broad issues just to put the company and our efforts and perspective.
Sure Yeah, so a few thoughts.
The first thing if you look at the $150 million of acquisitions, we just did and the transaction. We did last year with valleys and you really consider their master lease construct.
And where the operator and the very solid.
And all coverage based on our underwriting.
Arguably represents some of the best risk adjusted cash flows and all the commercial real estate. Most deals had aspects that were off market that are reflective of <unk> unique skill set.
Not just bidding in auctions.
But creating and originating transactions.
We compete on capabilities, not just cost of capital and these transactions and make that clear.
As we continue our efforts to facilitate and originate transactions, we remain committed to a balance sheet with optimal leverage for our business plan.
And maintained significant liquidity.
And more broadly to Peter's point as we move forward given the still very significant yield spread between our assets and the market level of interest rates and even more proven track record of operating resilience. We heard on some of the operator calls so far this quarter.
The underlying properties the case study.
It's still in play and the case for cap rate compression and multiple expansion remains very strong and that will give it back to Peter Thanks, Matt Yeah, that's very helpful and with that.
Thank you hear from others, but let's try and Oh.
Open the floor operator for questions.
Yeah.
Thank you, ladies and gentlemen at this time and we will be conducting a question and answer session.
I'd like to ask a question you May press star one on your telephone keypad and <unk>.
As I mentioned total and you can't your line is and the question to you.
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For participants using speaker equipment, and it may be necessary to pick up your handset before pressing the star team.
Our first question comes from the line of Barry Jonas and truly. Please proceed with your question.
Hi, Thanks for that.
And maybe like to start with Tropicana could you give any more color on the process, how deep was interested and he and used to maximize proceeds for us the relationship with value.
And important factor.
Well, let me take it and take a shot at it that the relationship with valleys and it's very important that probably wasn't a driving part of this there was a lot of interest.
In the range of.
Saying too much and the range of what we had invested maybe you could have made a couple of dollars but.
And we took the long view here to create and earning asset after all that's the business. We're in we got a significant cash and we'll get a significant cash payment upfront and.
Long term deal and a decent yield.
And also solidify our connection to bally's and this and.
Other things that we're looking at and do it.
Anybody else at the table and it had a steep.
No I think everything you said Peter is correct book I think.
And the ability for us to convert and asset it was non income producing into income producing and the ability to use the $150 million.
The offset to the additional acquisitions, we're doing and Blackhawk and rock Island, I think were very beneficial for us and our store and going forward.
Thanks.
That's great and then just as a follow up question.
And I'm curious to get your thoughts on the recent Realty income and acquisition of NAREIT and.
And see if there are any takeaways for you, especially as you think about consolidation at some point in the gaming REIT space potentially.
And that take a whack at that yeah, I mean, I'd, just say big picture Barry I think there are certain key factors and all triple net M&A and it's really initial accretion its future growth impact its diversification of the portfolio and I think and the impact of a larger denominator.
And the company and and the Realty income deal and all the feedback I've heard the overarching.
Positive was the 10% F O accretion that they shared and the countervailing point was.
Just a question around how denominator that large is going to impact their growth going forward.
And without any specifics to our sector I mean, I think those themes are applicable I think the accretion piece and the impact on future growth piece or are what they are diversifications, a little different because royalty income was a lot more diversified when it started so I don't know if they gained a lot there are companies or are much less diversified.
And you could take that from what it is and then the impact of the Dominator also.
As as relevant maybe more because there's a limited finite number of properties and the space. So I think that's how I read the tea leaves there and leave the conclusion to the year.
Okay.
Great. Thank you so much guys I appreciate it.
Thank you.
Our next question comes from the line of Todd Thomas with Keybanc Capital markets. Please proceed with your question.
Hi, Thanks, good morning.
First question I guess following up on the asset pricing and that you touched on cap rate compression in your opening comments or are you seeing price pressures or competition beginning to drive down cap rates range from a competitive standpoint are you seeing new capital show up on the real estate side.
Yeah, I think it's a little early to call exactly where spot is because there's not that many moving pieces and real time, we haven't seen three or four transaction close I'd say, what we did was certainly an off market deal and every aspect. So I wouldn't take our cap rate as market I mean, I'd suggest to you that was favorable to where the market might be we'll have to see where price discovery is.
And I'd also say every one of these deals there's a lot and nuances and we're very focused on credit quality of the operator or the construct we get and.
