Q2 2019 Earnings Call
Welcome to the Vivek Conference Center next available conference specialist will be with you momentarily.
This is <unk>.
Morning could likely during two gaming and leisure properties earnings call.
Thank you your name your name please.
Rachel.
Smit.
At last name.
Smith.
Thank you and the company please.
He I.E.R.A.
Hi Euro.
Thank you to the conference and the call is being recorded.
Greetings, ladies and gentlemen, and welcome to gaming and leisure second quarter 2019 earnings Conference call.
At this time, all participants I don't listen only mode.
A question and answer session will follow the fault presentation.
Should anyone require operator assistance you May press Star zero on your telephone keypad. It is now my pleasure to introduce your host Jeff to 14th of Investor Relations. Thank you Sir you may begin.
Thank you John and good morning, everyone and thank you for joining gaming and leisure properties second quarter 2019 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.P.R.O.P.I.N.C. Dot com.
On today's call management's prepared remarks and answers to your questions may contain forward looking statements as defined in the private Securities Litigation Reform Act of 1995.
Forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ 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.
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 forward looking statements contained in the Companys filings with the SEC as well as the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release.
On this morning's call, we're joined by Peter Carlino, Chairman, and Chief Executive Officer, and Steve Snyder, Chief Financial Officer gaming and leisure properties.
Also joining todays call are Deseret Burke senior Vice President and Chief Accounting Officer, Brandon more senior Vice President General Counsel and Secretary.
Steve Ladny Senior Vice President Finance, and Matthew Gemtek Senior Vice President of investments.
With that it's my pleasure to turn the call over to Peter Carlino Peter.
Thanks, Joe and good morning to everyone.
Happy.
Introduce another steady quarter here gaming leisure.
We exceeded our previously issued EBITDA they AFFO.
Guidance.
And I will say as I, usually do that we continue to evaluate.
Potentially accretive transactions that will add to our.
They may be say this industry, leading base of 46 properties.
And which are leased clearly too.
The.
Our industry, leading tenants so very very strong base and we continue to work at building on that will make our usual brief few comments Steve.
You would have go ahead, great. Thanks, Peter Good morning, everybody.
I'm just going to highlight a couple of things around the portfolio the balance sheet and our guidance.
Now that you've seen in our earnings release, we reported record net income from real estate of nearly $256 million for the quarter.
As you also see from the press release, we continue to enhance our disclosures in response to feedback that we get from you our investor and analyst base as highlighted by the cash NOI reconciliation on table on the table on page 10.
And Additionally, you see the significant master lease details that are included in our press release, which include the critical issues such as four wall coverage is of our tenants in the lease in mortgage table towards the back of the release.
Just drilling down on the lease portfolio the pen master lease just to highlight because its mentioned in the press release.
Did cease operations at the Tunica resorts facility as of June Thirtyth, which resulted in our acceleration of the depreciation and amortization associated with that real property. We are in the process with Penn of removing that property from the master lease and returning the property back to the ground less sore and as Weve disclosed previously there will be no impact to our lease income as a result of the removal of that property from the pen Master lease.
On the amended Pinnacle Master lease we're currently working with our tenant that lease anniversary to on for 30 April Thirtyth. We are reviewing with our tenant the performance of that lease because at the anniversary date based on performance. We do look to realize escalators of Penn as they disclosed in their earnings release does not feel the David achieved the level that will result in the escalators that feels like or seems to be based on their comments predominantly based on weather impacts and other nonrecurring impacts on several of the properties in that amended pinnacle master lease portfolio, but we will be taking the next couple of weeks to get a better understanding as to what actually transpired there and we'll continue to drill down on that opportunity.
On the El Dorado Master lease.
We've been working with the El Dorado folks as new to the operator property Opco Propco model as of the October one closing on the Tropicana acquisition.
We've been working with them on their calculations of the rent coverages.
