Gaming & Leisure Properties, Inc. Q4 FY2021 Earnings Call

Greetings. Welcome to Gaming and Leisure Properties' Fourth Quarter 2021 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 that this conference is being recorded. At this time, I'll turn the conference over to Joe Jaffoni. Joe, you may now begin.

Thank you, Rob. And good morning, everyone. Thank you for joining Gaming and Leisure Properties Inc. Fourth-quarter 2021 Earnings Call and Webcast. The press release distributed yesterday afternoon is available on the Investor Relations section on our website at www.glpropinc.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. Forward-looking statements may include those related to revenue, operating income, and financial guidance, as well as non-GAAP financial measures such as FFO and AFFO. As a reminder, forward-looking statements represent management's current estimates and the company assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to risk factors and forward-looking statements contained in the company's filings with the SEC, including its 10-Q and definitions in the earnings release and reconciliations of non-GAAP financial measures contained in the company's earnings release. On this morning's call, we are joined by Peter Carlino, Chairman and Chief Executive Officer of Gaming and Leisure Properties. Also participating in today's call are Desiree Burke, Senior Vice President and Chief Accounting Officer and Treasurer, Brandon Moore, Executive Vice President, General Counsel and Secretary, Steve Ladany, Senior Vice President and Chief Development Officer, and Matthew Demchyk, Senior Vice President and Chief Investment Officer. With that, it's my pleasure to turn the call over to your host, Peter Carlino. Peter, please go ahead.

Thank you, Joe, and good morning, everyone. I appreciate you joining our fourth quarter earnings discussion. This quarter, and indeed the entire year for GLPI, has been quite eventful. We undertook various transactions, both large and small, while significantly improving our balance sheet, which was a major focus for us this year, aiming for what we've internally termed fighting weight. We've prepared a detailed press release outlining all the important aspects, so I won't highlight every detail. Desiree and Matt will share some comments shortly. We are excited to welcome the Cordish companies to our group of top regional gaming tenants in America. In addition to Maryland Live, we achieved approval for the acquisition of Philly Live and Live Pittsburgh in Westmoreland County, Pennsylvania. Cordish offers some of the best regional gaming properties in the country and has a reputation as one of America's most successful developers. We look forward to collaborating with them extensively in the future. It's also worth noting that part of the purchase price was financed with over $300 million of OP units, which we see as a strong endorsement of our company. I encourage you to explore our website where you’ll find a collection of the finest and largest regional gaming assets in America. It's surprising to hear from investors that they haven’t seen our properties or recognize the quality they represent. A tour through our website should provide valuable insight into our portfolio. We believe there are additional growth opportunities with both Cordish and Bally's. We also aim to discuss potential investments with some of our existing tenants. Our outlook for 2022 is positive. In the second half of this year, we expect to finalize the acquisitions of Bally's Rock Island in Illinois and Black Hawk, along with completing the remaining Cordish purchases, which will bring our total to 55 properties. Gaming and Leisure Properties does not compete on cost of capital; instead, we win through our capabilities in assembling and executing complex transactions. We've maintained the best cash flow and four-wall coverage in the industry. We will continue to exercise caution and care in new investments, understanding the importance of shareholder funds since we, too, are shareholders. Regarding dividends, we are pleased to announce a $0.02 increase, totaling $0.08 for the year. I can confidently state that we expect this number to grow as we close transactions this year. Dividend growth is vital for me and for our shareholders, and we will responsibly continue to increase our dividends as opportunities arise. With that, I will turn the prepared remarks over to Desiree Burke, our Chief Accounting Officer.

Thank you, Peter, and good morning. I would like to highlight some key points from the income statement and compare the fourth quarter of 2021 with that of 2020. Our total income from real estate exceeded the fourth quarter of 2020 by over $17 million, mainly because of the Bally's transaction closure on June 3rd, 2021, which added $10 million to our income. Additionally, escalators on our Pinnacle Boyd, Belterra, and Penn leases contributed $2.5 million, rent received from Perryville was $1.9 million, and increased percentage rent from Penn Ohio added $2.6 million. Higher non-cash straight-line rent and non-cash revenue gross-ups contributed $2.9 million, but this was partially offset by a $3 million decrease in rent from Casino Queen due to the timing of cash collections on the lease in the fourth quarter of 2020. Our gaming revenue fell by $19 million. Due to the sale of our Perryville and Baton Rouge operations on July 1st and December 17th of this year, our operating expenses rose by $35.2 million, primarily because a non-cash gain recorded in 2020 was not repeated in 2021. This gain was associated with the Caesars exchange, which involved acquiring Waterloo and Bettendorf in exchange for Evansville, leading to a $41.4 million non-cash gain last year. In 2021, we incurred a non-cash charge of $12.2 million related to credit losses for our new Cordish lease. This relates to the CSO reserve as accountants refer to it, pertaining to that lease being financing for GLPI. There was also a non-cash land-lease gross-up and land rates amortization of about $5.9 million, partially offset by a $4 million recovery on the Casino Queen loan and a $12.2 million reduction in gaming expenses, again due to the sale of Perryville and Baton Rouge operations. Additionally, we reported a $6.8 million gain on the sale of Baton Rouge operations on a pretax basis and an insurance gain of $3.5 million. Regarding the Perryville sale, I want to emphasize that it has been recorded in our TRF segment for 2021. Starting in 2022, it will be recorded in our REIT segment due to the winding down of our taxable REIT subsidiary. The Maryland live lease will be treated as a financing receivable, which means we will recognize cash rent as interest income on revenue from real estate, and the change in the receivable will be reflected moving forward. However, we will clarify the cash received in our AFFO disclosures. With that summary, I will hand it back to Peter.

