Gaming and Leisure Properties, Inc. (GLPI) Q4 2019 Earnings Report, Transcript and Summary

Greetings, and welcome to Gaming and Leisure Properties Fourth Quarter 2019 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] I would now like to turn the conference over to your host, Joe Jaffoni. Please go ahead.

Thank you, Stacy, and good morning, everyone, and thank you for joining Gaming and Leisure Properties' fourth quarter 2019 earnings call and webcast. The press release distributed yesterday afternoon is available on the Investor Relations section of our Web site 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. Forward-looking statements may 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 forward-looking statements contained in the company's filings with the SEC as well as the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release. On this morning's call, we are joined by Peter Carlino, Chairman and Chief Executive Officer; and Steve Snyder, Chief Financial Officer at Gaming and Leisure Properties. Also joining today's call are Desiree Burke, Senior Vice President and Chief Accounting Officer; Brandon Moore, Senior Vice President, General Counsel and Secretary; Steve Ladany, Senior Vice President, Finance; and Matt Demchyk, Senior VP of Investments. With that, it's my pleasure to turn the call over to Peter Carlino. Peter?

Well, thank you, Joe, and good morning everyone. We are of course delighted to report the end of a great quarter and the end of a terrific year for GLPI and added shareholders. I set a goal in 2019 to do a better job of outreach to our shareholders, tell a better story and do a more effective job. And because I was feeling as Rodney Dangerfield used to say we can't get no respect and I was satisfied that performance was good, but clearly people weren't getting it out in the market. So in sharing our story most effective or more effectively with all of you and our excellence and actual performance, I was satisfied that the market would eventually come to recognize that regional gaming in particular offers some of the most attractive risk adjusted cash flows in the marketplace. As I like to remind folks that we speak with, our properties are 100% occupied today and we expect that they will be 100% occupied 10 years from today and 20 years from today. And that's unique. And we also want to make the point that regional gaming has revenue that is inherently more stable than Las Vegas strip revenue. And I think the market is just beginning to appreciate that. The story we've been telling, but I think people have come to recognize that these are pretty serious properties in the markets where we are in many cases our properties are market leaders and that's just beginning to be appreciated. For 2020, we'll continue to refine our outreach to all of you and to others who may not yet know our story. We remain totally focused on generating safe and attractive and accretive transactions this year as always. I think we have demonstrated over decades that we can compete on our abilities and not just our cost of capital. That having been said though, we have worked on a two prong attack to boost our equity value. You've just heard outreach is part of it. And on the debt side, continue to look for opportunity to improve our debt profile, rate, term at the same time remaining committed to our investment grade rating and remind you that we are the only gaming REIT that holds that those ratings, we're going to hang onto it. I should point out that though our standards are tough and many of you have heard me say that we're not in the monument building business. But rather disciplined buyers who manage our ambitions with a goal of building steady permanent cash flow for the future. Following this philosophy, our team has delivered total shareholder return over the last six years of 13.5% compounded annually. And by the way, this get a plug in for major tenants while at Penn National that was over 24% compounded over 20 years. So I think our record of delivering long-term value has been good. So, we'll remain aggressive, but disciplined and as we look to 2020 and beyond. So with that Steve, I'll turn it over to you.

