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Takeaway: We like the valuation but struggle to find a catalyst

"Easy pickings and no hard work, life doesn't work like that...  hang in long enough to get lucky"  -- Peter Carlino


Happy to report a good quarter.

$6m higher variance to guidance

  • Rents from Columbus & Toledo $700,000 better
  • Perry & Baton Rouge $1.3 million
    • Perryville cannibalization due to Horseshoe opening was less but not changing outlook
    • Baton Rouge performing better, not sure why, market seems more rational on marketing spend and reinvestment
  • 1x income tax true up for 2013 = ~$2 million
  • accruals for executive bonus, which is dependent on acquisitions, revered ~$2 million from bonus due to Meadows lawsuit.

Meadows Acquisition

  • Interest was robust from operators
  • Discovered financial information was unreliable & false
  • Forced to end operator discussions
  • Approached Cannery, no response
  • Filed Suit including: fraud & breach of contract
  • Seeking returns of $10 million consulting fee as well as potentially cancellation of purchase
  • Not take lawsuit lightly
  • Due to lawsuit, will not comment further


Q: Regional gaming outlook, state of industry, easier comps?

  • Appears to be a bottom in the market, not robust recovery, no shortage of people on the floor, but industry not collapsing, will settle out over time 

Q: Deal flow, process, timing & pace of transactions

  • Unique issues with Meadows and transaction, have general view that no deal is better than a bad deal, will proceed with great caution for shareholders
  • Recognize what PENN did to split off the REIT changed industry, elevated the value of others as well and have some companies and assets trading at comps to GLPI which makes acquisitions more difficult - others applied unrealistic multiple to valuations
  • Will work to identify an operator in advance at a known price

Q: Need to add more people for add'l due diligence?

  • Due diligence not a staffing issue, rather unique representations that were cause for concern
  • Always use outside resources to evaluate transactions

Q: Accelerated views on acquisitions outside of regional gaming?

  • Way too early to look beyond regional gaming for acquisitions

Q: Thoughts on impact from National Harbor on Perryville?

  • Expect a decline but reasonably modest.  Don't believe significant impact on Perryville, more likely negative impact on Horseshoe and Maryland Live

Q: Potential for competition in the market, impact on competitive advantage?

  • GLPI mgmt not convinced BYD and PNK will convert/establish a REIT - too difficult a process.  Look forward to competing.  Expect GLPI will be better rated credit, better rent coverage and lower leverage -- so GLPI a better more formidable competitor

Q: Financing capacity available as long as Meadows transaction up in the air?

  • No limit on size or number of deals, expect to finance 50% debt and 50% equity.  Don't feel their capacity is limited 

Q: Rent escalator, subject to adjustments - is the escalator day-to-day?

  • Press release data is unadjusted.  Within Master Lease calls for various adjustments, will be close, encouraged may still receive escalator.  Need final results from PENN through October 31, 2014

Q: Business attributes of non-gaming acquisitions.

  • Theater chain is not priorities 1, 2, or 3
  • Have looked at some other things, not a priority
  • Take 3x's the effort to think about opportunities outside of gaming

Q: Identifying an operator on the front end, limit GLPI on large portfolios?

  • Yes, a complexity and reality. Need to demonstrate ability to handle large acquisitions. Will consider using TRS to facilitate trade as well as loan structuring opportunities as well. GLPI well equipped to handle complex transactions

Q: Upstate NY opportunities?

  • Provided build to suit package to one operator in the Southern Tier area. Would like to own on the backside of construction.  Disclosed Traditions in Binghamton area

Q: Other green field opportunities?

  • Not many in limited license jurisdictions. Green fields few and far between

Q: ISLE - what factor influenced decision to outcome?

  • Unable to answer, if a property is out there, considered alive and simply won't comment.  GLPI looked.  Not comment further?

Q: Meadows - attempt to recast acquisition price?

  • Owners not willing to talk from get go. 

Q: Aging of database and demographic changes?

  • Younger people will gamble but not on same games their parents played. Seeing evolution of gambling, albeit slowly. Seen shift from tables to slots, now seeing shift back to table games