Greetings, and welcome to the Gaming and Leisure Properties' Fourth Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Hayes Croushore, Vice President, Finance for Gaming and Leisure Properties. Thank you. You may now begin..

Thank you, Melisa, and good morning, everyone. We'd like to thank you for joining us today for Gaming and Leisure Properties' fourth quarter 2017 earnings call and webcast. The press release distributed earlier this morning is available in the Investor Relations section of 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 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 related 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, Inc.

Also joining are Steve Snyder, Senior Vice President of Development; Desiree Burke, Chief Accounting Officer; and Brandon Moore, Senior Vice President, General Counsel and Secretary. And now I'd like to turn the call over to Peter..

Thank you, Hayes, and good morning, everyone. We wind up with a good fourth quarter and I think an excellent year for some reasons that we'll highlight.

I guess the most notable thing that occurred in the fourth quarter of course was the propose merger of Penn National and Pinnacle Gaming, which as we've had discussing, we and of course the sale of four properties to Boyd Gaming which brings a new tenant into our fold.

That transaction as you've seen in our release sure increase our total rent by approximately by $46 million and will be accretive to our shareholders and to all of you. We also concluded the transaction in Tunica, which we earlier announced this year. And again there has been some activity in the gaming space.

We've been very careful I think notable of the things we chose not to pursue in the end out there, because our focus remains now and always to do and only do accretive transactions. So as we look at 2018, we trust that toward the end or third and fourth of this year that Penn will complete its transaction which is terrific for us.

And as to new things, there are some interesting prospects and we are working on, obviously nothing we can announce or talk about but we're - I think we're looking for a terrific 2018 and 2019 as we look ahead over the next couple of years, so we think the future is pretty bright.

Bill, you want to highlight a couple of…?.

Sure. You know I think what I highlight is that the couple of items that effected the fourth quarter and none of which I think have any kind of the long term impact on our prospect of the company but we're really kind of one-off in the quarter.

We had roughly 1.9 million for the bonus which was the amount attributable to the fact that we had accretive transaction which the Penn, Pinnacle merger combined with Tunica meant that we got a full new deal portion of our bonus.

So really effectively what that means is that we've done more than $0.13 per share of accretive transaction, which has caused us to take an extra charge in the fourth quarter.

And the other piece that meaningful that had an effect on the quarter is relative to our TRS, the new tax law, the Tax Cut and Jobs Act had an impact where our effective rate obviously will drop from 35 to 21.

And for all of the differed tax assets we have in the book, we had to recognize the charge relating to the fact that as the guidance come off and we use those to reduce our future tax liability that will be done in the lower rate from 21 to 35 and that was roughly 1.8 million offset just slightly with an interest expense which we had a favorable variance of 0.5 million somewhat effected obviously by we currently launched which are doing out, as well as the fact that we had an upgrade on our ratings from S&P that moved us up to investment grade which caused our asset down in our bank facilities lending rate which took us from LIBOR plus 1.75 down to LIBOR plus 1.50.

Those are basically the only thing that I think are meaningful or worthy of really discussion in the fourth quarter.

I will I guess maybe add on that that route has a very tough comps in the fourth quarter as well as the first quarter this year probably spending a little bit into the second quarter where last year we were the beneficiary a lot of extra money flowing through that only related to the repairs of insurance proceeds on what we had in the previous August.

And so clearly that's an impact. Looking forward to next year on that rouge, we have a smoking ban that's coming in effect in August, July or August, which we think going to have probably about a $2 million impact on that property.

So that rouge is definitely a challenge property mostly because it's working off incredibly tough comps plus it has its headwind with smoking ban. That's it..

Tear gas and local disasters are very positive for us..

It can be..

A lot of federal money gets spent in the market so we tease about that. But serious for the folks involve but we've been very fortunate with that property in the past..

Yeah, it's not for the record, it's not that everybody takes insurance money and spends it in the casinos.

