Peter Carlino - Chairman, Chief Executive Officer Desiree Burke - Senior Vice President, Chief Accounting Officer, Treasurer Brandon Moore - Executive Vice President, General Counsel, Secretary Steve Ladany - Senior Vice President, Chief Development Officer Matthew Demchyk - Senior Vice President, Chief Investment Officer Joe Jaffoni - Investor Relations

Greetings! Welcome to the Gaming and Leisure Properties, Inc., First Quarter 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. . Please note that this conference is being recorded. I will now turn the conference over to your host, Joe Jaffoni, Investor Relations. You may now begin.

Thank you, Kyle, and good morning everyone. And thank you for joining Gaming and Leisure Properties first quarter 2022 earnings call and webcast. The press release distributed yesterday afternoon is available on 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 risks and uncertainties that may cause actual results to differ materially 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 risk factors and forward-looking statements contained in the company's filings with the SEC, including its 10-Q and the earnings release, 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 of Gaming and Leisure Properties. Also joining today's call are Desiree Burke, Senior Vice President and Chief Accounting Officer and Treasurer; Brandon Moore, Executive Vice President, General Counsel and Secretary; Steve Ladany, Senior Vice President, Chief Development Officer; and Matthew Demchyk, Senior Vice President and Chief Investment Officer. With that, it's my pleasure to turn the call over to your host, Peter Carlino. Peter, please go ahead.

Well, thank you Joe and good morning to everyone. We are pleased on this lovely spring day here in Pennsylvania to report another strong and eventful quarter for the company. In this quarter we completed as you know the acquisition of the real-estate assets of the Live! Casino & Hotel in Philadelphia and in Pittsburgh with the Cordish Companies. You will recall that we closed on the Maryland Live! property in December. And these are extremely high quality assets for any of you that know them, developed by one of the country's foremost property developers, and we see considerable opportunity parenthetically with Cordish as we look to the future. The details of this attractive transaction are well outlined in our published release. Also this quarter, we closed on two properties with Bally’s and Quad City in Rock Island and Black Hawk. So that’s properties added to our portfolio, which I just noted was some interest to me if not to you, that when we commenced our spin in 2011, we did so with 24 properties and that number has grown to today 55, and we intend to keep adding to that as we have consistently over the years. A couple other things I will quickly highlight. We are investing with Casino Queen in Baton Rouge, as you might recall, building the landslide facility which we controlled and sense that – I had a vision for that property that queen and the team, well accepted. I think the steel is up. It’s finally moving along with decent weather. If we can get all the things that we need with the target towards opening, I think second quarter of 2023. It’s going to be a pretty cool project if I must say. It really will and I think it’s going to have a significant impact in that market. Now that we are through that grouping of closings, which were – and always are somewhat uncertain from a timing point of view, I think that I am prepared to say that we will recommend to our Board shortly that we resume guidance. I know that the question some of you have asked in the past, but we’ll recommend resuming guidance within a range in the next few weeks and I would hope that perhaps we can initiate with the Board's approval, guidance this next quarter. In a similar vein, things are going extremely well for us this year and expect it’s going to be a strong year in 2022 and into 2023. With that mind, we are also prepared to recommend to our board, an increase in our dividend, and would expect to do so publicly in the next few weeks. So that is certainly a goal. I'm not absolutely certain, but management is prepared to recommend such an adjustment to our board. With that, I'm going to turn it over to Desiree and give you some financial focus.

Good morning! Thanks Peter. Our total income from real-estate outperformed the first quarter of 2021 by over $51 million. That was primarily related to the Cordish transactions which Peter just described, which increased our cash rental income by approximately $23 million. The closing of the Bally's transactions last year in June of 2021, which increased cash rental income by $10 million. The completion of the sale of our operations of Baton Rouge in Perryville and the following lease of the properties which increased cash rental income by $3.7 million. We achieved escalators on our Pinnacle Boyd, Belterra and Penn leases which added $2.9 million; and lastly, we had some higher non-cash straight line rent, revenue growth up and the investment and lease adjustments of $9 million. Our operating expenses increased by $13.7 million, and that's primarily these are non-cash related. It's the charge of $26.7 million related to the provision for credit losses associated with the new Cordish lease. Non-cash land lease gross up from land right amortization which increased by approximately $7 million, and those are partially offset by a decline of $19 million in gaming expense. Our gaming revenue and gaming expense are now both zero as a result of the sale of the operations on July 1 and December 17 of last year, and I should note that although G&A expense is only slightly favorable, the REIT G&A increased as compared to the first quarter of 2021 was primarily due to non-cash charges for stock compensation expense, as well as a reversal of our 2020 bonus which got reversed in the first quarter of 2021. So the number in 2021 is artificially low. With that brief summary, I'll turn it back to Peter.

