Greetings. Welcome to Gaming and Leisure Properties' fourth quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. A question- and- answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll turn the conference over to Joe Jaffoni. Joe, you may now begin.
Thank you, Rob, and good morning, everyone, and thank you for joining Gaming and Leisure Properties fourth quarter 2021 earnings call and webcast. The press release distributed yesterday afternoon is available in the investor relations section on our website at www.glpropinc.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to 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-Qs and definitions in the earnings release 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 participating in 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 and 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, everyone. Thanks for joining our fourth quarter earnings discussion. This quarter, and in fact, the entire year for GLPI, I think was pretty eventful. Notably, we effected a variety of transactions, both large and small, while at the same time significantly improving our balance sheet, which was a major focus for us this year. Get down to what we've internally call fighting weight. As always, we have prepared a very detailed press release with everything important, pretty well outlined. So I'm not gonna highlight every detail. Desiree and Matt will have some comment that we'll get to in just a moment. We're most pleased to welcome The Cordish Companies to our roster of the best regional gaming tenants in America.
In addition to Maryland Live!, we just achieved approval for the acquisition of Philly Live! and Live! Pittsburgh, which is out in Westmoreland County in Pennsylvania. Cordish brings both a grouping of some of the best regional gaming properties in the country, for any of you who have seen them, and along with the skills of one of the best and most successful developers in America. We are looking forward to significantly more work with them over time. Also pleased to point out that that part of the purchase price was funded with more than $300 million of OP units, which we view as a great vote of confidence in our company.
While you examine the new assets that we've just acquired with Cordish, I would invite you to look at the entire GLP website and what we believe is the best and certainly the largest assemblies of regional gaming assets in America. You know, I'm surprised from time to time talking to investors that they've never seen any of our properties, which is a surprise, and have no idea what kind of quality these properties represent. I do think that a trip through our website, looking at what we have in our portfolio, is instructive for many. With both Cordish and Bally's at the same time, we believe that there is an additional path to growth with these companies.
By the way, that could also include some of our existing tenants, as we talk to Penn about a variety of investments that they may wanna make going forward. We see 2022 as already off to a great start. I would point out, too, that in the second half of this year, we expect to complete the acquisition of Bally's Rock Island in Illinois and Black Hawk. Plus, of course, the balance of the Cordish purchases, which will get us to, I think, 55 properties today. Once again, I think what you see in these recent transactions that Gaming and Leisure Properties really never competes on the basis of its cost of capital.
We're not in the auction business, but rather we compete by capability and our ability to assemble and conclude very complex transactions. I also highlight that on a facility-to-facility basis, which I call especially to your attention, we've got the best cash flow coverage, four- wall coverage, property to property in the industry. You can expect, which I highlight here, that we'll retain our same caution and care in making new investments. I've said publicly many times that we're not in the monument building business. No transaction we have to do. We're very careful with our shareholders' money because we, like you, are shareholders. One other comment I'll make is about dividends. We're pleased to announce a $0.02 increase, $0.08 over the course of the year, annualized in dividends.
I think I can say safely that we expect over the course of this year, when transactions close and the year evolves, that number will rise. Dividend growth is particularly important to me as a shareholder, as I suspect it is to many of you, and we will responsibly continue to grow our dividend, as we are able. With that, let me turn the prepared remarks over to Desiree Burke, our Chief Accounting Officer. Des.
Thanks, Peter, and good morning. I just wanted to run through some highlights on the income statement and compare the quarter of 2021 over the quarter of 2020. Our total income from real estate outperformed the fourth quarter of 2020 by over $17 million, primarily due to the closing of the Bally's transaction on June 3rd, 2021, which increased income by $10 million, escalators on our Pinnacle, Boyd, Belterra and Penn leases, which added $2.5 million, Perryville rent received of $1.9 million, an increased Penn Ohio percentage rent of $2.6 million.
Higher non-cash straight-line rent and non-cash revenue gross ups of $2.9 million, partially offset by a decrease in our rent related to Casino Queen of $3 million due to timing of cash collections on the lease in the fourth quarter, mainly in the fourth quarter of 2020. Our gaming revenue declined $19 million, and as a result of our sale of Perryville and Baton Rouge operations on July 1st and December 17th of this year. Our operating expenses increased by $35.2 million, and that's primarily due to a non-cash gain during 2020, which was not replicated in 2021, which was related to the Caesars exchange, where we acquired Waterloo and Bettendorf in exchange for Evansville. That resulted in a $41.4 million non-cash gain last year.
We did have a non-cash charge in 2021 of $12.2 million related to the provision of credit losses associated with our new Cordish lease. This is the CECL reserve, is what accountants call it, which is related to that lease being a financing for GLPI. A non-cash land lease gross up and land rights amortization of approximately $5.9 million, which was partially offset by a $4 million recovery on the Casino Queen loan, a $12.2 million reduction in gaming expenses, again, due to the sale of Perryville and Baton Rouge's operations, and a gain on the sale of Baton Rouge's operations of $6.8 million on a pre-tax basis and an insurance gain of $3.5 million.
With respect to the Perryville rent, I wanted to again call to your attention that this has been recorded in our TRS segment during 2021. We will be recording that in our REIT segment beginning in 2022 as a result of the winding up of our taxable REIT subsidiary. With respect to Maryland Live! lease, this lease will be accounted for as a financing receivable. We'll therefore recognize cash rent as interest income on revenues from real estate and a change in the receivable going forward. However, we will reconcile that cash received in our AFFO disclosures. With that brief summary, I'll turn it back to Peter.
Thanks, Des. Matt, you wanted to make a couple of comments as well. You've been much involved in our balance sheet work this year and all of our transactions, so why don't you go ahead?
Sure. Thanks, Peter, and good morning, everyone. As Peter talked through, at this time last year, we shared a game plan, and it was playing offense and doing so within the context of being disciplined and emphasizing our commitment to balance sheet strength with respect for the role it plays in our success. Related to these goals, we've delivered. Not only did we expand the relationship with Bally's, one of our most dynamic tenants, but we also directly sourced a new relationship to our tenant roster with the Cordish Companies that Peter talked about. In a transaction where our counterparty made very clear GLPI was not the best price, it was the best decision.