What is happening is there is awful lot of jobs to get created and a lot people come into the market to assist with the repairs and adjustments and all of that and so you get an influx of people as well as a lot of extra discretionary job or extra work that generally done at favorable hourly rates.

So they need the labors to do the cleanup and that generates an awful lot of discretionary income in the local market related to the cleanup on the hurricane. It's some of result but that is what happened. Well with that I think we said, we used to start with, so we open the floor to questions. Melisa, if you would do that please..

Thank you. [Operator Instructions] Our first question comes from the line of Robin Farley with UBS. Please proceed with your questions..

Hi. I guess some two questions. One is, your guidance is your rent escalators for 2018, so I wonder if you just have any color, is it just some national harbor maybe still bring down a little bit after anniversary opening or just some color around that.

And then just a bigger picture question which do you think or what would you it short of changes like potential transaction are in the market overall having another gaming REIT our there now? Thanks..

That's a fair question. Bill you take the first and I'll take the second. I'll take the second. Relative to the escalator, it's been our practice not to include the escalators until we get to the point where we've got high visibility.

And certain from - on the Penn escalator which is November of next year, I would highlight that we did, that was one of the other I guess headwinds that we had is that at the end of last quarter, we'd estimated that we're going to get out of the potential full escalator of 5.4, we estimated we would get 4.

When the actual results came in, they were roughly 2.4 million. And so what that tell me is obviously the escalators especially when you are very close to the margin are incredible variable relative to how much they are. And for that reason, we have decided not to include escalators in our guidance.

I think it leaves us on a more conservative basis and therefore more likely that good news will come down the road so to speak. And even with the Penn escalator or the Pinnacle escalator which I think is probably in better shape candidly than the Penn escalator in terms of the cushion they have going in.

That would be a max escalated by 0.9 million and that would kick in at April 28th, 2018. So I will highlight, Penn has included in their guidance estimate that they think that their year-end coverage ratio on the rent will be 1.85, if the impact - if those target that would be a full escalator next year.

And that's not taking clarity, there is a revenue reset that for November of next year the five year revenue reset. The way that the calculation work, they would be calculating the rent coverage before the revenue reset, so the 1.85 and they would obviously when we have reset would give them addition cushion for 2019.

Is that sufficient color on escalator?.

Yeah, that's great. Thanks.

And then on the impact of having another gaming lead out there?.

Yeah, I think [indiscernible] would point on that. Look, we like monopolies that would prefer that there were no other players in the field of course they without saying what has occurred in inevitable.

I'd rather and I think it's our current experience that each of us just kind of found will and have found where we can play, does it mean that the markets are going to be more competitive, people will from our point of view maybe overpay for some assets that we wouldn't. That could happen.

So I think we have to - it's still early yet, I think we have to wait and see how this all plays out. We know what we have on our plate looking at 2018. We are encouraged by that and beyond that I think we just kind of wait and see.

Steve, you deal with that every day, you want to offer some thought?.

No, I think your point is it is too early to see what the impacts going to be. It's too early to see where that the newest kid on the block is going to focus their resources.

And at the end of the day, we're going to continue to remain disciplined and only look at transactions that are accretive for our shareholders regardless of what their parties are doing or not..

Yeah, I would just add in that we thought previously about our expectations of averaging 500 million a year of transaction.

I would say that last year was the combined effect of and I am saying about the actual amount would be, effect of the Penn transaction as well as the Pinnacle transaction that we effectively did transactions that would have been roughly equivalent, so 1.5 billion worth of transaction.

So I kind of look at it that we need to reset the class again as we've historically said we would thus far to 500 million a year. We reset that with the original Pinnacle transaction, I would argue we've now reset that again with the Pinnacle transaction and the Tunica transaction.

And as we look forward going towards the future, I am still comfortable that over the long haul, we will get our 500 a year that we kind of said and delivered on and effectively over the last four years and coming into the fifth year.

