Operator: Greetings, and Welcome to the Gaming & Leisure Properties Q3 2026 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. Please note, this conference is being recorded. It is now my pleasure to introduce your host, Joseph Jaffoni, Investor Relations. Thank you, sir. You may begin.
Joseph Jaffoni: Thank you, Christine, and good morning, everyone, and thank you for joining Gaming & Leisure Properties Q3 2026 Earnings Call and Webcast. The press release distributed yesterday afternoon is available in the investor relations section on our website at www.glpropinc.com. In addition to the Q3 press release, GLPI also posted a supplemental earnings presentation which highlights the events of the quarter, recent developments, and future considerations that can also be accessed at www.glpropinc.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. Forward-looking statements may include those related to revenue, operating income, and financial guidance, as well as non-GAAP financial measures such as FFO and AFFO.
Joseph Jaffoni: As a reminder, forward-looking statements represent management's current estimates, and the company assumes no obligation to update any forward-looking statements in the future. 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 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 at Gaming & Leisure Properties. Also joining today's call are Brandon Moore, President and Chief Operating Officer; Desiree Burke, Chief Financial Officer and Treasurer; Steve Ladany, Senior Vice President, Chief Development Officer; and Carlo Santarelli, Senior Vice President, Corporate Strategy and Investor Relations. With that, it is my pleasure to turn the call over to Peter Carlino. Peter, please go ahead.
Peter Carlino: Well, thank you, Joe, and good morning, everyone. Happy once again to report another strong quarter here at GLPI. I would note that despite volatility in both the debt and equity capital markets, our tenant operations and our businesses remain stable, as evidenced by our AFFO growth, again exceeding 10% in Q3. Importantly, nine of the 13 leases we report remain stable or expanded in coverage for the period ending 30 June, with healthy growth exhibited across the regional gaming environment again in Q3. The gaming world is very, very strong. Our growth was again driven by a combination of transaction activity and ongoing development capital funding. Notably, our funding for Bally's Chicago Casino remains on schedule, with the casino remaining on track for a H1 2027 opening.
Peter Carlino: With respect to the Cordish Live! Virginia project, we acquired the land associated with the facility in Q1 and began funding the entire project in Q3. To date, the performance of the temporary facility bodes very well for our underwriting of this development, towards which we will fund $467 million. I should also note that we continue to see a healthy runway of growth from our development pipeline, and despite the current capital markets and the climate that we're facing right now, transaction activity remains healthy as we evaluate a range of potential transactions. Our balance sheet remains nicely positioned, providing us with flexibility in an environment like the present, in which triple net REIT equity valuations have been, to say the least, disappointing. Importantly, despite our leverage capacity providing flexibility, our underwriting principles remain unchanged.
Peter Carlino: We continue to prioritize healthy long-term leases and an accretive spread to our cost of capital. Nothing remarkable in that. It is all good stuff. With that, I turn it over to Desiree.
Desiree Burke: Good morning. Just one clarification. It is nine of the 13 leases of our properties have rent coverage that either exceeds the prior quarter or equal to the prior quarter. I will start out and talk to you about our income results. For Q3 2026, our total income from real estate exceeded Q3 2025 by almost $38 million. This growth was driven primarily by $47 million in increases in cash income resulting from acquisitions and escalations. For Bally's, the acquisition of Bally's Lincoln real estate increased our cash income by $14 million. The Bally's Chicago lease increased our cash income by $12 million. The Belle development increased cash income by $1 million. For Penn, the Joliet funding, Aurora funding, and M Resort funding increased cash income by $8 million. The Sunland Park strategic acquisition increased cash income by $3.8 million.
Desiree Burke: The Dry Creek, Ione, and Cordish Virginia loans increased cash income by $4 million. The recognition of escalators and percentage rent adjustments on our leases added approximately $3.8 million of cash income. A combination of non-cash income items from revenue gross-ups, investment and lease adjustments, and straight-line rent adjustments results in a collective year-over-year decrease of $9.1 million. Our operating expenses increased by $65 million, mainly due to non-cash adjustments in the provision for credit losses. Included in our release is our full year 2026 guidance of between $1.22 billion and $1.225 billion, or $4.11 to $4.12 per diluted share in OP units. The guidance does not include the impact of future transactions. However, it does include additional development funding of approximately $265 million, bringing our total development spend for 2026 to $800 million.
Desiree Burke: From a balance sheet perspective, our leverage ratio is at 4.8x, slightly below our target level of 5x to 5.5x, and our rent coverage ratios on our master leases range from 1.61x to 2.46x as of the end of the prior quarter. With that, I will turn it back to Peter Carlino or open up for questions.
Peter Carlino: Yeah, I think we are ready for questions. Christine, please open the floor.
Operator: Thank you.
Desiree Burke: Thank you.
Operator: 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. A confirmation tone will indicate your line is in the question queue.