Great. Thanks Peter, and good morning everyone. Just a couple of housecleaning matters before I go into a little bit more detail. As you've probably seen by now, we did file our annual report on SEC Form 10-K last evening. It was effective this morning, so if that's out there for anyone to the degree you have follow-up questions. Secondly, you also saw our press release which we issued this morning pre-open after our Board call yesterday evening declaring the first quarter 2020 dividend at a rate of $0.70 per share, which is payable on March 20 to shareholders of record on March 6. Moving forward as Peter mentioned, it was really a very quiet quarter compared to some of our most recent quarters and that there were no non-recurring items, no unamortized financing fee write-offs, no goodwill impairment charges or anything really. We in the quarter really hit our stride as an operating business and feel strongly that we've set the template for the future opportunities for GLPI. We did modestly exceed our revenue and adjusted EBITDA guidance in the quarter and our AFFO, we actually exceeded our guidance by nearly 1%. So in by all economic measures, it was a very successful quarter for the company. For the full year, we actually modestly exceeded the high-end of our AFFO guidance, which we established a year ago when we issued our 2018 year-end earnings report, even though we faced the headwind of not realizing the full escalator, but just a fractional escalator out of the amended pinnacle master lease with Penn National Gaming. Just to touch on the portfolio real quickly, during the quarter, we did anniversary our lease relationships with both Boyd and Eldorado resorts. And those relationships have been very attractive, both sides, they've been mutually beneficial for both parties. I think you're going start to see some more of those mutual benefits as time unfolds. The first one that you're going to see and Boyd hit upon it in their earnings call last night. We did just recently get approval to move the Belterra Park facility into our owned real estate category. You'll recall, we used the bridge financing, a mortgage financing mechanism in order to satisfy concerns that were expressed at the time by the Ohio racing commission. In January this year, the Ohio racing commission, I'm happy to report did approve the transfer of that from a mortgage facility to an own facility highlighting the mutual benefit and the cooperation that exists with we and the Boyd folks. Also as it relates to the Boyd assets, very encouraged by their comments on their earnings call last night as they commented on their desire to invest capital in room refresh projects in two of our assets, the Ameristar Kansas City and the Belterra resort property. So, evidence is to us that continued performance and the continued interest and the continued benefit of the Boyd management approach to that four property portfolio. As it relates to Eldorado, we are continuing our discussions with Eldorado on finding a replacement for the Lumiere property. We're in the real estate ownership business. We extended a loan to Eldorado to satisfy the Missouri regulators that loan was for the purchase of real estate as required by the Missouri regulators, during the quarter we did release the mortgage on that facility. And/or as I said, actively working with Eldorado. As you can imagine, they've had some other pressing matters in front of them over these last couple of months. But they do remain engaged in a constructive dialogue on the replacement of the Lumiere property into the Tropicana master lease. This removal of the master -- the removal of the mortgage on the Lumiere property in conjunction with the removal of the resorts casino in Tunica from the Penn master lease, I'll point out, did result in a reduction in the property count that you're seeing in our earnings release. And then, you're going to see in our 10-K by two properties. With no impact whatsoever on any of our rental stream, or income stream or anything else I just pointed out, so that those we used to our 46 property count aren't surprised by what you see. During the quarter, we realized the full escalator on the Penn master lease as it anniversaried in November. We realize the full anniversary of the Meadows master lease, the Meadows lease as well as the catch-up payment for the partial escalator under the amended pinnacle master lease, which we brought to your attention and shared with you on our last quarterly call. In spite of the fact that there have been some significant construction disruptions at the Meadows, which as you heard from Penn are now behind them. They invested a great deal of capital in our facility in renovating and replacing the food court as well as building a new center bar, sports bar, sports book concept that has been very well received by patrons of the facility. Moving on, a Casino Queen has continued to pay their occupancy costs. There are no issues with respect to payment. As you know, they have been below their default coverage ratio. We continue to monitor the situation closely. We'd bring to your attention the fact that at the January 30, meeting of the Illinois gaming board, there was an agenda item for the request to transfer the ownership of the Casino Queen. So that the entity that we've described to you in the past has become much more active in the management and in the future will become much more active in the ownership of the Casino Queen. We're encouraged by the performance that we saw in the fourth quarter in terms of the revenue reports that the Illinois Gaming Commission did issue. I'm seeing pretty significant year-over-year improvements from a revenue standpoint. We did just earlier this week received the preliminary coverage calculations under that lease which we are now in the process of drilling down on because it doesn't appear that the flow through is there based on those revenue growth realizations that they did see during the quarter. So we will be working with the new management team at Casino Queen to get a better understanding of what's going on there. Finally, on the TRS, our management team and the taxable REIT subsidiary both in Perryville and Baton Rouge, [indiscernible] they continued to do a great job managing their businesses, managing the expenses of their businesses. And the TRS was a very pleasant outperformer during the quarter exceeding our guidance by nearly $800,000. We are in the process of looking at a potential modest investment, landside move in Baton Rouge now that the Louisiana regulators have approved the landside move and will inform you as those plans develop over the coming quarters. On the balance sheet, we saw in our earnings release that we closed the quarter with 46 million drawn on the revolver. We had gross leverage net of unamortized issuance costs of 5.5x trailing 12 months EBITDA at 12.31. We had net leverage of 5.49x trailing 12 months EBITDA. At the end of the quarter, we did have just under 9% of our debt was floating rate. I will bring to your attention the fact that we have recently called for the early redemption in March of our 215 million 4.875% notes still in November of this year and the 400 million 4.875% notes due in April of next year. I would point out for people on the call that even if we fund that on the revolver, which is not our current anticipation, we will be reducing interest expense and extending the duration of our debt. So there are tremendous opportunities for the company for continued rationalization and continued improvement of our capital structure as a result of the flexibility that we've provided ourselves with the call for the early redemption of those notes. There was in the quarter -- really at quarter end, an immaterial amount of activity on the ATM, part of that was just because of settlement date convention from an accounting standpoint. But we wanted to let everyone know that we do know how to use the at the market equity program and have evidenced it. Finally, we have established our guidance for the first quarter of 2020 as well as a full year guidance for 2020. Our guidance reflects the biennial variable rent resets in the Ford leases that are subject to variable rent resets in 2020. Those being the amended pinnacle master lease, the Boyd master lease, both of which will be in May and the Eldorado and the Penn Meadows master lease, which will be in October. So we've made estimates based on input that we've gotten from our tenants as well as the data that we follow with respect to the monthly performance of those properties so that we conservatively reflected what those variable rent reset impacts will be for the company in 2020. And the last point I'd make on the guidance, we've given a range for the year. The range is on the low side inclusive of the Eldorado escalator, which has a default trigger of 1.2x. So we're very comfortable. We're going to realize that escalator. And on the high-end of the range, we've included escalators for the Penn master lease in November, the Boyd master lease when it hits its lease anniversary in May, the Eldorado master lease of course, and then finally the Meadows master lease or the Meadows lease in October. So with that operator, I would turn it over for questions to the assembled group.

