Gaming & Leisure Properties, Inc. Q4 FY2020 Earnings Call

Greetings and welcome to Gaming and Leisure Properties' Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded.

Thank you, Sherri and good morning everyone and thank you for joining Gaming and Leisure Properties' Fourth Quarter 2020 earnings call and webcast. The press release distributed yesterday afternoon is available on the Investor Relations section of 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. The 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 its risk factors and forward-looking statements contained in the company's filings with the SEC, including its 10-Q, the earnings release, and 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 of Gaming and Leisure Properties; and Peter is joined by Desiree Burke, Senior Vice President and Chief Accounting Officer and Treasurer; Brandon Moore, Executive Vice President, General Counsel and Secretary; Steve Ladany, Senior Vice President and Chief Development Officer; and Matthew Demchyk, Senior Vice President and Chief Investment Officer. With that, it's now my pleasure to turn the call over to Peter Carlino, your host. Peter, please go ahead.

Thank you, Joe, and welcome to all who have dialed in this morning. Let me start by saying that 2020 was a bizarre year for all of us, and I'm just glad to be on this side of a brand new year. But there are some good things that came out of last year for the company. We, in many respects, had one of the most successful, if not the most successful year we have had since our spin into GLPI. I think part of the good news is that we have proved what we've been saying all along: that the real strength of gaming is in the regions, not in Las Vegas. We've always sold at a discount in the regional area.

Thanks, Peter. Good morning everyone, and thank you for taking the time to join our call. Our performance for the quarter was good, as we're ahead of all of our key metrics compared to the fourth quarter of 2019, due to the fact that we fully collected the Casino Queen rent in the fourth quarter, combined with our rent deferral agreement of $4.6 million. In addition, we had several non-cash items that are included in our P&L that I thought I should highlight. First, as Peter mentioned, we had the Caesars exchange transaction where we exchanged the Tropicana Evansville and received Bettendorf Waterloo. In return, we had to recognize a non-cash gain of $41.4 million in our income statement. Second, we had some straight-line rent adjustments in the quarter, and those adjustments are due to deferring less rent as a result of the accounting rules than what we had in the past. For more information on that, note 14 in our 10-K has a lot of details about how we will recognize that rent deferral over the next several years. The percentage rent reset for Meadows occurred on October 1, and the rent reset was down by $500,000 for the quarter or a full $2.1 million for the year. This is our last percentage rent reset until 2022. Obviously, excluding the Ohio percentage ramp for Casino Columbus and Toledo, which as we've disclosed, Toledo is in a rent for $22.9 million.

Yes. And Matt, do you want to add a few thoughts as well, please?

Sure. First, turning to our balance sheet. Just after the third-quarter call, we completed a successful equity raise to prefund our value transaction, delivering on our promise of prudent balance sheet management. As a result, our balance sheet is characterized by robust liquidity and thoughtful leverage. In addition, our long-dated unsecured debt yields continue to trade materially inside those of our peers. This is a valuable validation by the debt markets of the safety inherent in our business model, and a clear benefit to the weighted average cost of capital that we can utilize for transactions. Based on the strength of our position, the theme for 2021 at GLPI is to be offensively postured. As we navigate opportunities, we remain prudently disciplined in our focus on achieving a margin of safety, and our appetite remains voracious. Our team's decades-deep relationships across the gaming sector and our unique track record of being creative and structuring win-win solutions for counterparties both stand to be competitive advantages. Our team is committed to making the most of the opportunity set in 2021. As I wrap up, I'd like to take a step back for perspective. More than a decade ago, before we or our asset class existed, the global financial crisis tested cash flow resilience across the economy and the real estate world. Real estate asset classes that were newer quickly became battle-tested. New winners and losers became evident, and at times, contrary to traditionally held expectations. In the many years since, pricing trends and institutional interest have come to reflect the durability demonstrated amidst challenges. As the old saying goes, the hammer shatters glass but forges steel. Of late, the entire world has been subject to the wrath of the new and different hammer; a unique and challenging backdrop presented by COVID-19 has resulted in yet another significant test for a broader economy and across the spectrum of real estate assets.

