Gaming & Leisure Properties(GLPI) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record results for Q2 2023, with total income from real estate exceeding Q2 2022 by over $30 million, driven by the addition of Bally's Biloxi and Tiverton assets, which increased cash rental income by $12.1 million [10][11] - Operating expenses increased by $28.9 million, primarily due to non-cash items such as increased provision for credit loss on Cordish leases and higher depreciation expenses related to recent transactions [11][12] - The company refined its guidance for 2023 AFFO per diluted share to a range of $3.66 to $3.68, excluding the impact of future transactions [14] Business Line Data and Key Metrics Changes - The company continues to build its gaming portfolio, which now totals 59 properties, up from 19 at the time of the spin from PENN in 2013 [7] - The current land site development project in Baton Rouge has seen expenditures of over $56 million to date, with a total project spend expected to reach $78 million, generating rent at an 8.25% cap rate upon opening [13] Market Data and Key Metrics Changes - The company anticipates an annualized rent reduction in the amended PENN lease between $5 million and $6 million, beginning in November, due to prior COVID-related casino closures [35] - Rent coverage ratios remain strong, ranging from 1.96 to 2.76 on master leases as of the end of the prior quarter [37] Company Strategy and Development Direction - The company emphasizes a cycle-tested approach to managing its business, focusing on long-term stability and conservative leverage to navigate uncertain environments [17][18] - Management is actively seeking opportunities to prudently deploy shareholders' capital to increase long-term intrinsic value per share [19] - The company is committed to transparency and believes it supports institutionalization, which is crucial for its business model [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the competitive landscape, noting that discussions with existing and potential counterparties have been healthy, and they expect positive outcomes in the coming years [50][51] - The company is cautious but believes that the current environment presents opportunities due to traditional sources of capital being less predictable [42] Other Important Information - The company has committed $175 million to infrastructure and construction items at the Tropicana site, with expectations for further opportunities as the project evolves [32] - The company raised approximately $14.5 million under its at-the-market program, maintaining a net leverage of just under five times EBITDA [37][41] Q&A Session Summary Question: Can you discuss the competitive landscape and your ability to execute in the current environment? - Management noted that they do not see significant changes in competition and are encouraged by ongoing discussions, suggesting a positive outlook for the next couple of years [50][51] Question: What is the company's appetite for expansion into Canada? - Management indicated that while they continuously look at opportunities in Canada, they have not found a project that makes sense due to tax issues and regulatory differences [72][74] Question: How does the company view the underlying credit quality of Bally's? - Management emphasized their focus on the four-wall coverage of their portfolio and expressed confidence in the quality of the Bally's assets they own [86][87] Question: What are the expectations for percentage rent resets in 2024? - Management expects the percentage rent amount to increase in 2024, despite a decrease in the 2023 PENN lease reset, due to the absence of COVID-related closures in the new reset period [140][144] Question: How does the company plan to approach dividend policies given the current yield? - Management clarified that the dividend is largely driven by taxable income and required distributions, and they are not currently looking to change their dividend policy or engage in stock buybacks [107][108]