Taking into account everything that we report is four wall only everything that we report also is on a 12 month trailing basis and given the fact that the reporting date from Eldorado has included prior periods prior to their ownership, we think that the coverages that you see reported today for the June thirtyth quarter reflect better reflect the performance of those assets as you heard from the El Dorado call. They're very pleased with the operating performance of those Tropicana assets that are in our Eldorado Master lease and are very encouraged by the performance they've seen specifically out of Atlantic City in light of two new competitors that have come online maintaining closely maintaining the EBITDA on a year over year basis in light of those competitors.
Moving onto the Boyd Master lease.
As you see in the earnings release, we didn't realize the full escalator under the Boyd Master lease as of its anniversary date, which was April Thirtyth may onest that applies to both the three property master lease as well as the mortgage property at the Belterra Park facility in Cincinnati.
So we're very excited about the performance that we are seeing and that void is seeing on those assets that they took as part of the pinnacle divestiture moving down the roster of our tenants at casino Queen.
Casino Queen uniquely is a beneficiary of the Illinois gaming expansion legislation in several ways.
The first is they did the management team entered into a memorandum of understanding as has been disclosed publicly in the Saint Louis marketplace to manage and operate the nearest competitor that was entitled by that legislation the Fairmount Park facility.
So they have a unique business opportunity there and they are also going to be the beneficiary of sports betting there'll be the beneficiary of some table games tax relief and as an employee stock ownership plan owned facility. They will uniquely benefit from a 10 year tax credit as a result of the enabling legislation in Illinois.
Finally, as it relates to casino Queen you do see in the table as on the lease highlights that there.
Coverages have deteriorated between our last report and this report.
I will point out that casino Queen reporting in our table is on a quarterly lag. So the number that you see reported today reflects where the property was as of March 30, Onest and we're very encouraged by what we've seen in the current quarter that weve or are reporting now in terms of their improved operating performance. So we're optimistic that what you see there is actually a trough and we will start to see some improvement in the coverage from that tenant also we did come to learn during the quarter that the secured loan that is in front of our subordinated loan but obviously.
Not priority to our lease the secured loan was sold by the existing commercial lenders to a strategic investor who does have pretty extensive experience in gaming.
So we're very comfortable that there will be a new fresh set of eyes looking at the operating performance, there and providing impact on the performance add casino Queen.
The last asset under the lease portfolio of course is the meadows.
You will see in our guidance I'll touch on it later, we've removed any meadows escalator from the upper end of our guidance the meadows lease anniversary at September Thirtyth October Onest.
We are anxiously working with Penn.
And monitoring the portfolio the performance of that asset to see if there will be any possibility to realize an escalator. There you can see how close the coverages were as of the 12 months ended June Thirtyth.
Lastly on the portfolio side from a Trs standpoint, you'll see that the Trs subsidiary did hit spot on.
The guidance that we provided previously for the quarter in terms of its EBITDA performance I will highlight that the smoking ban in Baton Rouge did anniversary on June Onest.
We were actually starting to see some modest pickup before the fear of Hurricane Barry.
Stepped into that marketplace, but.
I think long term the management team at both our.
Hollywood Casino Baton Rouge, and our Hollywood Casino at Terryville have a very strong grip and have been very active and engaged in improving the operating performance in both of those assets.
On the balance sheet update I'd just point out a couple of things I think there is significant detail in the press release.
You will see in the press release that our balance sheet includes.
15% of our debt as variable debt and 85% approximately of our debt as fixed rate our gross leverage as of the end of the quarter based on a trailing 12 month basis adjusted for the acquisitions that we completed last year was 5.62 times at June Thirtyth and net leverage was 5.59 times.
Finally on the balance sheet, there was no activity on the ATM during the quarter.
Lastly on the guidance side.
I would point out that we have fine tuned our guidance and tightened the range based on what we're seeing from our principal tenants and the only difference that remains between the low end and the high end of the range for our guidance is the realization on the high end of the potential full escalator for the pen master lease as of its anniversary date November Onest of this year, which would be $450000 per month or an annualized basis of $5.4 million.
So thats all I have I'm going to turn this back to you operator for question and answers, yes, let's go straight to acuity.
Ladies and gentlemen, if youd like to ask a question. Please press star one on your telephone keypad a confirmation Tom will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Nick Yulico with Scotiabank. Please proceed with your question.