Thank you. [Operator Instructions] Our first question comes from Nick Zeniuk with Scotiabank. Please go ahead.

Hey, this is Greg McGuinness. I'm with Nick. Good morning everyone. Steve, all else being equal. If you were to find a sizeable acquisition that actually fit your strict underwriting process in the near future, how would you think about funding that deal? What's the availability of financing GLPI today and is there a target leverage metric that you may try to hit for the company through deal financing?

Look, we do have leverage guidelines that the board has set and that we have adhered to as Peter mentioned in his comments, it's taken us, it took us 4.5 years to get to a crossover investment grade issue, we're not going to give that up. We certainly were comfortable going into the closing on the fourth quarter, 2008 transactions, funding them with all leverage, taking our leverage up at the time to something north of 5.7. But as we said at the time, we saw a glide path, which we've achieved of getting down below 5.5, so leverage of 5 to 5.5 is where we're comfortable with, with the comfort level of stretching slightly up to 6 as we presented to the rating agencies for the right transaction, depending on what the market opportunities are at the time. We've been a beneficiary, Peter mentioned the equity value impact that we've seen throughout calendar 2019 as a result of the engagement we've entered into with you our shareholders. You're also seeing substantial improvements in our credit spreads. Our long dated 2030 maturities are now down to treasuries plus about 175 depending on which deal you look at. So the credit markets have been good to us. The equity markets have been good to us. You should think of us looking at every acquisition, financing on as accretive and as leverage neutral basis as possible.

All right. Thank you very much Steve. And then Peter, I'm just curious, have you spoken with Landon buildings after their initial public commentary? And then what are your thoughts regarding that potential merger suggestion with VG?

Well, yes, I mean we did. I think we've said that we had a conversation with those folks and understood what they were interested in. I think frankly look, our performance has been so terrific that that kind of took the air out of that balloon for now. But look shareholders are always pressing for us to do something that is in their interest. I see no particular advantage to transaction with VG. Look, they have their plans, we have ours. My argument would always be, if you like what those guys are doing, you ought to own them. If you like who we are and what we're doing own us and look the -- in the end it's all about producing more value for our shareholders. And I guess the bottom line is, certainly as we sit today, I see no advantage at all to that. And we've had no further discussion with them. And will we maintain, I think you've maintained a healthy dialogue.

Yes. I think Greg, at the end of the day, what's really been clear over this last 12 months since we've really been out talking with people is that we've got a differentiated approach and that ultimately to Peter's earlier comments, when you think about the value inherent in our portfolio that unique amongst the three public companies and amongst all gaming REIT structures. There's more ground to be covered and more upside as people appreciate the merits of regional assets and put appropriate multiples on them for us arguing than anyone. And then back to Peter's other point, when you think about the platform value and the scarcity value inherent that you get with our company, with the management team, with that track record and assets, you couldn't duplicate. I think that we, Atlanta billings both would agree that there's a lot of upside in the stock. And I think that's the case they originally made whether or not a transaction helps us get there doesn't seem like it's necessary if you look at the performance year-to-date.

Our next question comes from Joe Greff with JPMorgan. Please go ahead.

Hey, guys, just two quick questions. Thank you for all the information in both the release and these prepared comments. First question, the old tried and true question, can you talk about, what some of the things that might be in your pipeline broadly, how that pipeline might be in terms of size and activity-wise, how did that compare to the last couple of quarters? And then, just my second question, a point of clarification, Steve on your guidance, it doesn't appear to us that you're factoring in any benefit from calling in those two pieces of debt, just to clarify that and that's all for me. Thank you.

