Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GLPI reported a significant increase in total income from real estate, exceeding the second quarter of 2023 by $24 million.
- The company successfully completed several strategic acquisitions, including Tioga, Rockford, Casino Queen Marquette, and Baton Rouge landside development, contributing to increased cash income.
- GLPI announced a $1.6 billion transaction with Bally's, which is expected to be mutually beneficial.
- The company has a strong balance sheet with leverage below 4.6 times and an undrawn $1.75 billion revolver, providing flexibility for future transactions.
- GLPI's pipeline remains healthy, with close to $2 billion of new investments announced over the past six months, solidifying its position as a leading landlord in the gaming sector.
Negative Points
- There are concerns about the funding needs for upcoming transactions, including the Bally's deal, which will require a mix of debt and equity.
- The Illinois market, where GLPI is making a significant investment, has historically been challenging, raising questions about the project's success.
- The potential impact of Bally's go-private transaction by Standard General on GLPI's plans and strategy remains uncertain.
- Rent coverage ratios have slightly declined, indicating potential pressure on cash flows and profitability in some markets.
- The Chicago project, while promising, carries risks of budget overages and construction delays, which could impact GLPI's financial performance.
Q & A Highlights
Q: Can you walk through your expectations for how and when the capital commitments, including the Bally's transactions, development funding deals, and debt maturities, will be funded?
A: The funding needs for the Bally's transactions will be staggered over the next couple of years. We intend to fund these transactions with a mix of debt and equity. Our balance sheet is strong, with leverage below 4.6 times and a $1.75 billion revolver currently undrawn. We will actively monitor the capital markets to lock in capital at attractive rates for these transactions and other upcoming capital needs, including debt maturities. (Desiree Burke, CFO)
Q: What changed in your thoughts around the Illinois market that made you comfortable with the large investment there?
A: The Illinois project is a significant and impressive one. We have knowledge of the planned developments and have had a material impact in assisting Bally's team. Despite past challenges in the Illinois market, we feel confident in this project due to our thorough market analysis and the strong partnership with Bally's. (Peter Carlino, CEO)
Q: With Bally's accepting a buyout offer from Standard General, do you see any changes in plans or strategy with them?
A: We have not been approached by Bally's or Standard General to make any changes to our leases. For us, it's business as usual. We will carefully review the control transaction structure when it is announced and continue to negotiate the definitive agreements that will outline the transaction terms. (Brandon Moore, COO)
Q: Are you seeing increased interest from casino owners for transactions as the Fed is poised to lower rates?
A: We don't think anyone is sitting on the sidelines waiting for better days to move their assets. Transactions evolve over time due to various needs of our tenants. We always have something in the mix and are ready to seize opportunities as they arise. (Peter Carlino, CEO)
Q: Can you talk about your level of input in the Chicago project for construction and design?
A: We will take an active role in the Chicago project, closely monitoring the budget, plans, specs, and construction timeline. We have internal resources and experience to ensure the project is delivered on time and on budget. (Brandon Moore, COO)
Q: What are your rights if a tenant undergoes M&A and someone new assumes the lease or the leases are broken up?
A: Generally, breaking up leases or transferring them to new tenants requires GLPI's consent. Our leases have flexibility for tenants to transfer to eligible transferees, but significant changes would require our approval. (Brandon Moore, COO)
Q: What gives you confidence in your 2 to 2.5 times rent coverage projection for the Bally's Chicago project?
A: We conduct extensive underwriting for every transaction. For the Chicago project, our underwriting and third-party analyses indicate that the property can be very successful. We believe the rent coverage will be strong and realistic. (Steven Ladany, Chief Development Officer)
Q: How do you plan to fund over $2 billion of activity, and what is your approach to equity pricing?
A: Our balance sheet philosophy remains the same, aiming for a net debt to EBITDA range of 5 to 5.5 over time. We will be thoughtful and balanced in our approach, considering the capital markets and pricing to ensure attractive spreads for our transactions. (Desiree Burke, CFO)
Q: What are your thoughts on cash flow and profitability at Bally's, especially with the added stress from recent transactions and the take-private offer?
A: Our leases with Bally's have strong rent coverage, and we believe that if any issues arise, other operators would be willing to step in and operate the assets profitably. We are confident in our underwriting and the profitability of the assets. (Steven Ladany, Chief Development Officer)
Q: What are the main risks you consider when doing high capital and longer-term deals?
A: We consider the cost of money over time, construction timelines, market risks, and ensuring a margin of safety in each piece of our structure. We conduct in-depth market research and use outside vendors to inform our underwriting and ensure long-term stability and security of our cash flows. (Matthew Demchyk, Chief Investment Officer)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
