Greetings and welcome to the Gaming and Leisure Properties First Quarter 2016 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. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Kara Smith from ICR. Thank you. You may begin..

Good morning. We would like to thank you for joining us today for Gaming and Leisure Properties first quarter 2016 earnings call and webcast. The press release distributed earlier this morning is available in the Investor Relations section on our website at www.glpropinc.com.

On today’s call, managements' prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today.

Examples of forward-looking statements 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 relating to these forward-looking statements contained in the company’s filings with the SEC and the definitions and reconciliations of non-GAAP financial measures contained in the company’s earnings release.

On this morning’s conference call, we are joined by Peter Carlino, Chairman and Chief Executive Officer; and Bill Clifford, Chief Financial Officer of Gaming and Leisure Properties.

Also joining are Steve Synder, Senior Vice President of Development; Desiree Burke, Chief Accounting Officer; and Brandon Moore, Senior Vice President, General Counsel and Secretary. With that, I’d like to turn the call over to Peter Carlino.

Peter?.

Well, thank you, Kara and good morning, everyone. As usual, I will start with a few brief comments and then open the floor right away to question and answers. We have as usual and as you heard our entire group.

So I am happy to report both good and eventful quarter, operating results are in line of course with what we projected and we also have concluded a very successful equity raise as you know along with an equally successful debt raise.

And in the process we attracted a new group of long-term investors and I think now with the final closing on -- with Pinnacle, we position the company as the major player in the gaming REIT space as well as the third largest triple-net player in the United States. So we are excited about that, closing of course is schedule for Thursday.

Additionally, as you know we favorably settled our litigation involving the Meadows, but and have announced that we partnered with Pinnacle as the operator of that facility, which for those who haven’t seen is a traffic facility to south of Pittsburgh.

And I also want to note as we come up and finally approach the closing of Pinnacle that we have developed a tremendous working relationship with them and I would expect as a result that you will see us partnered on many future transactions and we are looking forward to that. So with that, I am going to open the floor to questions.

So operator would you please do that?.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Felicia Hendrix from Barclays. Please proceed with your question..

Hi, good morning and congratulations on all the positive events that you have had lately..

Thank you, Felicia..

You’re welcome. So I just wanted to start out, there has been some acquisition activity lately in sector. As you know Boyd has active with some acquisitions.

Just wondering, were you involved in the process for any of those assets? And then on Aliante specifically just wondering what your thoughts was on the purchase multiple because I am wondering if this comp now raises the bar for other acquisitions you may be looking at in Las Vegas..

Well, I speak to my end, we have got others who may want to comment. I don’t think there is much we want to say about what we have looked at and what we haven’t.

And I am very, very reluctant frankly to opine on what somebody else has chosen to pay for, for those assets because each company has a different metric, different cost saving opportunities, and so forth.

And I don’t know Bill do you want to went through an opinion on that?.

Well listen I mean obviously, it’s really difficult certainly we were aware of the transactions to your point, I think as we look at it when you’ve got properties where there is enormous expected synergies and opportunities for growth related to a specific plan or operating plan that a company has in place it’s very difficult for us to get involved to multiples that they are quoting obviously the multiple that they are paying on current EBITDA are -- would be difficult and doesn’t quite candidly work for our business model.

A 9 or 10 cap rate doesn’t fit into the thought processes of what they paid for those assets. Relative to what that does for future expectations if I had -- I would be pretty excited if I owned a small property in Las Vegas focus market right now. If I thought that that was going to continue.

But I think there is some strategic to what Peter said, I think there is some strategic thought processes going on with relative to what Boyd doing there in terms of their geographic footprint within the Locus [ph] market and how they’re to balance out their properties. And I quite candidly don’t have any inside into their thought processes.

So and I make sure they have a plan and a strategy that’s going to work them. This is just one of those type of transactions quite candidly that doesn’t fit within our business model.

That doesn’t mean that it wouldn’t fit in our business model in the future once they realized the opportunities that they see when they made the purchase and that as the result says they achieved those synergies that point in time that there is every reason that we could get involved. But as far as it’s the implications on the future.

I suppose it does raise the bar somewhat for regional -- for Locus properties in Las Vegas, but I think we’ll have to wait and see how that turns out in the future..

Yeah look which pumps me to conclude by saying that it’s probably a very good transaction for them..

Okay that’s clear. And Bill while we have you in the release which said that the company was going to be under 5.5 times leverage by the end of 2016.

I’m just wondering does that include the impact of the Meadows and also what’s the longer term target and how long does it take to get there?.

I think our target as we pretty much always said is 5.5. It’s our expectation that we’re going to the 5.5 with the Meadows does anticipate us making the acquisition on the 5.5 target. We’re going to be opportunistic about how we make that happen.