Peter Carlino: Perfect.
Operator: You may press star 2 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 Greg McGinniss with Scotiabank. Please proceed with your question.
Greg McGinniss: Hey, good morning. I just wanted to touch on.
Peter Carlino: Go ahead.
Greg McGinniss: Bally's Chicago, where the company talked about kind of scaling back their investment in that property, obviously still making the vast majority of it. How does that make you guys feel about the underwriting you did there, what your expectations were going in relative to the property that you will end up with? Thanks.
Brandon Moore: This is Brandon. I will start with that. I think the underwriting has not changed. So, what they are doing in Chicago to slow down the development of the hotel for political reasons or otherwise does not change how we view the market or how we ultimately think that property will perform. I think it is somewhat unfortunate that the city took the position it did and put Bally's in the position to have competition potentially that it did not think it would have. I think it is unfortunate for us that they slowed down the construction of that may delay the opening of the full complement of rooms. But ultimately, when that property fully ramps, I do not think we have a different view here as to how it will perform.
Carlo Santarelli: Yeah, and again, I will just add to that. From GLPI's perspective, our capital funding is going out on the same schedule it was. That casino operation is still on schedule to open in H1 2027. The incremental amenities obviously are included in our original underwriting, and we believe all of those will be developed as previously expected, just over perhaps a little bit longer time than we previously contemplated.
Desiree Burke: Yeah, and lastly, I will just add that we did underwrite the chance of the VLTs in Chicago, so we still feel good about our underwriting, the rent coverage that we expect.
Greg McGinniss: Okay, thank you. Then just switching gears to the Prologis joint venture. Is there any way for you guys at this point, I guess it is free cash flow funding in terms of if you were to do additional investment there, how to fund that accretively to increase your ownership?
Brandon Moore: Well, we should point out that the Prologis deal is on the property of the former Hollywood Joliet site, so that is property we already had on our balance sheet. We were utilizing that in a transaction rather than selling it to potentially generate a lot of excess income out of that from what we would have achieved if we just sold it on the market and fee simple. If the question is, are there opportunities to expand on that relationship, I would say perhaps. We have developed a good relationship with the Prologis team. I think we are all excited about the potential project in Joliet.
Brandon Moore: We obviously have excess land on several of our properties, but that is mostly leased to our tenants. I will not tell you that there is a huge supply of potential sites on our balance sheet, but I would not say that there is none. We will continue to see how that relationship expands as we develop it, but we are excited about the opportunity in Joliet.
Desiree Burke: I think your question was about our investment level, and I think our agreement allows us, as we have disclosed, up to 30%. We cannot tell you exactly what that will be because it depends on the opportunity and what is developed at the site, whether it is just done prefab and we do not know who the tenant is or it is done specifically for a specific tenant. But we would have the right to invest up to 30%.
Peter Carlino: Yeah, let me note that this is a terrific piece of property, and we are fortunate to align with a terrific partner, experienced partner. This is going to unfold over a period of years, but it is going to create a great deal of value, and we have a high degree of confidence in that. So, this is kind of a freebie, just one of those lucky things we were able to do, move quickly to take advantage of the ground when we got it back. I looked at the layout of what is anticipated, so we couldn't be happier. As has been said, we will look for other opportunities in our portfolio. Only good news with this one.
Operator: Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question.
Jamie Feldman: Great, thank you. I guess just sticking with Prologis, first venture into industrial, just with interest rates moving, with transaction markets getting shakier, and just listening to conference calls across all of REITs, there is some property types more than others that maybe people need capital. Does this open you up? Anything we can read into doing this deal? Sounds like it is on a site you had, but are you considering doing more outside of your core wheelhouse?
Carlo Santarelli: Jamie, I think simplistically, this was a unique situation where we had a very attractive land parcel. I think it was a monetizable asset that was otherwise going to likely generate very little value for us. We found a great partner to go forward and do it. As Brandon and Peter alluded to earlier, there might be some other opportunities within the portfolio for us to do similar things. But I think from your perspective, it is probably better to think about this as more of a one-off and taking advantage of an opportunity that presented itself for us.
Peter Carlino: We do not see a downside here at all. It is only good news.
Jamie Feldman: Okay, thanks for that. Just in terms of a JV structure, that is new also. How do you think, you made the comment before about disappointing REIT equity prices. How do you just think about JVs going forward and ways to grow the balance sheet of the business?
Brandon Moore: I think generally, we have seen JVs employed in the net lease area. I think we have taken a look at that. We have not seen anything compelling in that for our portfolio. Look, I think it is one of the multiple things we have at our disposal that we could potentially utilize if we have a need for capital and we do not feel like we are being supported by the equity market. At the present time, I would view that as something we have all collectively gotten a lot smarter on in the last 3 or 4 months, and I think we understand it well. If it is something that we can utilize to our advantage in the future, you may see us do that. I would not read through the JV of Prologis to be the same.
