Q3 2023 VICI Properties Inc Earnings Call

October 26, 2023

As parents are in listen only mode. Please note that this conference call is being recorded.

But 26 2023.

I'll now turn the call over to Samantha Gallagher Gen.

General counsel with Vg properties.

Thank you operator, and good morning, everyone should have access to the company's third quarter 2023 earnings release and supplemental information.

The release and supplemental information can be found in the investors section of the BG properties website at Www Dot BG properties Dot com.

All of our comments today will be forward looking statements within the meaning of the federal Securities laws.

Looking statements, which are usually identified by use of words, such as will believe expect should guidance intend outlook projects or other similar phrases are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect therefore, you should exercise caution in interpreting <unk>.

On them I refer you to the company's SEC filings for more detailed discussion of the risks that could impact future operating results and financial condition.

During the call we will discuss certain non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available on our website.

And our third quarter 2023 earnings release, our supplemental information and our filings with the SEC.

For additional information with respect to non-GAAP measures of certain tenants and our Counterparties discussed on this call. Please refer to the respective companies public filings with the SEC.

Hosting the call today are Ed Bottone, Chief Executive Officer, John Payne, President and Chief Operating Officer, David <unk>, Chief Financial Officer, Gabe Wasserman, Chief Accounting Officer, and Moira Mccluskey Senior Vice President of capital markets, Ed and team will provide some opening remarks, and then we will open the call to questions with that.

I'll turn the call over to Ed.

Thank you Samantha and good morning, everyone.

The third quarter of 2023 is a quarter most Reits are happy to be done with <unk>.

<unk> Q3, 2023 was down 8% swing negative for the year after not a great year last year in October has only continued negative trend.

But while the REIT stock marketplace didn't have a great quarter in Q3 2023. The key question to ask is what a given rate did in Q3 and now in October to improve its business for the future.

And BG our answer to this question has a number of elements to it.

We played offense selectively we played defense, we capitalized uncertain current conditions.

We prepared for potential future conditions.

We increased our dividend effective with Q3, 2023, and an annualized rate that well exceeds forward inflation expectations and continue to rate of dividend growth. Since 2019 that is three times greater than the largest net lease REIT over the same period and if there has ever been a period and we.

Each one should value a solidly covered and solidly growing dividend. They currently exceeds the 10 year rate. This is it.

Finally in a year in which REIT earnings growth has generally been difficult to come by <unk> <unk> per share earnings in Q3 grew 10, 7% year over year.

<unk> announced within and subsequent to quarter end about $1 $1 billion of new capital commitments.

While most of you have seen the strategic and economic merits of these investments. We know there are some of you who feel that we should have left that capital in a stockpile.

Some of you feel understandably that volatility is too high and visibility is too low we agree volatility is high and visibility is low and with the market movements of especially the last few weeks, we are sober and cautious about what the market conditions for capital allocation could be from her.

Here for how long no one knows.

But I can tell you that we continue to have high conviction about the commitments. We've recently made with century with Canyon ranch and now with Valero.

These commitments represented immediately accretive investments in real estate that should have positive impacts on 2024 earnings.

These commitments also represented investments in relationships that can and will be the answer in future years to okay. Now that things are back to normal how are you going to grow Vg.

Again, none of us know when the all clear signal sound, but it will at some point and reap the continued to invest in relationships will be best positioned to resume growing with market conditions and values have stabilized.

That's what we did in the recovery out of Covid, our schedule situational readiness put us in the position to acquire the Venetian and Mgb investments that are a key driver of our 2023 earnings growth and we made these investments through many other would be better.

It hadn't been fully readying themselves for recovery.

We have been able to undertake our recent investments because of the astute and agile work mortar mccloskey in the VC capital markets team.

Going back to our nearly $1 billion overnight equity raise in early January 2023, Bgs Opportunistically raised a total of approximately $1 $3 billion of forward equity.

Three giving BG or cost of funds for our recent investments that drive immediate accretion of which we've spoken.

We also play defense this past quarter during Q3 and subsequent to quarter end, we played defense by using close to $1 billion of equity in cash and only about $55 million of debt to fund, our new capital commitments, demonstrating our commitment to our long range leverage targets.

David <unk> and the <unk> Finance team also Blake defense by adding a further $200 million of swap protection since Q2 in anticipation of our 2020 for refinancing a $1.05 billion of the legacy <unk> five and five eights notes, giving us a total of $450 million of <unk>.

While protection.

And while we did all of this our tenants continue to demonstrate the vitality of their businesses as Jon will speak a momentarily I'm very proud of the work the entire <unk> team did this quarter against the volatile and difficult backdrop. The Vg team working within one of the lightest G&A loads of any S&P 500 re continued to create a culture of.

Excellence in resilience that I'm confident will serve <unk> stakeholders well for years to come no matter, what those years bring with that I'll turn the call over to John Payne for an operating and transaction marketplace update and John will then pass the mic to David <unk>, who will give our financial and guidance update.

<unk>.

Thanks, Ed while 2023 has been a volatile year in the real estate sector as Ed just highlighted.

<unk> put ourselves in the position on both the capital and relationship basis to not only continue our business, but to expand it into new sectors, new relationships and new geographies in the third quarter, we continued to grow with our partners et cetera casinos by closing our Rocky gap Casino resort.

Lord acquisition in Maryland.

And our sale leaseback of four gaming assets in Alberta, Canada growing our international footprint.

Sequencers to quarter end, we were very excited to announce our entry into the family Entertainment sector through our acquisition of 38 Bowling Entertainment centers with our new partners at Valero led by Tom Shannon and Brent Parker. The Valero team is a perfect example of a talented growth minded operator.

That has a deep understanding of their consumer recreational trends and the value that a beachy relationship and our capital can bring to their growth strategies.

Vt's tenants are not only continuing to show strong operating results, but are also continuing to invest in capital improvements all over the United States.

Caesars is investing over $400 million into just one asset Harrahs New Orleans <unk>.

<unk>, just announced a $1 billion plan to further enhance our asset including almost $200 million in just convention center space MGM spend hundreds of millions of dollars in capex each year on assets throughout Las Vegas, and the regional markets and even our smallest operators or <unk>.

<unk> millions of dollars each year on growth projects, thereby enhancing the quality of our assets and the productivity of their operating businesses.

These reinvestment commitments add to our conviction that we are continuing to construct a high quality portfolio of assets with the best experiential operators for our investors. This high quality classification comes from not only the quality of the real estate itself, but also.

The outsized productivity of these assets.

Activities that is hard to come by than almost any other real estate sector.

No place highlights the health and productivity of our tenants better than Las Vegas After meeting with Caesars CEO, Tom Reeg at G. III, which is the largest gaming conference in the United States. One analysts noted that Caesars is on pace for its best October ever and this is against the backdrop.

Drop of current macroeconomic uncertainty.

Even during these tough times Las Vegas continues to open new World class attractions, while diversifying its revenue streams and customer base. The opening of the must see entertainment venue. The sphere world famous events like Formula One in 2024 Super Bowl and a diverse and robust convention and conference schedule.

<unk> helps showcase that Theres no city, performing like Las Vegas, and it's clearly become the entertainment epicenter of the world.

Outside of Las Vegas Regional performance has continued to be resilient, while many operators in our discussions have cited increased expenses related to items, such as insurance or unrated play normalizing against tough comps regional operations continue to run at very strong profit levels supported by loyal consumers.

With their respective database straw.

Strategically we continue to be focused on all fronts.

Gaming non gaming domestic and international to grow our pipeline for <unk> future and gaming, Dan <unk> and I are in constant dialogue with new potential partners domestically and internationally and we are just as excited by the ways. We can potentially help our current tenants grow through additional <unk>.

In acquisitions or by utilizing our partner property growth fund in which we seek to fund our tenants high ROI opportunities at our existing assets.

Meanwhile, Kaelin, Florida has been cultivating and valuable connections and relationships across the family Entertainment sport wellness leisure and recreation sectors. As we continue pursuing our mission to be the real estate capital partner of choice to best in class growth minded operators of unique social infrastructure.

Properties.

During this most challenging time of market volatility for everyone. It is more important than ever for our team to continue to grow and deepen our networks and to grow our breadth of opportunities to best position for the years to come. This work is intended to position us to continue to deliver the growth our shareholders have come to expect from the <unk>.

Now I will turn the call over to David who will discuss our financial results David.

Thanks, John and it's great to speak with everyone. Today, the BTT takes pride in what we've accomplished in 2023 <unk> the year is not over but the results we posted last night.

Tweaks bolero announcements are exemplary of those accomplishments.

That said, we are improving the business, which should benefit VT and use shareholders at the 2024 and beyond.

Lighting the transaction, we closed last week with Valero and we've spoken to many of you about the deal was immediately accretive to our <unk> given we had prepared by raising forward equity for the transaction. Many months earlier generated generating an attractive spread to that cost of capital from an economic standpoint, the deal is very attractive but.

But as John mentioned it also builds a partnership with a market leader that we and the Valero team believe will grow together in the future.

Subsequent to funding this transaction, we have approximately $3 billion in total liquidity comprised of approximately $430 million in cash $250 million of estimated net proceeds available under our forward sale agreements and $2 $3 billion of availability under the revolving credit facility.

In terms of net leverage net debt to annualized Q3, adjusted EBITDA is approximately five seven times we are in.

Weighted average interest rate of 435% accounting for our hedge portfolio and a weighted average of six one years to maturity.

And then as we prepare for our first bond refinancing in early 2024, we've entered into forward starting interest rate swap agreements with an aggregate notional amount of $450 million to date.

Touching on the income statement <unk> per share was <unk> 54 for the quarter, an increase of nearly 11% compared to 49 for the quarter ended September 32022.

Our results once again highlight our highly efficient triple net model given the increase in adjusted EBITDA as a proportion of the corresponding increase in revenue and our margins continue to run strong in the high 90% range eliminating noncash items.

Our G&A was $14 4 million for the quarter and as a percentage of total revenues was only one 6% one of the lowest ratios in the triple net sector.

During the quarter, we increased our quarterly cash dividend of <unk> 41 per share or $1 66 on an annualized basis, representing a six 4% year over year increase.

Turning to guidance, we are updating and increasing <unk> guidance for 2023 in both absolute dollars as well as on a per share basis for.

Both of the year ending December 31, 2023 is now expected to be between $2 $1 7 billion and $2 one.

$8 billion or between $2 14, and $2 15 per diluted common share.

Based on the midpoint of our updated guidance we.

We expect to deliver year over year <unk> per share growth of 11% from the highest expected growth rates across all Reits as a reminder, our guidance does not include the impact on operating results from any announced but unclosed transactions interest income from any loans that do not yet have final draw structures possible future acquisitions.

Physicians or dispositions or capital markets activity or other non recurring transaction items and as a reminder, we do recorded noncash seasonal allowance on a quarterly basis, which due to its inherent unpredictability leaves us unable to forecast net income and <unk> with accuracy Accordingly, our guidance as <unk>.

Focused as we believe <unk> represents the best way of measuring the productivity of our equity investments in evaluating our financial performance and ability to pay dividends.

With that Elliott please open the line for questions.

Yes.

Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad. If you would like to withdraw your question. Please press star followed by one.

When preparing to ask a question. Please ensure your devices on mute locally.

First question today comes from Anthony <unk> with Jpmorgan. Your line is open.

Alright, Thank you and good morning.

My first question is we all could see kind of how your capital costs have changed over the last few months, but maybe can you give us a sense as to.

How you see your operators capital costs, changing and whether or not sale leaseback has become more or less competitive over the last few months.

I would say generally Tony.

It has become more competitive I think as you look at obviously the stock trading values of the operators that also the yields tourist on much of their credit.

Our our capital has the potential to be very compelling in $2024 2025, 2026, but that of course assumes that that our cost of capital is in a place where we can generate.

<unk> spreads and accretion against that and.

Our confidence level in predicting we're projecting our cost of capital a year from now is not high.

If anyone does have high confidence in their projections. Please call us immediately and let us know what we're missing.

Okay. Thanks, and then just.

Follow up.

You had mentioned your operators, putting a lot of capital into the assets and I know you have the property growth fund to help with that.