Thanks, Matt. So in summary, I think 2020 was a great year for GLPI, and I'm not sad about leaving it as we move into 2021, but it was a very impactful year. So with that, we will open the floor to questions and perhaps create an opportunity to hear from the rest of our team present today. So operator, would you please go ahead?

Thank you. Our first question is from Barry Jonas with Truist Securities. Please proceed.

Hey guys, good morning.

Hi, Barry.

Hey. Let's just start with the current M&A environment. I would love to get any updates there, what the pipeline looks like and any notable changes over the past 90 days?

Why don't I look around, it's Steve Ladany. There's activity out there, but I will let Steve share what he feels able to discuss.

Sure. Good morning, Barry. I think from a technical perspective as far as the M&A landscape in front of us. On the non-gaming side, we continue to see a myriad of opportunities coming across our desk. As you'd imagine, gaming has held up wonderfully during the COVID experience, but other non-gaming areas of the leisure space, etcetera, have not. So there's a number of opportunities that continue to come across our desk. However, as Peter has said many times before, we continue to believe that gaming presents us with the best opportunity for outsized returns on a risk-reward basis. So as much as we are looking at other opportunities, the M&A landscape in the gaming space continues to be very active. And there are a number of discussions we continue to have with a number of parties, both existing and potential new operators.

That's really helpful. As a follow-up, can you provide the status on the Belle of Baton Rouge? I know it was sold to Casino Queen and removed from our master lease without any adjustment to the rent. I'm curious if you still own it or its current status, and if there may be opportunities for additional rent in the future? Thanks.

Brandon, you want to please take the part of that regulatory piece?

Yeah. That transaction is not yet closed. So I think they've announced that Caesars has agreed to sell the Belle Baton Rouge operations to the Standard General Casino Queen team, but that's subject to regulatory approval by the Louisiana Gaming Control Board still. Our intention is to continue to own that property. So currently, that property is still in the Caesars lease. If that transaction is approved in Louisiana, we'll remove it from the lease and put it in a separate lease with the new Standard General team. But our intentions at the moment are to continue growing that property.

And there's no adjustment to the Caesars master lease, if that transaction does occur and that property comes out.

Got it. Okay. Just wait and see. All right. Thank you so much guys.

Thanks, Barry.

Our next question is from Greg McGinniss with Scotiabank. Please proceed.

Hey, good morning. Peter, we've been getting a lot of questions from investors regarding the CIO and CDO roles, as they seem a bit complicitous. Can you please walk us through the need for creating both those roles? And how responsibilities are split between the two?

We've received similar questions, Greg. It's actually quite straightforward for us. Steve's main role is to identify opportunities in the gaming sector, which he knows well. Matt, and I'm simplifying this, focuses on how those opportunities fit into our portfolio, including their valuation, financing, and all related aspects. If we're interested in a property, we consider what it looks like and how to integrate it into our balance sheet, including whether to pre-finance it. You've already seen some evidence of this in action. I understand there may be some confusion, but their roles are distinct. Steve is the one out in the field, either over the phone or in person, while Matt handles the internal aspects. Nonetheless, they collaborate effectively, and our team is functioning well together.

Okay. Thank you. And then, for a follow-up, the questions on these calls are so often focused on the acquisition pipeline. And I don't really feel like breaking tradition this morning. Are there any casino assets that are currently for sale and being marketed right now? And if so, what kind of EBITDA do those assets generate?

To clarify, the question was, are there currently casinos being marketed?

Yeah.

Right. Yeah. I mean, there are many opportunities, obviously, we're under NDA, but I can give you a sense. I mean, there are some that are not so private, that have been public lease, very large-scale assets that are for sale on the Las Vegas strip. But there's also individual, smaller, single property assets that exist as well. In between those two are portfolio trades that could occur with multiple properties. I mean, I think one of the things that we are seeing is that with the margin improvement of these properties, I think the sellers are trying to figure out where they're, in fact, going to land as far as a run rate. And that's part of the complication on the buyer side as well, is the new operator, if in fact it's a wholesale transaction, needs to also contemplate where they believe margins will settle in.

All right. Thank you.

