Gaming and Leisure Properties - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered record revenue ($394.9M, +3.8% YoY), AFFO ($276.1M, +4.4% YoY), and Adjusted EBITDA ($361.5M, +6.2% YoY), underpinned by recent acquisitions, contractual escalators, percentage rent adjustments, and development fundings.
• Full-year 2025 AFFO guidance was nudged up at the low end to $1.112–$1.118B ($3.85–$3.87/share), from $1.109–$1.118B ($3.84–$3.87/share), reflecting expected $130M Joliet funding at a 7.75% cap rate and ~$338M remaining H2 development funding; dividend declared at $0.78 in Q2.
• Versus S&P Global consensus: revenue was a modest miss, GAAP EPS missed driven by a non-cash provision for credit losses ($53.7M), while company-reported Adjusted EBITDA was strong; FFO/share consensus exceeded GAAP FFO/share, but AFFO/share printed $0.96, S&P values marked with *.
• Strategic catalysts include Bally’s lease reallocation ($28.9M annual rent moved to Bally’s Master Lease II with revised guarantees), tribal financing (Ione) advancing, PENN’s Joliet relocation funding, forward interest rate swaps hedging anticipated notes, and an active sale-leaseback/development pipeline.

What Went Well and What Went Wrong

• What Went Well

  • “Another quarter of record revenue, AFFO and Adjusted EBITDA,” with total revenue +3.8% YoY to $394.9M, AFFO +4.4% to $276.1M, Adjusted EBITDA +6.2% to $361.5M.
  • Bally’s assets “performing very well” and lease changes improved structural alignment; $28.9M annual rent reallocated to Bally’s Master Lease II with new Bally’s entity guarantees.
  • Pipeline execution: Boyd master lease extensions, Ione tribal project funding ($25.8M to date; $110M commitment at 11% rate), PENN’s $130M Joliet relocation at 7.75% cap rate.

• What Went Wrong

  • GAAP EPS impacted by non-cash macro modeling: provision for credit losses rose to $53.7M in Q2 due to downside GDP/tariff scenario inputs (TREPP/Oxford), despite all tenants current on rent.
  • Consensus comparison optics: slight revenue miss vs S&P; GAAP FFO/share and SPGI EBITDA “actual” appear below consensus, while company Adjusted EBITDA was strong—non-GAAP versus GAAP definitional mismatch drove confusion, S&P values marked with *.
  • Lease guarantee changes created investor questions; management clarified corporate guarantee remains on Bally’s Master Lease II; residual Casino Queen lease lacks parent guarantee but has guarantees from Bally’s entities due to restricted/unrestricted group considerations.

Transcript

Operator (participant)

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

Joe Jaffoni (Head of Investor Relations)

Thank you, Shamani. Good morning, everyone. Thank you for joining Gaming and Leisure Properties Second 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 risk factors and forward-looking statements contained in the company's filings with the SEC, including its Form 10-Q and in the earnings release, as well as the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release. On this morning's call, we are joined by Peter Carlino, Chairman and Chief Executive Officer of Gaming and Leisure Properties. Also joining today's call are Brandon Moore, President and Chief Operating Officer; Desiree Burke, Chief Financial Officer and Treasurer; and Steve Ladany, Senior Vice President and Chief Development Officer. With that, it is my pleasure to turn the call over to Peter Carlino. Peter, please go ahead.

Peter Carlino (Chairman and CEO)

Thank you, Joe, and good morning, everyone. We are pleased to announce another good quarter where most everything that we are working on has been moving according to plan. I promised you last quarter that we would achieve and should achieve a very strong year in calendar year 2025. That is still the case. Timing, unfortunately, does not always align with our four-quarterly calls. Stay tuned. We still stand by that. In the meantime, in this seemingly quiet quarter, we achieved a record year-over-year revenue, AFFO, adjusted EBITDA. Lots of good stuff happening, which we are excited to report as this year unfolds. With that, I am going to quickly move to Desiree Burke. Desiree, please go ahead.

Desiree Burke (CFO and Treasurer)

Sure. For the second quarter of 2025, our total income from real estate exceeded the second quarter of 2024 by over $14 million. This growth was driven by increases in cash rent of over $22 million, resulting from acquisitions and escalation. We have Bally Chicago Land, $5 million, the Tropicana Funding, $1 million, Kansas City and Shreveport, $8 million, Rockford Loan, $1 million, Strategic Acquisition, $1 million, ION Loan, $0.6 million, and the recognition of escalators and percentage rent adjustments added $4.9 million of cash income. The combination of non-cash revenue growth, sub-investment, and lease adjustments and straight-line rent adjustments partially offset these increases, driving a collective year-over-year decrease of approximately $8.2 million. Our operating expenses increased by $65.6 million, primarily resulting from a non-cash adjustment in the provision for credit losses due to a more pessimistic forward-looking economic forecast that is used in the estimation.

It should be noted that all our rent payments are current from all of our tenants. For the company's development properties, just a reminder that we continue to capitalize interest and defer all rent during the development for financial reporting purposes. However, we do add back that rent and deduct that interest in deriving at AFFO. In today's release, our full-year 2025 AFFO guidance is ranging $3.85-$3.87 per diluted share in OP units. Please note that our guidance does not include future transactions. However, it does include the anticipated funding of $130 million for the Joliet relocation project, as well as $375 million for development projects, with approximately $338 million remaining to fund during the second half of 2025. Our rent coverage ratios range from 1.69x-2.72x on our master leases as of the end of the prior quarter end. With that, I'll turn it back to Peter.

Peter Carlino (Chairman and CEO)

Thanks, Desiree. With that, we'll move to questions. Operator.

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 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up their headset before pressing the star keys. One moment, please, while we pull for a question. Our first question comes from the line of John Kilichowski with Wells Fargo. Please proceed with your question.

