Gaming and Leisure Properties - Earnings Call - Q1 2025

Executive Summary

• Q1 delivered record revenue ($395.2M, +5.1% YoY) and record AFFO ($272.0M, +5.2% YoY), but GAAP diluted EPS of $0.60 missed Wall Street consensus ($0.74*) largely due to a higher non-cash credit loss provision tied to a more pessimistic macro outlook.
• Revenue came in essentially in-line ($395.2M vs $396.9M* consensus), while AFFO/share rose to $0.96 from $0.92 YoY, supported by recent acquisitions, lease escalators, and development funding.
• Full-year 2025 AFFO guidance was modestly updated to $1.109–$1.118B ($3.84–$3.87 per diluted share/OP units) vs prior $1.105–$1.121B ($3.83–$3.88); management cited the removal of a Pinnacle escalator assumption at the high end.
• Potential stock catalysts: Q2 dividend raised to $0.78 (from $0.76) post-quarter, ongoing Chicago development milestones (272/331 caissons installed; steel arriving July), and active deal pipeline/sale-leaseback dialogue amid macro volatility.

Note: Asterisked estimate figures are from S&P Global.

What Went Well and What Went Wrong

• What Went Well

  • Record Q1 top-line and cash-flow metrics: revenue $395.2M (+5.1% YoY), AFFO $272.0M (+5.2% YoY), and Adjusted EBITDA $360.1M (+8% YoY), driven by acquisitions, escalators, and development activity.
  • Strong balance sheet and leverage: management highlighted annualized net debt/EBITDA of ~4.7x and well-laddered maturities, positioning GLPI to be opportunistic and pre-fund growth.
  • Clear development progress and tenant alignment: CEO emphasized Chicago is “well underway” with 272 of 331 caissons installed; GLPI is providing project expertise and funding support to tenants (e.g., Bally’s Chicago, Belle of Baton Rouge).

• What Went Wrong

  • EPS miss vs consensus: Diluted EPS $0.60 vs $0.74* consensus; CFO cited an ~$18M YoY increase in operating expenses primarily from higher non-cash credit loss provision on a more pessimistic economic forecast.
  • High-end guidance trimmed: Full-year AFFO per share high-end lowered modestly as the Company assumes Pinnacle escalator will not be achieved; development funding timing also trimmed to ~$375M from ~$400M (timing-driven).
  • Execution timing risks: Chicago timing remains subject to construction and municipal approvals; management acknowledged residual uncertainty while reiterating project momentum and risk-capped funding structure.

Transcript

Operator (participant)

Greetings and welcome to the Gaming and Leisure Properties First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joe Jaffoni, of Investor Relations. Thank you, sir. You may begin.

Joe Jaffoni (Investor Relations Consultant)

Thank you, Christine. Good morning, everyone, and thank you for joining Gaming and Leisure Properties First Quarter 2025 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 the 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 at Gaming and Leisure Properties, as well as Brandon Moore, President and Chief Operating Officer, Desiree Burke, Chief Financial Officer and Treasurer, 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 Peter Carlino. Peter, please go ahead.

Peter Carlino (Chairman and CEO)

Thank you, Joe. Good morning, everyone. It is always fun to introduce a good quarter. It is another good quarter for us here at GLPI. We have announced in our release an array of new projects, financing adjustments, and the like, which are, I think, well documented and will be explained, I think, in more detail as you hear from Desiree and Matt. I will not run through them, though. There is one item that I think I will raise in advance, and that is Chicago. We have had a lot of questions. I have read a lot of reports overnight through this morning asking about Chicago, which is understandable. That project, I think you need to know, is well underway. Jim Baum, our Head of Construction, is in Chicago significantly monitoring what and how that is proceeding.

I'd highlight that we only got control of that ground in July, and it's a complex project requiring lots and lots of city approvals and the like. It was delayed first because the contractor managed to knock a concrete or a masonry wall into the river, which caused some environmental problems. Needless to say, delays, understandable, but delays. The complexities of putting a building on a site that has probably been developed over several hundred years in underground conditions meant that the caissons that are upon which the structure is built have to be approved and were examined very, very, very carefully by the city. There are 331 caissons required at this project. I forget, Steve, the number's 200 and how many in now?

Steve Ladany (Senior VP and Chief Development Officer)

272 of them.

Peter Carlino (Chairman and CEO)

272. I got a new report this morning, and I just forgot to write the number down. 272 of those are done. They are installed. They'll all be finished in another month and a half. Notably, too, you should know that steel has been long ordered and expected to arrive sometime in July. That was an order placed quite early. That all looks very good. The company is committed. Remember, we're not the developer. Bally's is. The company is committed to this project. It is very well underway. I just want to defuse any thought to the contrary. Hopefully, I've done that. With that, Desiree, would you take the floor?

Desiree Burke (CFO and Treasurer)

Sure. Good morning. For the first quarter of 2025, our total income from real estate exceeded the first quarter of 2024 by over $19 million. This growth was driven by increases in cash rent of over $26 million, resulting from acquisitions and escalations. The acquisition of Bally's Chicago land increased our cash income by $5 million. Tropicana funding increased it by $1 million. Kansas City and Shreveport increased it by $8 million. The Tioga acquisition increased it by $1.4 million. The Rockford loan increased it by $1.9 million. The strategic acquisition increased our cash income by $2.3 million. Lastly, the ION cash income increased by $0.5 million for that funding. The recognition of escalators and percentage rent adjustments on our leases also added approximately $6.7 million of cash income.

The combination of non-cash revenue gross-ups, investment and lease adjustments, and straight-line adjustments partially offset these increases, driving a collective year-over-year decrease of approximately $7.6 million. On the expense side, our operating expenses increased by $18 million, but it was mainly resulting from a non-cash adjustment in the provision for credit losses due to a more pessimistic forward-looking economic forecast. For the company's development properties, we will continue to capitalize interest and defer all our rent during the development period for financial reporting purposes. However, we will add these back, as we have been doing, and deduct the capitalized interest in deriving at AFFO. Included in today's release is an updated full-year 2025 guidance ranging from $3.84-$3.87 per diluted share in OP units.

