Gaming and Leisure Properties, Inc. (GLPI) Q4 2014 Earnings Report, Transcript and Summary

Greetings, and welcome to the Gaming and Leisure Properties Fourth Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Kara Smith from ICR. Thank you. You may begin.

Good morning. We would like to thank you for joining us today for Gaming and Leisure Properties fourth quarter 2014 earnings call and webcast. The press release distributed earlier this morning is available in the Investor Relations section on our Web site at www.glpropinc.com. On today's call, managements' 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, and 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're joined by Peter Carlino, Chairman and Chief Executive Officer; and Bill Clifford, Chief Financial Officer of Gaming and Leisure Properties, Inc. Also joining are Steve Synder, Senior Vice President of Development; Desiree Burke, Chief Accounting Officer; and Brandon Moore, Senior Vice President, General Counsel and Secretary. Now I'd like to turn the call over to Peter Carlino. Peter?

Thanks, Kara, and good morning everyone. As usual and as you've heard, we have most of our team here so that we can answer any questions that you may have. We're happy to report a good year for us in most respects. We have largely completed our separation from Penn and our shared services agreement, which was a big focus over the course of the year to become completely independent, and I think we are just about there. I think we wound up a very good year. It could have been a great year if we could have come to a happier resolve with the Meadows transaction that we previously announced as you know, that now is the subject of litigation, which is unfortunate. I think I had characterized that pretty well in previous calls. So I'll leave out the editorial comments, but I'll ask Brandon to take a couple of minutes in just a bit, just to bring that up-to-date and kind of where we are. It's been a pretty active year for us. We've worked at a lot of stuff. It's kind of fun at our end to read the press and see what the analysts are thinking about what we're doing or not doing. I want to emphasize what we have always in the past, that if it's out there and you've thought about it, we've looked at it. I mean it's as simple as that. You can write that down. The trick of course is finding the right transactions. And I'm also saddened, and I want to emphasize this that we'd rather do no deal than do a bad deal. I mean, any fool can do a bad deal. We're interested in accretive transactions. Our focus is on the long-term to build a successful company, a profitable company, and you'd be digging your way out of bad deals for a very, very long time. Most of you who have followed us over a period of time know we're not gun shy, we're not afraid to stick our necks out, but we also won't do anything foolish. That's been our consistent record over the last 20 years and so it shall remain. Also to answer another question; you said that we're focused on the gaming industry, that is the case. It's also the case we've already looked at a couple of transactions outside the gaming business. That's not our first choice or our second choice, but if things appear and they're accretive and meet all the other criteria that we would want to meet, then sure, I think we haven't closed the door on anything. So that we're probably in a mode right now of very, very aggressively looking at a whole bunch of stuff, and I want to emphasize one point, Bill, probably spent a little time with it as well; these are very difficult transactions to accomplish because there's multiple parts. I mean it's not like we can just buy a company and offer a price, and maybe even do it in a hostile way. That's not possible because we're buying a part of a company, namely the real estate, and you need a whole lot of information to make those kind of transaction work. So it's -- in this sector, in the gaming sector, it is a much more complicated process. So that having been said, I think it is important we do care a lot if you recognize how hard we are working at a whole host of things even as we sit here today. Bill, you want to add something to that?

Well, actually I think you covered it really well. Listen, I think the concept of what we are trying to accomplish is obviously solving for tax issues associated with separating real estate out of a normally a C Corp, and doing so in a way that doesn't just create an enormous drainage; plus you've got to look at how you're going to be able to make all of that work with the tenant. In many cases, where the existing operator is looking to sell their entire business, that requires a third-party. Anytime it's no different than anything else negotiating between one -- two people is difficult, enter a third, and things get even more complex, but all durable, time-consuming; but durable. And I think the other component is what's kind of also in the back of everybody's minds is the concept that everybody is going to do and follow our footsteps. And so, I think that it sounds easy, it's not, but the reality is that does create some issues in terms of us being successfully getting transactions done because some people think that they're going to follow on our footsteps and they will inevitably try. But we continue to persevere, and we continue to work hard at it, and there's number of transactions that are in various stages of discussion, but that's probably about as far as I want to go.