We have, obviously we have a very nice size and we raise to maybe more equity than what we had said we would when our stock was in the mid to low-20s. We’re very happy with that outcome. I think we're very focused on making sure that we keep our balance sheet in great position to be able to go forward to do future transactions and future deals.

So more than likely you’ll see us do in a very non-market disruptive way. And there is a number of ways to get that done. We’ll undoubtedly raise some equity in the future, because that’s what REITs do. And I would expect that we’re going to be very focused on getting to 5.5 or below 5.5.

As we sit here today, the plan would be to make sure we’re there by the end of the year. And that’s about all I can I mean I’m not going to really get any more specifics than that..

No, that’s helpful, that answered my question thank you..

You’re welcome..

Our next question comes from the line of Steven Wieczynski with Stifel. Please proceed with your question..

Hey, good morning guys. So Bill first question I’m not sure you’re going to be able to answer this or you will answer it.

But so when you look at the guidance for the full year the 293 in AFFO, is there any way you could give us what that would look like if you owned Pinnacle hope for the full year?.

No I’m not going to give you that. If I was going to give it I would have given it in the press release. I think there is some timing issue there in terms of when all that’s going to happen.

Obviously it’s a function of what months do we close and then where do we end up, what’s the timing relative to the financing for that and what form does that take.

So has been our prior practice we’ve never really given forward looking guidance short of under having a better disclosed plan on how we plan to finance it I guess the best way of putting it..

And then is the Meadows not in the guidance for full year because the closing date is still five months out at f this point?.

Exactly..

Okay. And then last question I guess for Peter, and I guess give us a little bit more color on how you view the overall acquisition market today and then maybe your view with now having another competitor out there with the MGP deal getting done, that might be helpful..

So on the first part of that question, it’s so unknowable I kind of hate part of the question, I hate most of all like I joked about that with the group last evening as we talked about this call today.

The question always is what’s next, which I appreciate and of course we kiss a lot of frogs in this world of where doing new transactions is what we are about. We are looking at things large and small, but it’s so absolutely unpredictable.

I think it gets back to the points Bill was making before that all we can do is ready ourselves to whatever the hell comes up next. Getting our capital structured perfectly in line, having an absolute best cost of capital going forward and to that end we are completely and manically focused. You can count on that.

As it relates to what MGM has done, I think it’s terrific actually because I think we struggled for the first year and half with just kind of a ho-hum that now there is a gaming REIT with the only one isn’t that kind of cute.

And people just weren’t mustering the interest that I thought they should have had, MGM coming to the space add some additional luster to the process and some more muscle and scale and name recognition and so forth. And I think we’ve already turned the corner with their presence in the space. We view that I think as actually is a very good thing..

Okay, great. Thanks, guys..

Our next question comes from the line of Joseph Greff with JP Morgan. Please proceed with your question..

Good morning, guys.

Question on the Meadows financing and maybe ask a different way, Bill if you were to finance the Meadows transaction with all debt financing, would you still be at around 5.5 time pro forma 2016 EBITDA?.

No, we would be a little higher. Obviously we bring on the $25.5 million of rent and roughly 300 just north of $300 million the implications would clearly be that that would be an, A; I mean it probably takes you to roughly 5 probably around to 5.6 when you are done.

So it’s not -- that’s why we don’t feel an enormous pressure that necessarily have to go out and raise an equity in a particular time frame.

We can do it once we feel like the markets are stable and that there is a fair price and it would be a small offering if it was an offering or it could be there is different programs you can do an ATM program, you can do a forwards, you could do a overnight, you can do a drift, we could implement a drift program to raise some equity that way.

There is a number of ways of mechanisms that will be available to us or we could simply be a little bit more patient and say well the reality is this is going to take us a little more time and our leverage will naturally get to below 5.5 anyway.

And I think the last one is probably less likely, as long as the markets are reasonably cooperative as they have been. I think that’s clearly our intention to get down into that range below the 5.5 and get ready so that we can do another acquisition and not have to worry about having the pressure of the equity market.

I said the same when I was on the equity roadshow and it was kind of a way of helping people reflects on what we’ve been through, which is and for those of you they heard this I apologize because it's going to be hearing it again. But in my world there is reprimands, spanking and beating.

Reprimand you nod your head and acknowledge that maybe that wasn’t a great idea. As spanking it heard for maybe a few hours or a day and a beating here in the recovery room.

So we’ve just kind of come out of the recovery room for six months period with what happen with our stock around the Pinnacle overhang and I think quite candidly we are pretty happy to be out of the recovery room and I don’t picture us going back into the recovery room anytime soon.

