Greetings and welcome to Gaming and Leisure Properties' First Quarter 2017 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. I'd now like to turn the conference over to your host Hayes Croushore, Vice President of Finance. Thank you, sir. You may now begin.

Thank you, Mannie. Good afternoon, everyone. We would like to thank you for joining us today for Gaming and Leisure Properties first quarter 2017 earnings call and webcast. The press release distributed earlier this morning is available in the Investor Relations section on 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 risk 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 afternoon'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. Also joining are Steve Snyder, 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, Hayes and good afternoon, everyone. Glad, always happy to announce the completion of a good quarter, had an excellent quarter. You'll note we highlighted on page one of our release that our Bally's closing is scheduled for May 1, a small transaction, but a nice one and I think we have - if you look at page 2 of our release, pretty fairly outlined the improvements to net income that explain much of what has happened this quarter. I'm looking around the table here trying to get volunteers to see who's going to shed the real insight on where we're headed and what we're doing. I know Bill Clifford is just itching to make a couple of comments and we'll probably dragoon Steve Snyder to talk about future developments. So Bill, go ahead.

Sure. Relative to what we saw in the first quarter, we obviously had a good quarter and we exceeded our expectation relative to guidance and that's primarily attributable to three factors, one of which is Ohio and the rents received from Penn, relative to Columbus and Toledo as well secondly as Baton Rouge had a very good quarter, certainly exceeding our expectation and that was a big part of it. And the last piece is, a little bit less corporate overhead than we expected. Part of that was because we were successful and able, we've got a transaction done and therefore, we're able to capitalize on the expenses associated with the efforts that we had relative to the Tunica property. On the guidance, as we look forward, there's really two major components that was accounting for the increase in our expected performance going forward. One is the fact that we expect the Tunica property to close on Monday. Obviously, that was the transaction we announced at the end of March and which we're very happily surprised, somewhat surprised, but appreciative of the efforts that Mississippi did to approve a transaction, when the gaming industry is of lightning pace, given that it's basically one month since the time the transaction was announced [indiscernible]. The other component which is favorable news, that was not in our former guidance is that Pinnacle, we are assuming in our purposes of our guidance that they're going to pay us an escalator of the anniversary in May. So, those two components are obviously helpful in terms of where we're growing. We've announced the dividend. For this quarter, it's $0.62. We will look at adjusting the dividend or relooking at the dividend in the quarter, following that we have the first full quarter of results of Tunica and Pinnacle would be in the third quarter. The only other piece of news I would reiterate that we're very happy about is that Penn National on the call this morning obviously had very good results that preannounced some of their results previously, but again, exceeded those numbers and the rent coverages that they were - had alluded to three months had improved dramatically to the point where they expect the end of the year to be just lightly south of the 1.8 and that's almost a full 10th better than where they were three months ago. So, that's in any of our accomplishment, so we definitely want to thank them for their efforts.

We're wishing them well. We're very appreciative. Look, I think there is reason for optimism. It's hard to know where a year is going to go. Every year has its own character. They are off to a great start, but one doesn't know how they're going to finish, but we have renewed hope that they're going to close out the year in a very positive way. Steve, I'm not sure there is a whole lot we can tell this group about what we're up to. You can assume as always that we are very active here, the entire team, everybody at this table, looking at the next possibilities, nothing of course that we can ever announce, but we remain optimistic looking for steady and continued growth in this business. I think as I look at this, I think we're quite proud about what we've been able to accomplish since we created this REIT. It's been a nice move over these last few years. It's always about what's the next magic trick and I can only say that we're working on that. So with that, any other comments, I'll open it for questions. Operator?

[Operator Instructions] Our first question is from Robin Farley of UBS. Please go ahead.

Great. Just wanted to ask you a question that I was asking a similar company earlier today, which is, are you - do you have any thoughts on whether the potential changes in the corporate tax rate out there, changes to the tax are impacting the likelihood or timing of sales as you talked to asset owners.

Robin, we were actually kind of hoping to ask you and others on this call that very question. We've poked around at NAREIT. We're trying to understand better through our lobbyist and others what is likely to happen, but it seems so premature right now as anxious as we are and maybe even concerned as we are, it's just too early to make, in my judgment any guess of where this is going to be. Do you want to opine?

Robin, to your question, I mean, just as we are trying to figure out what impact in the tax reform tax that the President has now given us the sort of a bullet point note on will affect our business, you can rest assured that sellers are also contemplating the same question. So I think more than anything, we're anxious to see clarity, whatever form it takes, whenever it takes.