Thanks Des. One comment before we open to questions. One of our goals this year as we – in addition to the Casino Queen, Baton Rouge construction is to invest more dollars where possible with our existing tenants, so that we are actively pursuing dialogue that results are unknown, but it's a big focus internally here to see what monies we can put to work with our strong tenant grouping. So you might keep that in mind and hopefully we can announce some other activity through the balance of this year. With that operator, we can open the floor to questions.

At this time, we’ll be conducting…

Wait, let me. Hang on, let me slow down a second. I’m looking in the wrong direction around the table here. Matt Demchyk had some prepared comments that we’d like him to make. So sorry Matt, I do apologize.

Thank you, Peter. Thanks to everyone for joining this morning. As macro uncertainty persists and the capital markets volatility is evident, I want to remind everyone on the call today that GLPIs business model was built with an environments like this in mind. In fact, our reported four wall coverage has again increased across the portfolio with a number of leases now at all-time highs. This robust coverage reflects continued operating resiliency, while it also provides a buffer or margin of safety for our lease payments. Our leverage and liquidity are at levels that strengthen and support our business model and our balance sheet strength continues to be a key focus. The match funding strategy and capital markets discipline that we exercised in fully funding the entirety of our Cordish transaction with a creative mix of OP Units, ATM issuance and then success of overnight equity and debt offerings was prudent. It’s also emblematic of a simple balance sheet mantra that was developed and refined over many years of observing the REIT space - Do it right and sleep at night. We approach transaction funding going forward and our overall business, you should expect to see the same continued discipline that results in GLPI locking in the transaction accretion. As we move forward with our strong and sound financial foundation, our focus is clearly on unearthing opportunities for the prudent deployment of our shareholders capital, and our objective remains increasing long term intrinsic value per share for all of our shareholders. I’ll now turn that discussion back to Peter.

I don’t know, it’s dangerous if it comes back to be Matt. Look, I think Matt has highlighted philosophically kind of who we are and the way we think about our balance sheet and what we – what we're prepared to do to protect and enhance it. So with that, can I turn it over? Okay.

Ready to go.

So, we are ready to go. Operator, please open the floor to questions.

Thank you. . Our first question is from Neil Malkin with Capital One Securities. Please proceed with your question.

Good morning everyone. I appreciate the banter back and forth on a Friday morning, Peter. First question, I just want to make sure I understand it right. In terms of the G&A, a lot higher than we thought it was going to be, particularly with the unwinding of your last operating business. I think Desiree made – alluded to that. I just want to be sure, like is that burn off going to be in effect in the second quarter or stated another way, are you planning to get to like a sort of lower run rate G&A level starting in the second quarter. That would be really helpful. Thanks.

Fair enough. Des, go ahead.

Yep, and the answer is yes. I mean we will be at a lower run rate in the second quarter because of these non-cash items that are hitting us in the first quarter. Stock comp expense is running a little bit higher, although our stock comp expense is normally higher in the first quarter than it is for the rest of the year due to retirement eligibility and the accounting requires those to be expensed all immediately when those grants are awarded, so that will come down a little bit. But our G&A run-rate will definitely get lower and be more in-line with where you would expect.

Okay, thanks, great. I guess another one is on investment opportunities that you guys have mentioned, the internal existing tenant, investment opportunities. I was wondering if you can you know maybe talk about some that are closer than others, you know potentially the Tropicana. I think you said you might have some updates closer to the middle of the year. You know any comment there?

Well, let’s put Trop aside for a moment, we'll come back to Tropicana. There is nothing we can really identify, but you can bet that if you look at our portfolio of tenants and I think it's safe to say that we've had conversations with every one of them, about some perspective thing that we're initiating and that they may wish to do. Right now our cost of capital is becoming increasingly more attractive every day, it's long term, its permanent and it should be appealing, so we'll see. We can't control that. Obviously if we could put a hotel here or something there. There are those kind of conversations going on, but it’s depended upon when our tenants might pull the trigger, so. But I will tell you, the level of those conversations has increased. Again, no predictability whatsoever, except to say that we're really focused on that. Steve, I think you have more conversations now than we’ve had in a while.