So you know our track record of having done, transactions done, I think we starting to get to a point where having delivered for in four year, now we haven't done it on a nice move trajectory which I would fantasize about that the way it work for us that every year we have multitude of transactions and we'd be already, whether we got 400 million done or 600 million done.

But that's it's not the way it works in the gaming industry. So we're still - I haven't lost my enthusiasm or commitment or expectation that we're hit that target..

Well, let me add that look as a shareholder and I am first and foremost the shareholder, totally focused on dividend growth. We've done a terrific job with that since inception. And I can only speak as a voice of one, I've been pretty happen camphor with that result and looking forward to future growth. Again that's kind of what is about there.

So the word discipline has been used by I think each of this at this table is kind of what we've been about forever and that's what we'll remain. So it's protecting core always as we step forward that matters most. So I hope that gives you an answer about our feeling..

That's great, thank you very much..

Alright, Robin, thank you..

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

Hey, good morning, everybody..

Hi Joe..

Maybe another way of asking for you guys talk about the M&A or the acquisition environment at present time.

Peter, you mentioned earlier that you've been careful not to pursue maybe talk about that but other than a deal not been accreted for you, what are the characteristic have been that you would fail to pursue or not pursued that's out there right now?.

Well the prices is probably item 1, 2 and 3 and then stability and the quality. Less the quality of the asset but the quality of the earnings. I mean I try to make that plenty, I am speaking again as a voice of one much more focused on how liable is the cash flow out of that asset and they really care what it looks like or what it is.

So I don't know we can add a lot more, Bill you want to..

No, I think you know listen I mean - we do what I call a risk analysis on the long term prospect of whatever the target is and take a look at what we think going to happen 5, 10, 15, 20 years in a particular market.

There is certainly markets out there that we feel very comfortable with, they are going to be nice stable cash flow machines and we'd be quite comfortable in those markets. There is other markets where we are less though, some of them are obvious; some of them may not always be so obvious. And that's a big part of what we look at it.

What we want to make sure is that doesn't mean that we can't participate in more challenging market but we're not inclined to pay huge prices in challenging market. We much more comfortable paying the only - we can get come to with some price ranges in markets that are tougher.

But it revolves around what one or multiple to the recovered that we were getting out of the gate go and what we - how we projected what we might see is upside going forward, if there were upside at a particular property relative to being able to improve the rent coverage back to the kind of going back to the meadow as an example.

For the tenants we might want to work with another factors and whether it is cost collateralized and this is going to be an assets that might have some challenges but if it's going to cross collateralized with the number of other asset that we do good about will be more inclined to move forward that type of transaction.

So it's a little bit of art not totally science. The science comes in as you take a look and you can be here's what rent I am going to get and here's what I want to pay for it and what the impact on AFFO per share. That part is of science, but rest of it a little bit a combination of science and art..

Thank you..

Thank you. Our next question comes from line of Carlo Santarelli with Deutsche Bank. Please proceed with your questions..

Hi, guys, good morning.

Bill, could you just talk a little bit maybe holistically about how the changing federal tax structure has maybe altered the way that the industry would think about deals, maybe some of the opportunities that have fallen for, some of the stuff that isn't so obvious that you guys have maybe discovered as you've kind of gone through your process?.

You know I think the most meaningful impact is because the fact that the tax rate, the effective tax rate on the separation of assets which is always a challenge for us when we start, it's almost always looking at a target where they've got combined operation and land and building and separating the operating and land and building in many, many cases most cases have some kind of tax confront.

So clearly reducing that the rate just to pay is helpful. It can also be helpful in terms of I guess people now know kind of where the tax laws are going to be for a while and so people are starting to kind of make the decision and they understand what the implications are.

I think that was I am not going to say completely prohibitive to getting transaction done, but I think it kind set people of a mind that they would ignore the future tax that they could get a high enough price.