Brandon Moore: I think that JV was a situation where it was the best structure. It is what Prologis preferred to get into that structure. I think the read-through you should have there is if we are going to step outside of gaming, we are going to seek to do it with folks that know what they are doing. Clearly, Prologis is at the tip of the spear when it comes to developing these industrial sites.
Jamie Feldman: Okay, great. Thanks for your thoughts.
Operator: Our next question comes from the line of Smedes Rose with Citi. Please proceed with your question.
Smedes Rose: Hi. Thank you. I wanted to ask just a little bit about, I guess, your kind of cost of capital, which, like a lot of names in the space, is a little more challenged now. With the shares trading at a high dividend yield and a 20% discount to at least consensus NAV, any thoughts on putting in a share repurchase program? I think one of the overhangs is probably concerns around Bally's and the going concern language. Any kind of comments you can provide around your confidence in Bally's at this juncture, and maybe just other ways that you might be able to attack the steep discount that your shares are trading at?
Brandon Moore: There's a lot there.
Peter Carlino: Those are two different questions. Very different. Go ahead.
Smedes Rose: That is my question and my follow-up in one.
Brandon Moore: Well, I think we will talk about maybe the Bally's stuff first. I think the way that we think about the relationship with Bally's is in parts. There are two leases that are each nine figures of annual rental stream. Those leases, as you can see, are covered at 1.98 and 2.13 times. We feel very good about that. Chicago, as we discussed earlier on this call, is progressing nicely towards the H1 opening. We feel good about that. Obviously, there is some other smaller pieces of business that we have with them, but all of which we feel relatively good about. As it relates to the buyback, and obviously acknowledging why you are asking, and it is clearly topical right now, you are right. Our cost of both equity and debt capital have deteriorated over the last several months.
Brandon Moore: I think it is something that we think about, we talk about internally, we measure it against other opportunities with the pipeline that we have in place today that is already been established. I do not necessarily think it is something we are running to do, but I think it is something we do discuss routinely, and we will continue to do so.
Peter Carlino: Yeah. My quick reaction is that a buyback is always the last resort. It is when you have run out of all other hope and you decide to fold your tent. We have got a nice pipeline that the team, Steve and Brandon, are working on and feel pretty confident that there is opportunity out there. The current pricing won't last forever. There is some debate around the table about how long it might last. But so long as we can do accretive transactions and put them on the books, we are going to do that.
Smedes Rose: All right. Thank you.
Operator: Our next question comes from the line of Brad Heffern with RBC. Please proceed with your question.
Brad Heffern: Yeah. Thanks. Good morning, everyone. Peter, just following on your comment there. Are there accretive transactions that you are looking at now that would work on this current cost of equity?
Peter Carlino: I think we are saying yes. I mean, or we do not do them. It is that simple. Steve, why don't you All right, go ahead, Brandon.
Desiree Burke: Or we just don't use equity, right? As we've said, and looking at our development pipeline, we are funding them with free cash flow and with debt for the most part, because we don't like the price of our equity, to be honest, and it is way too low. Accretive to our cost of equity is one question. Accretive in general that we could put up a good deal for our shareholders is another one, which I definitely think we can do by using the strength of our balance sheet.
Steve Ladany: I would agree. I think it's pretty apparent that our cost of capital has increased at an unproportional rate to the cap rate you could probably push through on a transaction with a counterparty. The reality is, as Desiree Burke said, there are a number of ways that we can structure a deal to still make sure we are achieving accretion on an economic basis. I would say I think the benefit we have right now in the marketplace is this opportunity allows us to focus in a little more on qualitative features of transactions and be a little more discerning on that side.
Steve Ladany: I think whether that's looking at new tenant relationships, which bring about additional value to us, demographics or location, geographic diversification that maybe we don't have today or that would benefit us, and even property attributes, the opportunity to target a category killer or a property that doesn't have a competitive set nearby. Things like that that are credit-enhancing are now effectively at a discount because the market is. The price of everything has backed up, cap rates are higher, and the question is, can you get now a better asset for a price you would have paid for a lesser asset previously? I think the answer is possibly.
Peter Carlino: The moral of the story is, Brad, we are still open for business.
Brad Heffern: Okay, great. I appreciate the clarification there. On Bally's, talked a decent amount about it already, but I am wondering, they had the going concern language added to the 10-Q, but then they have also recently gotten additional capital or have an agreement in place for that. Can you talk about how those events have changed your view of the credit risk level there, if it has at all?
Brandon Moore: Yeah, Brad, this is Brandon. I do not think our overall view of their credit risk has changed. In other words, we were not totally surprised to see that in the 10-Q because we understand where Bally's sits. We remain optimistic with Bally's as a tenant in the going concern aspect because they have a lot of assets on the balance sheet that we feel will likely be monetized if they need to in order to proceed with their projects across the country. Those are very good projects. Chicago and New York will be very lucrative for them. Las Vegas is sort of a wait and see for them, I believe. But we believe that they have tools at their discretion to get to cash flow in Chicago, which I think is their first priority.