Yes, that's as far as we can go. Brandon, do you want to take a second and talk about the litigation that we have? Just a few words.

Sure. So there was -- in December we encountered a procedural issue that we could not have anticipated when we filed in the Federal District Court that required us to withdraw our suit and re-file in a State Court, which we did in January. And in the mean time we've made what we believe to be a compelling offer to settle the disputes with the Cannery folks that we assume they're are considering, but at the present time we're really preparing for litigation. We believe in our suit, and we'll continue down that path until something changes.

Yes, it is too bad in many respects because it is a quality property. Albeit, if we've now discovered with some issues, but it's a quality property that we'd be delighted to own under the right terms and circumstances. So no prediction about where that's going to go. As Brandon said, we like our case or frankly we wouldn't have filed it. So that's one segment of the year come and gone, but we've all moved on to other possibilities. So, look, its frustrating part of this call for us in the sense that you all want information, we'd love to give you information, but we're clearly constrained in commenting on virtually anything we're doing. So with that, why don't we open the floor to questions and see how close we can get to the answers you want to hear. Bill -- one second, operator; you want to add anything on the financial side?

I guess, yes, sure. Relative to what we're seeing in the regional gaming trends I think we would mirror what you probably heard in other companies' discussions, specifically Penn's. Certainly our properties, our two TRS properties are doing well. They had a very good December. Clearly that was a little bit of what helped our results in the fourth quarter. As far as Penn, the escalator -- there was a partial escalator contribution from Penn. And I think, we mentioned on the call last time, I knew we were close, obviously I didn't have access to the exact -- didn't have access to the Penn's daily operating reports or financial statements, but knowing that where things are going, I felt like there was a chance to get there. Relative to the Queen, I think Queen is paying the rent nicely. They paid down almost $10 million worth of their debt last year. So that property is really doing well. As we look forward, I think we're hopeful that although we're dealing with the same public information everybody else is, there's just a sense that the regional gaming trends seem to be firming, if not maybe even turning the corner, but that might be little too optimistic. It's very difficult to read into a trend of one or two month. I think December and January last year, the weather was incredibly poor. This year, obviously the snowstorms that have come through were not nearly as devastating as what we experienced last year. I'm really looking forward quite candidly to seeing where we end up in the second quarter. The first quarter I think is always tough on a year-over-year basis, given the weather comparison and calendars and everything else that goes on in that first quarter. But by the second quarter I think we'll have a really good read on what's happening with the regional gaming trends.

Okay. Bill, thanks. Okay, now, let's take your questions.

Thank you. [Operator Instructions] Our first question today is coming from Joel Simpkins with Credit Suisse. Please proceed with your question.

Yes. Hey, good morning, guys. Peter, I guess this first question is for you. I'm just curious on what you're making of this trend of seeing companies like El Dorado and now Golden Gaming go from private to public, and your broader thoughts on that, and does that crowd out or potentially create longer term opportunities for you guys?

It probably creates more opportunities. Bill, we were just talking as a group earlier, getting ready for this call, and you look at -- I think there's an expectation that in the gaming space or at least in the REIT world that there is going to be the deal of the week. Those of you who follow the gaming industry recognize that, (a), this is a smaller industry to be sure, many fewer players and there never were more than a couple of deals a year in any case. Now, there tend to be larger deals which we like so that we're not doing 20 deals a year, we might do one or two good sized transactions. So we look at the field and still believe that there is potential here irrespective of what others are doing. I don't think we're concerned about what's happening in the industry. It's going to play out, and then there will be prospects there too. So the public and private thing probably doesn't matter to us. I don't -- because we can structure either way.

Sure.