In fact, coming from a 110-year-old family company that has signed their own names to financing projects and other bills that need to be paid over those many years, it was taken as a great compliment when after hours of discussions and some negotiation, finalizing terms, Jon Cordish turned and said, "You know, it's pretty clear to me that you treat it like it's your own money. And the other REITs I've spent time with treat it like it's other people's money." The Cordish's decision to take a significant equity stake in GLPI underscores our philosophical and business alignment. We're looking forward to seeing what might come from our Cordish relationship overall and from the novel partnership structure that enables GLPI to invest at least 20% of the equity into any new gaming license opportunities achieved in new jurisdictions over the next seven years.
Realty Income's recently announced agreement to purchase Wynn's Boston asset at a 5.9% cap rate marks another milestone on the path towards institutionalization. It not only provides real-time price discovery, but also underscores the value created with our purchase of the Cordish portfolio. The fundamental thesis upon which our company was founded, that thoughtfully structured gaming real estate cash flows are of institutional quality, has been further validated. As I've often stated in the past, we own the most homes in one of the best neighborhoods. Turning to the balance sheet. Balance sheet strength and liquidity remain the foundation of our success. Throughout 2021, we stayed true to the philosophy of match funding our transaction activity.
We also perfected the use of multiple tools in our tool chest with not only our overnight equity issuance and 10-year bond issuances that were both well oversubscribed, but also with over $250 million of ATM issuance at over $49 a share. The gaming REIT sector's first OP unit issuance that Peter talked about. We are well-positioned to be well within the target debt range of 5x-5.5x that we've articulated. We've got almost $1.2 billion of unused revolver capacity, and we see our staggered, almost entirely fixed rate debt profile as a strength amidst market volatility. As we move forward, our focus remains on unearthing opportunities for the prudent deployment of our shareholders' capital. I'll turn it back to you, Peter.
Matt, thank you very much. I hope that was helpful to you all out there. Rob, would you please open the floor to questions?
Yes, thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question today, please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Again, that's star one. Thank you. Our first question is coming from the line of Neil Malkin with Capital One Securities. Please proceed with your question.
Thanks, everyone. Good morning. Good morning, all. First question. You know, the couple transactions, pretty notable transactions, over the last, I don't know, nine months or so, you know, really continue to validate, like you said, the regional gaming thesis. You know, wondering if you can maybe elaborate or talk a little bit more, either anecdotally, specifically, whatever you'd like on how you see the continuing institutionalization of the regional gaming market. I know obviously Vegas is well known, but you know, maybe if you could talk about, you know, incremental buyers, competitors, potentially how CMBS or debt markets have, you know, improved. Any of those things would be great.
Hey, Matt, why don't you take that?
Sure. I mean, you've seen the cap rates. I mean, we did what for us was an aggressive deal at a 6.9%, and very quickly in a few months, we've now seen a 5.9% for another regional property. As Peter said, I'd really underscore for anyone who hasn't been to the Cordish properties, please reach out. You should see them pound for pound. They're as good as anything you're gonna find. If you look forward, I mean, the realities are there's a significant amount of institutional capital in the private equity world, in their private REITs, and in other public companies that is looking for returns. When apartments have three handles, industrial has three handles, it's really hard to find safe and durable income.
When you look at a Dollar Tree or some other facility like that in a very second-tier market and compare it to some of the cash flows you get, that to Peter's point, not only have a great operator and a great property, but also strong floor wall coverage and credit support, it's pretty obvious we've got a better mousetrap and better business model when it comes to getting those cash flows. To date, you've seen a bit of a competitive moat related to not only relationships but also licensing. As people focus more on the space, I suspect some of them might find accommodations to do one or access both of those things. I'd expect more cap rate compression. I mean, I watched this play out as we've talked about in manufactured housing, in self-storage, data centers, cell phone towers.
As long as our cash flows deliver on the premise that we've articulated, you're gonna see more cap rate compression. Now, what does that mean for us is really the key question. I'd point out, we get this question all the time. How do you guys compete? You don't have the best cost to capital. Why should someone do a deal with you? In spite of that, you can look at the years of transactions we've done. To Peter's point, none of those are auctions. Each of those is a somehow bespoke, often directly negotiated deal with someone that does the transaction for more than maximized proceeds, just economic terms. Cordish, I think, is the best case study of that. As we go forward, we're also going to have to be thoughtful about how we're sourcing capital and the cost of it.
I tried to underscore the fact that we've used not only the ATM thoughtfully, but now this capability that's been validated by the Cordish's to use OP units, which is unique. The math is gonna be the same for us. Risk-adjusted returns in excess of our cost of capital. To Peter's point, doing only things that make our long-term intrinsic value greater.
Yeah, that's great.
Matt,
Sorry, go ahead.
Please go ahead.
No, no. Go ahead, Peter.
No, I like Matt's answer. It was pretty much on point, but why don't you carry all those questions?
All right. Great. Yeah. Okay. You know, can you maybe talk about, well, just in terms of maybe the acquisitions, you know, I noticed that Bally's got pushed back to the end of 2022, both of those transactions. Is that a function of, just like COVID and regulatory delays and constraints, or is there something else there?
Brandon, why don't you take that?
I don't think there's anything more to it. I would caution you, at Bally's, there's actually three separate transactions that we're looking at right now. There's the transaction in Las Vegas around the Las Vegas Tropicana, but then there's the Quad Cities and the Illinois. I would expect the Quad Cities and Illinois transaction or the Quad City and Black Hawk transactions to close prior to the Trop transaction, which I think will be later in the year. I think that the two former transactions will be a little bit earlier.