So I would say that we will do the right thing and make sure that we do not put ourselves in a position again to have a major overhang. This isn’t a major overhang under any circumstances.

So I look at it as being very focused on the future and saying we need to make sure that we never get ourselves into that position again of having a mandatory sizable slug of equity required. And that means we will have to do... we will be doing stuff to manage our balance sheet in a way that the accomplish that..

Great. And then I have two more follow-ups.

One is with regard to how you look at increasing, modifying the dividend do you look at the dividend change based on the anticipation of incremental AFFO growth per share or based on what you report and looking backwards and then raising the dividend based on what you reported in the prior quarters note any?.

Yeah I know I think, well listen I mean in this quarter we’ve got to look at it we did not raise the dividend in anticipation of Pinnacle transaction. We have -- we're going to have two months worth of rents.

We’re going to have about all honesty we’re going to have coming in we’re really going to be making a dividend payment before the end of the quarter. So in some ways we’ll only collected a month’s worth of rent and we’ll have a full allotment of shares related to the Pinnacle transaction.

So it didn’t really make any sense try to adjust it based on historical level what we’ve done is adjusted it reflecting on our expectations for the year. And that’s why we gave some guidance relative to once we normalize, which will be in the third quarter. By that point in time we can go to our more appropriate run rate.

I mean our focus is on 80% of AFFO is being our dividend policy. Base 80% of free cash flow. I think we will continue to do that. I mean going forward once we close the Meadows transaction I would expect we’ll do the same thing depending on the timing of that.

We may very well leave the quarter of the close as flat and then reflect whatever the impact is to the Meadows going forward into the future -- into the next full quarter where we’ve got the result. Hope that answered [ph] your question not but….

Right.

And then the dividend calculation adjustment that the $5.4 million that you deduct from AFFO for the full year and a $1.2 million for the second quarter, does that go away next year?.

It does. That goes away in the third quarter, the dividends well it won’t for the -- well for the outstanding shares that to the extent that we have employees who have options who are not receiving dividends, who elect not to exercise their shares for whatever reason.

We will still make that calculation in anticipation that those shares will eventually get converted into fully outstanding shares. So we have a combination of shares that are held by GLPI employees and we have options that are held by 10 employees still.

And so to the extent that those options are un-exercised that are vested, but un-exercised we will still account for the fact that those dividends will eventually get paid when they are exercised. So there will always be that adjustment.

But I would expect that that will come down significantly serving with the GLPI executives once the dividend no longer getting paid on those options..

Okay. And then my final questions for both you Bill and Peter.

Now that you have two potential buyers of gaming real estate and I guess it’s super early, but are you seeing more activity with sellers recognizing that having two potential buyers of real estate is better than one and therefore pricing might be better and seeing that manifest itself in the bigger pipeline?.

I think you answered it already. It’s much too early to make that kind of -- reach that kind of conclusion. It remains to be seen what MGM is going to be interested in.

Clearly their early focus is going to be on the two properties that are developing in Massachusetts and in Maryland that those are big things that they’re going to have to after they stabilize roll in. And yeah I think it’s way too early to conclude that..

Great, thank you..

Our next question comes from the line of Thomas Allen with Morgan Stanley. Please proceed with your question..

Hi. I thought it was interesting in your prepared remarks and the press release you note how those you are getting more interest from traditional REIT investors. Thinking about this the other way, are you seeing any increased interest from other triple net RIETs into the gaming space now that maybe it’s become more high profile..

I don’t think we’ve seeing that. I speaking for myself Bill you and anyone in the group can comment Steve might have some thoughts.

But I don’t think so, I think many have dabbled around the edges, but not many but several have we know that I think most are daunted by the licensing processes and obviously the bigger you are and the more states you’re dealing with, the more complex the problem.

I got to tell you that if you try to bring on a new director, single director who has not come up through time and has to go through all the states where we do business. It’s a very ugly and intrusive process. And that has and I think will remain for quite some -- maybe forever kind of a high bar of entry.

Any other comments, Steve?.

You’re right Peter, in fact the two triple-net REITs that have dabbled in gaming have noticeably sort of step back. So the non-gaming REITs that have tried just seem to be impacted by as you say the regulatory regime in adverse way.

So I do think now with MGM growth properties and ourselves there is obviously a robust marketplace, but I don’t see the triple-net guys that are out there coming into our space for the reasons you have stated..

Great, helpful, thanks. And then just my follow-up, can you just help us Bill think about G&A on a go forward basis once you are done with the Pinnacle and the Meadows transaction? Thanks..