Now they can take a look at stable, I know what the tax consequences of my transaction is going to be and that's the way that kind of lays out the future and I can make a decision relative to what I might want to do in terms of monetizing an asset and recognize that we've got a fairly stable outlook on taxes for the foreseeable future..

So, is it fair to say then the you guys believe that this would be overall that the policy should be helpful for the gaming REIT industry at least kind of getting more transactions done on a go forward basis, so at least you are on a better position today than you were a year ago at this time?.

Well we are and there's a couple of other little nuances that I think are helpful which I'll highlight which I think people get more comfortable with that. There is a limitation on interest expense that companies can take and rent expenses is not included in that.

So the reality is that the rent that they pay is fully tax deductible whereas the interest expense that they might be incurring while they carry the asset on their book for some people not but for some people might not be tax deductible but that could actually be also helpful looking into the future..

Great. Thank you very much..

Thank you. Our next question comes from line of Shaun Kelley with Bank of America. Please proceed with your questions..

Hey, this is a Barry Jonas. First question, guidance has diluted share count increasing by over $2 million in 2018.

Is this share issuances using the ATM maybe to fund recent M&A or something else?.

No, that's the performance, those are basically the restricted share timing besting as well as the performance shares that were granted in January relative to the fact that we performed in the top 88% of or north of 88% of the REITs over the last three year period..

Great. And then….

There a few options but there's not a lot of options expected in ATM..

Okay.

So not a material amount of cash coming into associative with the share count?.

No..

Great.

And then just want to get your thoughts on this rising interest rate environment we're in now, I mean obviously there's an impact to the multiple or triple net, but maybe just talk about how you see it influencing your business directly particularly from M&A perspective?.

Well, obviously you have to factor in interest rate expense as part of the calculus in terms of what you're going to pay for an asset as well as your own implied cost of capital associated with your equity.

And that's kind of what we were alluding to in the earnings release when we talked about acquiring assets that has to take into account interest rate environment and what's your expectations are over the long term.

Clearly it's not a great news from a triple net perspective obviously all of the triple net have been hit in their stock price rather significantly over the course of the last three months, ourselves included to a certain degree although we've had on a relative basis less impact than they have or the others have.

But it's kind we factor into the what our expectations are and we're much more inclined to be looking at what we think ten year bonds are trading or our longer term debt trading in terms of an implied cost of debt. And then you can take this - take a look where your current stock debt or what the equity component of it transaction would be..

Got it. Last one, just given how prevalent the gaming remodel has become, I'm curious if you still, if push back from asset owners now is mostly valuation based or you still have concerns around the model liability? Thanks..

It's hard one to answer. I don't think that's really effected owners thinking particularly. I mean as you see some trades occur at numbers that we might not like, it certainly involves others they think that they're less than wonderful property should be - it's really wonderful. But that is the reality of it.

We would wished in some senses things were different but that's kind of the current reality.

We see enough stuff and think there's enough on that we can do, so we're a long way from despair about getting meaningful transaction done just means again caution, patience and as Bill has said on these calls and certainly in most of this presentation, it gets to be I mean I guess some people will move for money but most instances, it's when they want or need to sell for some reason or another that they kind of need to have a transaction.

We have I don't know that we've converted anybody with just of theoretical phone call, hey would you like to sell your asset to us and we're going to give you say, I don't think we've actually gotten anybody to actually convert that was not otherwise looking to do something. That's probably what we're seeing out in the world..

I would had that I think I take encouragements. I mean one of the thing that I think helpful long term is there are three gaming REIT. I would argue all of the largest gaming companies that are domestically oriented are completely invested in the real estate investment trust model for the ownership of their asset.

And I don't think that's lost on the other players within the gaming industry. And then really just addressing your point about is there a reluctance about the model and does it work.

Boyd Gaming is another one, I'm not saying that they've endorsed completely for their own existing portfolio but they've certainly endorsed it relative to assets that they're acquiring from Penn and Pinnacle that transaction.