Okay, great. I guess just last one. I think on the last call, Peter, you talked about, or Matt, about, you know, elevated opportunity on the forefront. I'm just wondering specifically if you could talk about some of the alternative, you know, leisure, lifestyle, you know, consumer-oriented sort of endeavors or opportunities you're looking at, if you could, you know, give any color in that.
You know, answer has probably been the same for the last maybe seven years. There's not a week that goes by that we don't look at some other something. You know, the struggle that we have is that we're already in one of the best spaces on the planet from the point of view of certainty of cash flow, longevity of cash flow, long-term leases. You know, it's tough when you're already in the best place to take something less than the best. That having been said, there are some things we're looking at. Look, I've said probably for years, I expect one day we will alight, at least mildly, in some other space, but we just are not there yet. There'll be a discussion just for fun, I'll tell you about some new ideas.
It's scheduled for, I think I saw it, 3:00 PM to 3:30 P.M. on Monday afternoon. I mean, that's a scheduled call about a different concept, but we do this all the time, and we'll see. But at the moment, there's nothing really special to report.
Okay. Thank you guys very much.
Thank you.
Next question is from the line of Smedes Rose with Citi. Please proceed with your questions.
Hi. This is Stefan for Smedes. Just going back to your cost of capital. You talked about not competing on cost of capital, and then you talked about potentially moving into non-gaming assets. So what type of non-gaming assets would you be interested in? I know in the past you've talked about potentially looking at some hotels with Penn, and just how do you expand the universe kind of as gaming becomes more institutionalized?
Well, I do think there's opportunity with some existing tenants that we can explore and are exploring right now. That's pretty near term, by near term meaning over the next year, let's say, opportunity. Could happen, maybe won't, but there are active discussions about deploying capital with existing tenants. We're also excited, by the way, with Cordish, for example, again, people who are very aggressive, hungry, coast to coast and people with whom we'd love to work and do more. That applies to some of our other strong tenants. Again, it's highly unpredictable. We'll just have to see. In other space, again, I think I pretty well said that we just haven't seen what can match what we already have. Matt, do you wanna add any color to that?
Yeah. I'll just say, listen, we spend a lot of time investing in R&D in everything outside of gaming to keep our finger on the pulse of anything that might be durable cash flows. Really, at the end of the day, A, we don't wanna say specifically what those things might be because obviously it's a very competitive marketplace. B, you know, durable characteristics are really the hallmark of what we're looking for, and we don't wanna put our money into much more volatile income streams that cost a lot more than the gaming assets, to Peter's point. I'll also point out, we don't feel that we need to do something outside of gaming to prove that we can do something outside of gaming. We always have access to those deals.
The first deal we do is gonna be because it crosses the threshold of making sense on a risk-adjusted basis. We try to be creative. Obviously, I mean, when you look at where we are, we're in middle innings of institutionalization. Being able to find things in earlier innings of institutionalization with less efficient pricing is one avenue and one lens to look through. At the end of the day, it's gotta make the long-term value of the company greater.
Peter, you talked about- this is Michael Bilerman speaking. Peter, you talked about, you know, not wanting to compete in large auctions and, you know, generally wouldn't be competitive in those types of situations. Can you just talk a little bit about your relationship with Wynn? You know, obviously the Encore was not a broadly marketed transaction according to Wynn and Realty Income. But I'm sure you've had conversations, you would have had relationships and knocking on a lot of doors. I guess, what was it in the relationship that they didn't feel that you would be a good counterparty to buy that asset and progress down the road with just Realty Income?
Well, I can't speak for that. We had no conversation with them about that property, so it never came up, period.
I assume you've had a conversation with them over the years. I mean, I assume you have conversations with every operator as you've uncovered things, right?
Yeah, we have.
That's part of the duty, right?
We have. In an era, I spent a number of meetings with Steve himself over time, just never found something that made sense for us. Look, I mean, some of these transactions are kind of bespoke where either they were approached by somebody directly and decided that these are the guys. Look, it turns out in the end, we would not have been competitive anyhow, so I don't think we missed anything. I haven't lost five seconds of sleep over that transaction. Good for them. I think it's a sweet deal, and it does validate, as Matt says, the value of some of our properties. Look, in fairness, that is scarcely what I'd call a regional property.
It's really a Vegas scale property in a major market where you've got essentially a monopoly. I don't think it says a whole lot about regional value. It does that kind of validate the space and delighted to see someone else sees the value, but we wouldn't have been competitive for that in any case.
Why do you think you wouldn't be competitive? Do you feel like it's your own equity cost of capital? Was it the bumps in the leases? Was it the lack of CapEx? Was it the size? I guess, what are the elements that make it that you feel that given the same terms, it wouldn't have been something. I guess I'm getting a little bit of mixed messages, Peter, in the sense of it is a validation, but it's too rich of a price. We wouldn't play there, but maybe we would sell our assets at that price. I'm just trying to reconcile all of these comments.
No. Look, every transaction is different. Look, we've done transactions at very favorable pricing. The deal we did with Carl Icahn, look, not exactly a fellow known for giving away gifts, but it was a very complex transaction involving four public companies. You know, what we did there was quite extraordinary. We added value and creativity and so forth that maybe others couldn't. That we just look, like everything else, you find what you do best. Straight up auctions, I've said it very directly, Steve, the winner loses. Generally, that's the case. That, whether you're trying to buy an automobile or you're trying to buy a piece of art, laying down the highest price at an auction is not generally my idea of fun.
We have competed, for example, with MGP. We did compete there because we were always there. I was there with Jim Murren for a couple of years prior. Unfortunately, when he ran into some difficulty, that kinda ended our long-standing discussion about something we might do. The adjusted board, they've made a judgment that an auction would be the best way to go. Can't say they were wrong, and we were already there, so we thought we'd sort of move, look hard and see what we could do. In the end, we confirmed that for shareholders, it was not a right deal, and we chose not to play. That speaks for itself.
There are plenty of transactions to be done, as we've demonstrated just recently. We'll continue to do business, but every deal isn't for us. That's all. I mean, I don't know why.
Okay.
I don't understand.
All right. Well, thanks.
