Q1 2024 Gaming and Leisure Properties Inc Earnings Call
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Ladies and gentlemen, good morning, and welcome to the gaming and Leisure properties, Inc. First quarter 'twenty 'twenty four earnings conference call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
Joel Just: It is now my pleasure to introduce your host Joel just funding Investor Relations. Please go ahead Sir.
Joel Just: Thank you Ryan and good morning, everyone and thank you for joining gaming and leisure properties first quarter 2024 earnings call and webcast. The press release distributed yesterday afternoon is available on the Investor Relations section on our website at Www Dot G. L prop M Dot com.
On today's call management's prepared remarks and answers to your questions may contain forward looking statements as defined in the private Securities Litigation Reform Act of 1995.
Joel Just: Forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today.
Joel Just: Looking statements May include those related to revenue operating income and financial guidance as well as non-GAAP financial measures measures such as F. O N E F out.
Joel Just: As a reminder, forward looking statements represent management's current estimates and the company assumes no obligation to update any forward looking statements in the future.
Joel Just: We encourage listeners to review the more detailed discussions related to the risk factors and forward looking statements contained in the company's filings with the SEC, including the Form 10-K, and 10-Q and in the earnings release as well as the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release.
Joel Just: On this morning's call. We are joined by Peter Carlino, Chairman and Chief Executive Officer of gaming and leisure properties.
Speaker Change: Also joining today's call are Brandon Moore, Chief operating Officer General Counsel, and Secretary Deseret Burke, Chief Financial Officer, Treasurer, Steve <unk>, Senior Vice President Chief Development Officer, and Matthew <unk>, Senior Vice President and Chief Investment Officer.
Speaker Change: With that it's my pleasure to turn the call over to Peter Carlino. Peter. Please go ahead.
Peter M. Carlino: Well, thanks, Joe and good morning to everyone.
Peter M. Carlino:
Peter M. Carlino: As usual, let me call your attention to my written comments in our release, which highlights.
Peter M. Carlino: This has been a steady quarter for Australia, which we strengthened our balance sheet.
Peter M. Carlino: And anticipation for what we would hope to deliver through the balance of this year.
Peter M. Carlino: And the last paragraph of my comment with us from which I'll briefly quote.
Peter M. Carlino: In 2023, we completed a $1 $1 billion of transactions, including over $760 million.
Peter M. Carlino: Traditional real estate acquisitions, and 337 million of loan funding.
Peter M. Carlino: That's right.
Peter M. Carlino: The overall 2022 transaction value, despite a challenging market environment reflects their creativity and creating comprehensive financing solutions for our tenant partners.
Peter M. Carlino: Our 2023.
Peter M. Carlino:
Peter M. Carlino: Addition, set the stage for financial growth in 2024 and beyond.
So that Ah I can say.
Peter M. Carlino: Look well.
Peter M. Carlino: We're now working on a number of transactions, both small and larger.
Peter M. Carlino: And I think most of you recognize what we do is highly complex and it requires a great deal of careful structuring and often regulatory approval.
Peter M. Carlino: Nonetheless, we expect that our performance will level out acceptably well as it always has over the next over the balance of this year and beyond and so we feel pretty good about that.
Peter M. Carlino: And one final gratuitous column and I'll throw in that as a large shareholder I couldnt be more delighted with the growth in our dividends over these last years and our announcement this quarter as well so with that I'm going to turn it over to the Deseret Burke to make some comment desert right.
Desiree A. Burke: Thanks, Peter and good morning, everybody.
Desiree A. Burke: I'm, just going to highlight or they figure out what's happening in our income statement for the quarter for the first quarter. Our total income from real estate exceeded the first quarter of 'twenty three by over $20 million. This growth was driven by the Tioga acquisition, which increased cash rental income by 2.2 million, the Rockford acquisition, which increased.
Desiree A. Burke: Rental income by $3 1 million at Casino Queen Marquette acquisition in the Baton Rouge, Landside development, which increased cash rental income by $2 3 million.
Desiree A. Burke: The recognition of escalators and percentage rent adjustments on our leases, which added approximately $3 $5 million of cash rent.
Desiree A. Burke: The combination of noncash and that's when our lease adjustments and straight line rent adjustments, which drove a collective year over year increase of $9 4 million.
As far as operating expenses go they increased by $30 million, but that was primarily due to a noncash increase in the provision for credit losses.
Desiree A. Burke: Penn amended pinnacle and Boyd Master leases have rent resets that are occurring on may 1st of 'twenty 'twenty. Four we continue to expect that these resets oversold and increased percentage rent adjustments of between four and $5 million annually.
Desiree A. Burke: In addition, we expect to receive full escalation on these contingent escalation leases, which will result in $6 5 million of additional rent annually.
Desiree A. Burke: Finally, the amended Penn Master leases subject to contingent escalation as well on November 1st of 24 and is obtained and for wet herself and 4.2 million of annual rent.
Included in todays release is that Ray S. F O guidance, ranging from $3.71 to $3.74 per diluted share in O. P units. Please note that this guidance does not include the impact of future transactions.
Desiree A. Burke: We have invested in a zero coupon six month Treasury Bill that matures in August of 'twenty 'twenty four at an implied yield of 5.32%. So in addition to the cash that you see on our balance sheet. We also have the treasury Bill.
Desiree A. Burke: Coverage remains strong ranging from 1.98 to 2.71 in our master leases as of the end of the prior quarter.
Me: With that I'll turn it over to me for comments.
Thanks, dessert Ray and thanks, everyone for joining us this morning.
Speaker Change: Our focus on stability and dependability continues to show and the consistency of job you guys cash flows and a solid four wall coverage across our leases our business model is the built to navigate business cycles, including economic and interest rate volatility history suggests that heightened volatility often.
Speaker Change: Leads to opportunity for those who are prepared at G. L. P. I, we've worked hard to prepare for.