So choose to participate but would you reinvest post this if they decided they wanted to pull some of their capital out or do you see yourselves just limiting it to being involved in the projects as they are happening.

John.

Yeah, Tony just to level set here Tony the capital that I went through in my opening remarks is being put in by the tenants not bye bye.

<unk> at this time.

And I think Thats, what you were asking the other the other point of the question is if there is opportunities for us to help them with larger projects. In this property growth fund would we do that we would we would be thoughtful in our analytics behind an investment and we've talked to our partners all the time about how they're thinking about.

Growing their businesses and is there an opportunity for us to deploy incremental capital for incremental rent.

And we do that on an ongoing basis.

Tony If I understand your question correctly, if I understand your question correctly, I think you're asking as well.

Could there be opportunities downstream for us to buy incremental Rand.

The operator's capital went into the creation of incremental real property and yes that that could be an opportunity down the road should they want to monetize the value of the real property. They created through their capital investments because it's all predicated of course on making sure. We're buying good REIT income that is tied.

To the creation of incremental real property.

Got it yes.

What I was asking if I understood you on that.

Those items you were listing.

Capital costs were being funded by the operators already and so yes. It was a question of if you would go in later, if they decided hey look we put this in and we may want some of that back would you help us with that.

Got it exactly right okay.

Okay.

Thanks.

Our next question comes from John Decree with CBRE. Your line is open.

Good morning, everyone and thanks for taking our questions.

John maybe we could talk a little bit about the <unk> transaction and the cap rate that you've that.

<unk> got to there as well.

A little tighter than what we've seen some of the last regional gaming cap rates show up that I'm wondering if you could kind of speak to how youre looking at <unk>.

Caps for family Entertainment versus gaming and maybe more regional gaming in Vegas, Realizing Vegas is a bit of a different animal and other experiential real estate that you are looking at as well.

Yeah, I'll start John and then turn it over to John Payne.

So when you look at our Valero transaction.

It represents a number of different strategic initiatives. It obviously does as you've already said.

<unk> represents our initiation into a new category into that new category, we significantly expand our Tam and we do so by investing behind.

<unk> highly superior business model that Tom Shannon, the Valero team have created and the growth opportunity. They have to consolidate a very fragmented sector is very compelling to us. It is also a sector that obviously other reits have invested in and could continue to invest and so it is it is a somewhat more competitive.

Ive marketplace with a consequent impact on cap rates than you might see in regional gaming.

So.

There are there are times when gaming investments and non gaming investments can be a bit Apple and orange ish. If you will given that they do represent different marketplaces with different characteristics I do think the point of emphasis needs to be the seven 3% cap rate was immediately accretive and a very.

Additive spread to the cost of capital David Moore and the team have raised over the course of 2023 and we're very excited about the growth opportunity going forward. John do you have anything to add.

Yes, John I, just mentioned you asked about other categories that we're looking at obviously, we've already placed investments in indoor water parks wellness with Canyon Ranch pilgrimage golf, we made an investment in family Entertainment Center as you said with Valero, but we continue to spend some time looking for opportunities develop long term.

Partnerships and wellness leisure recreation, some entertainment sectors, and some sports sectors as well.

It is important the final thing I'll just add is its not an either or it's not hey, youre looking at gaming and Thats. What were just focused on and Youre looking at wellness and Thats, what youre spoken on we've got the capacity now to.

Constantly look for these unique opportunities.

To place investments over time as Ed mentioned in his opening remarks.

That's helpful. Ed made a good point about the capital raised previously.

This transaction I appreciate the additional color.

For a follow up John if you've kind of alluded on sports and other categories of entertainment I guess in the context of the MSG sphere opening in Las Vegas has certainly.

Rave reviews, and kind of what it looks like the epitome of experiential entertainment to us. So curious if that changes your thinking about the category Stadium entertainment mixed use and maybe the bigger kind of business model as models more rely on ticket sales, perhaps than anything else I'm sure.

Your thoughts or thinking in that category has changed at all.

It does not change, but you hit on the sphere.

Amazing Entertainment venue that was added to Las Vegas and sits on our land.

It is truly.

There is no no entertainment venue like it not only in the United States, but probably the world. But this is a category that we have looked at we continue to study. We clearly have not made an investment and we're trying to better understand the long term economics and viability of certain projects, but boy the shares amazing Johnny if you get.

The opportunity you should go to an event there.

Yes, absolutely thanks, John Thanks, everyone.

Thank you John.

We now turn to the Haynesville St Juste with Mizuho. Your line is open.

Hey, there good morning, Thanks for taking my question.

I wanted to follow up on the questions on Valero, but more from a how youre thinking about value creation and capital allocation and risk holistically in the current environment in the past you've talked about I think a minimum of 100 150 basis point spread as investment hurdle.

That's still the case in today's environment or would you perhaps once a quarter.

And David can talk to you know that is absolutely still the case in this environment and as we've talked about obviously, we were fortunate to raise the capital for this for the bolero transaction, specifically earlier in the year when in fact, the bolero was in our pipeline back things too.

Weeks months in time to come together.

We're not.

Our head count now stands as we sit here today, we look at the screen and see where the tenure is we obviously see where our stock prices and still our focus on generating those types of 100 150 basis points spreads to our cost of capital as we think about it we think about the next dollar of cost of capital, where do we need to price something to make it accretive based on the market that we are.

In an underwriting at that time and the capital that we have available to us.

I'll just add handle.

Had a few questions are along the lines that <unk> could you could you have used that money to buy 910 cap assets in our answer to that would be it.

Today, and especially during the period in which you were just stating the Valero deal.

We don't see any really good real estate occupied by really good operators trading at 910 caps right now the data could come when they do but that day is not here right now.

And in the meantime, with this capital volatility that we see.

We will be very very careful and recognizing that not only in the cost of capital volatile on a day by day basis that has implications for any deals that have long gestation periods. So we will have to particularly take care.

And any kind of deal.

Making it requires longer gestation periods to account for the fact, we do not have capital cost certainty by any means it.

We will necessarily haven't until the day, we decided to do a deal which means we will take great care in deciding to do anything against these market conditions.

Okay got it understood.

And then one more something that's unique about Valero.

Mark the first.

Direct equity ownership and non gaming real estate on your part I guess I'm curious if that's something you can expect more ops going forward and I know that deal is still a relatively small piece of ABR about 1%, but you do have a ROFO for eight years. So curious.

You see there with you.

That partner and or within that space going forward. Thanks.

Yes, so youre right technically that these do represent our first direct investments immediate ownership of non gaming real estate.

We should point out of course is that through our ventures with Cabot and Canyon Ranch.

We have contracted for.

The call rights that give us a direct path to real estate ownership in the future. So.

It happened to just be a difference between the nature of our acquisition of real estate.

Essential acquisition of real estate with Cabot and Canyon ranch versus the immediate acquisition with Valero.

And certainly in this case.

Had an operator with a very compelling opportunity to grow a very compelling opportunity to put sale leaseback capital to work, which led to our immediate acquisition of the real estate itself.

Thank you.

Our next question comes from <unk> with Morgan Stanley. Your line is open.

Hey, just two quick ones from me just going back to sort of the.

Bolero transaction.

And I appreciate all the details that you've provided.

They're in the partnership and so forth, but as youre thinking about sort of the.

Family Entertainment sort of space.

Bowling is sort of an interesting one maybe a little bit more color on how the deal came about and what other sort of avenues of verticals and family Entertainment.

That you entertain.

Now I'll turn it over to John in a moment, Ron and good to hear from you.

I do think one of the key characteristics of bowling is that is it is a low barrier to entry experience, but it is an experience that you can get better at and that's in contrast to some other experiences that can take place within the family Entertainment sector.

Where people might do it once or twice and then go Okay Fund I've done that I don't need to do it again and bowling is at its very heart recreation.

If you want to get philosophical about it you can say it goes back to our most ancient human urges too.

To aim at a target and strike a target and people tend to get pretty excited when they strike targets and that that that that energy exists within Boeing it's a recreational energy and not a passive energy. So we think that that has resiliency aspects to it there.

Speaker 1: call. At this time all participants are in listen mode.

Entertain.

We are at the heart of why bowling has has endured in various forums for literally hundreds and hundreds of years, where their outdoor on lawns or indoor and build the indoors and buildings, but I'll now turn it over to John who will give you.

Speaker 1: Please note that this conference call is being recorded today, October 26, 2023. I'll now turn the call over to Samantha Gallagher.

Now I'll turn it over to John in a moment, Ron and good to hear from you.

I think one of the key characteristics of bowling is that is it is a low barrier to entry experience, but it is an experience that you can get better at and that's in contrast to some other experiences that can take place within the family Entertainment sector.

Speaker 2: Thank you, operator, and good morning. Everyone should have access to the company's third quarter 2023 earnings release and supplemental information.

More color on how we develop that relationship John.

Yes, Ron I was just going to add that.

Speaker 2: The release and supplemental information can be found in the investor section of the Vichy Properties website at www.vichyproperties.com.

You've heard me speak about times that relationships.

Take time and this is one that.

There people might do it once or twice and then go okay fun I've done that I don't need to do it again and bowling is at its very heart recreation.

I think I looked at my notes in my first meeting.

Speaker 2: Some of our comments today will be forward-looking statements within the meaning of the federal security.

Was years ago with.

Speaker 2: Forward-looking statements, which are usually identified by use of words such as will, believe, expect, should, guidance, and tense, outlook, projects, or other similar phrases are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. I refer you to the company's SEC violence for more detailed discussion of the risks that could impact future operating results and financial conditions.

One of the top executives at Valero and we just studied the business for this long, it's got scale and Scott healthy credit.

If you want to get philosophical about it you can say it goes back to our most ancient human urges to to aim at a target and strike a target and people tend to get pretty excited when they strike targets and that that that that energy exists within bowling, it's a recreational energy and not a.

That is great margin with growth potential.

The thing I'll add to Ed's remarks.

As we continue to study the bolero business was the diversification of revenue streams. It has many cash registers.

Of how the business can get into the consumer's wallet.

Passive energy so we think that that has resiliency aspects to it.

Revenues from food and beverage it gets a large percentage from Boeing that gets business revenues from amusement. So we like that diversification as we dug into the business and dug into the team. So we.

Speaker 2: During the call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating the company's operating performance.

There are at the heart of why bowling has has endured in various forms for literally hundreds and hundreds of years, where their outdoor on lawns or indoor and build indoors and buildings, but I'll now turn it over to John who can give you.

Speaker 2: These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available on our website in our third quarter 2023 earnings release, our supplemental information, and our filings with the SEC.

We really took time years in this case to understand the business and then I think your final part was are there other operators over time that we could buy real estate and be partners with them and we're going to continue to study the family Entertainment Center space there.

More color on how we develop that relationship John.

Yes, Ron I was just going to add that.

<unk> heard me speak about times that relationships.

Speaker 2: For additional information with respect to non-GAAP measures of certain tenants and or counterparties discussed on this call, please refer to the respective companies public filings of the forbidden land books sequence.

Take time and this is one that.

They are really good operators, but we think we we started our journey in the family Entertainment Center with one of the best.

I think I looked at my notes.

First meeting.

Was years ago with.

One of the top executives at Valero and we just studied the business long it's got scale, it's got healthy credit.

Speaker 2: Hosting the call today is Ed Patoniak, Chief Executive Officer, John Payne, President and Chief Operating Officer, David Kieske, Chief Financial Officer, Gabe Wasserman, Chief Accounting Officer, and Moira McCluskey, Senior Vice President of Capital Markets. Ed and team will provide some opening remarks and then we will open the call to questions. With that, I'll turn the call over to Ed. Ed Patoniak, Chiefun table increasing

Great and then just my second one was just staying on the pipeline of deals and so forth.

Business that has great margin with growth potential.

So obviously the tenure is much higher than that and I think most anticipated and I'm just wondering like when that happens like how does that pipeline sort of evolve like do conversation stop do they pick up.

The thing I'll add to Ed's remarks.

As we continue to study the bolero business was the diversification of revenue streams. It has many cash registers.

Just trying to understand like what how is that pipeline evolving and conversations that youre, having at steep our repricing capital. Thanks.

How the business can get into the consumer's wallet.

Revenues from food and beverage it gets a large percentage from Boeing that gets business.