Thanks, Des. And, Matt, you wanted to make a couple of comments as well because much has evolved in our balance sheet work this year and all of our transactions. So why don't you go ahead?

Sure. Thanks, Peter, and good morning, everyone. As Peter talked through, at this time last year, we shared a game plan and it was playing offense and doing so within the context of being disciplined and emphasizing our commitment to balance sheet strength with respect to the role it plays in our success. And related to these goals, we've delivered. Not only did we expand the relationship with Bally's, one of our most dynamic tenants, but we also directly sourced a new relationship to our tenant roster with the Cordish properties that Peter talked about. In the transaction where our counterparty made very clear, GLPI was not the best price, it was the best decision. In fact, coming from a 110-year-old family company that has signed their own names to financing projects and other bills that need to be paid over those many years, it was taken as a great compliment. When after hours of discussions, some negotiation, finalizing terms, John Cordish turned and said, 'It's pretty clear to me that you treat it like it's your own money.' Any other REITs I've spent time with, treat it like it's other people's money. The Cordish's decision to take a significant equity stake in GLPI underscores our philosophical and business alignment. We're looking forward to seeing what might come from our Cordish relationship overall, and from the novel partnership structure that enables GLPI to invest at least 20% of the equity into any new gaming license opportunities achieved in the newest jurisdictions over the next seven years. Realty Income's recently announced agreement to purchase Wynn's Boston asset at a 5.9% cap rate marks another milestone on the path towards institutionalization. It not only provides real-time price discovery, but also underscores the value created with our purchase of the Cordish portfolio. The fundamental thesis upon which our company was founded that thoughtfully structured gaming real estate cash flows are of institutional quality has been further validated. As I've often stated in the past, we own the most homes in one of the best neighborhoods. Turning to the balance sheet, balance sheet strength and liquidity remain the foundation of our success. Throughout 2021, we stayed true to the philosophy of match funding our transaction activity. We also perfected the use of multiple tools in our tool chest with not only our overnight equity issuance and 10-year bond issuances that were both well over-subscribed, but also with over $250 million of ATM issuance at over $49 a share, and the Gaming REIT sector's first OP unit issuance that Peter talked about. We are well-positioned to be well within the target debt range of 5 to 5.5 times that we've articulated. We've got almost $1.2 billion of unused revolver capacity. And we see our staggered, almost entirely fixed-rate debt profile as a strength amidst market volatility. As we move forward, our focus remains on unearthing opportunities for the prudent deployment of our shareholders' capital. I'll turn it back to you, Peter.

Matt, thank you very much. I hope that was helpful to you all out there. So Rob, would you please open the floor to questions.

Yes. Thank you. At this time, we'll be conducting a question-and-answer session. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Neil Malkin with Capital One Securities. Please proceed with your question.

Thanks, everyone. Good morning. The notable transactions we've seen over the past nine months continue to support the regional gaming thesis. Could you elaborate on the ongoing institutionalization of the regional gaming market? While Vegas is well known, I would appreciate your thoughts on incremental buyers, competitors, and any improvements in CMBS or debt markets, or anything else related.

Hey, Matt. Why don't you take that?

