Gaming and Leisure Properties, Inc.

Ladies and Chairman, good morning and welcome to the Gaming and Leisure Properties, Inc. First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joe Jaffoning, Investor Relations. Please go ahead, sir.

Thank you, Ryan, and good morning, everyone, and thank you for joining Gaming and Leisure Properties' first quarter 2024 earnings call-in webcast. The press release distributed yesterday afternoon is available on the Investor Relations section in 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 the risk factors and forward-looking statements contained in the company's filing with the SEC, including the form 10-K and 10-K. and the earnings release, as well as the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release. On this morning's call, we are joined by Peter Carlino, Chairman and Chief Executive Officer at Gaming and Leisure Properties. Also joining today's call are Brandon Moore, Chief Operating Officer, General Counsel and Secretary, Desiree Burke, Chief Financial Officer and Treasurer, Steve Ladney, Senior Vice President, Chief Development Officer, and Matthew Demchek, Senior Vice President, Chief Investment Officer. With that, it's my pleasure to turn the call over to Peter Carlino. Peter, please go ahead.

Well, thanks, Joe, and good morning, everyone. As usual, let me call your attention to my written comments in our release, which highlight that this has been a steady quarter for us during which we strengthened our balance sheet, in anticipation for what we would hope to deliver through the balance of this year. In the last paragraph of my comment, from which I'll briefly quote, in 2023, we completed over $1.1 billion of transactions, including over $760 million of traditional real estate acquisitions and $337 million of loan funding commitments. The overall 2023 transaction value, despite a challenged market environment, reflects our creativity in creating comprehensive financing solutions for our tenant partners. Our 2023 addition set the stage for financial growth in 2024 and beyond. So that I can say that, look, we're – We're now working on a number of transactions, both small and larger, and I think most of you recognize that what we do is highly complex, and it requires a great deal of careful structuring and often regulatory approval. Nonetheless, we expect that our performance will level out acceptably well, as it always has over the balance of this year and beyond, so we feel pretty good about that. final gratuitous comment I'll throw in that as a large shareholder, I couldn't be more delighted with the growth in our dividends over these last years and our announcement this quarter as well. So with that, I'm going to turn it over to Desiree Burke to make some comment. Desiree.

Thanks, Peter. And good morning, everybody. I'm just going to highlight for the group what's happening in our income statement for the quarter. For the first quarter, our total income from real estate exceeded the first quarter of 23 by over $20 million. This growth was driven by the Tioga acquisition, which increased cash rental income by $2.2 million, the Rockford acquisition, which increased cash rental income by $3.1 million, the Casino Queen Marquette acquisition, and the Baton Rouge Landside Development, which increased cash rental income by $2.3 million. the recognition of escalators and percentage rent adjustments on our leases, which added approximately $3.5 million of cash rent, the combination of non-cash investment and lease adjustments and straight line rent adjustments, which drove a collective year-over-year increase of $9.4 million. As far as operating expenses go, they increased by $30 million, but that was primarily due to a non-cash increase in the provision for credit losses. Our Penn amended Pinnacle and Boyd master leases have rent resets that are occurring on May 1st of 2024. We continue to expect that these resets will result in increased percentage rent adjustments of between 4 and 5 million dollars annually. In addition, we expect to receive full escalation on these contingent escalation leases, which will result in 6.5 million of additional rent annually. Finally, the amended pen master lease is subject to continued escalation as well on November 1st of 24 and if obtained in full would result in 4.2 million of annual rent. Included in today's release is our AFFO guidance ranging from $3.71 to $3.74 per diluted share in OP units. Please note that this guidance does not include the impact of future transactions. We have invested in a zero-coupon six-month Treasury bill that was 2% in August of 2020 for an M5 deal of 5.32%.

So in addition to that, the

Our rent coverage remains strong, ranging from 1.98 to 2.71 in our master leases as of the end of the prior quarter. With that, I'll turn it over to Matt for comments.

Thanks, Desiree, and thanks, everyone, for joining us this morning. Our focus on stability and dependability continues to show in the consistency of GLPI's cash flows and the solid four-wall coverage across our leases. Our business model is built to navigate business cycles, including economic and interest rate volatility. History suggests that heightened volatility often leads to opportunity for those who are prepared. At GLPI, we have worked hard to prepare. Our leverage and liquidity are at levels that strengthen and support our business model. We've got normalized debt to EBITDA in the mid force, a staggered maturity profile, our next unsecured maturity not due until mid next year, and significant available liquidity between a revolver and quarter end cash position. We have positioned the company to have optionality on incremental capital sourcing for transactions as they arise. Our track record of creativity makes us an ideal choice for counterparties who would benefit from bespoke financing solutions. Our partners want not only to solve their current needs but also to have a partner who can predictably continue to meet them well into the future. We've always been a dependable capital partner, and in the current backdrop, the value of that dependability has gone up. As potential counterparties need to do things, we are here, ready for them, willing and able. We are focused on closing opportunities to prudently deploy our shareholders' capital. I'll now turn the call back to Peter.