We just proved it.
Yeah. All right. Well, thanks. Well, sorry to miss the company and you down in Florida, but we'll look forward to catching up at a later date. Thanks.
Thanks, [inaudible].
Let me just add for the audience just to follow up on Michael's question. You know, it is interesting to look at the Wynn's build and the fact that it's certainly well overcapitalized for the market it's in and looks terrific. As Peter points out, take a look at our portfolio. A lot of the pictures do. But when you really drill down beyond what it looks like, the quality of the cash flows, when you think about master leases, the four-wall coverage Peter brought up, limited license similar to this, the quality of cash flows in our portfolio is very comparable to the ultimate quality of cash flows that come out of the Wynn asset.
Our next question comes from the line of Jay Kornreich with SMBC. Please proceed with your question.
Hey, good morning. You know, you guys are set up kind of a nice pipeline of potential future growth by establishing relationships with now Bally's, Casino Queen, Cordish Companies. I'm wondering if you can just kinda talk about how you see those opportunities potentially playing out.
Well, you know, the real answer is it's hard to know. We'll stay close to these folks who we like a great deal and trust really that they like working with us, but we'll have to see how it unfolds. I can't make any prediction about where that might go. We've got some hungry partners out there that want to expand and will expand in this industry. We just wanna be kind of available when the time comes and the opportunity appears. Look, I mean, that's part of our job, to stay close and wish them well and hope we can be of help when the time comes.
Okay. I guess with specifically the Cordish Companies, you know, they own a wide range of both gaming and non-gaming assets. Are you able to expand a little bit more on just the partnership and opportunity set for you there going forward?
Look, let me be real clear. We would be willing to step into some other real estate space with them should that opportunity present itself. I mean, we've had those conversations. We'll see. Again, if we can provide something that they at the time would need or desire, then we wanna be the go-to people that they deal with. That's really our job, to hang around the hoop, be good friends and partners and to be available.
Right. Okay. I guess just one follow-up. You know, as going back to the Wynn, as, you know, they've now joined many other casino owners in selling off its real estate. Can you give any color on how many other sizable [holdco] operators that may be out there in the regional gaming opportunity set that, you know, awaits you if they're willing to start selling off their real estate?
I don't have a number. I don't know. Steve, would you have a thought about that?
I have some thoughts. I mean, I don't have exact numbers, but if you look at some of the large, more urban areas that have legalized gambling, you'll see that many of the sizable properties are probably already owned by a REIT. There are some owners that still have some of those assets in [holdco] form. Most of those are sole proprietor, family-owned type businesses, ones that would be potential transaction partners in the sense that they might, in fact, value the UPREIT structure and the tax benefits it provides. I think in large urban areas, you're gonna see those types of assets that still exist, and that does provide us a good runway for at least an open discussion around tax savings.
Separately, there are some large publicly traded companies in the gaming space that still own all or almost all of their real estate. There's a huge runway ahead for those opportunities. You know, I guess the benefit for them and the unfortunate truth for everyone at trying to acquire those assets is they have held out to date, and they've been proven correct, 'cause the valuations just keep climbing. There could be a point in time, depending on their borrowing costs and things of that nature, that could cause them to look for alternative sources of capital, or they might just decide to join the party and sell the real estate.
We're having ongoing conversations with those folks and those aren't necessarily these monster assets in urban areas, but collectively, as a company, their portfolios are very, very large and very valuable.
Great. Thanks so much for the color. All right, thanks, guys.
Thank you.
The next question is from the line of Haendel St. Juste with Mizuho. Please just use your question.
Yes, good morning. One more follow-up on Cordish. I guess I'm curious how large equity commitment you would be comfortable with there, given the co-investment opportunity you highlighted. Just curious about how you think about your balance sheet priorities in light of that potential equity commitment. Thanks.
My quick answer would be, it depends on the opportunity and the where the capital is going. If it's a new gaming property, for example, in a strong market, we might be willing to do a whole lot, and undoubtedly would. Listen, I have long said that a gaming license in a limited license jurisdiction is just an opportunity to print money. It's just terrific if you can find it. The only risk to you is overspending. I mean, just simply over-investing, which some in the gaming world have managed to do on a regular basis, but it's not what we do, and I don't think it's what the Cordish Companies. You mentioned them, but we have others that we would gladly partner with as well.
You expect some discipline and so it would be deal to deal. I don't think there's any limit on what we'd be willing to do depending upon the opportunity.
Hey, Haendel, this is Matthew. I just wanna add a couple thoughts. You know, that commitment is something that was a, I'll say almost a hard-fought negotiation. I mean, this is. People around the table are laughing. This is like someone handing away money. Coming from the REIT world, I know we get excited at a 7%, 8% development yield. I can't give specifics, but if you look back at the history that the Cordish's have been able to achieve, very similar to Penn, every one of these things is over 20% cash on cash, unlevered. So, the key point is, what we wanna do is move up the value chain and get access to cash flows earlier to.
I mean, this is a competitive advantage earlier in the process and not necessarily just be the takeout on the back end after a lot of value is created. We wanna participate in the value creation and hopefully own it on the back end. When you think about timing, I mean, we're gonna see it coming. I mean, these are all dependent on new licenses being granted somewhere around the country where they don't exist currently. That's why we have a seven-year window. It'll take some time for these to play out, and we hope for one does. To the extent of how we think about the balance sheet in conjunction with it, just like everything else, I mean, we're gonna keep our leverage in our 5x-5.5x range.
We'll assess at the time, depending on between now and whenever that might be, how much retained cash flow, et cetera, we have at our starting point, and we'll thoughtfully use a mix of debt and equity consistent with that goal. Just to be clear, that would be a great outcome for us if it were to come to pass. It's not guaranteed. Again, it's dependent on how things play out. It's a novel thing that we structured in that we hope to be able to realize and create value for our shareholders with.
Look, we can assume that we're staying very close to what's going on around the United States and spending time in those places to see how we may carve up or find some opportunities. We're very much on top of any gaming expansion anywhere. Let me just leave it at that.
