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spk02: Greetings. Welcome to Gaming and Leisure Properties' fourth quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll turn the conference over to Joe Giaffone. Joe, you may now begin.
spk01: Thank you, Rob, and good morning, everyone, and thank you for joining Gaming and Leisure Properties' fourth quarter 2021 earnings call and webcast. The press release distributed yesterday afternoon is available in the investor relations section on our website 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. 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 10Qs and definitions in the earnings release and reconciliations of non-GAAP financial measures contained in the company's earnings release. On this morning's call, we are joined by Peter Carlino, Chairman and Chief Executive Officer of Gaming and Leisure Properties. Also participating in today's call are Desiree Burke, Senior Vice President and Chief Accounting Officer and Treasurer, Brandon Moore, Executive Vice President, General Counsel, and Secretary, Steve Ladney, Senior Vice President and Chief Development Officer, and Matthew Demchek, Senior Vice President and Chief Investment Officer. With that, it's my pleasure to turn the call over to your host, Peter Carlino. Peter, please go ahead.
spk18: Well, thank you, Joe, and good morning, everyone. Thanks for joining our fourth quarter earnings discussion. This quarter, and in fact, the entire year for GLPI, I think it's pretty eventful. Notably, we affected a variety of transactions, both large and small, while at the same time significantly improving our balance sheet, which was a major focus for us this year to get down to what we've internally called fighting weight. As always, we have prepared a very detailed press release with everything important pretty well outlined, so I'm not going to highlight every detail. Desiree and Matt will have some comment that we'll get to in just a moment. But we're most pleased to welcome the Cordish companies to our roster of the best regional gaming tenants in America. So in addition to Maryland Live, we just achieved approval for the acquisition of Philly Live and Live Pittsburgh, which is out in Westmoreland County in Pennsylvania. Cordish brings both a grouping of some of the best regional gaming properties in the country, for any of you who have seen them, and along with the skills of one of the best and most successful developers in America. We are looking forward to significantly more work with them over time. Also pleased to point out that part of the purchase price was funded with more than $300 million of OP units. which we view as a great vote of confidence in our company. So while you examine the new assets that we've just acquired with Cordus, I would invite you to look at the entire GLP website and what we believe is the best and certainly the largest assemblies of regional gaming assets in America. You know, I'm surprised from time to time talking to investors that they've never seen any of our properties, which is a surprise. and have no idea what kind of quality these properties represent. I do think that a trip through our website looking at what we have in our portfolio is instructive for many. With both, and I'll say, with both Cordish and Bally's at the same time, we believe that there is an additional path to growth with these companies And by the way, that could also include some of our existing tenants. We talked to Penn about a variety of investments that they may want to make going forward. So we see 2022 as already off to a great start. I would point out, too, that in the second half of this year, we expect to complete the acquisition of Bally's Rock Island in Illinois and Blackhawk, plus, of course, the balance of the quarters purchases. which will get us to, I think, 55 properties today. Once again, I think what you see in these recent transactions that gaming and leisure properties really never competes on the basis of its cost of capital. We're not in the auction business, but rather we compete by capability and our ability to assemble and conclude very complex transactions. So I also highlight that on a facility-to-facility basis, which I call especially to your attention, we've got the best cash flow coverage, four-wall coverage, property-to-property in the industry. And you can expect, which I highlight here, that we'll retain our same caution and care in making new investments. I've said publicly many times that we're not in a monument-building business. No transaction we have to do. We're very careful with our shareholders' money. because we, like you, are shareholders. One other comment I'll make is about dividends. We're pleased to announce a $0.02 increase, $0.08 over the course of the year annualized in dividends. And I think I can say safely that we expect Over the course of this year, when transactions close and the year evolves, that number will rise. Dividend growth is particularly important to me as a shareholder, as I suspect it is to many of you. And we will responsibly continue to grow our dividend as we are able. So with that, let me turn the prepared remarks over to Desiree Burke, our Chief Accounting Officer. Desiree?
spk11: Thanks, Peter, and good morning. I just wanted to run through some highlights on the income statement and compare the quarter of 2021 over the quarter of 2020. Our total income from real estate outperformed the fourth quarter of 2020 by over $17 million, primarily due to the closing of the Bally's transaction on June 3rd, 2021, which increased income by $10 million, escalators on our Pinnacle, Boyd, Belterra, and Penn leases, which added $2.5 million, Perryville rent received of $1.9 million and increased Penn, Ohio percentage rent of $2.6 million. Higher non-cash straight-line rent and non-cash revenue gross-ups of $2.9 million, partially offset by a decrease in our rent related to Casino Queen of $3 million due to timing of cash collections on the lease in the fourth quarter, mainly in the fourth quarter of 2020. Our gaming revenue declined $19 million, and as a result of our sale of Perryville and Baton Rouge operations on July 1st and December 17th of this year, our operating expenses increased by $35.2 million, and that's primarily due to a non-cash gain during 2020, which was not replicated in 2021, which was related to the Caesars exchange, where we acquired Waterloo and Bettendorf in exchange for Evansville, And that resulted in a $41.4 million non-cash gain last year. We did have a non-cash charge in 2021 of $12.2 million related to the provision of credit losses associated with our new Cordish lease. You will have, this is the CECL reserve is what accountants call it, which is related to that lease being a financing for GLPI. a non-cash land lease growth up and land rights amortization of approximately $5.9 million, which was partially offset by a $4 million recovery on the casino queen loan, a $12.2 million reduction in gaming expenses, again, due to the sale of Perryville and Baton Rouge's operations, and a gain on the sale of Baton Rouge's operations of $6.8 million on a pre-tax basis, and an insurance gain of $3.5 million. With respect to the Perryville rent, I wanted to again call to your attention that this has been recorded in our TRS segment during 2021. We will be recording that in our REIT segment beginning in 2022 as a result of the winding up of our taxable REIT subsidiary. With respect to Maryland live lease, this lease will be accounted for as a financing receivable. We'll therefore recognize cash rent as interest income on revenues from real estate and a change in the receivable going forward. However, we will reconcile that cash received in our AFFO disclosures. With that brief summary, I'll turn it back to Peter.