And there's -- and listen, Steve would tell you that we'd love to do some deal with corporate units. I mean there is -- that's one of the things that we're working on right now with -- that we're working on. Just leave it at that. So I think we'd love to be able to demonstrate that there are many ways that we can do this. And in fact, we'll -- I think you'll see all combination of things as things unfold. Again, this is still relatively early days. I realize it's been a year and a couple of months since we started this, but we're happy with where we are. We could always be happier, but we're doing fine.

Okay. And I guess this might be a follow-up for you, Peter, if not, for Steve, I guess is there any sort of a hot button jurisdictional expansion opportunity you're tracking for 2015 or is it going to remain fairly quiet in places like Texas and Kentucky?

Yes, in terms of new potential, I mean we certainly look at that as well. We're certainly active in Massachusetts and poking around out there. We're active in New York, didn't end up on the winning end of that. So we could be a player with partners in new jurisdictions. I think we've said that before, but remember, there's not lot of new jurisdictions opening up. Texas, god knows, I mean it's a great gaming state. Why those folks won't come around? I have no idea. But you'll understand the politics as well as we do. So let's face it. I think the industry has matured significantly and now you're going to see a lot of consolidation, tracing of assets and so forth, and I think that's where it's going. New growth, it's going to be pretty limited.

Okay. Thank you, guys.

Thank you. Our next question today is coming from Steven Kent from Goldman Sachs. Please proceed with your question.

Hi, just a couple of questions. You mentioned that you might look at other real estate opportunities. Would it still be broadly within the leisure sector, and what kinds of competition do you see out there? And then, just separately, and I don't know that much about litigation or how these things work, but does the Cannery litigation slow down deal traction? So what I mean by that, when you're sitting across from somebody, are the sellers bringing that up as an issue, some kind of fear from the seller?

No, I think we're long past that. Look, I think once we explain the circumstances that were involved there, it's quickly forgotten. I think all of us would look at a situation like that through our own eyes. Would we react in a similar fashion and once they understand the fact that's a three-second conversation. So, no, it's not been a factor at all, at all. Steve, you're out there. Tell them the story every day and…

No, everybody understands that the circumstances around the Meadows transaction are absolutely unique to that transaction and that seller.

Yes, look, we've done a lot of transactions over the years. We've never had a situation like this before, where what was represented turned out to be something very different. Again, I won't get into the particulars, but just never had a situation like this before. So unfortunate, but it is what it is. We had forgotten it. It will like all things get resolved in some fashion.

Okay. And then the second question on just other opportunities out there, and how far a field do you go, or do you stay within the realm of leisure broadly?

Well, look, the smart answer -- sort of half serious answer is we go anywhere in the triple net capacity as long as it's accretive and secure, and all the -- say, nothing, the fundamentals are the same. Is the cash flow stable? Is it going to be there for the long-term? Is it accretive? Is it going to build value for shareholders? It's not real complicated. In one sense, it's not a complicated business.

And it is in an industry that we can develop the expertise to make sure that we understand what we're doing within the industry is the other criteria that we factor in, whether that comes in the form of existing expertise within the entity or whether that's something that we think it's fairly easily outsourceable, so that we recognize that we're not in an industry that we're a novice at, right, obviously we're very cognizant of the fact that the gaming industry has it's own nuances and we would expect every other industry does as well. And so we would expect that if we're looking at something that has to be an industry where we could have or secure the outside expertise we need to make sure we are running the business properly.

Well, I think that answers well. Well, look, we appreciate the drumbeat for deals, deals, deals. Who wouldn't like to do lots of deals? But as I said time and time again, any fool can do a bad deal. The trick is to be disciplined and to wait until you get the right deal. So it just gets no more complicated than that.

Okay, thank you.

Thank you. And next question today is coming from Dimitri Zapatos from Barclays. Please proceed with your question.

Hi, everyone. You guys talked a little bit about the potential stabilization of regional gaming revenue. But does that make you more or less optimistic that you'll be able to get deals done looking forward to next year and beyond?