Thanks, Matthew, and thanks, Desiree. I think you all have a pretty clear picture of who we are and where we're headed. So with that, operated with you, please open the floor to questions.

Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from the line of Greg McGinnis with Scotiabank. Please go ahead.

Hi, good morning. This is Elmer Chang on with Greg. If you look across the regional markets at the property still owned by gaming operators and those that want to expand still, what is the realistic investable market size that would still meet your desirable investments criteria? And maybe the real estate is desirable, but initial accretion is limited. So how much are you willing to give up on initial cash yields for potentially better growth? from rent escalators?

I don't think there's any shortage of opportunity, if I understand the question correct. We see a horizon of some pretty, I hesitate to say juicy, but good opportunities with partners and others that we have on the drawing board on a constant basis. But let me ask Matt to opine on that. answer. Sure.

I mean, when you think about the opportunity set, I'd really think of our job as figuring out structures and ways and approaches to make most every asset work for us. Remember, we've got master leases and we've got a lot of other structuring tools in our tool chest that have consistently made us really high quality cash flow. Every one of these deals tends to be, at least the ones we do, directly originated and with a lot of accommodations for solves on the other side. So I think of most all the assets out there over a long period of time as part of our opportunity set. The big question is what the catalyst is on the other side for someone to do something. And right now, there's different buckets. If you have someone who's rolling up assets, developing assets, maybe redeveloping at large scale, There's a more natural opening for someone like us. And the reality that these assets generate a lot of cash flow means that that sense of urgency isn't necessarily there for everyone. And it's our job to be ready if and when it arises. The other reality is this year we've got a presidential election and the amount of volatility that could come up as we get closer and concerns around tax changes Maybe that's another bucket to think about. I mean, that's where the Cordish deal ultimately came from.

Got it. Okay. It makes sense. And, and I guess speaking, being of catalyst for, uh, uh, an operator to do something, I was given, given recent valleys news of, um, you know, the credit rating being downgraded as a negative outlook. How have conversations changed, maybe around the potential investment opportunities, both new and those embedded within the pipeline due to the tighter financing environment?

This is Steve. I'll try to take a shot at that. So I think separate removed from VALY's, though I would include them in this comment, I think all of our counterparties, whether they're current tenants or potential tenants in the future, I think all of our counterparties have seen the increased debt costs last longer than I think they maybe had hoped for or at least anticipated. And I think as time has worn on and the hopeful desire for rates to be back to a much lower level has somewhat dissipated. I think people have started to come to more of a realization that higher rates might be around longer and therefore it has started to kind of somewhat reset the way potential sellers have thought about cap rates. Now, don't run with that in that I'm not saying that people have immediately have immediately pushed themselves from an expectation of 7.5% to 8.75%, but I think we have seen people become a little more realistic with respect to pricing expectation, and it has meant that cap rate expectation has started to move higher. Got it.

Okay.

Thank you. Thank you.

Thank you.

Our next question is from the line of Ronald Camden with Morgan Stanley. Please go ahead.

Hey, just two quick ones. Starting on the pipeline, commentary about doing a billion one last year, which is roughly 70%, 75% traditional versus sort of funding commitments. Maybe as you're thinking about the pipeline going forward, is that sort of the right mix of opportunities? How is that sort of evolving and so forth?

I guess a smart answer is we'll let you know when we get there. But, look, this is so completely unpredictable, as I made in my introductory comments. We're looking at some modest deals. You know, I call them inflation fighters. And then we're looking at some larger transactions as well. And I think that's kind of the way it's always been. We've managed to scrounge something out of the woodwork year in and year out, and we expect it's going to be more of the same. So the fact that this has been quiet through the early part of 24. I shouldn't suggest for a moment there isn't a ton of stuff going on here. Somebody here around the table, and I don't remember which of you all, had noted the analogy. It's sort of like a little duck going across a pond. It looks smooth and effortless, but down below the water, he's frantically paddling. We're always frantically paddling here, so I'll stick with that answer.

Great. My second one If I may, on the guidance, maybe just high level, can you talk about any moving pieces between NOI, interest costs, looks like the Treasury investment, how does that impact the guidance? And also, if you could talk about the Lincoln asset and an update there. Thanks. Okay. That does.

