Q2 2021 Gaming and Leisure Properties Inc Earnings Call

And I believe.

[laughter].

Greetings and welcome to gaming and Leisure properties, Inc. Second quarter 2021 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 started conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Joseph O'dea Investor Relations. Thank you you may begin.

Thanks, Doug and good morning, everyone and thank you for joining gaming and leisure properties second quarter 2021 earnings call and webcast. The press release distributed yesterday afternoon, and it's in Alabama and Investor Relations.

And of our website at G. L prompt 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 1095.

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 <unk> and <unk>.

As a reminder, forward looking statements represent managements current estimates and the company assumes no obligation to update any forward looking statements and the future.

We encourage listeners to review.

Viewed and more detailed discussion related to risk factors and forward looking statements contained in the company's filings with the SEC, including our second 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.

And 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 Day, Gladney, Senior Vice President and Chief Development Officer, and Matthew <unk>, Senior Vice President and Chief Investment Officer.

With that it's my pleasure to turn the call over to Peter Carlino Peter Please.

Okay.

Well, Thank you Joe and good morning to all who have dialed or tuned in this morning.

We're very happy to report and other excellent quarter here at G. L. P I.

I can tell you haven't done this for many many years a lot more fun to talk about good quarters and.

Please go and disappointing ones and happily and my career, we've had very few disappointing quarters over many years. So this is.

A good 1.

As usual I'll make very few comments I think we have our entire team here as always.

And I'm going to ask.

Then deseret Burke to highlight some significant points and and met them check will also have a few comments and then we'll open it.

To your questions are release I'd like to thank our is always is very very thorough and so most everything you need to know of course can be found there but.

We're here today to answer your questions.

That is why don't you take the Mike Thanks, Peter.

Good morning, our second quarter results are great and we're ahead of the second quarter of 2020 on several metrics to highlight the second quarter REIT segment results income from real estate increased by $22 million for the quarter compared to the prior.

And that's primarily.

Due to higher percentage rent and Penn Master lease and a $11 million related to Ohio rental income from the new bally's lease and $3.1 million Morgantown and around a $750000 related to the lease with Penn that began in the fourth quarter and last year and increase related to casino.

Queen and $3.4 million as a full quarter of rent was collected in 2021, well 2020 over call had a deferral escalators on our pinnacle and Boyd Master leases that became effective on may 1st of $1.2 million and some noncash straight line rent adjustments and revenue gross ups and 4 and a half million dollars.

And your year positive variances were partially offset by lower percentage rent of $1.8 million due to our amended pinnacle lease Boyd leaves ceaselessly meadows lease and percentage rent resets that were negatively impacted by the casinos closures from COVID-19.

And the REIT segment also had an increase in expenses of $6.

Neely and dollars compared to the second quarter of 2020, and that's primarily related to an increase and noncash items, such as our land rights and ground lease expense and depreciation and our second quarter. Trs segment results continued strong performance with net revenues and adjusted EBITDA exceeding prior year levels by $33.

$7 million and $14.3 million I also wanted to point out that we anticipate achieving a full escalator on the Penn Master lease effective November 1st of this year, which will increase annualized rent by $5.6 million and that we also expect to collect casino Queen rent deferral of $2.1 million related to the first quarter of deferral.

Formula upon the closing of the Baton Rouge transaction.

With that summary, I'll turn it over to Peter.

Thanks, very much and Matt you've got some points you want to highlight these do.

As many of you recall, we articulated a theme our goal really being offensive Lee postured coming into this year.

Our balance sheet strength, and smoothed capital market execution, and prudently source efficiently priced capital are essential and this effort does that and during the quarter, we opted to utilize our at the market equity issuance program, raising just over $70 million and proceeds and an average net price of just.

And over $47 a share or use of the ATM program took into account our balance sheet goals as well as the composition of our investment pipeline and our balance sheet is officially at fighting weight and then our leverages trending toward the lower half of our 5 to 5 and a half debt to EBITDA target range around.

Around year end and.

And we look forward to having the ability to comfortably earmark retained cash flow for redeployment and the growth enhancing investments.

Revenue enhancing capex from existing tenants or external opportunities to the extent we are successful our overall growth rate will enjoy the benefits of compound.

Cash flows as.

As we move forward with the strong and sound Financial Foundation, our focus is squarely on unearthing opportunities for the prudent deployment of our shareholders' capital. Our objective is to enhance our growth profile and conjunction with the enhancement of long term intrinsic value per share.

Compounding and taking a step back this is a unique dynamic and very exciting time for the gaming industry, and especially the gaming real estate industry.

The combination of higher rents that we're achieving from the escalators desert Ray talked about.

And in combination with the operational strength that Peter alluded to and the stronger tenant base.

Resulted.

Ultimately translates to greater value for our portfolio for our platform and for our shareholders pound for pound regional gaming real estate sound stands out as incredibly attractive compared to other investment opportunities across the real estate spectrum and beyond this reality.

And it is especially relevant as more and more institutional capital yearns for safe and durable income, which are the hallmarks of <unk> strategy and portfolio.

With that I'll turn the conversation back over to Peter.

Thanks, Matt that pretty well highlights.

Any of the great points that we'd like to make where and a great business had a great year.

And.

It's pretty exciting and so with that let's get to Q&A, Doug If you would.

Thank you, ladies and gentlemen at this time and will be conducting a question and answer session. If you'd like to ask a question you May press star 1 on your telephone keypad confirmation tone will indicate your line is a good question queue you May press star 2.

Year to remove your question from the Q4 participants using speaker equipment and it may be necessary to pick up your handset before pressing the star key our first question comes from a lot of these rows.

Citi. Please proceed with your question.