Well, it certainly makes it a lot of easier from our perspective to do a transaction, right, because at the end of the day what we're operating up is 15 years with four or five renewals, and clearly knowing that or seeing the sense that the industry is stabilizing and improving makes it much easier at least mentally in our end to wander into the transaction. So I'd say it's good. I think it's also good from a tenant perspective because they're looking at a fixed rent payment obligation as well. So if they get to a sense that their business is getting healthier, I actually think it's good. But the counter to that is obviously if the business is getting better, they might think that they can wait a little while and sell later at a higher price. So you have a countering counterbalance that you got. I wouldn't say it's all -- it's somewhat. They offset each other, right. I'd say on balance that's better. That is a good trend, but it's obviously the other side of the coin as well.

Well, no buyer wants to buy into falling cash flows. So I think Bill said it best. There are some counters to that but by and large you want to be buying into a successful front.

And just a follow-up on that, is the assumption that we should be using going forward for structuring any deals still 50/50 equity debt, or has that changed? Just some color on that.

We haven't changed our viewpoints in terms of making sure that we've got a rock solid balance sheet and financial statements or financial ratios. We are still committed to hopefully getting a complete investment grade ratings for our credit facilities, and I'd expect whatever transaction we do would be very much along the lines of what we've talked about 50-50.

Okay, great. And then, just one quick, small item; do you think there's going to be any impact or benefit to the smoking bans in Iowa and now in New Orleans? Just thinking about the Baton Rouge property, could there be some benefit may be even in Mississippi?

. :

It's a long drive to have a smoke.

It's a long drive. For some of the customers that are not really in the New Orleans market that might be making a choice between the Baton Rouge market and the New Orleans market, that could be helpful. It's about as far as I think that would go. As relative to Mississippi, I suppose that would be a Penn issue. Again, I'm sure it's helpful. Anytime you got the ability to provide smoking environment for customers who like to smoke, that's an advantage over someone who doesn't. But I don't know that it's going to be -- it's still long way from New Orleans to over to the Mississippi State line. So I think it's helpful but I don't -- we're not tweaking in any of our forecast for that effect.

All right, great. That's it from me. Thanks.

Thank you. Our next question today is coming from Thomas Allen from Morgan Stanley. Please proceed with your question.

Hey, good morning guys. It seems like every quarter we talked about characteristics for deal. Just wanted to get your updated thinking on doing truly transformational deals that kind of single transactions that are close to your current enterprise value, and if they were on the gaming front, how receptive are other large gaming companies in discussing deals with you? Thanks.

Now, how can we answer a question like that? I just rest my case with where it began. We look at everything; larger smaller I mean we've looked at something three times the size if it can make sense and we can figure out how to finance it properly. So I mean that size as I did indicate earlier, there are not a lot of easy deals. It's a lot simpler to work at something bigger than to work at something smaller, but we're looking at things both large and small, right now, Steve.

And looking at a transaction frankly, that meet a variety of finance approaches, yes, I mean Thomas to your questions I don't see us ever doing some of things that we've seen others in the triple net space doing, which is large transactions that are neutral from an accretion standpoint, just to get the scale. We are going to as Peter said, continue to remain disciplined, look for opportunities to enhance our shareholder value so that suggests to you or should that we're not looking at our enterprise multiple as evaluation parameter for an acquisition.

Very helpful, thank you. And then just on Ohio, you guys are more levered to the performance of that market given the monthly reset event; any initial thoughts on the market following the Racino openings? Thanks.

Well, Columbus and Toledo are the two properties particularly that are affected by the 20%. Listen, I think we get the same data you get, quite honestly, so, obviously I've always believed that a new market takes time and should have helped your growth prospects. I think we're behind this on the Racinos. They are all open. So we'll be anniversaring those. And I think that has clearly muted what would've been a very nice robust growth rate, certainly in the Columbus market, and so is Toledo. But at the end of the day I don't have access to the daily information actually I don't have access to marketing plans or anything else what's going on at the two properties. But I do think that as we've anniversaried that we should see some reasonably decent results and I think that's what's reflected in our forecasts.