From a guidance perspective, we use the SOFR curve while we're looking to estimate our high and low end of our guidance. And that is our largest moving part as well as the fact that we have the preview announced transactions for Rockford and the timing of the funding of that transaction. So it impacts the high and low end of the guidance. And then as far as values, again, I don't think we have any new information to provide at this time. We still have our option out there, but we don't have any information to know when they might actually be able to sell us that asset.

Great. Thanks so much. Thank you.

We do have a question coming from the line of Todd Thomas from KeyBank. Todd, could you please confirm if you've asked your question?

Yeah, hi, good morning. Can you hear me okay? Yes, we do. All right. first question uh just uh brandon matt you know i just wanted to go back um if we could real quick to some of the commentary around asset pricing and you know i'm just curious as as you know you you look ahead and and look at you know kind of what you're you're seeing out there underwriting in the pipeline uh you know whether you know you would expect to be deploying capital at higher yields than you know, say the 8.3% for Tioga as you, you know, you sort of look ahead assuming the environment does not change from here.

I'd say more broadly that's, you know, each one of these deals is so unique and it's really hard to come up with a homogenous answer. I don't know that rates have changed in the last few months based on some of the volatility, but I also think that level represents what's possible in an environment like this. And unfortunately, you'll have to see some headlines to see where we kind of land things with folks. We always try to get the most possible, but obviously there's a negotiation in two sides of it that get us to the finish line.

Yeah, this is Steve, and I think last quarter I didn't pull the notes to see what I said, but I think I said something along the lines of I don't expect to see deals north of 9% cap rates, and I don't expect to see deals south of 7%. And I think that reigns true at this point, and I think everything else Matt said is spot on.

Okay. Does the more recent backup in rates, does that impact plans at all regarding, you know, either, you know, sort of redevelopments or expansions that you and your operator partners have maybe been contemplating in any way, either, you know, sort of activity levels altogether or timelines?

I think that backup and rates actually increases the amount of dialogue we have with some of our partners. Obviously, as you would assume, when they're contemplating a capital improvement at an asset that we own with them and lease to them, they have a couple of pockets to take cash from or seek cash from for those projects, and one of which is borrowing costs. if we go turn back the clock a few years, the borrowing cost was always significantly inside of whatever cap rate we could offer from a financing perspective. That's no longer the slam dunk that it used to be. And so I think we've seen an increase in dialogue. And I think that will continue as we move forward here.

Yeah, Todd, one of the interesting dynamics we've seen playing out or are seeing in real time with the Fed not cutting as people might have expected is we've got an inverted yield curve. So people that are borrowing short based on SOFR, uh, our permanent capital on sticker price is a lot closer to what they might be thinking about or better than that versus an environment where we're quote unquote, a little more normal.

Okay. Uh, that's helpful. And just lastly, um, Desiree, You know, what do you do with the funds from the zero coupon fee bill at maturity? And what's the rate that you're earning on cash relative to the 5.32%? You know, I'm assuming it's relatively close, but what's assumed in guidance with those funds at maturity?

So at maturity, we're going to use the funds to repay the $400 million bond that comes due on September 1st. The 5.32 is very close to what we get for our normal cash deposit. Right now, we're at like 524, I think. That number changes by the day, though.

Right. Okay. All right. Got it. Thank you. Thank you.

Thank you. Our next question is coming from the line of Barry Jonas with Truist Securities. Please proceed with your question.

Hey, guys. Good morning. Let's talk about the competitive environment you're seeing out there right now for deals. Is it kind of the same faces or any new players out there? Thanks.

You know, I never think that we compete with anybody, frankly. The reality is, yes, sometimes there are other players around a particular transaction, but Matt coined a phrase a couple years back that most of our transactions are bespoke, where we discuss or find a way to provide something special, different, more effective in the aggregate to a particular partner. And I think we've done that. We're not always the, quote, cheapest. It's certainly not our goal. I used to say I never wanted to be the winner at an auction because the winner often loses. It's just not our goal. What we seek to do is find transactions that give us a spread. It's not real complicated to our cost of capital. And so far, we've been able to do that in any environment. So each transaction is unique. Each of our partners has a special desire. And plus, I'll add one other suggestion, too. In a recent discussion we had with a tenant, they do business with us because they like us and they have confidence in us and we have a good reputation of being a good partner. All that figures into it and it's more than just dollars and cents.

Got it, got it. And then maybe one for Desiree. I get it's non-cash, but can you provide more color on the change in the allowance for credit losses? Just try to understand if there are any wider ramifications down the road here or it's all just accounting. Thanks.

