Q3 2024 Gaming and Leisure Properties Inc Earnings Call
Greetings and welcome to the gaming and leisure properties third quarter 2024 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.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Georgia Pony Investor Relations. Thank you Sir you may begin.
Georgia Pony: Thank you Christine and good morning, everyone and thank you for joining gaming and leisure properties third 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.
Georgia Pony: On today's call management's prepared remarks and answers to your questions may contain forward looking statements as defined in the private Securities Litigation Reform Act of 1995 forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today.
Georgia Pony: Forward looking statements may include those related to revenue operating income and financial guidance as well as non-GAAP financial measures such as F. F O N E F F O I.
Georgia Pony: As a reminder, forward looking statements represent managements current estimates and the company assumes no obligation to update any forward looking statements in the future.
Georgia Pony: We encourage listeners to review the more detailed discussions related to risk factors and forward looking statements contained in the company's filings with the SEC, including its 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.
On this morning's call. We are joined by Peter Carlino, Chairman and Chief Executive Officer of gaming and leisure properties also joining today's call are branded Moore, President and Chief Operating Officer, Deseret, Burke, Chief Financial Officer, and Treasurer, Steve <unk>, Senior Vice President and Chief Development Officer, and Matthew them check 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 Carlino: Well, thank you Joe and good morning, everyone.
Peter Carlino: We are of course pleased to present.
Peter Carlino: Our third quarter earnings earnings result.
Peter Carlino: Which I think demonstrate our success in continuing to build upon our outstanding portfolio of gaming properties.
Peter Carlino: To encapsulate what I believe is the most important summary of this.
Speaker Change: Yeah, Let me read from the last line of Mike quoted press release comments.
It does the best job of summarizing how we feel about where we are.
Speaker Change: We believe our ability to develop investment activity in 2024.
Speaker Change: Nearly $2 billion.
Speaker Change: It is attractive blended yield of eight 4%.
Speaker Change: He is a firm affirmation of G. L. P is disciplined capital investment approach.
Speaker Change: The combination of our unrivaled gaming and real estate experience and a strong balance sheet is positioned G. L. P. I as a development funding and real estate partner of choice for operators of all sizes and has created a platform for near and long term growth and appreciation of shareholder value.
Speaker Change: I might also add that.
Speaker Change: To that effect that we have.
Speaker Change: Been very successful in doing this significant pre funding to date, but I'm going to leave that to Deseret Burke, who I know it.
Speaker Change: Sure.
Speaker Change: That's why don't you go ahead.
Speaker Change: Thank you Peter good morning for the third quarter I'm, Tony 24, our total income from real estate exceeded the third quarter of 23 by 'twenty five 'twenty $8 million. The growth was driven by the Toyota acquisition, which increased income by 3.6 that Rockford acquisition, which increased cash income by.
Speaker Change: <unk> 4.6, the casino Queen Marquette acquisition, and the Baton Rouge Landside.
Speaker Change: Name, which increased cash income by $1 5 million the strategic acquisition increase cash income by 2.3 million.
Speaker Change: Acquisition of Valley, Chicago land, which increased our cash income by 1.1 million and Bally's Tropicana funding increased by <unk> 4 million the recognition of escalators on percentage rent adjustments on our leases, which added approximately $5 3 million of patchy income as well as the combination of noncash revenue gross ups.
Speaker Change: Investment in lease adjustments and straight line rent adjustments, which drove a collective year over year increase of approximately 7 million.
Speaker Change: As Peter said, we've been busy for this quarter with our growth and development actually throughout 2024.
Speaker Change: Our operating expenses increased by 22.6 million, primarily due to noncash increase in the provision for credit losses that resulted from the Tropicana lease reclassification due to the recent investment.
Speaker Change: Related to the Bally Chicago property, the company will be capitalizing interest and deferring all rent received during the development period for financial reporting purposes. However, we will be adding the rent back and deducting the capitalize interest in driving a S. S O.
Speaker Change: The amended Penn Master leases subject to contingent escalation on November 1st half 'twenty four and if obtained would result in approximately $4 2 million of additional rent for US included in our release with our full year 'twenty for a F. F O guidance ranging from $3 74 to $3 76 per diluted share in O P units.
Speaker Change: Please note that this guidance does not include the impact of future transaction. However, it does anticipate our fundings for the Chicago Development project, The Bell development project and the eye on development project.
Speaker Change: Oh coupon Treasury Bill matures in 2025 at an implied yield of four 9% and we've entered into forward sale agreements to sell eight 2 million shares for the for net sales of $409.3 million.
Speaker Change: Our rent coverage ratios remained strong remaining from one nine to 2.59 on our master leases as of the end of the prior quarter.
Speaker Change: As you can see we've set our balance sheet up to be very strong as we head into 2025.
Speaker Change: That I will turn the call back to Peter.
Thanks, Dan.
Peter Carlino: And why do we ask Matthew Demchak to offer his thoughts Matthew.
Matthew Demchak: Sure. Thanks, Peter and good morning, everyone. Thanks for joining us today.
As we review our third quarter results I want to highlight our unwavering commitment to balance sheet strength and liquidity has enabled us to excel.
Matthew Demchak: Leverage ratios remain robust.
Matthew Demchak: And maturity schedule is well structured and our disciplined capital market strategy continues to Derisk our business model.
