Greetings, ladies and gentlemen, and welcome to Gaming and Leisure Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]It is now my pleasure to introduce your host, Jeff Jaffoni, Investor Relations.

Thank you, sir. You may begin..

Thank you, Jan, and good morning, everyone. And thank you for joining Gaming and Leisure Properties Second Quarter 2019 Earnings Call and Webcast.

The press release distributed yesterday afternoon is available on the Investor Relations section on our website at www.glpropinc.com.On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today.

Forward-looking statements may include those related to revenue, operating income and financial guidance as well as non-GAAP financial measures, such as FFO and AFFO.As a reminder, forward-looking statements represent management's current estimates, and the company assumes no obligation to update any forward-looking statements in the future.

We encourage listeners to review the more detailed discussions related to forward-looking statements contained in the company's filings with the SEC as well as the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release.On this morning's call, we are joined by Peter Carlino, Chairman and Chief Executive Officer; and Steve Snyder, Chief Financial Officer at Gaming and Leisure Properties.

Also joining today's call are Desiree Burke, Senior Vice President and Chief Accounting Officer; Brandon Moore, Senior Vice President, General Counsel and Secretary; Steve Ladany, Senior Vice President, Finance; and Matthew Demchyk; Senior Vice President of Investments.With that, it's my pleasure to turn the call over to Peter Carlino.

Peter?.

Thanks, Joe, and good morning, everyone. I'm happy introducing another steady quarter here at Gaming and Leisure.

We exceeded our previously issued EBITDA and AFFO guidance, and I will say as I usually do that, we continue to evaluate potentially accretive transactions that will add to our -- and maybe say this industry-leading base of 46 properties and -- which at least clearly to our industry-leading tenants.

So very, very strong base and we continue to work, building on that. We'll make our usual brief few comments.

Steve, you want to go ahead?.

Great. Thanks, Peter. Good morning, everybody. I'm just going to highlight a couple of things around the portfolio, the balance sheet and our guidance. Right now, you've seen in our earnings release, we reported record net income from real estate of nearly $256 million for the quarter.

As you also see from the press release, we continue to enhance our disclosures in response to feedback that we get from you, our investor and analyst base, as highlighted by the cash NOI reconciliation on the table on Page 10.

And additionally, you see the significant master lease details that are included in our press release, which include the critical issues such as 4-wall coverages of our tenants in the lease and mortgage table towards the back of the release.Just drilling down on the lease portfolio, the Penn master lease, just to highlight because it's mentioned in the press release, we did cease operations at the Tunica resorts facility as of June 30th, which resulted in our acceleration of the depreciation and amortization associated with that real property.

We're in the process with Penn of removing that property from the master lease and returning the property back to the ground lessor and as we've disclosed previously, there will be no impact to our lease income as a result of the removal of that property from the Penn master lease.On the amended Pinnacle master lease, we're currently working with our tenant.

That lease anniversary-ed on 4/30, April 30th. We are reviewing with our tenant the performance of that lease because at the anniversary date based on performance, we do look to realize escalators. PENN, as they disclosed in their earnings release, does not appear that they have achieved the level that will result in the escalators.

That feels like or seems to be based on their comments predominantly based on weather impacts and other nonrecurring impacts on several of the properties in that amended Pinnacle master lease portfolio, but we will be taking the next couple of weeks to get a better understanding as to what actually transpired there, and we'll continue to drill down on that opportunity.On the Eldorado master lease, we've been working with the Eldorado folks as new to the operator OpCo/PropCo model as of the October 1 closing on the Tropicana acquisition.

We've been working with them on their calculations of the rent coverages, taking into account everything that we record is 4-wall only, everything that we report also is on a 12-month trailing basis.

And given the fact that the recording to date from Eldorado has included prior periods prior to their ownership, we think that the coverages that you see reported today for the June 30th quarter reflect -- better reflect the performance of those assets.As you heard from the Eldorado call, they're very pleased with the operating performance of those Tropicana assets that are in our Eldorado master lease and are very encouraged by the performance they've seen specifically out of Atlantic City in light of two new competitors that have come online, maintaining -- closely maintaining the EBITDA on a year-over-year basis in light of those competitors.Moving on to the Boyd master lease.