Sure. I mean, so you've seen the cap rates. I mean, we did, but for us was an aggressive deal, the 69, and very quickly in a few months, we've now seen a 59 for another regional property. And as Peter said, I'd really underscore for anyone who hasn't been to the Cordish properties, please reach out. You should see them, pound for pound. They're as good as anything you're going to find. If you look forward, I mean, the reality is there is a significant amount of institutional capital in the private equity world in their private REITs and in other public companies that are looking for returns. When apartments have three handles and industrial has three handles, it's really hard to find safe and durable income. When you look at a Dollar Tree or some other facility like that in the very second-tier market and compare it to some of the cash flows you get, that to Peter's point, not only have a great operator and a great property, but also strong four-wall coverage and credit support, it's pretty obvious we've got a better mousetrap and a better business model when it comes to getting those cash flows. To date, you've seen a bit of a competitive moat related to not only relationships, but also licensing. As people focus more on the space, I suspect some of them might find accommodations to do one or access both of those things. I'd expect more cap rate compression. I mean, I watched this play out as we've talked about in manufactured housing, self-storage, data centers, and cell phone towers. As long as our cash flows deliver on the premise that we've articulated, you're going to see more cap rate compression. Now, what does that mean for us is really the key question. I'd point out, we get this question all the time. How do you guys compete? You don't have the best cost of capital. Why should someone do a deal with you? And despite that, you can look at the years of transactions we've done, to Peter's point, none of those were auctions. Each of those is somehow bespoke, often directly negotiated deals with someone that does the transaction for more than maximize proceeds just economic terms, and Cordish I think is the best case study at that. So as we go forward, we're also going to have to be thoughtful about how we're sourcing capital and the cost of it. I tried to underscore the fact that we've used not only the ATM thoughtfully, but now this capability that's been validated by the Cordish is to use OP units, which is unique. And the math is going to be the same for us, risk-adjusted returns in excess of our cost to capital. And to Peter's point, doing only things that make our long-term intrinsic value greater.

That's great.

Matt, sorry. Go ahead.

No, no, no. Go ahead, Peter.

No, I like Matt's answer, it was pretty much on point. But why don't you carry on with the question.

Can you discuss the status of the acquisitions? I noticed that Bally's has been pushed back to the end of 2022 for both transactions. Is that primarily due to COVID and regulatory delays, or are there other factors at play?

Brandon, why don't you take that?

I don't think there's anything more to it. I would caution you about Bally's, as there are actually three separate transactions that we're currently evaluating. One is in Las Vegas concerning the Las Vegas Tropicana, and the others are related to the Quad Cities and Illinois. I expect the transactions in Quad Cities and Illinois to close before the Tropicana transaction, which I believe will happen later in the year. The former two transactions should conclude a bit earlier.

Okay. Great. And then I guess just last one. I think on the last call, Peter, you talked about, or Matt, about elevated opportunity on the forefront, and I'm just wondering specifically if you could talk about some of the alternatives leisure lifestyle, consumer-oriented sort of endeavors or opportunities you're looking at if you could give any color in that?

Our answer is probably been the same for the last maybe seven years. There's not a week that goes by that we don't look at some other something, and you know the struggle that we have is that we're already in one of the best spaces on the planet from the point of view of certainty of cash flow, longevity of cash flow, long, long, long-term leases. It's tough when you're already in the best place to take something less than the best. That having been said, there are some things we're looking at and look, I've said probably for years, I expect one day we will light, at least mildly in some other space. But we are just not there yet. There'll be a discussion. Just for fun, to tell you about some new ideas, it's scheduled for, I think I saw 3:30 in Monday afternoon. That's a scheduled call about a different concept, but we do this all the time and we will see. But at the moment, there is nothing really special to report.

Okay. Thank you, guys, very much.

Thank you.

Next question is from the line of Smedes Rose with Citi. Please proceed with your questions.

Hi. This is Stefan for Smedes. Just going back to your cost of capital, you talked about not competing on cost of capital. And then you talked about potentially moving into non-gaming assets. So what type of non-gaming assets would you be interested in? I know in the past you've talked about potentially looking at some hotels with pent, and just how do you expand the universe as gaming becomes more institutionalized?

Well, I do think there's opportunity with some existing tenants that we can explore and are exploring right now. That's pretty near term, and by near-term mean over the next year, let's say, opportunity. It could happen, maybe won't, but there are active discussions about deploying capital with existing tenants. We're also excited, by the way, with Cordish, for example. Again, people who are very, very aggressive, hungry, coast-to-coast, and people with whom we love to work and do more. And that applies to some of our other strong tenants. But again, this is highly unpredictable, we'll just have to see. In other space, again, I think I pretty well said that we just haven't seen what can match what we already have. Matt, do you want to add any color to that?

I will just say, listen, we spend a lot of time investing in R&D and everything outside of gaming to keep our finger on the pulse of anything that might be durable cash flows. But really at the end of the day, A, we don't want to say specifically what those things might be because, obviously, it's a very competitive marketplace. But B, durable characteristics are really the hallmark of what we're looking for, and we don't want to put our money into much more volatile income streams that cost a lot more than the gaming assets, to Peter's point. I'll also point out, we don't feel that we need to do something outside of gaming to prove that we can do something outside of gaming. We always have access to those deals. The first deal we do is going to be because it crosses the threshold and makes sense on a risk-adjusted basis. So we try to be creative. Obviously, I mean, when you look at where we are, we're in the middle innings of institutionalization. And being able to find things in earlier innings of institutionalization with less efficient pricing is one avenue and one lens to look through. But at the end of the day, it's got to make the long-term value of the company greater.