Matthew Demchak: This quarter, we were judicious in our use of the ATM program, which was complemented by significant reverse inquiries from both existing and new investors and we're pleased to welcome them to our shareholder roster Andrew.
Matthew Demchak: And do you have raised the capital through forward agreements given the timing of our cash needs. We are in a solid position as we look forward to our 2025 spend.
Matthew Demchak: We're particularly proud of successfully completing our inaugural 30 year bond issuance. This.
Matthew Demchak: While still not only extends the weighted average maturity of our liabilities, but also marks another step towards the institutionalization of our asset class.
Matthew Demchak: Balanced and strategic approach positions <unk> with strong cash positive liquidity, enabling us to embark earmark.
Matthew Demchak: Earmark funds towards existing development commitments, while also positioning us for future opportunities as they arise.
Matthew Demchak: In the third quarter, we demonstrated our strategic ability and agility to the bally transaction announcements, which showcases our ability to create tailored solutions that benefit all stakeholders, we followed that up with an innovative first to market structure for travel investment with their eye on loan which includes an option for our partner.
Matthew Demchak: Her to convert flown into our lease these case studies of our creative flexibility enrich ongoing dialogue with prospects in our pipeline.
Matthew Demchak: And this year's announced activity when combined with our other contractual future opportunities.
Matthew Demchak: Put that together into a pipeline that we've developed that's becoming increasingly tangible and impactful.
Matthew Demchak: <unk> remains dedicated to leveraging our organization's development expertise to closely monitor ongoing projects, while we remain steadfast in our effort to prudently deploy shareholder capital to enhance long term shareholder value on a per share basis.
Matthew Demchak: And I'll hand things back to Peter.
Peter Carlino: Well, thank you Matthew and as always we have are in.
Higher team present with us today, and we anxiously anticipate your questions. So operator would you. Please open the floor.
Thank you we will now be conducting a question and answer session.
Speaker Change: If you would like to ask a question. Please press star 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.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Thank you. Our first question comes from the line of Barry Jonas with Truest. Please proceed with your question.
Speaker Change: Hey, guys.
Speaker Change: The.
Speaker Change: Loan is notable as I believe it's the first gaining a REIT deal with tribal gaming.
Barry Jonas: How do we get comfort with the structure and how confident are you that this could convert to sale leaseback.
Speaker Change: Brandon that's a question for you.
Brandon: Yeah, Yeah, Thanks, Barry I'm sorry.
Brandon: Yeah, the ion transaction I would say is the culmination of a multiyear process that we've been working on to try to come up with a structure that can be utilized.
Brandon: In a situation where you have land held in trust by a tribe and a good read investment I think it's probably just the first step. So this transaction with Io and includes a five year loan to finance the construction of our Greenfield development outside of Sacramento, but the most important part of that structure to us is a long term lease component whereby.
Brandon: At the end of the long term to try can elect to convert the principal into a long term lease structure and that long term lease structure and the documents necessary for that were all part of Eni G sees review.
Brandon: Recovered by the declination letter.
Brandon: It was received from the N I G seen them move forward.
We are cautiously optimistic here at the company that this long term lease structure is something that can be utilized as an alternative form of funding for tribes that have land held in trust. We are in the process of meeting with tribes. We have met with tribes over the last several years, we're in the process of going back to many of those trials now.
We have the letter in hand, and I think we'll know more in the coming months and quarters as to whether or not this is a repeatable path forward that we can turn it into a new revenue stream for the company or is it something that the tribes may not find as valuable as we hope again I think we're cautiously.
Brandon: Optimistic that this is a structure that can be utilized but we'll know more in the coming months and at this point, we've asked fried sooner into N D. A's as we talk about that structure in more detail. So I don't think we can share too much about the structure itself.
Brandon: As for the credit protections, which is I think where were you were bleeding.
Brandon: Bleeding, we have all the same protections and this transaction that a commercial lender typically gets win.
Brandon: Lending to tribes and tribal country. So we have the collateral of the accounts we have the collateral.
Brandon: The assets and things that the tribe, we get all that the same way that a bank would in addition to that this lease structure would permit us to foreclose on a lease and step in.
Brandon: And operate at the property now importantly, we can't operate the casino floor.
Brandon: On the property and so that is the that is the raw and tribal land only the trial run the casino, but all the protections that we have in place. The typical lenders received we are confident give us the protection to enter into this transaction and we're confident that we've underwritten it in a way that this transaction will be accretive.
For the company and gives us the opportunity to now roll this out with some other tribes and find out how how big this opportunity could be.
Speaker Change: That's great and just maybe just one point of clarification. The release said that there was a 45 year a maximum period, what what happens next.
Speaker Change: So at the end of 45 years, obviously, we don't have the simple and the land the tribe will keep the land will all go our separate ways.
Speaker Change: Erratically. They can run this transaction back so they could if they need additional capital or funding could seek to do a similar transaction. If not then then they keep their land or the federal government keeps their land and we all go our separate ways.
Understood Alright, thanks, and congrats again.
Barry Jonas: Thanks Barry.
Speaker Change: Our next question comes from the line of Greg Mcginniss with Scotiabank. Please proceed with your question.
Speaker Change: Hey, good morning.
Speaker Change: Congrats on the on the travel ambulance really no one really interesting and great that you guys got that done I'm curious what what's the incentive for them to extend past. The initial 25 years and also is that as that lease gonna have escalators included is it likely just to be a rollover of the.