And it's it's it's hard to kind of look at it all apples to apples because theres nuances, but I do think if you look at the valuations and the public companies. If you look at the one for capital and get exposure to higher yields back to the cap rate compression point over time, I'd expect there to be some compression and and our hope is and our strategy is to find opportunities to get excess return.
From our efforts so not to be bound by that and just kind of headwinds and the transactions that we do so I think we'll see how it plays out this year I think the stage is set for a positive backdrop in that regard and we will just have to wait and see how it plays out.
Okay, and then I was wondering if there was an update on the timing of the sales and the Trs operations and the closing of the initial bally's transactions.
Ran and whether you take it.
And it's simply Theres really no update on that and what we've said publicly is still where I think we are and the second half of this year and and I don't see anything to change that at the present time, whether it's early and the second half or later in the second half will depend on the regulatory process. Both of those are in full swing and I think well know much more next quarter than what we know this quarter, Yeah I think.
Okay, and I think we can't get ahead of that process and and we owe it to the folks and we work with our regulators to be patient get it done and they kind of set the time, so but I think our expanded and vacates, we stand by our previous suggestion.
And they will probably occur.
Okay got it or there are those are the two primary factors you know around around you know not providing guidance at this point and should we expect to see from additional guidance and visibility once those transactions close.
Okay.
Go ahead, Steve you want to take that.
Yeah, Todd I think the answer is yes.
And with seven assets currently either being divested or acquired it its very difficult for us to provide guidance because the timing aspect of old each transaction is so critical to what will ultimately be the annual performance here. So I think you're right. That's the main and that's the main overarching issues.
For us to provide anything that would be accurate to the.
And please.
And it's all good.
We're going to get there with these transactions, but we can only be wrong and trying to estimate when and how theyre going on and cars. So.
And we just feel that that whatever we said would be protected.
Misleading.
One way or the others.
No that'll smoothed out at the end of this year as we get into next year and we.
Yes.
Well that and get back to guidance.
Okay. Thank you.
Our next question comes from the line of David Katz with Jefferies.
Please proceed with your question.
Hi, This is cassandra asking on behalf of Steven.
And that's always true actually for a second.
And and give.
Give us a bit more on the rationale there, it's a ground lease and set us back and unusual and triple net.
Properties that we see.
Excuse me.
Sure.
You want to take that.
Yeah, I can I can jump in.
With respect to the Tropicana side of the transaction, yes, it's it's a ground lease and in effect that we are going to only own the land.
No form of from the transaction part of part of the long term.
Thoughts and as valleys as indicated in their press release was they will look at redevelopment opportunities and the future and I think it was important.
For them that they have the ability to make changes to the overall capital improvements that sit on top of the land today. So I think that was part of the thought process there it.
It will be triple net and that we have no carry costs associated with the property will just collect our rent on the land.
Got it that's helpful and with respect to the right of first refusal on and several market that's been laid out.
Can you just talk about the rationale between like balancing use and equity or debt to finance, such acquisitions or financing providing to them.
Yeah.
Yeah, I mean as the year plays out and I'll go back to that commitment to having balance sheet and the optimal place. We've historically said the guidepost for that are five to five five times debt to EBITDA and <unk>.
As the year plays out I think we're going to get some more visibility on the likelihood and some of the transactions coming to pass and.
I'll just remind you we have and our tool chest and the same same tools we've had historically.
We've got an ATM program. It's also got.
And cash flow that day at our size and it's actually a decent number that can help one things too and as we move forward and you know our intention on anything we're gonna do incrementally as to at least.
And that much yet.
And that means perhaps.
And that can be that's not going to lever the company.
Yes, I think that's true that's the best dance and we're committed to that and it's Matt well I outlined. So you can always assume were to stay in that range period.
Alright, Thank you very much.
Thank you.
Our next question comes from the line of Nick can it really go with Scotiabank.
Please proceed with your question. Thanks.
Morning, everyone.
And in terms and so a couple of questions on on valleys.
And he tell us what is the outstanding obligations and valleys on the 500 million and commitment for the games. He transaction you know its not clear also whether it was a black Hawk and rock island sale leaseback transactions would satisfy part of that obligation.
Sure so.
And you'd imagine we would love to fund the commitment and exchange for $500 million worth of sale leaseback acquisitions with valleys.