spk18: Thanks, Des. And Matt, you wanted to make a couple of comments as well. You've been much involved in our balance sheet work this year and all of our transactions, so why don't you go ahead?
spk17: Sure. Thanks, Peter, and good morning, everyone. As Peter talked through, at this time last year, we shared a game plan, and it was playing offense and doing so within the context of being disciplined and emphasizing our commitment to balance sheet strength with respect for the role it plays in our success. And related to these goals, we've delivered. Not only did we expand the relationship with Bally's, one of our most dynamic tenants, but we also directly sourced a new relationship to our tenant roster with the Cordish properties that Peter talked about. in a transaction where our counterparty made very clear GLPI was not the best price, it was the best decision. In fact, coming from a 110-year-old family company that has signed their own names to financing projects and other bills that need to be paid over those many years, it was taken as a great compliment when after hours of discussions, some negotiation, finalizing terms, John Cordish turned and said, you know, it's pretty clear to me that you treat it like it's your own money. In the other REITs I've spent time with, treat it like it's other people's money. The Cordish's decision to take a significant equity stake in GLPI underscores our philosophical and business alignment. We're looking forward to seeing what might come from our Cordish relationship overall and from the novel partnership structure that enables GLPI to invest at least 20% of the equity into any new gaming license opportunities achieved in newest jurisdictions over the next seven years. Realty Income's recently announced agreement to purchase Wynn's Boston asset at a 5.9% cap rate marks another milestone on the path towards institutionalization. It not only provides a real-time price discovery, but also underscores the value created with our purchase of the Cordish portfolio. The fundamental thesis upon which our company was founded, that thoughtfully structured gaming real estate cash flows are of institutional quality, has been further validated. As I've often stated in the past, we own the most homes in one of the best neighborhoods. Turning to the balance sheet, balance sheet strength and liquidity remain the foundation of our success. Throughout 2021, we stayed true to the philosophy of match funding or transaction activity. We also perfected the use of multiple tools in our tool chest with not only our overnight equity issuance and 10-year bond issuances that were both well oversubscribed, but also with over $250 million of ATM issuance at over $49 a share and the gaming REIT sector's first OP unit issuance that Peter talked about. We are well positioned to be well within the target debt range of five to five and a half times that we've articulated. We've got almost $1.2 billion of unused revolver capacity, and we see our staggered, almost entirely fixed rate debt profile as a strength amidst market volatility. As we move forward, our focus remains on unearthing opportunities for the prudent deployment of our shareholders' capital. I'll turn it back to you, Peter.
spk18: Matt, thank you very much. I hope that was helpful to you all out there. So, Rob, would you please open the floor to questions?
spk02: Yes, thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question today, please press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants that are 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, and that's star one. Thank you. Our first question comes from the line of Neil Malkin with Capital One Securities. Please proceed with your question.
spk13: Thanks, everyone. Good morning. Good morning, all. First question, a couple of transactions, pretty notable transactions over the last, I don't know, nine months or so, really continue to validate, like you said, the regional gaming thesis. Wondering if you can maybe elaborate or talk a little bit more about either anecdotally, specifically, whatever you'd like, on how you see the continuing institutionalization of the regional gaming market. I know, obviously, Vegas is well-known, but maybe if you could talk about incremental buyers, competitors, potentially how CMBS or debt markets have, you know, improved. Any of those things would be great.
spk18: Hey, Matt, why don't you take that?
spk17: Sure. I mean, so you've seen the cap rates. I mean, we did what for us was an aggressive deal to 6.9, and very quickly in a few months we've now seen a 5.9 for another regional property. And as Peter said, I'd really underscore for anyone who hasn't been to the Cordish properties, please reach out. You should see them pound for pound. They're as good as anything you're going to find. If you look forward, I mean, the realities are there's a significant amount of institutional capital in the private equity world, in their private REITs, and in other public companies that is looking for returns. And when apartments have three handles, industrial has three handles, it's really hard to find safe and durable income. And when you look at a Dollar Tree or some other facility like that in a very second-tier market and compare it to some of the cash flows you get that to Peter's point, not only have a great operator and a great property, but also strong four-wall coverage and credit support, it's pretty obvious we've got a better mousetrap and better business model when it comes to getting those cash flows. So to date, you've seen a bit of a competitive moat related to not only relationships, but also licensing. As people focus more on the space, I suspect some of them might find accommodations to do one or access both of those things. And I'd expect more cap rate compression. I mean, I've watched this play out as we've talked about in manufactured housing, self-storage, data centers, cell phone towers. As long as our cash flows deliver on the premise that we've articulated, you're going to see more cap rate compression. Now, what does that mean for us is really the key question. And I'd point out, we get this question all the time. How do you guys compete? You don't have the best cost of capital. um why should someone do a deal with you and in spite of that you can look at the years of transactions we've done to peter's point none of those are auctions each of those is a somehow bespoke often directly negotiated deal with someone that does the transaction for more than maximize proceeds just economic terms and cordish i think is the best case study of that so as we go forward we're also going to have to be thoughtful about how we're sourcing capital and the cost of it. I tried to underscore the fact that we've used not only the ATM thoughtfully, but now this capability that's been validated by the Quartishes to use OP units, which is unique. And the math is going to be the same for us, risk-adjusted returns in excess of our cost of capital. And to Peter's point, doing only things that make our long-term intrinsic value greater. Yeah, that's great.
spk18: Sorry, go ahead. Okay, go ahead. Please go ahead.
spk13: No, no, no. Go ahead, Peter.
spk18: No, I like Matt's answer. It was pretty much on point, but why don't you carry on with the question?
spk13: All right, great. Yeah, okay. Can you maybe talk about the, well, just in terms of maybe the acquisitions, notice that Bally's got pushed back to the end of 22, both of those transactions. Is that a function of, just like COVID and regulatory delays and constraints, or is there something else there?
spk18: Brandon, why don't you take that?