Yes Peter. I mean if you look at even just Boyd’s release right there, they are spending money in Treasure Chest and some other properties. We've already mentioned on the call today that we are working with Casino Queen on our landslide move in Baton Rouge. So property owners are starting to look at their own properties and with the margins where they are and the profitability where they are, they are looking for ways to increase revenues, because the pass through is amazing. So we are having conversations. I think we've had a conversation with every one of our tenants in the last quarter about different things that they are looking at, and like Peter said, no telling what will or won't happen, but it's a positive outcome for us to have that ongoing dialogue.

So you can count on that effort and look, we consistently found transactions year in, year out that help us build our portal to the 55 properties we have today. That number will surely grow over the next year. Let’s go back to Trop then, because that is a big question. The timing and both Matt and Steve can talk to that. Each of them plays a big part in keeping this going. Obviously anything we do is tied to our conversations with Bally's. It's been widely publicized that the A’s are looking at this site. They've looked at others. I think they – I think I – it’s safe for me to say that they have a very, very strong interest in our site if the transaction can work to their advantage. There's a lot of hurdles that have to be covered. We intend as long there’s something in it for us. I hate to sound greedy, but then it’s the way it goes. That property is committed to go to Bally's on terms we previously announced, that's fine. If that's all that ever happens, we'd be happy enough. If we can facilitate something bigger, better for them and for us, then you can bet we're going to do that. So that’s an active ongoing process right now. I can tell you that Matt, Steve and I were in Las Vegas last week. I lose track of time, it goes fast – a week ago, and talking in part about that and meeting with all parties, so we'll see. There's absolutely no certainty about where that may go. If we can facilitate something exciting, you bet we will. So there I must say stay tuned, we'll let you know.

Okay, great. If I could just sneak one more in, may be Matthew. What do you think the difference would be in your – the Cap rate that you're paying or the deals you're making. If you actually had in your contract terms, you know rent escalator minimums or uncapped escalators tied to CPI versus your kind of run of the mill structure you do for almost all your leases. Thanks.

Yeah, I mean I think it's a little bit of a philosophical question. I'll give you one data point though. I mean you can look at the Cordish lease we did and obviously that has a fixed escalator, so it has a minimum like you're talking about, and that's something that based on a negotiation and market conditions, we did at cap rate 6.9. But every one of these deals is very specific to the actual asset, the operator, the four wall coverage, the credit support and teasing out just one aspect is tough, because nothing's compatible. All that said, I mean the backdrop certainly changed over the past couple of years. We've seen newer leases that have market terms that have some sort of CPI with ceiling that are in them. We just saw the realty income lease that was done not that long ago, that after mimicking our structure went to a CPI with a ceiling that wasn’t too much higher, and I'll just say its part of the conversations we have in real time with counterparties on new deals. That’s something we keep in mind, but I don’t want to negotiate against myself on this call, as to where the terms might ultimately fall at.

Thank you.

Our next question is from Jay Kornreich with SMBC. Please proceed with your question.

Hey! Good morning guys! You know, just kind of big picture, over the past several years we've been talking about cap rate compression in the Gaming REIT sector and I wonder if you're starting to see that narrative essentially reverse as interest rates are quickly rising or kind of how you see that playing out going forward.

Go ahead.

I mean, it’s a great question. It’s one we ask ourselves a lot as we talk to our triple net peers. We are certainly seeing re-trades and cap rate shifting in real time, as in this week, last week. Order of magnitude, 25, 50 basis points going into closing for deals that were in a few months ago. All that said, we're at a very interesting place. We don't have as many data points for price discovery. There haven’t been that many transactions and you're right, we've got countervailing forces. On one side you've got the cost of debt going up which may actually make things a little more actionable for us, for tenants that look at our capital relative to the cost of debt they might use. But on the other side you've also got this depth of interest that appreciates the resiliency and durability of these cash flows, and I'd leave it to the next transaction or two to really see where that market clearing price might be. It will certainly play a role in that dialogue as a public company or on the margins. We are better positioned compared to private players than we were a month or two ago, because the high levels of leverage and the cost of leverage they were employing for their business models has now shifted meaningfully in real time, and we've got depth of access to capital through the capital markets and balance sheet strength to start with. So I think we need to let that play out a little bit more and I’ll use Peter’s term, ‘stay tuned.’