So, you know, that number is very volatile, and this quarter in particular, it was more the macroeconomic environment and assumptions around the commercial real estate index and where that is heading that caused the charge. I would say it's more accounting than anything. It has nothing to do with performance of our properties that are in our investment and financing lease line, which requires the reserve.

Great. Thanks so much, guys. Thank you.

Thank you. Our next question is coming from the line of Daniel Juliemo with Capital One Securities. Please proceed with your question.

Hello, everyone. Thank you for taking my questions. The first one, you all have a well-diversified portfolio with around eight public and private operator tenants, and I'm sure you guys are talking with them on a regular basis. I'm just curious, in those conversations, are there broader themes that they're all thinking through, or is it kind of a mixed bag?

Steve, what do you take that?

Sure. Look, I think that each company is in a different state, so I think they are similar themes as far as operating efficiency focused and expansion of their properties to drive additional revenues. Those themes are consistent. Where they start to deviate is some of the tenants are a little more focused on growth by way of maybe new jurisdictions that are opening up. Some are focused more on online platforms and things of that nature. So each one has a specific focus that's kind of taking some of the timeshare from them. But overall and overarching, they're all focused on the brick and mortar business. generating additional cash flow and ultimately, you know, paying our rent, which is what we're most focused on as well.

Okay, great. Thanks. And the next one's a little bit more like modeling focus. So we've talked about the dry capital powder you all have. And just thinking through, you know, the cash outlays for the next few years, should we be putting that capital to work as like potential development projects, acquisitions, a bit of both. We don't have insight into the so-called inflation fighter deals, so just want to give you guys credit there. Yeah, any insight there would be helpful.

I'm not sure what we can say. I'll maybe turn that over to Steve for a moment. Look, it's all the above. We expect to be doing all those things, large, small, development, property acquisitions, everything.

And I think everything... And that list is on our plate right now. Yeah, I don't know if I can give you any better insight, obviously. You know, the transactions, as Peter's opening remarks commented on, you know, these are complex transactions that do take time.

And even if I told you everything that I thought in my head that I sit here today and I think could possibly happen, I know for a fact some of that's never going to happen. And other things that I don't know about today are going to close. So it's very difficult for me to give you precise advice on how to best forecast us going forward.

Okay, thanks. I appreciate it.

Thank you. Our next question is coming from the line of Smeets Rose with Citi. Please proceed with your question.

Hi, thanks. I wanted to go back to something you talked a little bit about on your last call where working with kind of generational owners who are looking to efficiently pass along wealth and, you know, take advantage of tax structures, et cetera. And I'm just wondering if those conversations are kind of alive and well, and have they changed at all? With the upcoming election that Matt mentioned at the beginning of the call, some of those tax rules will supposedly expire next year, depending on who's president. I'm just wondering if there's any more urgency or if people are kind of waiting to see who comes in.

Yeah, in my discussions and experiences, I think that the urgency that we saw last go-round has not kind of picked up. Again, at this point, so there were there were some discussions, which, which definitively were significantly more interesting heading into Biden's election and focus around potential changes that could happen there. I think this time I haven't heard the same dialogue or rhetoric coming from the counterparties. I also think in many cases these aren't folks that are going to be impacted by a small change in the inheritance tax threshold or something of that nature. These people have significantly more wealth that's already been planned for and things like that. So I think in many cases it's a matter of understanding from the state planning perspective where they're at, where things lie, And then, honestly, it also matters what their health is like, because let's be honest, a step-up in basis is a different and more interesting concept if you think it's something that might come to fruition in the near term than something that's further off. So these are all ongoing discussions. There's no specific point in time that's caused people to jump, but it's constant front of mind for people and it's an avenue that I think we can continue to pursue going forward.

And Sneed's Tioga is an example of something that came from that kind of bucket, if you want to think about it that way. And as Peter mentioned, it's a situation where someone wanted to work with us specifically, And we got risk adjusted returns for our shareholders that were, we'd argue better than market based on the structuring and all the other things we bring.

Okay. Thank you. And I just wanted to ask you, you know, you talked a little bit about Valley sort of broadly, but I mean, are you, would you be interested in being kind of a solution to their problem? I mean, they've talked about needing financing to complete their Chicago, the permanent casino there. I mean, is that something that you would, A road you'd be interested in going down, or maybe you can't say, but I'm just curious for your thoughts.

I've been looking for an opportunity to get Brandon more involved. He's been sitting here silently. So, Brandon, we're going to dump that. We all have answers.

