Gaming & Leisure Properties, Inc. Q3 FY2024 Earnings Call

Greetings and welcome to the Gaming and Leisure Properties Third Quarter 2024 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joe Jaffoni, from Investor Relations. Thank you, sir. You may begin.

Thank you, Christine, and good morning, everyone, and thank you for joining Gaming and Leisure Properties third quarter 2024 earnings call and webcast. The press release distributed yesterday afternoon is available in the Investor Relations section on our website at www.glpropinc.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. Forward-looking statements may include those related to revenue, operating income, and financial guidance as well as non-GAAP financial measures such as FFO and AFFO. As a reminder, forward-looking statements represent management's current estimates, and the Company assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to risk factors and forward-looking statements contained in the Company's filings with the SEC, including its 10-Q and in the earnings release, as well as the definitions and reconciliations of non-GAAP financial measures contained in the Company's earnings release. On this morning's call, we are joined by Peter Carlino, Chairman and Chief Executive Officer of Gaming and Leisure Properties. Also joining today's call are Brandon Moore, President and Chief Operating Officer; Desiree Burke, Chief Financial Officer and Treasurer; 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 Peter Carlino. Peter, please go ahead.

Well, thank you, Joe, and good morning, everyone. We are, of course, pleased to present our third quarter earnings results, which I think demonstrate our success and continue to build upon our outstanding portfolio of gaming properties. To encapsulate what I believe is the most important summary of this, let me read from the last line of my quoted press release comments. I think it does the best job of summarizing how we feel about where we are. We believe our ability to develop investment activity in 2024 of nearly $2 billion and an attractive blended yield of 8.4% is a firm affirmation of GLPI's disciplined capital investment approach. The combination of our unrivaled gaming and real estate experience and a strong balance sheet has positioned GLPI as a development funding and real estate partner of choice for operators of all sizes and has created a platform for near and long-term growth and appreciation of shareholder value. I might also add that to the effect that we have been very successful in doing significant pre-funding to date. But I'm going to leave that to Desiree Burke, who I know is going to share her comments. Des, why don't you go ahead.

Thank you, Peter. Good morning. For the third quarter of 2024, our total income from real estate exceeded the third quarter of 2023 by $25.8 million. The growth was driven by the Tioga acquisition, which increased income by $3.6 million; the Rockford acquisition, which increased cash income by $4.6 million; the Casino Queen Marquette acquisition and the Baton Rouge land side development, which increased cash income by $1.5 million; the Strategic acquisition increased cash income by $2.3 million; the acquisition of Bally Chicago land which increased our cash income by $1.1 million; and Bally's Tropicana funding increased by $0.4 million. The recognition of escalators and percentage rent adjustments on our leases added approximately $5.3 million of cash income, as well as the combination of non-cash revenue gross ups, investment and lease adjustments, and straight-line rent adjustments which drove a collective year-over-year increase of approximately $7 million. As Peter said, we've been busy for this quarter with growth and development actually throughout 2024. Our operating expenses increased by $22.6 million, primarily due to a non-cash increase in the provision for credit losses that resulted from the Tropicana lease reclassification due to the recent investment. Related to the Bally Chicago Property, the company will be capitalizing interest and deferring all rent received during the development period for financial reporting purposes. However, we will be adding the rent back and deducting the capitalized interest in deriving AFFO. The Amended PENN Master Lease is subject to contingent escalation on November 1 of '24, and if obtained, would result in approximately $4.2 million of additional rent for us. Included in our release is our full year '24 AFFO guidance ranging from $3.74 to $3.76 per diluted share and OP units. Please note that this guidance does not include the impact of future transactions. However, it does anticipate our fundings for the Chicago Development Project, the Belle Development Project, and the Island Development Project. Our zero-coupon treasury bill matures in 2025 at an applied yield of 4.9%. We have entered into forward sale agreements to sell 8.2 million shares for a net sales of $409.3 million. Our rent coverage ratios remain strong, remaining from 1.9 to 2.59 on our master leases as of the end of the prior quarter. As you can see, we've set our balance sheet up to be very strong as we head into 2025. With that, I'll turn the call back to Peter.

Thanks, Des. And why don't we ask Matthew Demchyk to offer his thoughts. Matthew?