Generally speaking I think the Peter's point and kind of echoing what I've said before is, I don't think people are afraid of model, doesn't mean that they're going to turn around and all run out and do the transaction.

I think it's again a concept of are they at a stage for whatever reason that they're looking to monetize something into they want to do a transaction or not. I think people generally tend to stay where there at and they don't really make major decisions unless there's something compelling them to do that.

That another way unless there's a reason to sell, they're not going to sell..

Great. Thanks so much..

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

Hey, good morning. The Ohio variable rent has been I think have been a positive versus expectations this year, how you thinking about for 2018? Thanks..

I think, we - one other things that if I go back to the original transaction, then we always had a very good expectations for Ohio, unfortunately it took a little while for those to kind of kick in most because they put so much supply into Ohio within such a short period. And every time you have a brand new market.

The penetration takes longer than in mature markets so your growth rates are better. I would expect that there will be continue to be pleasant surprises in Ohio going forward. I wouldn't necessarily think that will be at the same level that they were this year, but I think that you will see the Ohio rent are climbing better than the rest of American.

So that I say another way that I would expect our Ohio percentage rent should be a better performer than the rest of the portfolio. Yeah, all depends, Ohio properties are doing terrifically well. It's been a great year for them. And I think no reason to expect it this year won't be excellent as the same time..

I will say just for - to get some color to what's in our guidance is we've reflected what Penn has included within their expectation or how much rent they will be paying on the Ohio properties. So I think from that perspective they correlate, guidance correlate to theirs.

They clearly have a much better visibility is to what's going on at the individual properties than we do. So short of getting some insides of they don't have, we're going to default to their numbers. And we do look at them, to make sure they look reasonable and I think they do, but that's kind of how we got to the numbers that are in our guidance..

So, what is your guidance imply in terms revenue growth there?.

I can't really - I mean that would - I think you should ask - for one, those are my numbers; two, is that would I like fall into the class of information that proprietary depend. So feel free to ask them..

Alright. And then just a quick follow-up question.

Have you ever look at underwriting or underwritten an international deal and kind of what are there gives and takes been of that?.

We have. We've definitely looked at some assets overseas.

The gives and takes there obviously the stability of the cash flow, you've also got currency transactions and taxes are and what the tax treaty might be with that individual countries that the assets are in and whether they recognize REIT income or REIT concepts are doubt and then how you manage to how you can effectively have a foreign - for U.S.

purposes it qualifies REIT income, so in that perspective it's clean. It's really a matter of what happens over in the foreign country and then how you get your money back into the U.S. How do you structure the transaction such a way that it's tax free and that's not always easy, I guess the best description.

So we have - we've spent some time, we've spent some money looking at that, so we didn't get to a transaction not for the tax issues but for other issues. So we definitely will look at that and we are open to that, so it's a haunting task sometimes especially there is not a clear cut treaty between the United States and that country.

It can really get tricky..

Yeah, maybe that's a good point to emphasis it. We remain open to any reliable source of cash flow wherever located. I mean subject to the qualification that Bill provided. So we do look at a lot of stuff but we have yet to see something that outside this industry at least and our current locations that would attract us..

Thank you..

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

Hi, good morning, gentlemen..

Good morning..

Obviously focusing around you know the issue of what you would buy and I think you did set some interesting boundaries. And I am wondering why you know single properties that are larger and whether they would or would not be on the acceptable list. And I suppose I am thinking along a line of Las Vegas where things tend to be on a bit larger scale.

How do you view those from for Atlantic City for that matter, you view those with a different risk profile or perhaps those opportunities just not present at themselves?.

A combination from my perspective, Las Vegas result have higher volatility and in other words when times are good time are great, when time are bad times are horrible in terms of that what not, so from a rent coverage perspective that's something that we think about.