The reduction in the high end of our guidance from prior quarter is primarily a result of the assumption that the escalation on the Pinnacle lease will not be achieved. Please note that the guidance does not include impact of future transactions. However, it does include our anticipated funding of approximately $375 million for the development projects and the expectations to settle our forward sale agreements in June of 2025. Our rent coverage ratios remain strong, ranging from 1.73 to 2.51 times on our master leases as of the end of the prior quarter. With that, I'll turn it over to Matthew.

Joe Jaffoni (Investor Relations Consultant)

Yes, indeed. Go ahead, Matt.

Matthew Demchyk (Senior VP and Chief Investment Officer)

Good morning, everyone. Thanks, Desiree. Welcome. In the first quarter, amid the market noise and macro uncertainty, we remain focused. We do not manage for the moment. We manage for the long term. That discipline leads to consistent results. In choppy waters, our cash flows remain steady, transparent, and resilient. We respect our balance sheet as the foundation for all that we do. Our leverage is very healthy at 4.7 times annualized net debt to EBITDA, and that is before including the benefit of the forward pulling in that Desiree mentioned. Our maturities are also very well laddered, and our pre-funding capital strategy is designed to reduce risk, maximize flexibility, and position us to act decisively when opportunities arise. In volatile times, that kind of readiness is an asset. The pipeline of opportunities we have built is intentional.

It helps lay the groundwork for growth that reaches into 2026, 2027, and beyond. In periods like this, the value of a strong, reliable partner becomes even more evident. Our tenant partnerships, rooted in a creative win-win mentality, often open doors that others don't see. In a relationship-driven business, as we continue to grow our roster of tenants, our reputation continues to be one of our most valuable competitive advantages. Our strategic approach is simple, but not easy. Keep the balance sheet strong, deploy capital with discipline, and scale with purpose. Our teams, both at the core and the specialized areas, are executing to monitor the active opportunities and also create new ones in our effort to maximize long-term intrinsic value per share. With those comments, I'll hand things back to Peter.

Joe Jaffoni (Investor Relations Consultant)

Matt, thank you. With that, Christine, would you open the floor to Q&A?

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. 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 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. Thank you. Our first question comes from a line of Greg McGinniss with Scotiabank. Please proceed with your question.

Greg McGinniss (Director)

Hey, good morning. On the Chicago development, I'm just curious, on the expectation to build out from this point forward, is it basically just assuming that there's kind of no other complications, I guess, from this point forward?

Peter Carlino (Chairman and CEO)

I mean, that's a speculative question. Who knows? I mean, it's a massive project. Delays are always possible, but I can't predict what the future looks like. We're monitoring this process. As I mentioned, we have our head of construction, who has built many, many projects with us through my years at PENN. He's on site and will remain on site until this thing is well, well established. Could something else come up? Of course. I mean, that goes without saying. Is there any reason to expect that? Let's hope not. The point is, things are well underway. The thing is coming out of the ground, which ought to be quite visible, publicly visible to anybody who rides by and wants to take a look.

Greg McGinniss (Director)

Okay. Thank you.

Peter Carlino (Chairman and CEO)

How's it going?

So far, so good. It's the guy who falls out the top window of a tall building on the way down. So far, so good.

Greg McGinniss (Director)

Okay.

Peter Carlino (Chairman and CEO)

I mean, look, I can't give you a better answer than that.

Greg, that is.

Matthew Demchyk (Senior VP and Chief Investment Officer)

No. Yeah, we structured this to make sure we had turn pay along the way. It is not like some of the other structures. We have to wait till it opens to get our cash flow. Separately, we also capped our exposure as part of our deal structure.

Peter Carlino (Chairman and CEO)

Yeah. Right now, the cash that's been advanced comes from Bally's. So that's fine with us.

Greg McGinniss (Director)

Right. Okay.

Matthew Demchyk (Senior VP and Chief Investment Officer)

The cash draw for us is not predictable until we get there.

Greg McGinniss (Director)

Okay. Yeah. No, that all makes sense. I can appreciate it. I was just trying to understand how much leeway was built into the assumptions. On the PENN projects, have you had any recent conversations with them? I know Ameristar in Iowa just got approval from State Commission. Has there been any recent conversations there as to whether or not they plan on taking the GLPI capital to help?

Joe Jaffoni (Investor Relations Consultant)

Dave, do you want to take it, Steve?

Steve Ladany (Senior VP and Chief Development Officer)

Sure. I think that it's a constant dialogue we have with them. I don't think we have any better clarity than we've conveyed in our documents here that we've published. I don't think our current expectation is that they withdraw funds this calendar year, but we will have to wait and see what comes of that. I can tell you that the dialogue around their reinvestment in properties is along the same lines as what you've seen in Boyd's announcements yesterday. I think the operators we talk to and deal with are starting to focus on the brick-and-mortar assets, and we think that's a positive thing for our properties and our assets.

Peter Carlino (Chairman and CEO)

Yeah. Let me say this. I'm not totally sad that they haven't drawn on our cash right now. Suggests that they've got enough cash to do what they need to do. Look, PENN is, the digital element aside, in a very strong position. They've got great properties. They're performing relatively well. That side of the business, the brick-and-mortar side, is doing extremely well. I'm gratified, frankly, to see that they're actually highly focused now on brick-and-mortar again. Good for them.

Operator (participant)

Our next question comes from a line of Ronald Kamdem with Morgan Stanley. Please proceed with your question.

Ronald Kamdem (Managing Director and Head of US REITs and CRE Research)

Hey, just two quick ones for me. I noticed the guidance, I think the assumptions for development funding was reduced. I think it was $400 million last quarter. Now it's $375 million. Is that all related to Bally's? Just what's the color behind that timing? What sort of drove that sort of change? Thanks.