Yeah. And relative to timing, I think the tax code implications are different for large strategic corporate type people versus maybe some of the people that we deal with, which are sometimes to be privately held situation where the tax impact is much greater consideration to whatever they might do relative to transaction. So I mean I think the answer to your question is, I have expressed some concern or desire to understand the implications of potentially doing a transaction. Others are probably a little less sensitive to that.

Capital gains improvement would maybe motivate some that are sitting on the sideline. That would be a positive thing. One does want their, a bit about the notion of doing away with interest production, pretty intriguing in this business or any capital intensive business. You really - I just don't think - I think patience is going to be necessary in this case, but I'm confident everybody out there who has a business, who is in business, owns a business, has shares in a business is wondering where in fact is this all going to go. In other words, we didn't tell you much.

Thank you. Our next question is from Steve Wieczynski of Stifel. Please go ahead.

So first, I just want to thank you guys for moving the conference call time. I think it's the first time any company has ever actually felt sorry for us lonely analysts on days like this. So with, just I guess Bill first, with you, at the TRS, obviously a pretty good quarter there and I think when you look at your revised guidance, it seems like all you really basically did was kind of flow through the bead from 1Q into the guidance. And I assume you're probably going to get me the answer that Penn gave this morning is that for the remainder of the year, you're still taking a pretty cautious view around the TRS component.

Well, listen, I think it's two properties, right, it's Baltimore, it's Maryville [ph] and Baton Rouge. So to the extent that it's, probably don't put as much time and energy and effort into it as Penn does relative to their pertaining trend line. It was a surprisingly good quarter and my history with surprising good quarters somehow are another by the end of the year, I think Penn to back to normal. So we kind of, we have taken credit for that bead in the first quarter and pretty much left everything the same going forward. Because we're not 100% sure we understand exactly why the first quarter was good as it was. But somehow or another, these things always have a way of normalizing. So I don't know that, we don't have properties that are really affected by weather and things, but it's not a weather attribute, but it could just be the excitement of Trump or the desperation of Trump or whichever way you want to look at it, some people motivated different way or it could be other factors that we just don't really feel like we have a great handle on why we did so well. So hard to get excited to say, well, if we knew that it was some sustainable component that we felt really good with the new trend or a new thought process or a new way of doing - new approach or whatever you want to call it, we would have - we might have been a little bit more aggressive, but we felt like okay, great, let's take what we've got. We're going to leave it where we work. We don't really have any information to indicate the rest of the year is going to be any different than what we were thinking.

Okay. Got you. And then second question I guess bigger picture question, maybe for Peter, but you talked about how you continuously are out there looking for your next move or your next deal, but just maybe help us understand, what does the environment look like out there at this point. I mean, is it still - do you have potential deals coming to you kind of on a consistent basis or has it slowed down a little bit?

I don't know there was ever fast. And I'm not being cute about that. Everything we have done to date, well, there's a couple of examples that kind of comes to us, it's like a Baton Rouge where we're asked to look at something, but the largest transaction we did was Pinnacle. We went to it, if you will, to make that distinctive and we made it happen. So I think there's not a lot of action and I can't tell you quite candidly that there's 100 people knocking at our doors. There's a handful of properties around the country that we remain focused on, a handful of businesses that we kind of keep a very close eye on, keep in contact with, Steve is constantly on the phone every day working on these thing. And we wait for a break. We wait for the opportunity to open up. Sadly, that's the nature of this business and I will say in anticipation of a question we always get, are you looking at anything else. I think we stepped up the pace at which we're looking at other possibilities. Absolutely nothing that we're willing to say makes sense for us today, but I think we're bound as employees of this company to explore every possibility as we look to develop this business going forward. Look, it's all about dividend growth. As a shareholder is what I feel. We keep going backwards and we're anxiously looking for ways to safely go forward. So this is the kind of lame answer that puts one part of this call that I hate. I wish we were in a business where we can say and you've heard me say it quarter-after-quarter, Starbucks might be able to say, we're going to roll out 50 units with some predictability. It's not the nature of what we do. So all we need for you folks to understand is that we're not asleep here in the home office and we're actively chasing down every possibility, but to suggest that there's somehow people hanging on the clothesline, that's not the case.

Thank you. The next question is from Shaun Kelley of Bank of America. Please go ahead.

Hi and thank you for taking my question. Maybe just sort of on the whole M&A node and some of these transactions are sort of difficult to talk about in the future. Could you give us a little bit more color on just how the Tunica transaction came together and just like sort of was that something you approached or they approached you and just a little bit more on sort of the specifics of that deal?