Great. Good morning, everyone. My first question is just on the acquisitions market can you can you talk about what the pipeline of activity looks like and then as well what are your thoughts on whether there would be any acquisition opportunities that opened up.
From the Caesars in Eldorado merger.
That's a pretty fair question, obviously that is the big news in our space.
That has occurred and it actually went where it was likely to have gone.
All along.
I describe it internally is.
Scott a following the bed the bread truck.
Keeping an eye on whether a couple of those fall off the back and we want to be there to catch up and so look we pay very very close attention to that otherwise there are number of smaller things that we look at at today. I mean, you know are a rabbit focuses is really on safety accretion.
It's just it is what drives us here and.
There's nothing that's imminent, but I can tell you that we're pretty actively looking at a number of modest transaction that.
Moved the needle forward, Steve Yes, Nick first of all.
Thanks.
Appreciate you and Greg joining us thank you for adding us to your coverage universe and I want to commend you on on the great work that you've done moving up the learning curve on this asset class will really appreciate having you participate in this phone call in terms of the question from an M&A perspective look we as a management team continue to be engaged actively on a day to day basis with prospective operators.
This financing source. This capital source that we created six years ago is the first gaming focused read has now become widely accepted as a capital source when I hear folks like Josh Hirsberg at Boyd talked about lease financing as an equity like capital source.
It's clear that we are really moving into the mainstream so to your question in terms of the M&A activity. We continue to work as Peter mentioned and continue to be fully engaged with potential operators to look at opportunities that might spring from a caesars Eldorado transaction to look at opportunities that might spring from El Dorados are boys were depends of the world who look to rationalize their portfolio. So this will continue to be as it has been very episodic, but you can rest assure that we are dedicating all of our resources to looking for those growth opportunities.
Okay, Great that's helpful and then.
Just a second question is on the Trs properties can you just.
Mine is kind of how long you plan.
So that's a a client earnings dilutive situation.
Well people is smiling and looking across the table that need for that one so.
Look.
Our answer has consistently been over the last five and a half years that.
We like having their toe or fingers. If you will still tied to operations I think one of the strengths that we bring to this industry is a lot a lot of a lot of years of gaming experience and the ability to underwrite stuff with a pretty acute knowledge of markets properties and management.
That having been said I mean, we.
Like those properties I think they serve the purposes I, just just outlined but look under some circumstances we're always.
Surveying opportunities an outright sale is probably less likely.
We would more likely find ourselves interested in tying it to a multi property transaction. If you would should such a thing occur but look we're very happy with owning those properties content to do so indefinitely.
And we have no imminent plans to sell them.
Okay. Thanks, everyone appreciate.
Thanks, Dan.
Thank you. Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.
Hi, good morning, everyone.
Hi.
I want to express my appreciation and approval of the.
Disclosure in the release and the discussion around it very helpful.
All right what I wanted to ask about is.
The mix of the portfolio, we do presume that you are engaged in active and looking at everything.
You know as Steve you've done for.
I won't go in trade asked how many are so I'm not saying that okay.
Because if you are doing it I was watching and it's not good for us so.
Good luck.
The prospect of owning things that maybe on the Las Vegas strip.
And the discussion around the perceived inherent value of those kinds of assets.
Larger more fully integrated resorts or things in that category.
How do you think about those.
No opportunities with it without being specific about either one.
Any any particular, one do you think that those would be.
Could be.
Additive to the portfolio and ultimately to the valuation on the company.
Good look David we we do look as you point out and everything and there are some.
Highly rumored potential transactions on the Las Vegas strip.
We have a view having grown up in regional gaming that there is much greater volatility on the Las Vegas strip.
We think the experience from the great financial crisis sort of proves that there is much greater volatility on the large mega properties on the Las Vegas strip relative to the regional properties.
You've probably seen the Green Street Advisors Research report that we collectively as an industry have worked on and was released and is available on our website.
We as a result of that in looking at underwriting an asset that has greater volatility would look at different coverages than what you see in the existing master lease portfolio and we'd really be focused on what the operator, what our tenant partners plans would be for the facility.