Sure, well there is no increase in headcount related to the transaction, there’ll be some nominal increases in what I’ll call the overhead numbers whether it’s your outside auditors, your D&O insurance, your SECP or bond rating fees those types of things, but those numbers should be very small number. So our G&A cost should stay very fixed.

The one item that will be coming out is the what I talked about a little bit earlier the dividends on options ends in the third quarter that’s not really a Pinnacle related item, but it’s an item that does go away in terms of work payments on those.

And then also some historical awards around called [indiscernible] stock or basically [indiscernible] stock goes away as well by the first quarter of 2017. We will hit the three year anniversary and when the maturing of those has happened and the vesting of those.

So I would say overall our overhead is actually going to come down, but from a -- and then hit a new basically new stable platform going forward. There will be a small increase for that ancillary cost, some reductions on the equity programs and how that impacts the income statement and then from that point forward, I think we are relatively stable.

And annually on any future acquisitions regardless of size I would expect that -- I don’t expect to see any significant or any increases really in headcount may be entry level staff individual for the legal department or may be individual staff person for the accounting department, but other than that I don’t see any need for any kind of increases, but Peter I think may want to touch on that as well..

No, I agree completely, Bill it’s pretty straight forward as long as we do not increase our operating capability or appetite that is properties like Perryville or Baton Rouge you won’t see any significant change in our headcount at the home office..

Helpful, thank you..

Our next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch. Please proceed with your question..

Hey, good morning, guys.

I was just wondering to follow-up on the comment around the participation from some of the REIT dedicated investors in the Pinnacle transaction, Bill, could you give us a sense of what some of the feedback might have been from some of those investors and anything that sort of change a little bit in your underwriting as you look at future deals? You talked about the overhangs you certainly don’t need to repeat that one, but anything else that may have been kind of lessons learned or discussion topics on the mind of some of those investors as you guys went through the equity raise.

That would be helpful..

Sure. I think there was a few things that came across, I think was obviously and Peter touched on this earlier the very visibility of the fact that MGM was converting to a REIT increase the level of interest in just the concept this might well become a whole new segment and sector versus a one-off and I think that was helpful.

I think there was as people dug into the work they started to realize that the visibility into us and understanding us was actually much easier to understand that and I think the analogy I heard was like medical property or healthcare REIT, which a lot of these guys were interested in, we are taking a look at that sector and comparing and doing a compare and contrast with us and them and finding out and figuring out quite candidly that it was much easier to get their hands around our economic prospects versus theirs.

I think there was -- then there is some of the old issues that have always been out there.

I think whether it was tenant concentration and helping guys digging in and working through the tenant diversification issue and how these cross collateralize master leases work and then some work we did around, explaining how resilient gaming operators are during difficult financial times and the analysis we gave on the road show was around what happened on a theoretical basis to rent coverage through the financial crisis and how that impacted our two tenants was being Pinnacle and Penn.

So that gave people all of a sudden a lot more comfort around the security of the cash flow stream in the AFFO and the stability.

I think just this generally speaking there was I think it’s also one of the things that we knew upfront when we did the spin, which was that it was going to take time for people to just kind of watch what happened and I think watching eight consecutive quarters of earnings coming in within less than a penny is variant.

So the guidance gave us credibility relative to our statement that we were a stable platform. So listen I think we are very happy with the mix of the investors, I think we’ve got some I think great long-term REIT investors who invested and I think have at least based on conversations seem pretty happy with their investment to-date.

And I think they like the prospects going forward, but we will see. Not sure if I addressed everything you asked there. So if I have missed something if you could ask it again, I won’t be offended..

No, it’s okay. I think you hit on a lot of it. But the follow-up would be leverage obviously at one point you are contemplating being a decent amount higher just given the cost of equity. It kind of reached out that self-fulfilling prophecy as the stock price went up that you could raise more or afford to raise more.

I guess the question on that ratio is does 5.5 times put you back in the kind of the area of investment grade is that still a target that you guys are trying to reach?.

Well, we are and I think Peter touched on this earlier, right, is that we have -- we are maniacally focused on having the very lowest cost of capital because at the end of the day our entire business is based on a spread between whatever cost of capital is and what we have to pay to acquire cash flow stream.

So investment grade is a very much a part of that strategy. I wish it was in my control. I think I can make some incredibly persuasive and logical arguments as to why we should be investment grade. But unfortunately my opinion counts for almost nothing.

So we’ll have to work with obviously the agencies in terms of working through those things and I think listen we did, we certainly had a tough period there was our equity and when our equity was trading at obscenely low levels, we were still committed to raising equity at almost any price. Well, really at any price and keeping leverage at 6 times.

