Q1 2025 Gaming and Leisure Properties Inc Earnings Call
Speaker Change: Thank you Christine and good morning, everyone and thank you for joining gaming and leisure properties first quarter 2025 earnings call and webcast. The press release distributed yesterday afternoon is available in the Investor Relations section on our website at Www Dot G. L prop Inc. Dot com.
Speaker Change: On today's call management's prepared remarks and answers to your questions may contain forward looking statements.
Speaker Change: As defined in the private Securities Litigation Reform Act of 1995.
Speaker Change: Forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today.
Speaker Change: Forward looking statements may include those related to revenue operating income and financial guidance as well as non-GAAP financial measures such as F. O N E F L.
Speaker Change: As a reminder, forward looking statements rep.
Speaker Change: Represent management's current estimates and the.
Speaker Change: Company assumes no obligation to update any forward looking statements in the future.
Speaker Change: 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 its 10-Q and the earnings release as well as the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release.
Peter Carlino: On this morning's call. We are joined by Peter Carlino, Chairman and Chief Executive Officer of gaming and leisure properties as well as Brandon Moore, President and Chief operating Officer, designate Burke, Chief Financial Officer, and Treasurer, Steve <unk>, Senior Vice President and 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.
Speaker Change: Well, thank you Joe and good morning to everyone.
Speaker Change: It's always fun to introduce a good quarter another good quarter for us here at G. L. P I.
Speaker Change: And we have announced in our release, an array of new project financing adjustments and and and alike, which are I think well documented and will be explained I think in more detail as you hear from Deseret and Matt.
Speaker Change: I won't run through them. So there is one item that I think I will raise in advance and that is Chicago.
Speaker Change: We've had a lot of questions. We I've read a lot of reports overnight through this morning, asking about Chicago, which is understandable.
Speaker Change: But that project I think you need to know is well underway.
Jim Bob: Jim Bob our head of construction is in Chicago significantly auto Dream, what and how that is proceeding.
Speaker Change: I'd highlight that we only got control of that ground in July.
Jim Bob: And it's a complex project, requiring lots and lots of city approvals and the like.
It was delayed first because.
Jim Bob: The contract to manage too.
Jim Bob: Knock a concrete.
Jim Bob: Great wall into the river, which caused some environmental problems and needless to say delays understandable, but delays.
Jim Bob: And then the complexities of.
Jim Bob: Putting a building on a site that has probably been developed.
Jim Bob: Oh, my several hundred years and underground conditions meant that the K songs that are upon which the structure is built.
Jim Bob: Has to be approved and were examined very very very carefully by the city. So there are 331 caisson is required at this project.
Speaker Change: I forget Steve the number is 200 and how many and now.
Speaker Change: 72, New 72, I got a new report this morning, and I just forgot to write the number down 272 of those are done.
Speaker Change: They are our installed they'll all be finished in another month and a half.
And notably two you should know that steel has been long ordered and they expect it to arrive a.
Speaker Change: Sometime in July and that was that was in order to place quite early so that that all looks very good. So the company is committed to remember we're not the developer Bally's is where the company is committed to this project it is very well underway.
Speaker Change: And.
Speaker Change: I just wanted to fuse that he thought that to the contrary, so hopefully I've done that and with that.
Desert Ray: Desert Ray would you take the floor.
Sure Good morning for the first quarter of 2025.
Desert Ray: From a real estate exceeded the first quarter at 24 by over $19 million. This growth was driven by increases in cash rents that were $26 million, resulting from acquisitions and escalation.
Desert Ray: The acquisition of Valley, Chicago Land increased our cash income by 5 million chunk I cannot funding increased by a million Kansas City in Shreveport.
Desert Ray: And Tayo the acquisition increased it by 1.4 million the Rockford increased it by $1 9 million the strategic acquisition increase our cash income by two 3 million and lastly, the ion <unk>.
Desert Ray: Cash income increased by 25 million for that funding erratic.
Desert Ray: The recognition of escalators and percentage rent adjustments or at least there's also added approximately $6 7 million of cash income.
Desert Ray: The combination of noncash revenue growth investment in lease adjustments and straight line adjustments, partially offset these increases driving our collective year over year decrease of approximately $7 6 million.
Desert Ray: On the expense side.
Desert Ray: <unk> expenses increased by 18 million, but it was mainly resulting from a noncash adjustment and a provision for credit losses.
Desert Ray: I'm more pessimistic I went looking economic forecast.
Desert Ray: For the company's development properties.
Desert Ray: We will continue to capitalize interest in deferral or rent joining a development period for financial reporting purposes. However, we will add these back as we have been doing ended up the capitalized interest and driving it.
Desert Ray: Yeah.
Desert Ray: Included in today's release, there's an updated full year 2025 guidance ranging from $3 84 to $3.87 per diluted share in O P units.
Desert Ray: Adoption and the high end of our guidance from prior quarter is primarily a result of the assumption that the escalation on the pinnacle lease will not be achieved.
Desert Ray: Please note that the guidance does not include impact of future transactions. However, it does include our anticipated funding of approximately $375 million for the development projects and the expectations just settle our forward sale agreements in June 25.
Speaker Change: Rent coverage ratios remain strong ranging from one 703 to 2.51 times on our master leases as at the end of the prior quarter with that I'll turn it over to Matthew Yes. Indeed go ahead, Matt.
Matthew: Good morning, everyone. Thanks Deseret.
Matthew: And welcome in the first quarter amid the market noise and macro uncertainty we remain focused we don't manage for the moment you manage for the long term and that discipline leads to consistent results.
Speaker Change: <unk> waters, our cash flows remain steady transparent and resilient.
Speaker Change: We respect our balance sheet is the foundation for all that we do our leverage is very healthy at 4.7 times annualized net debt to EBITDA and that's before including the benefit of that forward.
Speaker Change: Pulling in the Desert I mentioned, our maturities are also very well lathered and or pre funding capital strategy is designed to reduce risk maximize flexibility and position us to act decisively when opportunities arise.