Speaker Change: Our leverage and liquidity are at levels that strengthen and support our business model, we've got normalized debt to EBITDA in the mid force.
Speaker Change: Taggard maturity profile, our next unsecured maturity not due until mid next year and significant available liquidity.
Speaker Change: Between our revolver and quarter end cash position.
Speaker Change: Positioning the company to have Optionality on incremental capital sourcing for transactions as they arise our track record of creativity makes us an ideal choice for Counterparties, who would benefit from bespoke financing solutions.
Speaker Change: Our partners want not only to solve the current needs, but also to have a partner who can predictably continue to meet them well into the future.
Speaker Change: You've always been a dependable capital partner and in the current backdrop of the value of that dependability has gone up.
Speaker Change: That's a potential counter parties need to do things, we're here ready for them willing and able.
Speaker Change: We are focused on closing opportunities to prudently deploy our shareholders' capital now.
Speaker Change: I'll now turn the call back to Peter.
Peter M. Carlino: Thanks, Matthew and thanks Deseret.
Peter M. Carlino: You all have a pretty clear picture of who we are and where we're headed so with that operator would you. Please open the floor to questions.
Peter M. Carlino: Yeah.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now be conducting a question and answer session.
Speaker Change: If you'd like to ask a question. Please press star and one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stock east.
Speaker Change: Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Speaker Change: Yeah.
Speaker Change: Our first question is from the line of Greg Mcginniss with Scotia Bank. Please go ahead.
Greg Michael McGinniss: Hey, good morning, this is element Shang on with Greg.
Greg Michael McGinniss: If you look across the regional markets at the property still owned by gaming operators and those that want to expand still are.
Element Shang: What is the realistic in basketball market size that would still mean your desirable investment spread criteria.
Element Shang: And any you know maybe the real estate is desirable, but initial accretion is limited.
Element Shang: How much are you willing to give up on initial cash yields for potentially better growth from rent escalators.
Speaker Change: I don't think there's any shortage of opportunity if I understand the question correct.
Speaker Change: We see a horizon of some pretty.
Speaker Change: I hesitate to say juicy, but good opportunities with partners and and others.
Speaker Change: That we have on the drawing board on a constant basis, but let me ask Matt to.
Opine on that.
Speaker Change: Sure.
Matt: When you think about the opportunity set I'd really think of our job is figuring out structures and ways.
Matt: Like most every asset work for US remember, we've got master leases that we've got a lot of other structuring tools in our tool chest that have consistently made us really high quality cash flow every one of these deals tends to be at least the ones. We do directly originated and with a lot of.
Matt: Accommodations for salt on the other side, so I think as most all of the assets out there for a long period of time as part of our opportunity set. The big question is what the catalyst is on the other side for someone to do something.
Matt: And right now I mean, there's different buckets. If you have someone who is rolling out up assets developing assets may be redeveloped at large scale. So is it a more natural opening for someone like us and you know the reality that these assets generate a lot of cash flow means that that sense of urgency isn't necessarily there forever.
Matt: And it's our job to be ready, if and when it arises.
Matt: But the other reality is this year, we've got a presidential election and the amount of.
Matt: Volatility that could come up as we get closer and concerns around tax changes.
Matt: Maybe that's another bucket to think about I mean, that's where the cordish deal ultimately came from.
Speaker Change: Got it Okay makes sense and then I guess speaking being a catalyst.
Speaker Change: Sure Uh huh.
Speaker Change: And operator to do something I was given given recent valley's news.
Speaker Change: You know their credit rating being downgraded it was a negative outlook.
Speaker Change: Have conversations changed maybe around the potential investment opportunities, both new and there was embedded within the pipeline.
Speaker Change: Due to the tighter financing environment.
Speaker Change: This is Steve I'll try to take a shot at that so.
Steve: I think a separate removed from from valleys, though I would include them in this call.
Comment I think all of our counterparties, whether their current tenants or potential tenants in the future I think all of our Counterparties have seen the increased debt costs last longer than I think they maybe had hoped for or at least anticipated and I think as time has more on end.
Steve: The hopeful desire for rates to be back to a much lower level has somewhat dissipated I think people have started to come to more of a realization that higher rates might be around longer and therefore, it has started to kind of somewhat reset the way potential.
Steve: Sellers are thought about cap rates now don't don't run with that.
Not saying that people have had immediately.
Steve: Have immediately push themselves from an expectation of seven 5% to eight and three quarters percent, but I think we have seen people become a little more realistic with respect to pricing expectation and it has meant that cap rate expectation has started to move higher higher excuse me.
Speaker Change: Got it okay. Thank you.
Speaker Change: Thank you.
Thank you.
Speaker Change: Our next question is from the line of Ronald Camden with Morgan Stanley. Please go ahead.
Ronald Kamdem: Oh, Hey, just two quick ones starting on the pipeline.
Ronald Kamdem: Commentary about doing 1 billion won last year, which as you know roughly 70% to 75% traditional versus sort of funding commitments, maybe as you're thinking about the pipeline going forward is that sort of the right mix of opportunities or how is that sort of evolving and so forth.
Ronald Kamdem: Okay.
Ronald Kamdem: I guess, a smart answer is well, let you know when we get there but look this just so completely unpredictable as I made in my introductory comments, we're looking at some modest deals.
Ronald Kamdem: Call them inflation fighters and then we're looking at some larger transaction as well and I think that's kind of the way. It's always been we managed to scrounge something out of the woodwork year in and year out and we expect it's going to be more of the same.
Ronald Kamdem: So the fact that this has been quiet for the early part of 'twenty four.
Shouldn't suggest for a moment there isn't a ton of stuff going on here at somebody here around the table and I don't remember which of you all had.
Ronald Kamdem: I noted the analogy instead of like a duck going a little duck going across the pond.
Ronald Kamdem: It's it looks smooth and effortless, but down below the water here franticly battling we're always frantically paddling here, so I'll stick with that with that answer.