Perfect. Then just finally a housekeeping question for the benefit for all of us. Just on the $2.4 million compensation expense related to the one time dividend, just confirming on the adjusted EBITDA line, that negatively impacted adjusted EBITDA, right?

That's correct.

Okay, perfect. I thought, so I just wanted to make sure.

It's okay.

Thank you.

You're welcome.

Thank you. Our next question today is coming from Shaun Kelley from Bank of America Merrill Lynch. Please proceed with your question.

Hey, good morning everyone. So I just wanted to follow-up. Bill, in your prepared remarks, you mentioned that one of the issues that makes the transaction a little bit more difficult is the fact that other guys are trying to follow in your footsteps. And I was wondering if you could just help us understand that a little better. Is that because the assets themselves or those companies themselves are not available to you guys or looking to do deals? Or is that because sellers are waiting for competition?

It's hard to say. I don't think sellers are specifically waiting for competition. And I do think that obviously when people are off-pursuing their own paths, that they're obviously less inclined to want to talk to us, just as a general matter. It's really where I was coming from on that but…

Okay.

Nothing too deep there.

Okay. Don't need to make it deeper than it is. My second question would just be on probably more for Peter. But I'm curious, you've spoken in the past, and this is digging back a while, but very specifically about some of your views on Louisiana, and I am curious, is Louisiana a market where just because of the Texas risk, you'd really be unwilling or unlikely to do a deal, or is that not a deal breaker as you look at the risk around the eventual possibility of Texas legalizing gaming?

That's an interesting question. Look, we gave up the Hollywood property in three-fourth earlier on because I judged as I'd like to say I got in the plane and flew from Shreveport to Texas and there weren't even cows in between. So that like any military operation, you cut supply lines really easily; Texas gets gaming, you can write off that Western Louisiana market. And that is the case, now, it's turned out that others maybe made a better judgment because it's still not gaming effective. What would happen absolutely -- Of course it's going to happen like it's happened everywhere else as New Jersey has discovered, as Rhode Island, I just got someone said in the newspaper The Providence Journal I guess and showing massive pictures of the Penn facility. In fact it's a multi-page spread in Providence. Providence now is on this Massachusetts property it's going to be devastating to -- and it will to Rhode Island. I mean that's just the nature of things. So there will be a few holes that are filled in that are going to impact people. But back to your specific question, I don't know what the timing is in Louisiana would I myself be a buyer of a single property in western Louisiana wasn't part of a giant portfolio or something like that; absolutely, not. No I just wouldn't. I mean because never is a long time. And I look back myself and in a moment's reflection here, I've been around in racing business for 40 something years, 1972 when I started at Penn National as President. And I look it at say as we look at 15 year leases I remind the guys that comes fast guys, way faster than you dream and way faster than you think. So you've got to have a long term view about what's going to happen in these markets because we're committing to long term capital. So maybe that's more an answer than you wanted but that's the way we think about it.

Now, I think that's really helpful. And my last question then would be also on Louisiana, but totally different spin. You do have some exposure there because of Baton Rouge, and I'm carries on your thoughts around energy and the exposure to that. Have you guys seen any impact at your TRS property as a result of the declining oil price, and maybe any secondary impacts there two people? And I'm thinking you more from the negative perspective than from the positive where might benefit the consumer elsewhere.

Well, Baton Rouge is not really -- I mean it's the state capital. I don't think it's particularly heavy in the oil industry. I mean it's got a little bit of stuff going on in the periphery, but it's a major driver at the local Baton Rouge economy. So the answer to that question is that we're not really seeing anything that would indicate that it's a problem for the Baton Rouge property.

Its really we never build a hotel there. It's a 30 minute sit in property. It's a distinctly low goals property and I don't think there's anything happening in that market that changes that, and as Bill well pointed out, for state capital, there is a certain stability that one has there now. Pretty competitive in that market, but listen, I think our folks at that property have done a terrific job in maintaining cash flow there in a highly competitive setting. So given the competitive set there I must say we're very pleased what they're doing there.