Speaker Change: And volatile times that kind of readiness as an asset.
Speaker Change: The pipeline of opportunities. We have built is intentional it helps lay the groundwork for growth that reaches into 2026 2027 and beyond.
Speaker Change: Periods like this the value of a strong reliable partner becomes even more evident our tenant partnerships rooted in a creative win win mentality often open doors that others don't see in a relationship driven business as we continue to grow our roster of tenants. Our reputation continues to be one of our most valuable.
Speaker Change: <unk> competitive advantages.
Speaker Change: Our strategic approach is simple, but not easy keep the balance sheet strong deploy capital with discipline and scale with purpose.
Speaker Change: Our teams both at the core and the specialized areas are executing to monitor the active opportunities.
Peter Carlino: It also create new ones in our effort to maximize long term intrinsic value per share those comments I'll hand things back to Peter.
Peter Carlino: Thank you and with that Christine would you open the floor to Q&A.
Christine: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Christine: You May press star two if he would like to remove your question from the queue.
Christine: All 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.
Speaker Change: Thank you. Our first question comes from line of Greg Mcginniss Scotiabank. Please proceed with your questions.
Greg Mcginniss: Hey, good morning.
Speaker Change: The Chicago.
Greg Mcginniss: I'm just curious you know on.
Greg Mcginniss: And the expectation of the build out from this point forward is it basically just assuming that there's kind of no other.
Greg Mcginniss: Uh huh.
Greg Mcginniss: Complications I guess from this point forward.
Greg Mcginniss: Well I mean, we've got the speculative.
Greg Mcginniss: Who knows I mean, its a massive project delay.
Greg Mcginniss: Delays are always possible, but I can't predict what the future looks like a.
Greg Mcginniss: We're monitoring it.
Greg Mcginniss: This process as I mentioned, we have our head of construction, who has built many many projects with us through my years at Penn.
Greg Mcginniss: And he's onsite and will remain on site. So this thing is well well established so that's something that's come up of course. It goes without saying is there any reason to expect that well, let's hope not.
Greg Mcginniss: So, but but the point is things are well underway. The thing is coming out of the ground, which ought to be quite visible publicly visible to anybody who rides by wants to take a look.
Speaker Change: So okay. Thank you how has it gone so far so good.
Speaker Change: Who falls at the top but you know our window of a tall building.
Speaker Change: On the way down you know so far so good.
Speaker Change: Mhm, though okay.
Speaker Change: It made it look I can't give you a better answer than that.
Speaker Change: Hey, Greg Yeah, we structured this to make sure we had turned pay along the way. So it's not like some of the other structures, we have to wait until it opens to get our cash flow.
Speaker Change: And separately, we also capped our exposure as part of our as part of our deal structure. Yeah right now the cat has been advanced comes to valleys. So that's fine with us.
Speaker Change: Right, Okay, but the cat and then draw for US is it's not predictable until we get there.
Speaker Change: Okay, Yeah, no that all makes sense I can appreciate it I was just trying to understand you know how much leeway was built into the assumptions.
Speaker Change: On the Penn projects have you had any recent conversations with them. They now aerostar and Iowa, just got approval from the State Commission has there been any recent conversations there as to whether or not you know they.
Speaker Change: Plan on taking a G O P I capital to help.
Speaker Change: Yeah.
Speaker Change: If you want to take it Steve.
Speaker Change: Sure.
I think that it's a constant dialogue, we have with them I don't think we have any better clarity than we've conveyed in our in our documents here that we've published I don't think our current expectation is that they withdraw funds. This calendar year, but we will have to wait and see what comes of that debt.
Speaker Change: I can tell you that the dialogue around their reinvestment in properties is along the same lines as what you've seen in boys announcements yesterday I think the operators, we talk to and deal with are starting to focus on the brick and mortar assets and we think that's a positive thing for our properties and our assets, Yes, Let me say this.
Speaker Change: Not totally sad that they'd haven't drawn on our cash right now suggests that they've got enough cash to do what they need to do.
Speaker Change: Look Penn is in.
Speaker Change: The digital element aside are in a very strong position they've got great properties. They are performing.
Speaker Change: Relatively well and.
Speaker Change: So that side of the business the bricks and mortar side.
Speaker Change: Is doing extremely well and I'm and I'm gratified frankly to see that there actually.
Speaker Change: A highly focused now on bricks and mortar again, so good for them.
Speaker Change: Yeah.
Speaker Change: Our next question comes from the line of Ronald Camden with Morgan Stanley. Please proceed with your question.
Ronald Camden: Hey, just two quick ones for me so I noticed the guidance I think I had the assumption is for development funding was reduced.
Ronald Camden: I think it's $400 million last quarter now. Its 375 is that is that all related to bally's, just what's the color behind that timing and you know what what sort of drove that you know sort of changed thanks.
Ronald Camden: So it's all timing or its just you know pushing out some of the product projects due to separately that Peter mentioned.
Ronald Camden: Yes believe me, we just the guesstimate as best we can make it but you need to know, it's just a guesstimate of where things are going.
Ronald Camden: Okay. Great. That's helpful. I guess my my second question is just I'm, just going back to sort of the Chicago project. Maybe can you comment on just the latest update on gaming trends around the asset nearby the assets. What you guys are seeing.
Ronald Camden: We're hearing.
And and if you can broaden that out to just regional gaming overall, I mean, you mentioned pad, but just curious about what trends youre seeing in regional gaming overall and your views post tariffs. Thanks.
Ronald Camden: Sure.
Ronald Camden: Maybe starting in Chicago land area look I think that the trends have been pretty consistent.
Ronald Camden: So far this year with the one wrinkle being you know the recent opening of wind Creek and the performance there, which I think is has done what most people expected it to do which is take some market share from from other competitors I think we talked.
Ronald Camden: Talking about Chicago, specifically I think we we did notice that the performance last month was up which is positive I think there have been some.