Okay, I hear you, that makes sense. And then have you guys have been seeing any incremental institutional capital interested in the regional gaming space. I know last quarter we had a new competitor come with the Encore Boston Harbor transaction. So just curious if you've seen any new players poking around the regional market?

Related to poking around, sure. I think people have to take a look, but in their poking, I think some of them appreciate the challenges of getting into this space, especially when it comes to limited license space that have regulatory hurdles and other challenges that we've kind of uniquely positioned ourselves to take advantage of and be on the right side of. But yeah, I think based on the relative risk adjusted returns, there's certainly a lot of interest.

Okay, I appreciate the time. Thanks guys.

Thank you.

Our next question is from David Katz with Jefferies. Please proceed with your question.

Hi! Good morning, everyone. Thanks for taking my questions. With respect to the Cordish partnership, you obviously have access to whatever they may do in the future. Are you able to sort of talk about any order of magnitude of qualitatively about anything they may be active on, or how we should think about that partnership and its prospects for you in the near term, call it two to five years?

Yeah David, I mean the quick answer is, not really. I mean I wouldn't presume to get out in front of anything that they are thinking about, looking at and what have you, because they’ve been very aggressively as you know around the country in a variety of ways and between their casino facilities and their Live! Facilities that all by themselves freestanding and are incredibly attractive. They – I am sure you’re going to see them at the forefront of anything that evolves. Not just with new properties, but even some existing properties. I know they've demonstrated some interest. Again, I can't say how or what. In some existing properties where they could be a buyer, perhaps we could work along with them and in that regard as well. Again, this is really not much I can say, as I say, we are not leading that. But look, these guys are hungry people, they are very aggressive. You might remember that I bought the property in Kansas City, Kansas and build the NASCAR partnership. I bought that property from David way back. I figured he would – we were on a competing site and came to believe that he had a better side, more likely to win, and that was probably my first significant working with the Cordish Company and with David himself. So these guys are kind of everywhere, and all I can say is we are optimistic that something very positive will come out of it, but that's you know my usual gibberish until we actually produce it.

I understand. And if we can just follow that up with again hypothetical, you know just for perspective, the Cordish is involved with Caesars and Pompano, right, which is a much bigger, broader mix use kind of thing. Is that the kind of thing that you would take a serious look at to see if there's a role for you to play.

Steve, what we – sorry, I’m looking around the table for…

Yeah David, I think you know our arrangement with them is with respect to gaming development contractually I guess I should say. But with respect to our ongoing partnership and the dialogue we have, it's definitely the type of project that they would come and talk with us about. At this point in time I would defer to Matt to comment on our interest in getting involved in some of the more mixed use and apartment or residential type projects.

I don't know, let me see. Let me answer that quickly. There's nothing we turn our noses up at, at all if it makes economic sense. Good use of our capital, good for them perhaps and also for us? Absolutely! We would do the gaming thing. Look, thenon-gaming question comes up all the time as you know and I'm not sure we'll get a call about that, where are we looking at. You know, I don't think there’s a week that goes by that we don't consider some non-gaming something. The problem is we're in such a terrific sector today that finding its equivalent or even near equivalent is very tough, and when pressed I will say that, do I expect someday we’ll be someplace else? I have to say yeah, I got to believe we will. But are we there today or is it something on the near horizon? The answer is no. Yeah, not all that David, just on that broader topic as it relates to Cordish. This certainly is thematic and in real convergence, going on in real time, and it will likely continue to move to the future between sports based place making and sports betting, and when you think about our core competencies and what we understand between real estate and also the gaming market, some of the Cordish broader projects have aspects that could certainly check the boxes that are important to us. All that said again, nothing's hard wired, but it’s certainly – listen, when they started this partnership with us, it was to give their incredible operating capabilities a compliment with a really strong balance sheet, and a partner who could – if you put us together, we can compete with anyone, anywhere. But I think over time you get to see that manifest itself in unique ways and we'll have to wait and see exactly what they are.

Understood. I appreciate the answers.

Thank you and thanks David.

Our next question is from Smedes Rose with Citi. Please proceed with your question.