Sure. Thanks, Peter, and good morning, everyone. Thanks for joining us today. As we review our third quarter results, I want to highlight how our unwavering commitment to balance sheet strength and liquidity has enabled us to excel. Our leverage ratios remain robust, our debt maturity schedule is well-structured, and our disciplined capital market strategy continues to derisk our business model. This quarter, we were judicious in our use of the ATM program, which was complemented by significant reverse inquiries from both existing and new investors, and we're pleased to welcome them to our shareholder roster and to have raised the capital through forward agreements given the timing of our cash needs. We're in a solid position as we look forward to our 2025 spend. We're particularly proud of successfully completing our inaugural 30-year bond issuance. This milestone not only extends the weighted average maturity of our liabilities but also marks another step towards the institutionalization of our asset class. A balanced and strategic approach positions GLPI with strong cash positive liquidity, enabling us to earmark funds toward existing development commitments while also positioning us for future opportunities as they arise. In the third quarter, we demonstrated our strategic ability and agility through the Bally's transaction announcements, which showcased our ability to create tailored solutions that benefit all stakeholders. We followed that up with an innovative first-to-market structure for a tribal investment with our Ione Loan, which includes an option for our partner to convert the loan into a lease. These case studies of our creative flexibility enrich ongoing dialogue with prospects in our pipeline. And this year's announced activity, when combined with our other contractual future opportunities, adds together into a pipeline that we've developed that's becoming increasingly tangible and impactful. Our team remains dedicated to leveraging our organization's development expertise to closely monitor ongoing projects, while we remain steadfast in our effort to prudently deploy shareholder capital to enhance long-term shareholder value on a per share basis. Thank you, and I'll hand things back to Peter.

Well, thank you, Matthew. And as always, we have our entire team present with us today, and we anxiously anticipate your questions. So, operator, would you please open the floor?

Thank you. Our first question comes from Barry Jonas with Truist. Please proceed with your question.

Hey, guys. The Ione Loan is notable as I believe it's the first gaming refill with tribal gaming. How did you get comfort with the structure and how confident are you that this could convert to sell these specs?

Brandon, that's a question for you.

Yes, thanks, Barry. So yes, the Ione transaction, I would say, is the culmination of a multi-year process that we've been working on to try to come up with a structure that can be utilized in a situation where you have land held in trust by a tribe in a good REIT investment. I think it's probably just the first step. So this transaction with Ione includes a 5-year loan to finance the construction of a greenfield development outside of Sacramento. But the most important part of that structure to us is a long-term lease component whereby at the end of the loan term, the tribe can elect to convert the principal into a long-term lease structure. And that long-term lease structure and the documents necessary for that were all part of the NIGC's review and were covered by the declination letter that was received from the NIGC to move forward. We are cautiously optimistic here at the company that this long-term lease structure is something that can be utilized as an alternative form of funding for tribes that have land held in trust. We are in the process of meeting with tribes. We have met with tribes over the last several years. We're in the process of going back to many of those tribes now that we have the letter in hand. I think we'll know more in the coming months and quarters as to whether or not this is a repeatable path forward that we can turn into a new revenue stream for the company or is it something that the tribes may not find as valuable as we hope? Again, I think we're cautiously optimistic that this is a structure that can be utilized, but we'll know more in the coming months. At this point, we've asked tribes to enter into NDAs as we talk about that structure in more detail. I don't think we can share too much about the structure itself. As for the credit protections, which I think is where you were leading, we have all the same protections in this transaction that a commercial lender typically gets when lending to tribes and tribal countries. We have the collateral of the accounts. We have the collateral of the assets and things that the tribe, we get all that the same way that a bank would. In addition to that, this lease structure would permit us to foreclose on a lease and step in and operate at the property. Now, importantly, we can't operate the casino floor on the property. And so that is the rub in tribal land. Only the tribe can run the casino. But all the protections that we have in place that typical lenders receive, we are confident give us the protection to enter into this transaction and we are confident that we have underwritten it in a way that this transaction will be accretive for the company and gives us the opportunity to now roll this out with some other tribes and find out how big this opportunity could be.

That's great. And just maybe just one point of clarification. The release said that there's a 45-year maximum period. What happens next?