Ronald Camden: Changes there Hum on the valley side, and I think that we are looking forward to what those might bring to the property going forward.
Ronald Camden: More broadly speaking I think look I think we what we hear and what we see from our tenants. When we talk to them is very much in line with what you heard on Boyd's call yesterday, which is that they continue to see resilient customer base. They continue to see assets performing and at the same time they are very very attentive.
Ronald Camden: To those trends and what is going on in their ability to pivot and take care and manage their cost. If in fact, they have to do that so I think we're seeing promising trends right now and as we all know that so yeah only good for as many minutes till the next tweet comes out.
Steve: [laughter] Thanks, Steve.
Ronald Camden: Oh, thanks, so much that's it for me.
Speaker Change: Our next question comes from the line of Anthony Powell, along with J P. Morgan. Please proceed with your question.
Anthony Powell: Yeah. Thanks, good morning.
Anthony Powell: First one is just with regards to the pipeline in your own thinking right. Now has anything changed in terms of what you might want in terms of the yield now versus even like a month or so ago, just what your thought processes. There as you look at deals.
Anthony Powell: Hum.
Anthony Powell: I'll go and then anybody else wants to jump in again a.
Speaker Change: Look I think I think from my perspective from our perspective with respect to deals I think you know obviously, we always want to get the most accretive transaction as possible and so when our cost of capital starts.
Speaker Change: It starts to climb we obviously look to to keep the spread intact and increase the cap rate at which we would transact I will tell you, though anecdotally and I think it's important the counterparties seemed more more interested in even talking right now so as you would.
Speaker Change: Imagine as the markets gyrate and stock prices move around and credit spreads move in the treasury moves discussions, which were maybe exploratory and and soft in nature seem to be a renewed interest that doesn't mean that transactions happen. It just means that there is a.
Speaker Change: More attentive counterparty on the other end of the phone so I would share that with you anecdotally.
Speaker Change: Okay. Thanks, and then just just a quick follow up on on the guidance and just the assumption around the equity settlement at mid year is that just a placeholder or do you know do you do you intend to do it that way it doesn't seem like you necessarily need the money I'm just trying to think what.
Speaker Change: So we wanted to give everyone a placeholder for doing your modeling clearly our satellites do expire August for the majority of them anyway. So we just provided a placeholder.
Speaker Change: Okay. Thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Smedes Rose with Citi. Please proceed with your question.
Speaker Change: Hi, Thanks, I wanted to just maybe get a little more color kind of your thoughts you mentioned your counterparties being more attentive I mean, if you just could you just put that up to kind of just volatility in interest rates and the overall market or is there anything else going on specifically and then maybe just as the park senior you'd mention.
Speaker Change: On your last.
Speaker Change: Quarterly call potentially with higher layoffs from the government, but that could encourage some states to look to issue.
Speaker Change: License so to initiate four new legislation that just wondering if you're seeing a little thing about.
Speaker Change: On that end of things.
Speaker Change: So I'll take the first one maybe.
Speaker Change: With respect to the Counterparties look I think I think the interest is yes as you highlighted a lot of it is around what what is their alternative what is their alternative capital sources, what could they do with the capital where do they find themselves in the current universe. So I think folks who were maybe.
Speaker Change: Willing to dip their toe in and find out what they could get done and maybe we're holding out for a very significant price I think all of a sudden they they've seen.
Speaker Change: The field and landscape in front of them is changing and maybe they don't need to hold out for the last penny. So I do think there is it just the macro climate has caused people to kind of have a renewed sense of where they sit in the in the Grand scheme of things with respect to other jurisdictions I don't know if anybody linden's, you'll have to talk about just the regulatory climate.
Speaker Change: Yeah, Yeah sure.
Speaker Change: We are monitoring legislation in a number of different states for different reason. So you have bills that were proposed in states like Georgia, and Alabama that would introduce gaming for the first time I think those look unlikely in those states, but you have other states, where I gaming and V L T's in Illinois, and other states and.
Speaker Change: We take a we take a very close watch on those for the impacts of those could have on the bricks and mortar businesses and our tenants and I think those are all complicated.
Speaker Change: Endeavors, and it's different in each states. So there's a lot of different factions at play when you have those kinds of regulations that are being proposed and you have a lot of different groups that are pushing and pulling on those and to handicap. The legislation in some of these other states would be a bit speculative right now, but but I think you're seeing a very.
Speaker Change: <unk> intense focus on things like gaming and supply expansion because people are starting to realize the impacts that those things have and it's not as simple as just a build it and they will come. So I think those are pretty complex I think youre going to continue to see legislation on our gaming and sports betting sports betting is now prevalent and.
Speaker Change: And the majority of states, but you'll see it in states that don't have it and I think you'll continue to see legislation this year and in future years in states that don't have gaming, Georgia, Alabama, South Carolina, and North Carolina and now some of those have tribal gaming.
Speaker Change: But the ones that don't have commercial gaming I think you'll continue to see those coming up Texas in somebody's near lifetime.
Speaker Change: [laughter].
Speaker Change: Thank you I appreciate it.
Speaker Change: Our next question comes from the line of Todd Thomas with Keybanc. Please proceed with your question.
Speaker Change: Hi, Thanks, Good morning, I, just wanted to follow up a little bit on the investment landscape and sort of thinking about funding future investments just given the comments that conversations are active around potential do deals. So you have the $400 million of unsettled equity, but you werent active this quarter.
Speaker Change: At all and the stock is up on the year your absolute cost of capital seems to be holding in relatively well.
Speaker Change: And in the past you've been fairly proactive about raising capital and pre funding investments I'm just curious how youre thinking about your equity capital here today.
Speaker Change: Yeah are taught our philosophy remains the same if you look at our business plan for this year, we've got $3 75 going out you got 400, plus coming in from that forward settlement and you've also got a free cash flow, which is about $200 million per year. So if you look at it in isolation or in a cash positive position.