Speaker Change: 11% interest rate any details there would be appreciated.
Speaker Change: Yeah. So.
This is getting into a little bit of a stickier area, yes, there will be escalation on the rent and the lease.
I don't really want to get into on this call at this time the incentives for the tribe to extend the lease beyond 25 years to the 45 years I think that's part of it the moment, what we're hoping to keep confidential, but there are incentives for the tribe to.
Speaker Change: Extend the lease term from 25 years to 45 years in the 45 years is really has to do with some structural elements to ensure that we have good REIT income out of this project.
Speaker Change: Okay.
Speaker Change: I guess separately.
Speaker Change: A significant level of transactions announced year to date, which is great, but heavily weighted towards development versus now in place our cash flowing.
Speaker Change: Casinos I mean, how are you guys viewing the risk that you're taking on the development side versus you know the cash flowing operations.
Or are there just not the opportunities that you expect the unexpected or hope to see a an irregular acquisitions right.
Speaker Change: Let me, let me take that Brandon if I may in the group.
Speaker Change: Yeah.
Look I think we're still in business to buy existing assets when an available and we're aggressively looking talking some embedded in the various announced valley are transactions that we have on the horizon.
Speaker Change: So we will do that but what has emerged as an opportunity with I think first pioneered by yeah.
Speaker Change: Sally salad, Baton Rouge, or moving that property landside, great success, but we will get to repeat that opportunity with the Bell also in Baton Rouge is as you would know because.
Speaker Change: Because we have that capability.
Speaker Change: We built <unk>.
That's a good number of casino properties.
So I.
Speaker Change: I think we've announced previously didn't bomb who was the head of construction for me.
Speaker Change: I N over many many years involved with virtually all of our projects.
Speaker Change: Is back with D. L. P I right now and while we're not the contractor or developer, let's say in Chicago, we are hopefully providing a lot of of created a high level help to make sure that that project is everything that valley's would hope it to be and that it's delivered on time on budget.
Speaker Change: The usual things, yes, there is a measure of risk there.
Speaker Change: But I'm knocking on wood when I say, we have a long term track record of good success of bringing.
Speaker Change: Significant projects in on time and on budget.
Speaker Change: So we were willing to do both I think that the special capability that we add to our REIT.
Speaker Change: To the REIT business in a sense, creating properties that we can that.
But we can at least back to.
Speaker Change: Two operators so.
Right now I think we will do we will go in either direction, but it's not because we see more or less opportunity. If we can't find opportunity we will make it.
Speaker Change: I think that best summarizes what our attitude is about it with caution and care always.
Speaker Change: Yeah.
Speaker Change: Right, Okay, that's fair and I'm sorry, just one clarification question that letter that you received from the National Indian Gaming Commission.
Speaker Change: Is that just a framework for future deals are it doesn't actually get approval for anything else right.
Correct.
Speaker Change: N I G. C letter effectively does is it lifts the documents that have been reviewed and they've been and I'll use the word approved although that may not be the right word they don't approve the content of the documents what theyre essentially ensuring is that those documents don't constitute a management agreement or management control that would have the.
Speaker Change: The potential of invalidating the transaction or the documents and so the value of the declination letter.
Banks would receive is that you've had the N. I G. So you look at your documents and ensure that you haven't violated that critical protection that the management.
Speaker Change: So that's what that includes and what would we have to go through the same process in the next deal I think the answer is yes and no in other words, yes, we would go for a declination letter, but now it's not an issue of first impression and so presumably if we use the same documents and the same structure and the long term lease component that should be something we can get through much faster.
Speaker Change: That then what what this process entail.
Speaker Change: It's the same committee or commission that does the approval for all of those are in place for all of those transactions potentially.
Speaker Change: It's the same it's the same government entity and this reached the highest levels of the legal department there up to the General Counsel, we were working with and so the short answer is yes at the present time, that's what I'll go through the same folks now you can't guarantee that the same people will still be employed at the time that the next one comes through right, but but to the extent that it is yes. This is <unk>.
Speaker Change: And to the highest levels of the organization and so we're confident that if we stick to the knitting that we've created that this this this this will be something we can get approved.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.
Speaker Change: Hi, good morning, everyone.
David Katz: Thanks for all of the information there has been some public information around with respect to Las Vegas, and the Tropicana site.
David Katz: And I just you know frankly wondered if there are any updated thoughts or perspectives you can share around your role.
David Katz: The redevelopment of that site.
And I, if I'm remembering correctly I think you know I heard those buildings fall down a lot.
David Katz: Hi.
They certainly did.
Speaker Change: Brandon why don't you take take that.
Speaker Change: Las Vegas is obviously, a major focus of the company I'd say, our first priority continues to be ensuring and preserving the value of the remainder parcel that we have in place and so that's been our primary focus from the beginning it continues to be our primary focus now.
Speaker Change: I'm sure all of you saw that the buildings came down where imploded a few weeks ago. During G. TUI, which was an exciting event and the site is in the process of being cleared and making way for the A's to break ground on the stadium. The latest is both the A's and the integrated resort have filed pre <unk>.
Speaker Change: The metals for entitlements with the county, and some of that stuff has now come out into the media. So you can probably find a lot of those drawings and pictures out there that was the necessary next step is to get all of the authorities utilities traffic in line. So that we can begin the project and then on the integrated resort side.