We think 6 times quite candidly is investment grade. There is a number actually give you a whole slug of REITs that are at 6 times or north that investment grades. So we felt like it wasn’t like we were going into an irresponsible zone, we felt like we were just going into a zone that was somewhat at the higher end of it still investment grade.

Obviously the markets cooperated, the enthusiasm was there, we were able to upsize without having to pay a penalty price in terms of raising more equity and we elected to do that, which I think was the smart move.

And I think candidly talking to the larger REIT investors they were highly supportive of increasing the equity size of the offering and keeping the less and getting the leverage lower. So not only did that fit within our own internal thought processes, but it was nice to have shareholders supporting and encouraging that decision..

Thank you very much..

Our next question comes from the line of David Katz with Telsey. Please proceed with your question..

Hi, good morning. I think you’ve probably addressed with your metaphor for the recovery room your thoughts around your acquisition strategy going forward. So I wanted to ask about raising equity. And you listed the menu of different ways that you go about doing that.

But I think we’ve seen in the past where entities would accumulate or raise equity ahead of the deal or secondarily in response to the announcement or the targeting of something that they intend to buy.

How do you feel about those one strategy versus the other?.

Well it seems like after having come out of the recovery room do it earlier rather than later. However, I do think that you just have to do it in a way where you don’t disrupt the market and you don’t end up with an overhung. And I think there is a mechanism certainly quite candidly I think we’re almost spending too much time on this issue.

But I’m happy to -- our policy is obviously to deal with this issues many times in different ways people want to talk about it as possible.

I think at the end of the day you can do a transaction of the size, we generate -- we do generate $120 million approximately pro forma of free cash flow per year to accomplish the Meadows transaction at 5.5 times means about $160 million. So the amount of equity that we’re talking about here is relatively di minimus.

We also have embedded in our assumptions and I’m getting way more granular than you guys probably care about. But embedded in our assumptions as we are not assuming that everybody has exercised all of their options all of the GLPI employees and the Pan-employees. So we’ve been relatively conservative on that side.

And that would be -- and the reason that’s an equity raise of another forum is that when those employees exercise those options the strike price times a number of shares is actually an equity proceeds for us. So that’s another element that that’s going to come into play and we’ll measure that out.

Doing it I don’t think it’s ever bad to prefund the transaction and obviously having coming out of the recovery room would probably be okay with in other words doing an equity offering and if by some chance the deal fell apart it’s not the end of the world.

Certainly you’re not going to go prefund something in the multi-billion dollar category instead on it. But if you were to go out raise even if you did raise $100 million or $200 million of equity in anticipation I mean the reality is its 1% of our outstanding share count and 1% is just not enough to get excited.

It’s just not enough to worry about in terms of saying well I’ve got a little bit too much equity whether I am at 200 million shares or I am at whatever extra few million shares was now hardly a big problem. So that’s kind of how I’m looking at it..

Right. So is it fair to say that you could potentially on the potential list of potential strategies would be an ATM program that really just serves to reduce your leverage incrementally as you progress forward, which then presumably would leave you the latitude to do more things when they came up..

Yeah now listen ATM program, I mean it’s basically dribbling small amounts of shares out into the market on a fairly regularly basis it doesn’t affect the stock price. We can’t raise massive amounts of capital in a short-term with that kind of a program. But it’s definitely a way to get it done.

You can also look into forwards or other elements not that those are necessarily great.

Or we can just do a follow on offering, I think, I mean the one nice thing is that came out of this road show was that we clearly gotten the feedback that the big REIT players are very excited or I won’t say excited that’s probably too strong word, but they are very supportive of raising equity anticipation of getting deals done in the future.

And so, sitting there and if the feedback we got was you don’t have to worry about us not being supportive, because you’ve raised an extra equity in anticipation of getting a deal done.

And if that means that your dividend does go up by a penny it’s going to be in $2 and if you had to leave it at $2.40 instead of taking it to $2.41 don’t worry about it because that’s not really how we look at you.

So I think as we transition from investor types to a really way more focused on AFFO per share and not that we are not growing FFO per share on the long-term don’t ever takes this to mean different than that.

But recognizing that a quarter or two or three of a delayed ratification for a penny or two on your dividend is not going to translate into people having an adverse reaction is incredibly helpful and supportive of doing the right thing and getting our balance sheet where we wanted to be, which is we want to get to the lowest long-term cost of capital humanly possible..

Okay, thank you very much. Very helpful..

Our next question comes from the line of John DeCree with Union Gaming. Please proceed with your question..

Good morning. Thank you for taking my question. I think most of them have been answered so far, but just wanted to shift gears a little bit and get an update on the TRS strategy now that the TRS is a much smaller component of the business post to Pinnacle acquisition.

