Earnings Call Transcript - GLPI Q4 2022

Operator, Operator

Greetings. Welcome to the Gaming and Leisure Properties, Inc. Fourth Quarter 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Joe Jaffoni. You may begin.

Joe Jaffoni, Host

Thank you. Good morning, everyone, and thank you for joining Gaming and Leisure Properties fourth quarter 2022 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 the 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, our Chairman and Chief Executive Officer of Gaming and Leisure Properties. Also joining today's call are Brandon Moore, Chief Operating Officer, General Counsel and Secretary; Desiree Burke, Chief Financial Officer and Treasurer; Steven 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.

Peter Carlino, CEO

Thank you, Joe, and good morning, everyone. I want to acknowledge that we are experiencing some technical difficulties with noise on the line. Several of us have dialed in from outside the office, but we hope that won't disrupt our presentation. We are excited to report another successful and eventful year at GLPI, details of which are outlined in our published release. Some key highlights that we'll discuss further include reaching a new fixed rent agreement with PENN Entertainment, which significantly reduces the rent volatility we've faced in the past. We have also signed agreements to fund the relocation of PENN's properties in Aurora and Joliet, Illinois, support a new hotel in Columbus, Ohio, and assist with the second hotel tower at the M in Las Vegas. This is quite thrilling, and we are pleased to collaborate with PENN. This quarter, we also closed on the Bally's Tiverton property in Rhode Island and Bally’s Hard Rock in Biloxi. Additionally, we focused on improving our balance sheet over the past year and last quarter, achieving the lowest leverage we've ever had, positioning us to pursue opportunities while remaining within our targeted leverage range of 5% to 5.5%. Now, I’ll turn it over to Desiree to provide some financial details on what I’ve just mentioned. Desiree, please go ahead.

Desiree Burke, CFO

Thank you, Peter, and good morning, everyone, and thanks for joining our call. We reported record results for the fourth quarter of 2022, and our total income from real estate exceeded Q4 ‘21 levels by over $50 million. This growth was driven by the quarter's Live! transactions, which increased cash rental income by approximately $31 million. The addition of Bally's Black Hawk and Rock Island properties drove an increase in cash rental income of $3 million, while the Tropicana LV land lease increased rental income by $2.6 million. The recognition of escalators and 10 percentage rent increases on our leases added approximately $4 million of cash rent, as well as the combination of higher non-cash revenue gross-ups, investment and lease adjustments, and straight-line rent adjustments, which drove collectively a year-over-year increase of approximately $8 million. Our operating expenses declined by $33 million, primarily due to a reversal of previous period provisions for credit losses on our Cordish leases resulting from improved property performance and a decline of approximately $8 million in gaming and general and administrative expenses related to the 2021 sale of our TRS operations. We continue to see strong coverage ratios across our leases. In the fourth quarter, we realized full escalation on the PENN master lease, which increased annual building base rent by $5.7 million, $1 million of which was recognized in 2022. In connection with the PENN transactions, which created a new master lease, the existing PENN master lease was amended, and the Perryville and Meadows leases were terminated. The portion of our rents that are variable as a percentage of our cash rents will decline to approximately 5.3% in 2023 from 11.7% in ‘22, providing additional visibility into uncertainty of our future revenue streams from this tenant. From a balance sheet perspective, we had a very busy fourth quarter. During the quarter, we sold 3.2 million shares of common stock under our ATM program, raising net proceeds of $156 million. We also settled the forward sale agreement in February of 2023 and issued 1.3 million shares, raising net proceeds of $64.6 million. We used these proceeds to partially fund the early redemption in February of ‘23 of the $500 million, 5.375% notes, which were maturing in November of ‘23. Our net leverage is now just under 5 times EBITDA. In addition, we entered into a new $1 billion at-the-market program, which remains unused as of today. In today's release, we provided full-year 2023 guidance for AFFO per diluted share and OP units, ranging from $3.61 to $3.67 per diluted share and OP unit. Please note that this guidance does not include the impact of any future transactions. For modeling purposes, our non-cash straight-line rent adjustment for 2023 will be approximately $39 million, which will need to be included in revenue but then deducted for AFFO as it is non-cash. I would also like to note that we declared a first-quarter dividend of $0.72 per share on the company's common stock, as well as a special earnings and profits dividend of $0.25 per share. The special dividend is related to the earnings and profits from the sale of the Tropicana building, which was completed in the third quarter of 2022. With that, I will turn over the call back to Peter.