Ronald Kamdem: Right.
Ronald Kamdem: My second one.
Ronald Kamdem: I may add on the guidance, maybe just high level can you talk about any moving pieces between NOI and interest cost looks like the treasury investment how does that impact the guidance and and also if you could talk about the the Lincoln asset and an update there. Thanks.
Ronald Kamdem: Okay, but there's some from a guidance perspective Lee is that so far but we're looking to estimate our high and low end of our guidance and and that is our that's moving part as well as the fact that we have the premium announced transactions for Rockford and the timing of the funding of that.
Ronald Kamdem: The transaction also impacts the high and low end of the guidance and then as far as valleys Lincoln and I don't think we have any new information to provide at this time.
Ronald Kamdem: We still have our option out there but.
Ronald Kamdem: We don't have any information to know when they might actually be able to tell us that asset.
Speaker Change: Great. Thanks, so much.
Thank you.
Speaker Change: We haven't exhausted everybody yet have we.
Speaker Change: Operator.
Are we still connected.
Speaker Change: Peter I can hear you.
Speaker Change: Okay.
Speaker Change: Right.
Speaker Change: Brian.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: So Joe I think I think we understand that everybody that's dialed into the line can probably still hear us, but we don't have an operator to sell through the questions through to us. So we apologize for the delay.
Speaker Change: We're trying to contact the operator, I don't know why isn't that responding ladies.
Speaker Change: Ladies and gentlemen, I apologize for the technical difficulty standby one moment please.
Speaker Change: Once again, ladies and gentlemen, we do apologize for the technical difficulties, we do have a question coming.
Speaker Change: From the line of Todd Thomas from Keybanc, Todd could you. Please confirm if you've asked your question.
Todd Michael Thomas: Yes, hi, good morning can you hear me okay.
Todd Michael Thomas: Yes, we do.
Todd Michael Thomas: Alright.
Todd Michael Thomas: First question, just Brandon Matt I, just wanted to go back if we could real quick to some of the commentary around asset pricing.
Todd Michael Thomas: I'm just curious as.
Todd Michael Thomas: You look ahead and look at kind of what you're seeing out there underwriting in the pipeline.
Todd Michael Thomas: Whether you would expect to be deploying capital at higher yields than say the eight 3% for tayo guys.
Todd Michael Thomas: You sort of look ahead, assuming the environment does not change from here.
Speaker Change: I'd say more broadly that's.
Speaker Change: Each one of these deals is so unique and it's really hard to come up with a homogenous answer I don't know that rates have changed in the last few months based on some of the volatility, but I also think that level represents what's possible in an environment like this and unfortunately, you have to see some headlines to see where we kind of land things with folks.
Speaker Change: We always try to get the most possible, but obviously theres a negotiation in two sides of it to get us to the finish line.
Speaker Change: Yes. This is Steve and I think last quarter I didn't pull my notes to see what I said, but I think I said something along the lines of I don't expect to see deals north of 9% cap rates and I don't expect to see deals south of 7% and I think thats that range true at this point and I think everything else, Matt said is spot on.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: The more recent backup in rates.
Speaker Change: Does that impact plans at all regarding.
Speaker Change: Either sort of redevelopment or expansions.
Speaker Change: That you and your operator partners have has maybe been contemplating in any way either sort of activity levels altogether or timeline.
Speaker Change: I think the backup in rates actually increases the amount of dialogue, we have with with some of our partners obviously.
Speaker Change: You would assume.
Speaker Change: When they are contemplating a capital improvement at an asset that we own with them and lease to them.
Speaker Change: Have.
Speaker Change: A couple of pockets to take cash from our seat cash from for those projects and one of which is these borrowing cost and so.
Speaker Change: If we go to turn back the clock a few years the borrowing cost was always significantly inside of whatever cap rate Oh, we could offer from a financing perspective, that's no longer the slam dunk that it used to be and so I.
Speaker Change: I think we've seen an increase in dialogue.
Speaker Change: And I think that will continue as we move forward here Yeah, Todd one of the interesting dynamics, we've seen playing out or are seeing in real time that with the fed not cutting as people might have expected as we've got an inverted yield curve. So people that are borrowing short based on chauffeur.
Speaker Change: Our permanent capital.
Speaker Change: Sticker price is a lot closer to what they might be thinking about or better than that versus an environment, where were quote unquote a little more normal.
Todd Michael Thomas: Okay. That's helpful and just lastly, deseret.
Todd Michael Thomas: What do you do with the funds from the zero coupon T Bill at maturity and what's the rate that you're earning on cash relative to the to the 532% Im assuming its relatively close but whats assumed in guidance with those funds at maturity.
Speaker Change: So at maturity, we're going to use the funds to repay the 400 million dollar bond that comes due on September 1st and that 5.32 is very close to what we get for our normal cash deposit right now are at like 524 I think.
Speaker Change: That number changes by the day, though but.
Speaker Change: Right Okay.
Speaker Change: Alright got it thank you.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is coming from the line of Barry Jonas with Chewy Securities. Please proceed with your question.
Barry Jonathan Jonas: Hey, guys good morning.
Barry Jonathan Jonas: Maybe talk about the competitive environment, you're seeing out there right now for deals is it kind of a same faces or any new players out there. Thanks.
Speaker Change: You know I never think that we compete with anybody frankly.
Speaker Change: The reality is yes, sometimes there are other players around a particular transaction, but you.
Speaker Change: Matt coined.
Speaker Change: A phrase.
Speaker Change: A couple of years back that most of our transactions are bespoke, where we discuss.
Speaker Change: Find a way to provide something special different.
Speaker Change: More effective in the aggregate to a particular partner.
And I think we've done that we're not always the cheapest is certainly not our goal I used to say I never wanted to be the winner at an auction because the winter often loses.
Speaker Change: It's just not our goal what we seek to do is find transactions that.