Speaker Change: Our calendar year before anything new happens and to your point you know, we're always looking out at least 12 months I'm thinking about the needs beyond the end of the calendar year and also thinking about our pipeline and you're right. We've used our ATM program as a tool historically and will continue to have that I mean, our goal is to continue to pre fund.
Speaker Change: But always to do it in a very measured and balanced way.
Speaker Change: And if you look at our balance sheet, we've got some flexibility and some capacity. So we're going to continue doing what we did I wouldn't take this one quarter in isolation any read in any direction, but where we are in a very solid place.
Speaker Change: Okay and then if I just wanted to also just following up on the $375 million of fundings that are in guidance.
Speaker Change: You know I realize it's it's fluid a little bit not entirely in your control and I think that it was initially described as being backend loaded during the year, but just curious if there are any updated thoughts at this point.
Speaker Change: Around the cadence of that amount.
Speaker Change: And then any early thoughts on how we should think about fundings in 'twenty six just given the timing of Bally's Chicago was pushed out into 'twenty seven at this point in some of those.
Speaker Change: Amounts.
Speaker Change: Seem to be spread out a little bit further than we previously may have thought.
Speaker Change: And then I can start with them. The 375 is still back end loaded we had only funded about $12 million in the quarter.
Speaker Change: As far as pushing it out as I think I said on the last call. We do find after a bally's has done the work. So therefore, we pushed ours out 27, because you know the funding would lag when the actual work is completed.
Speaker Change: And signed off.
Speaker Change: So I do think that everything is consistent with what we had our last call.
Speaker Change: Okay. Thank you.
Speaker Change: Our next question comes from the line of Jay Kornreich with Wedbush. Please proceed with your question.
Jay Kornreich: Hi, Thanks, Good morning, just going back for one follow up to the Polish Casino development or are you expecting any impact just from the recent tariffs maybe increasing the cost of building items and maybe just the overall cost of the total project does that.
Jay Kornreich: I guess does that lead to any changes in your funding commitments if that happens and.
Jay Kornreich: Any any significant impact to how you think about stabilized rent for the overall asset if it does become more more expensive or stabilize rent coverage I mean, it's it's hard to know because we're so early in the game. Many of the expensive components are have already been ordered and are are in hand.
Jay Kornreich: We'll get a report.
Jay Kornreich: Somewhere down the road in the next weeks about where they are in purchases and so forth and what what's locked in and what is not.
Jay Kornreich: The goal of course is always a lock in as many of the big contracts as you, possibly can steel concrete a lot of the electronics and a couple end equipment and so forth.
Jay Kornreich:
Jay Kornreich: And that is a good bit of that.
Jay Kornreich: Has been ordered and is in a in the queue. So we need more information at Ara and frankly to kind of just where that is what percentages bought out well, we'll know that fairly soon and what percentage is still out there.
Jay Kornreich: A lot of that was domestically sourced.
Yeah, No I got an impact on things like steel would not have had a big any impact on that anyway from from.
Jay Kornreich: From a rent perspective, our our financing commitment is locked number. So you know if you if you extrapolated a tariff impact that we just mean that we are buying less assets, but we're spending the same amount of dollars and therefore your stabilized rent math would be the same thing.
Jay Kornreich: Because my rent is going to be function of the amount of spend I have it.
It would just mean that the return on capital from the valley side of the equation would be worse, if they actually fund more dollars into the project to get the same amount of EBITDA and this tariff thing as you. All know is is pretty fluid.
Jay Kornreich: So, it's not real clear kind of who what where and when.
Jay Kornreich: That's the understatement of the day so.
Jay Kornreich: The dog [laughter].
Jay Kornreich: We'll.
Jay Kornreich: Well, we'll know it when we see it.
Jay Kornreich: Okay. I appreciate that thought and then just one follow up I guess going into the iron than investment, let's say you invested $18 million out of 110 million commitment.
Jay Kornreich: Just curious of your thoughts on the pace of investment going along as planned and just any overall thoughts about.
Jay Kornreich: How is that progress is going in the overall, just general opportunity set of tribal and investments.
Speaker Change: But Brian did you want to do that.
Brian: The eye on investment is going as we had expected theres a G. M. P contract. There. So I think if there's a question on tariffs and things like that that's been covered on the ion project. We were out there recently for a travel meeting and had an opportunity to see the site I think that project is going great.
Speaker Change: We're we're enthusiastic about that project.
Speaker Change: And tribal gaming in General you know we were out at the Indian Gaming trade show and convention in San Diego, a few weeks ago. We had two days of meetings with a lot of different tribes and.
Speaker Change: There is a healthy level of interest from both tribes and quite frankly professional travel advisors in.
Speaker Change: In our structure and I'm, not saying that things that people are are are definitively deciding they need but I think they are recognizing that they need to consider it as part of their overall financing program. When they are refinancing debt entering into expansion.
Speaker Change: Programs are doing Greenfield investments. So so we're out there and we're talking to a lot of folks I think it will take some time to.
Speaker Change: To get traction on additional deals and to say, we will or we won't do additional deals I don't think we're there yet, but I would say the interest level.
Speaker Change: And tribal country for our financing structure on tribal land is robust at the moment.
Speaker Change: Okay I appreciate the thoughts thank you.
Speaker Change: As a reminder, if you would like to ask a question press star one on your telephone keypad.
Speaker Change: Our next question comes from the line of Barry Jonas with Truest. Please proceed with your question.
Barry Jonas: Hey, guys good morning.
Barry Jonas: How do you guys think valleys risk profile has evolved since you started the relationship.
Barry Jonas: That's an excellent question.
Barry Jonas: <unk>.
Barry Jonas: I'm I'm I'm looking if you're somebody who wants to jump on that one yeah look I think that we have obviously, we have more exposure to them now than we had before which stating an obvious they they obviously, where we're more broadly held as a public equity.
Barry Jonas: Equity when we started the relationship that's that's obviously changed.