So, at the end of 45 years, obviously, we don't have the simple in the land. The tribe will keep the land. We'll all go our separate ways. Theoretically, they can run this transaction back. So, they could, if they need additional capital or funding, could seek to do a similar transaction. If not, then they keep their land or the federal government keeps their land and we all go our separate ways.

Understood. All right. Thanks and congrats again.

Thanks, Barry.

Our next question comes from the line of Greg McGinnis with Scotiabank. Please proceed with your question.

Hey, good morning. Yes, congrats on the tribal land deal. It's really interesting and great that you guys got that done. I'm curious, what's the incentive for them to extend past the initial 25 years? And also, is that lease going to have escalators included? Is it likely just to be a rollover of the 11% interest rate? Any details there would be appreciated.

Yes, so this is getting into a little bit of a stickier area. Yes, there will be escalation on the rent in the lease. I don't really want to get into on this call at this time the incentives for the tribe to extend the lease beyond 25 years to the 45 years. I think that's part of the moment that we're hoping to keep confidential. But there are incentives for the tribe to extend the lease term from 25 years to 45 years. The 45 years really has to do with some structural elements to ensure that we have good REIT income out of this project.

Okay. I guess separately, significant level of transactions now, year-to-date, which is great, but heavily weighted towards development versus in-place cash-flowing casinos. How are you guys viewing the risk that you're taking on the development side versus cash-flowing operations? Or are there just not the opportunities that you expected or hoped to see on regular acquisitions?

Let me address that, Brandon, on behalf of the Group. We are still focused on acquiring existing assets when they become available, and we are actively searching and engaging in discussions. Some of this is included in the Bally transactions we've announced. We see an emerging opportunity, particularly inspired by the successful project in Baton Rouge where we removed land from the property. We expect to replicate this with the Belle in Baton Rouge, thanks to our established capabilities. Over the years, we've developed numerous casino properties across the United States. As we mentioned earlier, Jim Baum, who led construction at PENN for many years and has been involved in almost all our projects, is back with TLPI. Although we are not the contractor or developer in Chicago, we aim to provide significant creative and high-level support to ensure the project meets Bally's expectations and is completed on time and within budget. While there is some risk involved, we have a strong history of successfully delivering large projects on schedule and within budget. We are open to both avenues—developing new projects and acquiring existing ones. Our willingness to explore both paths comes from our understanding that if opportunities don't arise, we are prepared to create them. This sums up our cautious yet proactive attitude.

Okay. That's fair. I'm sorry. Just one clarification question. That letter that you received from the National Indian Gaming Commission, is that just a framework for future deals? It does not actually give approval for anything else, right?

Correct. What the NIGC letter effectively does is it lists the documents that have been reviewed and have been, and I'll use the word approved, although that may not be the right word, they don't approve the content of the documents. What they are essentially ensuring is that those documents don't constitute a management agreement or management control that would have the potential of invalidating the transaction of the documents. The value of the declination letter, what most banks would receive is that you've had the NIGC look at your documents and ensure that you haven't violated that critical protection, the management. So that's what that includes. Would we have to go through the same process in the next deal? I think the answer is yes and no. In other words, yes, we would go for a declination letter, but now it's not an issue of first impression. And so, presumably, if we use the same documents and the same structure and the long-term lease component, that should be something we can get through much faster than what this process entailed.

It's the same committee or commission that does the approval for all those transactions potentially?

It's the same government entity and this reached the highest levels of the legal department there up to the general counsel we were working with. And so the short answer is yes. At the present time, this would all go through the same folks. Now you can't guarantee that the same people will still be employed at the time that the next one comes through.

Right.

But to the extent that it is, yes, this has gone through the highest levels of the organization. And so we're confident that if we stick to the knitting that we've created, that this will be something we can get approved.

Great. Thank you.

Thank you.

Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.

Hi. Good morning, everyone. Thanks for all the information. There has been some public information regarding Las Vegas and the Tropicana site. I was wondering if you could share any updated thoughts or perspectives on your role in the redevelopment of that site. If I remember correctly, I heard those buildings are coming down live.

They certainly did. Brandon, why don't you take that?