Where valleys is continuing to work with their design professionals to fine tune, what that integrated resort might look like in phase one.
Speaker Change: Ultimately in phases, two and three and.
Speaker Change: And that process is still underway and we are really waiting the outcome of some of that to determine how much if any additional dollars. We're either asked to provide or more importantly willing to provide to support the construction of the integrated resort just as a reminder, this.
Speaker Change: <unk> is really is being financed all body as so that's not something that will participate in the land and quite frankly, the stadium will be owned by the stadium authority in Las Vegas, and so that's not that part of the project, we're not we won't be involved in.
Speaker Change: Very helpful and I wanted to follow up on some.
Some of the native American activities.
Speaker Change: And you know just listening to some of the answers when when we think about collateral in that context I you know I'd like to just better understand you know your ability to you know as collateral step in and manage the non gaming aspects of an asset or generally speaking.
Speaker Change: Or.
Speaker Change: You know versus the ability to sort of take the build.
Speaker Change: Building right, which I guess previously you've understood that you cannot.
Speaker Change: On on Native American land.
Speaker Change: Yeah.
Speaker Change: Not yes, that's not that's not quite accurate you can take the building as part of the lease. So we have a long term lease there in that structure, whereby we could take occupancy back of the buildings and structures on the properties and to the extent that it's not gaming we could run whatever whatever amenities are there.
Speaker Change: There you could theoretically and I say theoretically remove all the gaming and turn it into an Amazon distribution Center. If you wanted to during the lease term. So you have the ability to occupy and run. The buildings. You. Just can't you just can't operate gaming now we all know that operating gaming is the primary driver to the revenue.
Speaker Change: And those facilities and it's the amenities that really bring people in to drive the gaming we're not we're not we know that and we're in the same position that a bank would be and to say the collateral package is all encompassing in other words, you're going to take all revenue streams, all accounts youre going to take the assets in the property.
Speaker Change: And it's that level of collateral and protection that really enables enables any credit or to a tribe to sit down with the tribe. If there's a problem and figure out how that's going to be fixed because you have a mutual.
Speaker Change: <unk> benefit you add the tribe at that point of figuring out how do you get the cash flowing back to the tribe again, and how do you fix whatever it might be broken and in gaming you know that could be any number of things it could be that it could be that.
Speaker Change: Competition has come in and the and the facility doesn't matter who runs the facility it could be a management issue. We we just don't know you don't know what it will be but we'll rely on the same collateral package.
Speaker Change: What's the lease in order to secure our our investments with the tribe.
Speaker Change: Super helpful. Thank you. Thank you.
Our next question comes from the line of Chad Beynon with Macquarie. Please proceed with your question.
Chad Beynon: Good morning, Thanks for taking my question just wanted to follow up on the tribal discussion it.
Chad Beynon: It sounds like you guys have obviously done more extensive work than.
Speaker Change: Anyone in the industry, you've gotten comfortable with it you explained you know the rules and regulations here are the.
Speaker Change: This morning, so with that in mind do you think the competitive set for these deals going forward.
Speaker Change: Might be smaller than what you've seen historically on the commercial side just given all the nuances of the you know differences or do you think it'll be as competitive as what you've seen during the past couple of years in gaming.
Speaker Change: I think probably to be determined.
Speaker Change: Yeah, I think its probably to be determined we're out there to look I think you have it so that the total addressable market of tribal entrust gaming is very large which we all know how much of that market, we would be willing to invest in how much of that market would be what would want to take advantage of this type of structure and funding is to me.
Speaker Change: Determined I think there are certainly tribes that don't need financing and are very well healed and have all the things that they and then there are tribes that maybe desperate for financing we are probably somewhere towards the upper end, but we have to figure out how many tribes in there. It could utilize this type of structure on a long term basis to.
Speaker Change: On to their capital needs and that is the process. We're undertaking now and I I think we just don't know enough at the moment to know how big that opportunity could be yeah, but with respect to our our competitive set as far as who may want to enter this market and compete against us for transactions.
Speaker Change: I can't really speak to what others would or wouldn't do I can just tell you. We spent a number of years like multiple multiple years working on this and so there's an extensive amount of Av.
Speaker Change: Detail analysis, and legal work time, and cultivating relationships that have gone into this to get US just to the starting line here. So I do think look I'm sure. Other people will take a look and I'm sure. Other people will compete but their ability to do it with the same clarity that we have after.
Speaker Change: Call. It seven years of working on this I think is probably probably not going to be as fruitful for some others.
Speaker Change: Thank you I appreciate it and then with the with the use of the ATM program and just the volatility of our rates, particularly here in the in the past three months has anything changed in terms of how you view future.
Speaker Change: Leverage debt to EBITDA targets when running the business.
Speaker Change: No I mean, we've been consistently conservative we've got cash flow needs that go well into the next few years and we wouldn't be in a position that continues to kind of backfill and allows us to be opportunistic on new transactions, but I don't want to do is end up in an environment, where for small and medium deal with.
Speaker Change: We're kind of against the law enforcement and do an equity overhang position.
Speaker Change: And interestingly this deal we didn't do an overnight we didn't need to kind.
Speaker Change: Kind of pre <unk> to the balance sheet activities, we did leading into this transaction and you're going to continue to see us be thoughtful measured and balanced as we go forward.