Barry Jonas: Casino Queen when we when we started some of this was wasn't a significantly worse position in standard general was involved there, which which they turned that around and then now that it's part of bally's. So that's another aspect that is uniquely changed here. So I think the the relationship has continued to have.
Barry Jonas: <unk> I think you know we continue to look at it and in ways that we can be a co-operative long term partner.
Barry Jonas: While supporting their business and at the same time, making sure we don't take undue risk for our shareholders and Thats, partly how we ended up structuring Chicago the way in which we structured it which is direct funding hard cost as opposed to providing alone alongside of all the rest of their capital structure.
Barry Jonas: So things like that were done in a thoughtful manner. We capped the amount of exposure we have on that financing driven by our underwriting of the asset.
Barry Jonas: So I think we continue to look at it.
Barry Jonas: Well as any other tenant relationship we have as we want to be supportive we want to be helpful and we want to be thoughtful but all of that is cloaked in making sure. We take care of our shareholders not only return, but the risk that the shareholders of ours are taking in any one of these relationships. So a lot has changed but at the same time I.
Barry Jonas: At the end of the day, we look at a lot of it is very similar we're just much more alert to some of the risks yes.
Barry Jonas: I'll also say and I'm not discounting the valleys parent corporation credit risk as an important an integral component of what we look at but the underlying assets that we have in our portfolio are strong assets, they're performing very well and you can see that in the earnings release in the table there and the coverage the <unk>.
Barry Jonas: Four wall coverage at those properties is very strong so and I will say bally's has in front of them some challenging yet potentially very big opportunities. When you look at Chicago and Las Vegas.
Barry Jonas: And other things they do so they've proven to be a very good partner to us, but but I don't want to underestimate the value of the assets that we have in our portfolio and the importance that we place on that.
Barry Jonas: As you know we opened two.
Barry Jonas: New projects it with them at the Hollywood.
Barry Jonas: Rouge property, which.
Barry Jonas: We completely redevelop its really exceeded all expectations and the bell of Baton Rouge courses under construction now.
Barry Jonas: The hotel is open.
Barry Jonas: And the gaming facility.
Barry Jonas: Is fourth quarter target.
Barry Jonas: Its first rate it is really really first rate so.
Barry Jonas: They are trained they have single handedly transform that market.
Barry Jonas: Just going landside in building high quality property and I don't think its unique to that market I think youre seeing with Boyd and others. The transition from boat to land side is proving to be a pretty profitable move in and so that move off the water at the Bell we will see how much that grows the market there, but it's proving in other situations.
Barry Jonas: <unk> to be a good investment I think its spirit tend to move seriously too going landside, where they can.
And.
Barry Jonas: It's hard to mistake. The reality that you have going landside beat the heck out of the three story boats.
Speaker Change: Got it that's all really helpful. And then just as a follow up you know I think you mentioned I gaming before and I wanted to maybe see if you could talk more about how that factors into your underwriting I know sands looks to be exiting New York and they cited cannibalization is a concern.
Speaker Change: Yeah, I'll I'll I'll skip the sands part.
Speaker Change: I'm not sure if that was the reason they went or not I'd, just say I haven't done any digging into that but on I gaming I think we're very cautious with I gaming. There. There are it's obvious that with our bricks and mortar portfolio I gaming on its face would seemingly be dilutive to that and a threat to the <unk>.
Speaker Change: To that revenue that being said a lot of our leases have parent guarantees and if you tie the I gaming to the bricks and mortar casinos that may not necessarily be a bad thing for us if that increases the revenue and strength of our tenants.
Speaker Change: That's good where you have I gaming coming into states, where you don't have to have any investment in the states. So you really have no employees you don't have any real skin in the game in any state.
Speaker Change: Clearly that that's more destructive to us than in the other states. So I would say broadly we're against I gaming. There I think there are a lot of public policy reasons, why I gaming can be dangerous if it's not regulated as meaningfully as it is at the bricks and mortar casinos I think by having bricks and mortar operators b.
Speaker Change: The I gaming license easier at least have your hooks as a regulator in into those licensees.
Speaker Change: And as in a manner, where they have investments in the state's employees in the states.
Speaker Change: And so we continue to monitor that and as it relates to our underwriting.
Speaker Change: We have to look at the relative strength of our tenants and we have to look at the markets, where I gaming has been in place for some time, including our own home state of Pennsylvania.
Speaker Change: And and see to the extent, we believe that ultimately impacts our rent so in order to impact our rent I gaming has to have a very dilutive impact on the bricks and mortar is it having an impact sure. It is we've seen that is is it strong enough to date to cause us concern as to the stability of our rent not at the moment, but we will continue to look to monitor.
Speaker Change: Yeah, Let me suggest it's really unconscionable for these states to approve.
The invaders to arrive at the door and offer I gaming, who have no investment in the state whatsoever, when those of us in the bricks and mortar world.
Speaker Change: We have hundreds of millions if not billions invested in that state. So that we will lobby strongly in the future. If you're not if you don't have a bricks and mortar investment you ought not to be.
Speaker Change: In the gaming business, if there's a price to be paid so we'll see how that all plays out but.
Speaker Change: I maintain it as an unconscionable.
Speaker Change: Excess on the part of these states.
Speaker Change: So we will continue to lobby hard.
Speaker Change: Against that gave me where it's detrimental.
Speaker Change: Got it alright really appreciate it. Thank you so much guys.
Speaker Change: Our next question comes from the line of Mitch Germain with citizens. Please proceed with your question.
Mitch Germain: Thank you.
Speaker Change: How will the accounting for the 10.
Mitch Germain: Commitments, if they win or if they are done.
Mitch Germain: Is that could be similar to a loan or what youre doing on the development side.
Mitch Germain: It's interesting.
Mitch Germain: Yeah, so and it really depends on the timing of when they take our funding. So that's the property is open and running when they come to us too.