Brandon Moore: It is not something that we are excited about. It was not a disclosure that we were excited to see, but I do not think it has changed our view of them on the whole at the present time.
Peter Carlino: Well, on balance, we have other Bally's properties, as you well know, and they are all doing fine. So, the underlying credit, I guess, from our point of view, push gets to shove, is positive from our point of view. We hope it does not get there, but that value is there.
Brandon Moore: Yeah, I think if we look at the downside scenario, if we had to reposition these properties based on the coverages that Carlo has outlined earlier on the call, we feel very confident that we would be able to reposition those assets. Quite frankly, Chicago is so far along. There would be several, or I should say there are several parties who would be interested in Chicago if Bally's decided that it could not, would not, or cannot proceed with that project. So, we feel good about the Bally's assets we have, regardless of the fact that they filed this going concern 10-Q.
Brad Heffern: Okay, thank you.
Operator: Our next question comes from the line of Haendel St. Juste with Mizuho. Please proceed with your question.
Ravi Vaidya: Hi, good morning. This is Ravi Vaidya on the line for Haendel. I had another follow-up on Bally's. There were a lot of articles that came out talking about the fines imposed on Star Entertainment Group in Australia. It is about a $260 million fine. Given Bally's relationship with Star, is Bally's responsible for paying this? In your view, how does this impact liquidity, credit, and maybe their funding sources for a few of their projects that are ongoing right now?
Carlo Santarelli: Yeah, Ravi, thanks for the question. Just to back up here, when obviously the Bally's team made the investment in Star, it was eyes wide open that there was a significant overhang of a fine. I actually think that the end result is more than fine. Bally's Corp. is completely unrelated to this investment. I think what you're looking at is a situation at Star that is isolated to Star. For the most part, that business has started to certainly improve since new management has taken over. There is cash there on the balance sheet to go towards this fine. I believe they have up to 19 months to pay the fine, and I believe the business has started to produce some elements of cash flow to handle it.
Carlo Santarelli: As far as we are concerned, the Star investment has no bearing on anything that necessarily relates to us in terms of Bally's Corp. funding and Bally's Corp.'s US operations.
Ravi Vaidya: Got it. Appreciate the clarification there. You mentioned earlier about cap rates moving up and that there seems to be a greater appetite for acquisitions and more deals. How much would you say have cap rates have moved up, say, versus a year ago in the regional markets that you're targeting?
Steve Ladany: Honestly, if you look at the last large-scale transaction that was announced was not a year ago, and it was the Golden transaction at a 7.5 cap rate. I think if you brought that transaction or a similar transaction to market today, there's no way it's sub 8%. I don't think there's any way possible it is. I'd be hard-pressed to kind of guess what it would be, but based on that, I'd say you're probably in the neighborhood of 75 basis points wider. That's not a year.
Ravi Vaidya: Got it. Appreciate the color.
Operator: Our next question comes from the line of Barry Jonas with Truist. Please proceed with your question.
Barry Jonas: Hey, guys. Good morning. Appreciate the color on the pipeline, but as you think about it, I am wondering if you see opportunities to acquire maybe already leased gaming real estate from other property owners looking to recycle capital rather than just originating new sale-leasebacks with operators? Thank you.
Steve Ladany: Yeah, Barry. It is Steve. We, by all means, would definitely have an interest in acquiring real estate. At the same time, I would say our underwriting might not be aligned with prior underwriting. So, I think that that is to say, yes, by all means, I would love to buy some other real estate. I might decide when the team looks at it, we might decide that an asset that currently pays, and I am making something up, $25 million of rent really should only be paying $15 million of rent because circumstances may have changed. Maybe there is competitive threats that have come in and impacted it.
Steve Ladany: Maybe escalation has been too high. We are not really sure. But by all means, we would definitely take a look at this. I just do not think it is as easy as plug and play because our underwriting standards are not necessarily aligned with some of our competitors.
Barry Jonas: Great. Just a follow-up. Any updates on tribal discussions? I know you guys have built out relationships over the past few years, so wondering if discussions would extend to maybe outside of just tribal lands onto looking at commercial deals. Thank you.
Steve Ladany: I apologize, Barry. I missed the first part. Could you say it again?
Barry Jonas: Just looking for an update on your tribal discussions and wondering if those relationships could extend beyond for deals outside of tribal lands.