As you see in the earnings release, we did realize the full escalator under the Boyd master lease as of its anniversary date, which was April 30th-May 1st.

That applies to both the three-property master lease as well as the mortgage property and the Belterra Park facility in Cincinnati, so we're very excited about the performance that we are seeing and Boyd is seeing on those assets that they took as part of the Pinnacle divestiture.Moving down the roster of our tenants at Casino Queen.

Casino Queen uniquely is a beneficiary of the Illinois gaming expansion legislation in several ways. The first is they did -- the management team entered into a memorandum of understanding as has been disclosed publicly in the St.

Louis marketplace to manage and operate the nearest competitor that was entitled by that legislation, the Fairmont Park facility.

So they have a unique business opportunity there, and they're also going to be the beneficiary of sports betting, they will be the beneficiary of some table games, tax relief and as an employee stock ownership plan owned facility, they will uniquely benefit from a 10-year tax credit as a result of the enabling legislation in the Illinois.Finally, as it relates to the Casino Queen, you do see in the table as -- on the lease highlights that their coverages have deteriorated between our last report and this report.

I will point out that Casino Queen reporting in our table is on a quarterly lag, so the number that you see reported today reflects where the property was as of March 31st, and we're very encouraged by what we've seen in the current quarter that we are reporting now in terms of their improved operating performance.

So, we're optimistic that what you see there is actually a trough, and we will start to see some improvement in the coverage from that tenant.Also, we did come to learn during the quarter that the secured loan that is in front of our subordinated loan, but obviously not priority to our lease.

The secured loan was sold by the existing commercial lenders to a strategic investor who does have a pretty extensive experience in gaming.

So we're very comfortable that there will be a new fresh set of eyes looking at the operating performance there and providing impact on the performance at Casino Queen.The last asset under the lease portfolio, of course, is the Meadows. You'll see in our guidance; I'll touch on it later.

We've removed any Meadows escalator from the upper end of our guidance. The Meadows lease anniversary is September 30th to October 1st. We are anxiously working with Penn and monitoring the portfolio that -- the performance of that asset to see if there will be any possibility to realize an escalator there.

You can see how close the coverages were as of the 12 months ended June 30.Lastly, on the portfolio side from a TRS standpoint, you'll see that, that TRS subsidiary did hit spot on.

The guidance that we provided previously for the quarter in terms of its EBITDA performance, I will highlight that the smoking ban in Baton Rouge did anniversary on June 1st.

We were actually starting to see some modest pickup before the fear of Hurricane Barry stepped into that marketplace, but I think long term, the management team at both our Hollywood Casino Baton Rouge and our Hollywood Casino at Perryville have a very strong grip and have been very active and engaged in improving the operating performance in both of those assets.On the balance sheet update, I just point out a couple of things.

I think there is significant detail in the press release. You'll see in the press release that our balance sheet includes 15% of our debt as variable debt and 85% approximately of our debt as fixed rate.

Our gross leverage as of the end of the quarter based on a trailing 12-month basis adjusted for the acquisitions that we completed last year was 5.62 times at June 30 and net leverage was 5.59 times and finally on the balance sheet, there was no activity on the ATM during the quarter.Lastly, on the guidance side, I would point out that we have fine-tuned our guidance and tightened the range based on what we're seeing from our principal tenants.

And the only difference that remains between low end and the high end of the range for our guidance is the realization on the high end of the potential full escalator for the Penn master lease as of its anniversary date, November 1st of this year, which would be $450,000 per month or in annualized basis of $5.4 million.So that's all I have.

I'm going to turn this back to you, operator for question and answers..

Yes. Let's go straight to Q&A..

[Operator Instructions]Our first question comes from the line of Nick Yulico with Scotiabank. Please proceed with your question..

Great. Good morning, everyone. Our first question is just on the acquisitions market.

Can you talk about what the pipeline of activity looks like? And then as well, what are your thoughts on whether there would be any acquisition opportunities that open up from the Caesars and Eldorado merger?.