Mitch Germain: For the funding then it will not just be a normally an add on to the lease. However, if in fact, they take them during the development period, we will end up with some of the same accounting I used in the Chicago, which will be capitalization of interest.
Mitch Germain: Deferrals anyway.
Mitch Germain: Gotcha. Okay. That's helpful. And then that's very they just kicked me to what variables have to occur to them.
Mitch Germain: To bring you to the low end of guidance. It seems like there's absolutely no growth at that if you get there.
Mitch Germain: You know what kind of has to go wrong to take you.
Mitch Germain: To the low end here.
Mitch Germain: So to the low end it would mean that we do not see any escalation on their variable escalators from Blaine already written in Senegal.
Mitch Germain: Also what happens with we now have 900 over $930 million of variable rate debt. So what happens with our variable rate on that as well would have to increase.
Mitch Germain: Pretty significantly from where we are now to get us down to Atlanta, but that has been pretty volatile.
Mitch Germain: I see.
Mitch Germain: Yeah.
Speaker Change: Our next question comes from the line of Rich Hightower with Barclays. Please proceed with your question.
Rich Hightower: Hey, good morning, guys.
Mitch Germain: Good morning.
Speaker Change: Hi, Good morning, I wanted to circle back really quickly just on the some of the counterparty discussions and.
Speaker Change: More openness to talking with G. L. P. I about different forms of funding can you just help us understand the composition of the.
Speaker Change: The projects were talking about there I mean are we talking is it more expansions construction related financing is it full on.
Speaker Change: Traditional sale leasebacks for assets that aren't already sort of nail down you know within a REIT structure somewhere just help us understand maybe what the opportunity set looks like at this point.
Speaker Change: Kind of all of the above but Steve why don't you Yeah, I would say I would look my comments were more directed at a traditional sale leaseback and M&A to be honest some of the other.
Speaker Change: Are there other types of financings you mentioned like our you know our involvement or any one of our counterparties involvements in a discussion around a greenfield financing probably yields a better result for the counterparty. So those discussions where we were already.
Speaker Change: Those were already intertwined and those were progressing as you would expect.
Speaker Change: Things like M&A, where you know maybe I'm interested maybe im not.
Speaker Change: From a counterparty perspective, I think those are the areas where people seem to be a little more open to now discussing you know in a real tangible way what might have been on the periphery before.
Speaker Change: Okay. That's helpful. And then just on the balance sheet side, you know going back to some of Matt's prepared comments.
Speaker Change: In terms of capital funding and that sort of thing, but so if I'm not mistaken you still got the Lincoln valleys, you know options sitting out there I think you guys have said you would do that in a sort of a 100% debt financed.
Speaker Change: <unk>.
Speaker Change: So, let's just fast forward and assume that that happens at some point, where would you sit leverage wise based on kind of everything.
Speaker Change: Mix as of today that we know about.
Speaker Change: And what would you have to do at that point to fund new growth from there if you don't mind.
Speaker Change: Well still be well inside of our target level, five and a half times range. Once we fund the $735 million with all of that.
Speaker Change: And I.
Speaker Change: I haven't calculated the number but I'm sure. It's right around 547, now and so I think our balance sheet will still be in an extremely strong position how's that.
Speaker Change: I see.
Speaker Change: Yeah, we have it in shape in this shape in part because we know our forward.
Speaker Change: <unk> and pieces like that of the puzzle that we have to think about so just think about us as we use the ATM to the previous question is kind of chipping away at that on a blended basis.
Speaker Change: And in an environment like this we're not going to stray meaningfully, especially in the higher leverage direction.
Speaker Change: We're getting a very good spread through our cost of capital if we wanted to lock that in for our shareholders.
Speaker Change: Okay, great. Thank you guys.
Speaker Change: Our next question comes from the line of Daniel Guglielmo with capital. One. Please proceed with your question.
Hi, everyone. Thank you for taking my questions.
Speaker Change: This is not a good construction going on at the Bally's and Penn properties can you talk about the teams process for keeping up to date and then narrow on those projects.
Speaker Change: There are different level of touch project, a project with a partner and a partner.
Speaker Change:
Speaker Change: Actually it's a fair question.
Speaker Change: Yeah, I guess it depends.
Speaker Change: Not surprisingly on the scale of the project the complexity of the project.
Speaker Change: Things are pretty much on autopilot for example in Baton Rouge Big project terrific project, but it's.
Speaker Change: It's well understood and proceeding pretty simply and straightforwardly well.
Speaker Change: Chicago is in the early phases, it's a bigger project, obviously, it's going to take a lot more attention from us as I mentioned at the outset, we have detailed our head of construction since we're involved in such projects.
Speaker Change: To Chicago, and we expect to spend a lot of time until we're absolutely satisfied that most of the major buys have been done pricing looks good and the project is well underway. It is now well underway and we're confident in that but now we're in the process of trying to buy out the balance of the jobs get the balance of the plans.
Speaker Change: Drafted and priced and so forth. So there's a lot going on and so the bigger the project the more complex will spend more time there.
Speaker Change: And remember, we're not really we're not the developer balances, but because we can and wish to be helpful. We will pay close attention to that to make sure that project comes out successfully.
Speaker Change: I'll look around the table if anyone wants to add anything to that but it's a matter of need.
Speaker Change: And importance and so Chicago does rise to the top we've got a smaller case study if you look down in Baton Rouge, but some of the same points of contact and what was done at the Queen and the outcome. We got there well the queens a little different because we actually built that we executed the construction and turn keyed it to valleys, that's not the case in.
Speaker Change: This is their project and we're monitoring that.
Speaker Change: So far of course, there's been no request for a draw from us and that's fine.
Speaker Change: As I said earlier I'm always gratified, when our tenants reaching into their own pocket money upset suggest that they got it. So you know, but in due time, obviously that money will be drawn and we and required without any doubt at all so it's just a matter of timing.
Speaker Change: The long way around of saying, we do pay attention, but it is proportional to the complexity of the project.