Brandon Moore, COO

Peter, do you have any other further comments? If not, I think Matt had a few things he'd like to address?

Peter Carlino, CEO

I had put the – I put my speaker on hold. My apologies. Yes, indeed, I’d turn it over to Matt. So Matt, go ahead. I know you wanted to focus on a couple of points you thought were critical.

Matthew Demchyk, SVP and CIO

Sure. Thanks, Peter, and thanks for everyone for joining us in the busy earnings season. In an environment, the economic and monetary environment with significant cross currents, volatility and uncertainty, I want to remind everyone that GLPI's business model was built with environments like this in mind. So our shareholders can benefit from a platform that is strong, resilient, and opportunistic. We've worked hard and long on the effort to strengthen our balance sheet; our leverage and liquidity levels serve both as a ballast and also a strong foundation for growth. Our net leverage positions us for significant optionality as we look to fund future opportunities. At that end, we've also worked diligently the past many years to expand our tenant roster, sow the seeds of future growth through various structures of specific assets, open dialogue with new potential partners and to fortify our reputation as a collaborative landlord, problem solver interested in enhancing the long-term success of our tenant partners. We've got a seat at the table for opportunities and continue healthy conversations across the board. And to the extent one of our many conversations leads to an opportunity of interest, we're poised to pounce. We take our role as stewards of shareholder capital very seriously and remain resolutely focused on increasing intrinsic value per share over the long term. With that, I'll turn the call back to Peter.

Peter Carlino, CEO

Well, this time, thanks, Matt. I don't have my mute button on. No, I think that says very well what we're all about here. And I must say, just one editorial comment that I'm very pleased with where we find ourselves today. So with that, let's open the floor to questions. Somali, would you please open the mics.

Operator, Operator

Sure. At this time, we will be conducting a question-and-answer session. Our first question comes from the line of Greg McGinniss with Scotiabank. Please proceed with your questions.

Greg McGinniss, Analyst

Hey, good morning. Just looking at the guidance range, I’m a bit surprised by the low-end of the range given what appears to be a pretty straightforward story on lease escalators and limited percentage rent impact in November and December. And I guess based on our math, the guidance range does imply another 2 million shares outstanding versus where you stand today? So could you just touch on your expectations in terms of utilizing the ATM or settling forward equity? And what would end up driving you to the bottom end of the guidance range?

Desiree Burke, CFO

Yes, we did actually use the forward shares, which amounted to 1.3 million shares, from the end of 2022 to the beginning of 2023. We brought those forward to repay a $500 million bond that was due and redeemed early. This is the primary change in share count. Regarding the high and low projections, we currently have $600 million of variable rate debt, and interest rates fluctuate daily. There could be up to a 1% change in the interest rate affecting our low-end estimate, and we do not account for unforeseen changes, which contributes to the difference between our high and low estimates. Additionally, the number of M&A transactions we assess throughout the year impacts our general and administrative expenses, depending on how many of those we pursue. This is what influences the range from high to low and highlights the significant detail regarding the share count.

Greg McGinniss, Analyst

Okay. No, thank you very much for that. Just a second quick question here. Now that we're kind of closer to the end of Q1, do you have more visibility into how that reduced development is coming along with respect to timing and spend?

Steven Ladany, SVP and CDO

Sure. Peter, why don't you take that?

Peter Carlino, CEO

Steve, why don't you take that?

Steven Ladany, SVP and CDO

Thanks, Peter. Yes. So with respect to the Hollywood Casino in Baton Rouge, at this point in time, we are continuing to move forward. A lot of the major expenditures have been bought out. But we are still facing scheduling and timing disruptions associated with the supply chain and labor market. So I think at this point, our best approximation of hard cost spend funded by GLPI will be $70 million, and our expectation of timing for opening is likely to be sometime around the start of the fourth quarter. It could be sooner if some things go right, but I don't want to overpromise.

Greg McGinniss, Analyst

Okay. And even though the spend is going up, you guys are getting a return on that investment, right, still the full amount that you end up spending?

Steven Ladany, SVP and CDO

Correct. Yes. There was no cap on the conversion or whatever to rent. So yes, we'll get an 8.25% cap rate applied to whatever the total hard cost spend ends up.