Speaker 3: Third quarter of 2023 is a quarter most REITs are happy to be done with. The REIT index in Q3 2023 was down 8%, swinging negative for the year after not a great year last year, and October has only continued to be a negative trend.

Yeah, I'll start and then John and David can weigh in but they definitely slowdown right.

News from amusement so we like that diversification as we dug into the business and dug into the team. So we.

And anybody who doesn't slow conversations down against this backdrop of volatility clearly is not paying attention.

Speaker 3: But while the REIT stock marketplace didn't have a great quarter in Q3 2023, the key question to ask is what the given REIT did in Q3 and now in October to improve its business for the future.

It slowed down in terms of actual coming to any kind of fixing.

<unk> price given the volatility of capital but.

There are many good operators, but we think we we started our journey in the family Entertainment Center with one of the best.

I wanted to turn it over to Jon because what we don't want to do is ever put all pins down all of that not all pans out but stop all conversations because there will come a day as I said in my opening remarks, Ron there will come a day.

Speaker 3: At BGE, our answer to this question has a number of elements to it.

Speaker 3: We played offense selectively. We played defense. We capitalized on certain current conditions. We prepared for potential future conditions.

Great and then just my second one was just stay on the pipeline of deals and so forth.

When we begin to recover and we don't want to have to call people and say, Hey, you probably forgot about it because we haven't talked in months quarters years, what have you.

Speaker 3: We increased our dividend effective with Q3 2023 at an annualized rate that well exceeds forward inflation expectations and continued a rate of dividend growth since 2019 that is three times greater than the largest net lease rate over the same period. And if there has ever been a period in which one should value a solidly covered and solidly growing dividend that currently exceeds a 10 year rate, this is it.

We don't want to do that so John if you want to talk about the way in which we make sure our conversations continue even if.

Just trying to understand like what how is that pipeline evolving and conversations that youre, having as people are repricing capital. Thanks.

Even if they have to slow down a bit in terms of fixing value.

Yes, Ed you described it very well we're constantly looking for opportunities.

Yeah, I'll start and then John and David can weigh in but they definitely slowdown right.

To have conversations learn more about certain sectors and businesses that.

And anybody who doesn't slow conversations down against the backdrop of volatility clearly is not paying attention.

That we're not experts on today develop long term partnerships, but that doesn't mean, we transact at this moment of uncertainty. It means that we're preparing for the time when hopefully go from defense to offense and look at opportunities that we understand this sector of the company and.

Speaker 3: Finally, in a year in which re-earnings growth has generally been difficult to come by, Bichy's AFFO for share earnings in Q3 grew 10.7% year over year.

It slowed down in terms of actual coming to any kind of fixing.

<unk> price given the volatility of capital, but I wanted to turn it over to Jon because what we don't want to do is ever put all pins down all of that not all pans out but stop all conversations because there will come a day as I said in my opening remarks, Ron there will come a day when.

Speaker 3: Vichy announced within and subsequent to quarter end about $1.1 billion of new capital commitments.

That relationship so a little bit of a different time than the past couple of years, but we still are working.

Speaker 3: Well, most of you have seen the strategic and economic merits of these investments.

Speaker 3: We know there are some of you who feel that we should have left that capital in a stockpile.

To find opportunities for the long term.

When we begin to recover and we don't want to have to call people up and say, Hey, you probably forgot about it because we haven't talked in months quarters years, what have you.

Speaker 3: Some of you feel, understandably, that volatility is too high and visibility is too low.

Great. That's it for me thanks, so much.

Thank you Ron.

Speaker 3: We agree volatility is high and visibility is low. And with the market movement to this, especially the last few weeks, we are sober and cautious. Y'all know what the market conditions for capital allocation could be from here. For how long? No, one, no.

Our next question comes from David Katz with Jefferies. Your line is open.

We don't want to do that so John if you want to talk about the way in which we make sure our conversations continue even if you.

Hi, Good morning, everyone. Thanks for taking my question just one more on on Bolero and this is not intended to be a leading question anyway, but I know you do a lot of homework around the business and the us.

Even if they have to slow down a bit in terms of fixing value.

Yes, Ed you described it very well we're constantly looking for opportunities.

Speaker 3: But I can tell you that we continue to have high conviction about the commitments we've recently made with Century, with Canyon Ranch, and now with Bolero.

To have conversations learn more about certain sectors and businesses that.

Underlying real estate I Wonder if you could just talk about that.

The durability of that.

That we're not experts on today develop long term partnerships, but that doesn't mean, we transact at this moment.

Speaker 3: These commitments represented immediately a creative investments in real estate that should have positive impacts on 2024 earnings. These commitments also represented investments in relationships that can and will be the answer in future years to, okay, now the things are back to normal. How are you going to grow these?

That real estate value, what kind of capex it requires.

Relative to the other stuff that you've acquired so far and just sort of give us a picture of that long term value durability. Please.

Certainty it means that we're preparing for the time when hopefully go from defense to offense and look at opportunities that we understand the sector of the company and we develop that relationship so a little bit of a different time than the past couple of years, but we still are working to.

Yeah, David It's David Good to talk to you I can start and John chime in I mean, one of the things we love about the Bolero business model is the fact that they go in and reposition bouillon as it had been around for 100 is hundreds of years like I talked about but these assets are 10 to 50 plus years old that they buy.

Speaker 3: Again, none of us know when the all-clear signal will sound, but it will at some point. In REES that continues to invest in relationship.

To find opportunities for the long term.

Speaker 3: will be best positioned to resume growing when market conditions and values have stabilized.

Great. That's it for me thanks, so much.

And reposition with anywhere from $3 million to $5 million of capital and transform something that was dark and gray and a little bit data into a very lively experienced that as John talked about has multiple cash registers and is.

Thank you Ron.

Speaker 3: That's what WeBG did in the recovery out of COVID. Our situational readiness put us in the position to acquire the Venetian and MGP, investments that are a key driver of our 2023 earnings growth. And we made these investments when many other would-be buyers hadn't been fully readying themselves for recovery.

Our next question comes from David Katz with Jefferies. Your line is open.

Hi, Good morning, everyone. Thanks for taking my question just one more on on Bolero and this is not intended to be a leading question anyway, but I know you do a lot of homework around the business.

As a draw for the local community and they have done. This now since the late <unk> and have a portfolio of 350 assets across the country and some outside of the U S where they continue to see opportunity to grow and white space out there a very fragmented mom and pop ownership interest in the industry. They see opportunities for another 500 to one.

And the underlying real estate I Wonder if you could just talk about that.

Speaker 3: We have been able to undertake our recent investments because of the astute and agile work of Mara McCluskey and the Vichy Capital Markets team. Going back to our nearly $1 billion overnight equity raise in early January 2023, Vichy has opportunistically raised the total of approximately $1.3 billion of forward equity in 2023, giving Vichy a cost of funds for our recent investments that drive the immediate accretion of which we've spoken.

Durability of that.

That real estate value, what kind of capex it requires.

Relative to the other stuff that you've acquired so far and just sort of give us a picture of that long term value durability. Please.

Centers into their portfolio over time, and so that's what we do.

Think about it but the heart of your question David They take a box that's very solid.

It even better and make it essentially brand new.

Yes, David it's David Good to talk to you I can start and John chime in I mean, one of the things we love about the <unk> business model is the fact that they go in and reposition bouillon as it had been around for 100 is hundreds of years like I talked about but these assets are 10 to 50 plus years old that they buy.

Speaker 3: We also played defense this past quarter. During Q3 and subsequent quarter end, we played defense by using close to $1 billion of equity in cash and only about $55 million of debt to fund our new capital commitments, demonstrating our commitment to our long range leverage target.

You and I talk a lot about my old days way back and ski resort operations and what I learned back in <unk> days is default.

And reposition with anywhere from $3 million to $5 million of the capital and transform something that was dark and gray and a little bit dated into a very lively experienced that as John talked about is multiple cash registers and as a as a draw for the local community.

Fall in love with businesses that respond.

Speaker 3: David Kieske and the VG Finance team also played defense by adding a further $200 million of swap protection since Q2 in anticipation of our 2024 refinancing of $1.05 billion of the Legacy MGP 5 and 5-8th notes, giving us a total of $450 million of swap protection.

They respond intensively and quickly to capital investment and.

Management focus and intensity.

We've done this now since the late nineties and they do have a portfolio of 350 assets across the country and some outside the U S where they continue to see opportunity to grow and white space out there a very fragmented mom and pop ownership interest in the industry.

The difference between this and this give us as you can make a great capital investment and operate the heck out of the business and it doesn't snow.

Your soul.

Speaker 3: And while we did all this, our tenants continue to demonstrate the vitality of their businesses, as John will speak of momentarily. I'm very proud of the work the entire VG team did this quarter against a volatile and difficult backdrop. The VG team working within one of the lightest GNA loads of any S&P 500 re.

And what I love about this business is that it's very responsive to the investment to capital you invest capital and you get pretty much an immediate consumer response, and it's also a business that responds really well to management intensity and again, Tom Shannon in the bolero team are very very shrewd at <unk>.

I see opportunities for another 500 to 1000 centers into their portfolio over time.

Think about it against your heart of your question, David They take a box it's very solid.

It even better and make it essentially brand new.

Speaker 3: Continue to create a culture of excellence and resilience that I'm confident will serve be to stakeholders well for years to come.

And Thats, what we love about the business model and then the cash flows that come out of that business as John said have very high margins and very sticky recreation aspect to the cashless David I'll just add to this you and I talk a lot about my old days way back and ski resort operations and what I learned back in <unk> days.

Best in capital and know how to manage the P&L every single line top middle and bottom lines.

Speaker 3: no matter what those years bring. With that, I'll turn the call over to John Payne for an operating and transaction marketplace update. And John will then pass the mic to David Kieski who will give our financial and guidance update.

To drive to use that management intensity really transform results through the transformation of the experience.

David The only thing I would mention was just the detail of our underwriting.

Default.

Speaker 4: Thanks, Ed. While 2023 has been a volatile year in the real estate sector, as Ed just highlighted.

Fall in love with businesses that respond.

We.

We went to all 38 assets in the 17 states.

They respond intensively and quickly to capital investment.

Speaker 4: We at VG have put ourselves in the position on both a capital and relationship basis to not only continue our business, but to expand it into new sectors, new relationships, and new geographers.

We got to meet not only the senior management team as I talked about but our team got to meet the people on the ground that makes these assets so productive and it helped us in continuing to understand the durability of the business and the asset so.

And.

Management focus and intensity.

The difference between this and this give us as you can make a great capital investment and operate the heck out of the business and it doesn't snow.

Speaker 4: In the third quarter, we continue to grow with our partners at Centri.

Your soul.

And what I love about this business is that.

Speaker 4: by closing our Rocky Gap Casino Resort Acquisition in May.

That just gives you a flavor of how we.

It's very responsive to the investment of capital you invest capital and you get pretty much an immediate consumer response, and it's also a business that responds really well to management intensity and again, Tom Shannon in the Valero team are very very shrewd at investing capital and know how to manage the P&L ever.

Went about this investment.

Speaker 4: And our sale leads back to four gaming assets in Alberta, Canada, growing our international

Thank you.

Yes.

Speaker 4: Subsequent to quarter end, we were very excited to announce our entry into the family entertainment sector. Through our acquisition of 38 bowling entertainment.

We now turn to talk Thomas with Keybanc capital markets. Your line is open.

Hi, good morning.

So.

Speaker 4: with our new partners at Bolero, led by Tom Shannon and Brett Parker, the Bolero team is a perfect example of a talented growth-minded operator that has a deep understanding of their consumer, recreational trends, and the value that a VT relationship in our capital can bring to their growth strategy.

First question Ed.

And maybe John it sounds like the company.

Single line top middle and bottom lines.

May slowdown on investments in the near term until visibility improves which would make sense, but the ongoing conversations that you are having as you look to keep the lines open with new and existing relationships on potential opportunities do you expect to see.

To drive the use that management intensity really transform results through the transformation of the experience.

David the only other thing I would mention it was just the detail of our underwriting.

Investment yields increase sort of commensurate with the increases in capital costs across industries.

Speaker 4: Vichy's tenants are not only continuing to show strong operating results, but are also continuing to invest in capital improvements.