Desiree Burke (CFO and Treasurer)

Yeah. It's all timing, and it's just pushing out some of the projects due to the delays that Peter mentioned.

Peter Carlino (Chairman and CEO)

Yeah. Believe me, it's a guesstimate. As best we can make it, but you need to know. It's just a guesstimate of where things are going.

Ronald Kamdem (Managing Director and Head of US REITs and CRE Research)

Okay. Great. That's helpful. I guess my second question is just going back to sort of the Chicago project. Maybe can you comment on just the latest update on gaming trends around the assets, nearby the assets, what you guys are seeing, what you're hearing, and if you can broaden that out to just regional gaming overall? I mean, you mentioned PENN, but just curious about what trends you're seeing in regional gaming overall and your views post-terrif. Thanks.

Steve Ladany (Senior VP and Chief Development Officer)

Sure. Maybe starting in Chicago land area. Look, I think that the trends have been pretty consistent so far this year, with the one wrinkle being the recent opening of Wind Creek and the performance there, which I think has done what most people expected it to do, which is take some market share from other competitors. I think talking about Chicago specifically, I think we did notice that the performance last month was up, which is positive. I think there have been some changes there on the Bally's side, and I think that we are looking forward to what those might bring to the property going forward.

More broadly speaking, I think, look, I think what we hear and what we see from our tenants when we talk to them is very much in line with what you heard on Boyd's call yesterday, which is that they continue to see a resilient customer base. They continue to see assets performing. At the same time, they're very, very attentive to those trends and what is going on and their ability to pivot and take care and manage their costs if, in fact, they have to do that. I think we're seeing promising trends right now. As we all know, that's only good for as many minutes as till the next tweet comes out.

Ronald Kamdem (Managing Director and Head of US REITs and CRE Research)

Thanks, Steve.

Helpful. Thanks so much. That's it for me.

Operator (participant)

Our next question comes from a line of Anthony Paolone with JPMorgan. Please proceed with your question.

Anthony Paolone (Executive Director)

Yeah. Thanks. Good morning. First one is just with regards to the pipeline and your own thinking right now. Has anything changed in terms of what you might want in terms of a yield now versus even like a month or so ago? Just what your thought process is there as you look at deals.

Steve Ladany (Senior VP and Chief Development Officer)

I'll go, and then anybody else wants to jump in, they can. Look, I think from my perspective, from our perspective with respect to deals, I think obviously we always want to get the most accretive transaction as possible. And so when our cost of capital starts to climb, we obviously look to keep the spread intact and increase the cap rate at which we would transact. I will tell you, though, anecdotally, and I think it's important, the counterparties seem more interested in talking right now. As you would imagine, as the markets gyrate and stock prices move around and credit spreads move and the Treasury moves, discussions which were maybe exploratory and soft in nature seem to be a renewed interest. That doesn't mean that transactions happen. It just means that there's a more attentive counterparty on the other end of the phone.

I would share that with you anecdotally.

Anthony Paolone (Executive Director)

Okay. Thanks. Just quick follow-up on the guidance and just the assumption around the equity settlement at mid-year. Is that just a placeholder, or do you intend to do it that way? It does not seem like you necessarily need the money. Just trying to think what.

Desiree Burke (CFO and Treasurer)

We wanted to give everyone a placeholder for doing your modeling. Clearly, our forwards do expire by August for the majority of them anyway, so we just provided a placeholder.

Anthony Paolone (Executive Director)

Okay. Thank you.

Operator (participant)

Our next question comes from a line of Smedes Rose with Citi. Please proceed with your question.

Smedes Rose (Director)

Hi. Thanks. I wanted to just maybe get a little more color kind of your thoughts. You mentioned your counterparty being more attentive. I mean, do you just put that up to kind of just volatility and interest rates in the overall market, or is there anything else going on specifically? Maybe just as a part two, you mentioned on your last quarterly call, potentially with higher layoffs from the government, that that could encourage some states to look to issue more gaming licenses or to initiate gaming legislation. I'm just wondering if you're seeing anything on that end of things.

Steve Ladany (Senior VP and Chief Development Officer)

I'll take the first one maybe. With respect to the counterparties, look, I think the interest is, yes, as you highlighted, a lot of it's around what is their alternative? What is their alternative capital sources? What could they do with the capital? Where do they find themselves in the current universe? I think folks who were maybe willing to dip their toe in and find out what they could get done and maybe were holding out for a very significant price, I think all of a sudden they've seen that the field and landscape in front of them is changing, and maybe they do not need to hold out for the last penny. I do think it's just that the macro climate has caused people to kind of have a renewed sense of where they sit in the grand scheme of things.

With respect to other jurisdictions, I don't know if anybody else.

Smedes Rose (Director)

Brandon, do you want to talk about just the regulatory climate?

Brandon Moore (President and COO)

Yeah. Yeah. Sure. We are monitoring legislation in a number of different states for different reasons. You have bills that were proposed in states like Georgia and Alabama that would introduce gaming for the first time. I think those look unlikely in those states. You have other states where iGaming and VLTs in Illinois and other states. We take a very close watch on those for the impacts those could have on the brick-and-mortar businesses and our tenants. I think those are all complicated endeavors, and it is different in each state. There is a lot of different factions at play when you have those kinds of regulations that are being proposed, and you have a lot of different groups that are pushing and pulling on those.

To handicap the legislation in some of these other states would be a bit speculative right now, but I think you're seeing a very intense focus on things like iGaming and supply expansion because people are starting to realize the impacts that those things have. It's not as simple as just build it and they will come. I think those are pretty complex. I think you're going to continue to see legislation on iGaming and sports betting. Sports betting is now prevalent in the majority of states, but you'll see it in states that don't have it. I think you'll continue to see legislation this year and in future years in states that don't have gaming: Georgia, Alabama, South Carolina, North Carolina. Some of those have tribal gaming, but the ones that don't have commercial gaming, I think you'll continue to see those coming up.