Peter Carlino, CEO

Yes. I must say looking at it from Bally's point of view, looking recently at the construction and the progress there, it's very impressive. I must admit it's pretty exciting. I kind of wish we still were operating there. So I think it’s in partnership with Bally's; this is going to be a terrific project for them, and it's well on its way, really quite exciting.

Greg McGinniss, Analyst

Thanks, Peter.

Peter Carlino, CEO

Thank you.

Operator, Operator

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

Brad Heffern, Analyst

Hey, everyone. I was just curious if you could talk through what you're seeing on the deal flow front and maybe where you're expecting cap rates to trend.

Peter Carlino, CEO

Steve, do you want to talk about that? I mean, yes. Why don’t you take that.

Steven Ladany, SVP and CDO

Sure. We are experiencing a significant volume of deal flow, arguably more than ever before. We have a variety of transactions coming our way, including development-related deals and both domestic and international opportunities. This influx is largely a result of fluctuations in the capital markets, which are creating potential opportunities. Regarding your second question about expectations, I believe cap rates may rise slightly. However, our asset class has performed exceptionally well over the past few years and is gaining attention from more investors, leading to increased competition, as seen in Boston. At the same time, the conditions in the capital markets and the cost of capital may counterbalance this trend. Therefore, I anticipate that we will see transactions occurring at somewhat higher cap rates than what we've experienced in the last two years.

Brad Heffern, Analyst

Okay, and any updated thoughts on potentially acquiring Lincoln at some point down the road?

Steven Ladany, SVP and CDO

Yes, our current best expectation is that this will likely happen in 2024. I don't see many reasons for Bally's to pursue that approval in 2023. However, there are several reasons why they might be prepared to head in that direction in 2024. That’s our expectation.

Brad Heffern, Analyst

Okay, thank you.

Operator, Operator

Our next question comes from the line of Haendel St. Juste with Mizuho. Please proceed with your question.

Haendel St. Juste, Analyst

Good morning. Thank you. I wanted to go back to the capital allocation in the quarter. You guys were very active in the quarter. And I was hoping you could provide some color on some of the decisions you made, including paying down your $500 million notes with cash while you also issued, looks like about $200 million of equity from Q4 into early Q1 while also receiving the $200 million back from Bally's. And so you're sitting here with lots of great liquidity and leverage. So I guess, help us understand some of the decisions made in the quarter? And how do you expect to, I guess, use excess liquidity over the near term? I see you have some development projects in the pipeline. So help us understand the balance sheet philosophy as well. Thanks.

Desiree Burke, CFO

Sure. So we wanted to repay the $500 million, because, as you know, issuing 10-year debt in this market is probably a low six handle, not something that we would really love to live with for 10-years, as well as the fact that we had the Bally's transaction, which was requiring us to have debt-financed proceeds that needed to be guaranteed by Bally's. So we had to borrow $600 million. So we thought it was prudent to use some equity in order to do that. We paid down some debt and borrowed new debt. So, there were some equity utilized for the Bally's transaction even though in essence, it was a debt finance transaction.

Peter Carlino, CEO

I apologize, Desiree, please go ahead. I wanted to mention that we navigate carefully in our industry since there aren't many predictable acquisitions coming up. We gauge our current situation and assess what we have available to ensure we maintain an appropriate level of readiness for cash needs. It's important to raise funds whenever possible, and on the best terms available. As I’ve mentioned before, I am willing to accept some drawbacks from over-equitizing, as it allows us to be in a safer position. Our focus is on safety for our investors, so we take an opportunistic approach. This reflects our aspirations for the future. Desiree covered our immediate cash needs, which made this a sensible option. The debt market, unfortunately, was not very appealing. Please continue.

Haendel St. Juste, Analyst

Got it. Yes, go ahead. Was there more?

Matthew Demchyk, SVP and CIO

This is Matthew. I want to provide some perspective. Our long-term goal of maintaining a leverage range of 5 to 5.5 times is very important to us. Additionally, when we issue equity, it is primarily intended as permanent capital and with a long-term perspective. The decision to use cash for debt repayment was not the main focus; rather, it was about preparing for future opportunities and adding flexibility to our business model. This allows us to choose whether to use more leverage or equity as new opportunities arise. We have a variety of financing options at our disposal, including overnight, spot deals, and different debt strategies, which we have combined effectively to achieve the best results for shareholders. As we look to the future, we have more options than ever to ensure the best outcomes for the company.