Hi, Thanks.

And I guess my first question is you mentioned.

Achieving rent escalators with and I was just wondering do you expect to achieve those escalators with respect to other leases, which have anniversaries later this year based on what Youre seeing now.

The quick answer is yes, as you want to comment.

Penn escalator because of the performance and the Penn properties, we do expect the only 1 that.

That weight resets later this year as well as the meadows lease and I and we're not certain to that we expect to get an escalator on that we'll have to see as their COVID-19 months drop off and the better performing months come in how they perform so the only 1 we are projecting right now is the Penn escalator.

Yeah.

Okay. Thanks, and then.

And you just mentioned institutional capital continuing to look at this space and I was wondering do you.

Expect a more interest and the regional assets and you obviously saw another transaction and Las Vegas recently and I'm. Just wondering do you think is.

Is there something about the structure of regional gaming that makes it maybe more difficult.

And Mike for for institutional and comparable to come in.

Yeah, Smedes you know on 1 hand, we've got a bit of a moat because and a lot of the limited license states Theres a need for licensure and some other things that make it a little less direct for capital to go into our asset class but.

Over the many years.

As ive been and investment World. It reminds me of that law of physics that water ultimately find the lowest point capital is ultimately going to find the best risk adjusted returns and the amount of capital out there now if you look at some of the private equity platforms and the recurring income that they're focused on and their private REIT vehicles.

<unk> is stunning.

And over time, our cash flows fit that return profile incredibly well to date, we've been very successful with our relationships being the first mover, creating the space and finding and sourcing off market transactions at very nice risk adjusted spreads and.

And we've also pointed out.

<unk> institutionally institutionalization continues we expect to see more cap rate compression.

So you've got a few recent comps on the strip that happened interestingly, what you've seen and the regional markets year to date.

Anything of scale and our quality is really been off market or deal with valleys and then the transaction that M. G. P did.

And field, it's going to be really interesting to see a market clearing and high quality asset and the regional markets and perhaps supposed to even between now and the end of the year.

Okay. Thank you guys.

Our next question comes from a long line of Nick you. Let go with Scotiabank. Please proceed with your question.

Thanks, Good morning, everyone. I guess in terms of first question on valleys. You know are there any have you discussed any other options or opportunities with them. You know now that that 500 million dollar investment is off the table.

The quick answer is yes, but I'm gonna true.

Steve Lab me for that.

Yes.

Look we have a great relationship with valleys as seen from the various transactions and structures that we've accomplished and achieved with them.

Our dialogues with them continue.

Beyond this commitment.

Part of part of the commitment.

And was necessary for their day U K regulations.

Clearly they had the amendment from the Rhode Island.

Statutes to allow them to increase leverage and their outperformance and the properties has been incredible so.

They no longer needed that capital earmarked today, but I would not suggest that that means that there is there is no further dialogue with them, we're always talking with them and always interested and transact.

And with them.

Okay. That's helpful. Thanks. The second question is just on the I'm. The CFO search maybe you can give us an update on that its been a I think it's been a year now what's.

How should we think about when that could get resolved.

Well there isn't 1 that's a quick answer there isn't much we abandon that quite some time.

Trans out as Ive answered on earlier calls.

Functionally we've decided that among the the principals here with <unk>.

Deseret, Steve Matt.

And that.

We are perfectly able as you've seen.

In the interim time to handle everything and anything.

And I got holding all the financings we've done.

Plus the day to day operating stuff that we have reported are they just don't need now somewhere down the line I expect we will do it but we're not in any hurry with the great team that we have in place and we just don't need it quite candidly and I expect.

Say it again.

And somewhere down the line, we'll probably designate somebody or bring in somebody but at the moment, we've got no interest and spending no time on that subject.

Okay. Thanks Peter.

Thank you.

Yeah.

Our next question comes from the line of Carlo Santarelli with Deutsche Bank. Please.

Proceed with your question.

Hey, good morning, everyone. Good morning, guys, just a somewhat of a modeling question as you guys get closer here to the sale of the of the Trs assets, how should we think about kind of the G&A that maybe goes with those assets.

Yes.

As you want to take that.

Yeah, So and then Jan and they then performance and the properties are pretty much split pretty evenly. So I think you can think about those as half and half to do your modeling and you shouldn't be far off.

And I think.

The G&A also if you look at the breakout and the earnings.

Elyse the line item that's attributable to the non corporate piece is really related to the Trs. So I think that's the piece that's ultimately going to go away and speaking to you and then.

Trs goes away and when those properties go away, but if you're modeling for this year about half of it since we closed on the transaction with Perry that'll.

It happened on July 1st you can expect the other half to remaining for them until such time as we can conclude on the sale at Baton Rouge.

Right.

And I'm, obviously goes away.

Yes.

Alright appreciate it thank you.

Thank you.

Our next question comes from a lot.

Earnings from Thomas with Keybanc capital markets. Please proceed with your question.

<unk>.

Hey, Good morning. This is Ravi day, the underline for Todd Thomas just wanted to ask here are there any regional markets in particular that have surprised you and their strength and resilience coming out of the pandemic.

It's it's kind of everything.

And dare I say without being smart.

And the whole.

The whole industry as a surprise and kind of a shock I don't think anybody's and not EBITDA, So who know this industry well expected to kind of turnaround that we've had in many cases setting record.

Third topline numbers, which is the shocking part and understand the bottom line and margin improvement and all the things we know with the cost cutting that occurred but it is incredibly shocking to consider that many of our properties.

Alright tenants properties are hitting record numbers and doing it by the way over these last months.

With with limits on occupancy.

And I think they've been pretty judicious and who they allowed to.