I was perfectly comfortable here leading into that question. Look, I think the Chicago project and Chicago market in generally is a complicated analysis. And I think we are, you know, we are in dialogue with valleys and all their, all the projects and things are working on. And if Chicago is something that turns out to be in our estimation, good for our shareholders and a good opportunity to, Based on the build, based on the market, I wouldn't rule it out as something we would consider investing in. I don't think we have enough information today, and I don't think we're far enough along in that to say that we definitively would or we would not. But I can tell you that we are looking at it. That's about all we could say on Chicago. Okay. Okay. Fair enough.

Thank you. Okay. Okay. Appreciate it. Our next question is coming from the line of Jay Kornreich with Wedbush Securities.

Please proceed with your question.

Hey, good morning.

Can you highlight the timeline you see for funding additional ROI opportunities of properties within the current portfolio, such as the amended tenant lease and the casino cream market debt?

Do you want to take that, Brandon?

I can. I don't think there's really been any change in our anticipated timeline of the funding of those projects. We still anticipate that Penn will probably fund their projects off their own balance sheet to start those projects. And at some point in that process, they'll look to us for funding, maybe closer to the end of that process. That being said, with the way the markets have been, depending on where they are, they could knock on our door and ask for funding sooner. But at this point in time, we're not expecting any change in that. And I think Marquette is a similar timeline. I'm not sure where they stand in permitting and the things they're working on there. It's a much smaller cash outlay. But I think we'd expect that probably to begin in the latter half of this year.

There's a number of those opportunities that we're looking forward to. And in one sense, we take some comfort in knowing that they're out there, they're likely to occur. And, you know, we need something on our dance card down the road. And we expect lots of opportunity to unfold in near time.

Okay, I appreciate that. And then just as a follow-up, following the development funding for the Hard Rock Casino in Rockford, are you seeing additional opportunities for new casino developments around the country? And if so, what is your level of interest for being involved in those more speculative but higher interest construction financing opportunities?

Well, our interest is very high, as you might guess. Look, we're skilled casino developers as well. We bring that skill to the table, understanding markets, understanding cost. We've built a ton of casinos around the country. I've got that same team right here at GLPI. So we're well equipped, and you can assume that if it's – I used to say on the pen calls when I was over there, when questioned about are you looking at this, are you looking at that, My answer then and now is if it's alive and breathing, you can imagine we're looking at it.

Okay. Appreciate it. Thank you.

Thank you. Our next question is coming from the line of Handel St. Just with Mizuho Securities. Please proceed with your question.

Hi. Good morning. This is Ravi Vaithee on the line for Handel. Hope you guys are doing well. You have some percentage rents coming up here for the Penn Pinnacle lease and the Boyd lease. Can you give some color as to how those assets have been performing? Yes.

Yes. I think in my opening remarks, I mentioned that the Penn Pinnacle and Boyd Master leases rents, resets that were occurring this year, we're still expecting $4 to $5 million of an increase. Additionally, we're expecting to get the contingent escalation

on those leases as well and that would result in six and a half million dollars of escalation got it and uh just one more here you know but we've been trapping tracking foot traffic data and other metrics like that and notice that there's been just broadly across gaming there's been a bit of a decline in in football um what have you been noticing across your portfolio and have you seen anything impact uh rent coverages

No, I mean, in our earnings release, we do provide the latest rent coverage that we've been given by our tenants, pages 12 and 13, but they are still extremely strong. Our lowest rent coverage is at 198, and our highest on the master lease side is at 271. So some have come down, some have actually gone up. The 198 on the Penn lease was 195 last quarter, but, you know, Even the ones that are going down, it's small, a few basis points, not anything large at this point. But as I stated, those numbers are as of December 31st. We are on a quarter lag to receiving the rent coverage, and certain properties haven't reported yet. So they are as of December 31st. So the first quarter, we do understand there were some weather issues at properties, but we don't expect significant changes in our coverage.

But have you seen foot traffic down at your properties?

Yeah, we don't have any properties to see foot traffic, you know, so we have to rely on the same things that you all do, which is when our tenants report.

Yeah, we get no non-public information, none, zero. So we get it as you get it, frankly. Understood. Thank you. Thank you. Thank you.

Our next question is coming from the line of Chad Bainon with Macquarie. Please proceed with your question.

Morning. Thanks for taking my question. Wanted to focus on Vegas, I guess Clark County in general. A few operators opened up in the fourth quarter, one in the Burbs and then one on the Strip. Can you just update us in terms of your appetite in conversations in and around Las Vegas? Thank you.

Well, I guess you're, of course, asking about the TROP project or the broad commentary on what's going on in Las Vegas. I don't know. Steve, why don't you take that one?