Hi! Thanks. I just – you mentioned doing incremental investment with your existing tenants and I’m just wondering, over time would you like to have more, sort of almost like a formalized program or a goal of investing activity that you're existing tenants would be pursuing each year?

Oh! We have goals. Whether we can get there or not is another matter. I mean again, I’m not trying to be cute, but if we talk to – just pick anybody, pick Penn or Boyd or any. You know we are very enthusiastic of that and we’ll sometimes lay opportunities out in front of them. But in the end they set their own priorities, they set their own timing, and our job is to keep in front of them with our little smiling faces and hands in our back pocket where the wallet is to say, ‘We're here guys, we’d like to help.’ So there's nothing predictable at all, but there's a little bit more activity in that area than there has been, so we sense. We sense and believe that we ought to be able to pull off some meaningful investment this year with one or the other of them. Again, I hate to give you that kind of non-answer, but that's as close as I can come to it.

Yeah, we have a process… We have a process within our lease where if the tenant is undergoing a capital improvement of a certain size, they'll notify us, and I can confirm we have received those notices and responded with terms. We were willing to fund their capital improvements this year. So we don't have a name for our program, but we would love to put money to work and our tenants are aware of that.

Okay. I just wanted to ask you too, what – if the budget for the Hollywood Casino Baton Rouge, has that changed at all or is there an update on that in terms of what you’d be delivering?

Well, yeah I'm not sure that – well, let me back up. I don't know what we’ve said about that project before. I think we had laid out a budget way, way, way back that has expanded significantly, not just because cost have gone up and they have, but we've improved the scope measurably. Going landside as you know, its – the new facility is, if I must say so, going to be terrifically attractive, very appealing, particularly on the sports betting side and just the whole scope of it. You'll be able to drive up within a couple of inches of the front door almost and walk in and be playing. So it's going to be the most convenient place in town, clearly, and the quality of it will match anything else in town. So the scale of course is different, but it's going to be a first rate property, and so we're excited about that for them and for us, because we get to put some capital to work significantly more than what we talked about before. We're not prepared to lay out a number right now. Probably in another 45 days or thereabouts we should have a better handle on the buyout of that job. But steel is erected; all the pilings have long been done. The so called risky parts of construction by the river are long past and the building is moving pretty quickly. So second quarter of ‘23 is what we target for our finished facility. It should be cool.

Okay, great. Thank you.

Thank you.

Our next question is from Daniel Adam with Loop Capital Markets. Please proceed with your question.

Hi! Good morning! Thanks for taking the questions.

Good morning.

The nearly $27 million credit provision in the quarter, I believe is related to the Pennsylvania Live! Master Lease. How did that provision come about and what is rent coverage for the two Pennsylvania Live! Properties?

So, the actual $26 million, there was actually a decrease in the Maryland portion and an increase in the Pennsylvania portion, so that is a net number, the $26 million, and it really is due to economic factors that we have to consider and calculating our credit loss, as well as the rent coverage of both properties, clearly the property, the Maryland property is doing much greater – has much greater rent coverage in it than the Pennsylvania properties do, but I don't have the exact numbers.

We don’t expect losses.

Yeah, we definitely don't expect losses. It’s in…

We just have to do that as you know.

It's a non-cash charge. It’s added back for AFFO. It's a credit loss standard that's required known as CECL under the accounting rule.

Okay, got it, that makes sense. And then second, do you have any plans to refinance the Term Loan A or hedge your variable rate debt exposure given the rise in interest rates, and that's it for me. Thanks.

Thank you. Go ahead Steve.

Yeah, sure. Thanks for the question Daniel. We are in, right now in discussions with a group of lenders around potentially putting a new credit facility in place. So we're not looking to hedge that at this time, because those dollars won't be there for long and we will look to refinance that by next quarter.

Okay, great. Thanks so much.

Thank you.

Our next question is from John Massocca with Ladenburg Thalmann. Please proceed with your question.

Good morning!

Good morning, John.

Maybe building on that last question a little bit, as you look out into the debt market today, where could you price unsecured debt you think, just giving (a) the term loan is coming due in some of the near maturity unsecured debt you have as well.

Yeah, I mean I think you could look to the VG recent bond deals as a pretty good indicator considering both, our unsecured notes and their unsecured notes have the exact same ratings from all three agencies. But I think that would triangulate and I haven't looked at it in the last day or so, but I think that would triangulate to a 10 year offering around 5.25 and a 30 year offering at probably 5 and 5/8.