We don't need to provide a direct answer to that. There's always some level of activity taking place. Actual involvement is a separate issue. Our responsibility, as I've mentioned for many years, is to consider all options. If it's a viable opportunity, you can bet we're exploring it. Determining what's feasible is a different challenge. When we align with the seller's interests, for instance, if you were to ask what's available for purchase right now, I believe I could identify that property you're selling on the strip, one that could likely be acquired. However, these situations are constantly changing. Our main task is to be financially prepared and ready. That's an important part of Matt's role, ensuring we maintain a proactive stance to capitalize on opportunities as they arise. And that's precisely what we're doing.

All right, I appreciate that. Thank you.

Our next question is from Jay Kornreich with SMBC. Please proceed.

Hey, good morning. I guess sticking with the acquisition pipeline. Can you just provide any update on your dialogue with Bally's either around potential sale, the status within their current casino portfolio, or further expansion with you?

The - sure, I mean, Bally's is no different than our other tenants in that we talk to them very frequently about different opportunities, whether they are within their current existing portfolio or potential opportunities to expand. I mean, I think the world has come to recognize that they have been growing pretty rapidly and looking at expansion. So we are constantly talking to them about what opportunities exist, what markets they may be interested in, and what things we can help them shake loose. So, yes, we're in constant dialogue.

Yes. They're looking to expand; they're hungry buyers. I think, as Steve says, they're very hungry. And we want to be their partner of choice. So we work at that very hard.

Okay. And then, I guess, moving towards Casino Queen, which was your troubled tenant. Now you have a master lease with them. They paid back the deferred rent of $4 million of the loan, and you have this rule for the agreement. Can you provide an update on their performance, and is this an operator that you'd like to expand further with?

You want to take that, Steve?

Sure. I want to clarify that the master lease will be established after the acquisition of our TRS property. For now, it remains under a single asset lease. We are very confident in the management team; they have extensive experience in highly competitive markets like Las Vegas. We believe they possess the necessary skills to effectively manage these properties and maximize their performance. Regarding their growth interests, it's quite similar to what we've seen with Bally's. They are looking to acquire assets and expand their presence. Additionally, they are focused on enhancing their reach, particularly in the sports betting and iGaming sectors, as evidenced by the rebranding of the Casino Queen asset.

Okay. Thanks very much. That's it for me.

Thank you.

Our next question is from Daniel Adam with Loop Capital. Please proceed.

Hi. Good morning. Thanks for taking my question.

Good morning.

So, this is, I believe, the first earnings call where Penn's market cap is larger than GLPI’s, roughly 80% larger. Peter, I'm just curious, what do you make of that dynamic, if anything?

I think it’s great. Terrific. Look, it's always nice to have a tenant that is well-capitalized and this time Penn clearly is. Look, I mean, I founded Penn, so as you well know. And seeing it grow and do what it has been able to do and it’s been transformative, is quite remarkable. By the way, the question hasn't been asked yet, but it's an opportunity for me to sort of jump right to it. And that is this. I think what they're doing with the Barstool brand is an enormous enhancement to the bricks-and-mortar properties that we own. I feel very confident about that. Penn is committed to build out Barstool-themed facilities at its properties. I think that rollout has begun now. People are social animals. I think you're going to find, regardless of what else is done on the Internet, that's a guy placing a bet on a football game on a Saturday in his driveway. You're going to find a tremendous lift. I'm utterly satisfied in the properties that we own as well, and it's going to help change the demographic of who comes and plays in these facilities and so forth. So I couldn't be more excited about what's going on at Penn. I think it's a huge plus for us at GLPI.

I'd just say, well, it's exactly why we did what we did when COVID hit in early 2020. It was to assist our largest tenant in ensuring their long-term success. I think what's happened with Penn since that transaction that we did for Tropicana, Las Vegas to help them out in their time of need has benefited them greatly and therefore benefited us greatly.

I believe they will demonstrate their capability to be profitable ahead of any other competitor in the market, giving them a significant advantage they plan to leverage. The company is well-managed with ambitious objectives, and I feel very positive about the developments at Penn. Ultimately, this all benefits us by having a strong and well-capitalized tenant.