Yes, Joe. Let me start with the latter. You are absolutely correct. We are being, I think, reasonably conservative in our guidance as it relates to interest expense. We're obviously watching the capital markets. We're seeing tenors that seem to be available to issuers, including ourselves, that probably a year or two ago we would have never thought about or even considered. But given the long duration of our assets we're really looking at all options with respect to financing on a more permanent basis, obviously, than the revolver the redemption of the 4.785 and 4.875 that we've called. So you are correct in terms of the guidance. Your earlier question in terms of the pipeline look, I commend everyone on this phone call, everyone has an evermore creative way of asking the same question. And you'll get the same response from us. I mean, we look at, as Peter said, we look at everything that moves. We have tremendous relationships with the leading regional gaming operators, Penn Eldorado and Boyd in the United States. This is an industry that is continuing to consolidate in spite of what Josh and Keith might've said on their phone call in terms of their focus on the operating leverage that comes with sale leaseback financing transactions. The experience that we've had with that management team over the year plus now that they've been a tenant in our building has proven to them that we are a facilitator. We're not an obstacle, but we really are a business partner and a facilitator in helping them grow their business. And I expect them to continue to see those opportunities and explore those opportunities. So I would leave you with the thought that there's really nothing different. Obviously, cap rates have compressed for us in our peer sets. Our ability to pay has grown. And you should assume that operators and sellers are aware of that.

Our next question comes from David Katz with Jefferies. Please go ahead.

So, two questions, if I may. First, since the last quarterly conference call, we've seen some deals that have occurred and we frequently asked whether strip assets or larger scale assets would be of interest in, the answer is usually at a price. If we look at a couple of those deals and you can surmise that I'm speaking specifically about things like Bellagio, are the occurrence of those deals, are those positive for you? Are those good for the business model and are they good for you?

Well, let me take a quick shot at that. I know there's some opinions around the table and then I encourage others on our team to speak up. But look, I think it's terrific. What it underscores is that an institutional source of capital has looked at these unique -- in that case, Bellagio, it's a unique property to be sure and made a judgment that's a highly valuable asset that makes sense for the long-term. And I think we all put us sort of stand in the reflected light if you will of that transaction. Look, I think this has always been about from the time we started this market segment, gaming REIT, it was always about getting the market to appreciate that these are special assets with long-term enduring safe value. And anything that happens in our space that suggests that these are important -- is helpful. So, we're delighted. I can't say we would have paid what those folks paid, but look, it makes sense. It's unique. Matt, do you want to comment, because I know you spent some time with this slide.

I think you put it really well Peter. I just add, I mean there's a validation of the asset class for sure. And I think as people dig in more on the institutional side over the years, I mean, they're trying to solve for enduring cash flow and put a price on that. And would you dig into the merits of a portfolio like ours, ultimately there's clearly the case to be made that lower volatility of cash flow is more valuable over time. And also that this concept of scarcity value was really relevant in other parts of real estate, it's extremely important that barriers to entry and that's one thing you don't have as much of in Las Vegas, there's a high land cost, but you can build with capital some of our assets. I mean you look at the state of Ohio and the fact that the meets and bounds of those actual locations are in the state constitution. There's some enduring value there that ultimately as people dig in will be recognized and this is a step along that path, how long it takes to get to the end of that path. We don't know, but good signposts for sure.

Yes. David. The short answer to your question is, those transactions are absolutely beneficial to our asset class. There is no question in my mind that is institutional capital continues to look at opportunities as Matt mentioned and as Peter mentioned, there will continue to be a greater and greater appreciation of the -- basically the toll bridge nature of these regional gaming facilities and what they mean for state government. So, everybody gets caught up first and fit and finish, right. How pretty does the thing look and then secondly, how does it perform? And we've always been on the performance side.

All right. And my second, thank you for that. And my second question, certainly the stock performance shouldn't be lost on anyone. It's certainly not lost on me and hard earned on your part. There is still somewhat of a differential in sort of your trading level, I believe relative to the two others. What's your opinion as to why that exists and what you intend now, what strategies or thoughts you have about how you can continue to close that gap?

Yes. I need to correct you. I do think we are with the middle of the pack. We're not at the head of the class, but I think based on the performance that we've been able to post over the course of calendar 2019 and here into 2020, we're on the same lab with everybody. We're not quite at the same cap rates as one of our competitors, but we're on top of and depending on what metric you use actually through one of our other competitors. So I think you are starting to see the benefits of what Peter mentioned, which is really the significant engagement that we've undertaken with respect to investors both on the equity capital markets and on the debt capital markets side. So I would disagree a little bit with your conclusion, but your point is well-taken. It's not over. It's a work in progress and it's a work that we continue to be focused on day in and day out in terms of continuing to educate investors on the value of the cash flows that these regional toll bridges produce in these markets.