That's a pretty fair question. Obviously, that is the big news in our space that has occurred and it naturally went where it was likely to have gone all along. I describe it internally as us kind of following the bread truck, keeping an eye on whether a couple of lows fall of the back, and we would be there to catch them.

So -- but we're paying very, very close attention to that. Otherwise, there are a number of smaller things that we're looking at today. I mean our rapid focus is really on safety, accretion.

It is what drives us here and there's nothing that's imminent, but I can tell you that we're pretty actively looking at a number of modest transactions that move the needle forward.

Steve?.

Yes, Nick. First of all, thanks, appreciate you and Greg joining us, and thank you for adding us to your coverage universe and I want to commend you on the great work that you've done moving up the learning curve on this asset class, so really appreciate having -- participate in this phone call.

In terms of the question from an M&A perspective, look, we, as a management team continue to be engaged actively on a day-to-day basis with respective operators. This financing source, this capital source that we created six years ago is the first gaming-focused REIT has now become widely accepted as a capital source.

When I hear folks like Josh Hirsberg at Boyd talk about lease financing as an equity-like capital source, it's clear that we are really moving into the mainstream.

So to your question, in terms of the M&A activity, we continue to work, as Peter mentioned and continue to be fully engaged with potential operators to look at opportunities that might spring from a Caesars Eldorado transaction to look at opportunities that might spring from Eldorado's or Boyd's or the PENNs of the world who look to rationalize their portfolio.

So this will continue to be as it has been very episodic, but you can rest assure that we are dedicating all of our resources to looking for those growth opportunities..

Okay. Great. That's helpful. And then just a second question is on the TRS Properties.

Can you just remind us kind of how long you plan to operate those? Shall we expect the sale of the operations or it's some sort of leaseback over the next year? And how do you think about managing, selling those assets versus trying to reinvest, so that's a kind of earnings dilutive situation?.

People are smiling and looking across the table, Nick, for that one. Look, our answer has consistently been over the last 5.5 years that we like having our toe, our fingers, if you will, still tied to operations.

I think one of the strengths that we bring to this industry is a lot, a lot and a lot of years of gaming experience and the ability to underwrite stuff. We have the pretty accurate knowledge of markets properties and management. That having been said, I mean, we like those properties.

I think they serve the purpose that I just outlined, but look under some circumstances we're always surveying opportunities. An outright sale is probably less likely. We would more likely find ourselves interested in tying it to a multi-property transaction if you would should such a thing occur. But look we're very happy with owning those properties.

Content to do so indefinitely, and we have no imminent plans to sell them..

Okay. Thanks everyone. Appreciated..

Thanks Nick..

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

Hi. Good morning, everyone. I want to express some my appreciation and approval of the disclosure in the release and the discussion around it, very helpful. What I wanted to ask about is the mix of the portfolio. We do presume that you are engaged in active and looking at everything, as Steve you've done for -- I won't go in short, guess how many years.

I'm not saying it. Because if you were doing it, I was watching, and it's not good for either of us.

So look, the prospect of owning things that may be on the Las Vegas Strip and the discussion around the perceived inherent value of those kinds of assets, larger, or more fully integrated resorts or things in that category, how do you think about those opportunities without being specific about either one, any particular one, do you think that those would be -- could be additive to the portfolio and ultimately to the evaluation on a company?.

Look, David, we do look, as you point out, at everything and there are some highly rumored potential transactions on the Las Vegas Strip. We have a view having grown up in regional gaming that there is much greater volatility on the Las Vegas Strip.

We think the experience from the great financial crisis sort of proves that there's much greater volatility on the large mega properties on the Las Vegas Strip relative to the regional properties.You probably seen the Green Street Advisers research report that we collectively as an industry have worked on and was released and is available on our website.

We, as a result of that, in looking at underwriting an asset that has greater volatility would look at different coverages than what you see in the existing master lease portfolio.

And we'd really be focused on what the operator, what our tenant partners plans would be for the facility.So, someone coming in just using a hypothetical that is real-time and unpacking an asset that has been the beneficiary of the Caesars rewards or total rewards program, that becomes a very difficult asset to underwrite unless you have the right operator, the right profile and the right business plan.