So the maintenance CapEx requirement in Las Vegas relative to EBITDA is generally higher than regional gaming and that's not necessarily important for us because we're not responsible for maintenance CapEx but it does cause you some concern relative to what the operators going to be able to maintain in their building and make sure that they are going to stay competitive.

And then you know for whatever reason with those factors which ironically you would say in isolation that those factors say that multiple shouldn't be higher than where stable cash flow, but the reality - that's not the reality.

The expectations is what people willing to pay it for something in Las Vegas are significantly higher than would seem to be just by that model.

However what causes that in Las Vegas is proceed that center of gaming in world and so therefore there is tail effect in terms of the long term expectation for Las Vegas and we have to recognize that if that's part of what cause of those multiples. And with all that I think we are open to do any transaction in Las Vegas.

I don't - I am not - I don't know if you alluding on the speculation that particular huge assets available for sale but you know the likelihood that we could get there because we still not going to do a transaction in Las Vegas that's alluded.

So if the expectation is around the sales price and what not or anywhere near what I've kind of heard, I would say that the likelihood of us getting involved is pretty low.

Relative to Atlantic City, you know that's kind of has some of the same characteristics as Nevada in terms of volatility but it has a lot of risk factors and there is a lot of candidly I think Atlantic City has experienced last couple of years the benefits of couple of properties or few properties closing.

I think as we look forward, I know that the Taj/Hard Rock is going to be reopening and I think that's going to kind of revisit some of the tougher times Atlantic City and then there is obviously what may or may not happen with Revel.

So I think we have to look at Atlantic City and say well, we got some new supply coming in and I don't know that there has been necessarily growth in entire market very much.

Having said that once that's stabilize, you know I think Atlantic City is starting to look like once if you can normalize all that, Atlantic City is looking kind of stable in terms of - it's got a competition everywhere it's going to have it. I don't see any - there is no more surrounding space left to add gaming facilities.

No new facilities coming in. So you would maybe potentially it's a more in New York but or maybe I say Northern Jersey one day will get there. They are going to have to or seeing all their business to New York. That's just my own view. That's just didn't in the forms of time, I predict you are going to see gaming in North Jersey.

I guess to add to that answer is we'd be interested in Las Vegas at the right price. We have no reservations about the general health of Las Vegas, it's just more than market dynamic and the secular nature of the ups and downs of what would be there and how viable you know we would think the operator would be in a downturn.

And then Atlantic City, you now - the nice thing is that the bloom is - there is no bloom in Atlantic City, so expectations in Atlantic City are much more reasonable I guess, it's the right way in putting it..

Right, okay. Sorry, go ahead..

I was going to add that I think the issue with Las Vegas is that inadequate return on capitals, so going back to appendix we look at that and say and look at the average return on capital invested in Las Vegas and say you got to be kidding. There's no way we do that.

Let's take a property I could tell you real numbers, I won't, but what we stuck in, just pick anyone Toledo, Ohio, terrific property for the money spend. Performance better than 20% cash-on-cash that's the kind of deal we get excited about.

So well, if you're going to pick your poison and it's more broadly I would say that look we would do a deal with a shack on the beach. I'm speaking to seasonally, if we were satisfied, the cash flow was great and dependable.

So I mean I can't say it more plainly than that but with the Bible line that “many are called but few are chosen”, well that's kind of the way I think we see it. Go ahead..

Well, look I wanted to just follow that up quickly, I know I've asked the question before and gotten the answer but is there a set of circumstances around which you would consider wanting to sell anything?.

Us, sell asset. Sure, I mean somebody want to offer some incredible price that it's absolutely in the best interest of shareholders, we'd happily do that but I don't see it selling any of our leases at this point..

Yeah, we worked hard to get the scale that we currently have and looking at some of the things we have on the horizon, we intend to continue to grow. So we're not interested in going backwards..

Understood. Okay. Thank you very much. Appreciate it..

Thank you. Our next question comes from the line of [indiscernible]. Please proceed with your questions..