Las Vegas is a key area of focus for the company. Our top priority remains ensuring and preserving the value of the remaining parcel we have. This has been our main focus from the start and continues to be. Recently, the buildings were imploded during G2E, which was quite an event, and the site is now being cleared to allow the A's to begin construction on the stadium. Both the A's and the integrated resort have submitted pre-application documents for entitlements to the county, and some of this information has been reported in the media, so you can likely find drawings and pictures available. The next essential step is to align with authorities, utilities, and traffic to commence the project. On the integrated resort front, Bally's is collaborating with their design team to refine the plans for what the integrated resort will look like in Phases 1, 2, and 3, and this process is ongoing. We are awaiting results from this to see how much additional funding we may be asked or may be willing to contribute for the integrated resort's construction. It's important to note that the stadium will be fully financed by the A's and will be owned by the stadium authority in Las Vegas, so we will not have a role in that part of the project.

Very helpful. And I wanted to follow-up on some of the Native American activities. And just listening to some of the answers, when we think about collateral in that context, I'd like to just better understand your ability to, as collateral, step in and manage the non-gaming aspects of an asset, generally speaking, or versus the ability to sort of take the building, which I guess previously you've understood that you cannot on Native American land.

Yes, that's not quite accurate. You can include the building as part of the lease. We have a long-term lease for that structure, which allows us to regain occupancy of the buildings and structures on the properties. For non-gaming operations, we could manage whatever amenities are present. In theory, if desired during the lease term, you could eliminate all gaming and convert the space into an Amazon distribution center. You have the capacity to occupy and operate the buildings but not to conduct gaming. We understand that gaming is the primary source of revenue in those facilities, and the amenities are what attract customers to enhance gaming. We recognize this and are in a position similar to that of a bank, where the collateral encompasses all revenue streams, accounts, assets, and property. This comprehensive collateral and protection enable any creditor to work with the tribe to resolve issues if they arise. There is a mutual interest in ensuring that cash flow returns to the tribe and in addressing any problems that may occur. In gaming, this could stem from various factors, such as increased competition impacting the facility or management challenges. The specifics will always be uncertain, but we will depend on the same collateral package along with the lease to safeguard our investments with the tribe.

Super helpful. Thank you.

Thank you.

Our next question comes from the line of Chad Beynon with Macquarie. Please proceed with your question.

Good morning. Thanks for taking my question. Just wanted to follow-up on the tribal discussion. It sounds like you guys have obviously done more extensive work than anyone in the industry. You've gotten comfortable with it. You've explained the rules and regulations here this morning. So, with that in mind, do you think the competitive set for these deals going forward might be smaller than what you've seen historically on the commercial side, just given all the nuances, all the differences? Or do you think it'll be as competitive as what you've seen during the past couple of years in gaming? Thanks.

That's a fair question.

I think it's still uncertain at this point. We're exploring our options. The total addressable market for tribal gaming is significant, which everyone recognizes. However, the extent to which we would choose to invest in that market, and how many tribes would be interested in this type of structure and funding, remains unclear. Some tribes are financially secure and do not require financing, while others may be in urgent need of it. We are likely leaning towards the more capable end of the spectrum, but we need to determine how many tribes could benefit from this funding model over the long term to meet their capital needs. This is the assessment we are currently conducting, and we simply do not have enough information yet to gauge the potential size of that opportunity.

Yes, but with respect to our competitive set, as far as who may want to enter this market and compete against us for transactions, I can't really speak to what others would or wouldn't do. I can just tell you we've spent a number of years, like multiple, multiple years working on this. And so, there's an extensive amount of detail analysis, legal work, and time cultivating relationships that have gone into this to get us just to the starting line here. I do think, look, I'm sure other people will take a look and I'm sure other people will compete, but their ability to do it with the same clarity that we have after, call it 7 years of working on this, I think is probably not going to be as fruitful for some others.

Thank you. I appreciate it. And then with the use of the ATM program and just the volatility of rates, particularly here in the past 3 months, has anything changed in terms of how you view future leverage that's EBITDA targets when running the business?

No, I mean, we've been consistently conservative. We've got cash flow needs that go well into the next few years, and we want to be in a position that continues to kind of backfill and allows us to be opportunistic on new transactions. What I don't want to do is end up in an environment where for a small or medium deal, we're kind of against the wall and forced into an equity overhang position. Interestingly, on this deal, we didn't do it overnight. We didn't need to. We kind of pre-equitized it through the balance sheet activities we did leading into this transaction. And you're going to continue to see us be thoughtful, measured, and balanced as we go forward.