So someone coming in just using a hypothetical that is real time and on packaging an asset that has been the beneficiary of the seizures rewards or total rewards program.
That becomes a very difficult asset right on unless you have the right operator, the right profile and the right business plan.
So these are obviously all hypotheticals, but hopefully that gives you a flavor as to how we would think about underwriting opportunities as as you've asked.
Yes, it does.
And.
I asked the question in a general way.
Really because of that dichotomy on on the one hand, there is an inherent perceived value.
In those assets.
On the strip those larger scale resorts. Despite all of the facts historical facts that you cite which are completely accurate.
And we see that in other facets of hospitality right where.
Higher revpar higher rate assets.
Tend to fetch higher multiples despite that volatility despite.
What we would agree is perhaps a lower profitability level and I just think it's an interesting.
Intellectual exercise and it's a differentiating factor I think for the moment with your company versus others.
Versus your peers.
No.
Very good if you're spot on it's a very different differentiating factor and it really is reflective of our experience and also very reflective of management's.
Really stake in this business given Peters family as one of the largest shareholders in the company. We're really building a portfolio of lease income that we feel very comfortable is going to survive through the next decades.
Not just through the first term of the lease and I think to philosophically to to talk to that aspect of your question. There's really a dichotomy in that inherent value you brought up on one side is there's population growth. There's certainly a case that you'll see land value appreciation there over time, but the reality is that comes with an operating capex load that acts as a tax on the cash flows that ultimately pay our lease payments and you can't really get one without the other in our case and when you net the two.
The Compellingness is not when you adjust for volatility that much more attractive than any of the other markets that we're in.
Got it.
Thank you very much and.
Well done.
Thanks.
Thank you. Our next question comes from the line of Barry Jonas with Suntrust. Please proceed with your question.
Great. Thanks, So just a quick question on Casino Queen do you think it's possible you can recover some of the loan you wrote off last quarter [laughter].
Very that is a great question that is that sort of remains to be seen obviously accounting convention, we're not going to realize anything until the the check clears.
So it is a work in progress and.
All we can say today stay tuned.
Got it and then look at the given the interest level. The space is getting right now from reach with higher multiples, what's the right way to think about accretion levels on deals you you might be able to close you think you'll be able to get the same level of accretion you've seen in the past.
It looks very good.
Let me, let me react to your comment first by saying any one.
That sort of brings an institutional awareness to this asset class, whether it's another read whether its private equity whatever the case might be we think will over time enhance the relative value that we have in our portfolio because if somebody were to start today to replicate the portfolio of assets and master leases that we currently own I don't know that they can achieve what we have in any lifetime or multiples of lifetime. So.
I don't lay awake at night worrying about others entering the asset class I really focus and we as a management team have focused on the things that we can control educating investors as to the quality of our cash flow that being said are we going to see the same level of accretion in future transactions as we've seen in the transactions that we closed in Q4 of last year that would probably be idealistic I mean, we are myopically focused on growing the company, we're going to look at opportunities to grow the company from an immediately accretive basis.
So it might not be as.
Accretive as as that almost double digits that we hit with the Tropicana Eldorado transaction, but there are still tremendous opportunities in this asset class for us to continue to grow our business and for each of us in the asset class to continue to find our lanes.
Great and then last one for me you know look we spent a lot of time talking about pipeline for sale leaseback with with with casino operators, but do you see value in M&A with just other Reits, whether their gaming and non gaming at this point.
Well, we havent seen it to date I can say that.
It's a.
It's tough to pay for somebody else has created value.
We'd rather work at at creating their own.
I think Steve answered it pretty well, but let me add to that that there's always a transaction out there that we will do and find to do period.
Yeah, we've hit a lot of home run since we started this business, we did and we have as recently as last year. So we're coming off a great year.
There will be other transactions.
They will be accretive or you won't find us doing that I mean, it's simply a discipline.
If we can't find home runs will take a couple of doubles, maybe a single how about a but I mean, the idea is to keep the ball rolling down the field and that is our app abject total focus.
Isn't going to change.
So maybe the character of kind of what we find out there that may change a little bit, but as long as we're moving the numbers forward as were wildly committed to doing we're blissfully happy here at this company.