Steve Ladany: Yeah, by all means. The relationships we are building with the tribes have definitely been progressing. It is not a rapid transaction. There is just not a lot of velocity. There are a lot of educational aspects and teaching aspects that go into it to getting and building the relationship to get someone comfortable. I think, though, that the dialogue is definitely expanding. I think we have tried to spend time explaining that there is a way to monetize the asset possibly on tribal land and utilize the proceeds to expand beyond that. I think that has resonated with some tribes, especially the ones that are more well-capitalized, and some of which have maybe already made investments off of the tribal location to start with. So, I think there is a continued opportunity. I think we just need to kind of get some momentum and build it as we go.
Barry Jonas: Appreciate all the color. Thank you.
Operator: Our next question comes from the line of Robin Farley with UBS. Please proceed with your question.
Robin Farley: Great. Thanks. I know you have covered a lot of this already, but just going back to Bally's Chicago for a moment. I think you have been very involved in sort of directly overseeing the construction there. If there were delays in the opening, can you remind us in that scenario, where there is delay, what the impact would be to GLPI and how that would play out? Thanks.
Brandon Moore: Robin, this is Brandon. I think from a high level, virtually no impact to GLPI in the sense that when our dollars are funded, we are getting paid for those dollars real time. What it will do if it is delayed further, will delay the point in time where Bally's starts to realize some cash flow from the asset, and that ultimately plays into this going concern and liquidity concern. I think directly to GLPI will not change our income off the project. It will potentially change the time at which Bally's starts to receive income of its own, and that will put further pressure on their financial situation. I think that is more of an indirect impact, but certainly one that we are focused on.
Robin Farley: Okay, great. Thank you.
Operator: Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.
David Katz: Morning. Thanks for taking my question. Listening to all of the gaming conversations with management teams and just looking at where the industry is, it feels as though we could be on the front end of a pretty meaningful period of regional asset trading. We may be in the midst of it now, but in the early stages of it. Do you feel that that is the case? Are you seeing more deal flow in its very earliest stages? Is that a fair assessment on your part? Obviously, how are you positioning yourself to participate?
Steve Ladany: Well, David, obviously Churchill is out publicly with their process, so that is obviously one that you are aware of. I think separate from that, I think there are some private processes that are currently brewing that we are aware of. I think there has been a logical transition. If you go back a number of years, a lot of the large-scale regional gaming operators were going down a path of divestiture programs. Then I think the world changed and the focus became online, iGaming, sports betting, and the like. I think this is just kind of a natural progression back to where we were. So, I do think you are right that we will see some regional properties changing hands. I think from our perspective, it is twofold. One, we are trying to make sure we maintain all of our relationships with the folks who might be the divesting parties.
Steve Ladany: At the same time, we're trying to build and cultivate relationships with some new, smaller, private-type gaming operators who are interested in expanding and growing. I think it's just a life cycle that we're continuing to work through, and I think you have to have relationships on both sides to get as many looks as possible.
Carlo Santarelli: David, this is Carlo. I'll just add to Steve's comments. Obviously, I think if you look year to date, especially from operators who've already reported in Q3 and operators obviously who reported Q2, you're seeing very solid EBITDA performance from regional portfolios. You look across the valuations of a lot of these regional operators, they aren't great. I think, to Steve's point, that does begat some people maybe thinking to shuffle things or see where they could find incremental value.
David Katz: Agreed. Okay, thank you.
Operator: Our next question comes from the line of Todd Thomas with KeyBanc. Please proceed with your question.
Todd Thomas: Yeah. Hi, thanks. Good morning. Peter or maybe Desiree, if equity is off the table at the current valuation here, when you work through remaining fundings and commitments through 2027 primarily, how much incremental investment capacity do you have using free cash flow and the balance sheet? Should we still assume that 5 to 5.5 times is the right leverage target, or has anything changed around your tolerance for leverage?
Desiree Burke: No, nothing has changed. When we fund all of the transactions that we have out there through 2027 and 2028, we will still be at the low end of our 5 to 5.5 times leverage. So, no change there.
Todd Thomas: Well, okay.
Brandon Moore: Well, in the second part of it, I think, Todd, because of that and where we fall into that historical range, there is some dry powder in there for us to do deals using leverage above and beyond the current pipeline we have. I do not think we have any intention at all of even considering going above 5.5 times, but we have quite a bit of dry powder in there to get there. So, as Steve said earlier, if we find good accretive transactions that are assets that we believe long-term are assets that we will benefit from in our portfolio, we do have some dry powder there with which to work.
Carlo Santarelli: Yeah, Todd, you could run the math. As Desiree said, low end of that range, so even if you wanted to take some fraction of a half a turn and look at the capacity that that creates at some fictitious cap rate type of transaction, you will recognize there is considerable dry powder for incremental.
Todd Thomas: Okay. Sounds good. I wanted to just go back to the Prologis joint venture. Can you help us sort of frame up or think about the value creation on that opportunity? GLPI is receiving $61 million capital account credit for the land at 20%. What could that 20% interest ultimately represent once the project is fully developed or stabilized?