Okay. Great. That makes a lot of sense. And then I guess related to that, any update on the timing and level of interest in the possible sale of the Trump in Vegas? Thanks.

Yeah. Look, there are others. I mean, Steve is a lot closer to it than I am, although Matt also has had contact with people. There has been a shocking number, to my mind, and I'll use that word, of people coming out of the woodwork, signing NDAs to take a look at it. Now a lot of them, I will say, or what I call the dollar down, dollar a week crowd, with transactions that wouldn't interest us at all because they can't. We're not intending to take any risk whatsoever. We're looking for a cash buyer. It's possible we could participate in something, but never to put our capital at risk. Never. I can't underscore that enough. So there's some pretty good activity out there. It's – who knows, again, got to caveat that with, who knows what we'll get to the signing line. But I would say that, it's been pretty impressive. Steve, do you want to comment?

Yeah. I'll just add. We have a very – we have – there's a few parties that have shown very strong interest. And so, we continue to work on that. But I would also add that, the Coke transaction that just occurred at the Fountain Blue, we view as a very positive signal for our ability to exercise our sales process.

Would you like to add anything, Matt? Any thoughts?

Yes. The one other thought that's relevant is just we're seeing signs of a little loosening in the debt markets for developments, which is another encouraging development in that market. And I'll just remind everyone that, every potential buyer is looking at a meaningful redevelopment plan there to help maximize the potential of the assets. So that's going to be an important element for anyone who buys it. And I'll remind everyone, we're in a balance sheet position, but we don't have to do anything. So we're going to wait until we have a good deal on hand, if and when we'll move forward.

That captures the essence nicely. We want to be transparent and avoid misleading anyone. While we cannot guarantee anything just yet, we are encouraged by the increased activity we've seen as we entered 2021, particularly from serious buyers. That’s the update we have for today.

Great. Very encouraging. Thanks, guys.

Thank you.

Our next question is from Thomas Allen with Morgan Stanley. Please proceed.

Hey. Good morning. Can you just update us on your dividend? You announced in the release that you're going to go back to being a full cash dividend payer. But just, kind of, how you're thinking about it, medium to long-term? Thank you.

Well, we're thinking about it a lot, but I'm going to give you half-an-answer because, unfortunately, timing has just not worked out well for us. We have a board meeting next week to discuss the dividend. In fact, I think I'm looking at our General Counsel. We should be prepared to get an announcement out next week, Brandon, should we not?

Yes, I expect it will be next week.

Yes. We expect we will. Look, we have said cash dividend, 2021, and you can count on that. The precise amount that we've also said, we're not going backwards. So the goal, of course, is to move forward. But we can't get ahead of the Board. And all I can say is, by the end of next week, you should have an answer. Look, you recall, I am, first and foremost, a shareholder in this company, and my thoughts are completely aligned with what's best for shareholders. I want to move the highest possible dividend at the earliest possible time, consistent with prudence in this good sense. So we're going to look at it carefully. And remember, the goal is to build value and to build dividend income over the years. We've done that all along. We’re back to that; just how far, how fast we can push it, we'll let you know shortly. But you can expect the cash dividend going forward.

Thank you. Just to clarify on Casino Queen, you are now receiving $3.6 million per quarter in rent. There was a catch-up payment in the fourth quarter for the amounts not paid in the third and second quarters, and once the Baton Rouge deal is finalized, it will reach a run rate of $21.4 million. Is that correct?

Des, do you want to?

Yes. So, yes, you're correct. We collected $4.6 million of deferred rent in the fourth quarter. So our rent as of 2020 is fully collected. They were closed in 2021. So we have a small deferral that we expect to collect in 2020 when the sale of the Baton Rouge property is finalized. And, yes, your number is correct, that it goes to the increased rent once the deal closes.

Yes. It's tied to the other transaction with certainty, so that we'll get paid. Hopefully, they'll remain open as we go forward. But even if they don't, we still get paid.

But for the next couple of quarters until the deal closes, it should be $3.6 million of rent? But then, given they close for a period of time, maybe slightly lower in the short-term? Is that what I'm hearing?