Sit and a seat and and.

Carefully controlled their marketing towards the better of their customers, obviously and our industry. We have a high degree of knowledge of who are the value of every customer who.

Who come to our facilities, but on balance.

The answer is the whole thing is kind of shocking, but it demonstrates to Matt's earlier point, what we said all along.

And that there is an enormous strength in gaming generally.

Many of you have heard me say and 1 on 1.

And over these years that if you look at <unk> hierarchy of needs, it's food and shelter and it's gambling.

And it's very high people don't give up their entertainment. They just don't and that's been my experience for many decades as a matter of fact so.

There is resilience it's incredible people.

It won't be denied their entertainment.

Yeah.

Perfect. Thanks.

Just 1 more here are you looking to expand and any non gaming expansion experiential real estate, either by a debt or equity.

The quick answer is yes, and yes.

But and we've been doing we are looking as I tried to point out since the day, we sponge 7 almost 8 years ago.

A variety of things and the problem is we are in such a strong category.

And our revenues as we finally demonstrated our bullet proof knocking on wood as I say that there's always the atomic attack.

And just possible I, suppose, but we're pretty bulletproof finding its equivalent or anything close there too.

And is very very difficult.

We are looking at things and if I were a betting person and I'm basically none.

I would say its somewhere down the road, we might find something they've kind.

That isn't Mrs, but and it's our responsibility for looking for shareholder value overtime, but until we see it.

You won't see us pulling the trigger.

Got it thanks, so much I appreciate it.

Thank you.

Our next question comes from the line of Barry Jonas.

And of graduate Securities. Please proceed with your question.

Hey, guys good morning.

As you talk with operators do you think more willing to move to a complete asset light model under the right circumstances, where is there still some hesitancy to go all the way.

Well look I'll look at Matt for and opinion my sense is that the.

There's still those who who are taking it cautiously that want a balance that are willing to do some and consider others.

But I think.

I think generally people have.

What's the value that REIT and bring to the industry and youre going to see more and more people, saying or frankly, just wanting to cash in and take advantage of the kind of multiples that their cash flow can generate.

Yeah, I think you put it well Peter and I think it's a learning curve for the operators I think the fact that we had COVID-19.

Ignite and we saw the valuable.

Benefits of having leases in place that are permanent capital that have no bullet maturity resonates with folks and ultimately I think it's gonna be conversations between them and folks like you around what valuation they might get under 1 structural or another and as we move forward things could likely.

Covid and up for that but it may take some time.

Got it and then just to be clear.

Seeing rising Covid cases out there curious if thats influenced where you see it influencing discussions or timelines and and anyway. Thanks.

Not yet.

And so the quick answer is no.

As I said, there's always a threat.

Threat of and atomic attack down the road I, suppose or the equivalent thereof, but at the moment I think we're a good bit from that yeah. I think it's widely accepted that the operators have now been battle tested those protocols.

And in place.

A lot of people, who are and inoculated, there's masks theres a lot of other steps that could be taken and go into the draconian knee jerk and we're just going to close things down and certainly not the first step for anyone and.

The doors are open and we know how resilient and things can be.

Perfect. Thanks, so much guys.

Q.

Yeah.

Our next question comes from the line of David Blogger with Green Street. Please proceed with your question.

Good morning, I wanted to discuss the institutional capital and once again and.

And just thinking about that from a long term perspective, obviously it seems like it would be advantageous if we saw cap rate.

Thanks Gene and the regional markets from the standpoint net street and any of these would go up but at the same time and you've been able to attractively source deals at attractive pricing immediately accretive to Apple could you stand to benefit somewhat from this note lasting for a bit longer to continue to grow and attractive pricing before we see pricing reset like that.

I mean.

And probably have seen some of that this year and I'd argue if the assets that traded this year were totally marketed they would've been a tighter cap rates on all fronts.

And I really look at it as a win win I mean on 1 side. We continue to look at all the deals we've done to get really good returns for our shareholders at the same time.

If the wave comes.

And I think what goes over the short and there is re rating I mean, we can we have remember the largest most diversified portfolio and these kinds of cash flows and existence and the ability then harnessed that whether it's a joint venture and some other structure to source capital at far better pricing to enable us to go back out and redeploy it.

We're ready for all.

Up and I'll pass that might play out and do recall I mean to the earlier question 1 of the gating factors for us doing things.

A gaming since day, 1 is also the spread between where our assets are priced and where everything else is priced and to the extent your scenario plays out and maybe our whole portfolio re rates.

All vertically from here, which arguably it should were and just as good or better position to start looking more aggressively at some of the other stuff. So our job is to have a playbook that's ready for each eventuality and that's what we spend our time doing.

Got it and if that's helpful and just a quick follow up on that and as you mentioned <unk> and <unk>.

Considering.

And as dramatically and this business is quite real is that a potential avenues can help potential institutional capital overcome some of the gating issues from a regulatory standpoint.

Totally I mean at the end of the day when someone decides how to deploy capital, especially if there isn't about finding a platform and a seasoned management team is key.

And then you can look back, especially and nuanced real estate asset classes over time, that's been a I mean, that's kind of box 1 you need to check to make sense. So I think that totally makes sense and I think it's 1 way to monetize our skill set here if and when the world plays out the way you're suggesting it might.

Got it thank you.

Our next question comes from the line of Jay Kornreich with RBC. Please proceed with your question.

Hey, Thanks, good morning, it's.

It's great that you're planning on hitting all your master lease rent escalators. This year and I'm curious if you can just break out if that was achieved largely due to margin expansion and the regional gaming operators and solid or if it's more from strong revenue.

And I think 2019 level.

Yeah.