Okay. And then apologies if I missed this earlier in the call. You know we’re seeing – I know it’s not a primary area in which you kind of vested historically, but we've seen some kind of movement in terms of new supply into Las Vegas, strip market in particular. I mean how does that impact how you underwrite some of the transactions maybe that you're seeing come across your desk at all?

Well, you’re focused on the strip. I mean the strip itself doesn’t have a lot of meaning to us beyond the drop deal, but even that we're not – we have a prescribed deal there, well identified. So I'm not sure exactly. Maybe Steve, if you can give some color on that question?

Yeah look, there have been a bunch of transactions on the strip. I think there's one that some people may be aware of that's out there now. I think that the nuance with respect to kind of 2022 in this, in the M&A marketplace for gaming REITS. The thing I think you're going to see is, is I think transactions won't be as large and bulky. You've seen strip assets traded at very tight cap rates, very large dollars. Then we closed out the year with two regional assets, but again very large amazing performing assets. That's not what the typical regional market is comprised of. It’s comprised of wonderful small monopolies of various sizes and shapes. And so I think as 2022 rolls on, you'll see a continued M&A activity in the gaming space and in the REIT gaming space, but I think the size and scope of those transactions will be very different. I think you could see things as small as $100 million and you know maybe you see $1 billion, but outside of the strip I'm not sure that we're going to see those outside of large corporate M&A.

Let me make this comment if I may. In my sense, the encore Boston is not a regional transaction by any measure. You got a Las Vegas asset, basically built in a major market with Las Vegas kind of dollars. That doesn't really relate to what goes on in 90% of the gaming cities in the United States, so that's my personal bias. It's not necessarily reflective of any normal “transaction.”

Okay, that's very helpful color. Then one last kind of more detailed questions for me. Any kind of outlook or guidance or color on percentage rent resets for some of the leases that are resetting in May?

So the actual certifications haven't been provided to us yet, so we aren't prepared to comment. But clearly if you look at the release on page 13, you can see the rent coverage that we've reported or they’ve reported to us on a trailing 12 month basis. For the Pinnacle one its 2.29, for the Boyd one, its 2.93. Those are the ones that reset in May and they only need to be at 1.8 to achieve escalations, so.

We’re not telling you what it is, but thank you Des, that kind of points you in a direction.

Okay, that's it for me. Thank you very much.

Thanks.

Our next question is from Robin Farley with UBS. Please proceed with your question.

Great! Thanks. Just following up on an earlier question. Can you just clarify kind what change in assumptions in Pennsylvania created the increase in credit provisions?

Well, the Pennsylvania lease is a brand new lease for the quarter, so it created it – it’s a setting of the reserve for the first time, which is why the number is so large.

So was there something specific to those properties that it's centered in your earlier comments that you mentioned something about economic assumptions there, so I just want to clarify what will be different about those?

Well, that’s how that reserve is determined. It's based on the economic factors. We actually use a third party to do our calculations and to help us through our reserve model. But you know it's because Pennsylvania, we just signed on March 1, so therefore we're setting the reserve for the first time. From here on out you'll see movements in that reserve dependent upon you know as the interest rate environment goes up or cost of living continues to increase you'll see economic impacters impact what the estimate of the reserves will be. But as Peter earlier said, we don't really expect a cash loss as an accounting rule requiring you to look over the 39 years of the leases and set a reserve.

Let me be – most of you know I’m pretty straightforward. I think its crap that we have to do that, I'll be honest. And before you know you got a problem, banks take reserves, banks lenders take reserves all the time, but usually you wait and see and find out there's a problem. This is something prescriptive that we have to do and there's a formula and a process and as Des says, we bring in a third party to do it. It doesn't suggest for a moment that we expect to actually suffer those losses. I don't have anything more frankly than that, but that's kind of the way I feel about it.

Okay, thank you for clarifying. And then also, if you could just remind us in terms of your earlier comments about you are seeing interest in the transaction market in non-gaming REITS and maybe sort of some of this non-traditional buyers in this space, can you remind us, are you contractually protected from any potentially new buyers with your existing tenants or as long as they could match you better, the terms, you're not protected. If you just sort of help us think about the competitive mode there. Thanks.

You want to talk about what the lease provides.