And so these are obviously all hypotheticals, but hopefully, they give you a flavor as to how we would think about underwriting opportunities as you've asked..

It does. And I asked the question in a general way really because of that dichotomy on the one hand, there is an inherent perceived value in those assets on the strip, those larger-scale resorts. Despite all the facts, historical facts that you cite, which are completely accurate.

We see that in other facets of hospitality, right, where higher RevPAR, higher rate assets tend to fetch higher multiples despite that volatility, despite what we would agree is perhaps a lower profitability level.

And I just think it's an interesting intellectual exercise and it's a differentiating factor I think for the moment would be your company versus others versus your peers..

No. It is a very -- you're spot on. It's a very differentiating factor and it really is reflective of our experience and also very reflective of management's really stake in this business, given Peter's family as one of the largest shareholders in the company.

We're really building a portfolio of lease income that we feel very comfortable is going to survive through the next decades, not just through the first term of the lease..

And I think to -- philosophically to talk to that aspect of your question is really dichotomy in that inherent value you brought up, on one side as there's population growth, there's certainly a case that you'll see land value appreciation there over time, but the reality is that comes with an operating CapEx flow that acts as a tax on the cash flows that ultimately pay our lease payments.

And you can't really get one without the other in our case. And when you net the two, the compellingness is not when you adjust for volatility. That much more attractive than any of the other markets that we're in..

Got it. Thank you very much. And well done..

Thanks David..

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

Great. Thanks. So just a quick question on Casino Queen.

Do you think it's possible you can recover some loan you rolled off last quarter?.

Barry, that is a great question. That is -- that sort of remains to be seen, obviously accounting convention, we're not going to realize anything until the check clears. So it is a work in progress and all we can say today is stay tuned..

Got it.

And then, look -- given the interest level this space is getting right now from REITs with higher multiples, what's the right way to think about accretion levels on deals you might be able to close? You think you'll be able to get the same level of accretion you've just seen in the past?.

Look, Barry, let me react to your comment first, by saying anyone that sort of brings an institutional awareness to this asset class, whether it's another REIT, whether it's private equity, whatever the case might be, we think we'll overtime enhance the relative value that we have in our portfolio because if somebody were to start today to replicate the portfolio of assets and master leases that we currently own, I don't know that they can achieve what we have in any lifetime or multiples of lifetime.

So I don't lay awake at night worrying about others entering the asset class, I really focus and we, as a management, have focused on the things that we can control, educating investors as to the quality of our cash flow.That being said, are we going to see the same level of accretion in future transactions as we've seen in the transactions that we closed in Q4 of last year? That would probably be idealistic.

I mean, we are myopically focused on growing the company. We're going to look at opportunities to grow the company from an immediately accretive basis.

So it might not be as accretive as the -- almost double digits that we hit with the Tropicana, Eldorado transaction, but there are still tremendous opportunities in this asset class for us to continue to grow our business and for each of us in the asset class to continue to find our lanes..

Great. And then last one for me.

No look, we spend a lot of time talking about pipeline for sale-leaseback with casino operators, but do you see value and M&A with just other REITs whether they're gaming or nongaming at this point?.

Well, we haven't seen it to date, I can say that. It's tough to pay for somebody else's creative value. We rather work at creating our own. Look, I think Steve answered it pretty well, but let me add to that, that there's always a transaction out there that we will do and find to do. Yes, we've hit a lot of home run since we started this business.

We did. And we have, as recently as last year, so we're coming off a great year. There will be other transactions. They will be accretive or you won't finding us doing them. I mean it's simply a discipline. If we can't find home runs, we'll take a couple of doubles may be a single, how about a bunt.

I mean the idea to keep the ball rolling down the field and that is our object -- total focus isn't going to change. So maybe the character of kind of what we find out there may change a little bit, but as long as we're moving the numbers forward as we're widely committed to doing, we're blissfully happy here at this company..

Great. Thanks guys. And congrats on another solid quarter..

Thank you..

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

Hey, guys. Good morning. So I just wanted to ask as it pertains to the Pinnacle lease specifically and to the extent you could share, kind of the nature of the dispute.