Peter, you mentioned not wanting to compete in large auctions and that you generally wouldn't be competitive in those situations. Can you elaborate on your relationship with Wynn? According to Wynn and Realty Income, the Encore was not a widely marketed transaction, but I'm sure you’ve had discussions and built relationships. Why do you think they didn't consider you a suitable counterparty to purchase that asset and move forward solely with Realty Income?

I can't speak for that. We had no conversation with them about that property, so it never came up.

But I assume you've had a conversation with them over the years and then I assume you have conversation with every operator as you've uncovered things, right? That's part of the duty.

We have spent some time in meetings with Steve, but we just never found something that made sense for us. Some of these transactions are tailored where they were approached directly and chose their partners. If it turns out we wouldn't have been competitive anyway, I don’t think we’ve missed anything. I haven’t lost any sleep over that transaction. Good for them—I think it’s a great deal, and it supports the value of some of our properties. However, I wouldn’t classify that as a regional property. It’s more of a Vegas-scale property in a major market where there’s a sense of monopoly. It doesn’t say much about regional value, but it does validate the space, and I’m pleased to see that someone else recognizes the value. Regardless, we wouldn’t have been competitive for that asset in any case.

Why do you think you wouldn't be competitive? Is it related to your equity cost of capital, issues with the leases, insufficient capital expenditures, or size? What are the factors that lead you to believe that under the same terms, it wouldn't have been feasible? I'm receiving mixed signals here, Peter. It seems like it's a validation, but the price feels too high for us to participate, yet you are open to selling assets at that price. I'm just trying to understand all these comments.

Every transaction is unique. We have engaged in deals with very favorable pricing. For instance, our agreement with Cordish involved a complex transaction between four public companies, and what we accomplished there was quite remarkable. We were able to add value through creativity in ways that others may not have been able to. As with anything, you find your strengths. In straightforward auctions, the winner often ends up losing, which is generally not appealing to me. We participated in the deal with MGP because we were consistently involved and they had been under pressure for some time. Unfortunately, when they encountered difficulties, it ended our long-standing discussions about potential collaboration. The revised board decided that an auction would be the best approach, and we thought it made sense to explore our options. Ultimately, we determined that it wasn't the right deal for us, so we chose not to participate. That situation speaks for itself. There are numerous transactions available, as we've recently shown, and we will continue to conduct business, but not every deal suits us. I don't understand why that's hard to grasp.

Okay. All right. Well, thanks.

I have nothing to prove; we have already demonstrated that.

Yeah. Well, thanks. We'll sure to miss the company and you down in Florida, but we'll look forward to catching up at a later date. Thanks.

Thanks, Smedes.

And let me just add for the audience on just to follow up on Michael's question. It is interesting to look at the Wynn's build in the stack that it's certainly well overcapitalized for the market it is in and looks terrific, as Peter points out, take a look at our portfolio, a lot of the pictures do. But when you really drill down beyond what it looks like, the quality of the cash flows when you think about master leases, the four-wall coverage, Peter brought up limited licenses similar to this quality of cash flows in our portfolio is very comparable to the ultimate quality of cash flows that come out of the Wynn asset.

Our next question comes from the line of Jay Kornreich with SMBC. Please, proceed with your questions.

Hey, good morning. You set up a kind of nice pipeline of potential future growth by establishing ROFR with now Bally, Casino Queen, and Cordish companies. And so I'm wondering if you can just talk about how you see those opportunities potentially playing out?

Well, the real answer is it's hard to know. We will stay close to these folks, who we like a great deal and trust that they like working with us. But we'll have to see how it unfolds. I can't make any prediction about where that might go. We've got some hungry partners out there that want to expand and will expand in this industry. We just want to be available when the time comes and the opportunity appears. Look, I mean, that's part of our job to stay close and wish them well and hope we can be of help when the time comes.

Okay. I guess with specifically the Cordish companies, they own a wide range of both gaming and non-gaming assets. Are you able to expand a little bit more on just the partnership and opportunity set for you there going forward?

We are clear that we would be open to exploring additional real estate opportunities with them if the chance arises. We've had discussions about this and we will see how it unfolds. If we can offer something that they need or want at the time, we want to be their preferred partner. Our role is to stay close, be good friends and partners, and remain available.

All right. Okay. And then I guess just one follow-up. As going back to the Wynn as it did now join many other casino owners in selling off its real estate, can you give any color on how many other sizable hotel operators that maybe out there in the regional gaming opportunity set that awaits you if they're willing to start selling off their real estate?