Perfect. Thank you very much.

Thank you. Our next question today is coming from Joe Greff of JPMorgan Chase. Please proceed with your question.

Good morning, everybody. At this point, I think most of the questions have been exhausted. But I'll ask a question that was asked somewhat differently earlier. Are you seeing any seller reluctance diminish just because of the fundamentals turning over the last few months, or is that just more thinking that could happen? Thank you.

I think no, I mean I don't think there -- I mean, Steve, can answer the question better than I can. But I don't think there's been a enormous shift. I don't know I mean remember that our operating -- our model, our financing model has what our operating in it. So the degree sellers get comfortable that they've got -- they've halted the deteriorating performance trends in theory it should over time give them a lot more comfort looking at the transaction similar to those that we've done. So I'm optimistic but I mean we've only got right now probably 6 to 8 weeks of really some regional impact under our belt. It's just too early to call a trend.

Thank you.

Thank you. Our next question comes from Carlo Santarelli from Deutsche Bank. Please proceed with your question.

All right. Hey, good morning everyone. I just have one quick follow-up as it pertains to deals. When you guys originally came out with the REIT structure, and I'm thinking back to earlier last year. Could you talk about the level of reverse inquiries from operators? Just to put it in an example, someone coming to you and saying, hey look. If you're looking for a partner make sure that we're on your list of to call. Has that changed at all since maybe some of the early days?

No, Carlo, I don't think it's changed. I think what people recognize if they're going to sell their building there are significant tax consequences that they need to get their arms around, they need to understand their own allocational basis. And there's a lot of accounting and tax that's associated with it. I don't think the volume of increase has changed. I think people are recognizing or coming to recognize the complexities that are associated with it.

I'm sorry.

Let me interject one thing too. I think that at least in my thought we would see a lot more demand for sale leaseback kind of arrangement where people would choose to remain. Let's go out there we're talking to people right now about such arrangements. But I think it's safe to say Steve that more than that folks are interested in selling the business outright which then puts us in a position as Bill alluded earlier, to having -- and we're -- that isn't something we are addressing that we better have third-party operators.

And that's specifically, actually I apologize if I missed both. That's who I was talking about. Maybe the third-party operators coming to you guys saying hey need a partner on these things, we would certainly like to get a look. Have you seen any change in the case of the…

No, that stepped up. I mean I think it's safe to say we've got more prospects now than we had in the beginning. So … no I think we've got people who are willing to work with us with the right transaction. And that has to be more positive season.

Very much so.

I meant to say a negative but I think it's pretty strong right now.

No, and it boils back to the earlier point as people are getting more comfortable with the operating leverage that's built into our approach to a transaction.

Yes, I mean, look, I just look at Penn as a shareholder and as an outside observer we're doing very well coming through these tough times. I think and this transition very well. And I'm very optimistic that Penn is going to have a terrific year and look pretty good a year from now. And I think that's going to make people more comfortable when they recognize that, "Hey, the world doesn't come to an end. You're still running your business." There are tons and tons of businesses as I pointed out that are asset free they make a lot of money. And in the end what are you buying? You're buying sustained and sustainable earnings. No more complicated than that. so we like the model, we think it works we have players who want to work with us so … just going to have to keep working at these things until we get the right deal structure.

Thank you, guys.

Thank you. Our next question comes from George Smith from Davenport Asset Management. Please continue with your question.

Hi, there thanks for taking the question. Peter, I was glad to hear you mention the willingness to look outside gaming. And wondering if you could just compare the volume of deals that you're seeing there, and maybe talk about how they're being sourced? And within that, it would certainly seem as though you guys have a lot of expertise running hotels, and I wonder how fertile the hospitality industry might be?