Is it something that you would keep for flexibility perhaps consider divesting those assets or maybe even adding to with the capacity allowed..

I think you kind of answered it with your question that keeping it for flexibility makes a lot of sense and for these years that we are solely a gaming or principally a gaming focused REIT having operating capabilities, some very strong operating staff in place I think is the huge plus. I don’t how and if and when we will use it.

But it’s a capability that I think sets us apart from some others and I think it makes sense for us too. Now that having being said I can’t tell you that we have no plan to go out and pick up operating assets build that segment.

I think my general view is that it’s a feel safe for us, in case we might need or desire on an interim basis to take in a property to be able to handle it. But it’s not our business. We are a triple-net REIT and that’s kind of what we plan to remain.

Bill, anybody, Steve, any comments?.

Sure.

No, listen I think certainly it’s a nice strategy so that if we were to ever get in a situation where we wanted to acquire a portfolio of asset and for whatever reason we ended up with an operating entities let’s say a small piece that couldn’t fit within as we’ve talked about before we are not going to do transactions, we don’t have an operator invited.

But let’s say you ran across a portfolio and I know we may get excited about it any number this is just a total random number is set 10 I don’t think anybody has 10 properties. So that will be okay, I throw that out as an example.

But yeah 10 properties and 9 of them you had an operator or a partner identified and there was one small property that that operator couldn’t take for whatever reason whether it’s license limitations, SEC issues or whatever. We would think about maybe leaving that operating and moving that into the TRS.

Not necessarily on a permanent basis, but certainly as a mechanism to facilitate getting a transaction done. Especially in a scenario where you weren’t able to run a public process. So let’s say there was [indiscernible] that were available.

It was on a private -- on a confidential basis that you couldn’t just go out through the general market and we had 9 out of the 10 covered would we think about putting the one to the TRS the answer is yes. Other than that I think our expectation would be that’s not the desired outcome that’s simply a fallback position..

Great, thank you..

Our next question comes from the line of Carlo Santarelli with Deutsche bank. Please proceed with your question..

Hey, guys. Thank you. More of a theoretical question from me, when you guys think about acquisition opportunities. Especially as it relates to greenfields and not referring to anything specific.

But how do you think about stabilization of the asset and when over a period of time it would take you to get comfortable with kind of a proposed rent structure.

And maybe if you could answer it two ways for a greenfield development in a new market versus a greenfield development in an already established market?.

Well, it’s an interesting question. The greenfield transactions can make a lot of sense. As we’ve said for years and through our pan years we excel in monopoly situations and I liked those a lot. We were involved with several possible transactions in Massachusetts where it had we been the winner there is a high assurance of success.

So you kind of know when you see it in an established market watch the market how strong is whatever it is you’re planning to offer the offer you will have. It’s you underwrite these on a deal-by-deal basis. So I think we all know that now maybe but I’ll try it this way. You won’t us doing a greenfield property on this strip in Las Vegas.

We are always now and forever risk adverse and generally very, very cautious. So if there is any guidance at all, I get back to saying you know it when you see it. You kind of through years of experience in the gaming world kind of know what’s a safe and what is not.

Bill?.

I would agree with that. Obviously projects, greenfield projects that are as Peter said on the strip incredibly difficult to think about on a 9 cap basis when the total project returns have generally been mid-single-digits. So obviously paying rent at a 9 cap or 10 cap doesn’t work.

I think there are opportunities especially in new jurisdictions where there is limited competition or the market demographics are enormous that you can get excited about doing a greenfield project. We certainly did as we announced we were short lived.

But it was we were associated with a couple of situations where we were prepared to do a greenfield financing. We just didn’t happen to have the partners that were selected. So we obviously we -- that didn’t go anywhere. And I think in the future, there were opportunities in future states.

But I think quite candidly this is a very esoteric question in some ways because I don’t know of any states where there is any upcoming opportunities to even do a greenfield. So obviously Texas someday who knows. Georgia someday who knows, Northern Florida at some day who knows.

They all fit into that category of quite candidly being years away from anything that’s actual.

So I would leave it at that, that’s probably one of the areas that we’re not really going to have to spend a whole lot of time worrying about because it’s nothing that’s going to be on our horizon of an opportunity or a choice to make for probably a good long period of time..

Understood, thanks guys..

Your next question comes from the line of George Smith with Davenport. Please receive with your question..

Hi, thanks for taking the question. Bill you’ve spend a lot of time talking about lessons learned during the process as a buyer of assets.

I’m wondered if maybe can we think about lessons learned from a seller advantage point or maybe would be sellers, specifically do you think people have woken up at all to the benefits or potential win-win nature, striking a more accretive deal and then taking equity as currency..