So the answer and the 1 that we told you we're going to hit was the only and the Penn lease just to be clear and $5.6 million is just the Penn master lease and but.

The reason that they are hitting and is there for apartments I mean, they have had.

And record earnings and they've had record EBITDA and they've had record revenues all of them all of the above but the adjusted revenue to rent ratio is calculated as disclosed in our earnings release and the table and they're just really performing extremely well, which is why we are able to achieve day rent escalators.

Okay, and then do you foresee any opportunities with your current tenants for either.

Either fund expansions or redevelopment opportunities.

Yeah.

Answer is yes, that's part of an ongoing discussion with a number of our tenants are.

We're hopeful that over the next 12 months that we might be able to announce.

<unk>.

<unk>.

Some significant expansion of hotel and things of that sort to be illustrative nothing certain right now, but there are things that we're talking about and of course, we would welcome that opportunity and put some capital to work. We are as Matt pointed out earlier are well positioned to do that.

Got it okay. Thanks, so much that's it thank.

Thank you.

Our next question comes from the line of Robin Farley with UBS. Please proceed with your question.

Great and it's worth going back to an earlier topic and and I know that you know Vegas assets are not your strategy.

I'm just curious.

For Ya.

Take Peter and and some of the transactions, where you know that.

And the public gaming Reits.

And having maybe more leverage constrained since and others out there it's just that.

And some way put the public gaming we've had a disadvantage in terms of bidding for assets or is the answer well it doesn't matter because.

And as other buyers arent going to go after the type of assets that you're going after which are not the big Vegas assets.

And look I know that you you can assume either I mean, we do look at Vegas assets. That's part of it every day discussion here.

So it's not like they have leprosy or that were.

Frightened there.

We may or may not be able to get to the kind of number that is competitive.

And we don't presume that others are not looking at the same kind of assets that we do so look it's a competitive world. There is a number of players in it and many more are seeing how successful this industry as you would like.

And to be and it so its dynamic right now we like what we see in front of us.

We've got a good year expected Goodyear and next year, and we think theres and adequate runway for us, but I wouldn't close any doors Robyn.

We look at everything we really really do and as Matt pointed out we were becoming.

Ever more competitive across a broader range of industries.

But I guess and in terms of.

Not taking on the kind of leverage that maybe.

And maybe some other buyers.

How do you ultimately compete with that.

Well I think Rob and if our strategy was only.

Buy assets on the strip and we've now and the last 2 years seen the development of the C. MBS market to support strip that and drive strip asset valuations it might be a little more challenging but to date there hasn't been much formation of sea MBS capital and regional markets. So that is part of the explanation behind.

And the moat that exist over time, it certainly could evolve, but right now we get the benefit of that I mean, we get better returns on equity because theres not as much that jumping up and and taking lower returns as part of the capital stack, but Youre also right as a public company I mean, we do have legitimate a kind.

And kind of a sweet spot for our leverage that might be different than a price.

Private operator.

Private owner like a private equity fund that levers up to 70% 75%.

But there's a place for both I mean, that's been the case, if you look at other asset classes and real estate and Theres been a develop see MBS market, I mean and apartments develop GSE market, where the government actually loans the apartment and extraordinarily.

Low rates that hasnt precluded the public companies from building enormous portfolios. So there's room for all of the coexist Yeah. Let me, let me say that if we did not value our investment grade ratings.

And we were a private company.

And stuff and is out of these assets because.

As we've said time and time again, our revenue streams and both group and I can sleep at night forever looking at the portfolio that we have knowing that we're going to get paid this year next year and 10 years from now with absolute confidence.

Of course, we take more leverage but look we're a public company with a different set of goals.

And different financial structure that we want to protect and maintain so we're much more cautious and we play within the sandbox. If you will that we have.

Okay, Alright, great. Thanks for your thoughts.

Okay.

Our next question comes from the line of Handel St Juste.

Just with Mizuho. Please proceed with your question.

Hey, there good morning, good morning, so a going back to the comments on the balance sheet for a second and I guess I was intrigued by and the comments on.

The bally's games is back that no longer needed and you're back to fighting weight.

We're offensive and so it sounds like you're clearly gearing up and be more offensive here near term and I guess I'm more curious if you're thinking about investments outside of gaming as 1 of your peers had.

Done here recently, and if theres been any changing and thinking on that or anything on the table and how you think about required returns there versus your more core.

Regional gaming assets.

Yes, good morning, and I'll. So yes, we continue to.

And we mentioned a little bit earlier think about things outside of gaming.

I mean required returns are a function of a spread to our cost of capital given the risk of whatever the investment might be and.

I mean I.

We'll point out.

Just and our cost of equity, which is decent but and our cost of debt, which were sector, leading amongst our gaming peers. We are again and fighting weight I mean, we're ready both from a cost of capital perspective, and balance sheet perspective to do things.

And that said, yes things outside of gaming are part of that opportunity set.

And I'll just say our goal is not to let great be the enemy of good we've got great opportunities and gaming, but could there be something good outside perhaps and we've spent many years doing R&D to find what that thing or are those things might be.

And that's all I'll say there is stay tuned.

Okay.

Uh huh.

We will.

I guess back to the CFO search for a second and then not to beat a dead horse, but I think many of US 1 of the impression that the search is ongoing and it wasn't maybe the highest priority, but and we'll just take a bit of time.

And if it is that youre comfortable with players internally.

Who can fill the role do the responsibilities.

And why not designate 1 of those persons and CFO, it's a bit unique for a company of your size and not having a CFO.

My real question is more on guidance I guess, we're pretty far into the new year year here and I'm curious why not the comfort level to provide some annual guidance here, but just not going to happen.