Thanks. Congratulations on the new deal.

I would also say, keep in mind that we have the Lincoln option in the future and that will be funded with all debt. So we definitely have intentionally kept our leverage low so that when we add that in at all debt financed, we're still comfortable with our leverage position. But I agree with Matthew, our whole commitment has not changed to where we are, just trying to keep our balance sheet as strong as possible.

Appreciate it. Thank you.

Thank you.

Our next question comes from the line of Smedes Rose with Citi. Please proceed with your question.

Hi. Thank you. Regarding the Ione agreement, I'm curious about the presence of many Native American casinos in the Sacramento area. Can you provide insight into why they are pursuing the casino land now? Did they recently obtain a gaming compact, or are they newly recognized tribes? I'm interested in the timing of this. Additionally, could you address your source of financing at 11%? That seems like a relatively high rate. Do you think they might be struggling to find a more traditional form of financing? You mentioned that banks have similar agreements to yours.

Yes, thanks, Smedes. I think, as to your last question, the financing I think was going to be difficult for the tribe to get greenfield construction financing at an affordable rate at that facility. This was sort of a unique opportunity for us to take our development expertise and combine it with our desire to have a tribe that was willing to go to Washington with us and promote our structure. We sort of tripped into this very unique opportunity with the Ione band with a very strong leadership that was willing to embrace our structure and see it through the NIGC. That's not something that you can do as a commercial entity on your own. I think this is sort of a culmination of, and a combination of, they had a need at the tribe for financing that could result in the development of their casino and not drown them in the leverage with it. We had a desire for a tribe to help us find a structure through a long-term lease component that we could take to Washington. Through that combination, we have this transaction. I believe the tribe had the land in trust in 2020. So they have been working since they had about 228 acres outside of Sacramento. Once they had the land in trust, they began to develop and work on this project that will be developed by Warner Gaming. We are familiar with Warner from their efforts in the Spokane market. So they are not new to tribal gaming and tribal development. That was all part of the underwriting we undertook. We visited the site. We've done the economic study. So we're confident in their location and in their ability to get this done.

Thanks. That's great. And then I'm just wondering is there any, I know it's only been a few months, but any update on the Chicago asset? I know you've got the land. Any updates just on Bally's kind of drawing down on the timeline that you're providing there, or do you think that'll be later in their construction process?

Steve, do you want to take a whack at that?

Yes. With respect to funding around direct hard costs, I think from GLPI's perspective, the first set of construction that will fall into our side of the ledger will be the casino podium caissons and the hotel podium caissons, which will start that part of the project will begin Q1 of '25. So, I think that's the first moment in time where literally things will start to go into the ground that we will be looking at for funding.

Very good. Thank you.

Our next question comes from the line of Brad Heffern with RBC. Please proceed with your question.

Yes. Thanks. Good morning, everyone. If the Ione deal does convert into a lease, is that at the same 11%? And then more broadly, it sounds like there's a potential added layer of risk with this structure. Should we assume that in general you would require a higher yield than maybe on a traditional regional gaming deal?

Without getting into the details, the answer is it will be a little bit lower than the 11% construction funding rate, but it will likely be higher than anything you've seen from us in a regional deal.

With respect to commercial transactions versus tribal lease transactions, we would anticipate there will be an additional margin of cap rate applied to those transactions basically because at the conclusion of the 45 years, excuse me, we will not own the land or building versus a traditional commercial transaction.

Yes, okay. Got it. And then I was wondering if you could give an update on the Cordish relationship. Obviously, Bossier is close to opening and then there's the Virginia project as well. Is there any potential to be involved in either of those?

Sure. So in Bossier, they are funding that themselves. We have had some conversations with them around future transactions that could potentially come out of that, but there's no updates really on that one. With respect to Petersburg and some of the other things that they, there have been articles about other development type licenses that they are pursuing in different jurisdictions. We do have the 20% equity right to co-invest with them on those types of transactions, and we are in discussions around what we may or may not be interested in doing.

Okay. Thank you.

Our next question comes from the line of Mitch Germain with Citizens JMP. Please proceed with your question.

Thank you. Just maybe closing the loop on the Ione Loan. Is it the way to consider this really just a tribe that might be looking to develop? Or could you also use this structure for somebody that is maybe looking to expand or refurbish an existing casino?