Speaker Change: Give us a spread that's that.
Speaker Change: A little complicated to our cost of capital and so far we've been able to do that and in any environment. So each transaction is unique each of our partners has a special desire and and plus all at one of them.
Speaker Change: Their suggestion to in a recent discussion we had with the with the attendant.
Speaker Change: They do business with us because they like us and they have confidence in us and we have a good reputation of being a good partner.
Speaker Change: All of that figures into it and it's more than just dollars and cents.
Speaker Change: Yeah.
Speaker Change: Got it got it and then maybe one for Deseret again, it's noncash, but can you provide more color on the change in the allowance for credit losses, just try to understand if there are any wider ramifications down the road here or its all just accounting.
Desiree A. Burke: So you know that number is very volatile and this quarter in particular, it was more of the macro economic environment and assumptions around the commercial real estate index.
Desiree A. Burke: And where that is heading that caused the charge I would say, it's more accounting than anything that has nothing to do with performance of our properties that are in our investment and financing lifeline, which requires that reserve.
Speaker Change: Great. Thanks, so much guys.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is coming from the line of Daniel Julia Moe with capital One Securities. Please proceed with your question.
Speaker Change: Hello, everyone. Thank you for taking my questions.
Speaker Change: The first one.
Speaker Change: <unk> diversified portfolio with around eight public and private operator tenants I'm sure you guys are talking with them on a regular basis and I'm just curious and those conversations are they broader themes that they're all thinking through or is it kind of a mixed bag.
Speaker Change: Steve Why don't you take that sure look I think I think that each company is in a different different states. So I think they are similar themes as far as.
Steve: Operating efficiency focus.
Steve: Expansion of their properties to drive additional revenues those are those themes are consistent where where they start to deviate as some some of the tenants are a little more focused on.
Steve: Growth by way of maybe new jurisdictions that are that are opening up some are focused more on on online platforms and things of that nature. So each one has a specific focus that that's kind of taking some of the timeshare from them, but overall in <unk>.
Steve: Her arching bay, they're all focused on the brick and mortar business.
Steve: Generating additional cash flow and ultimately pay.
Steve: Paying a rent which is which is what we're most focused on as well so.
Speaker Change: Okay great.
Speaker Change: And then the next one.
Speaker Change: A bit more like modeling.
Speaker Change: We've talked about the dry capital powder, you all had and just thinking through the cash outlays for the next few years should we be putting that capital to work is like potential development projects acquisitions a bit of both.
Speaker Change: We don't have insight into the so called them, placing fighter deals. So just just wanted to give you guys credit there, yes, any insight there would be helpful.
Speaker Change: I'm not sure what we can say, maybe turn that over to Steve for a moment look it's all the above we expect to be doing all of those things large small development.
Steve: Property acquisitions, everything and I think everything and that list is on our plate right now.
Steve: Yeah, I don't know if I can give you any better insight obviously.
Steve: The transactions as Peter's opening remarks commented on you know these are complex transactions that do take time.
Speaker Change: And if I, even if I told you everything that I thought in my head.
Speaker Change: I sit here today, and I think could possibly happen I know for a fact some of that is never going to happen and other things that I don't know about today are going to close so.
Speaker Change: It's very difficult for me to give you a precise advice on how to best forecast us going forward.
Speaker Change: Okay. Thanks I appreciate it.
Speaker Change: Thank you. Our next question is coming from the line of Smedes Rose with Citi. Please proceed with your question.
Smedes Rose: Uh huh.
Smedes Rose: Hi, Thanks.
Smedes Rose: I Wonder if you go back to something you talked a little bit about on your last call. We're working with kind of generational owners, who are looking to.
Smedes Rose: Efficiently pass along wealth and you now take advantage of tax structures et cetera, and I'm. Just wondering if those conversations are kind of alive and well and have they changed at all with the upcoming election that Matt mentioned in the beginning of the call.
Some of those tax rules will be it depends on the expire next year, depending on whose hesitant I'm just wondering if theres any more.
Smedes Rose: Urgency or if people are kind of waiting to see how it comes in.
Smedes Rose: Yes.
Smedes Rose: My discussions and experiences I think the urgency that we saw last go round has not has.
Smedes Rose: Is not kind of picks up again at this point. So there were there were some discussions which rich definitively were significantly more interesting heading into bidens election, and focus around potential changes that could happen. There I think this time I haven't heard the same dial.
Smedes Rose: <unk> or rhetoric coming from the Counterparties I also think like in many cases these aren't folks that are going to be impacted by.
Smedes Rose: A small change in the in the inheritance tax threshold or something of that nature of these people have significantly more wealth. That's already been planned for and things like that so I think in many cases, it's a matter of understanding from mistake planning perspective, where they're at where things lie and then honestly. It also matters what their health.
Smedes Rose: As like because let's be honest a step up in basis is is it different and more interesting concept.
Smedes Rose: Do you think it's something that might come to fruition in the near term than something Thats. Further off. So these are all ongoing discussions theres no theres no specific point in time, that's caused people to jump.
Smedes Rose: But there is there is constant front of mind for people and it's it's an avenue that I think we can continue to pursue going forward.
Smedes Rose: And Smedes.
Smedes Rose: An example of something that it came from that kind of bucket. If you were to think about it that way and as Peter mentioned, it's a situation where.
Smedes Rose: Someone wanted to work with us specifically and we got.
Smedes Rose: Risk adjusted returns for our shareholders that where we'd argue better than market based on the structuring and all the other things we bring.
Speaker Change: Okay. Thank you and then just wanted to ask you you talked a little bit about valley sort of broadly, but I mean are you would you be interested in being kind of a solution to their problem I mean, they've talked about meeting financing to complete their Chicago.
Speaker Change: The permanent casino there I mean is that something that you would.
Speaker Change: Our roads you'd be interested in going down or maybe you cant say, but I'm just curious.