However, historically valleys has demonstrated an ability to efficiently fund transactions using various forms of capital.
I'd point out and remind you that the outstanding commitment is reduced by any incremental equity raise.
Raise above $850 million between the time of our agreement and closing of the games and this transaction and you've already raised 745 million. So.
We're cautiously optimistic that some portion of the sale leaseback financing may occur.
Yeah.
Okay and are you able to select which assets satisfy the sale of a sale leaseback obligation or is that at bally's discretion.
That's that's mutually it the language says that's a mutual that's a mutual agreement between us and bally's.
Yeah.
Okay. Thanks, I guess just one other question is on rent coverage, which is you know 1.3, which is below the typical 1.8 escalator coverage.
Governor.
Given the recent occupancy cap restrictions that are lifted and certain jurisdiction dish jurisdictions could you provide some insight into the potential trajectory of improving rent coverage.
And hang on.
And are you referring to the table, where we reported the prior quarter rent coverage.
And on page 14 and that early.
Yeah.
Okay.
You know obviously each of our tenants have been impacted by COVID-19 and in prior quarters and that is a trailing 12 month number so and.
Yeah, we expect those numbers to continue to and from that.
And we set the properties have continued to open up and have had fairly strong performance that we've seen other operators reported to date.
Those numbers are important point and time and trailing 12 months and this included close period.
Yes, I'd like to say and certainly it's hard to accounts to zero.
Zero revenue and limited revenue is just that so no we're not at all concerned.
About coverage and we expect that's going to move very swiftly back to a place that we're more comfortable and in line for increases and that.
It could take a look at some of the results we've seen at least valleys reported I mean, there were certainly some robustness and the time periods since the numbers in here and we're just we're not giving any guidance on the timeline of when we expect that to eclipse our thresholds.
Threshold, but we're hopeful to see it not terribly distant future.
Okay. Thanks, everyone.
Thank you.
Our next question comes from the line of Jay Kornreich with S. M. D. C. Please proceed with your question.
Hey, Thanks, and good morning, good morning.
As it always has been quite acquisitive lately, how do you think about the value from seven year rule for opportunities and the four states.
I know, it's always previously had a bid for Virginia casino development per that they might be interested and the downstate New York full scale casino cash gets legalized. So just curious and your overall big picture view on the potential here.
Sure I'll give a shot but book.
And all.
Obviously, we can't speak for valleys and attention job of any project, but yes. It was publicly reported obviously the day they were knocked out of the Richmond.
Bid process look I think the way we landed at Roper and those four jurisdictions.
It's predominantly based on the fact that we believe and they believe those are for George just jurisdictions, where ultimately online sports betting and gaming will be very important to a company. That's trying to put together and omni channel strategy, and therefore, whether or not they they achieved the acquisition of a property and the next 12.
<unk>.
And we're in year six of the ROE for I think we want to be able to have a seat at the table to work with them because as you did point out they have been acquisitive. They are aggressive and we would like to be their partners Inc.
And any transaction, whether that's a development project or a or a existing casino properties. So that's that was the thought behind that process.
Yeah.
Okay that makes sense and then just one follow up and the tenant conversation has largely shifted away from your largest tenant and national gaming do you do you foresee any further desire for them to grow and access new states with you as a partner or is the right way to think about external growth with newer operators like all of these are the real for on the casino Queen.
Yeah, I mean, I think the answer is we want to do business with every one of our tenants and we stay as close as possible to each of them.
<unk> to be a good and positive partner for the things that they may we used to do how it would shake out and in particular deal a state or and opportunity.
I can't predict but obviously, we spent a lot of time thinking about how we can be a good partner to our existing tenants period.
Happens at the moment the bally's is highly acquisitive they've proven to be really good guys, who work with honest easy its been kind of fun. So we're gonna go where the where the rivers flow and so and that could be with any one of our existing tenants.
Okay. Appreciate it thanks very much.
Our next question comes from the line of Cemig D Rose with Citi.
Please proceed with your question.
Hi, Thanks.
I just wanted to ask you.
Spent a lot of media stories about native Americans and moving into commercial gaming, particularly with a couple of assets and Las Vegas, now and do you see that as a potential avenue to.
New new tenants or is that of less interest to you.
The commercial with commercial and.
That's a terrific opportunity and we want to be part of that anywhere and any place we can with any responsible well capitalized group absolutely.
And then did I E.