spk12: I don't think there's anything more to it, and I would caution you. At Bally's, there's actually three separate transactions that we're looking at right now. There's the transaction in Las Vegas around the Las Vegas Tropicana, but then there's the Quad Cities and the Illinois, and I would expect the Quad Cities and Blackhawk transactions to close prior to the drop transaction, which I think will be later in the year. I think that the two former transactions will be a little bit earlier.
spk13: Okay, great. And then I guess just last one. I think on the last call, Peter, you talked about, or Matt, about elevated opportunity on the forefront. And I'm just wondering specifically if you could talk about some of the alternative leisure, lifestyle, consumer-oriented sort of endeavors or opportunities you're looking at, if you could give any color in that.
spk18: You know, our answer has probably been the same for the last maybe seven years. There's not a week that goes by that we don't look at some other something. And, you know, the struggle that we have is that we're already in one of the best spaces on the planet from the point of view of certainty and of cash flow, longevity of cash flow, long, long, long-term leases. You know, it's tough when you're already in the best place to take something less than the best. That having been said, there are some things we're looking at. And look, I've said probably for years, I expect one day we will alight, at least mildly, in some other space. But we just are not there yet. There'll be a discussion, just for fun, I'll tell you about some new ideas scheduled for, I think I saw it, 3, 3.30, and Monday afternoon. So, I mean, that's a scheduled call about a different concept, but we do this all the time, and we'll see. But at the moment, there's nothing really special to report.
spk13: Okay. Thank you guys very much.
spk19: Thank you.
spk02: Next question is from the line of Smeets Rose with Citi. Please proceed with your questions.
spk00: Hi, this is Stefan for SME. Just going back to your cost of capital, you talked about not competing on cost of capital. And then you talked about potentially moving into non-gaming assets. So what type of non-gaming assets would you be interested in? I know in the past you've talked about potentially looking at some hotels with Penn. And just how do you expand the universe kind of as gaming becomes more institutionalized?
spk18: Well, I do think there's opportunity with some existing tenants that we can explore and are exploring right now. That's a pretty near-term, I mean over the next year, let's say, opportunity. Could happen, maybe won't, but there are active discussions about deploying capital with existing tenants. We're also excited, by the way, with Cordis, for example, Again, people who are very, very aggressive, hungry, coast to coast, and people with whom we'd love to work and do more. And that applies to some of our other strong tenants. But, again, it's highly unpredictable. We'll just have to see. In other space, again, I think I pretty well said that we just haven't seen what can match what we already have. Matt, do you want to add any color to that?
spk17: I'll just say, listen, we spend a lot of time investing in R&D and everything outside of gaming to keep our finger on the pulse of anything that might be durable cash flows. But really, at the end of the day, A, we don't want to say specifically what those things might be, because obviously it's a very competitive marketplace. But B, durable characteristics are really the hallmark of what we're looking for. And We don't want to put our money into much more volatile income streams that cost a lot more than the gaming assets, to Peter's point. I'll also point out, we don't feel that we need to do something outside of gaming to prove that we can do something outside of gaming. We always have access to those deals. The first deal we do is going to be because it crosses the threshold of making sense on a risk-adjusted basis. So we try to be creative. Obviously, I mean, when you look at where we are, we're in middle innings of institutionalization. And being able to find things in earlier innings of institutionalization with less efficient pricing is one avenue and one lens to look through. But at the end of the day, it's got to make the long-term value of the company greater.
spk05: Peter, you talked about not wanting to compete in large auctions and generally wouldn't be competitive in those types of situations. Can you just talk a little bit about your relationship with Wynn? Obviously, the Encore was not a broadly marketed transaction, according to Wynn and Realty Income, but I'm sure you've had conversations. You would have had relationships and knocking on a lot of doors. I guess, what was it in the relationship that they didn't feel that you would be a good counterparty to buy that asset and progress down the road with just Realty Income?
spk18: Well, I can't speak for that. We had no conversation with them about that property, so it never came up, period.
spk05: But I assume you've had a conversation with them over the years. I mean, I assume you have conversations with every operator as you've uncovered things, right? Yeah, we have. That's part of the duty, right?
spk18: We have. In an era, I spent some numbers of meetings with Steve himself over time, just never found something that made sense for us. Look, I mean, some of these transactions are kind of bespoke, where either they were approached by somebody directly and decided that these are the guys. Look, it turns out in the end, we would not have been competitive anyhow, so I don't think we missed anything. And I haven't lost five seconds of sleep over that transaction. Good for them. I think it's a sweet deal, and it does validate, as Matt says, the value of some of our properties. But look, in fairness, that is scarcely what I call a regional property. It's really a Vegas-scale property in a major, major market where you've got essentially a monopoly. I don't think it says a whole lot about regional value. It does kind of validate the space, and I'm delighted to see someone else sees the But we wouldn't have been competitive for that in any case.
spk05: And why do you think you wouldn't be competitive? Do you feel like it's your own equity cost of capital? Was it the bumps in the leases? Was it a lack of CapEx? Was it the size? I guess what are the elements that make it that you feel that given the same terms, it wouldn't have been something? And I guess I'm getting a little bit of mixed messages, Peter, in the sense of, It is a validation, but it's too much of a price. We wouldn't play there, but maybe we would sell our assets at that price. So I'm just trying to reconcile all of these comments.
spk18: No, look, every transaction is different. We've done transactions at very favorable pricing. The deal we did with Carl Icahn, not exactly a fellow known for giving away gifts, but it was a very complex transaction involving four public companies. What we did there was quite extraordinary. But we added value and creativity and so forth that maybe others couldn't. So that we just, you look at everything else, you find what you do best. But straight up auction, I've said it very directly, Steve, the winner loses. Generally, that's the case. And whether you're trying to buy an automobile or you're trying to buy a piece of art, laying down the highest price at an auction is not generally my idea of fun. We have competed, for example, with MGP. We did compete there because we were always there. I was there with Jim Martin for a couple of years prior. Unfortunately, when he ran into some difficulty, that kind of ended our longstanding discussion about something we might do. And the adjusted board there made a judgment that an auction would be the best way to go. Can't say they were wrong. And we were already there, so we thought we should move, look hard and see what we can do. But in the end, we confirmed that it was not a right deal, and we chose not to play. So, look, that speaks for itself. There are plenty of transactions to be done, as we've demonstrated just recently. We'll continue to do business, but every deal is in for us. That's all. I mean, I don't know why that doesn't stand. So we just proved it.