Thank you. Our next question comes from Rich Anderson [ph]. Please go ahead.

So, when I think of what's going on in the Gaming REIT space, I feel as though you and others are basically exploiting an inefficiency in exploiting comes with a negative connotation. I don't mean it that way, but there's a wide spread between cap rates and costs of capital and you're able to create accretion, it reminds me of a long time ago when the REIT space, me being a REIT guy, not a gaming guy where you had this spread investing opportunity which ultimately went away and now REITs are having to develop or do other things to create accretion. So my question is, if you close your eyes, envision a similar chain of events happening here, cap rates coming down, property values up, all good, but your stock price in interest and rate environment don't adjust at a commensurate pace. What would you be inclined to do? Would you let the portfolio marinade? Would you adjust your underwriting? Would you look to other asset classes? Could you redevelop and scale? I'm just curious if it's something you're thinking about now or if it's something we're just not worried about today and we'll worry about it when that time comes.

Well, we're always looking ahead. Any suggestion that's an hour asleep. And you're not implying that of course, but no, look, we're always looking at what the future might hold kind of hard to react to something that has not yet occurred. We get the question constantly. What else might you guys do? And I love, we're going to stick with gaming as long as gaming is where we can be. And I think there's still significant runway over the next years before we really have to worry about being someplace else. Really do. There are some States that may approve gaming. I know Georgia is one, for example. We'd love to be players in that field as an example. And we maintain, and I'm looking down the table at Steve Ladany and Steve burning the midnight oil around various possibilities, things that we're looking at kind of determine what we could make work. That's a daily process. So I think we're a good bit away from throwing in the towel and imagine we've got, what do you think Steve?

Rich, first of all, welcome you and Jay to our coverage universe and welcome you to our asset class. Thanks for all the effort and energy you've put into moving up the learning curve. I mean, the answer to your question is pretty easy. It's really all of what you enumerated. Our responsibility as a management team is first and foremost to prudently manage the balance sheet and efficiently and accretively deploy capital. It's as easy as that and given the stakes that we all have in terms of ownership here in the company, particularly Peter and his family is you've heard me refer to him as our shareholder in chief as opposed to our Chairman or Chief Executive. You can rest assured that that same discipline is going to be applied to all of the alternatives that you mentioned developing or enhancing the existing portfolio. Looking at opportunities beyond regional gaming, looking at opportunities for development as this asset class continues to mature.

I have made the point that if I can just underline it again, that we're very aggressive folks and those who have followed us for years, but we're not in the monument building businesses that's why I said that there's no deal we have to do. So that in the end it's simply about building value, value, value. Steve said it and it's true. I'm a shareholder before I'm anything else. Shepherding our investments, being smart is all that matters to me. It isn't the next deal. It simply is not trying to look good or we get a bonus because we added three more properties that added nothing to the cash flow and nothing to maybe even increase the risk profile. We're just not in that business. The folks who generally stick with us are people who value what we do and value our investment philosophy. So for better, for worse, that's what we sell aggressive.

Okay. A second for me is our launch report, we kind of mentioned sports betting and online gambling as sort of a courtesy to pretend like we knew what we were talking about and I don't know that it's playing a major role in the underlying business of the bricks and mortar operations of your operators. And you can correct me if I'm wrong on that, but, then you have the Penn, Barstool kind of connection and the term Omni-channel was brought up. And I'm just wondering what's the next generation phase of the business? Do you think online gambling and sports betting becomes a bigger part of the conversation over the next several years and is that a good thing or a bad thing from the standpoint of your operators and what is GLPI willing to do to participate or adjust?