Yes. Yes. It's about $2 million of rent that was deferred for January and February, but then they'll go back to cash since they reopened their property. And that $2 million, we expect to collect during 2020 when we close on the transaction.

But in any case, we will collect. We're certain of that.

Okay. Yes, got it. Just want to make sure we’re modeling correctly. Thank you.

Our next question is from David Katz with Jefferies. Please proceed.

Hi. Good morning everyone.

David, good morning.

Good morning. So look, your comments are quite clear about the Las Vegas strip and a preference elsewhere within regional gaming. I'm just trying to think through other avenues of growth on the margin where there might be elements of specific regional properties such as a hotel or a retail element right outside of just owning the casino four walls and whether those kinds of opportunities are out there and interesting in some way?

David, they are definitely interesting and present in the market. We continue discussions with Penn regarding a hotel in Columbus and other potential developments. Recently, there has been interest in some of our undeveloped properties for various uses. We have received offers to sell some of these properties, but we are primarily focused on generating income rather than selling. While we might consider selling for the right price, our main objective is to build revenue over time. Yes, we are exploring a range of opportunities, and we'll see how things unfold.

And just to follow that up, if we were to sort of qualify between owning sort of a new hotel, right, or participating. I think you've said no participating in development of any kind, right? That's sort of putting capital at risk. So you'd be sort of owning the real estate on normalized or mature assets rather than sort of new issuances. Is that fair?

We do a new property with a credit tenant. I mean, we're not taking the risk. The risk is going to go elsewhere. So somebody is going to step up, who's going to be able to support it. Again, I've long said it on the Penn side, you will remember, I love saying it again. We are not in the gambling business. Our customers might be, but we are not, and that never is going to change. We don't take risk that we can avoid.

I understand. Thanks very much.

Thank you.

Our next question is from RJ Milligan with Raymond James. Please proceed.

Hey, good morning guys. I was wondering if you could just walk us through how we should think about both the escalators and the variable rent components in 2021 and 2022, given we're coming off such a low EBITDA year in 2020?

Des, we're looking in your direction for that.

If you refer to the release, there's a table outlining the performance of the adjusted revenue to rent ratio for most of our tenants, explaining potential escalations. This provides at least a five-week perspective on expectations for 2021. We're primarily not anticipating escalations in 2021, though we could be surprised. The data from 2020 and projections for how our tenants might perform in 2021 remain uncertain. Regarding variable rent resets, we have completed those for 2021, and there won't be any percentage rent resets until 2022. We'll gather ample data before then to understand what those resets will entail.

I should have started with a brief comment. I want to emphasize to our financial and legal team that we take great pride in our releases, which provide an extensive amount of detail. We've included as much information as possible for you to absorb in the time you have to read it. There is a lot of detail, and hopefully that will be helpful.

Okay. Yes, that was helpful. Thank you.

Thank you.

Our next question is from Shaun Kelley with Bank of America. Please proceed.

Hi. Good morning, everyone. I just wanted to get some thoughts on maybe the depth. As we're thinking about the buyer pool and M&A environment broadly, I think we're starting to see some new people arrive on the operating front as well. And I specifically want to get your take on some of the Native American operators looking at the OpCo side of transactions and what that might mean for the broader depths of the buying and selling market or the transaction market, if anybody had any thoughts there?

Well, it's a good thing. And we have entertained conversations with such folks over time, nothing at the moment actionable. Steve, do you want to add any thoughts to that?

Sure. So I think we're going to continue to see the trend. I think a number of the Native American tribal gaming enterprises are well-capitalized and looking for areas to reinvest their capital in industries that they're comfortable with, which at this point is definitely gaming. So I think it's something that we're going to continue to see, and I think there's also a number of instances with some of the casino expansion that's been proposed in different jurisdictions like Alabama and Nebraska where some of that could also come into play. So it's an area we're focused on, we're looking at, and we continue to try to build out relationships there because I think it is an opportunity for growth going forward.