Yeah, I'm not sure if he was asking about the TROP counter or not. I'm sure that'll be the Part B question. But from a Part A perspective, you're alluding to Fountain Blue and Durango. Look, I think from a casino property that's currently constructed and operating, mature assets, et cetera, new assets, I think we continue to have an interest in not only Las Vegas, but in downtown and in locals' markets. Obviously, we're anxiously watching the performance there. Obviously, Boyd reported last night, and we'll see Red Rocks information as Durango continues to mature. So we're anxiously watching that. We're interested in those markets. It's an area where we don't have as much exposure. We have the M Resort area. But, you know, we continue to have an interest there, and we'll continue to be active if opportunities present themselves.

Thank you for that, and sorry for the confusing question. Separately, you know, the past couple years, the IPO markets have been pretty quiet. It looks like there's been a couple in the past couple weeks. Not sure if that continues, and this is kind of the green shoot moment. When markets are busier, how does that impact conversations and kind of pricing that you have with public or private tenants? Thanks.

I personally don't think that the – I don't think whether the IPO market is hot or cold or is all that relevant to our space as far as acquiring casino properties from operators. I think that may drive operators to consolidate or a private operator to pursue acquiring or reverse merging into a public if in fact the IPO market's not there for them. And there are a number of smaller gaming operators that exist, but we talk to all those parties as potential tenants of ours. And we talk to private guys as well. So I think from a real estate acquisition perspective, I don't see the equity markets availability or lack thereof to the tenant to be a driver of our market or our acquisition pipeline.

Great. Thank you very much. Appreciate it.

Thank you.

Thank you. Our next question is coming from Robin Farley with UBS. Please proceed with your questions.

Great. Thanks. Two questions. One is just I think that this has been a couple quarters now that you've increased the provision for credit losses. Has it has it pretty consistently been what you're saying where it's just sort of the formula that you use for that and and nothing related to performance in in in the sort of And then Also you I think you kind of addressed this question, but you talked about number of potential transactions small and large do you have the

um, capacity or desire to, um, do all of them or are you, are you, could we see, you know, multiple, you know,

looking at potentially not precluding everything else.

That's the way to ask it.

Yes, why don't you take the first part?

Robin, I'll start. On the provision for loan loss, actually last quarter we had a reduction of the provision for loan loss, believe it or not, based on the macroeconomic assumption. So And again, I will reiterate, this is all macroeconomics. It is not specific to our individual leased properties. The rent coverage is still very similar to where it was last quarter, and it's not driving this provision for loan loss. It's completely macroeconomic, and it moves in all different directions, which is why it's a non-cash add-back to AFFO for us.

If someone else wants to... To the second question, would we limit what we do?

We'll never pass up, if we can do it, any good transaction, which means a proper spread to our cost of capital. Large, small, everything in between. And we're looking at various scales now. So I think we need to find a way to do that. to do anything that we think is good for the company, good for shareholders, that hasn't changed. And that's one of the reasons why we've kept our balance sheet strong so that we could go back quickly if need be. So we have a lot of capacity. We are hungry as hell. We would do anything that makes sense. Okay, great, thank you. Thank you. Thank you. My next question is coming from David Katz from Jefferies. Please continue with your question. Hi, everyone. Thanks for working me in. I appreciate it. You know, covered a lot of ground already, but I want to go back to the Is it a doc reference? Because it does seem as though And, you know, I think you're suggesting that it may not be. But my question is, you know, what are the sort of key barriers to things getting done? Is it cost of capital? Is it underwriting? you know, something else. And if it's a combination of all of the above, you know, help us maybe apportion what the headwinds are to seeing some more announcements and more things getting done. Because it's not just in gaming. It's, you know, in all of hospitality. Thanks. I don't know how we feel. let others opine, but I don't know that we feel any headwinds. Really, it's just normal complexity of timing, when does our prospective partner

want to affect a transaction, how it gets structured. If it's a development project, we may need a lot more information. These things take time and unfold over time. So, no, I don't think we feel any particular headwind. There's a lot of stuff, and I'll stick by my pathing fast.

illustration because we really are running a number of things and some that we expect to unfold over the months. Anybody else around the table want to? I've got some heads shaking here, so that's it. But go ahead. So, look, what I wanted to follow up with is, We've had definitely a perspective change on the cost of capital, right? I think 90 days ago we would have expected a downward bias in interest rates. That may be a little less, you know, the case. Is that true? you know, more or less of a problem, or are these just more substantial than anything else? Well, it hasn't been so far, but... Right.

You're absolutely right. I mean, the expectations on the rates have obviously come in. And they are not, you know, we started the year with five rate reductions, and then we went to three. And now this is probably one later on in the year, in December possibly.