Rich, first of all, from a sports betting perspective, every one of the operators that have reported to-date and I'm sure the report, the operators that have not yet reported are going to talk about the lift that they've seen in their buildings as a result of sports betting, where it's entitled. Whether it's the incremental food and beverage sales, whether or not it's just the incremental visitation, the incremental game play, the incremental table games, slot play that comes from more people and a newer demographic coming into the building. So the impact of sports betting in those markets where it's been approved in Pennsylvania, in Indiana, in Mississippi, in West Virginia, in New Jersey, it really has been a nice uplift for these businesses. In terms of the internet piece, the internet piece, as we've talked in the past, I mean, the first state to approve online casinos has been New Jersey. Now others have followed Pennsylvania in particular. But in the New Jersey model, those operators of the online casinos, the online sports books are tied to the casino facilities. And as we've said in the past, they're tied to the casino facilities because it's already an infrastructure that can be regulated. It's an infrastructure that is easier to tax and it's also an infrastructure and more of the real estate investors on this call will come to appreciate this. Gaming regulators and gaming operators do recognize a social responsibility because there is a small portion of the population that gambles beyond their means. And responsible gaming is an issue in every state in every jurisdiction and keeping gaming, whether it's on the internet or in a brick and mortar facility with those people that have those experiences that have those databases that have those backgrounds in terms of KYC, know your customer are always going to be the lead as these new States come online. So I don't foresee, if I heard you correctly, you're asking the question, is there an Amazon risk in our business? Correct. There is not from two respects. One is the regulatory framework I just mentioned and two is gaming does remain a very social and a very interactive activity. And I think New Jersey has proven that as the longest dated now online casino facility and it has proven a tool to identify and attract incremental customers to draw into the physical facility.

Okay, great. And I think my colleague Jay has one follow-up question.

Hi. Yes, thanks for taking the question. Just real quick. Does the 1.77 rent coverage for the Pinnacle East include the accounting adjustment that was discussed with Penn last quarter, which rose coverage above the escalator threshold or is this number not inclusive of that?

No, that number would be flowing through that on a trailing 12 basis based on the escalator when it was realized in April, May, end of April of 2019.

Next question comes from Robin Farley with UBS. Please go ahead.

I have two questions that are kind of related to topics you've already covered, but just a little bit of a different angle. One is, first is, are the other transactions that we've seen out there in the last three or four months, are they at multiples that, that are so high that they're actually raising seller expectations to a point that it would make it harder for you to do something that you might've been able to do six months ago?

Look, Robin, I don't think I can't speak for anybody and I'm not going to stereotype. But, I think if there any people on the planet that compare their real estate to the Bellagio on the Las Vegas strip, I would hope I could count them on the digits of one hand. These are very unique assets. These are very unique circumstances. Both of these partnerships that yes, sellers will try. More importantly, bankers will try and convince sellers that if they are retained as their banker, they can get them those multiples. But I would not look at the price discovery from Bellagio is being illustrative of the next two or three transactions by any stretch of the imagination.

I'll say flatly. We're not seeing that yet. I mean the things we're looking at, what we are not seeing that kind of reaction.

Okay, great. Well, that's helpful. Thanks. My other question is also related to the Penn deal with Barstool, but I guess what I want to ask is, we've kind of seen a precedent with Park MGM and an NGP where improvements or expansions like non-gaming elements are then kind of sold to a gaming REIT, sort of monetizing that, those additional pieces. So I'm wondering if the physical part of the deal with Barstool, where they're talking about adding restaurants and bars. And if that creates additional cash flow, is there opportunity then for GLPI to sort of buy that in the way we've seen this, precedent non-gaming deal when a property is expanded or renovated, is there an opportunity for that with the Barstool deal with Pam?

No, it's a fair question. I would not by any stretch of the imagination compare the conversion of the Monte Carlo into the Park MGM as anything that we would ever see in the regional markets where anything that the Barstool announcement would precipitate at Penn. What we have seen from them. I mentioned in my earlier comments they've been rolling out new food courts now. I think they're up to their fifth. They just opened the new eatery out at the Meadows. And they are continuing to invest in their businesses. We have had conversations with them and I know they've acknowledged it in the past as well to look at opportunities to maybe grow these businesses by adding hotels where there aren't hotels by adding RV Parks where there's excess land. Those are opportunities for us to put capital to work, but quite frankly, we become the indirect beneficiary when they do invest in their businesses. And that's why I commented after listening to the Boyd call last night by going back in and doing room renovations in the hotel at Ameristar, Kansas City and the hotel at Belterra resort in Indiana, we over time will be the beneficiary. They obviously will be the biggest beneficiary or they wouldn't be undertaking those projects. They see value there, which will in order to them and ultimately to us. Look, I think part of the answer is they're not going to -- anything they can fund internally of this relatively modest stuff, they are going to do. A hotel or something of that magnitude, we had those kinds of conversations. We are looking at some of the excess land in various markets. That sort of thing does make some sense, but I think they'll continue to -- which makes us very happy. As Steve said, they want to put money in our properties. God bless him. Now if Barstool becomes a universal studios kind of brand and they started expanding massively with a Barstool branded hotels or those kinds of things, we can all aspire. They have got some pretty end business around barstools. So anything's possible.