Speaker Change: Thanks, Congrats on the new deal keep in mind keep in mind that we have the Lincoln option in the future and that will be funded with all that said, we we definitely are have intensely kept our leverage low so that when we add that in at all all that financed them, we're still comfortable with our leverage position.
Speaker Change: I agree with Matt here or whole commitment has not changed to where we are and just trying to keep our balance sheet as strong as possible.
Speaker Change: I appreciate it thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Smedes Rose with Citi. Please proceed with your question.
Speaker Change: Hi, Thank you just on the.
Speaker Change: I own agreement I was just wondering I mean, there's a lot of native American casinos in the Sacramento area and do.
Speaker Change: Can you just have a sense of why are they coming to.
Speaker Change: You know to the theater land.
Speaker Change: Now they just report will get a gaming com character. They I don't know if they more recently recognized charges just wondering kind of around the timing and then maybe just if you could just speak to your thoughts there sorts of framework for what 11% I mean, that's a pretty high rate or do you think they're just not able to access an alternative more traditional form of financials, what you meant.
Speaker Change: Some banks already have agreements somewhat like the ones that you restructured.
Speaker Change: Yes, Thanks, Smedes I think as to your last question.
Speaker Change: The financing I think what's going to be difficult for the trying to get greenfield construction financing at an affordable rate at that facility. This was sort of a unique opportunity for us to take our development expertise and combine it with our desire to have a trial that was willing to go to Washington, with us and promote our structure and we sort of.
Speaker Change: We sort of tripped into this very unique opportunity with the eye on bandwidth a very strong leadership that was willing to embrace our structure and see it through the N. I G. C. That's not something that you can do as a commercial entity on your own and so I think this is sort of a culmination of a combination of there they had a need at the tribe for.
Speaker Change: I'm, saying that could result in the development of their casino and not dropping them into leverage with it we had a desire for a drive to help us find a structure through a long term lease component that we could take to Washington through that combination. We have this transaction and so I think this is a mutually beneficial transaction.
Speaker Change: As to why now I believe the tribe had the land in trust in 2020, so they've been working since they had its about 228 acres outside of Sacramento.
Speaker Change: Once they had the land in trust they began to develop and work on this project that'll be developed by Warner gaming.
Speaker Change: We're familiar with Warner from their efforts into Spokane market and so they are not new to tribal gaming and travel development and that was all part of the underwriting we undertook we visited the site.
We've done the economic study. So we're we're confident in their location and their ability to get this done.
Speaker Change: Thanks, that's great and then just turning into a new just I know, it's only been a few months, but any update on <unk>.
Speaker Change:
Speaker Change: On the Chicago asset I know, you've got the land and any updates just on valleys kind of drawing down on our credit line.
Speaker Change: You're providing there where do you think that would be later in the construction process.
Speaker Change: Steve do you want to take a whack at that.
Speaker Change: Yeah. It was with respect to funding around direct hard cost I think from from GOP ice perspective. The first set of of construction that will will kind of fall into our side of the ledger would be the casino podium caisson.
Speaker Change: The hotel podium caisson, which you'll start that part of the project will begin our Q1 of 25. So I think that's the that's the first moment in time, where we're literally things will start to go into the ground.
Speaker Change: That we will be we will be looking at for funding.
Speaker Change: Very good thank you.
Speaker Change: Our next question comes from the line of Brad Heffern with RBC. Please proceed with your question.
Brad Heffern: Yeah. Thanks morning, everyone. If the island deal does convert into a lease is that at the same 11% and then more broadly it sounds like there's a potential added layer of risk with this structure should we assume that in general you would require a higher yield than maybe on a traditional regional gaming Gil.
Without getting into the details. The answer is it is it will be a little bit lower than the 11% construction funding rate, but it will likely it is likely higher than anything you've seen from us in a regional deal.
Brad Heffern: And then with respect to commercial transactions versus tribal lease transaction, we would anticipate there will be a an additional margin.
Brad Heffern: Of cap rate applied to those transactions basically because at the conclusion of the 50 45 years excuse me you know, we will not own the land or building versus a traditional commercial transaction.
Speaker Change: Yeah, Okay got it.
Speaker Change: And then I was wondering if you could give an update on the Cordish relationship. Obviously, you know Bossier is close to opening and then there's the Virginia project as well is there any potential to be involved in either of those.
Speaker Change: Sure so in Bossier in Bossier, they are funding that.
Speaker Change: Themselves.
Speaker Change: We have had some conversations with them around you know future transactions that could potentially come out of that but no. There's no updates really on that one with respect to Petersburg and some of the other things that they have there been articles about other development type a licenses that they are pursuing.
Speaker Change: And different jurisdictions, we are we do have the 20% equity.
Speaker Change: Right to co invest with them on those types of transactions and we are in discussions around what we may or may not be interested in doing.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you.
Speaker Change: Our next question comes from the line of Mitch Germain with citizens JMP. Please proceed with your question.
Speaker Change: Thank you just maybe closing the loop on the I know alone.
The way to consider this really just a tried that might be looking to develop or could you also use the structure for somebody that is maybe looking to.
Speaker Change: Expand or refurbishing existing casino.
Speaker Change: I think the answer is that structure it could be utilized for almost any funding needs and tribal country and in other words it could be building a hotel tower it could be refinancing that quite frankly, if they want to use the proceeds from that it could be any number of projects or things that would drive our initiatives that drive has that they would need funding.