Speaker Change: I've been looking for an opportunity to to get Brandon more involved.
Speaker Change: Sitting here in style silently so Brandon we're gonna dump that we all have answered it perfectly comfortable here leaning into that question.
Speaker Change: Look I think the Chicago project in the Chicago market and generally is a complicated analysis and I think we are you know we are in dialog with valleys and all their all of the projects and things are working on and if Chicago is something that turns out to be in our estimation good for our shareholders and a good opportunity based on the build based on the market.
Speaker Change: I wouldn't rule it out as something we would consider investing in I don't think we have enough information today and I don't think we're far enough along in that to say that we definitively what are we would not.
Speaker Change: But I can tell you that we are looking at it that's about all we can say on in Chicago.
Speaker Change: Okay.
Speaker Change: Fair enough.
Speaker Change: Okay.
Speaker Change: I appreciate it.
Speaker Change: Thank you. Our next question is coming from the line of Jay Kornreich with Wedbush Securities. Please proceed with your question.
Jay Bradley Kornreich: Hey, good morning.
Jay Bradley Kornreich: You highlight the timeline you see for funding additional RLI opportunities our properties within the current portfolio such as the amended 10 lease.
Jay Bradley Kornreich: Casino Queen Marquette.
Jay Bradley Kornreich: Do you want to take take that Brett, but I can't I don't think there's really been any change in our anticipated timeline or the funding of those projects. We still anticipate that Penn will probably fund their projects off their own balance sheet to start those projects in at some point in that process. They will look to us for funding.
Maybe closer to the end of that process that being said with the way the markets have been depending on where they are are they could they could knock on our door and asked for funding sooner, but at this point in time, we're not expecting any change in that and I think mark had a similar timeline I am not sure where they stand and permitting and the things we're working on there it's a much smaller cash outlay, but.
Jay Bradley Kornreich: I think we would expect that probably to begin in the latter half of this year.
Jay Bradley Kornreich: There's a number of those opportunities that we're looking forward to and in one sense, we take some comfort in knowing that they're out there they're likely to occur and Oh, we need to supplement our dance card card to down the road and we expect.
Lots of opportunity unfold.
Jay Bradley Kornreich: In near time.
Jay Bradley Kornreich: Okay.
Speaker Change: Okay I appreciate that and then just as a follow up following the development funding for the hard rock casino in Rockford.
Speaker Change: Are you seeing additional opportunities for new casino developments around the country and if so kind of what how what is your level of interest for being involved in those more speculative, but higher interest construction financing opportunities.
Speaker Change: Well our interest is very high as you might guess look we're still casino developers as well, we bring that skill to the table understanding markets understanding cost.
We've built a ton of casinos around the country I've got the same team right here at at G. L. P. I. So we're well equipped and you can assume that if it's a I used to say on the Penn calls when I was over there if when questioned about are you looking at this are you looking at that my answer then and now is if it's alive and breathing you can.
Speaker Change: Imagine we're looking at it.
Speaker Change: Okay.
Speaker Change: Okay. Appreciate it thank you.
Speaker Change: Thank you. Our next question is coming from the line of Handel St Juste with Mizuho Securities. Please proceed with your question.
Speaker Change: Hi, Good morning. This is Ravi via the underline for Homedale Hope you guys are doing well.
Speaker Change: Percentage rents coming up here for the Penn Pinnacle leaves and the boy at least can you give some color as to how those assets have been performing.
Speaker Change: Okay.
Speaker Change: Yes, and I think in my opening remarks, I mentioned that the Penn and Pinnacle Master leases rents resets that were occurring this year, we're still expecting $4 million to $5 million of an increase.
Speaker Change: Additionally, we're expecting to get the contingent escalation on those leases as well and that would result in $6 $5 million of escalation.
Speaker Change: Okay.
Speaker Change: Got it and just one more here, but we've been tracking tracking foot traffic data and other metrics like that and noticed that there's been this broadly across gaming has been a bit of a decline in football.
Speaker Change: What have you been noticing across your portfolio and have you seen anything impact the rent coverages.
Speaker Change: No I mean in our earnings release, we do provide the latest rent coverage that we've been given by our tenants pages 12, and 13, but they.
Speaker Change: They are still extremely strong our lowest rent coverage is at 198 and our highest.
Speaker Change: On the Master lease side is at 271 so.
Speaker Change: Some have come down some have actually gone up 198 on the Penn lease was 195 last quarter.
Speaker Change: But you know even the ones that are going down that's small.
Speaker Change: Small a.
Speaker Change: A few basis points not anything as large at this point, but as I stated.
Speaker Change: Those numbers are as of December 31st we are on a quarter lag to receiving their rent coverage and certain properties haven't reported yet. So they are as of December 31st, though the first quarter. We do understand that there were some weather issues at properties, but we don't expect significant changes in our coverage.
Speaker Change: But have you seen with traffic down at your properties.
Speaker Change: Yeah, we don't have any properties to see foot traffic.
Speaker Change: Yeah. So we have to rely on the same things that you all do which is when our tenants report yeah, we get no nonpublic information none zero. So we get it as you get it frankly.
Speaker Change: Understood. Thank you.
Speaker Change: Thank you. Thank you are.
Speaker Change: Our next question is coming from the line of Chad Beynon with Macquarie. Please proceed with your question.
Good morning, Thanks for taking my question wanted to focus on Vegas, I guess Clarke County, and in General a few operators opened up in the fourth quarter one in the Burbs and then one on the strip can you just update us in terms of your appetite in conversations in and around Las Vegas. Thank you.
Speaker Change:
Speaker Change: Yeah, well I guess, you're you're of course, you're asking about the the drop.
Or the broad.
Commentary on what's going on in Las Vegas.
Speaker Change: I don't know if Steve why don't you take that one so yeah I'm not I'm not sure. If he was asking about the truck down or not but I'm sure there'll be the part B question, but part.