A lot more visibility obviously then back in April and just curious on from <unk>.

Fair enough. Thanks.

I think we've said before that will head the guidance and all likelihood as we get into next year, we decided with all the variables. This year things known maybe a couple of things not known.

Net negative I don't want to suggest for a moment, but that we just.

There is not have a perfect.

And or perfect site on where this year is going with it. So we're just going to play it out.

And get through this year look ahead to next year, where I think we'd probably.

We'll get back to guidance on the CFO thing.

And interesting.

<unk> problem or if you want and once the consider it that way we've got a very talented financial team here and I'm looking at.

And just part of it sitting across from me at this table so.

I am <unk>.

<unk> is the CEO of this company I am blissfully happy with the workings of.

This team and indeed, it is a team we could designate and office of CFO, we've talked about that.

And my suspicion is look there will be a day when we will do that but we're going to play this out longer to no disadvantage to shareholders or to this company I can't underscore that or not we have a great team.

Finance people here and this company and as I say, president and elsewhere and the buildings. So.

For the moment at least we're going to continue down the road we're on.

Fair enough. Thank you.

Thank you.

Our next question comes.

From the line of David Katz with Jefferies. Please proceed with your question.

Hi, good morning, everyone. Thanks for taking my questions.

I wanted to just delve in a little bit to Tropicana Las Vegas.

Which you know obviously, you've transacted already but there remains I.

I believe some excess land if I'm correct that you own.

Which you know for as far back as I can recall had some development potential.

As you know is there anything potentially a foot or prospectively.

There that and where you could maybe activity.

Activate that asset just a little bit.

David are you, referring to excess land at the trop site or more broad portfolio.

I was specifically referring to the trop site, but I'm happy to have you elaborate elsewhere as well.

If you feel like bill or David.

And there is potential for more at that site I don't think we or even valleys those what more is right now.

Frankly, we're working cooperatively with them to figure out how we can maximize whatever occurs there.

And I'm just here to say that.

David Bar.

Considering.

The maximization of every inch of that property. So.

And as much as I can say for the moment, but I wouldn't assume that the deal that we've announced is all that you may see coming out of it.

Tom.

We are and will tell I mean look we're very anxious to build a relationship with valleys they've been terrific to work with to date.

But I don't think they've refined what they want to do but we're helping and that process to figure out how we can get the best use from that site.

And Matt use and turn stay tuned.

I would stay.

Tuned on that 1 as well.

Got it and then.

And then if I can just tap into 1 crore.

Chronological experienced Peter and to just the fact that your team is closer to regional properties.

And we are I'd love, an opinion or <unk>.

Perspective around just the profitability levels that we have been seeing for the past 2 quarters, obviously people and our position and are actively debating the sustainability of some of those profitability levels and I would just think that your experience and information flow.

Yeah.

How sustainable are these.

Is it realistic.

Sure.

At the current levels I'm going to say not at the current levels.

However, 2 however, a good bit of that will definitely remain and I think every company, who said Holy smokes, there's a different way we can operate this business to <unk>.

I think pan and said they expect to keep about a half a day.

They publicly said that so and by the way had they not I would've taken a guess at about that level and I think with many of our investors I've offered that very thought that I expect about half of what it has been gain to be retained for the long haul and this.

And the industry has changed and.

And it's going to Ain't going to go back any too quickly.

Yeah.

Okay neighborhood half is.

Yes.

And the takeaway I'll stick my head, yes, I think so which David I'll add is a beautiful outcome for us if we just look at our 4 wall coverage from pre Covid.

And in that piece and all of a sudden we have an even more robust portfolio more of potential for escalator achievement I mean that really gives our business model some octane.

Sure and if we were to drop it and the context of digital proliferation, which is only supportive in most cases.

So all good.

More relevance more durability and more cash.

Okay. Thank you very much.

Thank you.

Our next question comes from a lot of Daniel Adam with Loop capital markets. Please proceed with your question.

Hi, good morning, everyone. Thanks for taking the.

Peter what what do you see driving the record topline results and gaming that you've alluded to earlier or is it is it pent up demand is as retail sports betting contributing understanding of course that it's on G. L. P highest court core business by any means.

Desperation word that comes to mind.

Question, <unk> and yet you've got my my priority on the mass low illustration the hierarchy of needs I can tell you is look I've been around the gaming business or the gambling business with certainly with Thoroughbred racing and Penn Nashville, where I was president of that company and 1972.

2 when we opened and been through a lot of recessions.

Fuel crises, all manner of things and I can tell you absolutely that and every 1 of those situations, except the OE downturn, except that we saw an increase in business business always went up when things when the world.

And went down and I I'm not sure that's logical and sensible, but that is a lifetime of experience over 50 years I can tell you that's the case.

And look we've all.

<unk> seen it people and desperate I mean, they've been cooped up for a long period of time.

They want to get out of masks, they want to get back to having fun living their lives and doing those things you see it.

Once you see it everywhere today.

People are just.

Anxious to get out and do stuff and I think we're the lucky beneficiary of just that and I will say also 1 other thing company as we've gotten pretty good as I said earlier of knowing their customers and clearly marketing has been.

And airtel, but targeted to those people who can produce the most revenue they've been pretty skillful and doing that.

That will remain remember the 2 biggest expenses and any gaming business and our marketing and people.

So if you don't blow your brains out doing stupid marketing, which.

I think you used to be the case, some decades ago and the gaming business and the early days when it was expanding around the U S and.

People finally, wised up and decided to keep a little of that to the bottom line. So we're looking at a very different.

Time, but I think the simple answer is.

People don't give up.

Through entertainments people are desperate to get out and I think that you'll find that pattern will continue.