I don't have a specific number. I’m not sure. As Steve mentioned, I have some thoughts. While I don’t have precise figures, if you examine some of the larger urban areas where gambling has been legalized, you'll notice that many of the significant properties are likely already owned by someone. There are still some owners that have those assets intact. Most of these are small, family-owned businesses that could be potential partners in transactions, as they might appreciate the benefits of upgrading structures and the associated tax advantages. Therefore, in major urban areas, you will continue to see these types of assets still in existence.

And that does provide us a good runway for at least an open to discussion around tax savings. Separately, there are some large publicly traded companies in the gaming space that still own all or almost all of their real estate. So there's a huge runway ahead for those opportunities. And I guess the benefit for them and the unfortunate truth for everyone on trying to acquire those assets is they have held out to date and they've been proved incorrect because the valuations just keep climbing. There could be a point in time depending on their borrowing costs and things of that nature that could cause them to look for alternative sources of capital.

Or they might just decide to join the party and sell the real estate. So we're having ongoing conversations with those folks, and those aren't necessarily these monster assets in urban areas, but collectively as a company, their portfolios are very large and very valuable.

Yes. Good morning. One more follow-up on Cordish. I guess I'm curious how large equity commitment you would be comfortable with there, given the co-investment opportunity you highlighted. I'm just curious about how you think about your balance sheet priorities in light of that potential equity commitment. Thanks.

My quick answer would depend on the opportunity and where the capital is allocated. If it's a new gaming property in a strong market, we might be willing to invest significantly and would likely do so. I have always believed that obtaining a gaming license in a limited license jurisdiction presents a great opportunity for profit. However, the risk lies in overspending and over-investing, which is something some entities in the gaming industry have done frequently.

Hey, Haendel, this is Matthew. I want to share a few additional thoughts. That commitment involved a hard-fought negotiation. People around the table are laughing; it's like someone giving away money from the REIT world. While we often get excited about a 7% or 8% development yield, I can't provide specifics. However, if you look at the history the Cordishes have achieved, it’s very similar to Penn, with every one of these projects yielding over 20% cash-on-cash, unlevered. The key point is that we aim to move up the value chain and access cash flows earlier. This gives us a competitive advantage. We don't want to just be the takeout on the back-end after significant value is created; we want to be involved in the value creation process and hopefully benefit from it on the back-end. Regarding timing, we will see it coming; these opportunities depend on new licenses being granted somewhere in the country where they currently don’t exist. That’s why we have a seven-year window. It will take time for these to materialize, and we are hopeful that one will. As for how we view our balance sheet alongside this, like everything else, we intend to maintain our leverage in the five to five-and-a-half range. We'll evaluate the situation based on how much retained cash flow we have at that starting point and will carefully use a mix of debt and equity in line with our goals.

But just to be clear, that would be a great outcome for us if it were to come to pass. It's not guaranteed. Again, it's dependent on how things play out. But it's a novel thing that we structured in that we hope to be able to realize and create value for our shareholders with.

And what we can assume if we're staying very close to what's going on around the United States and spending time in those places to see how we may carve up or find some opportunities. So we're very much on top of any gaming expansion anywhere. So I'll just limit, just leave it at that.

I have a follow-up question regarding Las Vegas. I'm interested in your thoughts on potential development opportunities there, particularly concerning the site and the potential stadium. We are not fully aware of Bally's intentions for the site, but we have been engaged in discussions with them and have an announced transaction in place. If we can enhance this transaction by deploying additional capital into a broader project that we are comfortable with, we would consider that possibility. However, for now, we are operating under the assumption that it will be a ground lease, which is a very favorable arrangement that we are pleased to have. We would collaborate with them if opportunities arise, but it must pass all the other usual considerations we evaluate, so there is nothing finalized beyond our current deal. Bally mentioned in their earnings call yesterday that they expect to provide more information and insights regarding the redevelopment of that project by mid-year, so we are working with them, but we will not be the ones to reveal their plans. To be clear, we have been very involved with them, but ultimately, it is their strategy, and we will see how it unfolds.

Okay. Fair enough. One more, Peter. I guess the guidance, a touchy subject when we graze in the past.

Yes.

If it's to the policy that we will not be having formal forward-year guidance this year and going forward and then any updates or comments on the CFO role also, a subject that we've asked in the past. It appears that the current structure is one that you've indicated you're comfortable with, but this gives.

I believe that if you consider our achievements over the past year, they have been impressive. Regarding the CFO situation, we are content with our current position. Our Board shares this contentment, and we have a strong team on the call today. While I cannot guarantee that we won’t address this in the future, we are currently very satisfied with how things are going. As for guidance, we plan to wait until our remaining transactions are completed since the timing is uncertain. We are open to the idea of returning to guidance, and as you know, we aim to be transparent. You have a good understanding of our anticipated revenues and earnings. For now, we will pass this quarter, but we will reevaluate it on a quarterly basis and leave it at that. This is a topic of much discussion on our end.