Peter Carlino (Chairman and CEO)

Texas and somebody's near lifetime.

Smedes Rose (Director)

Thank you. I appreciate it.

Operator (participant)

Our next question comes from a line of Todd Thomas with KeyBanc. Please proceed with your question.

Todd Thomas (Managing Director and Equity Research Analyst)

Hi. Thanks. Good morning. I just wanted to follow up a little bit on the investment landscape and sort of thinking about funding future investments, just given the comments that conversations are active around potential new deals. You have the $400 million of unsettled equity, but you are not active this quarter at all. The stock is up on the year. Your absolute cost of capital seems to be holding in relatively well. In the past, you have been fairly proactive about raising capital and pre-funding investments. I am just curious how you are thinking about your equity capital here today.

Peter Carlino (Chairman and CEO)

Yeah. Todd, our philosophy remains the same. If you look at our business plan for this year, we've got $375 million going out. You've got $400+ million coming in from that forward settlement, and you've also got a free cash flow, which is about $200 million per year. If you look at it in isolation, we're in a cash-positive position for a calendar year before anything new happens. To your point, we're always looking out at least 12 months and thinking about the needs beyond the end of the calendar year and also thinking about our pipeline. You're right. We've used our ATM program as a tool historically, and we'll continue to have that. I mean, our goal is to continue to pre-fund, but always to do it in a very measured and balanced way.

If you look at our balance sheet, we've got some flexibility and some capacity. We're going to continue doing what we did. I wouldn't take this one quarter in isolation as any read in any direction, but we're in a very solid place.

Todd Thomas (Managing Director and Equity Research Analyst)

Okay. I just wanted to also just follow up on the $375 million of fundings that are in guidance. I realize it's fluid a little bit and not entirely in your control. I think that it was initially described as being back-end loaded during the year, but just curious if there are any updated thoughts at this point around the cadence of that amount. Any early thoughts on how we should think about fundings in 2026, just given the timing of Bally's Chicago was pushed out into 2027 at this point, and some of those amounts seem to be spread out a little bit further than we previously may have thought.

Desiree Burke (CFO and Treasurer)

Yeah. I mean, I can start with $175 million is still back-end loaded. We had only funded about $12 million in the quarter.

As far as pushing it out, as I think I said on the last call, we do fund after Bally's has done the work. Therefore, we pushed ours out to 2027 because the funding will lag when the actual work is completed and can be reviewed and signed off. I do think that everything is consistent with what we said on our last call.

Todd Thomas (Managing Director and Equity Research Analyst)

Okay. Thank you.

Operator (participant)

Our next question comes from a line of Jay Kornreich with Wedbush. Please proceed with your question.

Jay Kornreich (VP of Equity Research)

Hi. Thanks. Good morning. Just going back for one follow-up to the Bally's Chicago casino development, are you expecting any impact just from the recent tariffs, maybe increasing the cost of building items and maybe just the overall cost of the total project? I guess, does that lead to any changes in your funding commitments if that happens and any significant impact to how you think about stabilized rent for the overall asset if it does become more expensive or stabilized rent coverage, I mean?

Peter Carlino (Chairman and CEO)

It's hard to know just because we're so early in the game. Many of the expensive components have already been ordered and are in hand. We'll get a report somewhere down the road in the next weeks about where they are in purchases and so forth and what's locked in and what is not. The goal, of course, is always to lock in as many of the big contracts as you possibly can: steel, concrete, a lot of the electronics and coupling equipment and so forth. A good bit of that has been ordered and is in the queue. We need more information on our end, frankly, to kind of know just where that is, what percentage is bought out. We'll know that fairly soon and what percentage is still out there.

Matthew Demchyk (Senior VP and Chief Investment Officer)

A lot of that was domestically sourced. The tariffs would not have had an impact on that. Things like steel would not have had any impact on that anyway.

Steve Ladany (Senior VP and Chief Development Officer)

Yeah. From a rent perspective, our financing commitment is a locked number. If you extrapolated a tariff impact, that would just mean that we're buying fewer assets, but we're spending the same amount of dollars. Therefore, your stabilized rent math will be the same thing because my rent's going to be a function of the amount I've spent. It would just mean that the return on capital from the Bally's side of the equation would be worse if they had to actually fund more dollars into the project to get the same amount of EBITDA.

Peter Carlino (Chairman and CEO)

This tariff thing, as you all know, is pretty fluid. It is not real clear kind of who, what, where, and when. That is the understatement of the day.

Steve Ladany (Senior VP and Chief Development Officer)

When it hits the dock.

Peter Carlino (Chairman and CEO)

We will know it when we see it.

Jay Kornreich (VP of Equity Research)

Okay. Appreciate that thought. Just one follow-up. I guess going to the Ion Van investment, looks like you guys have invested $18 million out of a $110 million commitment. Just curious of your thoughts on, is the pace of investment going along as planned? Just any overall thoughts about how that progress is going in the overall just general opportunity set of tribal land investments?

Peter Carlino (Chairman and CEO)

Brandon, you want to do that?

Brandon Moore (President and COO)

Yeah. The Ion investment is going as we had expected. There's a GMP contract there. I think if there's a question on tariffs and things like that, that's been covered on the Ion project. We were out there recently for a tribal meeting and had an opportunity to see the site. I think that project is going great. We're enthusiastic about that project. Tribal gaming in general, we were out at the Indian Gaming Trade Show & Convention in San Diego a few weeks ago. We had two days of meetings with a lot of different tribes. I think there is a healthy level of interest from both tribes and, quite frankly, professional tribal advisors in our structure.

I'm not saying that's things that people are definitively deciding they need, but I think they are recognizing that they need to consider it as part of their overall financing program when they are refinancing debt, entering into expansion programs, doing greenfield investments. We are out there and we are talking to a lot of folks. I think it will take some time to get traction on additional deals and to say we will or we will not do additional deals. I do not think we are there yet. I would say the interest level in tribal country for our financing structure on tribal land is robust at the moment.