Steve: Part of it from a part a perspective youre alluding to a fountain bleu in Durango.
Steve: Look I think from a from a from our casino property that is currently constructed and operating mature assets et cetera, new assets I think we continue to have an interest.
Steve: And not only in Las Vegas, but in downtown and in locals market, obviously, where you were anxiously watching.
Steve: The performance there.
Steve: Obviously Boyd reported last night.
Steve: And we will see a red rocks information as Durango continues to to mature. So we're anxiously watching that we're interested in those markets. It's an area, where we don't have as much exposure we have the M resort.
Steve: But we continue to have an interest there and we will continue to be active if if opportunities present themselves.
Speaker Change: Thank you for that and sorry for the confusing question.
Speaker Change: Separately the past couple of years, the IPO markets have been pretty quiet it looks like theres been a couple in the past couple of weeks not sure. If that continues and this is kind of the the green shoot a moment, but when markets are more are busier, how does that impact conversations and kind of pricing that you have with <unk>.
Speaker Change: <unk> or private tenants. Thanks.
Speaker Change: I personally don't think that the I don't think whether the IPO market is hot or cold or is all that relevant to our space as far as acquiring casino properties from operators I think I think that.
Speaker Change: That may drive operators to consolidate or a private operator to pursue acquiring or reverse merging into a public if in fact, the IPO market is not there for them, but and there are a number of smaller gaming operators that exist, but we talk to all of those.
Speaker Change: We talked to all of those parties as potential tenants of ours, and we talked to a private guys as well. So I think from a real estate acquisition perspective, I don't see the equity markets availability or lack thereof to the tenant to be a driver of our market.
Speaker Change: Our acquisition pipeline.
Speaker Change: Great. Thank you very much appreciate it.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is coming from Robin Farley with UBS. Please proceed with your question.
Robin Margaret Farley: Great. Thanks, two questions. One is just I think that this has been a couple of quarters now that you've increased the provision for credit losses. So.
Robin Margaret Farley: Is it is it pretty consistently been what youre, saying, where it's just sort of a formula that you use for that and nothing related to performance.
And the sort of I think sort.
Robin Margaret Farley: Small attend here and then.
Robin Margaret Farley: I think you've kind of addressed this question, but you talked about looking at a number of potential transactions small and large.
Robin Margaret Farley: You have to.
Robin Margaret Farley: Capacity or desire to.
Robin Margaret Farley: To all of them or are you are you weighing some versus others or could we see.
Robin Margaret Farley: Multiple everything that Youre looking at.
Robin Margaret Farley: Not precluding everything else.
Speaker Change: We ask them. That's why don't you take the first part and then I'll start on the provision for loan loss actually last quarter, we had a reduction in some part of it doesn't feel like possibly that are not based on macroeconomic assumption itself and again I will reiterate this is all macroeconomics. It is not specific to our individual lease properties that rent cut.
Speaker Change: Average is still very similar to where it was last quarter and it's not driving the provision for loan loss, it's completely macroeconomic and at news and all different directions, which is why it's a noncash add back to assets held for us.
Speaker Change: Similar to.
Speaker Change: The second question would we limit what we do we'll never pass up if we can do it any.
Speaker Change: Good transaction, which means a proper spread to our cost of capital.
Speaker Change: Large small everything in between and we're looking at properties at various scales now so I think we'd find a way.
Speaker Change: And to do anything that we think is good for the company and good for shareholders Hasnt changed and Thats one of the reasons why we've kept our balance sheet strong. So that we could act quickly if need be so we have a lot of capacity, we are hungry as ever and know this [laughter].
Speaker Change: Would do anything that makes sense.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is coming from David Katz with Jefferies. Please proceed with your question.
David Brian Katz: Hi, everyone. Thanks for working me in.
David Brian Katz: Good morning, David.
David Brian Katz: Covered a lot of ground already but I want to go back to the was it a DUC reference.
David Brian Katz: Because yeah. It is.
Speaker Change: It it does it does seem as though.
Speaker Change: You know the deal market has been relatively quiet or at least it looks that way to us.
Speaker Change: And you know.
Speaker Change: I think you're suggesting that it's you know that it may not be but my question is what are the sort of key barriers to things getting done as a cost of capital is it underwriting conviction or something else and if it's a combination of all of the above you know help us maybe.
Speaker Change: A portion what the headwinds are to to seeing some more announcements and more things are getting done because it's not just in gaming it's.
Speaker Change: All of hospitality.
Speaker Change: I don't know that we feel I'll I'll, let others opine, but I don't know that we feel any headwinds really its just the normal complexity of timing when does the.
Speaker Change: Prospective partner.
Speaker Change: Want to effect the transaction.
How it gets structured.
Speaker Change:
Speaker Change: When we if it's a development project, we may need a lot more information these things take time and unfold overtime. So.
Speaker Change: No I don't think we feel any particular headwind, it's there's a lot of stuff and I'll stick by my Vaseline fast.
Speaker Change: Illustration, because we really are on a number of things and some that we expect to unfold as the months.
Speaker Change: Proceed so and if I can it's kind of a.
Speaker Change: David that anybody else around the table one of them.
Speaker Change: Got it got some heads shaking here so.
Speaker Change: That's it.
So what what what I wanted to follow up with as you know we've had definitely a prospective change on the cost of capital right. I think 90 days ago, we would have expected a downward bias and in interest rates.
Speaker Change: Maybe a little less the case is is that.
Speaker Change: Issue in isolation.
Speaker Change: But more or less of a problem or are these just more circumstantial than anything else.
Speaker Change: Well it hasnt been so far but.
Speaker Change: But youre absolutely right I mean, the expectations on the rates have obviously come in and Theyre not yeah. We started the year with five rate reductions and then we went to three and now consensus is probably one and later on in the year ethylene December, possibly but Brian look we price each transaction.
Speaker Change: With an accretion analysis and make sure that we're getting enough.