Got it thanks for that and 1 more for you Peter.

Earlier this year, you made a very timely sell and Penn stock and I guess at this point is chairman emeritus of the company.

What is your involvement and if at all and pen.

Very little no longer get daily reports as I used to.

So I have no special insight into the company at all and didn't at that time don't know and I will tell you. This.

The price at which I sold.

It was purely lucky as if I can use that expression I sold for 1 reason only and that is the moron and the white house.

I'll say it flatly, so if youre.

<unk> leans go elsewhere.

With the kind of announcements coming out of the Biden whitehouse threats to capital gains and so forth.

And fourth.

And frankly, representing my family and our responsibility.

In the family Trust to do the right thing I thought boy, we're going to get some of that out of there and it just happened to be at that price. It could have been at the current price and I would have done the same thing and so im being very candid about that.

Very candid.

And about that I still have probably well over 100, and some million dollars of family money investing we didn't bail out entirely but that was the driver and all by the way on a personal net level. If the capital gains tax goes up to the ordinary income raised and my lifetime I'll never sell another share stocks and now you're getting into my politics, but that I am so angry.

And on investment and which I've been involved with for 50 years.

And would would be forced to be taxed at that level.

So now you've got and my personal view, but believe me, that's what drove it and nothing else.

I appreciate the candor thanks.

Okay.

Our next question comes from the line of Jamba Soccer with Ladenburg Thalmann. Please proceed with your question.

Good morning.

Hi, good morning, so quick.

Got it.

So 1 of your peers I think even some of your more broader peers and the net lease space as well.

<unk> been using kind of construction financing.

And it's maybe kind of a toehold into kind of.

Potentially the toehold into kind of a new transaction deal flow.

Is that something that you would potentially look to do or are there just too many kind of risks involved with that kind of a structure.

Yeah, John it's something we certainly.

Certainly have thought about especially I mean, when you think about within the gaming space opportunities, where we can have a really good insight and underlying underwriting and pro forma and we see a mispriced risk there and we certainly could could put capital there and the structure ideally that transforms into a sale leaseback, but you you said the right thing I mean.

I mean, the goal is to get the Townsend to what's ultimately going to be a recurring attractively price durable income stream and.

And.

And the other factors, we don't lend our balance sheet out for free I mean do you look at the deal we did with valleys day equity backstop, we got $150 million of real estate at and off market 8 cap rate.

We're gonna have for many years.

It's very different and doing a fully pre payable mezz loan at a construction project I mean, our goal is to maybe do something strategic but ultimately to get recurring cash flow. So we are open to everything and anything that we can and that makes our platform more valuable for shareholders. We're also.

Cautious and prudent and that application.

Are you seeing opportunities for those types of transactions today, I mean, there's a couple of state markets, where theres, some greenfield or brownfield development and use that.

A potential vertical for investment.

Let me, let me answer it this way and look we are talking.

A couple of tenants about a significant expansion at their properties loved to put capital to work in that way because it would fall into the master lease illustrative Lee.

But we have said look we'd love to see some greenfield opportunity and some of the states and they're talking about.

Going to gaming.

And we need to be there with a partner.

Refresh and we can get there and I can tell you that where those where there is that activity.

We are engaged and non saw I'll say about it but.

Look the opportunity so long as you don't.

With respect to develop and a limited license states.

And is about is bulletproof as you can get you kind of can't go wrong. If you just don't always spend that's the only discipline.

I point to the properties and the last that I built well, we would've been plain ridge and.

Oh, the Massachusetts and of course, the Ohio properties that I was totally involved with all the design of the building and development those things were built.

Budgets, they are spectacular and every way and the performance has been.

Astoundingly good.

So would we pass up and opportunity like that.

D L. P. I I don't think so so.

It's what we do and yes, we would be there yeah, I guess just to just to add to Peter's comment.

And most recently, we've had discussions with folks and and states, such as Nebraska, Virginia and Illinois.

Which are already permitted low.

And Jen, but we're on the ground and having discussions with people and jurisdictions, which are not yet legal as well. So yeah. We are we are scampering around looking for opportunities to deploy capital and as Matt said foothold.

And to ultimately own the land and building of those properties.

I like that standard.

Okay.

[laughter].

And then maybe changing gears, just a little bit on the balance sheet, where do you see your cost of debt capital today, and I'm, just thinking, particularly in the context of some of the.

Pieces of debt on the balance sheet and have kind of shorter.

Okay, and maturity or some of the higher coupon pieces and either potential there for prepayment and I know, there's kind of an equation and Matt.

You all will go through but.

And just the opportunity there and maybe.

I have a sense youre looking at our 2020 threes and the 5 plus coupon on those so you can look out and.

See our current 10 year paper is trading just around 3% and the public market.

And believe it or not I mean, we've talked historically about.

Conceptually looking even at the 30 year market and breaking the sound barrier for our asset class there and those rates believe it or not or are very close to if not at 4%.

So.

The remaining we're not in a rush to pre finance or prepay. The 2023 is the NPV is still negative to do so but it's certainly something we've got and are back pocket between now and then and we will do something if and when it makes sense.

Okay.

That's it from me. Thank you very much for answering my questions and.

And John I'll, just add with.

All are continuing to increase the term of our debt on our balance sheet, given the long life of our assets and the long life of our existing leases.

Our next question comes from a lot of John Decree, which C. B R. E. Please proceed with your question.

Good morning, everyone. Thank you for taking my questions.

The Gulf.

To get your views on the current M&A landscape, our outlook, a little bit Peter and and revisit your response to an earlier question about the current levels of record profitability and how much of that is sustainable.

Obviously a lot.

Lot of different views on the investment and analyst community I am sure Youre.