Jay Kornreich (VP of Equity Research)

Okay. Appreciate the thoughts. Thank you.

Operator (participant)

As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from a line of Barry Jonas with Truist. Please proceed with your question.

Barry Jonas (Managing Director)

Hey, guys. Good morning. How do you guys think Bally's risk profile has evolved since you started the relationship?

Peter Carlino (Chairman and CEO)

That's an interesting question. I'm looking for somebody who wants to jump on that one.

Steve Ladany (Senior VP and Chief Development Officer)

Yeah. Look, I think that we have obviously, we have more exposure to them now than we had before, which is stating the obvious. They obviously were more broadly held as a public equity when we started the relationship. That's obviously changed. Casino Queen, when we started some of this, was in a significantly worse position, and Standard General was involved there, which they turned that around. And then now that's part of Bally's. That is another aspect that is uniquely changed here. I think the relationship has continued to evolve. I think we continue to look at it in ways that we can be a cooperative long-term partner while supporting their business and at the same time making sure we do not take undue risk for our shareholders.

That is partly how we ended up structuring Chicago, the way in which we structured it, which is direct funding hard cost as opposed to providing a loan alongside all the rest of their capital structure. Things like that were done in a thoughtful manner. We capped the amount of exposure we had on that financing driven by our underwriting of the asset. I think we continue to look at it as well as any other tenant relationship we have as we want to be supportive, we want to be helpful, and we want to be thoughtful. All of that is cloaked in making sure we take care of our shareholders, not only return, but the risk that the shareholders of ours are taking in any one of these relationships.

A lot has changed, but at the same time, I think at the end of the day, we look at a lot of it very similar. We're just much more alert to some of the risks.

Brandon Moore (President and COO)

Yeah. I'll also say, and I'm not discounting the Bally's parent corporation credit risk as an important and integral component of what we look at, but the underlying assets that we have in our portfolio are strong assets. They're performing very well. You can see that in the earnings release and the table there and the coverage. The four-wall coverage at those properties is very strong. I will say Bally's has in front of them some challenging yet potentially very big opportunities when you look at Chicago, Las Vegas, and other things they do. They've proven to be a very good partner to us, but I don't want to underestimate the value of the assets that we have in our portfolio and the importance that we place on that.

Matthew Demchyk (Senior VP and Chief Investment Officer)

Yeah. As you know, we opened two essentially new projects with them at the Hollywood Baton Rouge property, which we completely redeveloped. It's really exceeded all expectations. The Belle of Baton Rouge, of course, is under construction now. The hotel has opened, and the gaming facility is a fourth-quarter target. It's first rate. It is really, really first rate. They have single-handedly transformed that market with just going landside and building high-quality property.

Brandon Moore (President and COO)

I do not think it is unique to that market. I think you are seeing with Boyd and others, the transition from boat to landside is proving to be a pretty profitable move. That move off the water at the bell, we will see how much that grows the market there, but it is proving in other situations to be a good investment.

Peter Carlino (Chairman and CEO)

Yeah. I think it's spurred PENN to move seriously to going landside where they can. And it's hard to mistake the reality that going landside beats the heck out of the three-story boat.

Barry Jonas (Managing Director)

Got it. That's all really helpful. Just as a follow-up, I think you mentioned iGaming before, and I wanted to maybe see if you could talk more about how that factors into your underwriting. I know Sands looks to be exiting New York, and they cited cannibalization as a concern. Thanks.

Brandon Moore (President and COO)

Yeah. I'll skip the Sands part because I'm not sure if that was the reason they went or not. I haven't done any digging into that. On iGaming, I think we're very cautious with iGaming. It's obvious that with our bricks and mortar portfolio, iGaming on its face would seemingly be dilutive to that and a threat to that revenue. That being said, a lot of our leases have parent guarantees. If you tie the iGaming to the bricks and mortar casinos, that may not necessarily be a bad thing for us. If that increases the revenue and strength of our tenants, that's good.

Where you have iGaming coming into states where you do not have to have any investment in the states, you really have no employees, you do not have any real skin in the game in any state, clearly that is more destructive to us than in the other states. I would say broadly, we are against iGaming. I think there are a lot of public policy reasons why iGaming can be dangerous if it is not regulated as meaningfully as it is at the bricks and mortar casinos. I think by having bricks and mortar operators be the iGaming licensees, you at least have your hooks as a regulator into those licensees in a manner where they have investments in the states, employees in the states. We continue to monitor that.

As it relates to our underwriting, we have to look at the relative strength of our tenants, and we have to look at the markets where iGaming has been in place for some time, including our own home state of Pennsylvania, and see to the extent we believe that ultimately impacts our rent. In order to impact our rent, iGaming has to have a very dilutive impact on the bricks and mortar. Is it having an impact? Sure it is. We've seen that. Is it strong enough to date to cause us concern as to the stability of our rent? Not at the moment, but we'll continue to monitor it.

Peter Carlino (Chairman and CEO)

Yeah.

Let me suggest it's really unconscionable for these states to approve the invaders to arrive at the door and offer iGaming, who have no investment in the state whatsoever, when those of us in the bricks and mortar world have hundreds of millions, if not billions, invested in that state. We will lobby strongly in the future. Look, if you don't have a bricks and mortar investment, you ought not to be in the iGaming business. There's a price to be paid. We will see how that all plays out, but I maintain it is an unconscionable excess on the part of these states. We will continue to lobby hard against iGaming where it's detrimental.

Barry Jonas (Managing Director)

Got it. All right. Really appreciate it. Thank you so much, guys.

Operator (participant)

Our next question comes from the line of Mitch Germain with Citizens. Please proceed with your question.