Okay. As a follow-up to that, I guess maybe more specifically around in Las Vegas, curious on thoughts on, you know, potential development opportunities there around the Trop and the potential stadium.
Well, we don't know exactly what Bally's has in mind for the site. We're actively involved in conversation with them. We have an announced transaction with them. But if we could enhance that transaction with deploying some capital, in a broader way to a project that we feel comfortable, we'd be open to that possibility. But right now, I think we're just assuming that it's gonna be a ground lease. It's a favorable deal. We're very pleased to have it. We would work with them should the opportunity arise, but again, it has to cross all the other hurdles that we would normally consider. Nothing locked in there beyond the deal we have.
I think Bally's mentioned on their earnings call yesterday that they expected to be back midyear with further information and thoughts around the redevelopment of that project. You know, we're working with them, but we're not gonna be the ones unveiling anything of their plans.
Yeah. That's fair enough. We have been very involved with them, though. To be clear, we really have been. Nonetheless, it's their plan, so we'll see where it goes.
Okay. Fair enough. One more, Peter. I guess, guidance, you know, a touchy subject when we've raised in the past.
Is this a type of policy that we will not be having formal forward year guidance this year and going forward? Any updates or comments on the CFO role, also a subject that we've asked in the past. It appears that the current structure is one that you've indicated you're comfortable with, but just curious if that's in a rethink. Thanks.
Yeah. I think if you look at what we've accomplished over the last year, it's been terrific. On the CFO issue, we're still content with where we are. Our board is very content with where we are. We have enormous capability with the senior folks you've got on the call with you today. We really, really do. I can't say that we won't someday address that, but at the moment, we're blissfully happy with the way everything is working. Guidance, a sticky issue. I think we're gonna wait till we get the last of our transactions closed. We're not sure about timing and a whole bunch of these things, and with that in mind, we're just gonna wait.
I have said that we're open to that, notion of getting back to guidance. Look, I think we're very transparent, though, as you know. In this business, you have a pretty clear sense of what our revenues and earnings are likely to be. But for the moment, we're gonna go past this quarter. But honestly, we'll look at it again, on a quarter- to- quarter basis. I'm just gonna leave it at that. It is a matter of much discussion at our end here.
It's okay. Fair enough.
I don't know if anybody else wants to offer from the GLPI team any other thought about guidance.
No.
Hearing none, there's the answer.
Okay. Fair enough. I'd appreciate it, and I think some investors would too, but thank you for the time.
Thank you.
Our next question is from the line of Greg McGinniss with Scotiabank. Please proceed with your question.
Hey, good morning. Peter, you briefly touched on the dividend during your opening remarks. You know, you've spoken a lot over the last couple years about getting the dividend back to $0.70 a share, which based on our numbers would represent about an 80% AFFO payout ratio excluding the future transactions. You stopped just short of that bogey at $0.69. Just a few questions there is, you know, why'd you hold back from that threshold? What is the payout target? And what's the expectation for additional raises this year?
The expectation is, I think probably safe to say very high. I don't know. I'd look at our counsel, Brandon, tell me I can get away with saying that. Yeah, I think it's pretty high, and that's our desire. I paint it that way. I think that is the case. We could have gone higher this quarter, but frankly, we kinda like the idea of stepping it up throughout the year. The ratio is, we have not been at 80%, Des, for a couple years now. By choice, we've decided to hold some firepower back, you know, and particularly now, since, you know, raising equity would not be a desirable thing to do.
Putting more cash and keeping, retaining more cash in our pocket seems to be a very sensible thing to do at the moment. I think, Des, do you wanna talk about kind of where we are? Where do you wanna go with that?
Yeah. No. I would say that, you know, the dividend, we have to wait for deals to close, right? I do not think it would be prudent for the company to go out with a dividend prior to the closing of the transactions that, you know, are necessary in order to increase a dividend. Our decision to stay at $0.69, and we do think $0.69 is comparable to the old $0.70 because we did raise 8.9 million shares in the fourth quarter and haven't received the benefit of that until January first when we start getting rent from Cordish. You know, it was a very thoughtful process.
We get close to the 80%, but we don't pay out exactly 80%, and we haven't in the past as well, but we are extremely close to the 80% payout ratio.
Okay. I guess you're comfortable staying near the 80%. I mean, I'm just a little confused because you've talked about the 70%, though. You were nearly there and then kinda just fell short for what sounds like. You just kinda want the ability to raise dividends later in the year.
Yeah. Let me say this. It doesn't display any lack of confidence. I really wanna emphasize that, in our likelihood of closing these transactions. We feel very confident that these transactions will each and all close. That having been said, we decided to sort of take the step-up approach. I think Desiree highlighted that we're really kind of the equivalent of the old $0.70. So internally, the question was, does the $0.70 number look psychologically better? What you're saying is it seems like it might have, but we kinda like the idea of stepping this thing up and having some fun quarter- to- quarter as we get through this year and into the next. We're very optimistic about where this is gonna go, and we feel good about it.
Okay. I guess along those lines then, kinda going back to Haendel’s question on the guidance where, you know, you don't have the operating assets anymore, which cleans up results. Looks like you're gonna be getting the escalators on most of the leases. You kinda have an idea or expectation that the transactions are gonna close. I guess I don't really understand why you're not comfortable providing guidance because you talk about, you know, I'm curious, but you're not sure when the transaction is gonna close. With your business, and I think the whole prior part of this call kinda reflects that, there's always gonna be transactions, right?
I think that.
We'll bring this up with our Board as our next meeting approaches relatively soon. This was an issue well discussed with our Board and I think we had decided with the Board's support to take a cautious approach to this. This issue is a schedule item that we'll consider at our next Board meeting and then we'll see. I did say down the road that we quite possibly would get back to guidance. We just haven't felt as if it was a life or death issue for us. We've decided with an abundance of caution, it's kinda who we are, that we would just wait a bit, step it up. I'd say stay tuned. I hear your request.