Haendel St. Juste, Analyst

Great. Guys, appreciate that color. Separate question, one for you, perhaps, Peter. I think the Governor of Texas mentioned the other day that he'd be open to experiential assets that have an element of gaming “if it can be built in the way that professional provides a form of entertainment for people”. So I guess, I was curious if you could provide your thoughts on the potential legalization of commercial and destination casinos in Texas. And if you would see that as more of an opportunity or a threat.

Peter Carlino, CEO

It is certainly not a threat. It could indeed present an opportunity for one or more of our operators. However, my feeling is that nothing significant is likely to happen at the moment. We might see movement towards sports betting first, especially since professional teams in Texas are involved. The development of outright casinos seems to be further off. I've always hoped that Texas would eventually embrace full gaming within my lifetime, but it appears that is unlikely in this initial phase. For what it’s worth, that’s my impression of the current situation in Texas. We are keeping a close watch on it, and we aim to be prepared for any developments in any state or region. Texas is a challenging environment, and I anticipate it will be a gradual process.

Haendel St. Juste, Analyst

Got it. Got it. Thank you, guys. I’ll leave.

Peter Carlino, CEO

Thank you.

Operator, Operator

Our next question comes from the line of Rich Anderson with SMBC. Please proceed with your question.

Rich Anderson, Analyst

Thanks. Good morning, everyone. You probably hear a version of this question every quarter, but there’s a lot of discussion about expanding beyond gaming. I'm curious if this is something you are considering within GLPI, similar to the TRS deal where you switched to full triple net lease arrangements. Are you resistant to non-gaming investments, or do you see that as a possibility in the near future for you?

Peter Carlino, CEO

We've always been open to exploring all options. I often use the analogy that I would consider a run-down beach shack without windows or doors if it provided stable cash flow, aligning with our goals. The challenge, however, is that we're currently in an exceptionally strong position. I've maintained for years that our revenues are incredibly secure, and I stand by that. It's difficult to move backward when you're at the top. We are continuously evaluating potential opportunities, and I believe there will come a time when we branch out. Almost every week, we review or are presented with non-gaming options. However, I don't believe in taking risks recklessly. Our responsibility is to consider all possibilities, but we're in no rush to make a leap. Firstly, we haven't found anything that matches our current situation, and as Steve pointed out, we still have plenty of opportunities ahead. I don't foresee a shift in the next couple of years, so we will continue to focus on our core strengths for now.

Rich Anderson, Analyst

Okay. Fair enough. Second question is the talk about a smoking ban in Atlantic City that the workers like, but I wonder what you think the net would be in that case or if this were to be something that got legs around the country. Do you think a smoking ban would be a good thing or a bad thing for your business when you kind of roll it all up?

Peter Carlino, CEO

For GLPI, there will be no impact from this. It simply won't affect us. It will have an impact on operators. The idea that you can allow smoking in such venues is a straightforward consideration. We've observed repeatedly that imposing a smoking ban typically results in a revenue drop of as much as 15%, and that loss does not recover. In states where it's allowable, many businesses are creating outdoor smoking areas that meet regulations, enabling them to continue operating. Again, this situation does not impact us, but operators have become quite innovative in constructing effective smoking facilities. Ultimately, the outcome heavily relies on how legislation unfolds. Overall, smoking bans tend to be detrimental for operators. That’s all I’ll say on that. It won't affect us.

Rich Anderson, Analyst

Okay. Yes, I remember the smoking section on a plane when I was much younger, it didn't seem like that was really a creative approach to addressing the issue. But yes, we'll see how it plays out in the gaming space. Thanks for your color.

Peter Carlino, CEO

Well, I think if we're in this situation, it's like being in the seat right behind the person smoking.

Rich Anderson, Analyst

I didn't quite get that one, but whatever. Thank you.

Peter Carlino, CEO

You’re welcome.

Operator, Operator

Our next question comes from the line of Barry Jonas with Truist Securities. Please proceed with your question.

Barry Jonas, Analyst

Hi, hey guys. Good morning. Congrats on a great year. I think years ago, you used to talk about a target of like $500 million a year of M&A. Curious how you think about that today?