We went to all 38 assets in the 17 states.

Todd.

Speaker 4: Feasers is investing over $400 million into just one asset in Paris, New Orleans.

I believe they will but it always takes time.

Sellers always tend to take.

Speaker 4: The Venetian just announced a billion dollar plan to further enhance our asset, including almost $200 million in just convention center space. MGM spends hundreds of millions of dollars in CAPEX each year on assets throughout Las Vegas and the regional markets. And even our smallest operators are investing millions of dollars each year on growth price.

More time to come to grips with realities and buyers.

That just gives you a flavor of how we.

Be sellers would be buyers.

Went about this investment.

And obviously, we've seen some cap rate expansion over the last year.

Thank you.

Im very confident in telling you that a year ago, we would not have been able to buy 30 April arrow assets of seven 3% cap rate very confident that we could not have done that.

We now turns itself Thomas with Keybanc capital markets. Your line is open.

Hi, good morning.

<unk> assets would have traded tighter a year ago as they traded considerably tighter a couple of years ago, when Carlyle bought a large portfolio of bolero assets.

So far.

Speaker 4: thereby enhancing the quality of our assets and the productivity of their operating business.

First question Ed.

Maybe John it sounds like the company.

Speaker 4: These reinvestment commitments add to our convention that we are continuing to instruct a high quality portfolio of assets with the best experience.

It may slow down on investments in the near term until visibility improves which would make sense, but the ongoing conversations that you are having as you look to keep the lines open with new and existing relationships on potential opportunities do you expect to see.

So as we look at as we look over the year to come and maybe years to come I think you can expect markets eventually to accept realities, but markets tend to take time to accept those realities and we'll be patient.

Speaker 4: This high quality classification comes from not only the quality of the real estate itself, but also from the outsized productivity of

Investment yields increase sort of commensurate with the increases in capital costs.

For that acceptance to take place.

Yes.

Across industries.

And enjoy the benefits of same store growth that we as a net lease REIT enjoy too a very rare degree.

Speaker 4: productivity that is hard to come by in almost any other real estate sector.

Todd.

I believe they will.

Speaker 4: No place highlights the health and productivity of our tenants better than law school.

It always takes time.

Thanks to our lease escalation and especially the CPI component of that escalation.

Sellers always tend to take.

Speaker 4: After meeting with Caesars CEO Tom Reig at G2E, which is the largest gaming conference in the United States, one analyst noted that Caesars is on pace for its best October ever, and this is against the backdrop of current macroeconomic uncertainty.

More time to come to grips with realities and buyers would be sellers would be buyers.

Same store growth is going to mean something in the net lease space over the next year, if things slow down and the way they might.

And obviously, we've seen some cap rate expansion over the last year.

And we will fight a report from our friends at Green Street.

I'm very confident in telling you that a year ago, we would not have been able to buy 30 April arrow assets of seven 3% cap rate very confident that we could not have done that these assets would have traded tighter a year ago as they traded considerably tighter a couple of years ago, when Carlyle bought a large portfolio of bolero assets.

It showed that both Vg NGL Pi enjoy same store NOI growth that is.

Speaker 4: Even during these tough times, Las Vegas continues to open new world-class attractions while diversifying its revenue streams.

About four times the standard net lease REIT.

Okay. That's helpful and then I guess within that context.

Speaker 4: The opening of the must see entertainment venue this year, world famous events like Formula One and the 2024 Super Bowl, and a diverse and robust convention and conference schedule all help showcase that there's no city performing like Las Vegas at its clearly become the entertainment epicenter of the world.

Sort of looking at potential investments.

Can you provide an update on the call right agreements and sort of current thinking on.

It was your park and Horseshoe Indianapolis, the potential timing, there and how youre thinking about.

Potential capital raising that that might be required to the extent something were to happen there.

Speaker 4: Outside of Las Vegas, regional performance has continued to be resilient. While many operators in our discussions have cited increased expenses related to items such as insurance or unrated play normalizing against tough comps, regional operations continue to run at very strong profit levels supported by loyal consumers with their respective database. Strategically, we continue.

That acceptance to take place.

And enjoy the benefits of same store growth.

And then David take that first the last half of that first and then John can take the first half yes.

He is a net lease REIT enjoy too a very rare degree.

Those who have been with us since the beginning of it in the early days with call rights at a 10 cap and as we talked to them. We said, we would use those to layer into our growth.

Thanks to our lease escalation and especially the CPI component of that escalation same store growth is going to mean something in the net lease space over the next year, if things slow down and the way they might and.

The pipeline, maybe slower or are there may be less opportunities in the marketplace and we take the same approach with the call rights in Indiana.

Speaker 4: gaming, non-gaming, domestic and international, to grow our pipeline for

We will say to report from our friends at Green Street that showed that both BG NGL Pi enjoy same store NOI growth.

Runs until the end of next year and into 2024, and we just have to call. It by the end of 2024. So as we look into the future will be very disciplined with where our cost of capital is but also very kind of.

Speaker 4: In gaming, Danny Valoi and I are in constant dialogue with new potential partners, domestically and internationally.

It's about four times the standard net lease REIT.

Speaker 4: And we're just as excited by the ways we can potentially help our current tenants grow through additional tuck-in acquisitions or by utilizing our Partner Property Growth Fund in which we seek to fund our tenants' high ROI opportunities at our existing assets.

Not at all about how we layer and layer that into our future <unk> growth.

Okay.

And then I guess within that context.

And then on the operating side, we just like we do with our current.

Sort of looking at potential investments.

Can you provide an update on the call right agreements and sort of current thinking on.

Assets that we own and we're continuing to monitor how.

The business is performing and Indianapolis as I've mentioned on other calls Caesars has put in significant capital to both the assets and those business continue.

Speaker 4: Meanwhile, Kellen Florial has been cultivating invaluable connections and relationships across the family entertainment, sport, wellness, leisure and recreation sectors as we continue pursuing our mission to be the real estate capital partner of choice to best in class, growth minded operators of unique social infrastructure.

As your park and Horseshoe Indianapolis, the potential timing, there and how youre thinking about.

Potential capital raising that might be required to the extent something were to happen there.

To be rewarded.

Well, David take that first the last half of that first and then John can take the first half yes.

Based on those capital improvement So we'll continue to monitor that.

Yeah.

Alright, thank you.

Those who have been with us since the beginning of it in the early days with call rights at a 10 cap and as we talked about them. We said, we would use those to layer into our growth.

Speaker 4: During this most challenging time of market volatility for everyone, it is more important than ever for our team to continue to grow and deepen our networks and to grow our breadth of opportunities to best position for the years to come. This work is intended to position us to continue to deliver the growth our shareholders have come to expect from the Vichy team. Now I will turn the call over to David, who will discuss...

Our next question comes from Greg Mcginniss with Scotiabank. Your line is open.

When the pipeline, maybe slower or there may be less opportunities in the marketplace and we take the same approach with the call rights in Indiana.

Hey, good morning.

Hey, Greg looking at the future opportunities with Canyon ranch or Valero.

Runs until the end of next year and into 2024, and we just have to call. It by the end of 2024. So as we look into the future will be very disciplined with where their cost of capital is but also very kind of.

Finding the incremental investment investment contingent upon the operator or is your team working with them to help find some opportunities.

And then also for any potential <unk> or investments.

Article about how we layer and layer that into our future <unk> growth.

Speaker 5: Thanks, John . It's great to speak with everyone today. The VG team takes pride in what we've accomplished in 2023, acknowledging the year is not over, but the results we posted last night and last week's Bolero announcement are exemplary of those accomplishments.

Those cap rates would be negotiated in real time, so can we assume maybe those would be.

And then on the operating side, we just like we do with our current.

50 to 100 basis points higher than where you've been the message previously.

Assets that we own and we're continuing to monitor how.

Yes, Greg it's a good question.

Speaker 5: As Ed said, we're improving the business which should benefit VG and UAs shareholders of the 2024 and beyond.

The business is performing and Indianapolis as I've mentioned on other calls Caesars has put in significant capital to both the assets and those business continue.

And to take the first part of your question, we very much partner with our partners I Canyon Ranch.

Speaker 5: Highlighting the transaction we closed last week with Bolero, and as we have spoken to many of you about, the deal was immediately accretive to our AFFO, given we had prepared by raising forward equity for the transaction many months earlier, generating an attractive spread to that cost of capital. From an economic standpoint, the deal is very attractive.

Developing investment criteria.

To be rewarded.

Flying those criteria to the marketplace to figure out where the best opportunities may be and I think I've mentioned back when we announced the expansion of our Canyon Ranch partnership back in late July.

Based on those capital improvement So we'll continue to monitor that.

Yeah.

Alright, thank you.

Our next question comes from Greg Mcginniss with Scotiabank. Your line is open.

John Goff and I share conviction that the coming years 'twenty four 'twenty five 'twenty six and onward could represent the kind of opportunity that John Goff and Richard rainwater saw and the resolution trust as the early Ninety's there could be some very compelling acquisition opportunities that are born out of not necessarily operating distress, but what could be.

Speaker 5: But as John mentioned, it also builds a partnership with a market leader that we and the Bolero team believe will grow together in the future.

Hey, good morning.

Hey, Greg looking at the future opportunities with Canyon ranch or Valero.

Speaker 5: Subsequent to funding this transaction, we have approximately $3 billion in total liquidity comprised of approximately $430 million in cash, $250 million of estimated net proceeds available under our forward sale agreements, and $2.3 billion of availability under the revolving credit facility.

Finding the incremental investments investment contingent upon the operator or is your team working with them to help find some opportunities.

A certain element of financing stress.

And then also for any potential ROFO or investments.

So we're excited about that we're patient we're willing to wait for the right opportunities to come along in that vein and when it comes to figuring out pricing in <unk> and call rights I think what we're increasingly focused on is the degree to which we may need a certain amount of flexibility.

Speaker 5: In terms of net leverage, net debt to annualized Q3 adjusted EBITDA is approximately 5.7 times.

Those cap rates will all be negotiated in real time, so can we assume maybe those would be.

50 to 100 basis points higher than where you've invested previously.

Speaker 5: We have a weighted average interest rate of 4.35% accounting for our hedge portfolio and a weighted average of 6.1 years to maturity. Then, as we prepare for our first bond refinancing in early 2024, we've entered into forward starting interest rate swap agreements with an aggregate notional amount of $450 million to date.

Yes, Greg it's a good question.

And to take the first part of your question, we very much partner with our partners I Canyon Ranch.

Between us as buyer and any would be seller to account for the unpredictability of capital costs, resulting values. So we're going to we're going to be careful that we don't lock in.

Developing investment criteria.

Playing those criteria to the marketplace to figure out where the best opportunities may be and I think I've mentioned back when we announced the expansion of our Canyon Ranch partnership back in late July.

Speaker 5: Touching on the income statement, AFFO per share was $0.54 for the quarter, and the increase of nearly 11% compared to $0.49 for the quarter ended September 30, 2022. Our results, once again, highlight our highly efficient triple net model given the increase in adjusted EBITDA as a proportion of the corresponding increase in revenue and our margins continue to run strong in the high 90% range when eliminating non-cash items.

To a cap rate for a future acquisition that may turn out at that time to be dilutive.

And I guess I'm looking at those potential Canyon ranch opportunities is there a.

John Goff and I share a conviction that the coming years 'twenty four 'twenty five 'twenty six and onward could represent the kind of opportunity that John Goff and Richard rainwater saw and the resolution trust as the early Ninety's there could be some very compelling acquisition opportunities that are born out of not necessarily operating distress, but what could be.

Around the balance size on a per asset basis, if theyre looking at in terms of making the investment.

That'll change based on cost of capital and expected returns, but just trying to understand the size of.

Speaker 5: Our DNA was $14.4 million for the quarter, and as a percentage of total revenues, was only 1.6%, one of the lowest ratios in the triple net sector.

Yes, they are looking at.

A certain element of financing stress.

Excuse me Greg.

David Good to talk to you and thanks for joining the call for a Canyon Ranch did some are 120 to maybe 150 rooms, but kind of 130 <unk> hundred 40 rooms are sweet spot one of the things that they want to ensure asset utilization. So if you look at Linux in Tucson, the room counts right around there.