I think the answer is the structure could be utilized for almost any funding needs in tribal country. In other words, it could be building a hotel tower. It could be refinancing debt, quite frankly, if they want to use the proceeds from that. It could be any number of projects or things that a tribe or initiatives a tribe has that they would need funding for. The key for us will be analyzing what collateral and assets they have that can be contributed to the process. That may be a mix of commercially held property that we could take a collateral interest in and repossess and own, and the tribal land and land held in trust that we would have our long-term lease structure. This gives us an opportunity to go to tribes, really have a discussion about their financing and funding needs, and figure out with each tribe how this structure might be utilized as a part of their overall funding plan to meet their needs. And so, it could be a little bit of everything, Mitch, to be determined.

I think, though, to just kind of put one extra point on that, our interest is in the long-term financing component here, the long-term lease aspect of the transaction, not the short-term loan transaction. As we look to go forward, I think we're probably apt to do a little less greenfield, which would probably need a loan component in it, and we'll probably look to go more with the long-term financing structure, which is going to be embedded predominantly with properties that are already open, running, and profitable.

Yes, ideally, I think that's right. Our next transaction, future transactions, we're focused on the long-term lease structure out of the gate. We do not anticipate having a lot of short-term loans that could turn into the structure, could not. This was something we needed to do in this transaction to get the tribe comfortable to be the leader to go to the NIGC with us and help vet this process. So, I think as we focus on this moving forward, we will be focused on the long-term lease structure as the initial step, not an option.

Yes. So, for 2024, it's pretty insignificant, right. The amount of funding that we have left versus the couple months that we have remaining in the year. I would look forward to 2025 when we provide financial guidance for 2025. We should have some more specifics around the actual funding amounts we're anticipating, likely give you a range of what those are to include in the models.

Great. Congrats on the quarter.

Thank you.

Our next question comes from the line of Todd Thomas with KeyBanc. Please proceed with your question.

Hi. Thanks. Good morning. First question, just Desiree, sticking with you, question on the updated guidance where the midpoint implies a $0.93 result in the fourth quarter, which is $0.02 below this quarter. I realize you did the notes offering, and there's some maybe timing mismatch there and some dilution between what you're earning on that capital versus the cost of the debt. But there's only a few months left in the year. I was just wondering if there's anything else to consider moving into the fourth quarter that might be having an impact?

No. We raised a small amount of equity that has some dilution for the fourth quarter, and those two bond financings are what is contributing to it being slightly lower in the quarter.

I wanted to follow up on the tribal deal. Peter, Brandon, earlier this year you discussed tribal gaming as a significant opportunity. I understand it's still early, but if this approach is sustainable and something you are willing to continue, what should we expect for GLPI's future in terms of the potential for new capital to be directed towards tribal gaming assets over the next five years? How might the composition of the portfolio change as we consider this new opportunity?

I think we all agree here that it's still unknown. And there's several of us who can speak to that. There's been conversations with others, and the value is yet to be proven. Steve, Brandon, do you want to comment on just the tenor of such as we have? But this is just at the very, very beginning. We're excited.

Yes, I think that's right. We're sort of in the beginning. We've created a structure now that we know the NIGC is okay with. Now we need to take that structure and see how much demand there is in the tribal world for this type of funding. We are very optimistic. If the demand that we think is there is there, the next question for us will be that we have not answered yet. We need to look at the risk profile of that deal. So we know the risk profile, the Ione deal and why we undertook it. What we don't know fully is when we take this structure to the next tribe, how can we improve upon that risk profile and at the ultimate risk profile, how much capital we are willing to invest here from GLPI in that structure? I think we need to better understand that risk profile on a rollout basis a little bit better before we can take the second step of determining how much capital here we might be willing to allocate to that revenue stream. I just think it's too early for us to fully answer that question at the moment.

It's an exciting opportunity. It's an exciting invention. Whether it gets accepted by the markets, we're waiting to see.

Okay. Thank you.

Our next question comes from the line of Dan Guglielmo with Capital One. Please proceed with your question.

Hello, everyone. Thank you for taking my questions. Just one on the macro side. So long-term treasury yields have been rising even after a large Fed rate cut. Does that change the way you all think about deploying capital since your portfolio does have such a long investment time horizon?