Speaker Change: For the key for us will be analyzing what collateral and assets. They have that can be contributed to the process that may be a mix of commercially held property that we could we could take a collateral interest in in Repossessing known.
Speaker Change: And the tribal land and land held in trust that we would have our our long term lease structure. So I think this gives us an opportunity to go to tribes really have a discussion about their financing and funding needs and figure out with each tribe. How this structure might be utilized as a part of their overall funding plan.
To meet their needs and so it could be a little bit of everything that's to be determined I think though to just kind of.
Speaker Change: One extra point on that I think our interest is in the long term financing component here, though the long term lease aspect of the transaction not the short term loan transaction. So I think as we look to go forward I think we're probably opt to do a little less greenfield, which would probably.
Speaker Change: No.
Speaker Change: Probably need alone component in it and we're probably look to go more with the long term financing structure, which is gonna be embedded predominantly with properties that are already open running unprofitable, yes, ideally I think that's right. Our next transaction in future transactions were focused on the long term lease structure out of the gate.
Speaker Change: We do not anticipate having a lot of short term loans that could turn into the structure could not this was something we needed to do in this transaction to get the tribe comfortable to be the leader to go to the N. I G C with us and help help that this process. So I think as we focus on this moving forward, we will be focused on the long term lease.
Speaker Change: Structure as the initial step not an option.
Speaker Change: Great. That's helpful. And then desert really quick question I think you had mentioned and Steve just talked about.
Speaker Change: Chicago funding commencing in Q1, but I think you had mentioned that there that guidance implies that there was a couple of different of these loan arrangements that are embedded can you maybe just kind of talk about how we should think about the dental and the island project and what the.
Funding schedule will look like over the next several quarters.
Yeah, so for 2020 four it's pretty insignificant right. The amount of funding that we have to lap versus you know a couple of months that we have remaining in the year I would look forward to 2025 only provide financial guidance for 2025, we should have some more specifics around the actual funding.
Speaker Change: We're anticipating likely give you a range of what those hard to include it in the models.
Speaker Change: Great Congrats on the quarter.
Speaker Change: Our next question.
Speaker Change: Next question comes from the line of Todd Thomas with Keybanc. Please proceed with your question.
Todd Thomas: Hi, Thanks. Good morning first question just desert sticking with you a question on the updated guidance.
Todd Thomas: Where the midpoint implies a 93 cent resolved in the fourth quarter, which as you know two cents below this quarter.
Todd Thomas: I realize you did the notes offering and you know there's some maybe timing mismatch there in some dilution between what you're earning on that capital versus the cost of the debt, but there's only a few months left in the year I was just wondering if there's anything else to consider moving into the fourth quarter that might be having an impact.
Speaker Change: No and that we you know we raised a little bit of equity that has some temporary share for the fourth quarter as well as there's two bond financing says, it's really what's driving it a little bit lower in the quarter.
Speaker Change: Okay.
Speaker Change: And then I just wanted to circle back to the to the travel deal if I could.
Speaker Change: You know Peter Brandon and in the past, even even earlier this year you've talked about.
Speaker Change: Tribal gaming as a tremendous opportunity and I realize it's early but if this is repeatable and it is a structure that can be employed that that youre comfortable working with.
Speaker Change: How should we think about the opportunity for G. L. P I going forward and and and sort of the company's appetite to migrate capital or allocate new capital towards or tribal gaming assets. If we look out sort of.
You know sort of some number of years five years or so how how how would the complexion of the portfolio potentially.
Look as we think about this as a new opportunity set.
Speaker Change: I think we all agree here that it's still unknown.
Speaker Change: You know.
Speaker Change: And there are several of us who can speak to that.
There's been conversations with others and the value is yet to be proven.
Speaker Change:
Speaker Change: Steve granted you wouldn't have a comment on just the tender.
Speaker Change: As we've had but this is just at the very very beginning.
We're excited I think that's right.
Speaker Change: Yeah, I think it's right and where we're sort of at the beginning we've created a structure now that we know the N. I G. C is okay with now we need to take that structure and see how much demand. There is in the tribal world for this type of funding and we are very optimistic and I think if the demand that we think is there is there. The next question.
For us will be that we have not answered yet we need to look at the risk profile of that deal. So we know the risk profile of the I own deal and why we undertook it well we don't go fully is when we take this structure to the next drive how can we improve upon that risk profile and that the ultimate risk profile, how much capital are we willing to invest here from G. L. P.
Speaker Change: In that structure, and I think we need to better understand that risk profile on our rollout basis, a little bit better before we can take the second step of determining how much capital here, we might be willing to allocate to that revenue stream. So I just think it's too early for us to fully answer that question at the moment.
Speaker Change: It's an exciting opportunities and exciting invention, whether it gets accepted by the market as well.
We're waiting to see so.
Speaker Change: Okay. Thank you.
Speaker Change: Our next question comes from the line of Dan Nemo with capital. One. Please proceed with your question.
Speaker Change: Hello, everyone and thank you for taking my questions.
Dan Nemo: Just one on the macro side, so long term treasury yields have been rising even after a large fed rate cut does that change. The way you all think about deploying capital since your portfolio does have such a long investment time horizon.
Speaker Change: I mean, clearly we always consider what our cost of capital is in our spread to that cost of capital will be adjusted as needed on that transaction, but and then it doesn't change. The fact that we are still in the market to grow and to do accretive transactions.