Sure. They approached us about doing a transaction. It's one of the benefits of being in a relatively small industry and that anybody who's decided that it is time to do a transaction even if we weren't calling them on a regular basis, they know that we're certainly one of the alternatives as to who you can sell your casino to in a way that's going to maximize your potential return. So we got a call. And we basically contacted Penn doing to fill out the transaction and they were, without a doubt, probably the only clear choice from our perspective in that they already had - they were very familiar with the Tunica market, they were prepared to put it into the master lease, which is a very important consideration for us and they offset the benefit of being able to extract synergies, because they already had a major property in the market. So between the two of us then, we were obviously able to get a transaction completed. And without a doubt the sellers were motivated and I've always - I've that probably on every call that is that the best - the only way we're really going to get transactions done is when we have individuals on the counterparties who are motivated to do a transaction and they just want to get the best price as they get not motivated directly by price, right. So when we approach people and say well, how much does it take to get you to do something you don't want to do is rarely works out very well for us. So we've come to a recognition that we want to be in touch with everybody to make sure that we're front and center of mind and that we're stressing our extreme interest in doing a transaction, but we also recognize that we've got to get transactions done in the way they are going to be value enhancing. And typically the problem obviously is when you approach somebody a sale, the first thing they want to do is tell you their real estate at your company. That doesn't work for us, so those conversations are fairly short. But I think I'm not sure I really add much more color than that.

That's helpful, it's just given the lumpy nature, I think just understanding how the stories from together is useful. And then the second question would be and this is also a follow-up to earlier, Peter, you mentioned that you may have stepped up your looking at different types of assets. Could you give us any color or view on what types of classes of assets that you at least have under consideration, are these going to be things that are leisure in nature and somewhat tangential to gaming or can they go even further afield, restaurants or convenience stores, something like that.

I guess the quick answer is it could go anywhere. I mean we tend to be focused on some leisure possibilities, I know Steve spends a lot of time in that space. But no in the end, it's all about, I think we're a finance business, I mean in the end that's what we are. And finding reliable sources of cash flow is all that really motivated. I mean that's kind of it. Show us a reliable source of cash flow that we can pay reasonably for and we'll go there, it's as simple as that, if we have confident that's it's sustainable. So mean that again I hate this kind of vague answers but I couldn't be clearer that, we're not stuck in a rut, we're looking at anything that can move the needle and safely do so. So Steve, would you?

No, I think says that well. I think we are going to continue to look at things that are consumer driven that are [indiscernible].

The next question is from Carlo Santarelli of Deutsche Bank. Please go ahead.

A lot of my questions have been asked, but if I could and this is just getting back to the recent acquisitions. When you go into a tougher market or a market that's been historically viewed as being one of the more competitive ones and I think [indiscernible] certainly is one of those markets. What would you guys like your process of identifying what proper rent coverage needs to be et cetera is a lot different or rely do you kind of rely on historical and part of the reason for my question is if you think about some other stuff where new competition could potentially be coming in. Does that kind of dependence on you know the history of the market relative to the history of competition et cetera help you make a more informed decision that you'd be more willing to do something ahead of a major competitive threat?

Look, I think that is a terrific question actually, because I think we do pride ourselves in bringing a unique underwriting ability through gaming asset. I mean it's hard to find a part in the United States that we don't understand or haven't had some dealings with so that we could look objectively and carefully at a market like Tunica, anybody's first choice. Look, the price was right, we understand that market, there is some real opportunity for synergy. Yeah, that's transaction that we are quite pleased to do. Look at what we paid for, we used to be out of it fairly quickly. Bill go ahead.

I think, listen, I think relative to Tunica, obviously that is a mature market that has obviously threats coming from potentially way long term down the road [indiscernible]. But Arkansas is totally taking a bite out of the operators. Having said that though we do think that it showing signs of stabilization and the purchase price multiple is the right price. And then combined with the synergies, we felt we got comfortable. And I'm not going to hide behind the back from that perspective, the fact that we have [indiscernible] lot easier and clearly had done the transaction individually on a single lease basis. So rent coverage would have had been a lot higher. There is a little bit of you know it somewhat it's not always completely. underwriting that specific asset, it's underwriting that in a context of work we're going to end up and who our counterparty is going to be it's going to be the tenant and what kind of collateral protection we're getting there. I think we go to the right answer for both.

And I think Sam is going to be very happy with that effort. The property is actually nice.

[Operator Instructions] The next question is from David Katz of Telsey Group. Please go ahead.

Since it sounds like you are taking attendance, you can put down one yes for the mid-afternoon earnings call rather than stacking up early morning with someone else. My question is not dissimilar from Carlo's which is thinking about these assets that you've acquired in Tunica from a much longer term perspective and entirely different one from you know Penn which is more about the accretion and what it sort of does to your model let's say over the next few years. How do you think - I mean do you - are you comfortable with Tunica being a stable market, it's certainly not a growing one but you know are you comfortable that this asset will be saleable at some point in the future should you choose to want to sell it.