Peter Carlino, CEO

I’ll answer briefly. I believe we're still on track, even if it's not in a specific year, and we're ready to support that. Is there anyone else from GLPI who would like to share their thoughts?

Steven Ladany, SVP and CDO

I mean, I'll throw in two second answer, I guess. I mean I think $500 million is fine as a goal. I think we continue to outperform that in the past. And I don't necessarily believe that we would underperform it in the future. So I think it's fine for a target. I think between the PENN transactions that we hope to fund over the next few years, and some of the capital improvement dollars that we expect to put out to different tenants for different projects. I think we're going to be there again or through it. So I think all signs point to that as a continued goal and continued purpose of outperforming it.

Barry Jonas, Analyst

Great. Great. And then just for a follow-up, why don't I touch on iGaming and cannibalization? Just really how it plays into any long-term strategy or how you may start underwriting future deals. Peter, I think I asked you this question like a year ago, and you said it was too early, but curious another year of data. Any updated thoughts here or still too soon? Thanks.

Peter Carlino, CEO

Barry, I still stand by my previous viewpoint from a year ago. iGaming offers the convenience that we all recognize, but at the core, people are inherently social beings. For instance, if someone is going to bet on a college game, they might consider doing it right in their driveway for their favorite team or another game taking place across the country. However, that isn't really the experience people seek. Take for example the success of the Cordish group's Live! Facilities, which do not even include gaming options. My 23-year-old granddaughter chose to head to Philly Live this year instead of watching the Eagles at home on a large screen, joining fellow fans to drink, party, and enjoy the atmosphere together. Gambling is fundamentally a social activity. You can play poker on your iPhone, but it's a different experience when you're sitting across from someone at a table, trying to gauge their emotions and strategies; that energy is what draws people in. I believe there will be significantly more gambling activity, but I don't anticipate any adverse effects from it. In fact, I'm even more convinced now that this will positively impact physical properties.

Barry Jonas, Analyst

Great. Thanks so much.

Peter Carlino, CEO

Thank you.

Operator, Operator

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

David Katz, Analyst

Hi, good morning, everyone. Thanks for taking my question. One of the areas I continue to ask about and think about is the ways in which you might engage with Native American entities, who are more and more expanding what they have on reservation land as well as trying to grow off-reservation land or contiguous to reservation land. If you could update us on your pursuit of those potential opportunities, if there is any, please?

Peter Carlino, CEO

We consider these opportunities and acknowledge the potential if we can find a way to make them work. Brandon, you've been exploring this for some time, and it relates to both legal aspects and business opportunities. Could you provide any insights?

Brandon Moore, COO

Yes. I mean we do spend a lot of time looking at opportunities in tribal gaming. I think there are some obvious challenges in dealing with the tribes from a protection standpoint because there's only so much you can do to exercise on the collateral. And so for us, it's a prudent research and development project to see if there's a way that we could finance or otherwise invest in some of these commercial developments that tribes are doing in a way that we can protect our asset, our investment, our shareholders. So it's something that we do focus on. It's an effort that we've engaged in for a number of years. We obviously haven't done anything to date. But if not to say that we don't think that there's an opportunity there. I think there is an opportunity there with the right tribe, the right project, and the right investment.

David Katz, Analyst

Okay. Thank you very much.

Peter Carlino, CEO

Thank you, David.

Operator, Operator

Our next question comes from the line of Daniel Gulino with Capital One. Please proceed with your question.

Daniel Gulino, Analyst

Hey, everyone. Thank you for taking my question. Just one for me. So services inflation is still elevated in the U.S. even though you all run a light operating model, your tenants are large employers in their various locations. Are there certain things you all are watching out for in 2023? Thank you.

Peter Carlino, CEO

In my opinion, we are well-protected by the coverages we have with our tenants, so it would take an unprecedented catastrophe for us to feel any significant impact. I am not overly concerned this year about any real harm to our tenants. That's my honest view, but I’m open to hearing any other thoughts on this matter.

Matthew Demchyk, SVP and CIO

Yes, I'll add one point. When we consider acquisitions, we take a careful approach in analyzing the income statements to ensure we find coverage with a suitable margin of safety based on factors like asset location and operating history. Assessing this is an important part of our acquisition strategy, and we give it significant consideration.