spk05: Well, thanks. Well, sorry to miss the company and you down in Florida, but we'll look forward to catching up at a later date. Thanks.
spk18: Thanks, Bates.
spk17: And let me just add for the audience, just to follow up on Michael's question, it is interesting to look at the wind's build and the fact that it's certainly well overcapitalized for the market it's in and looks terrific. As Peter points out, take a look at our portfolio. A lot of the pictures do. But when you really drill down beyond what it looks like, the quality of the cash flows, when you think about master leases, the four-wall coverage Peter brought up, limited license similar to this, The quality of cash flows in our portfolio is very comparable to the ultimate quality of cash flows that come out of the win asset.
spk02: Our next question comes from the line of Jay Cornrick with SMBC. Let's just see what the question is.
spk06: Hey, good morning. You know, you have set up kind of a nice pipeline of potential future growth by establishing rofers with now Bollies, Casino Queen, Cordish Companies. And so I'm wondering if you can just kind of talk about how you see those opportunities potentially playing out.
spk18: Well, you know, the real answer is it's hard to know. We'll stay close to these folks who we like a great deal and trust that they like working with us, but we'll have to see how it unfolds. I can't make any prediction about where that might go. We've got some hungry partners out there that want to expand and will expand in this industry. We just want to be kind of available when the time comes and the opportunity appears. So, look, I mean, that's part of our job to stay close and wish them well and hope we can be of help when the time comes.
spk06: Okay. I guess with specifically the Cordish companies, you know, they own a wide range of both gaming and non-gaming assets. Are you able to expand a little bit more on just the partnership and opportunity set for you there going forward?
spk18: Oh, look, real clear, we would be willing to step into some other real estate space with them should that opportunity present itself. I mean, we've had those conversations. We'll see. Again, if we can provide something that they at the time would need or desire, then we want to be the go-to people that they deal with. I mean, that's really our job is to hang around the hoop. be good friends and partners and to be available.
spk06: Right. Okay. And then I guess just one follow-up, you know, as going back to the win, as you know, did now join many other casino owners and selling off its real estate. Can you give any color on how many other sizable whole co operators that may be out there and the regional gaming opportunity set that, you know, awaits you as if they're willing to start selling off the real estate?
spk18: I don't have a number. I don't know. Steve, would you have a thought about that?
spk10: I have some thoughts. I mean, I don't have exact numbers, but if you look at some of the large, more urban areas that have legalized gambling, you'll see that many of the sizable properties are probably already owned by a REIT. So there are some owners that still have some of those assets in whole co-form. Most of those are sole proprietor, family-owned type businesses, ones that would be potentially transaction partners in the sense that they might, in fact, value the upreach structure and the tax benefits it provides. So I think in large urban areas, you're going to see those types of assets that still exist, and that does provide us a good runway for at least an open discussion around tax savings. Separately, there are some large publicly traded companies in the gaming space that still own all or almost all of their real estate. So there's a huge runway ahead for those opportunities. And I guess the benefit for them and the unfortunate truth for everyone trying to acquire those assets is they have held out to date and they've been proven correct because the valuations just keep climbing. There could be a point in time, depending on their borrowing costs and things of that nature, that could cause them to look for alternative sources of capital. or they might just decide to join the party and sell the real estate. So we're having ongoing conversations with those folks, and those aren't necessarily these monster assets in urban areas, but collectively as a company, their portfolios are very large and very valuable.
spk06: Great. Thanks so much for the call there.
spk02: All right. Thanks, guys. Thank you. The next question is from the line of Handel St. Just with Mizuho. Please receive your questions.
spk19: Yes, good morning.
spk03: One more follow-up on quarters. I guess I'm curious how large equity commitment you would be comfortable with there, given the co-investment opportunity you highlighted. I'm just curious about how you think about your balance sheet priorities in light of that potential equity commitment. Thanks.
spk18: Well, my quick answer would be it depends on the opportunity and where the capital is going. If it's a new gaming property, for example, in a strong market, we might be willing to do a whole lot and undoubtedly would. Listen, I have long said that a gaming license in a limited license jurisdiction is just an opportunity to print money. It's terrific if you can find it. The only risk to you is overspending, simply overinvesting, which some in the gaming world have managed to do on a regular basis. But it's not what we do, and I don't think it's what the quarters companies, you mentioned that, but we have others that we would gladly partner with as well. But, look, you expect some discipline, and so it would be deal to deal, and I don't think there's any limit on what we'd be willing to do depending upon the opportunities.
spk17: Hey, Handel, this is Matthew. I just want to add a couple thoughts. You know, that commitment is something that was, I'll say, almost a hard-fought negotiation. I mean, people around the table are laughing. This is like someone handing away money. Coming from the REIT world, I know we get excited at a 7%, 8% development yield. I can't give specifics, but if you look back at the history that the Cordes has been able to achieve, very similar to Penn, every one of these things is over 20%. cash on cash, unlevered. So the key point is what we want to do is move up the value chain and get access to cash flows earlier. I mean, this is a competitive advantage earlier in the process and not necessarily just be the takeout on the back end after a lot of value is created. We want to participate in the value creation and hopefully own it on the back end. But when you think about timing, I mean, we're going to see it coming. I mean, these are all dependent on new licenses being granted somewhere around the country where they don't exist currently. That's why we have a seven-year window. It'll take some time for these to play out. And we hope that one does. And to the extent of how we think about the balance sheet in conjunction with it, just like everything else, I mean, we're going to keep our leverage in our five to five and a half range. And we'll assess at the time, depending on between now and whenever that might be, how much retained cash flow, et cetera, we have in our starting point. And we'll thoughtfully use a mix of debt and equity consistent with that goal. But just to be clear, that would be a great outcome for us if it were to come to pass. It's not guaranteed. Again, it's dependent on how things play out. But it's a novel thing that we structured in that we hope to be able to realize and create value for our shareholders with.