Speaker Change: Great I really appreciate all that color and that makes sense and then just one more on the counterparty sale leaseback interest how how long does it take from someone.
Speaker Change: Someone's dipping a toe into an actual announcement and deal and do you think we need a little bit more macro stability before we really start to see folks come out.
Speaker Change: Just curious.
Speaker Change: Boy that.
Speaker Change: Sigma knows and that one totally unpredictable [laughter]. Some deals go yeah, Matt negotiated and you know 90 days or less and some take years I mean, it's it's it's.
Speaker Change: Other unknown, we want to get these things done as quickly as he can what's the main motivation of the of the.
Speaker Change: The seller so to speak what what what what do they need one or desire.
Speaker Change: And then I can maybe tell you how long it might take.
Speaker Change: So, but that's all over the lot.
Speaker Change: We want them fastest possible 30 days and done would be ideal.
Speaker Change: [laughter] they don't usually go that way.
Speaker Change: We wish we had that level of predictability deal yeah.
Speaker Change: Okay. Thank you appreciate it.
Speaker Change: Our next question comes from the line of Chad Beynon with Macquarie. Please proceed with your question.
Chad Beynon: Hi, Good morning, Thanks for taking my question just one for me today I wanted to ask about a deal that we saw this quarter with with one of your tenants valleys.
Chad Beynon: And and Star Entertainment it it looked like a pretty complicated multi tranche a convertible note and subordinated debt deal I'm wondering your interest kind of working with them on this just given kind of the risk profile and then also related to that your.
Chad Beynon: And getting into some of these other international markets, where there might not be.
Chad Beynon: As much competition. Thank you.
Chad Beynon: I think at this point, we have not been approached by valleys to participate in the star transaction and we haven't done any level of work on that we're obviously cognizant of it and we're cognizant on the impact that could have on the overall credit profile of that tenant but at the moment, we don't really have any more information than that.
Chad Beynon: And those assets have come up several times over the course of the last several years, we've looked at them at various points in time, but I don't think that translates into the transaction the valleys as potentially looking at so I don't know, we'll have much more to add to that and until or unless we hear something from valleys and on the international front, we do look at international acquisitions on a.
Chad Beynon: Everybody says that things that we have to worry about are the tax consequences of getting the money back to the U S. How it impacts that reach as well as exchange rate risk, but we do look at all of those risks and we do look at international transactions regularly.
Chad Beynon: Thank you both I appreciate it.
Chad Beynon: Sure.
Speaker Change: Our next question comes from the line of Handel St. Juste with Mizuho. Please proceed with your question.
Ravi: Hi, Good morning. This is Ravi gave you on the line for Honeywell I Hope you guys are doing well.
Speaker Change: Or any commentary regarding foot traffic consumer spend at your properties in light of a slowing macro and tariffs.
Ravi: Oh.
Ravi: [laughter].
Ravi: Yeah. So we don't actually get property level information from any of their tenants. So all we can tell you is what you've seen our blades well results were very positive that came out I'm sure, we'll get more information as our other tenants or lease them.
Ravi: But we have everything I've read debate has been pretty positive in the first quarter I don't know whether or not that will continue but.
Ravi: And.
Ravi: We know what you know at this point, Yeah remember, we get no nonpublic information you know exactly what we know.
Ravi: And there's no inside track with any of our tenants.
Ravi: Sometimes we wish we had that but we do not I think our general expectation is things are fine I'm not remotely.
Ravi: Losing any sleep over how well that tenants are doing.
Ravi: Have high high confidence that we'll be perfectly fine with every one of them frankly.
Ravi: Got it just one more here regarding the new deal our council bluffs.
Ravi: Do you expect them to take up to the $150 million in and if they do do you think they'll take it is Brent or is the five year pre payable term loan.
Ravi: We've left that option depend I think it's too early for US we have not heard from them as to the final spend in that market or the structure pursuant to which they'll take our money.
Ravi: Yes, I mean would they just wanted a backstop, but to make it very clear getting regulatory approval that it can be financed and done. So we've served that purpose.
Ravi: Due time I'm sure they'll come to us with the request.
Ravi: Got it thank you.
Ravi: Thank you our next our next question comes from the line of Robin Farley with UBS. Please proceed with your question.
Robin Farley: Thanks, you'd say answered much of them and you did talk a little bit about travel opportunities already I guess the takeaway from that is it doesn't sound like.
Likely that there'd be a travel transaction anything additional in 2025 is that kind of what the bottom line would be on that and then I mean is it really is the opportunity really try but only if there's kind of a new development or something right maybe not some of the other reasons that we keep doing transactions is that does that sort of thing in terms of expectations. Thanks.
Speaker Change: Look I'm not prepared to say that there's no chance that we can get something signed in 2025 I think that is certainly a possibility I can't give you a probability on it but I think it's a possibility and as far as the types of transactions. We're looking at I would say no. It's not all limited to Greenfield project.
Speaker Change: So we we have had a lot of conversations that have run the gamut from expansion opportunities to refinancing debt to greenfield opportunity. So I don't think the uses of capital are significantly different than the uses of capital in a commercial transaction and quite frankly, the one type of deal you don't get is just the traditional sale leaseback.
Speaker Change: But we could have those too, but we haven't had those conversations where somebody just wants cash for no use a specific use but but I think that that's certainly possible and I think part of the determination that some of these tribes need to me is not unlike a commercial facility of when you have your debt stack you have to think about how valuable.
Speaker Change: A long term piece of that is to your overall financial picture and your growth opportunities and your goals in your strategies and to date that hasn't been available to tribes on tribal land and we have a structure, that's making that possible and it's a new conversation. So it's not only with tries but quite frankly.
Speaker Change: A lot of it is with professional travel advisors, who advise these tribes onto their financing packages and their debt stacks and how to approach these things and those conversations are ongoing and I'm optimistic.