Speaker Change: The incremental benefit for our shareholders for the risk that we're taking.
Speaker Change: And we base that off of specific financings and as we stated we've gotten our balance sheet ready for some of these acquisitions and we've raised capital in and better market than where current prices trading today.
Speaker Change: Okay.
Speaker Change: Yes to answer your question, we consider all of that we're well aware of where the rates are going and we still believe we can get accretive transactions completed.
Speaker Change: We take a multiyear approach to thinking about the balance sheet, David So when we think about your leverage level. It took us a while to get where we are and now we've got full optionality when we think about incremental funding.
Speaker Change: So we've worked hard to reduce friction for capital raising reduce cost of capital raising and to Robin's question. If we have something of scale to do we're very confident we can raise the capital because we are so disciplined and people appreciate that and the way they step up when we actually raise capital from folks.
Speaker Change: Got it thank you very much.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is coming from Caitlin Burrows with Goldman Sachs. Please proceed with your question.
Caitlin Burrows: Hi, everyone. Good morning, just a quick one Peter back in the beginning you mentioned the growth in the dividend. So I guess with the yield as high as it is now I'm wondering if you or someone could talk about how you think of the dividend decisions to increase it and the outlook going forward like do you expect it to track <unk> growth or anything else, we should keep in mind.
Speaker Change: Oh, but that's where I take Oh Wow.
Peter M. Carlino: I do think it should track to ASO growth and we do have the taxable income distribution requirement that we monitor and you know as we do acquisitions, sometimes that affects the taxable income estimate that we have clearly when we have partnership suddenly do some of the unit transactions that changes the trajectory.
Peter M. Carlino: Yeah. There are taxable income that we're estimating but I do expect that for the most part should be driven off of the SSL.
Speaker Change: Got it.
Speaker Change: Okay. That's all thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is coming from John Decree with CBRE. Please proceed with your question.
John G. DeCree: Good morning, everyone. Thanks for taking my question.
John G. DeCree: Good morning.
John G. DeCree: Thank you well, maybe I'll I'll try to ask one that you've answered a few times a little differently. I think recent question. Peter you mentioned that you don't really see any headwinds to getting deals done. So so maybe to ask that differently.
Speaker Change: Is there anything that you look to or look at it you could see as a potential catalyst to perhaps stimulate activity because we all have kind of focused on interest rates, but is there anything else that you see out there that might get.
Speaker Change: Things moving a little bit more than we've seen so far.
Speaker Change: Well I'll reiterate I don't know the cost of capital.
Speaker Change: It has not affected.
Speaker Change: I'm looking around the table and nothing that we've looked at so far don't see that as an obstacle going forward at least for the foreseeable future.
Speaker Change: Transactions that we're grappling with our our all.
Speaker Change: Unfolding.
Speaker Change: In normal times.
Speaker Change: The challenge is of course, none of these things move quickly.
Speaker Change: We thought you would know this because we couldn't announce it but we thought we might accomplish tioga in than last year, but.
Speaker Change: It just takes time it takes what time. It takes so that are the nature of what we do is just complicated but.
Speaker Change: It's it's the partners desire to get something done I mean for example.
Well more than a year ago, we announced that the opportunity with pen around Columbus surround the M in la and Las Vegas, where Henderson.
Speaker Change: And Aurora and Joliet, all those things, but you know.
Speaker Change: Or they're just now starting to happen and it's just the nature of the business that we're in these are big assets complex transactions, but we feel pretty confident that we'll get our fair share going forward and we'll meet the kind of growth targets that you all are used to seeing.
Speaker Change: Thanks, Peter maybe a quick follow up.
Speaker Change: On a specific item that were kind of still probably most people that is the casino industry.
Speaker Change: Everyone has absorbed quite a bit of opex cost inflation last 18 months.
Speaker Change #100: Interesting Peter given your history on the operation side as well.
Speaker Change #100: Those higher costs.
Speaker Change #100: Motivate the.
Speaker Change #100: The industry with casino operators to maybe look at M&A as a way to scale and reduce costs could we see on the other side of this.
Speaker Change #100: This opex increase over the last two years as possible motivator for more M&A among your partners.
Speaker Change #101: You know.
Speaker Change #102: The quick answer for me is I haven't a clue of what I'd tell you be thinking I honestly I honestly don't we.
Speaker Change #102: We certainly even pen.
We haven't.
Speaker Change #102: Any reason to believe that they are not and I think they are proceeding at a pace with all the projects that they've got they've got the longest list. It's on our list so to speak.
Speaker Change #102: But others are there as well so do I think M&A is as an answer.
Speaker Change #103: I don't see it but I'm I'm looking around the table to see if anyone has a different view.
Speaker Change #104: I think I think the short answer is we like what you said is we don't know I think it could be it could be an answer to some of what they have on their balance sheets and what theyre looking at but it's not something we've seen but it doesn't mean that it isn't.
Speaker Change #105: Fair enough thanks, everybody.
Speaker Change #106: Thank you.
Speaker Change #106: Thank you. Our next question is coming from the line of Chris <unk> with Green Street. Please proceed with your question.
Chris: Thanks, Good morning, everyone.
Chris: First just a quick clarification for Deseret regarding the percentage rent resets could you remind me are those already contemplated in your guidance range or does the current guidance guidance range only account for the base rent escalations.
Chris: So the high end of the range includes the contingent and escalators that I mentioned.
Chris: Okay.
Chris: They're both they're all in there.
Chris: Okay.
Speaker Change #108: And then maybe just more broadly for the group probably one aspect.
Speaker Change #108: Think we've covered is just how your own internal underwriting standards may have changed.
Speaker Change #108: I ask thinking not only to.
Speaker Change #108: The last question about operating expenses and kind of the growth there in remaining a little bit stickier, but also what I think remains a pretty difficult backdrop for consumer savings discretionary spending. So curious you know how your own internal underwriting standards may have changed thinking about some of those factors.