spk18: And we can assume that we're staying very close to what's going on around the United States and spending time in those places to see how we may carve up or find some opportunities. We're very much on top of any gaming expansion anywhere. So let me just leave it at that.
spk03: Okay, and a follow-up to that, I guess maybe more specifically around in Las Vegas. Curious on thoughts on potential development opportunities there around the Trop and the potential stadium.
spk18: Well, we don't know exactly what Valleys has in mind for the site. We're actively involved in conversation with them. We have an announced transaction with them, but if we could enhance that transaction with deploying some capital in a broader way to a project that we feel comfortable, we'd be open to that possibility. But right now, I think we're just assuming that it's going to be a ground lease. It's a favorable deal. We're very pleased to have it. We would work with them should the opportunity arise, but again, it has to cross all the other hurdles that we would normally consider. So nothing locked in there beyond the deal we have.
spk10: I think Bally's mentioned on their earnings call yesterday that they expected to be back mid-year with further information and thoughts around the redevelopment of that project. So we're working with them, but we're not going to be the ones unveiling anything of their plans.
spk18: Yeah, that's fair enough. We have been very involved with them, though, to be clear. We really have been. Nonetheless, it's their plan, so we'll see where it goes.
spk03: Okay, fair enough. One more, Peter. I guess guidance, a touchy subject one we've raised in the past. Is it the policy that we will not be having formal forward year guidance this year and going forward? And then any updates or comments on the CFO role also? a subject that we've asked in the past. It appears that the current structure is one that you've indicated you're comfortable with, but just give us a bit of a rethink. Thanks.
spk18: Yeah, I think if you look at what we've accomplished over the last year, and it's been terrific. So on the CFO issue, we're still content with where we are. Our board is very content with where we are, and we have enormous capability with the folks you've got on the call with you today. We really, really do. I can't say that we won't someday address that, But at the moment, we're blissfully happy with the way everything is working. Guidance is a sticky item. I think we're going to wait until we get the last of our transactions closed. We're not sure about timing and a whole bunch of these things. And with that in mind, we're just going to wait. I have said that we're open to that notion of getting back to guidance. Look, I think we're very transparent, though, as you know. In this business, you have a pretty clear sense of of what our revenues and earnings are likely to be. But for the moment, we're going to go past this quarter. But honestly, we'll look at it again on a quarter-to-quarter basis. And I'm just going to leave it at that. It is a matter of much discussion at our end here.
spk19: Okay, fair enough.
spk18: I don't know if anybody else wants to offer from the TLPI team any other thought about guidance?
spk19: Here in none, there's the answer. Okay, fair enough. I'd appreciate it, and I think some investors would too, but thank you for the time. Thank you.
spk02: Our next question is from the line of Greg McGinnis with Scotiabank. Please proceed with your questions.
spk07: Hey, good morning. So, Peter, you briefly touched on the dividend during your opening remarks, but you've spoken a lot over the last couple of years about getting the dividend back to $0.70 a share. which based on our numbers would represent about an 80% AFO payout ratio, excluding the future transactions. But then you've stopped just short of that bogey at 69 cents. So just a few questions there. Why do you hold back from that threshold? What is the payout target? And what's the expectation for additional raises this year?
spk18: The expectation is, I think, probably safe to say very high. I don't know. I'd look at our council. Brandon, tell me I can get away with saying that. But, yeah, I think it's pretty high. That's our desire, so I paint it that way. So I think that is the case. We could have gone higher this quarter, but, frankly, we kind of like the idea of stepping it up throughout the year. And the ratio is – We have not been at 80% for a couple of years now. But by choice, we've decided to hold some firepower back to – and particularly now since raising equity would not be a desirable thing to do. So putting more cash and retaining more cash in our pocket seems to be a very sensible thing to do at the moment. So I think – Do you want to talk about where we are? I know, but where do you want to go with that?
spk11: I would say that the dividend, we have to wait for deals to close. I do not think it would be prudent for the company to go out with a dividend prior to the closing of the transactions. you know, are necessary in order to increase a dividend. So our decision to stay at 69 cents, and we do think 69 cents is comparable to the old 70 because we did raise 8.9 million shares in the fourth quarter and haven't received the benefit of that until January 1st when we start getting rent from Cordish. So, you know, it was a very thoughtful process. We get close to the 80%, but we don't pay out exactly 80%. and we haven't in the past as well, but we are extremely close to the 80% payout ratio.
spk07: Okay, so I guess comfortable staying near the 80%. I mean, I guess it's just a little confused because you've talked about the 70% bogey. We're nearly there, and then kind of just fell short for what it sounds like. You just kind of want the ability to raise dividends. later in the year.
spk18: Yeah, let me say this. It doesn't display any lack of confidence. I really want to emphasize that in our likelihood of closing these transactions. We feel very confident that these transactions will each and all close. That having been said, we decided to sort of take the step-up approach. I think Desiree highlighted that we're really kind of the equivalent of the old 70 cents. Internally, the question was, Does the 70-cent number look psychologically better? What you're saying is it seems like it might have. But we kind of like the idea of stepping this thing up and having some fun quarter to quarter as we get through this year and into next. We're very optimistic about where this is going to go, and we feel good about it.
spk07: Okay. And I guess along those lines, then, kind of going back to Handel's question on the guidance, where you don't have the operating assets anymore, which cleans up results, Looks like you're going to be getting the escalators on most of the leases. You kind of have an idea or expectation that the transactions are going to close. So I guess I don't really understand why you're not comfortable providing guidance because you talk about, you know, curious, but you're not sure when the transactions are going to close. But with your business, and I think the whole prior part of this call kind of reflects that, there's always going to be transactions. Right? Yeah.
spk18: We'll bring this up with our board as our next meeting approaches relatively soon. This was an issue well discussed with our board. And I think we have had decided with the board's support to take a cautious approach to this. This issue is a scheduled item that will get considered. at our next board meeting. And then we'll see. I did say down the road that we quite possibly would get back to guidance. We just haven't felt as if it was a life or death issue for us. We decided with an abundance of caution, kind of who we are, that we would just wait a bit, step it up. And so I'd say stay tuned. I hear your request.