Next question comes from Spencer Allaway with Green Street Advisors. Please go ahead.

Obviously since you guys touched upon in your prepared remarks, guidance assumes a range of outcomes regarding the leases that are subject to the rent resets in '20, but can you just provide a little bit more color on your confidence in achieving those resets based on the operator's health today the Form-20.

Yes. Good morning, Spencer and welcome you as well to our coverage universe. You've invested a lot of time and you've visited several of our properties and we thank you for it and appreciate those efforts. In terms of the escalators, the resets quite frankly that's why we disclosed the coverages on a four wall basis. It's one of the many reasons I should say why we disclose the four wall coverages that we do for each of our leases so that everyone on this phone call can sort of make their own value judgment based on where they're trending, what the likelihood is. You saw last year incorporate guidance, which on the low end had no escalators on the high end had all of the escalators. We've moderated that a bit this year just based on the performance of one particular master lease. So I think the answer will lie somewhere in between, but we feel very comfortable that the bounds that we've set with the high and the low estimate are reflective of the likelihood of realizing those bumps.

Okay. And then maybe just going back to an earlier question on land and buildings, a position in your stock, can you -- a side of M&A, but maybe can you just talk about any potential changes to governance or composition and or G&A that may have been discussed or suggested by the asterisk?

Yes. There's nothing that I'm just trying to think, is there anything, no, really no changes anticipated in any area and we just may. Yes. And there are no specific asks that, that's probably the best answer.

In Peter's opening remarks, he commented on the engagement that we've had throughout 2019 with all investors. So there is nothing unique to land and buildings we do interact with and we very much appreciate the dialogue that we've had with an ever growing number of investors and really factor everything into account and use that dialogue as an opportunity to just be better informed as we continue to manage this business.

You would ask about governance, really? There's nothing that has been requested. Actually I think in most measures we are pretty well rated for governance. We don't have any significant issues anywhere. Do we -- Brandon, I'm looking at our general counsel.

No, I don't think we have any specific governance issues that have been raised by shareholders to us. In the past quarter. One of the holds that we did have, I think was the lack of a female on our board, which because of the regulated nature of what it takes to be a director on our board, it took us quite some time to find quality qualified candidates. But we recently did add a female director to our board and we're very excited about that. I think that was the biggest request that we had from shareholders that we mouth filled.

The next question comes from Barry Jonas with SunTrust. Please go ahead.

Hi guys, this is Jeff on for Barry. Thanks for taking our questions. First off, you guys have been fairly disciplined in terms of setting the terms of your leases -- for future deals, can you maybe just walk us through what areas you're maybe more flexible on and which are less though?

Look every lease is a unique negotiation is a unique dialogue because we want to be the landlord of choice. We want to be the business partner of choice for our tenants. So it's difficult to stereotype. I would point back to my earlier comment. Anything that we do needs to be accretive, if it's going to be of a lesser credit quality, because obviously now we've gotten a portfolio of tenants with multi-billions of dollars in equity market cap, in most cases, not all, but certainly with the master leases. So anything that we do, if we're going to move out on the risk spectrum, we're going to be -- we're going to expect to be compensated for it. So, you're asking a hypothetical that really is impossible to comment on.

I'll just add Jeff. If you look at what we've done historically and you apply it to the current time, our goal is really to get the highest IRR possible. And if there are win-win ways, we can tweak aspects of the lease that we and then our tenant win, we'll be happy to do them. But it all comes down to the economics, like Steve said.

Great. Thanks. And then lastly from us, you've mentioned some international opportunities in the past. Is that still something you're considering?

Yes. I mean bottom line is we look at, as I said earlier, we look at any opportunity to accretively deploy our shareholders, our capital.

Next question comes from John DeCree with Union Gaming. Please go ahead.

I think you've addressed them all at least twice. But just to pile in here on kind of Las Vegas strip versus regional question a peer you've kind of spoken at length about that the less cyclicality and more resilience of regionals. And when we look at kind of valuation for the Las Vegas strip just kind of wanted to get some clarity or your thoughts, if there was an opportunity in Las Vegas strip was accretive, would you be interested in moving in there or stay focused on regionals? And then, I guess it's kind of a risk reward question. Would you approach kind of Las Vegas strip with a little bit more stringent underwriting standards given the kind of resiliency you've already have in your kind of existing regional portfolio.