But, you know, look, we price each transaction with an increase. and we base that off of specific financings and as we stated We've gotten our balance sheet ready for some of these acquisitions, and we've raised capital and better markets than where our current price is trading today. So I guess to answer your question, we consider all of that work of where the reefs are going and we still believe we can get accretion and transactions complete. We take a multi-year approach to thinking about the balance sheet, David. So,

When we think about our leverage level, it took us a while to get where we are.

And now we've got full optionality when we think about fundamental fundings. So we've worked hard to reduce friction, capital raising, reduce cost of capital raising.

And to Robin's question, if we have something of scale to do, we're very confident we can reduce capital because we

We are so disciplined and people appreciate that in the way they step up and we actually raise capital for folks. Got it. Thank you very much. Thank you.

Thank you. Our next question is coming from Caitlin Burrows with Goldman Sachs. Please proceed with your question.

Hi, everyone. Good morning. Just a quick one. Peter, back in the beginning, you mentioned the growth in the dividend. So I guess with the yield as high as it is now, I'm wondering if you or someone could talk about how you think of the dividend decisions to increase it and the outlook going forward. Like, do you expect it to track AFFO growth or anything else we should keep in mind?

I'll let Desiree take a whack at that. I know. distribution requirement that we monitor.

As we do acquisitions, sometimes that affects the taxable income estimate that we have. when we have partnerships and we do some of the unit transactions, that changes the trajectory of our taxable income that we're estimating. But I do expect it, for the most part, should be driven off of AFFO growth.

Got it. Okay. That's all. Thank you. Thank you. Thank you. Our next question is coming from John with CBRE. with your question. Good morning, everyone. Thanks for taking my question.

Good morning. Thank you. Well, maybe I'll try to ask one that you've answered a few times, but a little differently, I think. In a recent question, Peter, you've mentioned that you don't really see any headwinds to getting deals done. So maybe to ask that differently, is there anything that you look to or look at you could see as a potential catalyst to perhaps stimulate activity? I guess we all have kind of focused on interest rates, but is there anything else that you see out there? It might get things moving a little bit more than we've seen so far.

Well, I'll reiterate. I don't know. The cost of capital has not affected. I'm looking around the table. Nothing that we've looked at done. so far don't see that as an obstacle going forward, at least for the foreseeable future.

Transactions that we're grappling with are all unfolding in normal time.

The challenge is, of course, none of these things move quickly. We thought You wouldn't know this because we couldn't announce it, but we thought we might accomplish in last year. But, you know, it takes time. It takes what time it takes. So that the nature of what we do is complicated. But it's the partner's desire to get something done.

I mean, for example, well more than a year ago, we announced the opportunity with Penn around Columbus, around the AM in Las Vegas or Henderson, and Aurora and Joliet and all those things.

But, you know, They're just now starting to happen. And it's just the business that we're in. These are big assets. Complex transactions.

But we feel pretty confident that we'll get our fair share going forward and we'll meet the kind of growth targets that you all are used to seeing.

Thanks. Peter, maybe a quick follow-up on a specific item that we're paying attention to probably most people. That is the casino industry. And everyone has absorbed quite a bit of OPEX cost inflation last 18 months. And, you know, interesting, Peter, given your history on the operations side as well,

The higher costs motivate the industry or casino operator to be able to look at the game, get the M&A, get the M&A, get the M&A. to reduce costs we see on the other side of this top X increase over the last two years as a possible motivator for more M&A among your partners? You know,

The quick answer for me is I haven't a clue of what they'd be thinking. I honestly don't.

We certainly, even Penn, we haven't any reason to believe that they're, and I think they are, proceeding the pace with all the projects that they've got, and they've got the longest list it's on our list as well. So do I think M&A is an answer? I don't see it, but I'm looking around the table to see if anyone has a different view. I think the short answer is what you said is we don't know. I think it could be. It could be an answer to some of what they have on their balance sheets and what they're looking at. It's not something we've seen, but it doesn't mean that it isn't. Fair enough. Thank you, everybody. Thank you. Thank you.

Our next question is coming from the line of Chris Starling with Green Street. Please proceed with your question.

Thanks. Good morning, everyone. First, just a quick clarification for Desiree. Regarding the percentage rent resets, Can you remind me, are those already contemplated in your guidance range, or does the current guidance range only account for the base rent escalation?

No. So the high end of the range includes the contingent escalators that I mentioned.

Okay.

And the percentage rent resets, they're both, they're all in there.

Okay.

And then maybe just more broadly for the group, probably one aspect I don't think we've covered is just how your own internal underwriting standards have changed.