Desiree Burke: We cannot disclose that information yet. We do not even know who our ultimate tenant will be of the JV, right? What I will tell you is the way to look at it is we took a non-earning asset that was sitting on our balance sheet, which was land in Joliet, and we now put it into a structure that will ultimately earn a very healthy return. I would just look at it as a net-net positive. There is no negative to this. This was a non-earning asset.
Carlo Santarelli: Yeah, Todd, for modeling purposes, as Desiree said, Prologis is in the early stages of this. They are going to run this process, the development, the agreements and partnerships and whatnot. We will learn more along the way, and presumably at some point in the future, as their negotiations and their tenanting and stuff gets further along the line, we will presumably be in a place to be able to help you a little bit more from a modeling perspective.
Peter Carlino: Yeah, we could have sold the ground outright for, I could tell you, but I won't, but for a generous price. Obviously, we made the conclusion that over time, this is going to be a whole lot more valuable, particularly tied to a partner who is as strong as they are. This is something just kind of, I've mentally put it aside, just cultivate it and let it grow over the next 5 years.
Todd Thomas: Okay. All right, thank you.
Operator: Our next question comes from the line of Caitlin Burrows with Goldman Sachs. Please proceed with your question.
Caitlin Burrows: Hi, good morning. A couple questions ago, you guys were talking about that you do have some dry powder capacity for incremental deals. I guess just as you think of that forward pipeline, wondering if you could give any comment on whether you would put those discussions into the category of sale-leaseback, development, redevelopment. Just trying to think of what could be next.
Steve Ladany: This is Steve. I would put the majority of that discussion in the sale-leaseback bucket. We do have some conversations with folks about whether it be greenfield or redevelopment. I would not say that's the lion's share of the discussions that are ongoing at this time. I think the majority of people, the projects that were floating around out in the universe have been funded, many of which have been opened. So, states like Louisiana, Illinois, I think a lot of those projects are well on their way. So, those opportunities are fewer and far between, but we are having some conversation on that front, but the lion's share of conversations have been straight traditional sale-leaseback.
Caitlin Burrows: Got it. Okay. On the lease coverage side of things, I know you guys talked about it early in the call, and I am sure higher makes you feel better, and you talked about some incremental moves higher recently. But I guess if you look year over year, Bally's, but also Caesars and Cordish, those came down. Wondering if you could give any commentary on whether it is at what point lower coverage concerns you or even just the direction of them, and how you consider that, whether it is over a quarter or year basis.
Carlo Santarelli: Yeah, so, look, I think the direction of travel and the easier way to look at this, since it is all LTM EBITDA and LTM rent, is sequentially. Because, for example, you will have some leases that maybe had a tough Q4, and we are kind of cycling through that right now. I do think if you look across the entirety of the coverage portfolio, Caesars was one that clearly got a lot of attention. We did see a nice bump, as of the end of the Q2 in coverage there as that continues to stabilize. I think we talked about it earlier this year, that portfolio specifically had a tough Q4 at one specific asset. On a whole, I think the coverage story is strong, and it is kind of improving of late.
Carlo Santarelli: What I would also note is, you look across the earnings of those who have reported, Caesars being one, Churchill Downs being another, Boyd being another, not all tenants, but all showing a low to mid-single-digit regional EBITDA growth cadence in the Q3, which generally bodes well since we are reporting to you on a one-quarter lag.
Desiree Burke: Furthermore, I would add, our rent coverages are really strong. They are not what you see in other areas. We are sitting here talking about a low coverage of 1.61. That is still a strong coverage where a tenant would be happy with the return that they are getting. On the high end, we have threes out there. I am not at all concerned with that rent coverage. I will tell you, if you look back a year or even pre-COVID, we are not far off of where we were at that point in time. I feel very confident in our rent coverage right now.
Caitlin Burrows: Thank you.
Brandon Moore: Our demise has been much over-exaggerated here. I think our leases are in very good shape.
Operator: Our next question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question.
Ronald Kamdem: Great. Sorry to go back to Bally's. Just a two-parter. One is, with the going concern language, is there any ripple effects on the leases, right? Whether it is minimums or anything like that. Does that change anything on the lease front? Then two, just on Bally's Chicago, obviously there has been a lot of headlines and so forth, but what are the data points we should be looking at about the reception of the project and how it is going to ramp? Thanks.
Desiree Burke: From a lease perspective, obviously, we have rent coverage ratios that they cannot go below that are all disclosed in our lease, right, as far as a default goes. As we just said, at a 198 and a 213, they are nowhere near anything that would default their leases because our investments in Bally's, we are not really investing in the corporate entity. We are investing in specific assets that are performing very well. That is the first half of your question.
Brandon Moore: Yeah, I will just add, we do have in our leases defaults related to their material indebtedness. Should they default on their debt at GLPI, we would have some legal rights under the leases to take action. I am not saying we would or would not, depending on the circumstances, but just to be clear, we do have that right built into many of our leases. Sorry, Desiree. Ronald, what was the second part of your question?