John Kilichowski (VP and Senior Healthcare and Net Lease REIT Analyst)

Hi. Good morning. I just wanted to start by revisiting your interest in the lease-in call option at the end of next year.

Peter Carlino (Chairman and CEO)

It still remains and something we're counting on. What can we tell you about that?

John Kilichowski (VP and Senior Healthcare and Net Lease REIT Analyst)

I'm just getting a fair bit of interest on my end from investors, and I wanted to get your thoughts on this. Really, as Bally's is a tenant, Fitch recently downgraded them to ratings-watch negative based on negative free cash flow assumptions for 2025 and 2026. It seems like the only way to plug that funding gap would be with that sale-leaseback capital. I just want to hear about how you think about growing with them as an operator when one of their only solutions to keep them out of default is to kind of grow exposure to them.

Peter Carlino (Chairman and CEO)

Brandon.

Brandon Moore (President and COO)

Yeah. Thanks, John. I mean, I think that when it comes to Lincoln and as it relates to Bally's, as everybody knows, we currently own a large portion of the Bally's real estate portfolio as it is. The question for us is, in my mind, is Lincoln an asset we'd like to own at that cap rate and that price in that market? We have to evaluate that asset and say, is it an asset we'd like to own and add to that portfolio? Does it make that portfolio stronger? What does it do to that portfolio? As that opportunity becomes available to us, we are doing market studies and market research and taking a fresh look at that property to make sure that the economics that we've negotiated are still something that we think is accretive and good for the portfolio we own.

We recognize the challenges that people have with Bally's and our exposure to Bally's in Chicago and Las Vegas and the various projects we're working on. We're looking at Lincoln on a property level and determining whether that's a property we think is value-additive to our portfolio.

John Kilichowski (VP and Senior Healthcare and Net Lease REIT Analyst)

Very helpful. Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Brad Heffern with RBC Capital Markets. Please proceed with your question.

Brad Heffern (Director and Real Estate)

Yeah. Hi, everybody. Thanks. On Bally's Bronx, the Bally's doc cited a $2.5 billion commitment from GLPI. I know that specific project has a pretty uphill battle to approval, but given what you were talking about, about the risk-reward of Lincoln, which is significantly smaller, I guess, how do you think about the risk-reward balance for that type of commitment to Bally's for this project or any others, just given the leverage and funding concerns?

Peter Carlino (Chairman and CEO)

Do you want to take that, Steve?

Steve Landany (EVP and CDO)

Sure. Yeah. Look, I think with respect to all of the New York projects, we've had a number of conversations with various parties and remain interested across a wide array of projects and would be open to dialogue with multiple parties. I think the reality is right now where that process sits in the state of New York. Your guess is as good as ours as far as which properties ultimately get the license and then how a location next door to you might impact your particular property or not. Once we know where everything's going, I think we'll have a better sense. I think the way the process has worked, most parties have asked for highly confident type of letters, and from whether it be banks or real estate financing partners or any type of financing partners.

I think with respect to our relationship with Bally's in New York, as you know, we have the ROFR that still exists in the state of New York for all of New York, not just for downstate. With that, we're well positioned to be able to provide and evaluate real estate opportunities and financing opportunities there. Look, we're open to discussions not only with Bally's, but with other parties, and we've had many of those. It just so happens in this particular instance versus others, they elected to use our name in their application versus using a bank's.

Peter Carlino (Chairman and CEO)

Let me add and highlight something Brandon said earlier, and that is that we look at these projects on a property-by-property, project-by-project basis and underwrite them. In a free-standing sense so that they have to stand on their own merits. I think we ask ourselves, is this a property we'd want back. Under any circumstance? Is it strong enough? We look at it one at a time.

Brad Heffern (Director and Real Estate)

Okay. Got it. On the Casino Queen lease combination, can you give some insight into the give-and-take there? I assume you would have preferred to keep the Bally's corporate guarantee, but you were able to get this incentive for them to keep the leverage below 5.5x. How do you see those changes netting out?

Desiree Burke (CFO and Treasurer)

Yeah. I'll start there because I do think there's some confusion with our wording in the press release. Bally's Master Lease 2, we still have the parent guarantee. It's on the Casino Queen lease that we took the East St. Louis property and the Baton Rouge property out of that lease and moved it to Bally's Master Lease 2. It's really only that residual lease of Casino Queen, which leaves the Bell Project as well as Marquette that is without the parent guarantee, but it does have a guarantee from Bally's entities underneath. The reason that we did that was to accommodate Bally's, and we had proposed to do that because it was in an unrestricted group versus a restricted group within their credit facility.

Brad Heffern (Director and Real Estate)

Okay. Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Barry Jonas with Truist Securities. Please proceed with your question.

Hi. This is Jeremy on for Barry. Thanks for taking our questions. Curious how you guys think about the pending interlock transaction and how that changes Bally's credit profile. Thanks.

Peter Carlino (Chairman and CEO)

I'll give that to Steve.

Steve Landany (EVP and CDO)

Sure. Thanks for the question. Look, I think from our perspective, there are probably two major potential benefits that Bally's will receive from the GameSys interlock transaction. One is from a liquidity perspective. Obviously, there's a large amount of proceeds that would come back to Bally's, and they've indicated to the world that the intent was to pay down secured debt. I think from our perspective, that liquidity infusion allows for debt paydown, and ultimately, it provides better collateral coverage for whatever secured debt remains in place thereafter. From our GLPI perspective, we believe that with the material paydown occurring, it probably does make an easier path to removing the prohibition on the Lincoln sale-leaseback, which would in turn provide $735 million of total proceeds to Bally's provided that deal got done. There are a number of benefits.

Another one I would highlight probably is just that the refinancing risk on their secured debt, which I think was an overhang for the company in 2026, is now reduced by the material paydown. From our perspective, we view it as a positive outcome.

Got it. That's super helpful. And then just one quick follow-up. Peter, curious to get your thoughts on the big, beautiful bill and implications for REITs as well as your tenants. Thanks.