Okay. Fair enough.

I don't know. Anybody else wants to offer from the GLPI team? Any other thought about guidance? Hearing none. There's the answer.

Okay. Fair enough. I'd appreciate it and I think some investors would too. But thank you for the time.

Thank you.

Our next question comes from the line of Greg McGinnis with Scotiabank, please proceed with your questions.

Hey, good morning. Peter, you briefly touched on the dividend during your opening remarks. You've spoken a lot over the last couple of years about getting the dividend back to $0.70 a share, which based on our numbers would represented on 80% AFFO payout ratio, excluding the future transactions. But then you stepped just short of that bogey at $0.69. So just a few questions, there's why did you hold back from that threshold? What is the payout target and what's the expectation for additional raises this year?

The expectation is very high. I believe that is safe to say. I think it's pretty high, but that's my desire, and I frame it that way. We could have aimed higher this quarter, but we like the idea of gradually increasing throughout the year. We have not maintained an 80% ratio for a couple of years now, but that was a deliberate choice to hold some resources back, especially since raising equity isn't appealing right now. Keeping more cash on hand seems to be a sensible decision at the moment. Des, would you like to discuss where we currently stand? I know, but where would you like to take this conversation?

No, I would say that we have to wait for deals to close before making any changes to the dividend. It wouldn’t be wise for the company to adjust the dividend before finalizing the necessary transactions to support an increase. Therefore, we have decided to maintain the dividend at $0.69, which we believe is comparable to a 70% yield. This is because we raised 8.9 million shares in the fourth quarter, but the benefits of that won't start until January 1st when we begin receiving rent from Cordish. It was a carefully considered decision to get close to an 80% payout ratio, but we don’t strictly pay out 80%, and that has been our approach in the past as well. However, we are very close to achieving that 80% payout ratio.

Okay. So I guess comfortable saying nearly 80%. I mean, I guess I'm just confused and just a little confused because you've talked about the 70% we're nearly there and kind of just sell short for it sounds like just kind of want the ability to raise dividend later in the year.

Let me say this. It doesn't display any lack of confidence. I really want to emphasize that. In our likelihood of closing these transactions, we feel very confident that these transactions will each and all close. That having been said, we decided to sort of take the step-up approach. I think Desiree highlighted that we're really kind of the equivalent of the old $0.70 internally. The question was, does the $0.70 number look just psychologically better? What you're saying is it seems like it might have, but we kind of like the idea of setting this thing up and having some fun quarter-to-quarter as we get through this year and into next. We're very optimistic about where this is going to go and we feel good about it.

Okay. And I guess along those lines then kind of going back to Haendel's question on the guidance where you don't have the operating assets anymore, which cleans up results. It looks like you're going to be getting the escalators on most of the leases. You kind of have an idea or expectation that the transactions are going to close. So I guess I don't really understand why you're not comfortable providing guidance because you've talked about curious about you're not sure when the transaction that closed, but with your business and I think the whole prior part of this call will kind of reflects that there are always going to be transactions, right?

I believe we will discuss this with our board as our next meeting is coming up soon. This was a topic that was thoroughly discussed with our Board, and we have decided, with their support, to take a cautious approach. This matter is on the agenda for our next board meeting, and we will evaluate it then. I mentioned earlier that we might return to giving guidance, but we don't consider it an urgent issue at this time and have chosen to proceed carefully. It's part of our nature to be patient before moving forward. So please stay tuned, as I understand your request.

Okay. Yeah. Let's say just from an investor perspective, and at least the sell-side analyst perspective, that there is a level of confidence in the future that you guys do have or are necessarily sharing with the markets by establishing that guidance. And you can always go a bit wider if you're worried about the time and more, just let us know what the guidance implies for expected timing of transactions. Thank you, Peter.

That's fair enough. I suspect, by the way that virtually all of our board members are tuned into this call, and I suspect they have heard your desire.

Hello.

Mr. Katz, your line is open for questions.

Apologies. Post-COVID leaving it on mute. Good morning, everyone. Thanks for taking my question. I know that a portion of the strategy is to evolve beyond gaming. And I wonder if you could just elaborate a bit more or help us color in on what that might look like. Might it looked like a gaming property as part of a mixed-use development where your involvement might be broader? Is it perhaps through a vehicle of loan-to-own or other kinds of financing to launch a relationship? What might the evolution look like and what path could it take? Thank you.

I believe you outlined two reasonable approaches for us to explore, and we have certainly considered them. As we venture further into different areas or businesses, our likelihood of success diminishes unless we encounter something truly compelling. I dislike avoiding direct answers, but the reality is that we'll recognize the right opportunity when it presents itself. I earlier noted that nearly every week, we evaluate proposals that come to us from our banks, friends, or internal sources.