Speaker Change #109: Well look we're as rigorous as ever.
Speaker Change #109: You know any fool can do a bad deal and we don't want to be on that list of foolish people.
Speaker Change #109: So we're pretty.
Speaker Change #109: Rigorous in how we consider what we're willing to do with our capital.
Speaker Change #109:
Speaker Change #109: So I I don't expect that we'll make any adjustments there at all.
Speaker Change #110: There was another nuance to your question I think I've forgotten.
Speaker Change #110: Well I think we will continue to focus on the rent coverage and to your point on the Opex side of things I think we will make sure that.
Speaker Change #110: Youre not going to see us doing a deal that's sub 1.8 times rent coverage and we have not done that historically, but I think even more we're going to be scrutinizing rent coverages to ensure that what were looking at historically and in the last 12 months is what we would assume and believed to be the forecasted performance.
Speaker Change #110: <unk> going forward and in the future. So I do think that's an area, where you might see transactions start to look and feel a little different is that we're going to obviously you have to make sure we're underwriting not only for the past, but for the future a little more carefully yeah. Let me suggested were very aggressive.
Speaker Change #110: Around the Aero analysis, and and in a number of cases have and will continue to hire outside consultants to analyze our market. The same way we would if we were doing a project or or an expansion or something ourselves.
Speaker Change #110: So that we have as much third party judgment as well.
Speaker Change #110: So it's no I can't emphasize enough nothing in the current climate has changed made down the road, but at the moment, it's business as usual standards the same.
Speaker Change #110: Yeah, Yeah, I think the current climate effects pricing and the way, we think about it and when we think about pricing. These deals more so than in effects our underwriting process. So the process is the same.
Speaker Change #110: Just the outcome can be a little bit different in how we price. These transactions based upon the risk profile that we we determined through that underwriting process.
Speaker Change #111: Okay. That's all helpful comments, just one last quick one thinking about the Rockford development.
Speaker Change #111: Anything new you can share in terms of the developers intentions, you know in terms of perhaps selling the property over time.
Speaker Change #112: With respect to the sale or potential sale of the building improvements. We have we have not had further conversations with them about that and they have not expressed an interest to pursue those discussions while they're under construction. So we.
Speaker Change #113: We have no update to provide on that.
Speaker Change #114: Okay construction is going well.
Speaker Change #114: Yes.
Speaker Change #114: Things are going at one time, all the time and on budget.
Speaker Change #115: I appreciate it.
Speaker Change #115: Thank you. The next question is coming from David Hargreaves with Barclays. Please proceed with your question.
David Hargreaves: Hi, I appreciate your clarity on the on the rent coverage comments before desert useful link.
David Hargreaves: Lincoln came up in the conversation earlier and I'm wondering if the Mashpee Wampanoag decision that recently came up how you view that and if it factors into your appetite for that transaction. Thank you.
Speaker Change #117: Sure. So I look I think our I think with respect to that decision you know I think at this time.
Speaker Change #118: I'm I'm, not well I, probably shouldn't comment on it.
Speaker Change #118: I think we will see if that does ultimately come to fruition or not I think only time will tell and a lot depends on presidential elections and things of that nature.
Speaker Change #118: Outside of that I think that I said Lincoln as an asset is one that we've always we've always looked at as a as a premier property in that region.
Speaker Change #118: We believe the valleys as well as other gaming operators look at it as a premier property in that region and it's one that of course, we would we would want to.
Speaker Change #118: We also own the two Virgin asset and plain Ridge, which are all in that area as well and so clearly we will be very closely monitoring what we think the ultimate impact is to each of those properties across the various tenants that are on the as we move forward in that area.
Speaker Change #119: Thanks, and then turning to Vegas, I mean, the numbers have been so strong I'm wondering if you had any insight as to sort of the timing of the Tropicana closure and.
Speaker Change #119: If you were consulted about it I mean was it running EBITDA negative or I wonder why now closing it.
Speaker Change #119: If you had any thoughts thank you I'm going to let Brandon handle that it was positive.
Brandon: So I think that the the performance.
Brandon: This wasn't part of our long term strategy for that parcel.
Brandon: Go ahead, Ben please well I think that's right.
Ben: Was positive but in order to back to work backwards from the first pitch in the a stadium I think you'd find that the closing of the Tropicana was pretty much right on time. So so what that's been close to make way for the liquidation of the assets and ultimately the demolition of the property, which gets a shovel in the ground in 2025 to begin.
Ben: The Ace project and and the integrated resorts. So I don't think it was a matter of closing at early because to save costs and expenses I think it was a matter of on time closure and with the employees in that market knowing that that casino was closing I think valleys would tell you. They are having a difficult time keeping up.
Ben: Appropriate staff in there to keep that project opened so.
Ben: I don't think it was a function of all of it performing poorly I think it's just timing of this project project and process.
Okay I might have misunderstood I thought the original plans it caused called for keeping it open for a while and maybe that maybe that's changed.
Speaker Change #122: You would have to to ask valleys that question I don't think we here at G. L. P. I had any expectation that it would be opened any longer than what it was.
Speaker Change #123: Okay. Thank you. Thank you so much I appreciate it.
Speaker Change #124: Okay of course, thank you.
Speaker Change #124: I think we can taking Joe one one more question operator.
Speaker Change #125: I apologize we appear to have no additional questions at this time, so I'll pass the floor back over to Mr. Carlino for any additional concluding remarks, well the timing is perfect. We're looking at a clock and the and the hour has told so.
Peter M. Carlino: Look we thank all of you who have joined US today and appreciate your interest and support so with that thanks very much see you next quarter.
Speaker Change #126: Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.
Speaker Change #126: Okay.
Speaker Change #126: [music].
Speaker Change #126: Yeah.
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Speaker Change #126: Yeah.
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Speaker Change #126: Yeah.