Peter Carlino (Chairman and CEO)

Boy, I'm not sure I'm the best person at this table to answer that question. I don't think we've gotten really around to getting a grasp on the full impact of that. What are you?

Desiree Burke (CFO and Treasurer)

There's discussions about how it impacts REITs, but for GLPI, it will have very little impact on GLPI. I really haven't spoken to any of our tenants about how they're viewing the bill for themselves, but clearly, the tax rate remaining lower from a corporate perspective is a positive.

Peter Carlino (Chairman and CEO)

Yeah. I haven't heard any negatives, so. I'm looking around the table, and I think we all feel likewise.

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Robin Farley with UBS. Please proceed with your question.

Robin Farley (Managing Director and Leisure Analyst)

Great. Thanks. I wanted to go back to the provision for credit losses in the quarter. It's a large one relative to what you've done historically. You mentioned that nobody's delayed on payments. I think in your annual filings, it looks like a lot of the provisions for credit loss was based on commercial real estate price index changes. I don't know if they've released Q2 data yet. I don't know. Just if you could give us some color on that provision, that expense this quarter. Thanks.

Desiree Burke (CFO and Treasurer)

Sure. We use Oxford Economics, and we use a very detailed model that is done by a third party called TREPP, sorry. The GDP forecast that is in that Oxford Economic Assumptions declined from the prior quarter. They give you a base case, a downside case, and an upside case. The upside case and the base case were not too bad, but the downside case—they reference the uncertainty caused by tariffs as a reason for their downside case showing a decrease in GDP growth, as well as showing the CRE index growth declining from what it looked like prior quarter. It was still increasing, but it was a decline quarter-over-quarter, which caused the charge.

Look, anything can happen in the next quarter, but these are all based on assumptions of where the economy is and where it is going in the future, and not necessarily based on whether or not we are receiving our cash rent, which is why I added that statement in.

Peter Carlino (Chairman and CEO)

Yeah. It's an unfortunate requirement, I'll say. It's not a real number. It's not going to—yeah. Not anything to be taken with any great fear. It is a requirement. We do it, but I don't take it seriously.

Robin Farley (Managing Director and Leisure Analyst)

No, that's fine. I just wanted to understand that if it's this outside—the assumptions of an outside economic group rather than something that you're seeing fundamentally. Great. Thank you.

Desiree Burke (CFO and Treasurer)

Yes. It is outside.

Peter Carlino (Chairman and CEO)

Oh, yeah. Yes. Thanks, guys.

Operator (participant)

Thank you. Our next question comes from the line of Anthony Paolone with JPMorgan. Please proceed with your question.

Anthony Paolone (Co-head of U.S. Real Estate Stock Research and Senior Analyst)

All right. Great. Thank you. Peter, you started off talking about how things are moving according to plan. Can you talk about just progress towards maybe a tribal deal this year? I think you've talked about that in the past as maybe something that's in the cards.

Peter Carlino (Chairman and CEO)

Happy to, as much as we can say, but I'll turn that over to Brandon.

Brandon Moore (President and COO)

Yeah. I will say that we are in advanced discussions with a couple of tribes. I caution that only because any deal that we strike with a tribe will require that to be reviewed by the NIGC and the timing of the NIGC. Therefore, any announcement of a concrete transaction, definitive transaction, will depend on that process. We have visited with tribes in Oklahoma, California, New York. In Connecticut, we've sort of been around the tour. We have a lot of interest. We're having preliminary discussions with a whole subset of other tribes. I think so far, the education process on the type of financing we're willing to provide and what we can offer to tribes and the circumstances under which we can offer it is becoming more well-known among the tribal communities. We're getting a lot of positive feedback.

As we said early in the year when this came out, this is going to take quite a bit of time. I think that we are seeing some fruits from our labor. Whether or not we can actually get that across the finish line with a couple of these tribes, we'll probably find out in the next few months.

Anthony Paolone (Co-head of U.S. Real Estate Stock Research and Senior Analyst)

Okay. And so would you announce it and then take it through that process, or you'd have to go through the process before you even announce it? How would that work?

Brandon Moore (President and COO)

It's a fair question.

Peter Carlino (Chairman and CEO)

Very good question.

Brandon Moore (President and COO)

It's a fair question. I think in some ways, it depends on the tribe and the operator, if there is a third-party operator and their motivation. For example, if somebody else wants to put it out there, we will indicate that we are a part of it and our role in it. I guess if we had our way, we probably would wait until we had a concrete transaction through the NIGC to roll it out to the market just so we do not get people stirred up in one direction and then ultimately have to back off of it. I think it will depend on the facts and circumstances of the project and whether or not that project is going to be public anyway.

Steve Landany (EVP and CDO)

I would add, this is Steve, I would add, though, I agree with everything Brandon said. The one thing I would preface our thinking is I don't think there's a scenario right now where GLPI would fund any portion of a transaction absent the NIGC final approval in hand. That is one nuance. I know that some other deals have gotten announced recently where NIGC approval was pending, but fundings went ahead. I don't think that's something we're looking to do.

Anthony Paolone (Co-head of U.S. Real Estate Stock Research and Senior Analyst)

Okay. I understand. Just my other question for Desiree maybe. Just over the next 18 months, any thoughts on just how you think about refinancing debt? You did a couple hundred million of the swaps in the quarter and just trying to think about how early you want to address those or any other types of approaches to it.

Desiree Burke (CFO and Treasurer)

Yep. You're absolutely right. We started with the $200 million in hedges, right, towards the 975. We are internally reviewing our options and looking at the markets and the pricing and the spreads. The spreads happen to be pretty tight right now, which is good. There is nothing I can really signal that we're doing at the moment. Know that we are on it, and we are well aware of our future commitments.

Anthony Paolone (Co-head of U.S. Real Estate Stock Research and Senior Analyst)

Okay. Thanks for the time.