We take these matters seriously because our company's objectives are long-term. While we do not feel pressured to take drastic actions, we are focused on building a company for the distant future, and I believe we've been effective in that regard so far. This is an ongoing process, and I think we'll recognize it when it happens. Just for reference, there happens to be a call scheduled for Monday afternoon, around 3:30, to discuss a different topic. However, this is a normal part of our operations, and we'll continue exploring opportunities until we find something truly compelling.

But I'm curious. It is to getting its safety and it's getting inappropriate spread to our cost in capital, since we're really not in the business of, quote, 'strategic transactions.' We're only interested in cash flow and cash returns. That's who we are and that's who we've always been.

Good morning. I know it's very much an offer and not a deal at this point, but is there any impact to either you in-place leases or opportunities, structured, kind of hypothetical from the proposed acquisition of Bally's by Standard General, just thinking that you have other controlled tenants of Standard General in the portfolio today?

Matt, you want to opine?

I think I'll pass to Brandon.

Yeah. I'm not sure we're in a position to really speak to the Standard General offer for Bally's. Clearly, from the press release, the Bally's put out they have formed an independent committee. They've hired a banker. I suspect that they'll run that process and to the extent we have an opportunity to be a part of it, I'm sure we will try to be a part of it, but that process will take care of itself and we don't have any inside knowledge into that. The one thing I'll add is to the extent there is something there, the lens we look through is always going to be the same. It's asset quality, operator quality, four-wall coverage, credit support and figuring out ways to get accretive spread based on all those factors.

Is there anything structural within the existing leases or agreements that would be impacted at all by that becoming a private entity as opposed to a publicly traded one?

No. I don't think there's anything structural in the leases that would particularly be a problem. I think that if it were to become a privately-held entity, clearly, the leases would remain in effect. And if we had an opportunity to participate in that, we'd try to bolster those leases, but I don't think it changes the structure of the lease by the nature of the owner.

That's a fair question. The impact from Bally to GLPI has been very positive and supportive to this overall growth. We have a positive outlook under their current ownership structure and with their current leadership, so I don't have any major concerns. I think all of that is a potential opportunity.

And then if you think about potentially working with existing tenants to deploy capital into properties you already own, is there any cap rate advantage you can get in that deployment versus maybe the de novo transactions, especially we've seen cap rate compression in de novo transactions or are you competing, frankly, with alternative sources of capital that your existing tenants can access to fund those improvements of the properties?

That's a fair question. It's tricky question. The answer is, yes, I think we can do better. And in almost every case, there are reasons why under existing leases to be very difficult to go elsewhere. In other words, there will be a trade-off of some sort. We'll give you X. You may want Y and it'll be a discussion. So I don't have any fear that a transaction like that would go elsewhere. Because clearly, it's going to take a discussion and a trade-off of some sort. So I just leave it at that, but being almost impossible to go to another party unless other circumstances might dictate that. Very good.

Maybe this is Steve, and I would like to add that tenants often view things from a different perspective. For instance, if we own a casino property and decide to add a hotel, I still retain ownership of the land and the building at the end of the lease. While it might seem straightforward to compare borrowing rates and choose the lower one, the psychology changes significantly because tenants are aware they will leave the property behind. They might opt to fund their project through a bank loan, which could be cheaper. Ultimately, I understand their position since everything remains my property, and they cannot just relocate a hotel that isn’t theirs.

John, this is Matthew. I would also point out so your latter point about comparing our capital with other sources of capital is relevant. But the other side of the equation is other potential uses. And we've watched equities for some of the operators get pressure to the point that they've instituted share buybacks. So if there's an incremental dollar on their balance sheet and they can use it for either buying back their shares at a very opportunistic price or putting it into a building, our capital may fill an interesting gap there.

Okay, that was all very helpful, and that's it for me. Thank you very much.

Thank you.

Our next question comes from the line of Spenser Allaway with Green Street. Please proceed with your question.

Thank you. Just on the digital gaming front, it seems as though the operators are in an arms race to gain market share and customer acquisition costs appear high. That said Penn does seem to have some sort of advantage with its captive audience from its partnerships. Just curious if you can comment on how you view this playing out over the next couple of years.

Well, it's hard to know. I mean, we have no insight whatsoever into Penn's thinking or philosophy other than an awareness that they decided to be very disciplined in marketing spend and claim or believe that they are profitable today, and that's been a goal to get to profitability earlier, that's all we kind of know. What the impact on the bricks and sticks operations will be, time will tell. I do know, for example, near to us, they just opened the facility a couple of months ago in Morgantown, Pennsylvania, right down the road from our offices, I mean, 15 minutes away. The sportsbook presence and so forth has been pretty successful in attracting customers to that facility who then play on our Bricks-and-mortar facility. So what the overall impact is likely to be. I think it's going to be positive, but I think it's going to take some time to really understand where that's going.