I mean, clearly, we always consider what our cost of capital is and our spread to that cost of capital will be adjusted as needed on a transaction. But, I mean, it doesn't change the fact that we are still in the market to grow and to do accretive transactions.

Yes, I mean, at the end of the day, it's highly important for us to stay disciplined. We think about increasing the duration on the right side of the balance sheet and really hedging out that potential future risk. That's where the 30-year issuance we did really pleases us a few months ago. I mean, we've opened that market to ourselves. We've been pretty focused otherwise on a 10-year. I mean, we haven't gone short with anything outside of tax structuring. And you should continue to see us think that way. Also, to Desiree's point, include that kind of tenure in our underwriting on the front end.

Yes, look, we're not about to do any transaction that's going to leave us underwater. I mean, I think, as I've been fond of saying on these calls over many years, there's no transaction we have to do. I never feel, and we never feel, pressure to stretch to something that just doesn't make economic sense. Our business is all about a spread to the cost of capital and we will, as Matthew suggests, remain disciplined.

Great, great. Thank you. I appreciate that. And then I saw a good article on Chicago this morning just around development funding. Outside of kind of Bally's and Casino Queen, are there other tenants coming and asking what they can do to improve their properties? And would you all kind of help fund those improvements? And then kind of as a second part, is there like a capital outlay size that makes it worth your while? Is there kind of a $10 million might not be enough, but $100 million is? I'm just curious there. Thanks.

Sure. Yes, I can take a shot and if anybody else wants to add anything. I think the answer to your second part is no. No, there's not really a size requirement. I think the answer is if one of our tenants has a project that makes sense capital-wise and ROI-wise for them to do and they're willing to allow us to assist them with funding and it's accretive to us, we're willing to entertain it. That's the easy one. I think the first part of your question, I think, is a huge opportunity. I think we continue to have discussions with all of our tenants about capital improvements at their properties. If you look at Boyd's earnings yesterday, obviously, there's a lot of excitement about what happened with their land side move at Treasure Chest. Obviously, Casino Queen benefited greatly by the land side move in Baton Rouge. We already have the redevelopment projects going on at some of the other properties. So I think we continue to have discussions with tenants. I think tenants are starting to see there's upside, legitimate upside that is tangible, recognizable and hits their bottom line if they do make appropriate investments. So those discussions are picking up, and I expect to have more of those opportunities to present them to us in the future.

Great. Thank you.

Our next question comes from the line of RJ Milligan with Raymond James. Please proceed with your question.

Good morning, everyone. I spent some time discussing the debt aspect, and I’m looking to elaborate on a previous question regarding leverage and capital sources. Can you share your overall perspective on equity funding and provide some context about ATMs?

Yes, thanks, RJ. Well, you speak about philosophy. I mean, I think of the Fed's mandate, price stability at max employment. For us, we've got no equity overhang and ensure that existing shareholders benefit from our new announcements, not kind of opportunists that flip into deals. That means we need to optimally capitalize the company as we move forward and also be very measured with our ATM use and balanced. When you get a new deal, you get to look at, hey, if you consider the existing leverage of the company and the impact of the incremental investment, are you off-size in any way compared to your target leverage? For us, that's 5 to 5.5, and we've become very comfortable at the lower end of that range. Given the environment, we actually chose to build below that range to get some extra firepower for future opportunities consider at Lincoln. In this situation, we weren't off sides in the short term or in the long term. That led us to say, hey, all right, we're in a position to then use the ATM, use the forward, and do it in a balanced way. We would have done less this quarter if it weren't for some deep interest that we had from some very thoughtful shareholders, and we're able to get more done. We thought, hey, in this case, given where the stock is, relative cost of equity and debt, cost of equity versus when we underwrote the deals, we'll take the bird in the hand, and we did that. Again, it puts us in a great position with ample cash for our base case 2025 business plan. As we move forward, we're going to continue to weigh the same things. My hope is in hindsight, you'll say those guys were thoughtful, balanced, and measured. We can't predict exactly how it'll play out because it's a function of all these moving variables. Hopefully, that gives you some insight.

Yes, that's helpful, Matt. Thanks, guys. That's it for me.

Thank you.

Our next question comes from the line of Chris Darling with Green Street. Please proceed with your question.