Look, I think you've answered it with a lot more caution. And remember it's one thing to operate a spectacular property which we built and have in say Toledo, Ohio or Columbus, Ohio, no hotels. As compared to say a 4,000 room hotel property along with other entertainments as nightclubs and everything that goes with it. You can imagine the would we be much, much more coverage to be satisfied that we will be safe in a downturn and we know that the downturn will have a profoundly larger effect than the Las Vegas strip property than it would in your neighborhood store. That's been demonstrated. It's pretty clear. And so yes, I mean we'd be thrilled to look at a good property, but again, it would be with eyes wide open. And we would like to think some sensible underwriting approach, but no, we will look at anything. I sometimes say many are called, but few are chosen.

Our next question comes from John Massocca with Ladenburg Thalmann. Please go ahead.

You kind of mentioned in your prepared remarks that you would want to fund any potential future acquisition activity on a leverage needful basis. But I guess given the recent performance in your stock, would it not make sense maybe to kind of over equitize any transaction to kind of bring leverage kind of well below target levels.

John that was in response to an earlier question. It wasn't in the opening remarks, but your point is well taken. The bottom line is, we are at leverage levels for the company given the cash flows that are assets produced that we are very comfortable with. I don't lose any sleep at night over the balance sheet of GLPI. So we -- your point about over equitizing look, everything is a fact and circumstances determination based on what market environment exists at the time. And right now, as I did say in some of my opening remarks, you're looking at long dated opportunities in debt capital markets that if you'd asked me two years ago might be available to GLPI would've looked at -- looked at you like you're crazy. So you should assume that we will look at all capital structures with respect to both the existing balance sheet as well as prospective acquisitions.

Okay. And then just one quick detail question. Can you maybe quantify the variable rent change assumptions that are baked into 2020 guidance?

We've not drilled down -- we're not disclosing that only because we do not want to front run our tenants. And more importantly, we don't want to say something that our tenants come back and suggest that we should not have disclosed. So what we've guided people to is, there are monthly revenue reports buy property in every market in which our portfolio is located, except for Nevada, Mississippi and Colorado. That you can get a very good sense of what the resulting variable rent resets will be. We do maintain a database for each lease, looking at the monthly revenues and feel that we have very good insight into those, but again, prefer not to front run our tenants.

Okay. But just to clarify that is, some level of changes baked into your guidance, correct?

I'm sorry. Yes, absolutely.

Our next question comes from Daniel Adam with Nomura. Please go ahead.

Most of my questions have been answered. But if I could just ask one on the TRS properties, I'm wondering if you have a sports betting strategy in place. Should Maryland and/or Louisiana pass legislation? My sense is that Maryland in particular could have draft regulations approved before November of this year. Thanks so much.

Thanks Daniel. The answer in Maryland, any expansion in gaming has to go to the voters. So right now there is a bill in the legislature in Maryland that would change that. But to-date any change in gaming must go to the voters, if this were the referendum question that were on the ballot, it would allow for regulatory approval of sports wagering in the future. So it's not as cut and dried as your comments may have suggested. But the answer to your question is absolutely. With respect to both of our TRS assets, Louisiana and Maryland as you can imagine are on very different tax. What happens in Baton Rouge is not the same as what happens in Annapolis with respect to enabling legislation for sports wagering. But we have had several discussions. Our property management teams at both locations have been engaged as you can imagine cause of a number of the vendors are very actively out there looking at what states will be next and how they can participate.

Our next question comes from Jordan Bender with the Macquarie Group. Please go ahead.

So we saw JV form during the quarter, in the space and you guys had mentioned that you don't need a larger offset, but if there's a value, is this something that you would entertain without flux, the balance sheet. And it is my follow-up. Could you quantify the investment for the move totally in Baton Rouge? Thanks.

Yes. I'll take the latter question. We've told the people that are involved in it that it's to be under $20 million because there's no real revenue growth opportunity. It's really all a matter of being more efficient in how we deliver services down there and coming off of a three story riverboat to a purpose built land-based facility. So that's an easy question.

Yes. Maybe the definable cost saving, but they're limited. They're not insignificant, but that's all we see no revenue growth going landside nothing material. As to the joint venture notion…

Yes. I'd say historically, this is Matt. Historically we've been creative with our acquisitions and the structure could play a role in the future if it made sense, but we certainly would underwrite things with an appreciation for look through leverage. I think to the point your question and also with an appreciation of any appropriate complexity, discount or other kind of incidentals that would come with that for our structure. But it is an interesting avenue for potential transactions in the future.

I mean, the bottom line is, we've talked about it.

Thank you. We've come to the end of the Q&A session.

Well, that's pretty finite and sudden, but I hope this has been helpful to all and we'll look forward to speaking with you all again next quarter. Thank you so much.

This concludes today's teleconference. You may disconnect your license at this time and thank you for your participation.