I will just add Peter. We have seen a lot of investment in our properties by our tenants in expanding and building sportsbooks to attract customers into the facilities. And I think if you look at the product that the Cordish team offers, they really offer a fantastic product of a sports bar atmosphere. Where in many instances, I think you probably agree it'd be better to be there than in the stadium with an 80-foot-wall TV and food and beverage. And so I think what sports betting has done is it's spread across the country as it has resulted in quite a bit of investment in our portfolio assets.

The Cordish people have got this down better than just about anybody else on the planet. Their live facilities, not even gaming license facilities, are hugely successful because they're so exciting; they are physically scaled big time, and beautifully done. And they just are very attractive to new customers. So I mean, I think this is evolving. But for the casino companies, I think it's a plus. I know early days at Charlestown when they opened up early, the sports betting, it was very successful, attracting new customers, mostly male, who would come and play tables in addition to what they came to do with the sports betting. So I think this is a symbiotic arrangement. It's not been a net draw; it's actually been a net plus for the companies. We'll see where it goes, you know, in the future.

Spenser, this is that sorry, Spenser. I'd also point out the theme over the next number of years may likely be convergence as well. When you think about the sports-based place-making that Peter and Brandon articulated, and the reality that some of the folks betting on their phones are in the casinos but a lot of other places. The likelihood and there's some data that shows this is that there are people who enjoy making those bets and make more bets if there is a fun, exciting environment like some of the ones that Cordish develops, creates, and manages. And that's something that we certainly are thoughtful about and it ties into David's questions earlier too about thinking about what our strike zone is and how things might play out over time with the kinds of properties that we think makes sense for us.

Thank you. The next question comes from the line of John DeCree with CBRE. Please proceed with your question.

Good morning, everyone. Thanks for taking my question. I think you've covered a lot of ground, but maybe one more Peter and one of your peers talked about possible international gaming opportunities. And then in the context that maybe digital gaming and sports betting blurs the border a little bit between the U.S. and Canada. Is international gaming something that you would consider seriously and under what pretenses or how would you kind of evaluate those opportunities?

We've looked at international for a long time, looking my days with Penn, I could write a book on just how many places where I spend time. Japan, of course, China, Vietnam, Portugal, I could go on a long list. Australia, keep going. I've been to all these places. Finding the right transaction that makes sense and then given exchange rates and in Canada, it's particularly tricky. We just haven't found the right opportunity where we felt we could be competitive. Would we do that? Absolutely. Do we look there? You bet we do. So look, we look at everything. I'm not being coy, but we look at everything. That's kind of our job. But kind of taking a bible quote, many are called but few are chosen, that's the process.

John, a couple of the key guardrails for us are countries with strong legal frameworks and property rights. We want to make sure that we could certainly collect our rent and have the ability to perfect any issues. And also all the math we look at to Peter's comments is really net of taxes, translation, and any explicit costs that would be involved in getting the cash out of the asset and ultimately onto our balance sheet. Then the same process takes place looking at risk-adjusted cash flow and how it impacts the company's value.

Thanks, Matthew, that's helpful. Maybe one more and probably know the answer here, Peter, Matthew, but I think you've spoken to potential opportunities with Native American tribes in their push into commercial casinos. Obviously reservation gaming is about half of all gaming in the U.S. and very tricky there from a regulatory perspective. But if there's a creative way to get involved, perhaps on the non-gaming side where there's adjacent hotels to Native American casinos. Have you had any of those conversations? Is there any movement on that front or is it just too tricky to get anything done given all the restrictions as it relates to gaming?

It is very tricky. We've looked hard at it for many years, but I will say this I think that the opportunity to maybe easing up now for a variety of reasons and that is the tribes becoming more commercial in many markets. So that opportunity may now be more open and just leave it at that. But yes, of course, we're very aware of that.

All right, thank you. And good morning, everyone. Just one question for me. So yesterday, one of your competitors alluded to being open to embracing a joint venture structure for a certain deal should they arise. I'm wondering if you've considered that kind of structure and under what circumstances might a joint venture make more sense than going at it alone. Thanks.

That's a pretty fair question and the answer is we spend a lot of time examining that possibility. I don't know what we're prepared to say, Matt, do you want to make any comments?

I think that is a comment, obviously, for us to have every tool in our tool chest. We need to be able to access capital and get some value for our platform and our validation in a transaction where pricing might be aggressive. So we haven't done it to date, but we certainly have dialogue with the right folks. If and when it's appropriate to be able in a position to use it.

Well, simply to thank those who have dialed in this morning, we're excited about what we accomplished last year. We're particularly excited about the things that we believe are going to get done this year. It looks like another strong year. So we'll look forward to talking at the next quarter. And thank you all very much.

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