Daniel Gulino, Analyst

Okay, thank you.

Peter Carlino, CEO

Thank you.

Operator, Operator

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

Ronald Kamdem, Analyst

Great. Just two quick ones for me. One, just on bigger picture, regional gaming revenue operating trends, some of the data we've seen in December had shown it was sort of down year-over-year, I think down a percent, no alarm by any means. But just curious what you guys are seeing on the regional gaming front, if any commentary there would be helpful. Thanks.

Peter Carlino, CEO

We don't have access to any information that you don't have. We're only aware of what's publicly available. However, we don't see any indicators of impending issues. I believe the 1% decline is a minor fluctuation that can be overlooked. Overall, our tenants seem to be performing well, and there's still a long way to go before we need to consider any concerns. Does anyone on the GLPI side have any insights regarding this?

Desiree Burke, CFO

Yes, even though coverage may decrease due to certain factors in the regional markets, we still believe our tenants’ rent coverage is stronger than it was in 2019. Additionally, it's only down 1% from an all-time high after COVID and the situation in 2021. We are not concerned at all. It certainly won't affect our business, as only 5.3% of our rent is variable. Even if there were a slight impact on tenant revenues and coverage, we have strong coverage, well over two times at our master lease tenants, which means it will not affect GLPI.

Ronald Kamdem, Analyst

Great. Helpful. And then my second question was just going back to the guidance on the AFFO growth of 2.5%. Just sort of curious, what's baked into that in terms of organic growth or rent bumps? And presumably, what's baked into that for the external drivers? Thanks.

Desiree Burke, CFO

So we have baked in all fixed escalators that will happen in 2023. We have baked in the transaction that we did with Bally’s or the recent one with Biloxi and Tiverton. We have not baked in any additional acquisitions into the 2023 guidance number.

Ronald Kamdem, Analyst

Great. That’s it from me. Thanks so much.

Peter Carlino, CEO

Thank you.

Operator, Operator

Our next question comes from the line of John Massocca with Ladenburg Thalmann. Please proceed with…

John Massocca, Analyst

Good morning.

Peter Carlino, CEO

Good morning, John.

John Massocca, Analyst

So maybe going at the cap rate question from a different angle. You've seen a couple of transactions in the regional space closed or be announced in the last couple of months and kind of in a rough high 7% cap rate, low to mid-8% cap rate range. Do you think that's an appropriate level of return given what we've seen in terms of interest expense and cost of capital increases, both for landlords and operators?

Peter Carlino, CEO

Probably not. But Steve, do you want to share your thoughts on that?

Matthew Demchyk, SVP and CIO

I'll hop in. Firstly, I'd say I hope that's an achievable rate for the kind of things we like to buy. I mean those were both nuanced transactions with a lot of characteristics that, for various reasons, didn't work for us. And the reality is in the broader world, I think you've seen more of an expansion in cap rates in broader triple-net than in gaming to Steve's earlier comments around appreciating the stability of these cash flows. So the good news is for our business model and for our inputs to our cost of capital equation, we can get a healthy risk-adjusted spread at rates like those the situations we like, and it's really going to come down to asset by asset.

John Massocca, Analyst

Okay. And then a quick kind of detailed question on the balance sheet. Any updated thoughts on swapping out the term loan? And I guess if you were to do it today, what would kind of be rough pricing on that?

Desiree Burke, CFO

So we only have about 9.5% of our total debt at a variable rate debt, and we have looked at the swap rate, and we are comfortable that we at this time, do not intend to swap that out.

John Massocca, Analyst

Okay. I guess any broad thoughts on where pricing is today or even pricing is today relative to last year, just…

Desiree Burke, CFO

Right. So the last time that I looked at it, a three-year swap was around 5.2%.

John Massocca, Analyst

Okay. That’s helpful. Thank you very much.

Peter Carlino, CEO

Thank you.

Operator, Operator

And we have reached the end of the question-and-answer session. I'll now turn the call back over to Peter Carlino for closing remarks.

Peter Carlino, CEO

Well, thank you very much. And thanks to everyone who has dialed in today. We are really excited about having closed out a very eventful year. But we think that 2023 is going to be a strong year for us as well. Fingers crossed, working hard and hope to see you all next quarter. Thank you.

Operator, Operator

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.