Counterparts, and peers as well has that influenced buyers and sellers do you think that's made it more difficult to get some regional gaming stuff over the finish line just wanted to get your thoughts on on how the M&A market might be considering.

That debate.

Get out and the regional World.

It is not.

I'd like to think if there's not an opportunity tree was stuff falling to.

And to the ground and get out there with a blanket and catch it all is it is so so varied and and and.

Profound.

The reality is as Ive used before.

I mean, we're not catching and stuff, we actually have to mine for opportunity because it's just it's just not there's not a lot of stuff for sale at any given moment.

And there's you know.

There were a number of properties that we've looked at significant properties that we like to own.

And we're engaged with the seller.

But the seller says.

If you if I buy if you buy this from me I've got no used from the proceeds where am I going to put up I mean, it sounds like and it's a nice problem. It sounds silly, but in other words, a seller is not ready to sell to the seller is ready to sell there's got to be some reason.

Much of the stuff that we've purchased has come.

And because of the some need strategic or otherwise for the seller to offload properties.

And up or just get out of the business, but until that happens.

We can't make it happen.

1 of our former employees used to say, it's like somebody coming up to your house and.

It's driving down the streets.

Property and say Wow, that's kind of cool jam on the brakes runs up to your front door of banks and they do it and I Love Your house I want to have it and then you say well it's not for sale.

But but you know I really like it and I really wanted to well it's not for sale.

Debate could go back and forth for awhile, but until the seller decides.

It's easier and the price gets to a point, where it's yours.

It's not going to happen so our job is to hang around the hoop.

So actively.

They are bang and the boards to be there if and when that occurs at a vague answer, but that's pretty well characterizes what it's out there.

They're not.

Size of the properties for sale Tomorrow morning at 9 o'clock.

That's helpful color Peter and.

Maybe to ask.

A follow up on part of your answer there.

Given maybe some of the reluctance C. As we see cash flows from from casinos increase and cap rates compress.

Are we heading to a point if you had to pull out your crystal ball, where valuation or just absolute dollar price given where cap rates are going and where EBIT dollar is going and these properties or do you think we're getting close to where.

There's going to be folks that are willing to let stuff go with it.

We're seeing record levels of EBITDA and rental cap rates as well.

The answers to my view is yes, but im looking around the table other comments, John I think I, just think a zillow and that make me move price I think and Peter's analogy that guy may or more than they have an idea and are well if I ever got ex I'd consider.

<unk> and Youre right robust results right now give capital providers like us a little more license to get close to that make me move number if it exists but again, it's really driven by what are they going to do with the money.

And do have the capacity to help with that a little bit if were we to give units or something to someone and try and structure.

Something but at the end of the day, if they don't need to or want to do something with that capital, we still cant pride out of their hands and.

And remember everything we do and those scenarios I mean.

If we don't know where EBITDA is going to be and we have a decent sense from her with our experience where it could be we need a margin of safety built in and.

And remember the last few deals you saw us do.

Uncertainty, we can solve for price with still decent 4 wall coverage ratio and that's been important to us and will continue to be.

Very helpful guys I appreciate the color and all the thoughts.

Thank you.

Our next question comes from the line of Jordan Bender with Macquarie. Please proceed.

And your question.

Hey, everyone and good morning.

It hasn't been touched on and a while or at least since before COVID-19.

<unk> talked about doing $500 million and transactions on an annualized basis.

I know you don't have a crystal ball and could future years here, but can we kind of expect it's 5.

Given the million dollars is a benchmark moving forward.

I haven't given up on that yet and I don't think we will.

And now it's never going to be a straight line.

It just isn't.

But that's certainly our internal goal that we believe should be achievable.

<unk>.

And it's far exceeded that to date, but you know.

What's the how do they do ads on TV today.

Past.

Performance is not a prediction of what.

Of the future something to that effect whenever that exculpatory phrases.

And that is pretty popular with financial projections.

Awesome, Thanks, and then.

Understanding the covenant and sharing piece today.

And payout ratio is still below historical levels in 2021, and you've kind of talked about possibly re implementing guidance as we enter 2.

2 should we expect that payout ratio to go back into your and 70% to 80% ish range.

Uh huh.

The answer is yes, because it does he want to make a comment.

And when we our payout ratio is very close to what it had been historically and we.

24, 80% of and Thats how its.

That's true for 2021 was coming into the year, what what are and that there'll be Howard our Trs properties perform what would happen with them and.

And the escalators and whatnot so.

Yes, you we've always had the same go and they go will.

And from 2022, yes, Okay, and I'll say it just as an investor and this company myself that day.

Dividend growth is critically important to me within responsible level. So you can bet that we're going to continue to move it to the best of our ability and keep it going forward.

Awesome. Thanks, guys.

Our next question is a follow up question from the line of Snead Rose with Citi. Please proceed with your question.

Oh, great. Thank you, it's Michael Bilerman here with Smedes.

Matt I wanted to come back to sort of capital raising and Peter you can feel free to answer this as well.

And that you talked about raising $17 million of equity on the ATM.

Quarter, I think execution about 46.67.

And you obviously have a lot more you can raise on the ATM, but I wanted to see like how eager would you be to sort of reload the balance sheet today.

To position you to do something down the road, where you can know your cost of capital today.

And not knowing where you may be able to transact and buy something and the future. It would appear as though the institutional interest in your asset class is so high and you've made a ton of comments on this call describing that so wouldn't it be easier today to go out and do a joint venture raise a significant amount of proceeds and be at the ready to capitalize.

And the price on the numerous opportunities that you've been talking about that could come to fruition.

Yes, Michael and I mean.