Mitch Germain (Managing Director of Real Estate Research)

Thank you. How will the accounting for the PENN commitments, if they when or if they're done, is that going to be similar to a loan or what you're doing on the development side with capitalized interest?

Desiree Burke (CFO and Treasurer)

Yeah. It really depends on the timing of when they take our funding. If the property is open and running when they come to us to ask for the funding, then it'll just be a normal lease and add on to the lease. However, if in fact they take it during the development period, we will end up with some of the same accounting that you see with Chicago, which will be capitalization of interest and deferral of any rent collected.

Mitch Germain (Managing Director of Real Estate Research)

Gotcha. Okay. That's helpful. Desiree, maybe take me to what variables have to occur to bring you to the low end of guidance. It seems like there's absolutely no growth if you get there. What kind of has to go wrong to take you to the low end here?

Desiree Burke (CFO and Treasurer)

Right. To the low end, it would mean that we do not achieve any escalation on our variable escalators for Boyd. We already removed Pinnacle. Also, what happens with we now have over $930 million of variable rate debt. What happens with our variable rate on that as well would have to increase pretty significantly from where we are now to get us down to our low end. That has been pretty volatile.

Mitch Germain (Managing Director of Real Estate Research)

Thank you.

Operator (participant)

Our next question comes from a line of Rich Hightower with Barclays. Please proceed with your question.

Richard Hightower (Managing Director)

Hey, good morning, guys.

Brandon Moore (President and COO)

Good morning.

Richard Hightower (Managing Director)

Good morning.

I want to circle back really quickly just on some of the counterparty discussions and more openness to talking with GLPI about different forms of funding. Can you guys help us understand the composition of the projects we're talking about there? I mean, is it more expansions, construction-related financing? Is it full-on traditional sale leasebacks for assets that aren't already sort of nailed down within a REIT structure somewhere? Just help us understand maybe what the opportunity set looks like at this point.

Brandon Moore (President and COO)

Kind of all of the above, but Steve, why don't you?

Steve Ladany (Senior VP and Chief Development Officer)

Yeah. I would say, look, my comments were more directed at traditional sale-leaseback and M&A, to be honest. Some of the other types of financings you mentioned, like our involvement or any one of our counterparties' involvements in a discussion around a greenfield financing probably yields a better result for the counterparty. So those discussions where we were already, those were already intertwined, and those were progressing as you would expect. Things like M&A where maybe I'm interested, maybe I'm not from a counterparty perspective, I think those are the areas where people seem to be a little more open to now discussing in a real tangible way what might have been on the periphery before.

Richard Hightower (Managing Director)

Okay. That's helpful. Then just on the balance sheet side, going back to some of Matt's prepared comments in terms of capital funding and that sort of thing. If I'm not mistaken, you still got the Lincoln Valley's option sitting out there. I think you guys have said you would do that in a sort of 100% debt-financed method. Let's just fast forward and assume that that happens at some point. Where would you sit leverage-wise based on kind of everything in the mix as of today that we know about? What would you have to do at that point to fund new growth from there, if you don't mind?

Desiree Burke (CFO and Treasurer)

We'll still be well inside of our target leverage of five and a half times, right, once we fund the $735 million with all debt. I haven't calculated the number, but I'm sure it's right around five because we're at 4.7 now. I think our balance sheet will still be in an extremely strong position post-that acquisition.

Peter Carlino (Chairman and CEO)

Yeah. We have it in this shape in part because we know our forward commitments and pieces like that of the puzzle that we have to think about. Just think about us as we use the ATM to the previous question as kind of chipping away at that on a blended basis. In an environment like this, we're not going to stray meaningfully, especially in the higher leverage direction. We're getting a very good spread to our cost of capital, and we want to lock that in for our shareholders.

Richard Hightower (Managing Director)

All right. Great. Thank you, guys.

Operator (participant)

Our next question comes from a line of Daniel Guglielmo with Capital One. Please proceed with your question.

Daniel Guglielmo (Equity Research Analyst)

Hi everyone. Thank you for taking my questions. There's a lot of good construction going on at the Bally's and PENN properties. Can you talk about the team's process for keeping up to date and in the know on those projects? Is there a different level of touch project to project or partner to partner?

Peter Carlino (Chairman and CEO)

That's actually a fair question. I guess it depends, not surprisingly, on the scale of the project, the complexity of the project. Things are pretty much on autopilot, for example, in Baton Rouge. Big project, terrific project, but it's well understood and proceeding pretty simply and straightforwardly well. Chicago is in the early phases. It's a bigger project. Obviously, it's going to take a lot more attention from us. As I mentioned at the outset, we have detailed our head of construction, since we're involved in such projects, to Chicago, and we expect to spend a lot of time until we're absolutely satisfied that most of the major buys have been done, pricing looks good, and the project is well underway. It is now well underway, and we're confident in that.

Now we're in the process of trying to buy out the balance of the job, get the balance of the plans drafted and priced and so forth. There's a lot going on. The bigger the project, the more complex, we'll spend more time there. Remember, we're not really the developer. Bally's is. Because we can and wish to be helpful, we'll pay close attention to that to make sure that project comes out successfully. I'll look around the table if anyone wants to add anything to that, but it's a matter of need and importance. Chicago does rise to the top.

Matthew Demchyk (Senior VP and Chief Investment Officer)

We've got a smaller case study if you look down at Baton Rouge of some of the same points of contact and what was done at The Queen and the outcome we got there.

Peter Carlino (Chairman and CEO)

The Queen's a little different because we actually built that. We actually did the construction and turnkeyed it to Bally's. That's not the case in Chicago. This is their project, and we're monitoring that. So far, of course, there's been no request for a draw from us, and that's fine. As I said earlier, I'm always gratified when our tenants reach into their own pocket and put money up, suggest that they got it. In due time, obviously, that money will be drawn and required without any doubt at all. It's just a matter of timing. The long way around is saying we do pay attention, but it's proportional to the complexity of the project.