Speaker 5: During the quarter, we increased our quarterly cash dividends of $0.41.50 per share or $1.66 on an annualized basis, representing a 6.4% year-over-year increase.

So we're excited about that we're patient we're willing to wait for the right opportunities to come along in that vein and when it comes to figuring out pricing and ROFO and call rights I think what we're increasingly focused on is the degree to which we may need a certain amount of flexibility.

Speaker 5: Then turning to guidance, we are updating and increasing AFFO guidance for 2023 in both absolute dollars as well as on a per share basis.

What they're working on and developing in Austin will be right around that size and so as we think about potential other dots on the map, whether it be ski or beecher or potentially even international one day, it's how do you find.

Between us as buyer and any would be seller to account for the unpredictability of capital cost.

Speaker 5: AFFO for the year ending December 31, 2023 is now expected to be between $2.17 billion and $2.18 billion, or between $2.14 and $2.15 per diluted common share.

<unk> values. So we're going to we're going to be careful that we don't lock in to a cap rate for a future acquisition that may turn out at that time to be diluted.

How do you focus on assets of that size and given the economic magnitude or vitality that comes out of the out of that business. You can take a conventional hotel that has similar room sizes and make the economics, so much greater and so much better than what was out of a traditional hotel and so.

Speaker 5: Based on the midpoint of our updated guidance, ETA expects to deliver year over year AFFO per share growth of 11%, one of the highest expected growth rates across all regions.

And I guess I'm looking at those potential Canyon ranch opportunities is there a.

Speaker 5: As a reminder, our guidance does not include the impact on operating results from any announced but unclosed transactions.

That's part of the excitement for the opportunity that we potentially see together in the future.

Around the balance size on a per asset basis. If they are looking at in terms of making the investment.

Some of the distress or malaise that may be coming.

Speaker 5: interest income from any loans that do not yet have final draw structures.

From that sector.

That'll change based on cost of capital and expected returns, but just trying to understand the size of.

Speaker 5: possible future acquisitions or dispositions, capital markets activity, or other non-recurring transaction items. And as a reminder, we do record a non-cash CECL allowance on a quarterly basis, which due to its inherent unpredictability leaves us unable to forecast net income and FFO with accuracy. Accordingly, our guidance is AFFO-focused, as we believe AFFO represents the best way of measuring the productivity of our equity investments.

Okay, and just a final one for me.

You may not have an answer on this one but have you guys been in talks with MGM about their perceived likelihood of receiving the license and Empire City and your potential investment there.

Yes, they are looking at.

Excuse me Greg.

David Good to talk to you and thanks for joining the call for a canyon ranch at somewhere 120 to maybe 150 rooms, but kind of 130 <unk> hundred 40 rooms are sweet spot one of the things that they weren't mature asset utilization. So if you look at Linux in Tucson, the room counts right around there.

John.

Yes.

Well first of all MGM has been a great partner.

What they're working on and developing in Austin will be right around that size and so as we think about potential other dots on the map, whether it be ski or Beecher.

We were able to acquire MVP and those assets and obviously the New York process is going on right now.

Speaker 5: evaluating our financial performance and ability to pay dividends. With that, Kelly, please open the line.

Actually even international one day, it's how do you find.

There is some who believe <unk> you said that the two current <unk>, we will get two of the three licenses.

How do you focus on assets.

Speaker 1: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two.

And given the economic magnitude or vitality that comes out of the out of that business. You can take a conventional hotel that had similar room sizes and make the economics, so much greater and so much better than what was out of a traditional hotel and so.

Should MGM, the one of those and they're looking to.

Build that business and we see an opportunity to use our capital to to build and get incremental rent will absolutely talk to the partner about that so we'll just have to see Greg how this process plays out over the coming years.

Speaker 1: When preparing to ask your question, please ensure your device is unmuted locally.

Speaker 1: first question today comes from Anthony Pallone with JPMorgan. Your line is open.

That's part of the excitement for the opportunity that we potentially see together in the future.

Speaker 6: All right, thank you and good morning. My first question is, we all could see kind of how your capital costs have changed over the last few months, but maybe can you give us a sense as to, how you see your operators capital costs changing and whether or not sale leaseback has become more or less competitive over the last few months?

Some of the distress or malaise that may be coming from that sector.

Alright, thanks, everyone.

Okay.

Okay, and just a final one for me.

Our next question comes from Smedes Rose with Citi. Your line is open.

You may not have an answer on this one but have you guys been in talks with MGM about there.

Hi, Thanks.

I just wanted to ask you a little bit about how you think about the scope of the opportunity with Valero overtime I guess against coverage levels. I think you said about three two times coverage. So a lot of.

<unk> likelihood of receiving the license that Empire city and your potential investment there.

Speaker 3: You know, I'd say generally, Tony, it has become more competitive. I think if you look at, obviously, the stock trading values of the operators but also the yields to worst on much of their credit, you know, our capital has the potential to be very compelling in 2024, 2025, 2026. But that, of course, assumes that our cost of capital is in a place where we can generate capital. And so, I think, you know, I think, you know, I think, you know, I think, you know, I think

Thank you John.

Yes.

Cushion in there, but where would you sort of be comfortable like us continuing to kind of a buy up there.

Well first of all MGM has been a great partner.

We were able to acquire MVP and those assets and obviously the New York process is going on right now.

Third EBITDA and converting it into wind relative to the coverage levels.

There is some who believe <unk> you said that the two current <unk>, we will get two of the three licenses.

Yes.

We've studied the business as you've heard US say, we started the business in the company for a couple of years now.

And should MGM be one of those and they're looking to.

The their ability to go into an asset with very low four wall coverage and transform that asset into very high four wall coverage gives us a lot of conviction in the business and then obviously with the master lease and the corporate guarantee that we get out of the out of the.

Speaker 3: positive sprints and accretion against that and you know our confidence level and predicting or projecting our cost to capital a year from now It's not high If anyone does have my confidence

Build that business and we see an opportunity to use our capital to to build and get incremental rent will absolutely talk to the partner about that so we'll just have to see how this process plays out over the coming years.

Speaker 3: in their projections, please call us immediately and let us know what we're missing.

The incremental protection, we get gives us a lot of comfort.

Alright, thanks, everyone.

Speaker 6: Thanks. And then just follow up. You'd mentioned your operators putting a lot of capital into the assets. And I know you have the property growth fund to help with that if they so choose to participate. But would you all reinvest, you know, post this if they decided they wanted to pull some of their capital out? Or do you see yourself just limiting it to being involved in the projects as they're happening?

That's the area that we target kind of high twos four wall coverage low threes and then obviously the corporate guarantee in Europe, they're a growth minded operator, who understands the merits of the sale leaseback model.

Our next question comes from Smedes Rose with Citi. Your line is open.

Hi, Thanks.

<unk> that they have the capital available to.

To grow their business in way shape or form that they want to do and they want to size. The rent in a way that gives them protection to make sure that they are creating and benefiting from all the upside that they generate.

Christian in there, but where would you sort of be comfortable like us continuing to kind of a buy up there.

Given their business model and the economics that they do produce.

Speaker 4: Yeah, Tony, just to be to level said here, Tony, the capital that I went through in my open remarks is being put in by the tenants, not by VG at this time. And I think that's what you were asking. The other point of the question is, if there's opportunities...

Third EBITDA and converting it into rent relative to the coverage levels.

Okay, and then I just wanted to ask about the balance sheet.

Leverage ticked up slightly to $5 seven from five six and you still have the split leading between S&P and Moody's what do you think kind of what's the kind of the <unk>.

Yes.

As you've heard US say, we started the business in the company for a couple of years now.

Their ability to go into an asset with very low four wall coverage and transform that asset into very high four wall coverage gives us a lot of conviction in the business and then obviously with the master lease and the corporate guarantee that we get out of that out of the.

Speaker 4: for us to help them with larger projects in this property growth fund would we do that? We would be thoughtful in our analytics behind an investment. And we talk to our partners all the time about how they're thinking about growing their businesses. And is there an opportunity for us to deploy incremental capital for incremental rent? And we do.

Path I guess with Moody's and when do they want to see continued diversed diversification away from gaming or.

And I guess kind of what's the leverage metric that you think that they would need to see in order to move it to investment grade.

The incremental protection, we get gives us a lot of comfort.

Yes, just to hit on.

That's the area that we target.

Your first point I mean, the leverage ticked up quarter over quarter really good cash went down right. If you look at our supplement quarter over quarter.

High Twos four wall coverage low threes, and then obviously the corporate guarantee and their their growth minded operator, who understands the merits of the sale leaseback model.

Speaker 3: Tony, if I understand your question correctly, if I understand your question correctly, I think you're asking as well, could there be opportunities downstream for us to buy incremental rent if the operator's capital went into creation of incremental real property?

Debt only went up $55 million that was the fund the St century, Canada asset in cash went down $230 million as Ed talked about the equity and the cash out the door to fund the acquisitions that we closed during the quarter, So really a de minimis move in leverage.

Or is that they have the capital available to.

To grow their business and the way shape or form that they want to do and they want to size. The rent in a way that gives them protection to make sure that they are creating and benefiting from all the upside that they generate.

In terms of Moodys Thats, a continual education and it's just.

Speaker 3: And yes, that could be an opportunity down the road. Should they want to monetize the value of the real property they created through their capital investments? Because it's all predicated, of course, on making sure we're buying good, good income that is tied to the creation of incremental real property.

Given their business model and the economics that they do produce.

It takes time alright, we've been around for six years.

Education the agencies on the gaming net lease model.

Okay, and then I just wanted to ask about the balance sheet.

Hitting Moody's in particular on gaming tenants.

Leverage ticked up slightly to $5 seven from five six and you still have the split <unk> between S&P and Moody's what do you think kind of what's the kind of the <unk>.

And as we've talked about I think many of you in the past they took our rating up two notches. When we did our inaugural investment grade offering back in April of 2022, we've been in touch with them.

Speaker 6: Yeah, that's what I was asking. So I understood, John , that those items you were listing, those capital costs were being funded by the operators already. And so yeah, it was a question of if you would go in later, if they decided, hey, look, we put this in. And we may want some of that back. Would you help us with that?

Path I guess with Moody's when when do they want to see continued diversed diversification away from gaming or.

Consistently and we will for an agency to make a move is often takes an event. So we're hopeful in the coming months or.

And I guess kind of what's the leverage metric that you think that they would need to see in order to move it to investment grade.

At a time there will be the acknowledgment of the sanctity of our cash flows and upgrade.

Yes.

Your first point I mean, the leverage ticked up quarter over quarter really good cash went down right. If you look at our supplement you quarter over quarter.

And it's there's really.

No real kind of black and white trigger it's a little bit just do what you say say, what you do and continue to prove the merits of your business model, which we have been very very diligent in working harder.

Speaker 1: Our next question comes from John DeCree with CBRE. Your line is open.

Debt only went up $55 million that was the phone the St century, Canada asset in cash went down $230 million as Ed talked about the equity and the cash out the door to fund the acquisitions that we closed during the quarter, So really a de minimis moving leverage.

Okay. Thank you.

Speaker 7: And, or John , maybe we could talk a little bit about the Bollero transaction and the cap rates that you've got to there. It's a little tighter than what we've seen some of the last regional gaming cap rates show up at. I wonder if you could kind of speak to, you know, how you're looking at caps for family entertainment versus gaming and maybe more regional gaming than Vegas realizing Vegas is a bit of a different animal and other experiential real estate that you're looking at as well.

Our next question comes from Chris calling with Green Street. Your line is open.

In terms of Moodys Thats, a continual education and it's just.

Thanks, Good morning, everyone.

It takes time alright, we've been around for six years, we're educating the agencies on the gaming net lease model for educating Moody's in particular on gaming tenants.

Going back to the pricing environment, but thinking about traditional gaming real estate, specifically it seems like theres been this dynamic over the past call. It 18 months or so where gaming real estate has been positively we priced relative to traditional commercial real estate and I wonder if that dynamic is still playing out in your mind or do you think cap rate.

And as we've talked about I think with many of you in the past they took our rating up two notches. When we did our inaugural investment grade offering back in April of 2022, we've been in touch with them.