Great. Thanks, guys and congrats on another solid quarter.
Thanks, Thank you.
Thank you. Our next question comes from the line of Carlo Santarelli with Deutsche Bank. Please proceed with your question.
Hey, guys. Good morning, So I just wanted to ask as it pertains to the pinnacle lease specifically and to the extent you could you could share.
Kind of the nature of the dispute front from Steves comments it appeared.
More as though you were looking at kind of the impacts.
In terms of what happened in the quarter, which we saw through Penn's results and weather and the nonrecurring nature of some of them is there any change in the way that that may be.
Pinnacle under former management was was allocating corporate costs towards the properties relative to the way that Penn is doing it now.
Carlo I want to re characterize your question first there is not a dispute between us and our major tenet. We are trying to get informed we are trying to get educated we hear what you heard in terms of their earnings call and the nonrecurring impacts whether they were construction related or weather related.
We are trying to understand as a result of the integration exactly how they are looking at the coverages because when you see the the sequential decline in the coverage that we saw from.
Threethirty one to 630, we just need to be informed and understand so I would not again I would not classify it as a dispute but we are on a fact, finding undertaking right now with respect to our major tenant.
Great. Steve that's helpful. And then and then just if I may it am I correct in that that would assume that the two Q1 9 pinnacle portfolio EBITDAR was down or are those 12 assets I should say was down somewhere in the ballpark of like $25 million year over year.
That is the math, it's basically the point Oh, a degradation in the coverage versus the annualized lease stream out of those assets.
That's.
That is the back of the envelope math that has us asking questions and and trying to become more informed.
Understood. Thank you very much thank you.
Thank you. Our next question comes from the line of Joe Greff with Jpmorgan. Please proceed with your question.
Good morning, most of my questions were already asked and presented to you guys, but just to follow up on one of your comments Steve.
Can you just talk about you know now versus say three or six nine months ago.
The number of maybe new entrants looking at gaming real estate.
On whether those might be native American companies.
Other triple net lease.
Read that arent gaming specific halex entity that particularly as Theres, one read out there that put on their board.
Again is that could that you guys know fairly well so I'm just trying to get a sense of how broad that is in respect to your comments about sort of the institutional class a real estate investors looking at gaming real estate assets and whether or not this question is sort of different whether you're looking at chunky sort of more Las Vegas real estate or sort of the kind of more.
Regional smaller casino properties.
Wow, Joe you're asking for a thesis there or what.
[laughter] on time, you right now.
Okay. Okay.
No look.
The bottom line and Ginnies addition to the PR Board is she shoot you are absolutely right uses the quality season gaming executive.
Look as I said earlier anybody that brings attention to the asset class in NPR certainly has indicated it didn't mention it on their earnings call.
We have seen you asked the question about tribal gaming folks getting involved in owning all of the real estate our Bethlehem.
They also are now getting more involved from an opco standpoint, and become potential partners for us and for others.
So I think what you're going to continue to see and it's always been the case in gaming when people get informed get educated and they see missed pricing.
And they see opportunities to deploy capital in a way that allows them to create incremental value, they're going to do it and quite frankly, that's what we saw back in 2012 2011, when we started down this path to what created this asset class when we spun GLP I'll GLP out of Penn National So I would expect that to continue what we're doing as a management team is controlling the things that we can control. We spent more time on the road this year than probably in all previous five years combined.
We've been in front of more investors and engaged with more investors and I think you're starting to see the results of that in our shareholder roster as you see the quarterly reporting from institutions. So we're managing the things that we can in light of the environment that you pointed to in your question.
And just as a follow up.
Is there anything any limitation or any new ones that would be different in terms of that you are having a tenant that's a native American casinos versus.
In more traditional casino that necessarily a a casino thats on sovereign land, but just as an operator conoco.
Yes in a commercial environment no different what so no difference whatsoever.
Got it. Thank you guys sovereign land is impossible.
Right.
Thanks, Joe.
Thank you as a reminder, ladies and gentlemen to ask a question in the press Star one on your telephone keypad.