Operator (participant)

Thank you.

I thought you could.

Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.

Todd Thomas (Managing Director and Equity Research Analyst)

Hi. Thanks. First, I just wanted to follow up on that last question, actually. Desiree, when do the forward interest rate swaps commence? Are there additional interest rate swaps being considered, or are you currently comfortable with where your variable-rate debt exposure is today?

Desiree Burke (CFO and Treasurer)

Yeah. The swaps that I'm talking about are forward-starting swaps. They're actually hedging the future bond issuance. They're not typical interest rate swaps, and they are effective at any point if we pull a bond down next month that, let's say, they would be placed against that bond. It would reduce the interest rate that we would receive based on where the tenure is today. Am I considering more? It really depends on where rates are. There is a lot of economic news that comes out next week, so we will be paying close attention to determine whether or not we want to do any additional swaps depending on what happens in the market next week.

Peter Carlino (Chairman and CEO)

Yeah. Let me add just a gratuitous comment that, look, we have a lot of things on the horizon. We're very mindful of our requirements. And spend a great deal of time sort of trying to noodle out where we can best head down that path. So we're very attuned to what our requirements are going to be, and we're going to be as ahead of it as we possibly can. Nobody's asleep around that issue.

Todd Thomas (Managing Director and Equity Research Analyst)

Okay. That's helpful. I also wanted to ask about the management changes that were recently announced and disclosed. Going back, the company went without a Chief Financial Officer for a little while before Desiree was appointed to that seat, and you now are eliminating the Chief Investment Officer role. I realize you have a lot of activity in the works, and it sounds like the pipeline's active. You commented on tribal deals, but I'm just curious if there are broader implications to how we should think about that decision at all as it pertains to the broader investment landscape and opportunities that you see emerging over the next several years?

Peter Carlino (Chairman and CEO)

The quick answer is no. There's really no change in our thinking or our behavior. Look, we operate in a pretty flat basis. As you pointed out before Desiree was appointed, we had kind of an office of four. There's certainly no financial decision made that everybody that is at the table isn't involved with. Steve is really pointing all the gaming-related stuff. Matt had joined us, I think, pretty effectively early on with the idea of bringing an investor's perspective, an outside perspective of what it takes to be a REIT and serve our shareholders well. I think he did that quite well. His internal work and his agreement with that title was really for non-gaming things. Obviously, we have a great gaming team here.

We were hoping that there might be opportunity to do more outside of gaming things, which, as it turns out, never really materialized simply because we find ourselves in such a terrific space. We've not found anything better. It goes. This really makes this just involves no change at all for the team. We wish Matt well. We thank him for the things he did for us over in the early days. That's really all we can really say about it.

Todd Thomas (Managing Director and Equity Research Analyst)

Okay. All right. Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Haendel St. Juste with Mizuho Securities. Please proceed with your question.

Haendel St. Juste (Managing Director and Senior Equity Research Analyst)

Hey, guys. Good morning. Desiree, I wanted to follow up, I guess, on the capital deployment outlook for the back half of the year. You outlined I think there's another $338 million or so expected to be deployed in the second half of the year. I'm curious how much of that is tied to Bally's versus other projects like the Bell and I think ION. What's the risk of some of that slipping into next year? Thanks.

Desiree Burke (CFO and Treasurer)

Yep. As you know, we did not change the number for this year. We are still at $375 million for the full year. Yes, we only funded $25 million or so in the second quarter. The majority of it is definitely Bally's. I will tell you that since The Bell is opening in the fourth quarter or at the end of the year, that will likely be fully funded. The majority of that remainder to be funded is mainly Bally's Chicago project. We feel good about the number.

Haendel St. Juste (Managing Director and Senior Equity Research Analyst)

Okay. Fair enough. Maybe a follow-up on Bally's, but from a different perspective. Curious, we're getting some questions from investors on the lack of a guarantee there. I guess your thoughts on why the Bally's Chicago's lease does not have a guarantee considering the Bally's credit profile and inherent development risk for that project. Maybe some color on higher underwriting potential inflation and tariff headwinds tied to construction costs at that project. Thanks.

Brandon Moore (President and COO)

Yeah. I can take the—this is Brandon. I can take the guarantee piece. When we negotiated Chicago, Chicago development is in the Bally's credit unrestricted group. That prevents them from providing a parent guarantee on that project. They have disclosed this in their AK filing around the development agreement. There is a path to adding that Chicago property to the parent guarantee and the restricted group. That will come upon completion of that development property and certain other hurdles. I think what you see there is Bally's Capital, Marquette, the Bell, Chicago, all of their development projects that are not currently generating cash flow in that unrestricted group. There are other assets in that unrestricted group that we got comfortable with.

Overall, I would say with Chicago, it is not unlike the rest of these. We have underwritten that project that if, in the unlikely circumstance that Bally's has to sell that project or something happens to Bally's corporate, that project is still a great project. We know a number of different tenants that would be more than happy to be in that location in Chicago. When we look at that risk associated with having that in the unrestricted group, we are not terribly concerned about that at the moment. That is why it is there.

Peter Carlino (Chairman and CEO)

Yeah. Let me make a couple of comments. First, the Bell is a terrific project. You know how successful the Queen was in Baton Rouge, and the Bell is moving along extraordinarily well. It is going to be a very cool project. It will be successful. I have no worries about that at all. In Chicago, we're much involved. Jim Bomb, our head of construction, is out there several days a week, every week. We have a team of people, a coming group whose sole responsibility is to track cost, approve bills, invoices, work in place, and so forth. I can say with some enthusiasm, the project's moving along pretty quickly. Over 100 people working that site every day right now, more to come. We feel pretty good about that. At the moment, things are looking good.

I think I've committed, and we'll try to get it out next week to start with a quarterly newsletter, if you will, that kind of lays out progress at the Chicago site, maybe including some photographs, let people recognize this is a real project, moving along very, very well, and that we're pretty excited about it.

Brandon Moore (President and COO)

Yeah. It might be an opportunity too for us to clear up a little bit of confusion that there's been around the Chicago development agreement that was recently filed. There was some confusion that there have been changes in economics or terms associated with that. The reality is that that is the development agreement, the first version of that development agreement that was signed after the binding term sheet. There have been no changes in the economics. We've finally agreed to certain terms related to that project, and that was the filing of the document. There was no change. That wasn't an amendment. There was some confusion around the cap rate on the lease property. That was originally 8%. It's still 8%. The improvements are at 8.5% cap rate. There were no changes in the economics on that transaction either.

Peter Carlino (Chairman and CEO)

That is also the reason why we have not had any draws under that contract to date. Until all that was signed and done and committed. That will follow shortly.

Haendel St. Juste (Managing Director and Senior Equity Research Analyst)

Got it. Got it. Appreciate the color.

Operator (participant)

Thank you.

Peter Carlino (Chairman and CEO)

Something awesome.

Operator (participant)

Our next question comes from the line of Ronald Cantley with Morgan Stanley Investment Management. Please proceed with your question.

Hey, good morning. It's Jenny on for Ron. Thanks for taking my question. I just want to follow up on the two properties that we transferred to Bally's master lease too. I'm just curious, can you talk a little bit about the four-wall coverage of these two specific transferred properties compared to the other Bally's properties in your profile? Thank you.

Peter Carlino (Chairman and CEO)

You can send it out. If you would.

Desiree Burke (CFO and Treasurer)

Actually, we do not receive individual property coverage. We only get it lease by lease. There is really nothing I can add there. As we move forward and reporting occurs, we will be updating you with where the four-wall coverage is in Bally's master lease too.

Got it. Okay. Sounds good. I think I'm actually really interested in the potential financial commitment you guys are going to put in New York downstate casinos. Do you have a number or budget on your mind now for the total commitment of each of the projects? Do you have a preference? In an ideal world, if you win both simultaneously, do you have a priority? Would you prioritize either of the properties? Thank you.

Peter Carlino (Chairman and CEO)

I mean, I guess you never say never. I think based on the recent news around Bally's, I'm not sure that that's—I’m not sure that that project has an ability to go forward, at least based on the current voting that has occurred. I think if the bottom line is if the properties are constructed to the right size for the addressable market, from a diligence perspective, we get comfortable that there's adequate coverage. By adequate, I mean well north of two times coverage on the new development. We're getting adequate spread to our cost of capital. I think I feel pretty comfortable saying we would probably look at any of the projects in New York, and we'd be happy to engage in those discussions. I think our level of commitment—I’ll use that word with an asterisk around it—I think our level of commitment varies based on every project.

We're more than happy to engage in discussions and have detailed back and forth and try to help people find solutions. I think where the dollars come from ultimately, if these projects were to be awarded, it may or may not come from us, I think, is a pretty fair way to describe it. There's a long distance between where we sit today, the application process, the approval process, decision process, and ultimately somebody financing it. Whether we're the person sitting with them at the end of that race is hard to tell. It'd be hard.

To make money. Not to make money unless you overspend. I mean, you can do something colossally stupid. If you build to the market, as Steve highlighted, it would be a nice problem to have. I think we have a realistic sense of what the prospects are there.

Makes sense. Thanks so much.

Operator (participant)

Thank you. Our next question comes from the line of Daniel Guglielmo with Capital One Securities. Please proceed with your question.

Daniel Guglielmo (Consumer Equity Research Analyst)

Hi, everyone. Thank you for taking my questions. Based on state revenue data and operator commentary, regional gaming trends have been strong this quarter. Do those positive trends change the way you think about your business as the owner of regional properties? Does risk appetite increase or the willingness to be more aggressive to go after deals? Any commentary?

Peter Carlino (Chairman and CEO)

I don't think it makes us want to be more aggressive. I think we underwrite these things the same way regardless. Is there an appropriate spread to our cost of capital? Can we make—and how secure is that particular property now and for the long term that we're going to be involved with it? We do underwrite this with that long-term view in mind. No, we're gratified. Look, I have said many times, and many of you know that I have described gaming revenues as bulletproof. I stand by that. They've been bulletproof for the many, many, many years that I've been in and around this business. I think we're gratified to see that these companies are doing very well.

Desiree Burke (CFO and Treasurer)

I would say underwriting-wise, we do not look at one quarter, right? We look at history, go back three, four, five years to see how a property has performed. One quarter would not change our bullishness per se. Obviously, it helps the rent coverage that we would be looking at at a point in time. We even consider that in anything that we would bid on.

Peter Carlino (Chairman and CEO)

Yeah. If you take looking across the street at the Penn Entertainment building. The company is doing extraordinarily well with its Brickton Motor Properties. We all know what caused the overhang on its stock value, but that has nothing to do with the properties that we own. They're doing terrifically well. We're happy that that's the case.

Daniel Guglielmo (Consumer Equity Research Analyst)

Great. Yeah. I really appreciate all that color. This one's a little more high level. Do you think the focus for the stock has shifted too much towards what can go wrong instead of the positives and what can go right? On that, what are the team's goals for the second half of this year to maybe try and help shift that focus?

Peter Carlino (Chairman and CEO)

That is a really— That is a totally good question in the sense I'm glad you asked it. No, I don't think we get credit for the consistently good things that we have done here at this company. I've never heard it expressed quite that way, that people focusing on what could go wrong rather than what could go right. I think that is the case. Look, in fairness, Chicago raises some questions. I think Bally's credit, not unfairly, raises some questions. We're sensitive to that. As I think we said earlier, we look at these projects on a unit-by-unit basis. We're satisfied that if everything develops as we plan, things will be fine. We're happy with kind of where we find ourselves. Let me address one other point too. We get questions about, quote, development. We're not out of the sale-leaseback business by any means at all.

I think you'll see some transactions evolve shortly. We hope so between now and the end of the year that answer that question. We're just willing because we are capable of doing the development kind of stuff ground up because that is the business that we all come out of, this group around the table. We're willing to do that. I think it opens another avenue, but just one of several that we will pursue. Our business is putting money to work at an appropriate spread. We'll do it in any way we think we can.

Brandon Moore (President and COO)

Yeah. I think some goals for the back half of the year would be to try to get one of these tribal transactions that Brandon mentioned earlier, try to get one of those over the line and announced, and obviously try to continue to expand our relationship with current tenants. I think there's opportunities to continue to do things. You've seen us announce things in the past with them with respect to their properties or expansion projects they've worked on. I think we're going to continue to try to push those processes forward. We're always out trying to create new tenant relationships. I expect us to be very active through the rest of the year.

Daniel Guglielmo (Consumer Equity Research Analyst)

Thank you. Appreciate it.

Operator (participant)

Thank you. Our next question comes from the line of Rich Hightower with Barclays. Please proceed with your question.

Rich Hightower (Managing Director and U.S. REIT Equity Research Analyst)

Hey, good morning, everybody. Obviously, I think a lot of my questions have been asked and answered, but definitely appreciate the additional color on the Bally's to master lease. I think that was helpful for everybody here. I think maybe just more globally, as we think about your position effectively as a creditor to your tenant base, and using Bally's as a great example, what is the value of a parent guarantee in a situation where you do have a balance sheet constrained operator? I'm also thinking in the context of iGaming and online sports, Steel and Share, evidently, I'm looking at Pennsylvania and Michigan, but there are other examples. What's the value of a parent guarantee if sort of total system revenues, which would include some of those alternate gaming forms, could contribute to the security of the lease?

Just how do you think about the moving pieces on the chessboard there, and how should we think about it?

Brandon Moore (President and COO)

There's a multi-loaded question there. I'll start with the top of how we think about the parent guarantee. I think we don't look at the parent guarantee and work our way down, right? A parent guarantee is nice to have, and we believe it's important to have so that things like iGaming revenue and other things can be used to support our leased property and our rental income. That being said, we are very careful to underwrite each property on its own merits and look at the portfolio on a four-wall coverage basis, which we've said in the past. Therefore, if the parent guarantee doesn't end up having value because the parent gets themselves in trouble, we're hyper-focused on making sure that these assets are a portfolio of assets that other tenants could come in and operate because it has the appropriate coverage.

We haven't allowed the rent to outpace the revenue in a way that makes that lease a weak lease. We're hyper-focused on those things. That's why when you hear us talk about Chicago and other markets, Lincoln, we're looking at the asset, the quality of the asset, the quality of its cash flows, its risk to adjacent growth, supply growth within the state. We're looking at all those things because we don't rely solely on that parent guarantee. I don't want to discredit it as something that's not important. I think it's important to have. As the parent generates more capital and cash flow through things like iGaming, that parent guarantee has value because then all the revenues from those sources of income can be used to support our rent. We don't rely on that in our underwriting as a threshold matter.

Steve Landany (EVP and CDO)

Yeah. Said differently, if the tenant had a 1.1 times rent coverage but had a massive, valuable business that's outside of our property that caused the parent guarantee to be very valuable and the overall corporate coverage to look great, we wouldn't feel any better about our position because the person could turn around and hand us the keys back at some point because the asset that we have association with is not all that valuable to their overall enterprise. When we look at things, if we say, "Well, if they're making the equal amount of rent, they're making the equal amount of EBITDAs, we're making rent," then they are incented to try to make it work and continue to operate our business, regardless of what's happening outside of that.

That's why the four-wall coverage is so critically important because at the end of the day, whether someone or some company gets themselves into hot water because of investments they've done away or leverage issues or whatever it may be, if the core business is strong, whether it's that tenant or a new tenant will want to run that business.

Rich Hightower (Managing Director and U.S. REIT Equity Research Analyst)

Yeah. I mean, let me just.

To highlight something that you would remember well. In the Apollo TPG Harris acquisition, I like to point out, I mean, the sponsors had a problem. The properties were fine. They continued to operate to this very day and did so profitably. That is why we look at property by property, as I think both Brandon and Steve have highlighted. We think that is where the value lies. Is this property worth what we are paying for it or exactly?

Brandon Moore (President and COO)

I think on iGaming, we're keenly aware of the expansion of iGaming. We're in a state where iGaming was one of the first states to be introduced here in Pennsylvania prior to COVID. We have many years of runway on iGaming here in Pennsylvania, and we own properties in Pennsylvania. What we've seen is, has it had an impact on the growth of the brick-and-mortar? Yes. It's impacted the growth, but it hasn't resulted in deterioration as far as we're seeing. You have a somewhat mature iGaming market here in Pennsylvania. The tenants that are participating in that market are getting fairly robust revenues from that source, but it isn't reaching a level where we are concerned about the viability of the brick-and-mortar. We are cautious, but I think if you look at that as a data point.

For us, it gives us a little bit of comfort, but we still are very focused on the growth and proliferation of iGaming in different jurisdictions.

Rich Hightower (Managing Director and U.S. REIT Equity Research Analyst)

Very, very helpful, guys. I really appreciate it. I guess. Let me ask it another way, just to sort of put things in a vacuum. If you agree to shift two assets out of a master lease or whatever the arrangement was in order to cater to a tenant's other creditors, what does GLPI get in return, and how should we think about that sort of more in isolation, if that's the right way to think about it?

Brandon Moore (President and COO)

I'm not sure I would necessarily agree with the characterization that we agreed to cater to the creditors. I think Bally's came to us with a proposed merger with Standard General, some of which we had a right to say yes or no to. Other pieces of it, we did not under the terms of our legal documents with them. Their request to move assets that are not generating income and keep them in the unrestricted group is something we agreed to as part of the overall transaction. We were comfortable in doing so because of some of the things that Peter described, where we believe that the landside moves of those properties will generate a significant amount of additional EBITDA and revenue such that we're comfortable with those few properties being in an unrestricted group.

I would say that was at the request of our tenant, but we didn't feel as though on the whole we were having any detriment in the quality of what we have.

Peter Carlino (Chairman and CEO)

Yeah. Look, we have a relationship now with Bally's that we are good partners. As a result, I think we feel very strongly that they're committed to us as we are to them, as we are to all of our tenants, as the sensible, friendly source of financing as time goes on. We think that we got a lot of benefit from that allowance.

Rich Hightower (Managing Director and U.S. REIT Equity Research Analyst)

Thank you very much.

Peter Carlino (Chairman and CEO)

Excuse me. Got a cold.

Operator (participant)

Thank you. Our next question comes from the line of Chad Beynon with Macquarie. Please proceed with your question.

Chad Beynon (U.S. Director of Research and Head of Gaming and Leisure)

Morning. Thanks for taking my question. It appears that some of these barge-to-land-based moves have received pretty strong returns. We heard this from one of your tenants last night on the earnings call, and we're excited to see Penn's upcoming opening here. Given that regional gaming revenues, particularly in the second quarter, have looked pretty good and there are still some opportunities out there, do you think the opportunity of these barge-to-land-based moves will grow? How will GLPI's funding opportunities kind of participate in this potential growth? Thanks.

Peter Carlino (Chairman and CEO)

I think they will grow because I think states recognize that, look, that river boats are an anachronism. We can all benefit from going landside. I think you're going to be quite excited about what Penn will do in Joliet and Aurora as well. I think it's going to be terrific. I expect great results down at Baton Rouge for Bally's with the Bell. I think that's a trend that's going to continue.

Brandon Moore (President and COO)

Yeah. I think what you're seeing in regional gaming is the regional gamer values the additional amenities that can be added by these landside moves. When you're gaming on a boat, you have multi-level gaming with low ceilings and stairs and other challenges, and adding amenities to the floor is difficult. You bring these things landside and you add an entertainment venue and a sports book and more food and beverage outlets. I think you're seeing a big lift in some of these things. Overall, I think these are good for regional gaming. As we think about iGaming versus brick-and-mortar, as these things turn into more entertainment destinations as opposed to just floating slots, I think it's a value add to our portfolio and to gaming in general.

Peter Carlino (Chairman and CEO)

Plus, Penn is investing in other Brickyard Motor amenities, a hotel in Columbus, and expansion that they've long needed at the end. There's some pretty cool stuff happening that we think will prove to be very successful.

Chad Beynon (U.S. Director of Research and Head of Gaming and Leisure)

Great. Thank you. In terms of international opportunities, I know this quarter we saw a record-setting EBITDA result from a company that's in a pretty good position in Singapore. Not specifically looking at Singapore, but it sounds like international EBITDA for this industry still has a long way to grow. What's your appetite at this point to look outside of the United States and Canada? Thank you.

Peter Carlino (Chairman and CEO)

Yeah. I think that's a, yeah. Fisher. Yeah. We've looked at things in the past, whether it be South America or Australia. We've looked at some European things. I think the reality is it all comes back to what the tax treaties are and how you bring the money back and what that costs you because the IRS, or excuse me, the REIT is an IRS tax code. Therefore, we don't get the same, we don't get the same tax benefits in some jurisdictions. We have to consider that with respect to our cost of capital when we look at anything, and the same in Canada. That's just an extra amount of diligence that goes into looking at anything, but we're clearly open to entertaining the idea. At this point, I'd say we're a little more focused on the U.S. and the tribal aspects. Yeah.

To be clear, we have looked at a number of things over time, but just, again, never found anything that worked for us.

Chad Beynon (U.S. Director of Research and Head of Gaming and Leisure)

Thank you both.

Operator (participant)

Thank you. Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.

David Katz (Equity Analyst)

Morning, everybody. Thanks for working me in. Look, I just wanted to go back to the gaming side and ask Steve a question, which is, we're seeing a lot of the opportunity set coming from existing tenants. In our travels, it does feel as though there's a bit of a divide between those that have a philosophical willingness to either be or not be tenants. Do you find in your travels that there are operators or prospective tenants that are on the fence and, I guess, said a different way, is there a pipeline of new tenants within the land-based gaming world that we could see adding three to five years?

Steve Landany (EVP and CDO)

Yeah. I think the—yeah, thanks, David. I think the key to your question was the three to five years, not necessarily five, but I think if you were saying, "Hey, in the next 12 months, how do you take a sole proprietor and convince them that not only do they want to now no longer own their real estate, but maybe they want to exit completely?" I think you're right that there is a little bit of, "I'm in on the idea and I like it," or, "I'm out and I've never really considered it." I think that that ice cube melts as time goes on. In the conversations we've had, I think the landscape of the gaming non-current REIT tenant folks is predominantly sole proprietors and family-owned businesses. There are plenty of those out there.

I think that there's an education and a comfort level that has to be built, and that takes time. I think we are getting traction. I mean, I think if you had asked this question three years ago, I don't know that we would have said we thought Cordish was going to ultimately sell their real estate and become a tenant. They've done it, and they're a huge fan of what it's done for them, and they're a huge proponent. We've had them talk to other tenants that we now have in our roster who were considering it. I think as we move forward, there is a continued opportunity to win people over one at a time. They have to be in the right mindset.

They have to be looking for the right solution, and we have to have a relationship with them such that we are the provider of that solution.

Brandon Moore (President and COO)

I think, David, as you've seen, this industry is really. Relationships are extremely important. We spend a lot of time here at GLPI cultivating both new and existing relationships. We do not take any of those things for granted. As Steve said, we are like ships passing in the night sometimes because folks are out visiting with people and making sure that they understand we're interested. We're not twisting anybody's arm, but we do feel as though when the right time comes for some of these proprietors to think about monetizing some of what they have, we hope that GLPI is the first name they think of. The way to do that is to cultivate these relationships over time. We think we do a pretty good job at that.

Peter Carlino (Chairman and CEO)

Yeah. Look, I've said for many, many years, people do business with people they like. Being a landlord of choice, and with the benefits that I think the sale-leaseback arrangement offers, is something that people have to come around to. I think Steve's answer, Brandon's answer was as perfect as they could get, frankly. Lots of opportunity.

David Katz (Equity Analyst)

Okay. Thank you very much. Yep. Thank you.

Operator (participant)

Thank you. Our next question comes from the line of smedes Rose with Citi. Please proceed with your question.

Smedes Rose (Director)

Hi, thanks. You've obviously covered a lot of territory here. I just wanted to ask you one question on the development of the ballpark in Las Vegas. Is there any kind of update there, and maybe any change around your thinking in terms of your commitment to the Bally's kind of casino hotel that, I guess, eventually will be built there as well?

Peter Carlino (Chairman and CEO)

There's a lot of finger pointing at the table here as to who wants to take that. We have an answer. Brandon, we'll look at you. Just how you take it.

Brandon Moore (President and COO)

Decent amount of time out there these days. Look, I think we're pretty excited about what's happening on the site. I'll say that from the get-go. Steve and I were out at the groundbreaking a few weeks ago. A lot of excitement in that town, both from the LVCVA, from the county commission, from local businesses. I think people are very excited about what the A's are going to bring to Las Vegas. That being said, we are still working with Bally's on the remainder of the site and how a resort development with a combination of entertainment and gaming and retail can best complement the product that the A's are delivering. I think Bally's is coming close to a more final product there. I know that they've shared that both with us and with various politicians there in Las Vegas, and everyone is pretty excited about what they're seeing.

As it relates to our future investment in the site, as you know, we've committed $175 million, $50 million of which we have spent through the demolition, $125 million remains. We are committed to funding that $125 million. Where it goes in the site is up for some negotiation because there's something we'd like to own for the $125 million. There are a lot of different opportunities. I think as we see the full financing of the site and the build-out of the site and the amenities and the third-party vendors that are coming in, there is an opportunity for us to invest more into that site.

Whether or not we capitalize on that opportunity will depend on what the opportunity is, how the financing of that property shapes up, and at that time, we'll figure out whether or not more investment in that property by us makes sense for us and for Bally's, quite frankly. Bally's needs to decide how they want to fund and finance that site. If they do not need any more capital from us, that's fine too. I think overall, there's a lot of excitement about that site and what it will bring to that corner in Las Vegas.

Peter Carlino (Chairman and CEO)

Yeah. We, I think, did a good thing in connecting Bally's with the Marnel organization, who have done a terrific job of planning out the balance of the site. I think Brandon's correct. What happens next is going to be in Bally's court. We stand by encouraging, but the final script has not been written.

Smedes Rose (Director)

Great. Thank you.

Peter Carlino (Chairman and CEO)

Maybe suffice it to say, we're not going to do anything stupid. We're not going to jump off any bridges.

Smedes Rose (Director)

That's reassuring.

Thank you.

Peter Carlino (Chairman and CEO)

Thank you. I think we're—how's our time? We've got maybe one more question.

Operator (participant)

Sure. Our last question comes from the line of Greg McGinniss with Scotiabank. Please proceed with your question.

Greg McGinniss (Wall Street Analyst)

Hey. Good morning. In the discussions with Penn on their request for the $130 million on Joliet, did those conversations also touch on the other potential investments? I understand that these items will not be included in guidance until there is a signed agreement. What is your confidence that they could call on what could be up to $600 million in additional funding?

Desiree Burke (CFO and Treasurer)

The $225 million for Aurora is a definitive obligation that GLPI has. That one, I can tell you for sure will happen. The other ones remain—the only two that remain now would be the M and the Columbus Hotel. Those are really up to Penn to request our funding.

Greg McGinniss (Wall Street Analyst)

Okay. Thank you. I just wanted to clarify on that Bally's proposal, did you make—there is a $2.5 billion commitment from GLPI if they get one of the licenses?

Steve Landany (EVP and CDO)

There is a—yes, there is a piece of paper from GLPI that says that we would consider a commitment. It is not— I mean, yes, we would consider committing financing to owning land and funding building improvements depending on diligence, where the licenses are awarded, and a myriad of other terms and conditions which have yet to be discussed or determined.

Brandon Moore (President and COO)

I think globally, I would think about it like this. The downstate licenses present a tremendous potential opportunity. We would like to be a part of those opportunities should we have counterparties that would like for us to be a part of those opportunities. I think the Bally's script at that location is largely unwritten, right? We have not seen plans and specs and budget and all the kinds of things that would be required for GLPI to commit a fixed dollar amount to that site. We are supportive of Bally's. We are supportive of the project. Just like Steve said, we will probably be supportive of many other projects in downstate New York. Do we think $12 billion is the right number? Probably not. Is $2 billion the right number? That may be great. I think it all depends on how these unfold.

All I think you are seeing is that GLPI has indicated a willingness to use our balance sheet to fund what we think will be very accretive cash flow in downstate New York under the right circumstances.

Greg McGinniss (Wall Street Analyst)

Okay. Thank you.

Operator (participant)

Thank you.

Peter Carlino (Chairman and CEO)

Any other comment from around the table? Do you want to do that, Steve?

Yeah. There was a little discussion around the table about some statistics and information around the Chicago project. I think we'll wait until we issue a press release around that issue just to bring people up to date and to be highly transparent with what's going on at that site and with that project. Stay tuned. We'll get something out to you. With that, I thank you all for dialing in today. We're kind of happy with where we are, except for, I think, our stock price. That aside, we're doing fine. Thank you. See you next quarter.

Operator (participant)

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