Speaker 3: Yeah, I'll start John and then turn it over to John Payne. So when you look at our Polaro Transaction, it represents a number of different strategic initiatives. It obviously does, as you've already said, represents our initiation into a new category. Into that new category, we significantly expand our tab. And we do so by investing behind

So maybe moving into more commensurate fashion with the 10 year right now.

Consistently and we will for an agency to make a move is often takes an event. So we're hopeful in the coming months or peer.

Yes, Chris good to talk to you I think the honest answer would be we don't know.

Period of time, there will be an acknowledgment of the sanctity of our cash flows and upgrade.

The most recent.

Trade in Big box gaming, obviously, it was a realty income.

And Theres really.

Investment in <unk>, where I believe it took place in it.

Speaker 3: a highly superior business model that Tom Shannon and the Bolero team have created. And the growth opportunity they have to consolidate a very fragmented sector is very compelling to us. It is also a sector that obviously other REITs have invested in and could continue to invest in. So it is a somewhat more competitive marketplace with a consequent impact on cap rates than you might see in regional gaming.

252 cap rate so exactly to your point.

Theres not a lot of the real estate categories covered by Green Street, where youre seeing those kinds of cap rates right now, perhaps outside of industrial and maybe data centers. So.

Okay. Thank you.

Our next question comes from Chris <unk> with Green Street. Your line is open.

<unk> resilience, there, but beyond that velocity of investment.

Thanks, Good morning, everyone.

We have a lot of data to point at but I do think going back to what John has been saying about the vitality, especially of Las Vegas, where so much of our capital is invested there is really no other place on earth like it.

Speaker 3: So there are times when gaming investments and non-gaming investments.

Speaker 3: can be a bit Apple and Orange-ish if you will, given that they do represent different marketplaces with different characteristics. I do think the point of emphasis needs to be that the 7.3% cap rate was immediately creative and a very positive spread to the cost capital. David Moore and the team have raised over the course of 2023 and we're very excited about the growth opportunity going forward. John , do you have anything to add?

It may sound, a bit trivial, but I will point to for instance, pink.

Having just performed last week at Allegiant.

So maybe moving into more commensurate fashion with the 10 year right now.

Announcing I want a residency in Las Vegas, and I want it now.

Yes, Chris good to talk to you I think the honest answer would be we don't know.

<unk> recognizing as a global artists that Las Vegas is the place for global artist to situate themselves right now because.

The most recent.

Trade in Big box gaming, obviously, it was a realty income.

Because of the drawing power.

Investment in <unk>.

Speaker 4: Yeah, John , I just mentioned you ask about other categories that we're looking at. Obviously, we've already placed them up.

Vegas has on a global basis, so youre seeing a resiliency of economic activity that should constitute some degree of resilience of value that youre, not obviously, you're going to see in a lot of other sectors, where you are facing either secular headwinds.

I believe it took place.

252 cap rate so exactly to your point.

Speaker 4: indoor water parks, wellness with Canyon Ranch, pilgrimage golf. We made an investment in family and our team at Center as you said with Palero. But we continue to spend some time looking for opportunities to develop long-term partnerships and wellness, leisure, recreation, cemented our team and some sports sectors as well. And I think it's important, the final thing I'll just add is it's not an either or it's not a

Theres not a lot of their real estate categories covered by Green Street, where youre seeing those kinds of cap rates right now, perhaps outside of industrial and maybe data centers. So there is a resilience there.

Or supply demand imbalance.

But beyond that velocity of investment I don't think we have a lot of data to point at but I do think going back to what John has been saying about the vitality, especially of Las Vegas, where so much of our capital is invested there is really no other place on earth like it.

Yes, Ed the other the other thing Thats unique in the gaming business right now than other businesses right is that the operating performance.

Speaker 4: Hey, you're looking at gaming and that's what we're just focused on. You're looking at wellness and that's what you're focused on. We've got the capacity now.

A lot of these casinos, particularly in the city you called out Las Vegas or are doing incredibly well right. So yes, theres a lot of volatility in the markets, but their core business.

Speaker 4: to constantly look for these unique opportunities.

And it may sound, a bit trivial, but I'll point to for instance, pink.

Speaker 4: to place investments over time, as Ed mentioned, in his opening remarks.

Having just performed last week at Allegiant.

Is really performing quite well so we'll see how this plays out.

<unk> I want a residency in Las Vegas, and I want it now.

Speaker 7: That's helpful. I think Ed made a good point about the capital and raised previously for this transaction. I appreciate the additional colors.

I appreciate all the thoughts that's it for me.

<unk> recognizing as a global artists that Las Vegas is the place for global artist to situate themselves right now because it's because of the drawing power that.

Thank you Chris.

Speaker 7: Maybe for a follow up, John , you've kind of alluded on sports and other categories of entertainment. You know, I guess in the context of the MSG sphere opening in Las Vegas and has, you know, certainly.

We now turn to Nate Crossett with BNP.

One is open.

Hey, good morning, maybe just one quick one on the balance sheet if.

Las Vegas has on a global basis, so youre seeing a resiliency.

If you could just maybe remind us of the guidance for your leverage band and then just and just talking.

Speaker 7: rave reviews and kind of looks like the epitome of experiential entertainment to us. So curious if that changes your thinking about the category, you know, stadium entertainment, mixed use and maybe the bigger kind of business model is models that more of a line on ticket sales, perhaps than anything else. I'm sure your thoughts are thinking in that category to change it all.

Economic activity that should constitute some degree of resilience of value that youre, not obviously going to see in a lot of other sectors, where you are facing either secular headwinds.

Talking about debt maturities for next year I know you mentioned the swaps.

But can you just tell us how youre thinking about addressing that maturity.

Or supply demand imbalance.

What would the term b and.

Maybe where you think you could price money today.

Yes, Ed the other the other thing Thats unique in the gaming business right now than other businesses right is that the operating performance.

Yes, its very good in fact, yes, I mean, we've been very vocal and committed to getting leverage back to our five.

Speaker 4: It has not changed, but you hit on the sphere with what an amazing entertainment venue that was added to to Las Vegas and sits on our land.

A lot of these casinos, particularly in the city you called out Las Vegas or are doing incredibly well right. So yes, theres a lot of volatility in the markets, but their core business is.

Between five and five five times net debt to EBITDA.

Obviously, we took that up a little bit with MVP acquisition and the agencies acknowledged that.

Speaker 4: It is truly, there's no entertainment venue like it, not only in the United States, but probably the world. But this is a category that we have looked at. We continue to study. We clearly have not made an investment and we're trying to better understand the long-term economic.

<unk>, we would work very hard to get that leverage back down and we've kind of exceeded the pace that we originally told the agencies in the summer of 'twenty, One and then in terms of our 10 year money. We do have a maturity that comes due may one 2020 for the window opens on February one 2024.

Is really performing quite well so we'll see how this plays out.

I appreciate all the thoughts that's it for me.

Thank you Chris.

Speaker 7: viability of certain projects, but boy, the sphere is amazing, Johnny. If you get the opportunity, you should go to an event there. Yeah, absolutely.

We now turn to Nate Crossett with JMP. Your line is open.

Talked about as we've mentioned collectively we have $450 million of notional forward starting swaps out there we've been legging into a hedge our hedge policy.

Hey, good morning, maybe just one quick one on the balance sheet.

If you could just maybe remind us the guidance for your leverage band and then just and just.

To get ahead of that.

Refinancing.

Speaker 1: We now turn to a handle think justice with Mizzou. Your line is open. Hey there, good morning.

There are 10 year money today spread somewhere to 20 to 30 give or take 10 or 20 basis points over the 10 year. So as we sit here today with a 10 year five thats going to low <unk> low to mid Sevens capital.

Talking about debt maturities for next year I know you mentioned the swaps.

But can you just tell us how youre thinking about addressing that maturity.

What would the term b and.

Speaker 6: questions on Valera, but more for me, how you're thinking about value creation and capital.

Maybe where you think you could price money today.

But we will assess the market.

The mix of 570, <unk>, we do have access to the term loan market that a lot of recent do not have access to so we'll be very focused on ensuring that we.

Speaker 6: and risk holistically in a current environment. In the past you talked about

And it's very good in fact, yes, I mean, we've been very vocal and committed to getting leverage back to our five.

Speaker 6: minimum 100, 150 basis points spread as an investment hurdle. I can give you some care. That's still the case in case environment or would you perhaps want?

Between five and five five times net debt to EBITDA.

Obviously, we took that up a little bit with MVP acquisition and the agencies acknowledged that.

Extending the tenor but also.

Speaker 5: And I'll, David Kittakia. Now that is absolutely still the case in this environment. And as we talked about, obviously, we were fortunate to raise the capital for this, for the Bolero transactions, specifically earlier in the year, when, in fact, the Bolero was in our pipeline back then. And things take weeks, months, and time to come together.

Take advantage of the best pricing and the best lettering maturities as possible.

And I'll, just reiterate Nate that while it does not obviously show up in.

In trailing leverage numbers, when we invest billions of dollars of equity against only $55 million of debt on our recent accretive capital investments. It will obviously have a forward deleveraging effect.

Talked about as we've mentioned collectively we have $450 million of notional forward starting swaps out there we've been legging into a hedge hedge policy.

Speaker 5: But we're not, I had not a stand as we see it here today. We, you know, we look in the screens here with the 10 year is we obviously see where stock prices and still are focused on generating those types of 100 to 150 basis point spreads to our cost of capital. As we think about it, we think about the next dollar of cost of capital. Where do we need to price something to make it a creative based on the market that we are in and underwriting at that time and the capital that we have available to us.

Okay. That's helpful.

To get ahead of that.

Maybe just one more on the bolero I think it's about maybe 10% of their portfolio.

Refinancing.

Given you any indication how much they would be willing to do over time.

Trying to size the potential opportunity here.

So as we sit here today and almost all of their assets are in a sale leaseback format. So it would be potential future growth opportunities as they find opportunities in the marketplace.

But we will assess the market.

Speaker 3: I'll just add, Hendel, we've had a few questions along the lines of, well, geez, could you have used that money to buy 9 and 10 cap assets? And our answer to that would be, today, and especially during the period in which you are gestating the Bolero deal.

The mix of 570, <unk>, we do have access to the term loan market that a lot of <unk> do not have access to so we'll be very focused on ensuring that we.

The.

One of the reasons, we were able to build a relationship and develop this.

Speaker 3: We don't see any really good real estate occupied by really good operators trading at 9 and 10 caps right now.

Extending the tenor but also.

Transaction over time.

Take advantage of the best pricing and the best lettering maturities as possible.

<unk> desire to grow <unk> access to capital and obviously <unk> desire to grow and as you saw in our materials in the commentary if you look at the bolero announcements. They are very they are thrilled with the deal that throw the partnered with BG and we're optimistic there will be more to come together, but there is nothing directly off the balance sheet as we sit here today, yes.

And I'll, just reiterate Nate that while it does not obviously show up in.

Speaker 3: the day could come when they do, but that day is not here right now. And in the meantime, with this capital volatility that we see, we will be very, very careful in recognizing that not only does it cost capital volatile on a day-by-day basis, that has implications for any deals.

In trailing leverage numbers, when we invested $1 billion of equity against only $55 million of debt on our recent accretive capital investments. It will obviously have a forward deleveraging effect.

I can't remember the exact number so hopefully David or John My name, but the thing to keep in mind is that Valero is the market leader in.

Speaker 3: that long gestation period. So we will have to particularly take care.

Okay. That's helpful.

Speaker 3: in any kind of dealmaking that requires longer cessation periods to account for the fact we do not have capital cost certainty by any means and won't.

Maybe just one more on the bolero I think it's about maybe 10% of their portfolio.

Remarkably unconsolidated category with Valero owning do they even own 10% of the category and I think down 10%.

Given you any indication how much they would be willing to do over time.

Speaker 3: will necessarily have it until the day we decide to do a deal, which means we will take great care in deciding to do anything against these market conditions.

So their opportunity to continue to roll up assets.

Trying to size the potential opportunity here.

Transformed the assets transform the experiences and transform the economics is where the future growth between Valero and BT will take place and again, thanks to a.

So as we sit here today and almost all of their assets are in a sale leaseback format. So it would be potential future growth opportunities as they find opportunities in the marketplace.