Uh huh.
If you look back historically, we've talked about and on the travel reservations is a little hard to structure appropriately for our structure, but anything they do off off campus effectively with with the projects that are on the traditional sale leasebacks with us to me, which we'd love to do it with the right.
Our balance sheet, the right credit and and some of them and have a lot of cash flow they'd like to grow and so it's certainly a part of the conversation here and has been frankly.
Yeah, and do you I mean do you feel like this is an avenue that's more native American tribes will.
Pursue going forward you know for whatever reasons. It just seems like there's been a little bit of a true and if some of them had been and it for a while but yeah.
And I think I guess, it would be like a big.
And a big new thing over the next few years.
The question and this means that they have a lot of cash sitting around what do you do with it right I mean.
People with good situations have that problem around the world and and they know that business and they know the upside from that business and it's very unique compared to other things you could put your cash into so I'd expect there to be more of it yeah, and and I'd I'd Echo that and and include the fact that there's a number of jurisdictions, which historically have not had gaming you know, Nebraska, Alabama, which are now.
Starting to move towards it and so as you have cash flow and you're sitting on a sitting on a on a on a wonderful assets. That's performing but you have you have Saudi and kind of competition, possibly coming in around you you're going to look to diversify and I think that's something we're going to continue to see and I think you're right. I think we'll continue to see things happen in Vegas.
Maybe maybe not on the strip, maybe I'll strip, but I think we will continue to see activity there.
Okay. Thanks, and then just maybe a comment I mean, I I don't know if you're taking a vote on this but you know theres only three gaming REIT and I think to have your call concurrent with one of the others is you know you should probably like reach out to your peers and this faith and figure out a way to have calls at separate times.
A comment or two.
And what it's worth it to me that's a fair comment they came in and after we did and I think somebody came into my office and since and we move out and I say that let them move Oh that'd be cute, but yes. It's unfortunate we agree so where the same day no malice, there and just the way it kind of worked out.
Okay.
Yeah.
And as a reminder, ladies and gentlemen, it is slowing and wanted to ask a question.
Our next question comes from the line and it's been very.
And with Bank of America. Please proceed with your question.
Hey, guys. Thanks for taking the question.
And one a little bit more broadly just as we.
We've seen some new states legalize online sports betting and the license system is kind of Untethering from land based casinos to a certain extent just be great to see or hear your thoughts and how that's going to affect the transaction market going forward and maybe your own growth plans.
Well look I mean part of the answer is we don't really know but.
You know most of these.
States are tethered to bricks and mortar there are some that are and there are some ongoing debate and various states I know talking to our major tenants, they're very focused on bricks and mortar. They are completely focused on that and are building out facilities.
<unk> and some you know.
Considerable cost to to capitalize on that opportunity so.
I don't think the script has been written yet there are some states you're right. It could open up to the world it's possible.
But I think on balance look people are social animals, and I'll take the point that and make the point that.
Book, you might place the occasional bad from home or from your car from a parking lot and someplace, but by and large.
On a Saturday afternoon football is gone and Sunday.
What ball activity people, who don't want to be with other people and enjoying a drink and get the whole social experience. So.
I think what's going to happen is you're going to see a huge lift and gaming and the United States generally I'm not sure. That's good from a public policy point of view, but I think that's what's going to happen you're going to see numbers rise everywhere.
And I'll point something out I mean, do you use the word tethered.
And one piece of this practically for us and patented state structure. It but the reality is if you look at Penn and public comments.
Value of a customer that uses multiple pieces of their omni channel platform, whether it's gaming sports betting and the bricks and mortar is inherently multiple times more profitable. So theres a business incentives for our operators to have both pieces and their delivery platform and at the end of the day I mean, our assets are essential and I'm getting.
And customers that are reliable and predictable and give them more profitability. So.
I think when we look back we're gonna get many positives that come from COVID-19 and we're giving this case study that we're getting and on the growth front and I don't know that it's going to be very different because there's economic incentives are going to be there regardless of how the state structure things Yeah I think.
And one deferring a comment just around your M&A question.
I do think that it could it could be a little different in that if you can now go and be one of 60 online license holders and Maryland, you don't maybe that and feel the need.
To go acquire and asset there.
I think that that's the that's the surface understanding of it but I think what the reality is yes.