Thanks. Good morning. Going back to an earlier question around potentially pursuing traditional sale leasebacks or redevelopments with tribal operators, is that ultimately a more difficult hurdle to overcome, given that I'd imagine traditional financing alternatives may be more competitive from a pricing standpoint? I ask; I just wonder if you're going to be functionally limited to projects that sit further out on the risk spectrum, where pricing might make more sense from the standpoint of both parties.

Chris, I'm sorry, to clarify, your question is about a tribal sale leaseback versus tribal current traditional financing?

Yes, exactly.

Currently, tribal financing is actually not as, in many cases, not as price beneficial to the operators as a traditional commercial gaming enterprise's debt financing would be. So there's already kind of an additional margin that they're already paying. I think that one big aspect that needs to be considered, and obviously, we'll talk to the tribes about it as they think about this alternative, is right now the average tenure that they would be able to achieve on a debt financing is probably max 8 years. That means the tribal people who are receiving the distributions have a refinancing risk to their distribution every, call it, 5 to 8 years. As we all know, rates change and things change. So one major benefit that a long-term lease structure would provide someone is the ability to kind of steady out their distributions and reduce that refinancing risk in a very material way. If you're talking about 8 years versus 4 to 5, I think we all can see that there's a pretty big benefit there. Look, we're going to have discussions. We'll see where they go. I don't disagree that there are definitely some nuances that are different, but that's the opportunity that's presented itself, and that's why we think we will get better margins on these types of investments than we would on a traditional commercial deal.

That's really interesting and helpful to hear. Shifting gears a bit, regarding the traditional commercial gaming space and any recent discussions with potential counterparties, could you share the latest around transaction pricing? Perhaps you could discuss any bid-ask spread you might be observing and how that might be evolving recently.

Yes, I think the most recent conversations, look, I think when the credit markets were less than enthusiastic over the last 12 months, I think a lot of potential counterparties somewhat sat on their hands. I think what's happened now that people see rates are maybe going to come in some, at least on the short end, they've started to kind of reengage their thought process around could they potentially do a transaction. The good news is I feel like the current rate environment is causing folks to be a little more open and thoughtful around potential transactions. The slight downside I would suggest is that everyone thinks rates are going to grind so much tighter that all of a sudden everyone's asset values will be high again, and you can pay a significantly more aggressive cap rate than reality. I think there's going to be more discussions whether it results in more transactions; only time will tell.

All right. I appreciate the time. That's all for me.

Thank you.

Our final question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question.

Hey, thanks for taking my question. You have Jenny on for Ron. So first, I think we're very impressed by the innovative avenues GLP has been pursuing in the last few quarters. I'm just curious if there's any other initiatives, such as other avenues or like non-gaming deals or other new opportunities from the new relationships or development opportunities on the pipeline if you can comment on the criteria for those opportunities you're evaluating, it would be great. Thanks.

The quick answer on outside of gaming is really nothing. I mean, we're not looking to move away from gaming as our source business. We look at stuff on a regular basis, always have some actually pretty thoroughly. But, again, as we've said, call after call, quarter after quarter, we haven't found any other territory that is as stable, dependable, and rock solid as gaming. As long as we can keep doing that, we will. But again, not turn our noses up on any good opportunity. As to what's out on the horizon, it's never predictable. It's serendipitous to some degree. We source transactions, but we also, as I noticed somebody, I just read it in one of the notes this morning, has been quoted as saying we kiss a lot of frogs. Indeed, we do, always looking for a princess. Steve, how would you want to characterize what we're seeing in the world?

Well, look, I think my comments would probably be similar to what I was saying to the last question. I know, Matt, were you going to say something prior to Matt answering? Excuse me, Peter. Okay. I think you've covered everything, Peter.

Okay. Then we have.

That makes sense. I think the second one, I want to switch back to Bally's Chicago. I think you mentioned the first round of funding is going to be Q1 '25. Maybe talk a little bit more like how many rounds of funding are you planning in 2025 and like the approximate amount of those funding in 2025, just for my models. Thanks.

Yes. So we are still refining our timing on the funding, working with Bally's and the construction team. So, as I said earlier, we will be providing that with our 2025 guidance, but we're not in a position right now to provide 2025 fundings.

Oh, that makes sense. Yes, that's all for me. Thanks so much.

Well, thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Thanks, operator.