From Steve's comments, it appeared more as though you were looking at kind of the impacts of in terms of what happened in the quarter, which we saw through PENN's results and weather and the nonrecurring nature of some of them.

Is there any change in the way that maybe Pinnacle under former management was allocating corporate costs towards the properties relative to the way that PENN is doing it now?.

Carlo, I want to recharacterize your question, first. There's not a dispute between us and our major tenant. We're trying to get informed. We're trying to get educated. We hear what you heard in terms of their earnings call and the nonrecurring impacts, whether they were construction-related or weather-related.

We are trying to understand as a result of the integration exactly how they're looking at the coverages because when you see the sequential decline in the coverage that we saw from 3/31 to 6/30, we just need to be informed and understand.

So I would not -- again, I would not classify it as a dispute, but we are on a fact-finding undertaking right now with respect to our major tenant..

Great. Steve, that's helpful.

And then just, if I may, am I correct in -- that would assume that the 2Q '19 Pinnacle portfolio EBITDAR was down or those 12 assets I should say, was down somewhere in the ballpark of like $25 million year-over-year?.

That is the math. It's basically the point of a degradation in the coverage versus the annualized lease stream out of those assets. That is the back of the envelope math that has us asking questions and trying to become more informed..

Understood. Thank you very much..

Thank you..

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

Good morning. Most of my questions were already asked and presented to you guys, but just a follow-up on one of your comments, Steve.

Can you just talk about now versus say 3 or 6, 9 months ago, the number of maybe new entrants looking at gaming real estate, whether those might be native American companies, other triple net lease REITs that aren't gaming-specific.

How extent to that particularly obviously there's one REIT out there that put on their board a gaming executive that you guys know fairly well. So I'm just trying to get a sense of how broad that is in respect to your comments about sort of the institutional class of real estate.

Investors looking at gaming real estate asset, and whether or not this question is sort of different whether you're looking at chunky sort of more Las Vegas real estate or sort of the kind of more regional smaller casino properties?.

Wow, Joe, you're asking for a thesis there or what?.

Opine you, right now. Go..

No. Look, the bottom line and Ginny's addition to the EPR Board is, she -- you're absolutely, right, she's a quality season gaming executive. Look, as I said, earlier, anybody that brings attention to the asset class and EPR certainly has indicated it and mentioned it on their earnings call.

We have seen, you asked the question about viable gaming folks getting involved and owning all of the real estate, all of Bethlehem. They also are now getting more involved from an OpCo standpoint and become potential partners for us and for others.

So I think what you're going to continue to see and as always been the case in gaming, when people get informed, get educated and they see this pricing and they see opportunities to deploy capital in a way that allows them to create incremental value, they're going to do it.

And quite frankly, that's what we saw back in 2012, 2011 when we started down this path to what created this asset class when we spun GLPI out -- GLPI out of PENN National. So I would expect that to continue.What we're doing as a management team is controlling the things that we can control.

We spent more time on the road this year than probably in all previous five years combined.

We've been in front of more investors and engaged with more investors, and I think you're starting to see the results of that in our shareholder roster as you see the quarterly reporting from institutions, so we're managing the things that we can in light of the environment that you pointed to in your question..

And just as a follow-up.

Is there anything -- any limitation or any nuance that would be different in terms of you're having a tenant that's a native American casino versus a more traditional casino? Not necessarily a casino that's on sovereign land but just as an operator, as an OpCo?.

Yes. In a commercial environment, no difference whatsoever..

Got it. Thank you, guys..

Sovereign land is impossible. Thanks, Joe..

Thank you. [Operator Instructions]Our next question comes from the line of Shaun Kelley with Bank of America. Please proceed with your question..

Hi, good morning, everyone. Would just like to echo my thanks as well for all the additional disclosures. It's quite helpful. Just to drill one out.

You guys I mean obviously another big development of the quarter was the Illinois gaming expansion and Peter, I think over the years you had some specific views about Illinois that I think probably proved out pretty pristine, but just broadly speaking when you think about your tenants, can you help us think about pros and cons as it relates to GLPI's portfolio? I mean, you're pretty clear on Casino Queen, it's a net positive.