Great. Steve, I have another question regarding the challenges in underwriting that you mentioned earlier, related to the changing margin profiles of several casinos. While I hope this is mainly positive, I would like to hear your thoughts on the long-term impact on valuation from what many see as a structural change in margins. Do you think this could lead to higher overall valuations and metrics, or perhaps result in improved rent coverage ratios? How do you see this developing?

I don't have any predictions, but if I had to estimate, I believe it likely impacts new transactions, which I assume is what you're asking about. Regarding a new potential transaction, I don't think the rent coverage underwritten by a landlord and tenant will necessarily change. Similarly, I don't think the valuation based on multiples for the landlord or tenant will change significantly. What will change is the increased cash flow. Consequently, when you apply the larger EBITDA to the various factors, it will result in a higher total valuation. This is the key element. Additionally, the value will be significantly influenced by the operator, particularly whether there are sports betting or iGaming opportunities in that area, whether previous deals have limited potential, or if there is wide-open access for the new operator. These factors will continue to create variations in valuation.

Let me share an additional thought on this. We are still in the early stages, and we are observing margins with reduced occupancies and higher margins, which is quite unusual but a very positive sign. I believe this trend will be more sustainable over time. While we cannot be entirely certain about its complete sustainability, only time will provide clarity. From a buyer's standpoint, making decisions based on current numbers likely involves some risk or discretion. I often receive questions about sustainability, and I believe that the situation will not revert to previous levels. The operators have discovered ways to manage their businesses more efficiently. However, whether current conditions will last remains uncertain, in my opinion.

Thank you very much.

Our next question is from David Gallagher with Green Street. Please proceed.

Good morning, everyone. Thanks for taking my question. Just a follow-up on Penn, obviously, market cap growth over the last year has been tremendous. And certainly, they're in a much healthier liquidity position now than, say, a year ago. And moving forward with that relationship, does that change how you view rent coverage at all? Understanding if these are obviously long-term leases and property level dynamics are important, does that change how you view rent coverage?

Anyone want to opine on that?

I mean the rent coverage is specific to the lease and the property that's in the lease. So, no that would not have an impact on what we would expect for rent coverage on the lease.

Yes, I think just to clarify what I meant. Would you be willing to discuss coverage? Yes. Given that the corporate situation is a little bit stronger?

I figure that's where you're going, yes. Maybe it's best most, I can say, but maybe, but not much. I mean, I think we're comfortable in the range we are. Matt, what do you think?

It's not our intention to take less. I mean we haven't looked at the corporate level coverage. We've been focused on the four-wall coverage for all the right reasons historically. So, I think going forward, you'll see us continue to focus on four-wall coverage. Because at the end of the day, it's a duplicative benefit, right? You get the greater of the corporate coverage or the asset coverage. And as we move forward, I think that discipline will serve us well.

Well, even though they're in a master lease, I think we've always looked at four-wall coverage. Some of our competitors have been a little less vigorous in that area, but we prefer to have four-wall coverage that we feel good about.

Yes. Ultimately, the corporate coverage really speaks to the multiple that the cash flow should trade at, right? Because this is very senior lean in their capital stack, but at the end of the day, they got to view it as a business unit like everyone else would. And when it comes up for renewal, it’s going to depend on how profitable those assets are. And that's why we have the highest four-wall coverage, and we focused on that out of our peer set.

Got it. That makes sense. Just a quick follow-up, the right of first refusal for Casino Queen, can you give us maybe some potential opportunities that could arise with that relationship with Casino Queen and that right of first refusal?

It's hard to say at this point, to be totally honest. I think they're focused on closing out the two transactions that they've announced that they've signed, one with us and one with Caesars. And so I think they continue to look to try to find areas to grow, but I don't have a good sense to be able to give you any guidance around what that means on a quantitative basis.

I do get the sense in talking with their principals that they're committed to doing more business with us. That is for a variety of reasons. I think it's pretty clear that's the intent. So we're staying tuned with what they're up to and anxious to help if and when we can.

Thank you, everyone.

Happily, they're very aggressive. It's great. Good to have a hungry partner.

Our next question is from John Massocca with Ladenburg Thalmann. Please proceed.

Good morning.

Good morning.