Yeah, I'm not sure I fully comprehended where you're headed with the question, but I can address what protective measures we have with respect to our current tenants. So our leases do contained radius restrictions on new competition with our tenants and so we are protected in some ways in new markets with tenants opening facilities down the street. The intent of that is that a tenant shouldn't be in a partnership with us and next door open a brand new facility or buy a facility and move their business next door, thereby harming our business and our rent and our building. So we are protected under the leases. Outside of the leases I wouldn't identify any specific protection as it relates to our current tenants.

Yeah, the only thing that's tied up Robin as we talked about earlier, any new gaming developments that might come in the next seven years with the Cordish companies, that is one piece we’re hardwired into as a partner and we've got a few other structures with other tenants to have first look at things or the things that aren't – we don't know if they're going to come to pass or not.

Okay, thank.

Not that we give away any secrets, I think it's no mystery that Penn has talked about hotel in a couple of markets. We would love to participate with them if they find our offer attractive and the opportunity should arise. But as I said earlier, these things are unpredictable. Our job is to be ready, willing and able to support these folks and others should the opportunity arise. So you – I guess the point we were trying to make is that we're front and center in front of these guys, these people every day, ready, willing and able to proceed, and we just senses there is a lot more momentum toward some activity. Only the year will tell whether we're right or wrong.

Okay, great. Thank you.

Thanks Robin.

Our next question is from Barry Jonas with Truist Securities. Please proceed with your question.

Great, thanks. Beyond just assets, what's your view on M&A with other REITs with portfolios maybe outside of gaming? Any general parameters you would look for or require there? Thanks.

I don't know. Matt, you want to take a whack at that one.

Specifically about?

Well, about anything outside.

Well anything, I mean its small and large scale. Anything outside of gaming, we got the same hurdles that we've talked about historically. One is to have durability and give us conviction that the business models got resiliency, like our underlying business and our gaming assets, and then it comes down to a risk attested spread to our cost of capital and how it fits in with the competitive advantages we have, both underwriting and sourcing capital. So there's a number of things out there that could be moving pieces. The funnel is very wide at the top, but gets pretty slimmed down when you think about the criteria we have, and then it's a cost to capital question to see if each incremental opportunity, even if it's in an area that’s attracted us can make sense for us financially, and we have to wait and see how it plays out.

Yeah, we have to have an appropriate spread to our cost to capital, number one. But where these things sometimes come apart is the longevity issue. If you look at the transaction we just did with Cordish Companies who have a very, very, very long time horizon, and you look at what typical REIT leases look like, we are in such a great space, its rally hard to accept something less than that.

And we, just to add to that.

Sorry, but this is an important point, adding conjunction to Peter’s. We spend a lot of time creatively thinking about how we can partner or source these things. We’ve got a lot of ongoing discussions across people that you might know the names of and that you don't know the names of, to think about ways where we might just like in gaming, get unique access or uniquely price something that could be the spokes solution for someone else and some sort of off market larger something. All that said, to Peter’s point nothing's yet across the threshold. But that's an extra tool in our tool chest, if you look at what we've done historically in gaming, that we think could be applicable outside of gaming.

Yeah, I think you saw it with other REITs or you suggested that.

Yeah.

Yeah we look at other things, including corporate type transactions potentially. But sufficed to say that we haven't found anything remotely actionable on the horizon.

Okay, great, yeah that's what I was getting at. Or maybe just as a follow up Peter, you know I'd love you know pulling from your old operator days. Any general thoughts on how this creeping inflation environments impacting your tenants and their customers?