Well, I guess to be completely honest. I don't think we're looking outside the industry really not. I mean there's plenty of gaming stuff that we have in hand. And again at the risk of saying this one time too many, we're running a public company. Our responsibility is to shareholders, we will do whatever it takes. I used to say in the earlier Penn days that -- look, we'll build in the gaming business first racing then gaming and maybe someday it will be widgets. Fortunately, we didn't have to go to widgets or widget in a sense what we've just done and split the company for shareholders benefit and form this REIT, so now I'll say the same thing. I mean it will be widgets in the end if we have to but it'll be the last thing that we'll do. We've had some things that have crossed our desks submitted by others and looked seriously at a couple of things. I don't think we've looked particularly in the hotel space, tend to be very competitive. And again can it be accreted. Is it going to be safe and stable? The same criteria apply; I mean these are triple net Leases we're really talking about stability of cash flow and financial structure. And with now must more to it. So show us the right deals or help us -- we'll find the right deals and we'll do it. I wouldn't move out anything reasonable. But as for the moment we're not looking. We were not frankly in the gaming space right now that we're very involved with. So we have to run out of that then we'll let you know.

And coming back to third-party operators, as I think about Penn potentially being one of them; is that in a way preferred in that it's easier under the existing structure, or do you think there's this desire to have a different third-party operator for the purposes of diversification? Or does it just come down to who's willing to pay the most for the rights…

You just -- it is simple as that, Penn is something that we can talk to. And remember any of the bigger companies are conflicted in so many markets. That's the problem. That necessitates that we go out and talk to others. So look, would Penn be looked at favorably here? Of course, absolutely. But are they exclusively so? Absolutely, not. In fact, yes I can't emphasize that enough. That is one of twenty others that have expressed interest in that we and Steve are working with. So if it makes sense, great, and if they're willing to pay up, great, but that's what it's going to take.

And Bill, on the dividend, it appears as though we're now set at a quarterly run rate it looks like around $0.55. And I guess the only variability going forward would just be any fluctuations in Ohio revenue.

Yes, it's 4.5 [ph] just to be technically accurate on the dividend for the quarter, which comes out to run rate annualized to 218. Looking forward, I think the variability there's only really two items that can affect the AFFO or FFO of the TRS at least for this year, the TRS operating result out of Baton Rouge and Prairieville and then the variable rents in Columbus and Toledo everything else is fixed, and we could end up; I should talk a little bit about the escalator. For purposes of our guidance, we assumed that there's no escalator obviously there's a long time between now and the end of October. We remain hopeful but we just hoped that it's more prudent to reflect guidance without the escalator. And obviously as we go along, we'll be able to see that we should end up with -- we'll see where we are. It's part of the description of what will happen to the escalator. I'm hopeful.

Just remind me what it would take worth a kick in and how meaningful it would be?

We needed rain coverage of 1.8 with the rent, and then meaningful wise it comes to about $5 million a year, if the full escalator -- like this year we didn't end up with the full escalator, sort of the extend to the ratios vary really tight to the 1.8 you can end up with up to 5 million, that's probably the best way to look at it.

Up to $5 million; and we're at what 120 million shares out?

117.

Okay, thank you so much.

Thank you. Our next question today is coming from Kevin Coyne from Goldman Sachs. Please proceed with your question.

Thanks for taking the question. I just wanted to revisit I think some comments you made on prior calls just to make it's still the case, I believe you said when you were looking at a larger portfolio that number one, you would want the manager in place and number two, that you preferred to have a sole manager as opposed to piecemeal operators signed up. Is that still the case?

Well, I think of course you'd always prefer sole mangers if you could. The reality is for a larger portfolio that's not likely to be the case so that it would require a couple of operators. Look we're operating -- we're working with that presumption that we have identified people to do those things. So at the very extent we're looking at I think it's safe to say that we identified operator groups that would work just fine. So wanted it ideal, takes more than one we'll do that whatever it takes.