Okay. Yeah. I would say just from the investor perspective and at least the sell-side analyst perspective, that there is a level of confidence in the future that I think you guys do have, but aren't necessarily sharing with the markets by establishing that guidance. You can always go a bit wider if you're worried about the timing, or just let us know what the guidance implies for expected timing of transactions. Thank you.
That's fair enough. I suspect, by the way, that virtually all of our board members are tuned into this call, and I suspect they have heard your desire.
Thanks. Thanks, Peter.
Thank you very much. It's a fair question.
Thank you. As a reminder, to ask a question today, please press star one from your telephone keypad. The next question comes from the line of David Katz with Jefferies. Please proceed with your question.
Hello.
Mr. Katz, your line is open for questions.
Apologies. Post-COVID, leaving it on mute. Good morning, everyone. Thanks for taking my question. I know that a portion of the strategy is, you know, to evolve beyond gaming, and I wonder if you could just elaborate a bit more or help us color in on what that might look like. Might it look like, you know, a gaming property as part of a mixed-use development where your involvement might be broader? Is it, you know, perhaps through a vehicle of, you know, loan to own, or other kinds of financing to launch a relationship? What might that evolution look like and what path could it take? Thank you.
Well, look, I think you laid out two sensible ways to get our toe in the water. That's certainly stuff that we have looked at and would consider without a doubt. Look, the farther off you get into some other space or some other business, frankly, the less likely we are to get there barring something very compelling. David, I hate to. You know, look, I hate dodging answers, but the truth is, we'll know it when we see it. I did emphasize earlier in the call that scarcely a week goes by that we're not looking at something that one of our banks or one of our friends or somebody internally has brought to us as a possibility.
We look at this stuff quite seriously because, again, these company's objectives are long-term. While we are not, you know, pressed to, you know, do heroic or crazy stuff, we are trying to build a company for the long future, and I think we've done that pretty effectively to date. It's an ongoing process. I think we'll know it when we see it. As I mentioned, just for fun, there happens to be a call on the calendar with some folks Monday afternoon. I know it's. I think at 3:30 P.M., to be precise, from my memory, to discuss something different. This is a normal part of what we do, and we'll continue unless and until we find something that kinda grabs us.
You know our criteria. It's getting its safety, and it's getting an appropriate spread to our cost of capital, since we're really not in the business of quote, "strategic transactions." We're only interested in cash on cash return. That's who we are. That's who we've always been.
Okay. Appreciate that. If I can, you know, just go back to one issue that you have discussed a little bit, which is the most recent entry into this category, you know, historically, you know, pays much higher prices. While they've paid a higher price than I think most of, you know, you and your peers have so far, it sure looked like a great price to them. You know, I only take that in the context that, you know, that there could be more of the likes of them. There should be more of the likes of them, that will look at opportunities at a better price than you're willing to pay, as highly attractive. I heard Matt's comment earlier that, you know, sometimes people make a better choice necessarily, you know, that isn't entirely numbers-driven.
I'm just posing the question about whether the market just got tighter and more competitive for new opportunities.
You know, that's a fair question, and time will tell. Look, I think that's a unique property. As I said, it's really a Las Vegas property, a very expensive, one could argue, overbuilt for that market, but property in a major city in a monopolistic position. I think that's unique. I wouldn't imagine those folks would be going to, I'm just being smart, Tunica, Mississippi, to buy any asset in the market at a similar multiple. Look, I think it's partly property to property, market to market, and I think that was a unique situation. Time will tell where else they go or people like them go. Is that fair? I think, is that fair?
I do think it's fair. Thank you.
Okay.
David, let me add a thought to that. It's interesting. I mean, I'm gonna go back to the point of look at our transaction table and everything we've done historically. You rightfully point out that there is some reliance of our business model on people needing to do things for strategic reasons, but that's happened now, I don't know, at least a dozen times. I mean, Cordish made very clear in this transaction, I mean, they were not trying to maximize proceeds. What they were trying to do was find a business partner to enable their business plan for the next many generations. They expect their kids and their kids' kids all to be owning the OpCo and running these assets for the future, foreseeable future, and beyond.
In that transaction, we've structured a number of things to be able to help them execute on that. I suspect that others would have paid a much more aggressive coverage. In fact, in their case, they wanted less rent, and they're speaking our language. We have, again, a philosophical alignment of views, and they're not the only people in the world that think that way. You look back before that, public company, Bally's, and the fact that they were looking to do a strategic M&A deal in the U.K. and needed someone to do exactly what Peter pointed out, be creative, do something bespoke, move quickly with something very complex. Those are all things that we've got muscle memory from doing it many times before that we can execute on. You can keep looking back on our transaction history.
Historically, it's been the case that people look at more than just cost of capital. To your question, I'll say if this was just similar to a mortgage broker, and we're just looking for the lowest rate, everything else held constant, we may not be the best buyer. Those terms may not be the ideal ones for our shareholders. Remember, every time we do a deal, we take very seriously the reality that we're selling a piece of our portfolio at the valuation that our stock's at in order to buy whatever's next. It needs to be at least additive to that in whole. If there's very aggressive coverage or a very aggressive cap rate without a lot of credit support, it gets more challenging for us to pencil.
In spite of all that, we've time and time again, found ways to do creative things that have added value for our shareholders.
Understood.
Yeah. Let me say this.
Thank you so much.
Look, we can't.
Please.
I think Matt says it well. We're not the choice in every situation, but we want to be the REIT of choice in this industry. The people that are most desired to work with, the best partner, the most available friend to develop a future together with our existing tenants. That's what we strive to be. Maybe not the biggest, but absolutely the best.
Thank you.
Our next question is from the line of Robin Farley with UBS. Please proceed with your question.
Robin, you may be on mute.
Hi, Robin, your line is open. You may be muted. Okay, gentlemen, I'll move on to our next question from John Massocca with Ladenburg Thalmann.
Good morning.
Good morning.