And there are owners of assets in states, which have had massive price appreciation tied to the assumption that those states or tied or license back to our properties and if those things don't happen those valuations move aggressively. So if you take New York for example, and look at and asset there.
Assumption that all of that was going to be tied to a property and a suddenly.
Appears that it might not be well will massively swing what the perception is of value for particular assets. So I actually think we're gonna see M&A come out of this and it's going to be the opposite direction and what everyone's thinking it's going to be people that we're holding out with hopes that they were gonna get this massive pot of gold and now all of a sudden people cannot.
Access the market a different way and now they realize that maybe they should be a seller anyway.
Yeah.
Great. That's super helpful color really appreciate that and then I guess one other question from me just on the M&A market I understand the transactions you guys have done and the the last few months have been generally a bit more off market, but it'd be great to hear kind of your sense about what the buyer pool for assets looks like I know kind of free COVID-19 there was a.
Talk about the increasing institutionalization and west private equity, which has been quite active on the on the operational side. So far post COVID-19, but just be great to see kind of who else you guys are seeing out there in terms of deals.
And why don't you take a look at that yeah, I think that it's the usual suspects and we certainly see them and I think on the margin there so little sniffing around from some of some folks on the private equity side, but remember, it's not that easy and they need.
A lot of these states you need to be license, there's a lot of regulatory dynamics involved and.
Not for the faint heart and that has given us historically and economics, but to an extent and better risk adjusted returns. So we'll see how that plays out but youre right on the path towards institutionalization, it's inevitable and that other folks get involved and.
And on the other side and you can look at the Venetian deal I mean, Apollo as they're not in the real estate, but does and operator. So there's also a case that some of that capital finds its way into the operating side and and uses someone like us which might actually be helpful to us and we'll have to wait and see.
Yeah.
Great. Thank you guys congrats on another great quarter and that's it from me.
Thank you.
Our next question comes from the line of Handel St. Joseph with Mizuho. Please proceed with your question.
Hey, good morning, Thanks for taking my questions.
So just the.
The first one is a follow up on book value transaction I know, it's kind of already have agreement that this line of credit from funds and backstop. So I'm curious.
And it gets a better yet how do we understand your thoughts around the balance sheet strategy that five to five five times leverage.
The range, we outlined how did that play into how you structured the deal and any concern at all with their ability to put that financing backstop to you and within what I think is about three days.
Okay.
Sure. So a two part two part question. There first I think look we have we have significant amount of time between now and and.
And when any transaction would be closing on the game and I think Theyre zone.
A lot of things, which could happen between now and then which could impact and the total amount.
Commitments. So I think that we're committed as Matt said earlier to the leverage point.
It's down the line, we find ourselves acquiring additional assets. We will of course, we will of course look to use different avenues that are available to us such as the a T. M. For example to a to go ahead and make sure we stay within our our leverage parameters with.
With respect to that.
Three days notice.
I'm just going to say my personal belief is we will have significantly more heads up as to whether or not that commitment would be needed to ultimately fund the transaction well in advance of three days before closing so.
Again, I think we have.
What looks to be so.
Some time mid and six to nine months.
To watch this play out and I think we'll know more information as we go and significantly more information next quarterly call.
Got it got it alright. Thank you for that and then I guess a question on and.
Got it and why still no guidance.
And I'm thinking into it and said why are you not giving guidance I know, there's a lot of other means.
And other sectors with equal or even greater uncertainty that have provided guidance of.
And so on that and certainly understand the challenge that the unique times per.
And here, but curious when we can expect guidance and then maybe as part of that as well, what's the latest with the CFO search.
Well I'll just I'll just reiterate the comment from earlier around the guidance I think the the main.
Overlying factor that's driving the fact that we're not providing guidance right. Now is that we have set and assets that are so we have three divestitures and we have for acquisitions that are pending.
Regulatory approval and timing TBD. So I think that's been the main item that's caused us to have hesitation around providing guidance goes without knowing the timing, we're definitely not going to get the number right.
I'll, let Peter answer the rest of them and they see it.
Oh searches and it's really.
For the moment.
Not searching.
Look I think you can see pretty evidently and from this quarter and last quarter. I mean, we have no need for somewhat and that capacity today and where we eventually feel like yeah. I think we're going to see how things shake out and we've got a great team here all bases are covered completely odd.
Italy perfectly and.
Well just have to see how it evolves and but I think ultimately down the road.
You'll see us filling that slot, but there is no active surgical and right now and it's just.