Speaker 6: One more something also unique about the Lero. Mark the first direct equity owner.

The.

Basically a right of first offer.

One of the reasons, we were able to build a relationship and develop.

Speaker 6: non-gaming real estate in your part. I guess I'm curious about something you guys expect. More ups going forward and I know that you'll still have relatively small future ADR about 1%. But you do have a real full for eight years. I'm curious how.

What amounts to.

An exclusive financing partnership real estate financing partnership that we will enjoy with them for the next eight years.

This transaction over time.

Okay I'll leave it there thank you.

Speaker 6: see there with either that partner and...

We now turn to Chad Beynon Macquarie. Your line is open.

Speaker 3: yeah so you're right technically that these do represent our first direct investments immediate ownership of non-gaming real estate what we what we should point out of course is that through our ventures with cabit and can in ranch we have contracted for call rights to give us a direct pass to real estate ownership in the future

Good morning, Thanks for taking my question just one for me this morning.

<unk> markets and countries are obviously going through different phases of economic cycles, and I know in the past you've talked about growing outside of the U S. Understanding that these relationships take time has anything changed in terms of how youre thinking about non U S versus U S opportunities with respect.

Can't remember the exact number so hopefully David or John My name, but the thing to keep in mind is that Valero is the market leader in a remarkably unconsolidated category with Valero owning do they even own 10% of the category I don't think they own 10% now so so there are.

Speaker 3: So, you know, it happens to just be a difference between the nature of our acquisition of real estate.

<unk>.

Speaker 3: potential acquisition of real estate with Cabinet Canyon Ranch versus the immediate acquisition with Bolero. Certainly in this case, you had an operator with a very compelling opportunity to grow, a very compelling opportunity to put sailed east back capital to work, which led to our immediate acquisition of the real estate itself.

Current cap rates multiples relationships. Thanks.

Opportunity to continue to roll up assets.

Transformed the assets transform the experiences and transform the economics is where the future growth between Valero and BT will take place and again, thanks to a.

Yes, and I will point out as someone who carries both the Canadian passport as well as U S. Passport, we have expanded internationally, Canada is another country and we're very proud to be invested there.

Basically a right of first offer.

And.

What amounts to.

John and the visit and Colin in the business development team continue to.

An exclusive financing partnership real estate financing partnership that we will enjoy with them for the next eight years.

Research International markets as overall real estate marketplaces, and then the categories of interest the experiential categories of interest within those markets and again those are those are situations, where we will make sure to take the time and take great care.

Okay I'll leave it there thank you.

Speaker 1: Oh, next question comes from Ron Camden with Morgan Stanley . Your line is...

We now turn to Chad Beynon Macquarie. Your line is open.

Speaker 7: Hey, just two quick ones from me just going back to sort of the Bolero transaction and appreciate all the details that you provided there in the partnership and so forth, but if you're thinking about sort of the family entertain

Good morning, Thanks for taking my question just one for me this morning.

To make wise investments.

Given that.

They need to be based on deep knowledge of the market before we ever commit capital.

Speaker 7: space, bowling is sort of an interesting one, maybe a little bit more color on how the deal came about and what other sort of avenues or verticals in family entertainment.

Thank you Chad Thank you very much.

Got it I think Elliot.

That will wrap things up correct.

Yes. This concludes our Q&A.

<unk>.

Chinese.

Current cap rates multiples relationships. Thanks.

Closing remarks, yes.

Speaker 3: I'll turn it over to John in a moment, Ron, and good to hear from you. I do think one of the key characteristics of bowling is that it is, it is a low barrier to entry experience, but it is an experience that you can get better at.

Yes, Thank you Allie and thanks, everybody on the call today, we really appreciate.

You being with us and we wish all of you. The best in this very very volatile time. It is a time, we will get through and.

Again, we thank you for your time today.

And.

John and the <unk> and the business development team continue to.

Ladies and gentlemen, today's call is now concluded. Thank you for your participation you may now disconnect your lines.

Speaker 3: And that's in contrast to some other experiences that can take place within the family entertainment sector where

Speaker 3: people might do it once or twice and they go okay fun i've done that i don't need to do it again and and bowling is at its very hard recreation it's all about it you can say it goes back to our most ancient human urges

To make wise investments.

Given that.

Speaker 3: to aim at a target and strike a target. And people tend to get pretty excited when they strike targets.

They need to be based on deep knowledge of the market before we ever commit capital.

Speaker 3: And that energy exists within bowling. It's a recreational energy and not a passive energy.

Thank you Chad Thank you very much.

Got it I think Elliot.

That will wrap things up correct.

Speaker 3: So we think that that has resiliency aspects to it that are at the heart of why bowling has endured in various forms for literally hundreds and hundreds of years, whether outdoor on lawns or indoors in buildings. But I'll now turn it over to John who can give you more color on how we developed that relationship, John .

Yes. This concludes our Q&A I'll now hand back to Ed what Johnny.

Yes, Thank you Allie and thanks, everybody on the call today, we really appreciate it.

<unk> being with us and we wish all of you the best.

Three very volatile time is it time, we will get through and.

Again, we thank you for your time today.

Speaker 4: Yeah, Ron, I was just gonna add that you've heard me speak about times, that relationships take time, and this is one that...

Ladies and gentlemen, today's call is now concluded. Thank you for your participation you may now disconnect your lines.

[music].

Speaker 4: first meeting was years ago with one of the topics that

Speaker 4: at Bolero, and we just studied the business for this long. It's got scale, it's got healthy credit, it's a business that has great margin with growth potential. The only other thing I'll add to Ed's remarks.

Speaker 4: as we continue to study the Bolero business was the diversification of its revenue streams. It has many cash registers of how the business...

Okay.

Speaker 4: revenues from food and beverage, it gets a large percentage from bowling, it gets business revenues from amusement. So we like that diversification as we dug into the business and dug into the team. So we really took time, years in this case, to understand the business. And then I think your final part was, are there other operators over time that we could do? Yeah.

Speaker 4: partners with and we're going to continue to study the family and our attainment center space. There are many good operators but we think we...

Speaker 4: started our journey in the family entertainment center with one of the best

Speaker 8: great and then just state my second one was just staying on the pipeline of of deals and so forth uh... so you know i see the tenures much higher than i think most anticipated and i'm just wondering like when that happens

Speaker 8: Like how does that pipeline sort of evolve? Like do conversations stop? Do they pick up? Just trying to understand like what? How's that pipeline evolving in conversations that you're having as people are reprising capital?

Speaker 3: Yeah, I'll start and then John and David can weigh in, but they definitely slow down, right? And anybody who doesn't slow conversations down against this backdrop of volatility.

Speaker 3: clearly is not paying attention. It's well down in terms of actual coming to any kind of fixing of value and price given volatility is capital.

Speaker 3: But I want to turn it over to John , because what we don't want to do is ever put all pens down, all, not all pens down, but stop all conversations. Because there will come a day, as I said in my opening remarks, Ron, there will come a day.

Speaker 3: when we begin to recover and we don't want to have to call people and say, hey, we probably forgot about it because we haven't talked to you in months, quarters, years, what have you. We don't want to do that. So John , if you want to talk about the way in which we make sure our conversations continue, even if...

Speaker 3: even if they have to sew down a bit in terms of fixing value.

Speaker 4: Yeah, had you described it very well? We're constantly looking for opportunities.

Speaker 7: learn more about certain sectors and businesses that.

Speaker 7: that we're not experts on today, develop long-term partnerships. But that doesn't mean we trans.

Speaker 7: at this moment of uncertainty. It means that we're preparing for the time when they hopefully go from defense to offense and look at opportunities that we understand the sector or the company and we develop that relationship.

Speaker 7: So a little bit of a different time than the past couple of years, but we still are working to find opportunities for the long term.

Speaker 1: Our next question comes from David Katz with Jefferies.

Speaker 9: Hi, morning, everyone. Thanks for taking my question. Just one more on on on Bolero. And this is not intended to be a leading question in any way. But I know you do a lot of homework around the business and the underlying real estate. I wonder if you could just talk about the durability of, you know, that

Speaker 9: that real estate value, what kind of cap exit requires relative to the other stuff that you've acquired so far, and just sort of give us a picture of that long-term value durability, please.

Speaker 5: Yeah, David, David, get the talk, Jack and start and John chime in. I mean, one of the things we love about the Bolero business model is the fact that they go in and re-position, bullying out, is it a bit around, you know, not for hundreds, is hundreds of years like I talked about, but you know, these efforts are 10 to 50 plus years old that they buy.

Speaker 5: and reposition with anywhere from three to five million dollars of capital and transform something that was dark and gray and a little bit dated into a very lively

Speaker 5: experience that is John talked about has multiple cash registers and is a is a draw for the local community And they've done this now since you know the late 90s and they have a portfolio 350 assets across the country and in some outside the US

Speaker 5: where they continue to see opportunity to grow and the white space out there are very fragmented mom and pop ownership in just industry. And you know, they see opportunity for another 500 to 1000.

Speaker 5: centers into their portfolio over time and that's what we like about it. But to give you a hearty or question, they take a box that's very solid and make it even better and make it especially brand new.

Speaker 3: And that's what we love about the business model. And then the cash loads that come out of that business that's just John that have very high margins and very sticky recreation aspect to the to the cash loads. You know David I'll just add to this you you you and I talk a lot about you know my old days way back in skewers or operations and what I learned back in skewers or days is to fall love that fall in love with businesses that respond

Speaker 3: that respond intensively and quickly to capital investment and management focus and intensity.

Speaker 3: And the difference between this and the ski business is you can make a great capital investment and operate the heck out of the business and it doesn't snow.

Speaker 3: your SOL. And what I love about this business is that it's very responsive to the investments of capital. You invest capital and you get pretty much an immediate consumer response. And it's also a business that responds really well to management intensity. And again, Tom Shannon and the Bolero team are very, very shrewd at investing capital and know how to manage the P&L, every single line, top, middle, and bottom.

Speaker 3: to drive, to use that management intensity to really transform results through the transformation of the experience.

Speaker 7: David, the only other thing I would mention is just the detail of our underwriting, you know, we went to all 38 assets in the 17 states.

Speaker 7: We got to meet not only the senior management team, as I talked about, but our team got to meet the people on the ground that make these assets so productive.

Speaker 7: And it helped us in continuing to understand the durability of the business and the asset. So that just gives you a flavor of how we went about this investment.

Speaker 1: elevator's autonomous for key bankue Consumer

Speaker 8: Hi, good morning. So first question, Ed. Maybe John , it sounds like the company may slow down on investments in the near term until visibility.

Speaker 3: I believe they will, but it always takes time. Cellars always tend to take...

Speaker 3: more time to come to grips with reality than buyers. Would be sellers, would be buyers.

Speaker 3: And obviously we've seen some cap rate expansion over the last year. I'm very confident in telling you that a year ago we would not have been able to buy 38 Bolero assets at 7.3% cap rate. Very confident that we could not have done that. These assets would have traded tighter a year ago as they traded considerably tighter a couple of years ago when Carlyle bought a large portfolio of Bolero assets.

Speaker 3: So as we look over the year to come, and maybe years to come, I think you can expect.

Speaker 3: markets eventually do accept realities, but markets tend to take time to accept those realities and we'll be patient for that acceptance to take place.

Speaker 3: and enjoy the benefits of same-store growth that we as a net lease re enjoyed to a very rare degree. Thanks to our lease escalation, and especially the CPI component of that escalation.

Speaker 3: same-store growth is going to mean something in the net lease space over the next year if things slow down in the way they might and uh... and will cite a report from our friends at green street that showed that uh... both bg and glp i enjoy same-store and a lot of growth that you know about four times the standard net lease re

Speaker 8: Okay, the telpul. And then I guess within that context, you know, of sort of looking.

Speaker 5: But in day to take the first, the last half of that first and then John can take the first half. Yeah, Todd. And those have been with us since the beginning, right? In the early days we had call rights of a 10 cap. And as we talked about then, we said we'd use those to layer into our growth.

Speaker 5: when the pipeline, you know, may be slower or there may be less opportunities in the marketplace. And we take the same approach with the call rights in Indiana that runs until the end of next year, end of 2024. And we just have to call it by the end of 2024. So as we look into the future, we'll be very disciplined with where our cost of capital is, but also very kind of methodical about how we layer that into our future AFFO growth.