Our next question comes from the line of Shaun Kelley with Bank of America. Please proceed with your question.
Hi, Good morning, everyone on would just like to Echo My my thanks, as well for all the additional disclosure quite helpful.
Just.
Throw one out to you guys I mean, obviously another big development in the quarter was on the Illinois gaming expansion and Peter I think over the years you've had some some specific views about Illinois that I think probably proved out pretty prescient, but but just broadly speaking when you think about your your tenants.
Can you help us think about pros and cons as it relate.
Well, that's a very very tough question. So look you heard my criticisms over the years.
And I know Tim will not on the pen side has had some pretty clear comments about doing business in Illinois, It's very very unstable place like I've said worse.
But it's a tough place to do business I don't think we know yet how the chips are going to fall I mean, that's my perception. Steve you may have a different thought about or additional thoughts, but I think we're going to have to wait to see with these things get located how it plays out my general sense is it's probably not good.
No I don't think thats going to have any impact on us.
As a company operators may have a different set of issues.
But.
It's.
I don't think that scrip has been written yet yes, Sean the only thing I would add to Peter's comments twofold. One the timing of these things coming online is very unclear I know the legislation had some pretty short fuses for the awarding of licensing licenses, but as we've all learned over the years zoning and entitlement local approvals there a lot of complexities to citing casino facilities that are really unique to this asset class, which are some of the most that we have around our asset class.
Secondly, as it relates to us in particular GLP ATI.
Given the two assets on the Illinois side of Chicago land that we own in the Penn Master lease portfolio the.
Indiana asset that we own in northwestern Indiana under the amended Pinnacle Master lease.
Fortunately every asset that we have in Illinois apps and casino Queen is in a master lease.
So we feel very comfortable and it is why we constructed the portfolio as it is and why we have a high preference for master leases when it comes to underwriting new opportunities.
We feel that we are certainly well protected unfortunately, it's the operators, who bear a little bit more of the burden of the impact of these forms of expansion and its also why the operators spend many.
In some cases hundreds in some cases millions of dollars of resources on lobbying throughout the United States.
To protect their industry.
The flip side, obviously is now we've got sports betting in Illinois, and sports betting will enhance the operating performance of those assets that are in our portfolio today. While these new facilities are being cited and opened so we think quite candidly there might be a short term benefit.
Before there is any long term impact, but again that will be born more by the operators.
Thank you guys.
Thanks, Sean.
Thank you. Our next question comes from the line of Thomas Allen with Morgan Stanley . Please proceed with your question.
Hey, good morning.
So so with the C series Eldorado deal.
Beachy, obviously announce it.
That also done.
Some forward sale agreements as well as.
Per call structures and things that you guys haven't done in the past how are you thinking about those structures potential.
Options in the future. Thanks.
Well those those are two different questions right from a capital raising standpoint, Weve always looked at all options, including with forward, which was included as a component of our ATM.
On the capital deployment side.
And just completely lost the thought put call yeah. That's it.
Go ahead yeah.
So on the on the put call side.
A consideration that is really important as each each of these transactions obviously needs to be match funded in our perspective and to the extent we have put in the in our potential future capital allocation structure, we need to solve for that somewhere and that probably would mean just funding it well in advance of execution or a large portion of it to take the risk off the table and once you add that into the math on something that could have a long tail. It certainly pulls down your current and potential return on it. So it's just it's another variable that has to factor into the calculations, but all else equal. It I mean, certainly we prefer to do deals normal course than have to have a structure like that in place and it also resonates when we talk with.
Potential tenants I mean, an important thing and every one of our relationships is the reality that it's a long term partnership.
Where we helped facilitate growth and to the extent the capital markets change significantly between now and when that might happen on our operator and tenant side.
They are they're hopeful.
And one of the best assured that we're in a strong capital position to step up and if we have a lot of capital that could potentially be called with put that it may preclude us from being in that position all else equal.
That's helpful. And then just in terms of looking at non gaming assets as that stepped up at all.
Thomas I wouldn't suggest that it's stepped up or decelerated.