Speaker Change: At the end of the day is highly important for us to stay disciplined we'd think about increasing the duration on the right side of the balance sheet, it really hedging out that that potential future risk and that's where the 30 year issuance. We did really pleases us a few months ago. I mean, we've opened that market to ourselves we've been pretty focused.
Speaker Change: Otherwise the 10 year I mean, we haven't gone short with anything outside of tax structuring and you should continue to see us to think that way and also the designated points include that kind of tenor and our underwriting on the front end.
Yeah look we're not about to do.
Speaker Change: Transaction, that's going to leave us underwater.
Speaker Change: I think as I have been fond of saying on these calls over many years. There's no transaction, we have to do I never feel and we never feel pressure to stretch this something that just doesn't make economic sense.
Speaker Change: Where our business is all about it spreads to the cost of capital and we will as Matthew suggests and remain disciplined.
Speaker Change: Okay, great. Thank you I appreciate that and then I I sounds good article on Chicago. This morning, just around development funding.
Speaker Change: Outside of kind of valleys in casino Queen or there other tenants coming and asking what they can do to improve their property and would you all kind of help fund those improvements and then kind of as a second part is there like a capital outlay size that makes it worth your while as they've kind of are you now.
Speaker Change: 10 million might not be enough, but 100 million is I'm just curious there. Thanks.
Speaker Change #100: Sure Yeah, I can take a shot and if anybody else was there anything I think the answer to your second part is no no. There's not really a size requirement I think the answer is if if someone one of our tenants has a project that makes sense capital wise and Rois are wise for them to do and they're willing to.
Speaker Change #100: To allow us to assist them with funding and it's accretive to us we're willing to we're willing to entertain it. So that's that's the easy one I think to the first part of your question I think is a huge opportunity I think we continue to have discussions with all of our tenants about capital improvements at their properties. If you look at Boyd's earnings yesterday.
Speaker Change #100: Obviously, theres a lot of excitement about what happened with their landside move a treasure chest, obviously casino Queen benefited greatly by the landside move in Baton Rouge and.
Speaker Change #100: And we have the we already have the redevelopment projects going on.
Speaker Change #100: But some of the other properties. So I think we continue to have discussions with tenants I think tenants are starting to see there is there's there's upsides legitimate upside that is tangible recognizable and hits the bottom line if they if they do make appropriate investments. So those discussions are picking up and I expect to have more of those opportunity.
These to present them to us in the future.
Speaker Change #101: Great. Thank you.
Speaker Change #100: Yeah.
Speaker Change #102: Our next question comes from the line of RJ Milligan with Raymond James. Please proceed with your question.
RJ Milligan: Hey, good morning, guys.
RJ Milligan: Hum.
RJ Milligan: I spent some time talking about the debt side and I'm just thinking about expanding on an earlier question as you talk about leverage and sources of capital and then just more broadly can you touch on just the general philosophy on equity funding and then maybe the decision tree around the ATM use.
Speaker Change #104: Yeah. Thanks RJ.
Speaker Change #105: [noise] about philosophy, I mean, I think of the fed's mandated price stability at Max employment for US, We've got no equity overhang and ensure that existing shareholders benefit from our new announcements kind of opportunistic slipped into deals, but that means we need to optimally capitalize the company.
Speaker Change #105: We move forward and also be very measured with our ATM use imbalanced and you know when you get a new deal you got to look at Hey, if we consider the existing leverage of the company and the impact of incremental investment are you off sides in any way compared to your target leverage and for US that's five to five and a half and we've become.
Speaker Change #105: Very comfortable at the low end of that range and given the environment. We actually chose to go below that range to get some extra firepower for future opportunities considered of Lincoln.
Speaker Change #105: And.
Speaker Change #105: In this situation, we weren't off sides in the short term.
Speaker Change #105: We're in the long term.
Speaker Change #105: And that led us to say, Hey, alright, we're in a position to then use the ATM use this word and do it in a balanced way and we would've done less this quarter if it weren't for some some deep interest that we had some from some very.
Speaker Change #105: Thoughtful shareholders and we're able to get more done and we thought hey in this case, given where the stock is the relative cost of equity and debt.
Speaker Change #105: Cost of equity versus when we underwrote the deals will take the burden of HAMP and we did that and again it puts us in a great position with ample cast for a base case 2025 business plan and as we move forward, we're going to continue to weigh the same things and you know my hope is in hindsight, you'll say those guys were thoughtful balanced and measured.
Speaker Change #105: But we can't predict exactly how it will play out because it's a function of all these moving variables.
Speaker Change #105: But hopefully that gives you some insight.
Speaker Change #106: Yeah. That's helpful. Matt Thanks, guys. That's it for me.
Speaker Change #106: Thank you.
Speaker Change #107: Our next question comes from the line of Chris Darling with Green Street. Please proceed with your question.
Thanks, Good morning.
Going back to an earlier question around potentially pursuing traditional sale leasebacks or redevelopments with tribal operators is that ultimately a more difficult hurdle to overcome given that I'd imagine traditional financing alternatives, maybe more competitive from a pricing standpoint.
Speaker Change #107: And I ask I, just wonder if you're gonna be functionally limited to projects. That's it further out on the risk spectrum, where pricing might make more sense from the standpoint of both parties.
Speaker Change #108: Chris Chris I'm, sorry to clarify your question is about a tribal sale leaseback versus tribal current traditional financing.