Speaker Change: Stick that we'll be able to make something out of those but we're still in a wait and see mode, but I wouldn't say necessarily 'twenty 'twenty five is out of the picture.
Speaker Change: Okay, great very helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Caitlin Burrows with Goldman Sachs. Please proceed with your question.
Caitlin Burrows: Hi, Good morning, maybe just a question on that new supply as you guys think about that what it means for your own construction opportunities and competition for existing properties I guess, what's your expectation for new supply of regional gaming maybe over the next three years.
Speaker Change: And do you even have much or any visibility on that.
Speaker Change: I don't I don't know that we have any more visibility than you do at this point as you've seen states that were quote unquote limited license jurisdictions have found ways to be not limited license jurisdictions. So here in Pennsylvania, We've had expansion of supply in the last five years, Illinois had expansion of supply.
Speaker Change: And so and so I think it's certainly possible in states that we may not be predicting at the moment I do believe in the southeastern part of the United States in the next two to four years, you will see some expansion of gaming there are states. There obviously that don't have commercial gaming today and there are a lot of folks that are pushing for that down there next year.
Being an election year will make that more of a challenging environment for a game or a new piece of gaming legislation, but but but I think you'll see expanded supply and.
Speaker Change: The south eastern part of the United States in the coming in the coming years, but again, our job of course is to be.
Speaker Change:
Speaker Change: Close to every and all opportunities coast to coast I mean, that's that's it.
And so we want to be a player in every case stay on top of that stuff have lobbyists and place we ourselves spend time in these various states that look possible lives as they likely but look possible. So yeah, we say as the expression goes we stay close to that.
Speaker Change: Yes, we monitor this very closely because it's part of our underwriting so anytime we're looking at a new project. We don't just look at that project and in that market. We're thinking you know five years ahead 10 years ahead, where can the competition come whereas the new supply likely to come what markets are currently underserved that could open themselves of new supply. So so it is part of the overall underwriting.
Speaker Change: Process here at the company to make sure. We're thinking ahead about how new supply could impact a deal today, because we're entering into transactions for the long term not the short term and so this is something we do we do follow very closely.
Speaker Change: Got it and then Peter you mentioned earlier has some deals take like 90 days, how they take years, which I would totally believe I was wondering if you could talk a little bit whatever you could tell us about the pipeline today and kind of just like what's active versus put on hold given macro volatility right now or have you to what extent have you seen some.
Speaker Change: Potential partners, saying, you know, what let's revisit in a while and we're going to pause conversation for now.
Speaker Change: You know there's not much I can tell you about that I really as you know I can't say too much but I'll give you. This one story there was a particular.
Speaker Change: Property owner in another state that had properties that I really desired.
Speaker Change: Every year I would go talk to that person.
Speaker Change: Sometimes a couple of times, a year and year end year out.
He was so well off and is it really is true he didn't need the money. He said I have no place to put it.
Speaker Change: Don't need it I think after three or four years I finally gave up.
Speaker Change: And then a year or two later made a deal with somebody else because they just happened to be there at the right time at a time when he decided to do something so our job is as we said earlier is to stay close to opportunity and basically never give up and make sure that you have there because there's often a day when that person decides or reasons.
Speaker Change: Eight reasons, who knows that now they are ready to transact and we want to be there.
Speaker Change: Close close at hand, so that really characterize is our job and responsibility and looking at opportunities completely unknown beyond that.
Speaker Change: Job is to dig them up close.
Speaker Change: Hope to get Lucky.
Speaker Change: Yeah, Theres some groups that the macro uncertainty may impact maybe some of the larger public companies that Steve mentioned, maybe are slower to do big things in an environment without certainty, but theres a lot of catalyst and Theres a lot of other groups out there that are doing things that need to do things. So the comments about us being more relevant in a volatile environment.
Speaker Change: But we'll go back to it's.
Speaker Change: It's just getting to the finish line with folks, but we certainly have encouraging conversations in the backdrop like this and a letter has a very valuable I mean with that balance sheet behind it.
Speaker Change: Especially for some of the things that are out there for a counterparty.
Speaker Change: Thanks.
Speaker Change: Our next question.
Speaker Change: As a follow up from Greg Mcginniss with Scotiabank. Please proceed with your question.
Greg Mcginniss: Hey, Thanks for taking the follow up.
Greg Mcginniss: <unk> talked in the past about your relationship with Cordish on on prior calls, but now that the Petersburg, Virginia casinos broken ground do you have any renewed interest and a 20% equity co investment there if not why and when would you have to make that investment if you choose to.
Greg Mcginniss: Sure.
Greg Mcginniss: That is a difficult thing to answer so I'm looking at I'm looking to bail out of it I was going to get.
Greg Mcginniss: Give it to Brandon.
Greg Mcginniss: Well I think they are in the process of correcting their temporary structure down there and where we.
Greg Mcginniss: We can't say too much more about the Virginia opportunity and our thoughts on our investment potential investment any investment there at the present time.
Greg Mcginniss: Okay.
Greg Mcginniss: You can ask the same question Greg on the next call and maybe we'll have a better answer.
Greg Mcginniss: Yeah, I kind of figured it would be something like that.
Greg Mcginniss: Alright, Thank you know.
Speaker Change: I used to say one question do you look at this you look at that I would say, if it's alive and breathing, we're probably looking at it that doesn't mean.
Speaker Change: The physical says many are called but few have chosen and that's sort of a challenge for us always to stay close.
Speaker Change: I'll say.
Speaker Change: Hmm.
Speaker Change: I think about.
Speaker Change: Yes.
Speaker Change: Thank you we have reached the end of the question and answer session I would now like to turn the floor back over to management for closing comments.
Speaker Change: Well, that's pretty simple we thank all of you who have dialed in this morning.
Speaker Change: Many of the questions asked stay tuned.
Speaker Change: By next quarter, we'll be able to give you some more color.
Speaker Change: We thank you.
Speaker Change: See you next quarter.
Speaker Change: 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.