I know it's very much an offer and not a deal at this point, but is there any impact to either kind of, you know, your in-place leases or opportunities, either structural or kind of hypothetical, from the proposed acquisition of Bally's by Standard General? Just seeing that you have other kind of controlled tenants of Standard General in the portfolio today.
Matt, do you wanna opine?
I think I'll pass to Brandon.
Yeah, I'm not sure we're in a position to really speak to the Standard General offer for Bally's. Clearly, from the press release that Bally's put out, they have formed an independent committee. They've hired a banker. I suspect that they'll run that process and, to the extent we have an opportunity to be a part of it, I'm sure we'll try to be a part of it, but that process will take care of itself, and we don't have any inside knowledge into that.
The one thing I'll add is to the extent there is something there, the lens we look through is always gonna be the same. It's asset quality, operator quality, four-wall coverage, credit support, and figuring out ways to get accretive spreads based on all those factors.
I guess, is there anything kinda structural within the existing leases or agreements that would be impacted at all by that becoming a private entity as opposed to a publicly traded one?
No, I don't think there's anything structural in the leases that would particularly be a problem. I think that if it were to become a privately held entity, clearly the leases would remain in effect. If we had an opportunity to participate in that, we'd try to bolster those leases. I don't think it changes the structure of the lease by the nature of the owner.
As you think about, you know, potentially working with existing tenants to deploy capital in properties you already own, is there any kind of cap rate advantage you kinda get in that deployment versus maybe de novo transactions, especially as we've seen kinda cap rate compression in de novo transactions? Are you kinda competing, you know, frankly, with alternative sources of capital that your existing tenants can access to fund those improvements at properties?
You know, that's a fair question, an interesting question. The answer is yes, I think we can do better. In almost every case, there are reasons why under existing leases, it'd be very difficult to go elsewhere. In other words, there'll be a trade-off of some sort. We'll give you X, you may want Y. You know, it'll be a discussion. I don't have any fear that a transaction like that could go elsewhere, because clearly it's gonna take a discussion, and a trade-off of some sort. I just kinda leave it at that. Yeah, it'd be almost impossible to go elsewhere.
Okay. It's fair. Go ahead.
This is Steve, real quick. Maybe what I would add is I think that the tenant typically looks at it with a different lens. For example, if we own a casino property, we own the land and the building, they're deciding they're thinking about adding a hotel. Well, at the end of the lease, I still own the land and the building. In many cases, as simple as it may seem to just say, "Well, they can borrow at X rate and I might offer Y, and they should just pick the lower of the two," in many cases, the psychology of it all changes 'cause they know they're leaving it behind at the end.
They're gonna either fund it, maybe potentially cheaper with a bank loan, but at the end of the day, I get it 'cause it's on my property. They're not gonna pick up and move the hotel they just built. Ultimately, in many cases, they might look to use our capital in a more advantageous way for us.
And John, this is Matthew. I'd also point out, so your latter point about them comparing our capital with other sources of capital is relevant, but the other side of the equation is other potential uses. We've watched equities for some of the operators get pressured to the point that they've instituted share buybacks. If there's an incremental dollar on their balance sheet and they can use it for either buying back their shares at a very opportunistic price or putting it into a building, our capital may fill an interesting gap there.
Okay. That was all very helpful, and that's it for me. Thank you very much.
Thank you.
Our next question is from the line of Spenser Allaway with Green Street. Please just use your question.
Thank you. Just on the digital gaming front, it seems as though the operators are in an arms race to gain market share and customer acquisition costs appear high. That said, Penn does seem to have, you know, some sort of advantage with its captive audience from its partnerships. Just curious if you can comment on how you view this playing out over the next couple of years.
Well, it's kinda hard to know. I mean, we have no insight whatsoever into Penn's thinking or philosophy other than an awareness that they decided to be very disciplined in marketing spend and claim or believe that they are profitable today. That's been a goal, to get to profitability earlier. That's all we kinda know. What the impact on the bricks and sticks operations will be, time will tell. I do know, for example, near to us, they just opened a facility a couple of months ago in Morgantown, Pennsylvania, right down the road from our offices, probably 15 minutes away. The sports book presence and so forth has been pretty successful in attracting customers to that facility who then play on, you know, our brick and mortar facility.
What the overall impact is likely to be, I think it's gonna be positive, but I think it's gonna take some time to really understand where that's going.
I'll just add, Peter.
You know, we have seen a lot of investment in our properties by our tenants in expanding and building sports books to attract customers into the facilities. I think if you look at the product that the Cordish team offers, you know, they really offer a fantastic product of a sports bar atmosphere where in many instances, I think you'd probably agree it'd be better to be there than in the stadium with a 80-foot wall TV and food and beverage. I think what sports betting has done as it's spread across the country is it has resulted in quite a bit of investment in our portfolio assets.
The Cordish people have got this down better than just about anybody else on the planet. Their live facilities, not even gaming license facilities, are hugely successful because they're so exciting. They're physically, as Brandon points out, scaled big time and beautifully done. They just are very attractive to new customers. I mean, I think this is evolving, but for the casino companies, I think it's a plus. I know early days at Charles Town, when they opened up early, the sports betting, it was very successful in attracting new customers, mostly male, who would come and play tables in addition to what they came to do with the sports betting. I think this is a symbiotic arrangement. It's not been a net draw.
It's actually been a net plus for the companies. We'll see where it goes, though, for the future.
Spenser, this is Matthew .
Okay, Matt in.
Sorry, Spenser. I'd also point out that the theme over the next number of years may likely be convergence as well. When you think about the sports-based placemaking that Peter and Brandon articulated and the reality that some of the folks betting on their phones are in the casinos, but a lot are in other places, the likelihood, and there's some data that shows this, is that those people will enjoy making those bets and make more bets if they're in a fun, exciting environment like some of the ones that Cordish develops, creates, and manages. That's something that we certainly are thoughtful about, and it ties into David's questions earlier, too, about thinking about what our strike zone is and how things might play out over time with the kinds of properties we think make sense for us.