So what is your view on guidance going forward? Is that something you would feel comfortable providing again after some of these outstanding deals close, or might that be somewhat more contingent on a normalized operator environment, given how that impacts escalators?

That's a very fair question. It's when we're kicking around hot and heavy here, it will be a Board discussion shortly as well. Look, while we have the TRSs out there kind of in limbo, not sure when precisely they're going to close, and that obviously would have some big impacts. We just don't think it's in investors' best interest to have us put something out there that could be wildly depending upon timing of closings and so forth, wrong. When we're free and have closed those transactions, and we're down to pure REIT operations, I think that's something we can well consider. I'm looking at Desiree, I think shaking her head in a positive way. So what do you think?

I agree. So right now, we have the Bally's transaction also, which would be $10 million a quarter in rents, right? So not knowing the timing of the sale of TRS operations, not knowing the timing of the closing of the Bally's transaction, we just thought it's better to get more clarity around those things before reconsidering guidance.

Yeah. But we'll take a serious look at it post these transactions.

Great. That makes a lot of sense. Building on Greg's earlier question, there is a traditional C-level position that is still vacant at the company. Considering the expertise already present in the CIO and CEO roles, do you believe hiring a CFO is necessary at this time?

The simple answer is that we haven't felt the need for such a position. Currently, we're managing well with Desiree, Matt, and Steve handling the responsibilities typically associated with a CFO. Our internal team is entirely capable of getting everything done, and we've operated efficiently like this for a long time. Although it may seem like there’s a gap, we're not pressured to fill it immediately. When the time comes, we will bring someone on board, but for now, we are comfortable with our setup. We take pride in the quality of our work and the longstanding experience of our team. We have considered some very qualified candidates, but they have to be exceptionally compelling to surpass the talent we already have. So, for the time being, we will continue with our current structure and have not made any public announcements regarding this.

Okay. I mean, you think about the asset class, it's a pretty easily manageable asset class. And so you have this group of talented people around. You mean, CFO is an extra cost but it's not a huge extra cost, but it is an extra cost. I mean, is there any thoughts maybe just either not filling it at all or just changing a title in order to kind of not add the extra G&A, if you will?

The answer is yes, and maybe. Got it. We're actively thinking about that right now. But, I think you know and you can see, that we have all the capability in this company that we need to do what we do.

Sure.

To do what we do.

And then, just a quick modeling question, with regards to Casino Queen, I know, you put that on cash accounting in 2Q. Are they back on an accrual basis today, and as of 4Q 2020?

No. They're still on a cash accounting basis. Once you elect, you have to stay with that. So they're on cash accounting.

So that repayment of $4.7 million is going to be excluded again in the first quarter of 2021?

You would not expect another $4.6 million in 4Q 2021, that's right. Because there will not be $4.6 million of deferred rents at that time. As we said earlier, there's about $2 million that will be deferred out of the first quarter that we expect to collect sometime during 2021. But it's not $4.6 million.

If I consider the relative impact from the fourth quarter of 2020 to the first quarter of 2021, is that around $6 million of rent, based on what was paid in the fourth quarter and what will not be paid in the first quarter? And importantly, this is all cash?

Yes. That's correct. You would lose $4.6 million that you collected in the fourth quarter plus, their normal rent that was in the fourth quarter. You would not expect to see it all in the first quarter, other than another $1.2 million for March.

Okay. That's it for me. Thank you all very much.

Thank you.

Our next question is from John DeCree with Union Gaming. Please proceed.

Good morning, everyone. Thanks for taking my question.

Good morning.

Peter, I think in an earlier comment, you've mentioned that a lot of folks have kind of come by and taken a peak at Tropicana, but really not serious buyers or just perusing. I'm curious, if you are seeing that on the sell-side as well, for stuff that you're looking at? Are there really motivated sellers, or are people just kind of putting a sign out, hoping did they catch a lofty price and aren’t particularly motivated?