You know, that’s always a fair question. I have made a couple points over time. I used to say that – and many of you have heard me say before that our revenue in the gaming world is bullet proof. It is absolutely bulletproof and fir a company like ours or even an operating company like say we’ll pick on Penn, there’s really, who has properties literally from Maine to California. They are so well distributed that nothing really can hurt the entire program and I would go on to say we are taking atomic attack to hurt revenue from a well-capitalized gaming company. We got an atomic attack to migrate hard, an amazing surprise called the pandemic. Never in American history have we shut down a country. It actually happened, but the good news in all that is, everybody survived and they are and doing better than we were doing before we went into it, that is a shocking, happy surprise. I can tell you that I've been around the gaming business certainly and the racing business since 1972 when I began as President of Penn National itself. Through every recession, except ’08, through every recession our revenues at that facility and most of our gaming facilities went up. Now, you could try to hang a reason on it, I have no idea, and even then as your now looking at our numbers, we never drop coverage below let's say 1.4x throughout the worst of the pandemic. So I believe and again many of you heard me say this, that if you look at Maslow's hierarchy of needs, it is food, it is shelter and it's gambling. Now it sounds preposterous, but all I - it's a way of underscoring that revenues in the gaming world are highly, highly, highly sticky. People never give up their entertainment. It’s the last thing that goes. So, I mean - that's the point I just can't underscore enough; not really worried about the recession, not worried about gas prices, again people won't give those things up very easily. So I don't think there's any massive exposure on the horizon. I mean maybe there's some set of circumstances that could involve, but under normal conditions I think it's going to be companies like… We were in Las Vegas last week and you all know that performance of these facilities is staggering. I mean you can't get a hotel room out there, amazing! Amazing that the convention business is not completely retired. So we're looking at entertainment and travel, so – and of course as the best we know, the properties in our portfolio as you see are killing it. It’s amazing! So I don’t know what I’ve answered, but it’s just sort of the environment that we find ourselves in.

No, that’s really helpful. Thank you so much.

Thank you.

.

By the way as Matt said, we are sleeping well at night. I kind of like his highlight there. We are sleeping well, we are not worried.

Our next question is from Spenser Allaway with Green Street. Please proceed with your question.

Thank you. Massachusetts recently passed a bill to legalize sports betting in the state, including wagering at casinos and mobile betting. To the extent that gaming revenue increases with the addition of new users linked to sports wagering, do you think we could see leases in the renegotiated between yourself and the operator so that you're able to capture more of the upside, perhaps the percentage rents?

Let’s see who wants to provide that answer, go ahead.

I’ll start and I’ll hand it to Brandon. So you’ll recall long ago, in a couple conversations, we highlighted our efforts over time to create a black and white definition around some of these features that didn't exist back where we originally cut our leases. And the most major tenant of ours and most applicable set of circumstances were our leases with Penn and we’ve since worked with them and I've arrived at a conclusion that we think balances these points very well, and effectively geo locates the activity that happens within our casinos and our leases with them and counts all activity that someone might have on their phone, which might sound like a small thing, but at the end of the day if I'm sitting at the bar with you, with someone else and we don't want to get up to go to a kiosk, there's certainly a decent amount of activity that happens in that manner, and it's really facilitated by the environment of the real-estate that the people are in. I don't know Brandon what else we might add.

I wouldn't add too much of that. I mean I think the focus for us and those leases was because of Penn’s announced omni-channel approach to building out the bars and sports bars in their facilities and our facilities to drive more traffic and revenue in there, and it was important to us with the structure of that lease that that revenue that's taking place in our buildings be captured. I think with respect to some of our other leases, more recent leases where the variable rent construct is not present, that will have less of an impact on us whether that bet takes place outside the parking lot, inside the parking lot or inside the facility. That being said, it will add to the coverage and the health of the facility and the operations being conducted within the facility that will have less impact on the economic consequences of the rental that we derived from it. So the Penn lease is pretty important because of the variable rent structure, less important from an economic standpoint and our newer leases.

Alright, that’s helpful. I couldn't remember if the deal location is already kind of contemplate and then it sounds like to the extent that it becomes the more like prominent attribute moving forward with other tenants that would be considered.

Oh, goodness yes. Let me say this, the question we get and implied I guess in what you're asking is, what's the impact going to be on the bricks and mortar companies? There's no doubt that that's going to be a growing sector, even I game in those places where it occurs. But my - these are still early days yet for this. I think that's sad, may be sad reality is, there is going to be a lot more gambling, that's the reality. I don't expect and I think most operators we've talked to don't expect a hit to bricks and mortar performance in any meaningful way. The reality is, it’s just going to be a lot more gambling going on, for better or for worse as a public policy point of view, so that's my sense.

No, we would agree with you. Thank you.

Thank you, Spenser.

We have reached the end of the question-and-answer session. And I'll now turn the call over to Mr. Carlino for closing remarks.

Well good, and we are happy to close out our conversation. We thank you for taking time to join us this morning. We're feeling good about where we have been, we're feeling good about where we're headed and with that, I'll look forward to chatting with you all again next quarter. Thanks very much. Thanks operator.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.