Speaker Change #109: Yes, exactly yes. So currently the tribe the tribal financing is actually not as.
Chris Darling: In many cases, not as as price beneficial to the operators as a traditional commercial gaming enterprises, a debt financing would be so so theres already kind of and additional margin that they're that they're already paying I think that the one big aspect that.
Chris Darling: It needs to be considered.
Chris Darling: And obviously, we'll talk to the tribes about it as they think about this alternative is the right now the average tenor that they would be able to achieve on a definite anything is probably Max eight years and so what that means is the tribal the tribal people who are <unk>.
Chris Darling: <unk> the distributions have a refinancing risks to their distribution every call. It five to eight years and as we all know rates change and things change. So the one one of the major benefits that a long term lease structure would provide someone is the ability to to kind of steady out their distributions in <unk>.
Chris Darling: Reduce debt refinancing risks in a in a very material way. So if you're talking about eight years versus 45, I think we all can see that there there's a pretty big benefit there. So look we're gonna have discussions, we'll see where they go I don't disagree that there's there's definitely some nuances that are different but that's the opportunity.
Chris Darling: D. That's presented itself and that's why we think we will get better.
Chris Darling: Better margins on these types of investments than we would on a traditional commercial deal.
Speaker Change #111: Okay, that's really interesting and helpful to hear and maybe just shifting gears a little bit just as you think about the traditional commercial gaming space in recent conversations you might have had with any potential counterparties.
Speaker Change #112: What's the latest you can share just around transaction pricing, maybe you could speak to a you know how it.
Speaker Change #112: Any bid ask spread that you might have or be observing and how that might be evolving more recently here.
Speaker Change #113: Yeah, I think I think the most recent conversations look I think when the credit markets were less than enthusiastic over the last 12 months I think a lot of potential.
Speaker Change #113: Counterparties are somewhat sat on their hands and I think what's happening now that people see rates are maybe going to come come in some or at least in the short and they've started to kind of reengage.
Speaker Change #113: Their thought process around could could they potentially do a transaction. So the good news is I feel like that the current rate environment is causing folks to be a little more open and thoughtful around potential transactions are there.
Speaker Change #113: The slight downside I would suggest is that everyone thinks rates are going to grind. So much tighter that all of a sudden you know everyone's asset values will be high again and you can pay you know a significantly more aggressive cap rate than reality. So I think we're there's going to be more discussions whether it results in more transactions only time will tell.
Speaker Change #114: Alright I appreciate the time, that's all for me.
Speaker Change #115: Thank you.
Yeah.
Speaker Change #116: Alright final question comes from the line of Ronald Camden with Morgan Stanley. Please proceed with your question.
Ronald Camden: Hey, Thanks for taking my question you have Danielle, Iran. So first I think we're very impressive right now.
Ronald Camden: Innovative Avenue T. L. P has been pursuing this in the last few quarters.
Ronald Camden: Just curious if he has any other like initiatives such as other avenues are like nine gaming deals or other new opportunities for new relationships.
Ronald Camden: Our development opportunities on the pipeline if you can comment on the criteria that those opportunities will.
Ronald Camden: It would be great.
Speaker Change #118: The Clinton and neither are going outside of gaming is really nothing.
Speaker Change #119: We're not looking too.
To move away from gaming as our source business.
Speaker Change #119: We look at stuff on a regular basis always have some actually pretty thoroughly but again as we've said call after call quarter. After quarter. We haven't found any other territory that is as stable dependable.
Speaker Change #119: And rock solid as gaming.
Speaker Change #119: So so long as we can keep doing that we will end up but again not turned our noses up on any good opportunity.
Speaker Change #119:
Speaker Change #119: As to what's out on the horizon, It's it's never predictable its serendipitous to some degree we source transactions, but we also.
Speaker Change #119:
Speaker Change #120: As I noticed somebody.
Speaker Change #120: Just read it one of the notes this morning, I've been quoted as saying, we kiss a lot of frogs and indeed, we do always looking for a princess and.
Speaker Change #121: Steve how would you want to characterize what we're seeing in the world.
Steve: Well look I think our I think my comments would probably be similar to what I was what I was saying to the last question I know I'm, not where you're going to see something prior to Proto Matt answering.
Steve: Okay, I think I think I think you've covered everything Peter.
Speaker Change #123: Okay, then we have.
Speaker Change #124: That makes sense I think the second one.
A lot of fleets back to Dallas, Chicago, I think you mentioned a first round of funding is going to be Q1, 'twenty five maybe talk a little bit more.
Speaker Change #125: I like how many rounds of founding I are you planning in 2025 and like the approximate amount of both allo five careful in my model.
Speaker Change #126: Yeah, So and we are still refining our timing on the fundings that were working with ollie's and the construction team. So as I said earlier, we will be providing that with our 2025 guidance, but we're not in a position right now that provide 2025 fundings.
Speaker Change #127: Oh yeah.
Speaker Change #128: That's all for me thanks, so much.
Speaker Change #129: Well thank you.
Speaker Change #130: Uh huh.
Speaker Change #131: If that's it then were happy to close off our call.
Speaker Change #132: I hope that our presentation has been helpful and we will look forward to connecting with you all.
Speaker Change #132: At the end of the next quarter. Thank you so much.
Speaker Change #133: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
Speaker Change #133: Thanks, operator.