I think clearly there is an argument or a discussion point that if you’re selling an asset for cash clearly you want to get the highest price humanly possible. If you’re going to be taking a significant amount of equity back.

Making sure that the transaction is an accretive and positive transaction can actually end up in a result where you end up with a better transaction as a seller than actually eating out the last tiny bit of consideration. Now the problem with obviously that’s rationale thought process, but it’s being token you’re sharing some of that upside right.

So people sellers generally have an emotional reaction to trying to get the last time. I think it takes a very pragmatic seller to be able to get to that point. Obviously I’m sure this is a nice clandestine way to talk about the situation happening in a certainly bankruptcy court or process in the United States.

Who knows, I mean I would think that there is absolutely in a situation where it’s a major transaction where there was equity take back that the seller should be thinking about what does the implications mean for the acquirer and is that in fact going to be a transaction that’s going to be well received or not and that there is upside to be shared on that they are actually benefitting both parties.

We’ll see I mean it would say it takes an enlighten seller to understand that concept. And we’ll see if that if there is any of those out there in the market.

Listen I think opportunities are going to be there, there is going to be potential for us to do transactions of a variety of sizes some there may be will be small transactions that we might affect, I can tell you that we will -- obviously we are very interested in being a good partner with people that we have entered into transactions whether that’s with Penn or Pinnacle or the Casino Queen.

We were quite excited quite candidly about the prospect of the Meadows transaction ending up with Pinnacle because I think it also sends a message to people that doing transactions with us is the beginning of a relationship that can be mutually beneficial for growth for both parties.

And we would do other transactions with our existing tenants and be excited about doing that.

In fact, we might do things that quite candidly for an existing tenant that we might not do for an outside party as an example especially on something of certain size or scale or whether we might have to provide some incremental financing like we did for the Queen original transaction.

Those are types of things that we look at as part of our tools to be helpful with other people who are somewhat hesitant about entering into a transaction with us, I know it kind of gone up on a bit of a tension here and I apologize for that.

But I think yes, it being a -- and what you’re really talking about is acknowledging the partnership relationship, right.

So if you are taking back equity, you are taking back equity in an entity that you are going to own a significant percentage of you should as well be jointly interested in how well that partner is going to do that partner obviously being us in a situation where we are giving back significant amount of equity.

So a long waited answer, hopefully one of those comments was on point and the other ones you can take for editorial comment..

And real quick, just to make sure I am clear on the dividend, our new run rate becomes $0.60 that does capture the full benefit of Pinnacle and then presumably I don’t know if you guys have put much more numbers on it, but once we get Meadows we will have something slightly incremental to that?.

Yeah, I mean obviously it’s the expected run rate where we are at with at least in the third quarter for the Pinnacle transaction. Obviously, there are escalators and what not that come into play in the future that will have an impact going forward, which should be positive.

It does not have the Meadows, I think the Meadows is a transaction that was structured recognizing a fairly rich price, but we have built-in escalators that are stronger as the time goes on assuming that the property performs in accordance with both ours and Pinnacle’s expectations I think they are going to be very excited to pay us the increased escalators because obviously that means they are making an upsize return or an increased return on their investments as well.

So, directly yes, the third quarter is Pinnacle only. Yes, when the Meadows comes in depending on the time of when that gets approved we would hope that that would be -- but I don’t think it’s based on the size and scale of that transaction, I don’t think it’s going to have a huge impact by any stretch on our AFFO per share.

But yes, there is hopefully some potential incremental benefits to that, if not immediately down the road, is the escalators kick in..

Okay, thanks for the time..

You’re welcome, thanks..

Our next question comes from the line of Daniel Rubin with Gate Capital. Please proceed with your question..

Hi, this is actually [indiscernible] Jeff. I have a couple of questions, if I can.

Assuming our Pinnacle deal close this Thursday, would you adjust the dividend that you will pay in September for the new run rate?.

No, we are going to adjust it in the third quarter. So, we are expecting to pay a $0.56 dividend in second quarter, which is consistent with what we did in the first quarter and then starting in the third quarter we’re expecting to pay $0.60..

So that would be the 917 dividend that you pay or whatever would be the first one at the higher rate..

Yeah, that will be paid sometime in September, right..

Okay. So that’s the first question.

Second question is what’s the total amount of option proceeds that you expect in 2016?.

I think we are going to decline to give that level of specificity that’s really dependent on it’s a projection and it’s my estimation of when individuals are going to exercise their option. So I don’t necessarily want to put too much pressure on those individuals..