We have at our disposal of old tool chest of things 1 is the ATM, which we've used.

For net price.

Little closer to 47, but at the same time we.

But a lot and remain open to joint ventures, and other things I mean remember Theres a few things 1 we don't have a predictable cadence of acquisitions. So we don't want to overshoot and the other direction and and kind of Delever to a point, where we're not getting the benefits of leverage at their maximum kind of ability to kick in and there is also large transactions.

And is out there. So if we did something of significant size, that's where we're making a decision between the benefits of using equity and debt versus the benefits of the JV partner. So I mean, I think it's gonna be nuanced, it's going to be case by case would you saw US do this quarter was due that call. It last piece of positioning ourselves to be and fighting weighted.

Wait to take advantage of especially small and mid mid priced opportunities out there and not have an equity overhang or or any kind of headwinds to our ability to raise capital but from here going forward. I think everything you said is going to be part of our business plan on an opportunistic basis.

Well, I guess why and make it opportunistic why not sort of go down the road and.

And try to do something where you can get and attractive cost of capital and tap into that.

And that amount of.

Interest that's out there and you know how you run a little bit lower leverage for a period of time, but you've been able to take advantage of a situation.

But why wouldn't you be aggressively trying to do it.

We we do aggressively have conversations to position herself or things like that but it's the sources and uses equation like we're not if youre asking should we delever to 4 and a half or 4 times with a large JV and then wait for the next thing we don't know when the next thing will be or what scale. The next thing will be or what pricing it might have so so.

And where we're positioned and thoughtful about being ready for that scenario, but I don't think we we would force. It if we didn't have a good use and the proceeds I mean that day.

And I think the ATM demonstrates that we're headed down that road, but you know we have a lot of borrowing capacity.

Undrawn lines, and so forth and yes, we.

So yeah and about equity as he raised it opportunistically, but I think we were pleased with where we are right now.

Right.

We'd like to pair the concept you have with the use of funds with the transaction with something else and youre not willing to say, yes, I mean, Peter the only and if we were just Michael if we were private and we didn't have that.

Public markets, which were totally respectful of and appreciative of our cash flows would lend themselves to much higher leverage and you have seen and the last couple of years is get it down to a range. That's very very I mean, arguably maybe low for what our assets could support but we think prudent for our business model to force it well beyond that and the hope that something may arise.

And I talked I mean are you, giving up more than you're gaining and it's a balancing act, it's an art, but we think where we're close to the efficient frontier.

And why.

The other by a lot on the hope of kind of redeploying.

Well I think the I mean look I think there's going to be opportunities right and you think about the institutionalization of the asset class to think that it's going to just stop.

Here is probably on warranty and especially given the confidence that you have and the long term performance of the asset class Visa's Joint Ventures don't you can't just snap your fingers and execute them right. These are long term sort of.

And relationships that you have to document and let alone all the financing so if you.

Find that opportunity and it's not like you can just snap your fingers and create a joint venture with an institutional partner or partners or funds get all the leverage and.

And deleverage.

And take advantage of that so I was just trying to push to see whether and it doesn't seem as though based on your comments and appetite to sort of fully reloaded.

Load and take advantage today of the extraordinarily debt markets and equity markets too.

Monetize some part of your portfolio.

Yeah, well it doesn't sound like that and you have any interest to do that actively today, we have interest to actively do it for the right reasons I mean, and your scenario. If you were to do that and cap rates continue to.

Compress we could lock in our cost of capital and now have a negative spread to where we redeployed if things compressed and another 100 basis points and the next 12 months I mean again, the REIT business, especially triple net and health care. As you know is and match funding business and I don't want to call and your scenario if I'm if.

And I'm, calling the cost of my capital now and with an uncertain and use of proceeds again and I'd, rather put them together, but we're totally and appreciative of the effort and the timeline and that's why we put effort into that channel to make sure if and when it's appropriate we're well positioned.

And then just finally interest.

Yeah, Peter mentioned, some uncertainties to not wanting to give guidance, even though it's a lot more clearer today in terms of the performance of your assets and Peter You mentioned there were a couple of things and not know and are those with your existing assets that are not known or is that external opportunities probably more so on the buy and the sell given the conversation we just had.

It kind of as you want to.

Yeah.

And that timing still on the sale of our taxable REIT subsidiaries and we just wanted to clean all of that out and then begin forecasting once we have all of the unknown and out of our.

You know that we things and we can better control and halfway there.

With the sale of freight very though.

So it's all the unknowns are all due to the Trs theres nothing else transaction or with your existing assets. This fall to the Trs and why couldn't you just sort of bracket, the Trs income and things and give us the rest.

Other things as well.

And we just not going to go down that road.

We can't and so I mean, yeah. There are other things, we're looking at doing could happen might happen that.

Nothing negative where I'm looking at the positive side, it's mostly good.

Trs performance by the way, it's been terrific and and it.

Go ahead, Dennis do you want to.

I mean honestly the flip side of that is it.

Greetings and now and it's pretty easy for everybody to put your ex rate. So it doesn't you don't necessarily need company guidance for that but and then I think we and.

And providing guidance and determine the right time for the company to begin doing so yeah.

That is all the time, we have for questions I'd like to hand, it back to management.

And if that was and remarks.

Well, Yeah, let me, thank all who have dialed in this morning, and obviously, we appreciate that and it just say this is a lot more fun when the news is good which it is you find us and are very optimistic mood about where we're going through the balance of this year and looking into next year, we feel very good so.

And we've.

We've left that impression, which I hope we have then we've had a successful call and we thank you for joining US. Thanks, again and see you next quarter.

Ladies and gentlemen, and this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.

Yeah.

Yeah.