Daniel Guglielmo (Equity Research Analyst)

Great. Yeah. I really appreciate all that color, and that makes sense. Just one more on the counterparty sale-leaseback interest. How long does it take from someone dipping a toe into an actual announcement and deal? Do you think we need a little bit more macro stability before we really start to see folks commit and get serious?

Peter Carlino (Chairman and CEO)

Boy, I'll stick my nose in that one. Totally unpredictable. Some deals go and are negotiated in 90 days or less, and some take years. I mean, it's an utter unknown. We want to get these things done as quickly as we can. What's the motivation of the seller, so to speak? What do they need, want, or desire? I can maybe tell you how long it might take. That's all over the lot. We want them as fast as possible. Thirty days and done would be ideal. They don't usually go that way.

Steve Ladany (Senior VP and Chief Development Officer)

We wish we had that level of predictability at the end of the deal. Yeah.

Daniel Guglielmo (Equity Research Analyst)

Okay. Thank you. Appreciate it.

Operator (participant)

Our next question comes from a line of Chad Beynon with Macquarie. Please proceed with your question.

Chad Beynon (Managing Director and Analyst)

Hi. Good morning. Thanks for taking my question. Just one for me today. Wanted to ask about a deal that we saw this quarter with one of your tenants, Bally's, and Star Entertainment. It looked like a pretty complicated multi-tranche convertible note and subordinated debt deal. Wondering your interest kind of working with them on this, just given kind of the risk profile, and then also related to that, your interest in getting into some of these other international markets where there might not be as much competition. Thank you.

Steve Ladany (Senior VP and Chief Development Officer)

I think at this point, we have not been approached by Bally's to participate in the Star transaction, and we haven't done any level of work on that. We're obviously cognizant of it, and we're cognizant of the impact that could have on the overall credit profile of that tenant. At the moment, we don't really have any more information than that. Those assets have come up several times over the course of the last several years. We've looked at them at various points in time, but I don't think that translates into the transaction that Bally's is potentially looking at. I don't know we'll have much more to add to that until or unless we hear something from Bally's.

Desiree Burke (CFO and Treasurer)

On the international front, we do look at international acquisitions on a regular basis. The things that we have to worry about are the tax consequences of getting the money back to the U.S., how it impacts our REITs, as well as exchange rate risk. We do look at all of those risks, and we do look at international transactions regularly.

Chad Beynon (Managing Director and Analyst)

Thank you both. Appreciate it.

Steve Ladany (Senior VP and Chief Development Officer)

Sure.

Operator (participant)

Our next question comes from a line of Handel St. Juste with Mizuho. Please proceed with your question.

Ravi Vaidya (VP)

Hi. Good morning. This is Ravi Vaidya on the line for Handel. I hope you guys are doing well. Can you offer any commentary regarding foot traffic, consumer spend at your properties in light of a slowing macro and the tariffs?

Desiree Burke (CFO and Treasurer)

Yeah. We don't actually get property-level information from any of our tenants. All we can tell you is what you've seen at Boyd's results were very positive that came out. I'm sure we'll get more information as our other tenants release. Everything I've read to date has been pretty positive in the first quarter. I don't know whether or not that will continue, but we know what you know at this point.

Peter Carlino (Chairman and CEO)

Yeah. Remember, we get no non-public information. You know exactly what we know. There is no inside track with any of our tenants. Sometimes we wish we had that, but we do not. I think our general expectation is things are fine. I'm not remotely losing any sleep over how well our tenants are doing. Have high, high confidence that we'll be perfectly fine with every one of them, frankly.

Ravi Vaidya (VP)

Got it. Just one more here. Regarding the new deal at Council Bluffs, do you expect them to take up to the $150 million? And if they do, do you think they'll take it as rent or as a five-year prepayable term loan?

Steve Ladany (Senior VP and Chief Development Officer)

We've left that option to PENN. I think it's too early for us. We have not heard from them as to the final spend in that market or the structure pursuant to which they'll take our money.

Peter Carlino (Chairman and CEO)

Yeah. I mean, they just wanted to backstop and make it very clear getting regulatory approval that it could be financed and done. We have served that purpose. In due time, I'm sure they'll come to us with the request.

Ravi Vaidya (VP)

Got it. Thank you.

Peter Carlino (Chairman and CEO)

Thank you.

Operator (participant)

Our next question comes from a line of Robin Farley with UBS. Please proceed with your question.

Robin Farley (Managing Director and Leisure Analyst)

Thanks. You've answered most of them, and you did talk a little bit about tribal opportunities already. I guess the takeaway from that is it doesn't sound likely that there'd be a tribal transaction and anything additional in 2025. Is that kind of what the bottom line would be on that? I mean, is the opportunity really in tribal only if there's kind of a new development or something, right? Maybe not some of the other reasons that we see you doing transactions. Is that sort of fair in terms of expectations? Thanks.

Brandon Moore (President and COO)

Look, I'm not prepared to say that there's no chance that we can get something signed in 2025. I think that is certainly a possibility. I can't give you a probability on it, but I think it's a possibility. As far as the types of transactions we're looking at, I would say no. It's not all limited to greenfield projects. We have had a lot of conversations that have run the gamut from expansion opportunities to refinancing debt to greenfield opportunities. I don't think the uses of capital are significantly different than the uses of capital in a commercial transaction, quite frankly. The one type of deal you don't get is just a traditional sale-leaseback. We could have those too. We haven't had those conversations where somebody just wants cash for no specific use, but I think that's certainly possible.

I think part of the determination that some of these tribes need to make is not unlike a commercial facility of when you have your debt stack, you have to think about how valuable a long-term piece of debt is to your overall financial picture and your growth opportunities and your goals and your strategies. To date, that has not been available to tribes on tribal land. We have a structure that is making that possible. It is a new conversation. It is not only with tribes, but quite frankly, a lot of it is with professional tribal advisors who advise these tribes on their financing packages and their debt stacks and how to approach these things. Those conversations are ongoing, and I am optimistic that we will be able to make something out of those, but we are still in a wait-and-see mode.

I would not say necessarily 2025 is out of the picture.

Robin Farley (Managing Director and Leisure Analyst)

Okay. Great. Very helpful. Thank you.

Brandon Moore (President and COO)

Thank you.

Richard Hightower (Managing Director)

Yep.

Operator (participant)

Our next question comes from a line of Caitlin Burrows with Goldman Sachs. Please proceed with your question.

Caitlin Burrows (VP)

Hi. Good morning. Maybe just a question on new supply. As you guys think about that, what it means for your own construction opportunities and competition for existing properties. I guess, what's your expectation for new supply of regional gaming maybe over the next three years? And do you even have much or any visibility on that?

Brandon Moore (President and COO)

I don't know that we have any more visibility than you do at this point. As you've seen, states that were quote-unquote limited licensed jurisdictions have found ways to be not limited licensed jurisdictions. Here in Pennsylvania, we've had expansion of supply in the last five years. Illinois has had expansion of supply. I think it's certainly possible in states that we may not be predicting at the moment. I do believe in the southeastern part of the United States, in the next two to four years, you will see some expansion of gaming. There are states there, obviously, that don't have commercial gaming to date, and there are a lot of folks that are pushing for that down there. Next year being an election year will make that more of a challenging environment for a new piece of gaming legislation.

I think you'll see expanded supply in the southeastern part of the United States in the coming years.

Peter Carlino (Chairman and CEO)

Look, and our job, of course, is to be close to every and all opportunities, coast to coast. I mean, that's it. We want to be a player in every case, stay on top of that stuff, have lobbyists in place. We ourselves spend time in these various states that look possible. I was going to say likely, but look possible. Yeah, as the expression goes, we stay close to the hoop.

Brandon Moore (President and COO)

Yeah. We monitor this very closely because it's part of our underwriting. Anytime we're looking at a new project, we don't just look at that project and in that market. We're thinking five years ahead, ten years ahead, where can the competition come? Where is the new supply likely to come? What markets are currently underserved that could open themselves to new supply? It is part of the overall underwriting process here at the company to make sure we're thinking ahead about how new supply could impact a deal today because we're entering into transactions for the long term, not the short term. This is something we do follow very closely.

Caitlin Burrows (VP)

Got it. Peter, you mentioned earlier how some deals take like 90 days, others take years, which I would totally believe. I was wondering if you could talk a little bit, whatever you could tell us about the pipeline today, and kind of just like what's active versus put on hold given macro volatility right now. To what extent have you seen some potential partners say, "You know what? Let's revisit in a while, and we're going to pause conversation for now"?

Peter Carlino (Chairman and CEO)

There's not much I can tell you about that. As you know, I can't say too much. I'll give you this one story. There was a particular property owner in another state that had properties that I really desired. Every year I'd go talk to that person, sometimes a couple of times a year, and year in, year out. He was so well off, and it was true. He didn't need the money. He said, "I have no place to put it. I just don't need it." I think after three or four years, I finally gave up. A year or two later, made a deal with somebody else because they just happened to be there at the right time, at a time when he decided to do something.

Our job, as we said earlier, is to stay close to opportunity and basically never give up and make sure that you're there because there's often a day when that person decides for reasons, estate reasons, and who knows that now they're ready to transact, and we want to be there close at hand. That really characterizes our job and responsibility in looking at opportunities. Completely unknown beyond that. Our job is to dig them up, keep close, hope to get lucky.

Matthew Demchyk (Senior VP and Chief Investment Officer)

Yeah. There are some groups that the macro uncertainty may impact. Maybe some of the larger public companies that Steve mentioned maybe are slow to do big things in an environment without the certainty. There are a lot of catalysts, and there are a lot of other groups out there that are doing things that need to do things. The comments about us being more relevant in a volatile environment, we will go back to. It is just getting to the finish line with folks. We certainly have encouraging conversations in a backdrop like this. Our letterhead is very valuable, I mean, with that balance sheet behind it, especially for some of the things that are out there for a counterparty.

Caitlin Burrows (VP)

Thanks.

Operator (participant)

Our next question is a follow-up from Greg McGinniss with Scotiabank. Please proceed with your question.

Greg McGinniss (Director)

Hey, thanks for taking the follow-up. I mean, we've talked in the past about your relationship with Cordish on prior calls. Now that the Petersburg, Virginia casino has broken ground, do you have any renewed interest in a 20% equity co-investment there? If not, why? When would you have to make that investment if you choose to?

Peter Carlino (Chairman and CEO)

That is a difficult thing to answer. I'm looking to bail out on it. I'm going to give it to Brandon.

Brandon Moore (President and COO)

I think they're in the process of erecting their temporary structure down there. We can't say too much more about the Virginia opportunity and our thoughts on our investment, potential investment, any investment there at the present time.

Greg McGinniss (Director)

Okay.

Brandon Moore (President and COO)

You can ask the same question, Greg, on the next call, and maybe we'll have a better answer.

Greg McGinniss (Director)

Yeah. I kind of figured it'd be something like that. All right. Thank you.

Peter Carlino (Chairman and CEO)

I used to say when questioned, "Do you look at this? Do you look at that?" I would say if it's alive and breathing, we're probably looking at it. That doesn't mean it's the biblical sense, "Many are called, but few are chosen." That is sort of the challenge for us always to stay close. We'll see.

Greg McGinniss (Director)

All right. Thank you both.

Operator (participant)

Thank you. We have reached the end of the question-and-answer session. I would now like to turn the floor back over to management for closing comments.

Peter Carlino (Chairman and CEO)

That's pretty simple. We thank all of you who have dialed in this morning to many of the questions asked. Stay tuned. Maybe by next quarter, we'll be able to give you some more color. We thank you. See you next quarter.

Operator (participant)

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