And I ask, thinking not only to the last question about operating expenses, and kind of the growth they're in remaining a little bit stickier, but also what I think remains a pretty difficult backdrop for consumer savings, discretionary spending. So curious, you know, how your own internal and your own rising standards may have changed. What do you think about some of those factors?

Well, look, we're as rigorous as ever.

You know, any fool can do a bad deal.

We don't want to be on that list of foolish people. So we're pretty and how we consider what we're willing to do with our capital.

So I don't expect that we'll make any adjustment there at all. There was another nuanced here question I think I've forgotten.

I think we'll continue to focus on the rent coverage, and to your point on the OPEX side of things, I think we will make sure that, you know, you're not going to see us doing a deal that's, you know, sub 1.8 times rent coverage. And we have not done that historically, but I think even more we're going to be scrutinizing rent coverages to ensure that what we're looking at historically and in the last 12 months is what we would assess

and what we believe to be the forecasted performance going forward and into the future. So, I do think that's an area where you might see transactions is that we're gonna obviously have to make sure we're underwriting not only for the past, but for the future a little more carefully. Yeah, let me suggest that we're very, around our analysis and in a number of cases have and will continue to hire outside consultants to analyze a market. So the same way we would with

We were doing a project or an expansion or something ourselves so that we have as much third-party judgment as well. So it's – no, I can't emphasize it enough.

Nothing in the current climate has changed. Maybe down the road, but at the moment it's business as usual. Standards are the same. Yeah, I get it. Yeah, I think the current climate affects pricing and the way we think about it. And the way we think about pricing these deals is more so the effect of the writing process. So the process is the same. It's just the outcome can be a little bit different in how we price these deals. that we determine through that underwriting process. Okay, all comments. Just one last quick one, thinking about the rock anything new you can share in terms of the developers and intentions in terms of perhaps selling the property over time? With respect to this, or potential sale of the improvements, we have not had further conversations with them about that, and they have not expressed their interest to pursue those discussions while they're under So we have no update to provide on that. Okay, fair enough. The construction is going well. The things are going well. One time, you know, on budget. Yeah. Appreciate it. Thank you. The next question is coming from David Hargraves with Barclays. Please proceed with your question.

Hi. I appreciate your clarity on the rent coverage comments before those are useful. Lincoln came up in the conversation earlier, and I'm wondering if the Mashpee Wampanoag decision that recently came up How do you view that, and if it factors into your appetite for that transaction? Thank you.

Sure.

So, look, I think with respect to that decision, I think at this time, I think We'll see if that does ultimately come to fruition or not.

I think time will tell, and a lot depends on presidential elections and things of that nature.

Outside of that, I think that asset, Lincoln as an asset, is one that we've always had. as a property in that region. We believe that Bally's, as well as other operators, look at it as a premier property in that region and it's one that of course we would want to own.

We also own the Tiverton asset and Plain Ridge which are all in that area as well and so clearly we will be very closely monitoring what we think

the ultimate impact is to each of those properties. As we move forward in that area. Thanks. And then in turning to

I mean, the numbers have been so strong. I'm wondering if you had any insight as to sort of the timing of the Tropicana closure. And if you were consulted about it, were you running any of it negative? I wonder why now closing it, if you had any thoughts. Thank you.

Yeah, I'm going to let Brandon handle that. What was positive, so I think that the performance, I mean, this wasn't part of the long-term strategy for that person. Go ahead, Brandon, please.

I think that's right. It was positive, but in order to work backwards from the first pitch in the A stadium, I think you'd find that the closing of the Tropicana was pretty much right on time.

So that's been closed to make way for the liquidation of the assets and ultimately the demolition of the property, which gets a shovel in the ground in 2025 to begin the project and the integrated resort. But I don't think it was a matter of closing it early because to save costs and expenses I think it was a matter of on-time closure.

And with the employees in that market knowing that that casino was closing, I think Bally's would tell you they're having a difficult time keeping appropriate staff in there to keep that project open. So I don't think it was a function of it performing poorly. I think it's just timing of this project and process.

Okay, I might have misunderstood.

I thought the original plans had caused for keeping it open for a while. Maybe that would change. I had any expectation that it would be open any longer than what it was. Okay. Thank you. Thank you so much. Appreciate it. Of course. Thank you. I think we can take, Joe, one more question. Our operator. I apologize. We appear to have no additional questions at this time.

So I'd like to pass the floor back over to Mr. Carlino for any additional questions, including remarks.

Well, the timing is perfect. We're looking at our clock. And the end. The hour has so, look, we thank all of you who have joined us today and appreciate your interest and support. So with that, thank you very much. See you next quarter. Ladies and gentlemen, this does conclude today's talk. We thank you for your participation.