Ronald Kamdem: Just trying to get some tea leaves on the Chicago opening. What are the data points saying about the reception of the assets? What are you guys tracking? What are you looking at? Thanks.
Carlo Santarelli: Yeah. Ronald, there is a lot of, obviously, media articles written about this project. I saw one the other day that talked about the site being slow. We know there to be close to 1,000 workers, and everything is moving at full speed on that project. I think that as it continues to progress, we have gotten more and more comfortable with that H1 2027 opening. I do not think a lot has changed in terms of how we think about the underwriting. Desiree mentioned earlier on this call, VLTs were always part of our underwriting case.
Carlo Santarelli: I do not know that there has been anything necessarily incremental that would change the way we think about the ultimate returns, barring the delay on the full completion of the amenities associated with the project, and maybe that pushing back that full ROI that we originally contemplated, which again, as Brandon mentioned earlier, has no impact on when rent revenue, rent income is coming to GLPI.
Steve Ladany: This is Steve. Just to give you a little context on the construction progress, because that could be helpful maybe as well. The overall project is roughly two-thirds complete. That is the overall project. That is inclusive of everything, even the parts you have heard that are delayed. So, two-thirds of the project is complete, and there are over 1,000 daily workers on site. Importantly, the hotel structure, that is the part that everyone knows was delayed, but that entire structure, as well as the casino, are expected to be weather-tight by December. So, there is still work going on on the hotel to make sure it is weather-tight, and so that is all expected to happen by December.
Steve Ladany: And if that does happen according to plan, as we are expecting, that will make all of the progress throughout the winter months in Chicago that much easier for everyone working indoors. Those are kind of some of the things we are looking at on the construction side, and we are eager to be able to report to you that weather-tightening has occurred.
Ronald Kamdem: Great. That is helpful. I guess my last one, and maybe it is a quick one. Can you remind us the variable rate reset for what they ended up being for this year and what we should look for next year? Thanks.
Desiree Burke: Yep. We do not have any rent resets in 2028, so you do not need to look at anything for next year. The percentage rent decline for 2027 is $3.3 million, of which $2.2 million will happen in 2026, but a full year will be the $3.3 million in 2027.
Ronald Kamdem: That is perfect. Thanks so much.
Operator: Our next question comes from the line of Chad Beynon with Macquarie. Please proceed with your question.
Chad Beynon: Morning. Thanks for taking my question. Wanted to get your take on your appetite on the Strip, given some of the results we have seen this summer, which may just be a return to seasonality. I think we have all been spoiled the past couple years. Some of the seasonal patterns have changed, but it certainly highlights the negative operating leverage that we see in Vegas and destination markets versus the regional markets. I would just love to hear your thoughts.
Peter Carlino: Let me share my general philosophy about Las Vegas. It is great when it is great, and it is really crummy when it is crummy. None of that rubs off on the regional markets. I have been saying for many, many years, as you all know, that the revenues coming out of regional markets are essentially bulletproof. There is only one thing in my many years of experience looking at these markets that affects performance, and that is employment. If there is a significant run of unemployment, that will impact a local property. By and large, their revenues are bulletproof, and I stand by that. I think time and the decades have proven me right. So we are not worried about the regional market. As I say, Vegas, it is great when it is great. I will say that again. Not so cool when it goes the other way.
Peter Carlino: But it is a different world from what we mostly deal with. We do not compare ourselves with what goes on there. It is a shame that impacts in Vegas affect people's perceptions about what goes on in the regional market, but they are not the same.
Chad Beynon: Okay. Thanks, Peter. With the midterms next week, it does not look like there is a lot of potential bills that would impact you guys directly. A number of sports betting bills and some small things around the edges that would obviously change to blue or red, and that could have derivative impact. Anything else that you guys are keeping an eye on for next week that would kind of cycle into your business?
Carlo Santarelli: Yeah, Chad, I think there is a couple things that we will pay attention to. I think your overall synopsis is broadly accurate. Some governor's races that might change the tone of how certain states are viewing certain things. You have the pari-mutuel stuff in Virginia. Obviously, the Cordish Live! project that we have would be something to pay attention to. Both of those counties are 2-plus-hour drives away, so we do not really think that has any impact on what we have going there. Then you have the ballot initiatives in Northeast Indiana. Again, if you look at the map, there is not a lot of competition within an 80, 90-mile radius of where those three counties are located. So, I think overall, pretty quiet, and like you said, a little bit more relevance for some of the OSB stuff and things along those lines.
Chad Beynon: Thanks, Carlo. Appreciate it.
Operator: Our next question comes from the line of Jason Wayne with Barclays. Please proceed with your question.
Jason Wayne: Hi, good morning. Thank you. Just a quick one. Is there any update on the A's stadium project? How far along are those discussions, and do you have any better picture of what GLPI's role could look like there?
