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In preparation for PENN's F2Q 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.


  • [Hollywood St. Louis]  "We're planning to spend roughly $61 million in total to rehab the property. One of the things about purchasing an asset from Harrah's was we recognized that there have been some deferred maintenance and also that the property needed to be refreshed and obviously the slot product needed some updating."
  • "The two next projects are Youngstown and Dayton racetracks. Capital spend, which includes $125 million for license, basically a relocation fee and a gaming license. And so we're looking to $267 million and $257 million of cap spend, which will happen over the course of the next year and a half. We expect to open sometime in 2014." 
  • "Jamul Indian Village project, which will require us to get some financing. We have a backstop financing there from 2010, but we'll be in the market, looking to do a single standalone credit facility for the Indian project in California. Capital spend there is projected at $350 million and obviously you can see that there's no gaming taxes, which is a great thing."
  • "We're going to create a new publicly-traded company, GLPI, which will hold the majority of PENN's real estate, with the majority of the non-real estate holdings being held at Penn National, the existing company. It's a tax-free spinoff of common stock to the PENN shareholders and we will be refinancing all of PENN's existing debt, including the new credit facilities and the subordinated debt, and that hopefully will take place sometime in the fourth quarter."
  • "We're also taking care of the other preferred equityholders by redeeming at par for the preferred stock held by the Centerbridge and that agreement states that it's at par, regardless if PENN shares should happen to be trading north of $67 at the time of the spin, and they still receive par, they're not entitled to any premium or extra earnings in exchange for agreeing to be redeemed at par."
  • "We're going to enter into agreements with PENN's competitors, which I think on a sale leaseback arrangement, at least we expect to, we think that would have been very difficult to try and do something like that with the existing PENN company as an operator. But as a separate REIT, we expect that that will be our primary method for growth."
  • "One of the, probably most significant terms is that if the lease, at the end of any period, if the operator chooses to not renew the lease, there's a requirement that the operator has to basically sell or transfer it's gaming license and gaming equipment to the successor tenant. That was a very important element of the lease, because we wanted to ensure that there was no danger that these facilities would ever be not be able to operate as a gaming facility. We clearly think that's the best use for the property and we didn't want to have that drag on valuation."
  • The fixed base rent component, which has annual escalators subject to a minimum rent coverage of 1.8. There's a 2% rent escalator basically on the replacement cost of building as of 2013. That'll be annual escalator, so long as the rent coverage is better than 1.8.  The fixed rent component for the facilities other than Toledo and Columbus gets reset every five years at 4% of revenues for the trailing five years, so every five years, we'll have a rent reset based on the performance of the properties under the lease. And then Columbus and Toledo are adjusted on a monthly basis at 20% of revenues."
  • "Next steps, we have to finalize the Carlino Group agreement. We need to finalize our financing agreements with our banks. We also have to start the process of refinancing of all of PENN's existing debt and putting in place the bank agreement, as well as the bonds for the transaction going forward. And then we would expect that in the fourth quarter that we'll complete the spin and the E&P purge will happen hopefully in the first quarter of 2014, at which point in time, we'll make our REIT election."
  • "Higher dividend is better, it's basically the mantra. So we will do as many transactions as we can, so long as each transaction improves the dividend per share. And that's really going to be our driving force."
  • "The one that's in the gaming industry that everybody is focused on as being the absolute worst market in the United States right now, I'm not sure if that's true, but it's Atlantic City. So clearly, you could do a transaction in Atlantic City and there would be tons of operators in Atlantic City who'd be thrilled to sell you your property, that would probably be accretive to your dividends in the first year. And then eventually as the continuing trend in Atlantic City develops, if they couldn't pay the rent, oh well, too bad, see you later."


  • "What we have in the second to the fourth quarter is approximately an incremental $9 million of corporate overhead for Q2-Q4, of which we think about $3.5 million to $4 million is related to development costs and roughly $5.5 million for the stock price movement through March 31.  That expense will go higher because our stock was at roughly $54 at the end of the quarter. And clearly, it's trading higher. So, we will continue to see some additional expenses there.
  • "Looking out for the year, we're expecting maintenance CapEx at $94.3 million, project CapEx of roughly $277 million. That would include total expenditures for Columbus and Toledo, wrapping to be around $36 million." 
  • "And then we've got $13 million for the Hotel at Zia, and then we expect to spend another $47.8 million in St. Louis. And then there's some other stuff kind of floating through that gets us to a total of project CapEx of $277 million for the year."
  • [Revenue trends] "We're actually taking our property level guidance up in the second through fourth quarter versus where we were before by roughly $7.2 million. And as I touched on earlier, we're offsetting that with some expectations around development costs and the stock employee expenses of $9.1 million. So on a full year basis in the second through the fourth quarter, we did take it down a couple of million. But I would characterize that as actual trendline improvement from the property levels, offset by some corporate expenses related to what we're doing in the different jurisdictions."
  • [Ohio] "I think you're going to see another build that will start in the July-August timeframe as we hit the summer months as well. We're still working on marketing activities to continue to expose our new property to customers for the first time, and that's gone very well. Our repeat visitation has been very, very strong; our database growth continues to be very, very strong. So, this is very typical what we've seen in how Penn National opens a property in both Toledo and Columbus."
  • "Most of our data suggests that the weather had a big impact on visitation. We didn't see much change in spend per visit at our core properties year-over-year. Most of the effect was admission trends and visitation trends that I think were either impacted by new competition in our markets or weather-related. It doesn't seem to be any change in consumer spending when they do visit our properties. It's been more of the same, generally flat."
  • "My expectation is once the internet cafes do get contained, we will see improved business volumes, and it's just going to be a wait and see approach on how we address the overall count in the Columbus operation. But I would expect at this point that the 2,500 count that we have there today will get us through 2013."
  • "We continue to have active discussions with partners that are very interested in talking to Penn National about working together for online poker or online gaming, as it advances state-by-state. We continue to see that it's not something that's going to happen at the Federal level in 2013, but we think it will continue to evolve state-by-state. It's very difficult to predict how quickly."
  • "I would continue to characterize overall the promotional activity across these regional markets as fairly stable."