Yes. To clarify, while there are people interested in Tropicana, they lack significant financial resources. So, while their intent to operate the asset is genuine, it's not aligned with our terms. Currently, there aren't many opportunities available in the gaming sector, which isn't surprising. We're exploring some options, but finding worthwhile picks requires effort. When I began in this industry back in 1994, there were numerous companies emerging in the riverboat sector, and we acquired many of them. We now own a substantial number of the better ones in our regional portfolio, but such opportunities are scarce. We're observing individual assets that would fit well in our portfolio, but until sellers are ready or have pressing needs, our role is to stay close and attentive. Our former CFO, Bill Clifford, had a saying I appreciate: Imagine someone driving by your house, sees its beauty, and expresses a desire to own it, only to find out it's not for sale. After some back-and-forth, there may come a point where a price would prompt you to reconsider. Ultimately, it's a matter of timing, and our job is to stay close to potential opportunities until the right moment arises. Additionally, our reputation helps attract partners who know we can manage complex transactions effectively. It's important to note that last year saw very few deals signed outside of our own efforts, emphasizing that securing opportunities requires consistent groundwork. I'm not exaggerating when I say this is the reality of our responsibilities.

Understood, that’s helpful, Peter. If I can ask one more? Matt, I think you mentioned earlier that many of the people considering Tropicana are looking at a redevelopment plan. I just wanted to confirm that comment. My question is, among those showing the most interest, are you seeing interest from traditional casino companies, financial sponsors, or third-party real estate developers similar to those we've seen get involved before at the northern end of the strip? I'm curious about where you’re seeing the most interest.

Yes, so I'll take the second part first and the answer is all of the above. And we've got a diverse set of interests from folks from a lot of different specialties. And the key thing, I'd point out, is you've got 35.1 acres that are some of the most strategic acres on the strip right now that are primed for redevelopment. And what the Coke folks are doing and what we'll see happen on the strip over the next decade, really this is an important piece of that. And so yes, everybody is looking at redevelopment. I mean there's so much underutilized acreage there and there's so much upside to the operations from taking more market share. I think everyone is thinking about how to make it most relevant for the upcoming decade or two. And as you see the benefits of the latest field not far away and that end of the strip coming to life, I think you're going to see something really interesting happen there. And we've been privy to some of the what the plans might look like, and they're all interesting and compelling.

Yeah. Look, it's likely a multi-use development, as you would imagine, from residential retail, the whole enhanced casino, et cetera, et cetera. So it's the kind of folks who would do that that are most serious about this opportunity.

Got it. Thanks so much for all that color. And thanks again.

Thank you. How we’re doing time-wise? We have time for one or two more questions.

We have one more left, which is Robin Farley with UBS. Please proceed.

Great. Thanks for fitting me in. Most of my questions have been answered. But just going back to your earlier comment about potential transactions. You mentioned the strip. And it seemed like it was more than just the trough you were referring to. Is there interest out there from buyers working with you to do something with an existing strip operation, not a redevelopment opportunity, but just more typical of the type of transactions you've done?

Steve, do you want to take that?

Certainly. So look, at different points in time, there've been different interested operators. And obviously, the market has continued to evolve. I think there are some highly integrated destination resorts that sit on the strip that are at any one point in time being marketed. And as we think through those and have discussions with potential operators, we're always interested and willing to look at transactions. And different times, we've had different folks that have come forward, and we pursue things with them. So we'll look at anything, and we constantly talk to current and new potential operators about possible transactions.

Yeah. Look, maybe I can make clear, we're not anti-strip. I mean, it's some wonderful properties there; just has to be underwritten differently. You've got a whole different cost structure. And when those hotels, for example, are empty, they are empty. And you've got enormous cost drag and so forth. It's not, let's say, a property in Toledo, Ohio, where you don't even have a hotel; cost structure is so entirely different, and the ability to make money is so much simpler. It's just more complex. So we're up for anything. And we would do anything, but we just have a different view of how you put it together.

Okay, great. Thank you very much.

Thank you, Robin.

And that does conclude our question-and-answer session. I would like to turn the call back over to management for closing remarks.

Operator, thank you very much, and thank you all for dialing in today. As I said, last year was a surprisingly successful year for us. We're charging ahead in 2021, hoping we get through COVID and get out the other side. So we're optimistic about this year and look forward to talking with you next quarter. Thanks, again.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. And thank you for your participation.