GLPI Q2 2014 CONFERENCE CALL NOTES

The long and slow process of validating the operating strategy continues - territory well known to other REITs charting a new course in new asset categories.

 

 

PREPARED REMARKS

  • Achieved predictable earnings and on balance feel good about day-to-day at GLPI

Q&A

  • Rent Escalator, why exclude?
    • Reason to believe results through October will be slightly below 1.8x coverage, prudent.  No special information and making objective judgement.  PENN includes no escalator in its guidance.
  • ISLE acquisition and potential accretion... Iowa properties impact decision?
    • Given event, GLPI not want to own properties in Iowa. However, GLPI looks at all possible transactions.
  • Search for operators at The Meadows, strict/formal process?
    • Searching for operator, but also put forward a TRS application to be operator if unable to find an operator.  Talking with all potential operators, public as well as private equity.  Should have a decision in a few weeks.
  • The Meadows transaction - put into TRS as temporary or permanently?
    • Strategically no interest in being long-term operator of The Meadows...deadlines GLPI needs to meet regarding purchase transaction - will be disclosed in the 10Q. 
    • When asset sits in the TRS reduces flexibility to do a portfolio transaction due to limitations on TRS.
  • OpCo transaction at The Meadows - strategic, financial, surprises?
    • Interest "was" expansive, not limited to specific buyer -- PE, multi-tenant, investors...currently working to bring transaction to a closing.  Had 18 parties interested -- implied GLPI is at "last and final" offer stage.
  • The Meadows closing?
    • Approvals by States as well as steps of transactions dictate still 2015, no delay. 
    • If no operator, raise equity capital at 5.5x EBITDA
  • Stabilization in any regional gaming trends?
    • Outlook is not exciting, nor is there good news...month-to-month.  Regional markets very crowded. Lower end <$100 theo player is not back, not healthy.  Upper end okay. 
    • Perryville:  Baltimore opening will negatively impact Perryville and reflected in GLPI guidance. 
    • Big picture trends are not great.  
    • Schools extended in NE, caused extended graduation dates resulted in very slow June.  Saw at Perryville.  First two weeks okay, third week drop off - believe due to high school graduations...(side bar - no mention of delayed spend tied to July 4th holiday - let's see what mgmt says for 3Q).
    • First week in July very encouraging
    • Do not expect anything robust in 2H 2014.
  • Volume of discussion for acquisitions picked up over past three months - given prepared remarks?
    • Enough to do, but want to make the right deal.  Focused on growing accretive earnings and growing dividend base. 
  • Who is starting discussions? 
    • Both sides -- GLPI as buyer as well as sellers coming to GLPI.
    • Surprised by how often GLPI is contacted for new markets for development partner.
  • Interest in more properties in Illinois?
    • Interested in properties everywhere - if credit is good
    • Doing business in Illinois is like doing business in ZImbabwe, very unstable...never know where the State is going.  
    • Hearing from operators in Illinois, not clear this is the it will happen... AND not sure Illinois will see an increase in GGR and gaming tax.  In fact, expect Illinois to see less gaming tax if new casinos open due to progressive tax rate.  More than sufficient gaming in Illinois. 
  • More difficult to sell and operating asset or more difficult to buy an asset with operations?
    • Complexity of tax-basis and liabilities - acquiring is complex but selling operator FF&E and operations is challenging but off-set is step up on basis.  Both sides "hard" in this world today.
  • Mechanics of a portfolio transaction - how sell an operator, entity or single assets? 
    • Transactions are complex and increased uncertainty.  In perfect world have tenant identified at time of contract.  Ideally, simultaneous purchases of a portfolio transaction.
  • Push back on deal volume - sellers need higher multiple or waiting for higher EBITDA?
    • Nobody said anything about push back...don't assume push back. 
  • Expectation for competition from a new gaming REIT - due to activist pressures? 
    • Have 100% confidence other companies looking at structure but from GLPI experience - process is long, time consuming, maddening, monumentally difficult and expensive. 
    • PENN didn't have "massively" large investors (related party rules).  
    • Tax basis calculations are complex and sometimes contra to the process.
    • Not surprised nobody has done a conversion within gaming sector. Smart that gaming companies have not made premature announcements as timeline is lengthy.  Not expect any company announcement for at least 12 months from today...
  • Any interest in Atlantic City at fire sale prices?
    • Need owner to pay rent, need EBITDA - therefore, very limited interest and not holding any talks with any property of interest in AC.