Brandon Moore: Yeah, this is Brandon. The A's stadium itself, I think, is progressing nicely. I think they are on track to open that stadium with, assuming there is a first pitch in baseball in 2028, I think they are on track to do that. We are getting to the point in that project where certain infrastructure improvements for the integrated resort are being permitted. GLPI has not been asked at the present time, or I should say we have not committed to anything in addition to the $125 million we have remaining. We are really waiting to see how that best can be deployed on the site. We have not ruled out some additional funding, but I think there is a lot that we need to see and answers we need to have in order to understand the overall project before we are willing to commit more capital to it.
Brandon Moore: I think we continue to be in a position where we are ready to fund when that is needed, and we are just waiting to understand how that integrated resort is going to unfold.
Jason Wayne: All right. Thank you.
Operator: Our next question comes from the line of David Hargreaves with Barclays. Please proceed with your question.
David Hargreaves: Hi. I'm wondering if you have any position on historical racing machines at Plainridge Park in Massachusetts, whether those are permissible or not.
Steve Ladany: Well, I don't think we have an opinion on it at this point in time. We're aware of the efforts to try to get the legislation done. We know that there would be some ancillary impact to Plainridge that would be positive, but that's the extent of our involvement.
David Hargreaves: Got it. We've been beating this Bally's Chicago thing to death, but I'm just wondering if there's any room count that Do you know how many rooms they'll have when they open up?
Brandon Moore: We don't at the present time. I mean, we just look to their HCA. I mean, we've heard that Bally's comment publicly that they intend to comply with the HCA. The HCA has a minimum number of rooms in it, so we would expect it to open with those, but we haven't gotten into the details on opening day.
David Hargreaves: Got it. Thank you very much.
Operator: Our next question comes from the line of Daniel Guglielmo with Capital One Securities. Please proceed with your question.
Daniel Guglielmo: Hi, everyone. Thank you for taking my question. Just one from me. I think heading into the back half of this year, there was nervousness around discretionary spending with gas prices high, but it does not feel like it has fully materialized. Can you just talk a little bit more about what you are hearing from the regional operators on the ground, and what gives you all and them the confidence to continue deploying capital for growth?
Carlo Santarelli: Yeah, thanks, Daniel. It is Carlo. I think, look, obviously, it is a valid concern. Peter and the team and I were just discussing earlier, employment really is the biggest driver of regional gaming. If you look at the cadence of 2026, again, in Q3, you are going to see gaming revenue up a little bit over 2%. It was up a little bit over 2% in Q1. It was up closer to 3% in Q2. If you look at kind of Q3 Property EBITDA, I think Caesars reported up 4%. Boyd's same store was up close to 3%. Monarch up 2%, Churchill Downs up 4%. I think there are a lot of concerns around there. Obviously, gas prices, cost of everything is up for people. But you are just not seeing it manifest in gaming results.
Daniel Guglielmo: Great. Thank you.
Operator: Our next question comes from the line of Colin Mansfield with CBRE. Please proceed with your question.
Colin Mansfield: Hey, everybody. Just one question from me. Maybe a pivot to outside gaming. Would love to get your updated thoughts on how you are thinking about potential opportunities, let's say, in the leisure space. If you look in that environment right now, there are, I think, several operators where your cost of capital is much more attractive than what their cost of debt or equity might be. There might be some that are facing some idiosyncratic issues or hiring restructuring advisors. So I am just kind of curious, the attractiveness of anything outside of gaming right now. Has anything in your view changed, or are you seeing more opportunities where you might be opportunistically able to provide your cost of capital to some of these real estate heavy names that might be facing a little stress right now? Thanks.
Brandon Moore: I will jump in. Colin, appreciate the question. I think nothing has changed in our approach to non-gaming, venturing into non-gaming. It is going to have to be something that we find both accretive and we have or able to acquire the expertise to grow it. So, I do think there are some opportunities out there. We continue to look at those. But if you see us venture outside of gaming, as we have done with Prologis, we will seek to do it with folks that know what they are doing and can help us grow in that whatever business we enter into. So, I think you are right, there are probably some more opportunities out there, but our philosophy and approach has not changed.
Peter Carlino: Yeah, let me add too, we haven't run out of gaming opportunities yet. Brandon said earlier, thoughts about our demise have been greatly exaggerated. As long as we can stick to our knitting, we're going to do that. We never give up looking at other things. That's part of what we're challenged to do. But we're blessed to be able to continue with what we know best.
Colin Mansfield: Appreciate it. Thanks, guys.
Operator: We have no further questions at this time. Mr. Carlino, I'd like to turn the floor back over to you for closing comments.
Peter Carlino: Thank you very much, Christine. Thank you all for dialing in, and we will look forward to seeing you next quarter. Bye-bye.
Operator: 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.