Okay. Yeah, no, we would agree that it would be additive, but really appreciate the insight, especially at the property level. Just last one from me. As you look, you know, towards the future and you're signing new leases, has there been any consideration to have uncapped CPI-linked escalators, just given the inflation concerns around long- duration leases?
I would suggest this. I mean, I can't imagine anybody in the current environment who is a tenant prospect signing an uncapped CPI. I mean, you'd have to be out of your mind to do that. I know I wouldn't, and I suspect nobody on this call would do it either. You know, it just, it's so dangerous in the current environment. Would we love to have it? Absolutely. But I think we'll walk a tightrope and try to get as large an adjustment as we can. But the uncapped, I think, just isn't gonna happen. I'd be shocked if anybody went for that these days. I don't know how you could.
Yes. Spenser, it's Matthew again. I'd say it's a top consideration. At the same time, you've got interestingly in these last number of deals, look at MGP's new lease reset or Realty Income's lease. There's caps that have certainly crept into the market that have become market. But I wanna point you to a couple points that Realty Income made. Even with 1.75% fixed, which is what they have for the initial term of their lease, and the same as in our lease with Cordish, even at that rate, it compares incredibly favorably to the standard triple net escalator, which is a lot closer in their case, I think to 1%.
The fact that we're not fully capturing inflation is true, but in the other direction, there certainly is a case that we're doing a lot better than a lot of the other leases in the triple net world. The other thing I wanna point out when you think about our company and our shareholders and our risk exposure there is the fact that I'll point back to this long-dated staggered maturity debt schedule. One thing we've been very focused on with new debt issuances is to not go short even if we could get cheaper capital. We've skipped over three-year, five-year, and we actually did 100% 10-year debt on our last issuance.
In fact, we even thought about a 30-year bond, but market volatility ticked up into when we actually were able to hit market, which was we had to thread a needle based on Cordish's timeline and wanting to get done by the end of the year. That's something we're gonna continue to focus on and matching better the duration of the cash flows from our income stream, which you point out are very long dated with very strong credit and the credit on our balance sheet.
Okay. Thank you.
Thank you.
Thank you. The next question comes from the line of John DeCree with CBRE. Please proceed with your question.
Good morning, everyone. Thanks for taking my question. I think you covered a lot of ground, but maybe one more. Peter, and one of your peers talked about possible international gaming opportunities, and then in the context that maybe digital gaming and sports betting blurs the border a little bit between the U.S. and Canada. Is international gaming something that you would consider seriously, and kind of under what, you know, pretenses or how would you kind of evaluate those opportunities?
Oh, we've looked at international for a long time. Look, in my days with Penn, I could write a book on just how many places, you know, where I've spent time. Japan, of course, China, Vietnam, Portugal. I mean, every I could go on a long list. Australia, keep going. I've been to all these places. You know, finding the right transaction that makes sense, and then given exchange rates and in Canada, it's particularly tricky. We just haven't found the right opportunity where we felt we could be competitive. Would we do that? Absolutely. Do we look there? You bet we do. Look, we look at everything. I'm not being flip, but we look at everything. That's kind of our job. You know, kinda taking a Bible quote, many are called but few are chosen.
I mean, that's kind of the process.
John, a couple of the key guardrails for us are countries with judges with long black robes and property rights. We wanna make sure that we could certainly collect our rent and have the ability to perfect any issues. Also, all the math we look at, to Peter's comments, is really net of taxes, translation, any explicit costs that would be involved in getting the cash out of the asset and ultimately onto our balance sheet. Then the same process takes place looking at risk-adjusted cash flow and how it impacts the company's value.
Thanks, Matthew. That's helpful. You know, maybe one more, and you'll probably know the answer here, Peter, Matthew, but I think you've kind of spoken to, you know, potential opportunities with Native American tribes in, you know, their push into commercial casino. Obviously, you know, reservation gaming is about half of all gaming in the U.S. and very tricky there from a regulatory perspective. You know, if there's a creative way to, you know, get involved, perhaps on the non-gaming side where there's adjacent hotels to Native American casinos, have you had any of those conversations? Is there any, you know, movement on that front, or is it just too tricky to get anything done, you know, given all the restrictions as it relates to gaming?
It is very tricky. We've looked hard at it for many, many years. I will say this, I think that the opportunity may be easing up now, for a variety of reasons. That is the tribes becoming more commercial, in many, many markets. That opportunity may now be more open. I'll just kinda leave it at that. Yes, of course, we're very aware of that.
Yep. Just massive part of the U.S. gaming industry. You know, curious how long or if and how we can start to cross over. Appreciate the thoughts, everyone. Thanks so much for taking my questions.
Thank you. By the way, this call, I'm just looking at the clock, sets an all-time record for either my many, many years with Penn or here at GLPI. Why don't we take maybe just one or two more questions, and then we'll wind up.
Sure. The next question is from the line of Daniel Adam with Loop Capital Markets.
Hi. Thank you and good morning, everyone. Just one question for me. Yesterday, one of your competitors alluded to, you know, being open to embracing a joint venture structure for certain deals should they arise. I'm wondering if you've considered that kind of structure and under what circumstances might a joint venture make more sense than going at it alone? Thanks.
That's a pretty fair question. The answer is, we spend a lot of time examining that possibility. I don't know what we're prepared to say. Matt, do you wanna make any comment?
I think that is the comment. Obviously.
Okay.
For us to have every tool in our tool chest, we need to be able to access capital and get some value for our platform and our validation in a transaction where pricing might be aggressive. We haven't done it to date, but we certainly have dialogue with the right folks if and when it's appropriate to be able in a position to use it.
Okay, great. Thank you.
Yeah. How about one more question?
We have no additional questions at this time. Mr. Carlino, would you like to make some closing comments?
Well, simply to thank those who have dialed in this morning. We're excited about what we accomplished last year. We're particularly excited about the things we believe are gonna get done this year. It looks like another strong year. We'll look forward to talking at the next quarter. Thank you all very much.
Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.