What we don't expect to sell it. We expect be part of the same portfolio of assets for forever. But I don't think we look at it is an asset coming into be able to carve out. And once it goes into masterly, it kind of goes into the big pile and stays there and et cetera et cetera.

As we look at it, we're feel - we feel perfectly fine. I mean as I kind of indicated earlier relative to the Tunica piece, right, is that when an asset goes into the master lease and is past collateralized, the risk profile of that asset is dramatically different and then if it is a single one off asset with the tenant whose got the ability to then potentially hand it back. Had we entered into a lease like that I can assure you that both the rent coverage that we would have expected as well as potentially even the multiple that we would have paid, may well have been different. So, it's a little bit of a way that we can get to it at a satisfactory outcome with very little risk of our shareholders and quite candidly we end up with a transaction that works because there are enormous costs synergies potentially available in that market. So their multiple they will certainly generate dramatic free cash flow improvement over that transaction and will have it more than paid off well before anybody would expect there to be a problem to it. Relative to the Tunica market itself, I think it's a mature market for sure, but I think the Tunica market is a market that's going to be around for a very, very long time. I think the likelihood of the Tunica market disappearing is I think remote. So, with some other market, I mean every market will provide at some level, but there are other markets that we look at across United States that we think have a lot more downside to them over the long term and potentially Tunica.

If you look at the rents coming from that property, obviously if you add a new property, you've got to make a determination of what the rent additive will be at a multiple that uncovered that's acceptable to us. But once it goes into the pot, it's just part of a pot and never to be remembered again. So whether it's up or down, having a portfolio of properties as Penn does one assumes that a given time this, X is up, Y is down, would be all this, but the beauty is the coverage that we have is spread across the board. We'll never again think about specifically what Tunica is doing versus Ohio or any other place. Well, I take Ohio back because we have escalators in there, so there are some that we do watch a little more closely, but generally I think you get the idea. There is one red and that's it.

It does and your answer sort of led me right into my second question, which is, our experience with hospitality REIT is that at some point or some stage of life they become more of a balanced buyer and seller and obviously at the moment I think the list of buyers if you were a seller is short to nonexistent. At some point in under some sort of circumstances, don't you need to become a seller not necessarily a large way but a trimmer or a trader as we've seen with other hospitality REITs and obviously it would appear that Caesars is headed in the direction of joining the fray. How do you think about that evolution for GLPI over time?

Well I think to the extent that we would be a seller or not is clear, but if we ever got to a point where we wanted to be a seller, we would be looking at the different leases that we have and obviously it's going to again, reiterate we're not a seller, but we look and say well, how many independently leases do we have, we have because we obviously have ten, but that would be a of [indiscernible] lease to sell, right. Technically that's a huge lease to sell. You have the Casino Queen potentially is the lease that you could sell on a one-off basis to somebody. And we've the metal that we could turn off and around themselves. So those are leases that theoretically at different sizes, but you could potentially sell so to speak if it ever got to the point where you want to do that. Now we have some other limitations in that with the current tax law, we can't just turn around and sell anything without potentially creating a risk of an embedded gain, but we have the right to pay the tax on. And that's the ten-year period, so - oh five years. Okay, I got corrected, I thought it was ten. But five-year period, it used to be ten? Okay, I feel a little better. So it used to be ten, it's now five, so you can't - you just can't turn out and sell an asset for five years. And we'd be selling the lease, so at end of the day we'd have whatever properties are embedded in that lease. There is no ability to carve up the lease without a negotiation with the tenant in terms if you were to try say well, I want to take these six properties and separate them out just like we have a right to object to that. The tenant would have a right to object to that if we say we want to take, let's say we want to go to [indiscernible] and say, hey, we've got somebody that really like to own X, Y. Z properties, we want to separate the lease agreement. That would involve negotiation with them and they would have a right to object. And maybe they would agree to it, maybe they wouldn't. So I guess there's a very long winded answer of saying that we couldn't - we could sell the individual pieces or individual leases but that's really not in any way shape or form in any part of our strategic thought processes as we sit here today.

It is not, but I will say this. I think that possibilities will open over time as the investment world, the REIT world gets to understand the stability of the cash flow that we have here. I mean what we consider ourselves mostly undervalued today for a couple reasons and I'm not going to try to dissect, but we have an extraordinarily stable cash flow that in itself would be appealing I think to many, but certainly appealing to me. If that adds any color to this at all.

Thank you. At this time, I'd like to turn the conference back over to management for closing remarks.

Not much to add. I think we said most of what we can this quarter but thank you very, very much for joining us today. [indiscernible] said he hated the afternoon, but we've taken vote, and so does. You might see us on an afternoon again, will see. We thank you all very much, see you next quarter.

Thank you ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.