Good morning..

Morning..

So just quickly touching on touching on Pennsylvania and the many casinos out there, I mean how do you weigh that as an opportunity versus a train on revenue at Penn and Meadows?.

That's it.

Well, I think the Meadows I think is pretty well protected given the fact that there really can't be any casinos within a systems within a range that would have an impact on the Meadows between them and the downtown Pittsburg facility, the river, the zones protection or such that I think the Meadows did very well isolated and protected from Pennsylvania.

Penn National on the other hand is obviously much more exposed. And we were going to have to wait and see how that work. We take comfort that Penn acquired a license been in the area that is probably the largest market for Penn National that can be affected by the new tax for the new Pennsylvania site.

It doesn't mean that the process is over, I mean they think they're going to give 11 sites or something like that, they're just not 11 sites in the state. In my mind I think there's more market last that it will have some impact could have some impact on Penn National..

Not much though.

I mean if you look north and look west, we are on cows at there, I mean really hard which is why Penn had protected market to the south by the way probably the largest of them, you don't care about Penn but you're an outsider coming in that would have been the largest available market the New York, Northern Maryland kind of market that would be available in the States.

So Penn did well to lock that up and in fact yeah I think with a very, very smart move on their part. So I don't think there's a lot of exposure because there's just not a lot of places that people can go around Penn National.

Further east potentially posted where we are somewhere between King of Russia and it's possible, but we're just going to have to wait and see. I think Penn itself and in its call this morning said I think today isn't there another auction today, it's going to be interesting to see how that all plays out.

But Bill said it right, there are not enough spaces just nowhere to go on the state, still not 11. There is still two more sites, yeah sure that will work but. On the other hand States done very well because they got way more on each site than they could ever imagine, so economically they're going do fine..

Understood.

And then there's an opportunity you guys I mean how does that market look now you're going to have this additional competition in there, is it something where you think there to do some attractive acquisition opportunities either with Penn or some of the other operators coming in and bidding on these states?.

There could be, we'll have to wait and see how that plays out. I don't - I think they're going to be relatively small facility, I don't think these are going to be, these are not your major huge facilities by any stretch of imagination with 750 machines and the table that I think those will be relatively modest facilities.

There could - listen, we look at and say yeah, is that something would be interested in, we could well be interested in. I mean we have some limitation within our belief in terms of what we could participate and finance new transaction.

We have a 50 mile zone relative to being able to if it was somebody the Greenfield type project that wasn't a Penn National - wasn't being done by the Penn National or we would have. We couldn't participate if it was in 50 miles of the Penn facility. In that protection it works both ways. It works for the tenant but it also works for us.

So I think we just have to wait and see where all of these facilities end up being placed and how they are capitalize..

Okay. Make sense. And then looking out to future with Boyd, I know on their call they stated lease structures and look well pretty similar to PNK's existing lease structure those four properties but without the corporate guarantee.

I mean is there any more negotiating to go with those leases or is that kind of steady and stone the way it's been laid out?.

I think to address the issue of the corporate guarantee, what we did and said is we got a much higher default rent coverage ratio. So that at the end of the day if the asset - the only time you care about a parent guarantee is if the assets are struggling.

And so we've got an exchange for not having the parent guarantee there is a much higher ratio relative to when the lease falls those in the fall, which gives that rights and the other ability to have a negotiation much earlier if those assets aren't performing that we would otherwise have which company given us parent guarantee..

Okay..

These are outstanding assets that they well established strong players in their markets, it's about a safe and rock solid as you can get. And one will support the other, so I mean I don't think there's much concern there..

Yeah, they are cross collateralized between them. So the assets that they got within net lease are cross collateralized..

That makes sense. And then you looking at guidance a little bit, straight-line rent is going to kind of move around as well the direct financing lease.

Is timing of that just the PNK direct financing lease that will move down with the rent reset in April and then the straight-line all that straight-line kind of move down is with the Penn reset in November?.