Great, that's helpful. Thank you. and just a follow up -- in that process if it was a larger portfolio and you didn't have a 100% wind up in advance, would you consider letting the TRS grow a little bit in the short term to put some assets in there and then find managers down the road?

Quick answer is yes. We certainly miss out on a large transaction because there's a couple of strikers that didn't fit in with an existing operator. And the goal -- that the goal would be that to make that a temporary situation. In other words depending on facts and circumstances may be because there is a need, you can't run a public process. Sometimes you might very well have to commit yourself to taking on an operating role for a couple of properties or whatever, and then as soon as the process is public, you then immediately shift into the mode of finding somebody. I think our approach should be that it should be a fairly small percentage of the portfolio, not a large percentage of portfolio that's unresolved on that issue, but assuming it was small, absolutely.

Great, thank you.

Our next question today is coming from Tayo Okusanya from Jefferies. Please proceed with your question.

Hi, yes, good morning. Most of my questions have been answered. But just wanted to find out, with all the conversation about Pinnacle splitting into two companies and Caesar also possibly splitting into an OPCO/PROPCO, just curious if you feel that ends up changing the landscape somewhat in regards to your acquisition outlook? Or whether you have any concerns it creates additional competition going forward?

I think the quick answer is, let's see what happens. I mean we can't predict what the landscape is going to look like. Business world changes everyday. Let's see what happens with those companies, and we will hang around, and Bill, you want to…

Well, I think both of those companies are quite a few ways off from actually getting ready to be able to be competitive in the REIT space. I think from what I understand in the public information anyway those I would expect that both of those are not going to be 2015 issue, probably be later than that, and also I think even coming out from what I've been able to gather from the public information, I think both of those companies will have higher cost of debt and higher costs -- and should trade at lower multiple. Obviously, who knows on the last one, that's a subjective issue, but pretty comfortable that they will both have higher cost of debt. So I think we'll be in a position to re-spin an advantage position relative to them when and if they get there.

Okay, thank you.

Thank you. Our next question today is coming from Andrew Berg from Post Advisory Group. Please proceed with your question.

Hey, guys; one housekeeping question, what were the total dividends for this year?

That was $2.48 ordinary, and then we have the EMP dividend at the beginning of the year…

It's a billion.

Yes, 1.51 billion, which came at 11.85, something like that.

And you said that you think you're going to $2.18 right now scheduled dividends for this year.

Yes, in last year's number that was $0.40, which was a one-time of which $0.35 was a clean-up after we had an agreement with the IRS relative to the EMP first. So we ended up doing a supplemental dividend for $0.35, and then $0.05 came from actually as a result of some of the restructurings we did inside the TRS, which creates taxable income at the parent that we had to distribute.

Okay. And then…

It's really a one-off. It wasn't a recurrent. That $0.05 wasn't recurring.

Okay. And then CapEx this year, I think with everything was about $140 million [ph], which you said $100 million was projects. How should we think about CapEx for the fiscal year we're in now?

I think we have about $9 million with CapEx for next year. A big chunk of that is slot machines for Prairieville.

Okay; and availability under the revolver?

Availability under the revolver here is roughly 444 million. And I would expect this year that -- assuming we don't get any transactions closed, that will grow as well distributing 20% of our rates and our free cash flow, which leaves 20% that we'll be using to pay down the revolver throughout the year.

Okay, great.

Thank you.

Thank you. We have reached the end of our question-and-answer session. I'll just turn the floor back over to management for any further or closing comments.

Thank you all for joining us this morning. I hope we left you with a generally positive view of what we're working on here. There is a lot in the soup, and we're looking forward to 2015, and we will see how it plays. I mean, look, this is not as we say I missed the Penn calls we used to do. We can talk about properties and regions and all kinds of good stuff. Here -- what's your -- politicians, this is what's your next year, which I think we violated; and the gaming space is never going to be an everyday occurrence. But I feel pretty comfortable we're going to get where we need to be, and we will do so in the same discipline manner that we have in the past. So with that, thanks a lot; see you next quarter.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.