spk07: Okay. Okay. Yeah, I would say just from the investor perspective and at least the sell-side analyst perspective that there is a level of confidence in the future that I think you guys do have but aren't necessarily sharing with the markets by establishing that guidance. So you can always go a bit wider if you're worried about the timing or just let us know what the guidance implies for expected timing of transactions.
spk18: That's fair enough. I suspect, by the way, that virtually all of our board members are tuned into this call and I suspect they have heard your desire.
spk19: Thanks, Peter.
spk18: Thank you very much.
spk19: It's a fair question.
spk02: Thank you. As a reminder, to ask a question today, please press star 1 from your telephone keypad. The next question comes from the line of David Katz with Jefferies.
spk19: Please receive your questions. Hello. Mr. Katz, your line is open for questions. Apologies.
spk16: Post-COVID, leaving it on mute. Good morning, everyone. Thanks for taking my question. I know that a portion of the strategy is to evolve beyond gaming, and I wondered if you could just elaborate a bit more or help us color in on what that might look like. Might it look like You know, a gaming property is part of a mixed-use development where your involvement might be broader. Is it, you know, perhaps through a vehicle of, you know, loan to own or other kinds of financing to launch a relationship? What might the evolution look like and what path could it take? Thank you.
spk18: Well, look, I think you laid out two sensible ways to get our toe in the water, and that's certainly stuff that we have looked at and would consider without a doubt. Look, the farther off you get into some other space or some other business, frankly, the less likely we are to get there, barring something very compelling. David, I hate dodging answers, but the truth is we'll know it when we see it. I did emphasize earlier in the call that scarcely a week goes by that we're not looking at something that one of our banks or one of our friends or somebody internally has brought to us as a possibility. And we look at this stuff quite seriously because, again, this company's objectives are long-term. while we are not pressed to do heroic or crazy stuff, we are trying to build a company for the long, long future. And I think we've done that pretty effectively to date. So it's an ongoing process. I think we'll know it when we see it. As I mentioned, just for fun, there happens to be a call in the calendar with some folks Monday afternoon. I think it's 3.30 to be precise from my memory. to discuss something different. But this is a normal part of what we do, and we'll continue until we find something that kind of grabs us. But you know our criteria. It's safety, and it's getting an appropriate spread to our cost of capital, since we're really not in the business of, quote, strategic transactions. We're only interested in cash-on-cash returns. That's who we are. That's who we've always been.
spk16: Okay, I appreciate that. And if I can just go back to one issue that you've discussed a little bit, which is the most recent entry into this category historically pays much higher prices. And while they've paid a higher price than I think most of you and your peers have so far, it sure looked like a great price to them. And, you know, I only take that in the context that, you know, there could be more of the likes of them, there should be more of the likes of them that will look at opportunities at a better price than you're willing to pay as highly attractive. But I heard Matt's comment earlier that, you know, sometimes people make a better choice necessarily, you know, that isn't entirely numbers driven. I'm just posing the question about whether the market just got tighter and more competitive for new opportunities.
spk18: You know, that's a fair question, and time will tell. Look, I think that's a unique property. As I said, it's really a Las Vegas property, a very expensive, one could argue overbuilt for that market, but property in a major city in a monopolistic position. I think that's unique. I wouldn't imagine those folks would be going to – I'm just being smart – Tunica, Mississippi to buy any asset in the market at a similar multiple. So, look, I think it's partly property to property, market to market, and I think that was a unique situation. Time will tell where else they go or people like them go. Is that fair?
spk19: I do think it's fair. Thank you.
spk17: David, let me add a thought to that. It's interesting. I'm going to go back to the point of look at our transaction table and everything we've done historically. So you rightfully point out that there is some reliance of our business model on people needing to do things for strategic reasons. But that's happened now, I don't know, at least a dozen times. I mean, Cordish made very clear in this transaction, I mean, they were not trying to maximize proceeds. What they were trying to do was find a business partner to enable their business plan for the next many generations. And they expect their kids and their kids' kids all to be owning the opco and running these assets for the future, foreseeable future and beyond. And in that transaction, we've structured a number of things to be able to help them execute on that. I suspect that others would have paid a much more aggressive coverage. In fact, in their case, they wanted less rent and they're speaking our language. We have, again, a philosophical alignment of views. And they're not the only people in the world that think that way. You look back before that, public company, Bally's, and the fact that they were looking to do a strategic M&A deal in the UK and needed someone to do exactly what Peter pointed out, be creative, do something bespoke, move quickly, do something very complex. Those are all things that we've got muscle memory from doing it many times before that we can execute on. And you can keep looking back on our transaction history. Historically, it's been the case that people look at more than just cost of capital. And to your question, I'll say if this was just similar to a mortgage broker and we're just looking for the lowest rate, everything else held constant, we may not be the best buyer. And those terms may not be the ideal ones for our shareholders. Remember, every time we do a deal, we take very seriously the reality that we're selling a piece of our portfolio at the valuation that our stock's at in order to buy whatever's next. And it needs to be at least additive to that in whole. And if there's very aggressive coverage or a very aggressive cap rate without a lot of credit support gets more challenging for us to pencil. But in spite of all that, we've time and time again found ways to do creative things that have added value for our shareholders. Yeah, let me say this.
spk18: Look, we can't – I think Matt says it well. We're not the choice in every situation, but we want to be the reader choice in this industry, the people that are most desired to work with the best partner, the most available friend to develop a future together with our existing tenants. That's what we strive to be.
spk19: Maybe not the biggest, but absolutely the best. Thank you. Our next question is from the line of Robin Farley with UBS. Please receive your questions. Robin, you may be on mute. Good job. Hi. Robin, your line is open. You may be muted.
spk02: Okay, gentlemen, I'll move on to our next question from John Misosha with Ladenburg Salmon.
spk19: Good morning.