No, the direct financing lease doesn't have anything to do with the anniversary of it, it's just a straight line and amortization that goes down overtime - or that with the direct financing piece sorry.

And then the straight-line rent is for Penn, at the end of the five years which we were originally required to take the portion of the rent of the tenant to be fixed which was the original variable part, amortize basically recognized that over 35 years that we've been deferring the straight line on that.

That will flip on the five year anniversary, because will then be through that initial five year lease period, it will then instead of being rent that we're deferring will actually be recapturing rent that we've previously deferred. The net impact of all that for clarity, there will be no impact to EBITDA or the AFFO.

However, both FFO and net income will both increase dramatically which you are seeing a portion of that in 2018 and will be much more meaningful in 2019..

And understood on the straight-line.

So the deferred financing lease just with that doesn't change at all because if you take the 1Q and you just run it out, it will be higher than the full year?.

The deferred financing lease adjustment will actually increase because inside it being add back as a receivable, it gets recognized in that deferred financing lease line as rental income and that's really just due to Pinnacle rent reset occurring in 2018..

Okay. Yeah that makes sense. And that's it for me, thank you very much..

Thank you..

Thank you. [Operator Instructions] Our next question comes from the line of [indiscernible] Please proceed with your questions..

Hi, guys. Just quick question, recognize guidance excludes the Penn, Boyd, Pinnacle transactions, U.S.

care speculate on when you think it may actually come in to numbers this year and what it may contribute on pro forma basis?.

Yeah. I mean Penn has indicated that they expected to close in the second half. They clearly have much better inside as to the timing. I think I would - as a plus minus I think it's probably in the middle of that but I have no information that in any way better than what they've got.

They're certainly having all the means that they alluded to on their call with SEC and with the regulators not that we have and also sometime been invited to speak at the regulator meeting, but we're really more the third party participant.

And I think there's a combination of obviously you got three gaming entities, really two but you got Pinnacle, how is kind of actively going away, you got Penn it going a got license in the States. We have to get license in that as well. But then you've got Boyd, who's going to get license in the States which has started from scratch.

So I think it's going to be in the gaming industry typically it takes anywhere from nine months to a year to get through the licensing process, particularly if it's a brand new entity that's getting licensed and if it's complex entity even more inclined to be longer than shorter..

Let me make this comment, we see no obstacle to getting this done at this time. Now I'm going to put out a general counsel who's sitting right next to me on the spot, who could offer without any inside knowledge, a general view September, October, I mean..

It's tough to say, I mean we haven't been a part of the discussion that Penn and Boyd have been having and clearly the applications in those states are more on there than they are on us.

With respect to Massachusetts, where we do have a direct contact and obligation, I certainly think will be within that timeline and we're encouraged by the conversations we've had with them on their timeline.

But again, I think you have to defer to Penn or Boyd and or Boyd in the discussion they're having in some the key states is what the ultimate timing would be. If I guess, there will be pure speculation..

Got it.

But with respect Massachusetts given the recent events of occurred any - have you spoken with them since win stuff has popped up and whether or not that might slow things down on your side because of how they're trying to progress on that front?.

We have no reason to believe that the analysis they're doing with respect to the win company will have any impact on the timing of our suitability review. Several of those both that are here with our company now were previously reviewed in connection with Penn's review because that look like before the spinout of GLPI from Penn National Gaming.

And so not everyone here is the stranger to Massachusetts. And we believe that will get the application quickly and that won't have a significant perhaps any impact on the timing for us..

Great. Well thanks, guys. I appreciate it..

Thank you..

Thank you. Mr. Carlino, there are no other questions at this time. I will turn the floor back to you for any final comments..

Okay, well thank you very much and thank you all for dialing in this morning. We're happy about our last year results and pretty excited about what we see on the horizon. So with that see you next quarter..

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation..