Greetings. Welcome to the Gaming and Leisure Properties First Quarter 2014 Earnings Call. At this time [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kara Smith [ph]. Ms. Smith, you may begin.

Good morning. We would like to thank you for joining us today for Gaming and Leisure Properties First Quarter 2014 Earnings Call and Webcast. The press release distributed earlier this morning is available in the Investor Relations section of our website at www.glpropinc.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include those related to revenue, operating income, financial guidance as well as non-GAAP financial measures, such as FFO and AFFO. As a reminder, forward-looking statements represent management's current estimates, and the company assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in the company's filings with the SEC and the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release. On this morning's conference call, we are joined by Peter Carlino, Chairman and Chief Executive Officer; and Bill Clifford, Chief Financial Officer of Gaming and Leisure Properties, Inc. Now I'd like to turn the call over to Mr. Peter Carlino. Peter?

Thank you very much, Kara. Good morning to you all and welcome to our first-- actually, our first full quarter presentation. I must say, as we sat here thinking about the presentation, it's quite different for us to not have a lot of operations to talk about, but rather just numbers that are pretty straightforward and clear, and happily in line with what was projected. With me as has been our practice over the years, is Bill Clifford, of course. Desiree Burke, looking around the table; Brandon Moore; Steve Snyder; Curt Magleby, everyone, all here to answer questions, if you have any. Obviously, things are in line with what we imagined. I'm going to let Bill talk briefly about a couple of points he might highlight and thereafter, as -- again as our practice, we're open for any questions that you may have. So Bill?

Thanks, Peter. Probably just 2 items that I would highlight for people's benefit relative to what's been reported and certainly, deviate -- deviations from our guidance. The first component is in our guidance, we had incorrectly assumed on the fully diluted share count that the E&P dividend would be based on a weighted-average basis, reflecting the date of the payment of the dividend, where, in fact, it's -- the fully diluted share count is counted from the very beginning, basically, back to last year. So what that did was the per share information that was in the guidance is different than what was in our last press release. However, what we thought it would be more informative is to help people understand how we did on a per-share basis, giving effect to the correct calculation of the share count. The other item that I would highlight is that in our adjusted EBITDA line, guidance was $3.6 million, that a little bit over $3 million higher than it should've been because that was not taking into account the dividend payments to employees, which properly gets reflected in adjusted EBITDA. Those are the 2 items that I think are probably the most significant in terms of where we're different from guidance. Other than that, as you can see, adjusted funds from operations were up by $100,000. I mean that's about as close to that I'll ever expect us to be going forward. So with that, I think we'll open up the floor to questions.

[Operator Instructions] Our first question is from the line of Cameron McKnight of Wells Fargo.

Questions to Bill. I noted that the 2% escalator is in your 2014 guidance. How confident are you that the escalator will apply at the end of this year in light of Penn's recent guidance?

Well, we don't have -- I no longer am the beneficiary of getting the detailed information, daily basis information that Penn has. There is no doubt that the rent escalator is right on the cusp and we -- I thought about whether we pull out the $1 million that would effect this year or not, we decided to leave it in simply because I think it's too early in the year to expect as that won't happen. I know -- I take some interest, for instance, that -- obviously, the first quarter was a really tough quarter. I know as they said on the call that they talked about some really poor results in for a few weeks in March and April, which was basically the genesis for the reduction of their guidance. I think we'll wait until we get out to the end of the second quarter, which at that point in time, will be past the weather impact and some of the calendar issues around Easter and if -- clearly, if they perform in line with what their guidance is, then I would expect that the 2% escalator would be at risk. Having said that though, I think there's some hope for the future and that I think, when the 2 properties in Ohio open up, that will help their ratio going forward, assuming that the properties perform, as well as we -- I believe they will perform. That may mean that we may not have an -- may or may not have an escalator for this year, but then there's a good chance that we'll be back up over the 1.8% in the following year, again, assuming that they stabilize. It is, without a doubt, a little bit troubling where regional gaming trends have been for the last several quarters, but I think at this point, we're a little bit passive on this side of the table, so we're just going to have to wait and see what the rest of the year.

Okay, great. And then just as a follow-on to -- for Peter or Bill. Could you restate in broad terms your expectations on potential acquisition volume likely sellers, potential addressable market, some of the points that you've addressed before?

Let me take a second at that. I had thought of saying in my opening remarks, I highlighted that these calls are kind of uninspired, relatively speaking, because we don't have large operations to talk about good or bad, and it's simply the numbers are the numbers. And that -- everything that you would really want to know about are all the things we can't tell you. That is the problem. I mean beyond saying that we are very, very actively engaged in many initiatives at various places in the country, and are highly focused on our mission. There's really not, anything else that we can tell you until we can tell you. So I mean, that is -- it is kind of a frustration. We know what you, all, like to have and we certainly, like to be able to tell you more, but we are fully engaged in attempting to build this company along the lines that we said we would and believe me, we are. Do you want to anything to that, Bob?

No, there's not a lot to add. I do remain comfortable and confident that we will get the transaction done this year. I hope we'll get it closed this year, but I do believe we'll get something done this year. We certainly have enough -- we're certainly talking to enough people to estimate that something will come through, but as Peter said, this, we know we really can't announce anything until it's time to make the announcement.

Our next question comes from the line of Shaun Kelley of Bank of America.

I just wanted to stick with the acquisition landscape. Maybe to ask the question in a different fashion. Do you think that -- any sense that the current operating environment that you've see in regional gaming has changed the willingness of sellers to engage or potential sellers, I should say, to engage in discussions with you guys? I mean obviously, if people believe that this is a cyclical blip, are they going to want to sell off of numbers that are currently as low as they are, and in general, our sense of operators is that they still believe a lot of the issues or headwinds that they may be facing are cyclical rather than structural?

Let me say this, with the hundreds of gaming properties, independent gaming properties as well around in the United States, there are many reasons why people sell, sometimes driven by financial need or partners that need to say goodbye to each or there's a long list of stuff and we believe that will always be there. Steve, do you have an opinion?

I think the answer to the question, Shaun, there's nothing from a macro standpoint, there's nothing from an industry-specific standpoint that leads us to conclude that the amount of opportunities is any different now than it was 90 days ago. So if the question is are regional guys retrenching, rethinking valuations, we've seen no reduction in conversations that would indicate that.

That's exactly what the question was. So that's helpful. And then I guess, my second question to turn back to fundamentals, as we think about some of the puts and takes in guidance that obviously, the Iowa situation, which you may be passive in and may not be able to comment on, I'm not sure if that's being driven by you or Penn, or both. The question is really, are there any remedies, obviously, that's come out of your guidance, there any remedies that you may have to reinstate that or to actually still kind of return to a favorable outcome in that market even though it's kind of come out of your guidance at this stage?

Look, the true answer for GLP is pretty simple. We are completely out of that situation because the licensee is Penn, and while I remain Chairman of the board at Penn, I really am not as is required remotely involved in the day-to-day there. Obviously, the tone of what they are doing over there is much the tone that I had set. The behavior of the Iowa Racing and Gaming Commission is outrageous, illegal, really beyond description. It was appalling and I've been very forthright in saying that. What has come out of that, which is kind of interesting in Iowa is that a preliminary -- and Brandon, correct me if I'm wrong, ruling from the court seems to say that the licensee is actually the charity, that they're the folks who controlled the license and though the casino companies put up the money, if this -- if I get this right, that's very nice, but the real control rests with the charity, which is something that we would not have contemplated.

I think that's right, Peter. I think it's far from decided, but that was clearly, the suggestion in the last court ruling that we saw in that case, so I think there's probably more to come in Iowa, but that was certainly, the last suggestion.

Yes, so look, my encouragement for Penn, even as Chairman, would be simple. I mean you take this as far as you can through every venue, state, federal, take it to the gosh darn Supreme Court do that. But this is such an outrage, such a theft of property that, I mean it makes me apoplectic to even talk about it. So my hope and expectation is that the Penn folks will do everything and anything to fight this to the last breath, period. Now what the outcome is going to be? Look, it's a local court, I'll be very honest with you, I don't mind saying it on a public call. What happens in a lot of these states, you get hometown. I mean it's amazing to me, tough it is to find justice in somebody else's state, and the twisted judgments that some courts will come to, to make an outcome go the way they want it. So I'm being very forthright and direct. What happened in Iowa or what is happening is a disgrace, so that's it. You got the tone that I feel about it, and I presume and hope that Penn will carry on in that spirit. Is that an answer?

I think it's pretty clear. And my last question will just be, I didn't see if your name was on the list of possible parties in New York, but you may not have had to submit if you weren't going to be the licensed party, so I was curious just on your views at that market, you have discussed the idea of kind of backstopping some greenfield developments through GLPI, so just kind of wondering how you might approach or think about the New York opportunity?

Yes, the New York opportunity, obviously, is pretty challenging right now to figure out. Because people have been surprised by the locations. Why? I don't know, but there are some folks upstate they didn't expect things to be quite as close to Manhattan as some of these 22 applicants have presented. So I think the situation has to flush out a little bit. These license applications themselves are due June 30, we've had conversations with multiple parties. I would say stay tuned to see where we end up in support of any applicants from a financing perspective, but there is obviously 60 days at this point before some of that will clarify itself.

[Operator Instructions] Our next question is from the line of Thomas Allen with Morgan Stanley.

Just following up on the prior question, are there other greenfield opportunities you're looking at and I read recently that you bid for Florida property, but I think there are some extenuating circumstances, can you just give us some more color on that?

Sure. We were partners with Mohegan Sun, who is going to be the operator and we participated in an auction where the existing creditors credit bid with their -- what was due them, and they prevailed, at a price that I thought was incredibly a rich price. Obviously, we've gone as far as we feel comfortable and basically, they demonstrated an undying desire to own the property and operate the property. And my understanding is that they plan to close today, assuming that all goes according to plan. They'll be the happy operators of the Miami highlight facility. I think we -- there's certainly, a valuation there, but the reality is as we looked at that property, we did not see the types of upside that would be required to support a purchase price that was north of where we were going or north of where the bid went, and so unfortunately, I guess at some level, we ran into someone who had a view on valuations that were far in excess of what we thought the property was worth or what Mohegan thought the property was worth, to be more accurate. And I think your first question was when you look at greenfield, where we -- yes, look, my answer is the same as it's always been and was in the Penn days, and that is simply that if it's out there, you can bet we're looking at it. Period. I mean you can just write that one down, that we're very actively engaged between all of us at this table and especially Steve, Curt, Bill, all of us are very attuned with what's going on around the country and we're poking around everywhere, and with every possible mix of things.

And in relative to the greenfield, then we're certainly, interested in greenfield in areas where we see great growth potential, right. I don't think we're going to be -- certainly not interested in doing greenfields in Tunica, Mississippi, or Atlantic City. So obviously, there are certain markets, new markets that come up something like New York, Boston, certain areas in Massachusetts will be interesting and any new state that has new jurisdiction where it gets authorized, we'd be very interested in participating. More mature markets where returns aren't really very compelling, we'll probably wouldn't be interested in.

That actually bring me to an interesting point. Did you look at this Caesars Tunica transaction or property or did you look at any of the AC properties that have closed?

Yes, you wouldn't get us to step anywhere near the properties in AC that have transacted, so I can tell you that, that is absolutely not level of properties that we'd be interested in, at GLP. The Tunica property, similar situation is that you got to look at that market, recognizing an oversupply. There maybe a couple of properties in Tunica that we might be interested in, they would obviously, have to be the leading properties within the market, but buying anything that's on the verge of closing or on the verge of extinction, is not something that you'll see GLP involved -- or get involved in, including the properties that traded.

Okay. And then final question. There appears to have been -- there may be some shareholder activism around some of your traditional peers, doing a similar opco/propco spend as you did. Any thoughts on the likelihood of you seeing competition and how that could impact have your deal volumes going forward?

Listen, I mean every company has its own issues to deal with relative to trying to follow the footsteps of what Penn did. Anybody who thinks it’s easy is confused, I'll just leave it at that. And obviously, I don't want to start -- one, I don't have the intimate knowledge to really opine on each individual company's outlook for getting there. I know there are going to be roadblocks. We had roadblocks that we had to overcome as part of the Penn transaction. We work through those, it was a 3-year process. Obviously, there's a roadmap now, which would be helpful to the other companies trying to follow us, in terms of they probably will be able to short-circuit that process a little bit, but I don't think this is something where you're going to find somebody who's just starting the process today and finishing up by end of the year. I think that's an incredible exaggeration. We've always contemplated that there would be people who will be interested in joining our space, that is not something that we would be surprised about. We're certainly, not surprised if they want to, that they see what the success of the transaction we did, and that we fully expect that everybody is going to do their own research in terms of whether they can accomplish the same thing. I think we'd stay tuned. On one hand I think, it's actually encouraging that they're looking at it because what that means is that as they pursue their thoughts around trying to do the same thing we did in terms of converting into a REIT, it opens up the opportunities that they're going to start to realize that there may be an easier way to accomplish, pretty much the bulk of the same goals, which is to increase valuation and monetize the value of the land and buildings, and obviously, we'd love to help them with that. But obviously, they first need to do their homework. They need to understand what pitfalls are, what the traps are, what the difficult problems will be as they try to accomplish that, and then we'll have, I think at some point in time, they will all want to take a look at the alternative and saying, "Well, instead of doing all of that, with all of the risk and all of the legislative potential risks in the future, is there maybe not a solution that could happen a little bit faster and quicker?" And will see where that goes. I see it's encouraging. I don't actually see it as necessarily bad news.

It's like threading a very, very, very fine needle, which Desiree can very well attest to, because she has lived with the bizarre and often conflicting accounting requirements understanding the basis and on the property. I mean, I couldn't begin to describe it, but we could, it take another 1.5 hours to tell you just how miserable this is, and as they will discover, it's a multi-year period at best, so we're going to have a runway uncluttered for a fair while and we've certainly, confidence with that. I take Bill's view that, that's tomorrow's problem, we don't have to worry about that today or for a while. And who knows what the IRS is thinking about this and the Treasury, there's already been proposals to stop this kind of thing. So who knows, we may be got in under a wire, but again, all this is unknown, can't worry about that. We always assume competition's around the corner right behind to somewhere even if you can't see it, so that it's always move as fast as you can and then they're going to have to catch you.

The next question is from the line of Carlo Santarelli with Deutsche Bank.

I was just wondering if you guys could possibly present us with, maybe, a base case timeline for how an acquisition discussion, how long it would take, how that pet process would work? And maybe, if Casino Queen was the usual, but that's fine as the answer, but just kind of so that we could think about when you engage in a deal that both parties understand it’s going to get done, what is the process from there in terms of timing?

I'll describe a little bit about the Queen -- how the Queen went, I'm not sure it's typical. What we've generally found is that you start a conversation where people explore the ideas, you get them some kind -- you first have a verbal discussion and kind of socializing the idea, you then move the stage of putting together on paper something around what it would look like. The other party goes off and kind of thinks about it for a while. And then they come back and say, "Gee, would you give us a more detailed term sheet?" So we give them the detailed term sheet, and then eventually, they get to a point where they're prepared to move forward. Now what was helpful with the Queen was that they were solving a particular problem with their covenants on their existing financing, and they, therefore, had a deadline that they were working towards. And because they had a deadline, that process was much quicker than it might otherwise be, but I think -- I think all of those things take months. Each one of those stages takes weeks to months. It's not like those steps are going to have socialized, call the next stage, send something in fall in 1.5 weeks, and start negotiations the succeeding week. It's more -- a more lengthy process than that. Some are slower than others.

Well, a lot gets to the motivation of the property owner, are they looking to remain? Are they looking to maybe cash out some partners? Are they looking to sell out right, because we look at that too and then in that affect, we have to -- well, we can bring something into the TRS, we could do that. We can, if it's a more complex deal or maybe one that involves multiple properties, we've got to find an operator, we'll find an operator, whoever that may be. In some cases, it could be a Penn, could be, but Penn is conflicted in a lot of places for FTC reasons, so we're cultivating others and that's a sincere and a pretty firm focus here. So this could take any form at all and all forms, and I think you'll see over the next couple of years, we will do every one of those kinds of transactions, every one.

I mean one of the things that does lengthen the process is how good of an understanding does the potential seller out of their tax basis in their assets and in their entities. And so generally, what we're finding is as we get a little bit more serious, all of a sudden we end up having to do some exploratory work around tax basis and structuring, which can tend to take a period of time. But fortunately, from the Queen, they happen to be an ESOP, and so that information was totally irrelevant because they didn't know any tax on a disposition of land and building. But when you're dealing with an entity that has a tax consequence, you have to -- there's some additional work that gets required that can be several weeks or months sometimes just getting a better understanding of exactly where they're at. So that's one of the obstacles to getting the transaction done quickly.

Great, and then just quickly, at what stage, Bill, would you guys actually announce the transaction? I know you said you might be able to announce something this year, and possibly not close it until next year. I'm assuming that delay is going to be the state approval process. Is there anything else I'm missing in there?

Well, we wouldn't announce the transaction until we have the signed purchase agreement, obviously, because, the deal isn't until it's signed. The timing is the required gaming approvals because under even a straight sale leaseback arrangement, it would be a financing source for the licensees that they would need approval from the gaming regulators for approval. Queen was another situation where I was quite amazed at how quickly the state of Illinois was prepared to move on the transaction. That was obviously, helpful that our transaction was fresh. All the regulators certainly, were up to speed on all of the issues around Gaming Leisure Properties and understood who and what we were, and I think it was also helpful that the Queen was an employee-owned situation where they had a problem with their bank covenants, and I think the state of Illinois was very accommodating in terms of getting the approval somewhat fast-track versus what we would have known- -- might have expected in a normal circumstance. So that deal was clearly quick, it's probably going to set the record for almost every deal we do in terms of the timing, from the beginning to the end. I would say that's probably -- the first one will be the shortest one, which is somewhat ironic. If you think as you do more deals, that you get better at it and faster, but there was just a number of pieces in that deal that just allowed it to get done a lot quicker than you might normally expect.

Next question is from the line of Steve Wieczynski with Stifel.

So I want to ask a regional question, maybe a little bit differently. I guess this would be for Bill, with your TRS EBITDA unchanged still at $35 million? I guess, I'm a little bit surprised that, that hasn't gone down a little bit from where you guys gave guidance last quarter. Was your guidance built pretty conservative for those 2 markets?

It was conservative, I think it was with the benefit of understanding where we were in the first quarter, I think we -- I would like to think we did a pretty good job, but who knows. It's still early and I don't want to ring the bell of success on projections where we're going, but we had some pretty draconian assumptions around cannibalization, reflected in our guidance and we've seen nothing yet that would cause us to change that view. Given that we were pretty much in line with the first quarter, we'll have 2 properties, so I mean let's look the, trying to get 2 ahead of ourselves, here in terms of our amazing ability to forecast. The reality is it's only 2 properties, they're both relatively small. One really didn't have -- I mean had some weather in Baton Rouge, and it's kind of hard to argue that it was really meaningful and, Perryville, they clearly had some weather issues as well. I'm taking the view again because it's not the predominant driver of our company. I'm taking the view to take let's wait and see what happens in the second quarter before we start thinking about adjusting guidance either up or down.

Okay, got you. And then I think the answer to this question to be, no. But Peter, in the past you talked about looking at non-gaming venues at some point, down the road. And I assumed that at this point there's no change, in terms of there's still a lot of gaming stuff out there what you're looking at and the non-gaming stuff is well off at this point?

Yes, I have said, just to put this in a context that is clear and I think, what drives everything about here. One thing about being in the public world, if you care about your shareholders and I think we do, especially since I am a large shareholder as well, then your challenged always to keep this machine growing. We don't get a lot of credit, I think they're going out and buying a light care facility, or however, good or appealing that may be. So I will probably say this many times that we're going to stick very close to what we know easily. But look, in the end, the requirement is to grow and if we sort of run the table and they're satisfied at some point a few years down the road that we could've done it all, you could see us do other things because that is our responsibility to our shareholders. To keep growing and do it smart and maybe an acquisition of a company in a different field, where we pick up a lot of whatever, including knowledge, by the way, sure. Because we are obliged to keep this machine growing. So that's our commitment. That's what we're focused on, but look, we're going to do the -- it's never easy, but I'll say the easier stuff, first. And that I would never say never about something else, it's just not in the horizon right now.

Thank you. At this time, for closing comments, I'll turn the floor back to Mr. Peter Carlino.

Well, I wish we could say a whole lot more. I hope that well before year end, we can announce something else that will give you, all, and us, some encouragement. But we're working hard and we look forward to seeing you next quarter. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.