Yes, it's pacing as it always has we look at all experiential kinds of opportunities. We look at all opportunities that would be adjacency to our existing portfolio.
It's really just a matter of finding the right assets that have the same credit characteristics. The same resiliency and durability that we currently have because you should expect as we've said in the past.
If we go beyond gaming, it's going to be for assets that do have similar attributes to gaming.
So that remains a work in progress.
Helpful. Thank you.
Thank you. Our next question comes from the line of John Silka with Ladenburg Thalmann. Please proceed with your question good morning.
Good morning.
So as you look at some of the transactions that might come out of the Eldorado Caesars merger and probably just larger operator M&A activity generally it seems like those have tended to be focused on kind of lower EBITDA property sold the smaller operators looking to kind of scale up their operations.
So maybe what is unique about underwriting those transactions versus some of the larger deals you did.
In the last couple of years.
But it's certainly important to have the right operator in place that's kind of a plan that can actually add value to the assets and make sure that they are durable and stable over time and then it comes down to the locations of the underlying markets and how we construct the portfolio in a master lease around those so as long as we get comfortable with a lot of those similar attributes that we look at in a larger transaction, we can be in a good place and remember given the shifts in the industry and the focus on larger properties by some of the public players I mean, there is an opportunity set that ultimately should lend itself to some smart folks that can really give the attention due to some of these properties that may be off.
Off the radar for some larger operators that could create value for both the operator and for us as a landlord if they execute a business plan well, but it really comes down to that execution of the business plan and having the right person than that in the seat.
I can tell you that the guys have spent a fair amount of time this year, maybe more than ever.
Talking with cultivating.
New potential operating partners in the industry and that's almost an everyday process. It stepped up this year.
And and ongoing and we feel pretty good about that so.
That's a good question and we're very focused on it.
Okay, and then on the detail side looking to balance sheet given the current interest rate environment is there any thought towards maybe swapping and even potentially recasting and extending out the term on on the term loan a.
Yes, John look.
Our biggest responsibility is to prudently manage the balance sheet. So you should assume that given the move in the 10 year Treasury rate from three and in November of last year to 1.741 0.73. This morning, certainly has our attention.
If we had reacted to everyone who has come in and pitch. This on locking in converting hedging take your pick in terms of what you call. It we probably would have been at a much higher rate because they started way back in the early spring.
So we do monitor all the time the credit markets and obviously given the billion dollars maturity that is due November of next year at four and seven AIDS.
We do see some opportunity both from an interest rate savings perspective, and the opportunity from just locking in longer 10 or longer duration interest rate. So.
We are looking at those kinds of things, but at this point in time, we don't have anything to share with you.
Okay, and then maybe on the kind of acquisition side again as you go out and talk to some of these operators me are you getting any new I guess pushbacks are kind of reasons why they might be cautious about utilizing an opco propco structure.
Cautious or reasons why.
Look there's a wide spectrum ride from guys that own all of their real estate to folks that own very little if any of their real estate and are very comfortable from an operating standpoint. So there there are different business philosophies that are out there.
Some folks do feel that.
Owning the real estate gives them a little bit greater cushion.
We're not going to change their views, but I do think that people are waking up when they see reactions to opco propco M&A activity that result in the operators are seeing equity value appreciation to the fact that maybe there is some port portion of their portfolio that they don't need to own and can create greater operating leverage but there is no uniform opinion out there as you would expect and the most frequent catalyst as a distinct opportunities if you look at.
Most all the recent transactions that have occurred except for one I can think of I mean, they've all involved.
Redone Opco Propco split just based on the state of the market and pricing in the market. So I'd I'd almost argue it's more of an embrace its just a question of when the catalyst come up.
To facilitate it.
Hi.
That's a good point because it look is going to be harder for buyers to execute a transaction. If they don't have a re partner never going to get to the pricing.
Understood. That's it for me. Thank you very much thanks.
Thank you.
I'd like to turn the conference back to Mr. Carlino for closing comments.
Well that makes it simple and easy.
Thanks, all very much for dialing in this quarter will actually look forward to.
Good talking to you next round, thanks very much.
Operator, thank you.
Thank you ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.