Okay. Let me ask it another way, at the end of ‘15 you had about $7.9 million I think just under $20 a shares so that would be like do all those $7.9 million expire or....

They don’t expire and there is roughly a -- there is a mix roughly half and half it’s not exact. Options held by GLPI employees and Penn employees. The Penn employees have not been receiving dividends on their options, the GLPI employees have that that option or those dividends paid on options end with the third quarter dividend.

So it’s our expectation that most of the -- certainly a big chunk of the employees will exercise their options in that window of time after they or either before or after they no longer receiving a dividend.

As I said on the road show, if I was coming up with a stock that was non dividend participating in our story how many of you would be interested in buying it and obviously the answer is almost zero, pretty down close to zero.

And for the same reason obviously with 80% of the free cash flow going out in dividends it’s not really -- it's not that prudent for the employees to be hanging on to their options when they are not participating in the dividend..

Okay.

And just lastly, based on the opportunities that you see out there today in the acquisition landscape, how long would you guess it might be before you would consider an acquisition outside of again?.

Let me take that, Bill. We try to answer it this way. We’ve looked at some non-gaming opportunity. In one sense look it’s all about buying reliable cash flow. I mean that’s the whole deal. And so if it took any sphere that you like, if we had confidence in the stability of that cash flow and thought that we could make a long-term transaction around it.

We would do it tomorrow at 9 O’clock we really would and we are not looking in those areas. But we have an approach with some broader leisure related or entertainment related kinds of things and yeah we’ll look at it. It’s function of stability. Again we are not seeking those things out right now. Don’t think we are in a hurry to go there.

So we think we’ve kind of run the table in gaming and I think we are long away from that. But I think it’s an inevitable as a public company we have a responsibility to -- for responsible growth. And we’ll be focused on that, but we have no prejudice against it even now it’s just isn’t where we’re looking today..

Alright. And lastly can you just briefly talk about your shareholder base. I know there is about 52 million shares that are going to Pinnacle holders this week.

It looks like the short answer is there is about 9 million shares or 9 million or 10 million where that started, I’m just wondering in your conversations with the larger Pinnacle holders how much of that you expect to turn over? And then the other consideration is the composition of your shareholder base pro forma for the equity raise and how that might change when the REIT become a separate category at the end of August and how you are sort of thinking about this whole thing?.

I will take that, listen I think the mix obviously this is a transaction that Pinnacle tax that the Pinnacle shareholders are going to receive GLPI shares has been long know.

Our short interest is up I would assume that there is a component of those people who did not want to own GLPI shares who have at various points in time probably shorted the GLPI portion of that side of the transaction. I’ll be very interested in the next person to see but the short answer is in the period after the transaction closes this Thursday.

There are a number of people who own both GLPI as well as Pinnacle shares who put an order in the book to own more shares at GLPI and our public equity offerings. So I would assume that those people were aware that they will be receiving GLPI shares as part of the Pinnacle transaction, in fact I know 100% sure they were.

So a certain number of those individuals we assume will be perfectly happy taking ownership of their GLPI shares and retaining those shares.

There will be certainly others that will probably look to rotate out, I don’t think there is going to be rush to the door, I don’t think this is a situation where Thursday morning is going to hit and they’re all going to hit sell no matter what the prices I think they are going to look at it as an opportunity to potentially rotate out overtime.

Certainly anybody who had a position where they wanted to be there has already set themselves up for that to happen and I doubt they would take the market, they would just all of a sudden on Thursday wake up and decide Oh! My God, I own GLPI shares.

So I think it will be a gradual process, I think I am not overly concerned with how that’s going to take place.

I think it will happen over the natural course and I am sure that those people that are looking to rotate out will do so in orderly fashion and it will take some period of time for that to happen, but I don’t expect it to take -- I’d be surprised if it take more than a few weeks for that for people to feel that they are in a good position.

And then as some guys have actually said to me, and I am not looking to even guys who acknowledge that they are not a natural holder, it’s not the end of the world to collect north of 7.5% dividend while they’re waiting for their time to rotate out it’s hardly the worst outcome in the world.

So we will see, I mean obviously, I can never predict what the market is going to do and what the individual investors are going to do they surprise me all the time.

So, we will see what happened, but I am not losing a lot sleep over this the fact that there is going to be those shareholders and they are going to rotate out, I think it will happen on a fairly organized basis..

And operator, let me say this, if there is one more quick question. We will take one more and I think we’re going have to wind this up..

We have no further questions at this time..

Well then this is perfectly well time, as we get to the end of the hour and I take the opportunity to thank everyone for calling in today. And as always we look forward to seeing you again at the end of next quarter hopefully with equally good news. Thanks, again..

Thank you..

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..