Because all bases are covered.
So a question on guidance and.
And that's on perhaps providing a range with perhaps at the high and contemplate one set of circumstances at the bottom and contemplate another and.
And we thank them and to that.
Uh huh.
I think it's virtually impossible for us to achieve that with all the moving pieces because if there were one or two moving pieces, we clearly to try to make an estimate on the low end and based on timing and the high and when you have seven moving targets I think that to come up with a meaningful range would be very very difficult I think the range would probably be some.
Alarms and would not be a meaningful number for us.
Yeah timing is everything and these transactions, obviously theres a lot of money involved and a monthly basis and.
We can't guess I mean, we can estimate and take a.
Swag, it and what it might be but we've talked about and nausea, and with our board and with his team sitting right here today, and we've decided that there are so many variables and it just we cant be right and don't feel comfortable putting it out there.
No as I said.
Earlier today.
We may well get through a lot of this stuff be back and a position where we can feel comfortable once again and if that seems to make sense at that time, then they will do it I mean, we understand the interest.
But right now we think it's not serving us certainly not serving our shareholders as well to put out a number that we can't.
And with confidence.
Alright, Thank you for the support.
Thank you.
Our next question comes from the line and Robin Farley with UBS.
Please proceed with your father's day.
And most of my questions been asked and I guess Im just curious if you have thoughts on that.
And Asia, and sell price and and kind of.
What do you think about valuations and and the Vegas market from here forward and obviously that was done at a time with a little more uncertainty, but just curious if your thoughts on that.
Hi, Robyn a math it sounded like your question so sure.
So firstly, Rob and we think the valuations and the Vegas market given the risk associated with the cash flows are far less attractive and what we got and the deals that we did and we'd underscore the benefits that we got and the deals that we got.
More broadly I mean, I think it reflects the cap rate compression we've talked about I think if you look at their lease structure, the escalators and the IRR construct and it certainly helped drive the pricing.
And a way that puts a good mark out there for our entire asset class and.
And I think we'll watch us things transpired and see where things price going forward.
Okay, great. Thank you.
Thank you.
Our next question comes from the line of John and Masako with Ladenburg Thalmann. Please proceed with your question.
Maybe just following up on that last question with kind of a broader lens I mean.
It seems like if you were to take.
Venetian transaction, maybe some of the deals that <unk> done a pretty wide gap and and I know your deals aren't necessarily market, but just broadly speaking, there's a pretty wide gap between kind of cap rate on regional assets and.
And Las Vegas assets at this point and then I guess, what do you think needs to happen for.
And some kind of convergence to occur on those cap rates, if it will kind of ever.
Yeah, I mean, I think we're seeing a lot of that right now and then we talked about at the last call to look at the underlying operating cash flow is look at the resiliency and look at the credit worthiness of our tenants and you'll see if you look at the stock prices of our whole public company asset class, they've all moved neatly upward and this environment and if you're.
Look at and I know, we've talked about historically other asset classes like self storage manufactured housing data centers go down the list. It took a while and it was a slow process, but it was a methodical and it was pretty consistent over time and we've seen the beginnings of that we do not think we're past the middle innings of this cap rate compression the merits of our cash flow.
Paired to especially the fixed income market I mean, if you took our our our assets got rid of them and just created bonds out of our cash flow as they would trade well better than than where our company's value and where the assets are valued and on top of that we have real estate as collateral that is mission critical to state budgets and operationally essentials to the operators and when you put those facts in front of people.
It's it's a learning curve I think there is a price discovery piece that comes from the private side I mean, we've talked about that historically too as the public market gives one form of price discovery. If there are transactions and the private market that come from private equity or other sources or anything we might do and whether it be a joint venture.
Or something else to give a positive mark for the asset class, there's really no transactions that take place that represent the value of the 1920 asset master lease with a credit worthy counterparty like Penn and and we hope and folks like you help make that case as we move forward because it's pretty obvious when you look at the resilient and see where the cash flows should trade, but there's a time element involved.
And that's always been that way and and we're methodically moving forward on that on that trajectory look I'll say flatly, the cash flow coming out of reasonable properties is more valuable and the cash flow and the strip period. It just it that's the story we've been telling book continue to tell the facts bear it out without a doubt, but look people like glitz and.
The market is the market.
We can't affect that except to say, if you really care about reliability.