spk04: Good morning. I know it's very much an offer and not a deal at this point but is there any impact to either kind of you know your in-place leases or opportunities either structural or kind of hypothetical from the proposed um exhibition of values by uh standard general just thinking that you have other kind of controlled tenants of standard general in the portfolio today matt do you want to opine
spk17: I think I'll pass to Brandon.
spk12: Yeah, I'm not sure we're in a position to really speak to the standard general offer for Bally's. Clearly, from the press release that Bally's put out, they have formed an independent committee. They've hired a banker. I suspect that they'll run that process, and to the extent we have an opportunity to be a part of it, I'm sure we'll try to be a part of it, but that process will take care of itself, and we don't have any inside knowledge into that.
spk17: Yeah, and the one thing I'll add is to the extent There is something there. The lens we look through is always going to be the same. It's asset quality, operator quality, four-wall coverage, credit support, and figuring out ways to get accretive spreads based on all those factors.
spk04: I guess is there anything kind of structural within the existing leases or agreements that would be impacted at all by that becoming a private entity as opposed to a publicly traded one?
spk12: No, I don't think there's anything structural in the leases that would particularly be a problem. I think that if it were to become a privately held entity, clearly the leases would remain in effect. And if we had an opportunity to participate in that, we'd try to bolster those leases. But I don't think it changes the structure of the lease by the nature of the owner.
spk04: Okay. And then as you think about, you know, potentially working with existing tenants to deploy capital and properties you already own, Is there any kind of cap rate advantage you kind of get in that deployment versus maybe de novo transactions, especially we've seen kind of cap rate compression in de novo transactions? Or are you kind of competing, frankly, with alternative sources of capital that your existing tenants can access to fund those improvements at properties?
spk18: You know, that's a fair question, an interesting question. The answer is yes, I think we can do better. And in almost every case, there are reasons why under-existing leases be very difficult to go elsewhere. In other words, there'll be a trade-off of some sort. We'll give you X, you may want Y, and it'll be a discussion. So I don't have any fear that a transaction like that could go elsewhere, because clearly it's going to take a discussion and a trade-off of some sort. So I just kind of leave it at that. But, yeah, it would be almost impossible to go elsewhere.
spk04: Yeah, I would add.
spk10: Maybe, this is Steve, real quick. Maybe what I would add is I think that the tenant typically looks at it with a different lens. For example, if we own a casino property, we own the land and the building, they're deciding, they're thinking about adding a hotel. Well, at the end of the lease, I still own the land and the building. So, in many cases, as simple as it may seem to just say, well, they can borrow at X rate and I might offer Y, and they should just pick the lower of the two, in many cases, the psychology of it all changes because they know they're leaving it behind at the end. So, they're going to either fund it maybe potentially cheaper with a bank loan, but at the end of the day, I get it because it's on my property. I'm not going to pick up and move the hotel they just built. So ultimately, in many cases, they might look to use our capital in a more advantageous way for us.
spk17: And, John, this is Matthew. I'd also point out, so your latter point about them comparing our capital with other sources of capital is relevant, but the other side of the equation is other potential uses. And we've watched equities for some of the operators get pressured to the point that they've instituted share buybacks. So if there's an incremental dollar on their balance sheet and they can use it for either buying back their shares at a very opportunistic price or putting it into a building, our capital may fill an interesting gap there. Okay.
spk02: That was all very helpful, and that's it for me. Thank you very much. Thank you. Our next question is from the line of Spencer Alloway with Green Street. Please proceed with your questions.
spk08: Thank you. Just on the digital gaming front, it seems as though the operators are in an arms race to gain market share and customer acquisition costs appear high. That said, Penn does seem to have some sort of advantage with its captive audience from its partnerships. Just curious if you can comment on how you view this playing out over the next couple of years.
spk18: Well, it's kind of hard to know. I mean, we have no insight whatsoever into Penn's thinking or philosophy other than and awareness that they decided to be very disciplined in marketing spend and claim or believe that they are profitable today. And that's been a goal, to get to profitability earlier. That's all we kind of know. What the impact on the bricks and sticks operations will be, time will tell. I do know, for example, near to us, they just opened a facility recently a couple months ago in Morgantown, Pennsylvania, right down the road from our offices, probably 15 minutes away. The sportsbook presence and so forth has been pretty successful in attracting customers to that facility who then play on our bricks-and-mortar facility. So what the overall impact is likely to be, I think it's going to be positive, but I think it's going to take some time to really understand where that's going.
spk12: I'll just add, Peter, you know, we have seen a lot of investment in our properties by our tenants in expanding and building sportsbooks to attract customers into the facilities. And I think if you look at the product that the Cordish team offers, you know, they really offer a fantastic product of a sports bar atmosphere where, in many instances, I think you'd probably agree it'd be better to be there than in the stadium with a 80-foot wall TV and food and beverage. And so I think what sports betting has done as it's spread across the country is it has resulted in quite a bit of investment in our portfolio assets.
spk18: The Cornish people have gotten this down better than just about anybody else on the planet. Their live facilities, not even gaming-licensed facilities, are hugely successful because they're so exciting. They're physically, as Brandon points out, scaled down. big-time and beautifully done. And they just are very attractive to new customers. So, I mean, I think this is evolving. But for the casino companies, I think it's a plus. I know early days at Charlestown, when they opened up early the sports betting, it was very successful in attracting new customers, mostly male, who would come and play tables in addition to what they came to do with the sports betting. So I think this is a symbiotic arrangement. It's not been a net draw. It's actually been a net plus for the company. We'll see where it goes, though, for the future.
spk17: Spencer, this is Matt. Sorry, Spencer. I'd also point out the theme over the next number of years may likely be convergence as well when you think about the sports-based placemaking that Peter and Brandon articulated, and the reality that some of the folks betting on their phones are in the casinos, but a lot are in other places, the likelihood, and there's some data that shows this, is that those people will enjoy making those bets and make more bets if they're in a fun, exciting environment like some of the ones that Cordish develops, creates, and manages. And that's something that we certainly are thoughtful about, and it ties into David's questions earlier, too, about thinking about what our strike zone is and how things might play out over time with the kinds of properties we think make sense for us. Okay.