Speaker 4: And then on the operating side, we just, like we do with our current.

Speaker 7: assets that we own. We're continuing to monitor how the business is performing in Indianapolis. As I've mentioned on other calls, seizures is put in significant. Capital to both the assets and those business continue to be rewarded based on those capital improvements. So we'll continue to monitor that.

Speaker 10: Our next question comes from Greg McInnes with Scotia Bank. Your line is open. Good morning.

Speaker 11: And then also for any potential ROFOs.

Speaker 3: Yeah, I think it's a good question. And to take the first part of your question, you know, we very much partner with our partners like Canyon Ranch at developing investment criteria.

Speaker 3: Applying those criteria to the marketplace to figure out where the best opportunities may be. And I think I mentioned back when we announced the expansion of our Canyon Ranch partnership back in late July , the John Goff and I share a conviction that the coming years, 24, 25, 26, and onward, could represent the kind of opportunity that John Goff and Richard Rainwater saw in the resolution trustees in the early 90s. There could be some very compelling out-position opportunities that are born out of...

Speaker 3: Not necessarily operating distress, but what could be a certain element of financing stress.

Speaker 3: So we're excited about that. We're patient. We're willing to wait for the right opportunities to come along in that vein.

Speaker 3: And when it comes to figuring out pricing and real photos and call right

Speaker 3: I think what we're increasingly focused on is a degree to which we may need a certain amount of flexibility between us as buyer and any would-be seller to account for the unpredictability of capital cost and resulting values. So we're gonna we're gonna be careful that we don't lock in

Speaker 3: to a cap rate for a future acquisition that may turn out at that time to be diluted.

Speaker 5: Yes, excuse me Greg. Stay with good to talk to you and thanks for joining the call. You know for a candy ranch it's somewhere you know 120 to maybe 150 rooms but kind of 130, 140 rooms or sweet spot.

Speaker 5: One of the things is they want to ensure asset utilization. So if you look at Linux and Tucson, the room counts right around there.

Speaker 5: What they're working on and developing in Austin will be right around that that size

Speaker 5: And so as we think about potential other dots on the map, whether it be ski or beach or potentially even international one day.

Speaker 5: How do you find or how do you focus on assets of that size? And given the economic magnitude or vitality that comes out of that business.

Speaker 5: you can take a conventional hotel that has similar room sizes and make the economics so much greater and so much better than what were was out of a traditional hotel. And so that's that's part of the excitement part of the opportunity that we you know we potentially see together in the future and some of the distress or malaise that may be coming from that sector.

Speaker 11: about their you know perceived likelihood of receiving a license empire city

Speaker 4: Yeah, we will. First of all, MGM has been a great part.

Speaker 7: we are able to acquire MGP and those assets. And obviously the New York process is going on right now. There's some who believe, as you said, that the two current racinos will get two of the three licenses.

Speaker 7: and should MGM be one of those and they're looking to build that business and we see an opportunity to use our capital to build and get incremental rent. We'll absolutely talk to the partner about that. So we'll just have to see how this process plays out over the coming years.

Speaker 12: Hi, thanks. I just wanted to ask you a little bit about how you think about the scope of the opportunity with Bolero over time, I guess, against coverage levels. I think you said about 3.2 times coverage, so a lot of cushion in there. But where would you sort of be comfortable, I guess, continuing to kind of buy up their

Speaker 12: you know, there are ebibond converting it into rent relative to the coverage level.

Speaker 5: That's me. We studied the business as you heard us say. We studied the business and the company for a couple years now and

Speaker 5: Their ability to go into an asset with very low four-wall coverage and transform that asset into very high four-wall coverage gives us a lot of conviction in the business and then obviously with the master lease and the corporate guarantee that we get out of the incremental protection we get gives us a lot of comfort.

Speaker 5: That's the area that we target, you know, kind of high twos, four wall coverage, low threes, and then obviously the corporate guarantee. And they're a growth-minded operator who understands the merits of a sale leaseback model and ensures that they have the capital available to grow their business in the way, shapes, or forms that they want to do. And, you know, they want to size the rent in a way that gives them protection to make sure that they're creating and benefiting from all the upside that they generate, given their business model and the economics that they do produce.

Speaker 12: Okay, and then I just wanted to ask about the balance sheet. The leverage just picked up slightly to 5.7 from 5.6.

Speaker 12: and you still have the um... what waiting between s and p and movie what do you think are kind of what's the kind of uh... uh... path i guess with communities and if they want to see continued that participation away from gaming or it will put uh... and and i guess kind of what uh... sort of leverage metric that you think that they would need to see in order to move into investment great

Speaker 5: Yeah, it means that's just the only first point. I mean, the leverage to take that quarter of a quarter really good cash went down. Right? If you look at our supplement, you quarter of a quarter.

Speaker 5: That only went up $55 million. That was the fun of the century Canada asset and cash went down $230 million as I talked about the equity and the cash out the door to fund the acquisitions that we closed during the quarter. So really a diminimous move in leverage. Like in terms of moody is at the continual education and it's just a, it takes time. All right, we've been around for six years. We're educating the agencies on the gaming net lease model for educating moody's in particular on gaming tenants.

Speaker 5: And as we talked about, I think with many of you in the past, they took our rating up two notches when we did our inaugural investment grade offering back in the April of 2022.

Speaker 5: We've been in touch with them consistently. And we will, for an agency to make a move, it often takes an event. So we're hopeful in the coming months or period of time, there will be an acknowledgment of the.

Speaker 5: I think that the of our cash flows and an upgrade coming. And it's, there's really...

Speaker 5: No real kind of, you know, black and white trigger. It's a little bit of just do what you say, say what you do, and continue to prove the merit of your business model, which we have been very, very diligent and working hard at. Thank you.

Speaker 7: Thanks, good morning, everyone. Going back to the pricing environment, but thinking about traditional gaming real estate specifically, it seems like there's been this dynamic over the past, called 18 months or so, where gaming real estate has been positively reprised relative to traditional commercial real estate.

Speaker 13: And I wonder if that dynamic is still playing out in your mind or if you think calf grade or maybe

Speaker 3: Yeah, Chris, good to talk to you. I think the honest answer would be, we don't know. The most recent trade in big box gaming obviously was a realty income investment in Bellagio, where I believe it took place at it...

Speaker 3: 5.2 cap rate. So exactly to your point, there's not a lot of the real estate categories covered by Green Street, you know, where you're seeing those kinds of cap rates right now, perhaps outside of industrial and maybe data centers.

Speaker 3: so that there there is resilience there uh... but beyond that the logic investment uh... i don't think we have a lot of data to point out uh... but i do think you know going back to what John has been saying about the vitality especially of los vegas where so much of our capital is invested there's really no place on earth like it and you know and and it may sound a bit trivial but uh... a point to for instance pink pink name id

Speaker 3: announcing, I want a residency in Las Vegas and I want it now because she's recognizing as a global artist that Las Vegas is the place for global artists to situate themselves right now because of the drawing power that Las Vegas has on a global basis. So you're seeing a resiliency of economic activity that should

Speaker 3: constitutes some degree of resilience of value that you're not obviously going to see in a lot of other sectors where you are facing either secular headwinds uh... or supply demand and balance

Speaker 4: Yeah, and the other the other thing that's unique in the gaming business right now than other businesses, right, is that the operating performance.

Speaker 4: of a lot of these casinos, particularly in the city you'd call out Las Vegas, are doing incredibly well. Right? So yes, there's a lot of volatility in the markets, but their core business is really performing quite well. So we'll see how this plays out.

Speaker 1: We now turn to Nate Crossett with BMP. Your line is open.

Speaker 12: Hey, good morning, maybe just one quick one on the balance

Speaker 12: If you could just maybe remind us of the guidance for your leverage band.

Speaker 12: and then just address like talking about demoturities for next year. I know you mentioned the swap.

Speaker 12: But can you just tell us how you're thinking about addressing that maturity?

Speaker 12: what would the term be and maybe where you think you could price money.

Speaker 5: Yeah, Nate, David, get the fact, yeah. I mean, we've been very vocal and committed to getting leverage back to our five, between five and five and a half times in that debt to EBITDA.

Speaker 5: Obviously, we ticked that up a little bit with the MGP acquisition and the agency's acknowledged that and Understoodably would work very hard to get that leverage back down and we've kind of exceeded the pace that we originally told the agencies in the summer of 21 and in terms of our 10-year money We do have a maturity that comes to May 1st of 2024 the window opens on February 1st of 2024

Speaker 5: As I talked about, as we've mentioned collectively, we have $450 million of notional forward-starting swaps out there. We've been legging into a hedge.

Speaker 5: a hedge policy to get ahead of that refinancing. With our tenure money today, spread somewhere to 222.30, give or take 10 or 20 basis points over the tenure. So as we see here today with a 10 year or five, that's kind of low seven, low to mid-7th capital.

Speaker 5: The most of the market is that it makes a five, seven, or 10s. As it all tens, we do have access to the terminal market that a lot of reeds do not have access to. So we'll be very focused on ensuring that we

Speaker 5: extend the tenor but also take advantage of the best pricing and the best laddering of our maturity is as possible.

Speaker 3: And I'll just reiterate, Nate, that while it does not obviously show up.

Speaker 3: in trailing leverage numbers. When we invest a billion dollars of equity against only 55 million dollars of debt on our recent accretive capital investments, it will obviously have a forward deleveraging effect.

Speaker 12: Maybe this one more on the Polaro. I think it's about maybe 10% of their portfolio. Have they given you any indication how much they would be willing to do over time? Just trying to like size.

Speaker 5: As we sit here today, almost all of their assets are in a sale lease back format. So it would be potential future growth opportunities as they find opportunities in the marketplace. And one of the reasons we were able to build a relationship and develop...

Speaker 5: transaction over time is, you know, Vichy's desire to grow, Vichy's access to capital, and obviously Bolero's desire to grow. And as you saw in our materials and the commentary, if you look at the Bolero announcements, they're very

Speaker 3: They're thrilled with the deal, they're thrilled to partner with Veche, and we're optimistic there will be more to come together, but there's nothing directly off the Bolero balance sheet as we see here today. Yeah, and I can't remember the exact numbers, so hopefully David or John might, Nate. But the thing to keep in mind is that Bolero is the market leader in a remarkably unconsolidated category with Bolero owning, do they even own 10% of the category? I don't think they own 10%.

Speaker 3: So, their opportunity to continue to roll up assets, can transform the assets, transform the experiences, and transform the economics, is where the future growth between Bolero and Veche will take place. And again, thanks to basically a writer-first offer, what amounts to an exclusive financing partnership, real estate financing partnership, that we'll enjoy with them for the next eight years.

Speaker 1: opening up into ChatBanon with McCwary. Your line is up.

Speaker 14: Morning, thanks for taking my question. Just one for me this morning, different markets and countries are obviously going through different phases of economic cycles and I know in the past you've talked about, you know, growing outside of the U.S., understanding that these relationships take time. Has anything changed in terms of how you're thinking about non-U.S. versus U.S. opportunities with respect to, you know, current cap rates, multiples, relationships? Thanks.

Speaker 3: Yeah, and I will point out as someone who carries both the Canadian passport as well as US passport. We have expanded internationally. Canada is...

Speaker 3: another country and we're very proud to be invested there. And you know, John and Kellan and the business development team continue to research international markets.

Speaker 3: as overall real estate marketplaces and then the categories of interest, the experiential categories of interest within those markets.

Speaker 3: And again, those are situations where we will make sure to take the time and take great care to make wise investments given that.

Speaker 3: They need to be based on deep knowledge of the market before we ever commit capital.

Speaker 3: Thank you Chad. Thank you very much, appreciate it. I think Elliot that will wrap things up, correct?

Speaker 1: Yes, this includes our Q&A. I'll hand back the Edward Turnian. See you at the closing room.

Speaker 3: Yeah, thank you, Elliot. Thanks to everybody on the call today. We really appreciate you being with us, and we wish all of you the best during this very, very volatile time. It is a time we will get through. And again, we thank you for your time today.

Speaker 1: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now just connect to us.

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