And certainly you really wont be any reach and the market risks and let's do you want to have a 4000 room hotel and things are tough, but you and I have none and habits and facility like some rebuilt and Ohio.
Columbus day Yeah.
Way better off by any measure and if you cared about return on investment.
Would you put your money and the separate would you put it and what are these regional market pretty simple when I put it and we did it and.
So look it's an anomaly I understand I mean, do you drive up to the philosophy element when it's pretty exciting.
People do that but.
Don't be seduced by five five pretty pictures.
And if you care about quality and really Wanna be looking at the regional market. That's a story that's.
We believe will eventually.
Yeah and quality to us John is cash flow quality and the one thing I'd point out is the coverage rates and both of these markets I mean look at the coverage on the last deal that went away from us and the strip and look at the coverage that we were able to achieve one of the assets that we buy and not only do you get a better cap rate and if something that's operationally essential and mission critical and the states you also get coverage that's in <unk>.
Especially when you stress at well above one you can look back at the deal. We did two deals that go with the values last year. It was called Twin River and if you take the trailing four wall coverage for the trailing 12 months and include all the closures that we've talked about all those euro as Peter pointed out even some negative numbers all covers but still in excess of 1.4 times there.
And at the end of the day, that's called the margin of safety and that helps us sleep at night, and that's our value proposition to our shareholders. The bond market appreciates. It I mean, despite historically being a little more leverage than our peers with the best cost of debt because the folks are looking at the underlying and risk profile of the cash flows when they give those rates and so our company and.
It's inevitable over time that the equity market will continue to appreciate it as we deliver results and clip the coupons and send the dividends to shareholders and do what we said we were going to do.
Thanks, Matt Okay.
And then maybe sticking with that theme of kind of regional performance and maybe on a more specific kind of level. How should we think about the cadence of the Ohio portion of the 10 percentage rent and and coming quarters and I understand it's down to kind of individual property performance, but I guess, how strong are the comps that you know these are gonna be.
Based on quarter to quarter.
At this point.
Well the one thing I will tell you went public and.
Don't forget that we have a flow ourselves.
Yeah that is pretty much fixed at that range. So I don't think it can't go higher and quickly, but it can't go lower so the.
Only one that's really the area there and she's only need a lot more would be Columbus, and you know as we've seen and as these properties continue to open up.
Okay.
Continued good performance and not the closures that we have and the trailing 12 months.
Okay and it isn't it.
A reminder, the concept based on prior month or are they based on a year over year basis.
When you say the constant and the percentage rent is based on net revenue incurred within the period.
Okay.
And that quarter to quarter. It may just be.
From this quarter versus the prior quarter, I guess it'd be kind of weighted to maybe think about it based on the reported numbers.
That's right and reported numbers that I discussed and it's a $3 2 million and beat was first quarter and 2021 versus first quarter of 2020.
Okay.
Perfect. That's it for me. Thank you very much. Thank you.
Our next question comes from the line of Steve for Zillow with Deutsche Bank. Please proceed with your question.
Hey, good morning, guys and thanks for taking our question given cost have reduced as heavily as they have been for operators and as such acquisition and acquisition related synergies are probably harder to justify.
You guys expect the M&A environment to remain as active as it has been.
Oh, Yeah go ahead Steve.
Yeah, I do I think that day.
And you know the synergy aspect was certainly important a few years ago, when El Dorado acquired aisle and Eldorado acquired Tropicana.
I think that at this point.
I think those large scale M&A deals, where one operators buying 10, 12 15 assets from another operator and is able to garner a massive corporate expense synergy I think those deals are few and far between going forward just because the landscape in the gaming operator world.
He is pretty is pretty share, they're just not a lot of those IL trop type size companies that are still left so I do think that synergy piece will be less important the.
The asset quality asset type and filling out your omni channel I think those are the things that people are looking at and talking with operators and they're focused on the type of assets. There I think they are being a little more selective at this point as far as what what assets they are buying and what market, but I don't think synergies are going and are going to slow.
Down and the M&A environment.
Yeah.
Okay, great. Thank you.
Yeah.
There are no further questions in queue I'd like to hand, the call back over to Mr. Carlino for closing remarks.
Well, thank you very much and thanks to all who dialed in this morning.
And to talk with you and we'll look forward to hopefully another strong quarter.
Next time around and so so you that and thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect your lines at this time and.
And have a wonderful day.