spk08: Yeah, no, we would agree that it would be additive, but really appreciate the insight, especially at the property level. Just last one for me. As you look, you know, towards the future and you're signing new leases, has there been any consideration to have uncapped CPI length escalators? Just give me inflation concerns around long duration leases.
spk18: I would suggest this. I mean, I can't imagine anybody in the current environment who is a tenant prospect signing an uncapped CPI. I mean, you'd have to be out of your mind to do that. I know I wouldn't, and I suspect nobody on this call would do it either. You know, it's so dangerous in the current environment. Would we love to have it? Absolutely. But I think we'll walk a tightrope and try to get as large an adjustment as we can. But the uncapped, I think, just isn't going to happen. I'd be shocked if anybody went for that these days. I don't know how you could.
spk17: Spencer, it's Matthew again. I'd say it's a top consideration. At the same time, you've got, interestingly, in these last number of deals, look at MGP's new lease reset or lease, realty incomes lease, there's caps that have certainly crept into the market that have become market. But I want to point you to a couple of points that Realty Income made. And even with 175 fixed, which is what they have for the initial term of their lease, and the same as in our lease with Cordish, even at that rate, it compares incredibly favorably to the standard triple net escalator, which is a lot closer in their case, I think, to 1%. So the fact that we're not fully capturing inflation is true, but in the other direction, there certainly is a case that we're doing a lot better than a lot of the other leases in the triple net world. The other thing I want to point out when you think about our company and our shareholders and our risk exposure there is the fact that I'll point back to this long-dated staggered maturity debt schedule. So one thing we've been very focused on with new debt issuances is to not go short even if we had cheaper capital. So we've skipped over three-year, five-year, and we actually did 100% 10-year debt on our last issuance In fact, we even thought about a 30-year bond, but market volatility ticked up into when we actually were able to hit market, which was we had a thread and needle based on Cordish's timeline and wanting to get done by the end of the year. But that's something we're going to continue to focus on and matching better the duration of the cash flows from our income stream, which you point out are very long-dated with very strong credit, and the credit on our balance sheet.
spk19: Okay. Thank you. Thank you.
spk02: Thank you. The next question comes from the line of John Decrete with CBRE.
spk14: Pleased to see you with your questions. Good morning, everyone. Thanks for taking my question. I think you covered a lot of ground, but maybe one more. Peter and one of your peers talked about possible international gaming opportunities and then in the context that maybe digital gaming and sports betting blurs the border a little bit between the U.S. and Canada. Is international gaming something that you would consider seriously and kind of under what pretenses or how would you kind of evaluate those opportunities?
spk18: Well, we've looked at international for a long time. Look at my days with Ben. I could write a book on just how many places where I've spent time. Japan, of course, China, Vietnam, Portugal. I mean, I could go on a long list. Australia, keep going. I've been to all these places. You know, finding the right transaction that makes sense and then given exchange rates in Canada, it's particularly tricky. We just haven't found the right opportunity where we felt we could be competitive. Would we do that? Absolutely. Do we look there? You bet we do. So, look, we look at everything. I'm not being flip, but we look at everything. That's kind of our job. But, you know, kind of taking a Bible quote, many are called, but few are chosen. I mean, that's kind of the process.
spk17: John, a couple of the key guardrails for us are countries with judges with long black robes and property rates. We want to make sure that we can certainly collect our rent and have the ability to perfect any issues. And also, all the math we look at, to Peter's comments, is really net of taxes, translation, any explicit cost that would be involved in getting the cash out of the asset and ultimately onto our balance sheet. And then the same process takes place looking at risk-adjusted cash flow and how it impacts the company's value.
spk14: Thanks, Matthew. That's helpful. Maybe one more, and you'll probably know the answer here, Peter, Matthew, but I think you spoken to potential opportunities with Native American tribes in their push into commercial casino. Obviously, reservation gaming is about half of all gaming in the U.S., and very tricky there from a regulatory perspective, but if there's a creative way to get involved, perhaps on the non-gaming side where there's adjacent hotels to Native American casinos, have you had any of those Is there any movement on that front, or is it just too tricky to get anything done, given all the restrictions as it relates to gaming?
spk18: It is very tricky. We've looked hard at it for many, many years. But I will say this. I think that the opportunity may be evening up now for a variety of reasons, and that is the tribes becoming more commercial in many, many markets. That opportunity may now be more open and just kind of leave it at that. But, yes, of course, we're very aware of that.
spk14: Yep, just a massive part of the U.S. gaming industry. So, you know, curious how long or if and how we can start the crossover. So I appreciate the thoughts, everyone. Thanks so much for taking my questions. Thank you.
spk18: By the way, this call, I just look at it at the clock, sets an all-time record for either my many, many years with Penn or here at GLPI. Why don't we take maybe just one or two more questions, and then we'll wind up.
spk02: Sure. The next question is from the line of Daniel Adam with Loop Capital Markets.
spk15: Hi. Thank you, and good morning, everyone. Just one question for me. So yesterday, one of your competitors alluded to being open to embracing a joint venture structure for certain deals should they arise. I'm wondering if you've considered that kind of structure, and under what circumstances might a joint venture make more sense than going at it alone? Thanks.
spk18: That's a pretty fair question, and the answer is we spent a lot of time examining that possibility. I don't know what we're prepared to say. Matt, do you want to make any comments?
spk17: I think that is the comment. Obviously, for us to have every tool in our tool chest, we need to be able to access capital and get some value for our platform and our validation in a transaction where pricing might be aggressive. So we haven't done it to date, but we certainly have dialogue with the right folks if and when it's appropriate to be able in a position to use it.
spk19: Okay, great. Thank you. Yeah. How about one more question?
spk02: We have no additional questions at this time. Mr. Carlino, would you like to make some closing comments?
spk18: Well, simply to thank those who have dialed in this morning. We're excited about what we accomplished last year. We're particularly excited about the things we believe are going to get done this year. It looks like another strong year. So we'll look forward to talking at the next quarter. And thank you all very much. Thank you.
spk02: This will conclude today's conference.
spk18: May it disconnect your lines at this time, and we thank you for your participation.
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