How do you think about sort of the rest of it? Look, I know you purely -- you kind of can't get into maybe individual assets, but at a high level it's going to be a lot of supply, so how are you guys thinking about what that could mean for coverage in the medium term?.

Well, that's a very, very tough question, Shaun. Look, you've heard my criticisms over the years and I know Tim Wilmott on the PENN side as had some pretty clear comments about doing business in Illinois. It's a very, very unstable place. I've said worse, but it's a tough place to do business. I don't think we know yet how the tips are going to fall.

I mean that's my perception, Steve. You may have a different thought about it or an additional thought. But I think we're going to have to wait to see where these things get located, how it plays out. My general sense is, it's probably not good.

I don't think that's going to have any impact on us as a company, operators may have a different set of issues, but it's -- I don't think that script has been written yet..

Yes, Shaun. The only thing I would add to Peter's comments twofold. One, the timing of these things coming online is very unclear.

I know the legislation had some pretty short fuses for the awarding of licensing and licenses, but as we've all learned over the years, zoning, entitlement, local approvals, there are a lot of complexities to citing casino facilities that are really unique to this asset class, which are some of the moats that we have around our asset class.Secondly, as it relates to us, in particular, GLPI, given the two assets on the Illinois side of Chicagoland that we own in the PENN master lease portfolio, the Indiana asset that we own in Northwestern Indiana under the amended pinnacle master lease.

Fortunately, every asset that we have in Illinois absent Casino Queen, is in the master lease.So we feel very comfortable, and it's why we constructed the portfolio as it is and why we have a high preference for master leases when it comes to underwriting new opportunities.

We feel that we are certainly well protected, unfortunately, it's the operators who bear a little bit more of the burden of the impact of these forms of expansion, and it's also why the operators spend many, in some cases hundreds, in some cases millions of dollars of resources on lobbying throughout the United States to protect their industry.The flip side obviously is now we've got sports betting in Illinois and sports betting will enhance the operating performance of those assets that are in our portfolio today, while these new facilities are being cited and opened.

So we think quite candidly there might be a short-term benefit before there's any long-term impact, but again, that will be borne more by the operators..

Thank you, boss..

Thanks Shaun..

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

Hi, good morning. So with the Caesar Eldorado deal and VICI obviously announced that it had also done some forward sale agreements as well as put-call structures. Things that you guys haven't done in the past.

How do you thinking about those structures as potential options in the future?.

Well, those are two different questions right, from a capital raising standpoint, we've always looked at all options, including the forward, which was included as a component of our ATM. On the capital deployment side, I just completely lost the thought..

Put call..

Yes. That's it. Go ahead..

Yes, so on the put-call side, a consideration that's really important is each of these transactions obviously needs to be match funded, in our perspective.

And to the extent we have a put in our potential future capital allocation structure, we need to solve for that somewhere and that probably will be -- would mean just funding it well in advance of execution or a large portion of it to take the risk off the table.

And once you add that into the math on something that could have a long tail, it certainly pulls down your current and potential return on it. So it's just -- it's another variable that has to factor into the calculations, but all else equal, I mean generally we prefer to do deals normal course than have to have a structure like that in place.

And it also resonates when we talk with potential tenants, I mean an important thing in every one of our relationships is that -- reality that it's a long-term partnership where we help facilitate growth.

And to the extent that capital markets change significantly between now and when that might happen on our operator and tenant side, they're hopeful and want to be best assured that we're in a strong capital position to step up. And we have a lot of capital that could potentially be called with a put.

It may preclude us from being in that position all else equal..

All right, that's helpful.

And then just in terms of looking at nongaming assets, is that stepped up at all?.

Thomas, I wouldn't suggest that it's stepped up or decelerated. It's pacing as it always has. We look at all experiential kinds of opportunities. We look at all opportunities that would be adjacencies to our existing portfolio.

It's really just a matter of finding the right assets that have the same credit characteristics, the same resiliency and durability that we currently have because you should expect, as we've said in the past, if we go beyond gaming, it's going to be for assets that do have similar attributes to gaming. So that remains a work in progress..

Helpful. Thank you..

Thank you. Our next question comes from the line of John Massocca with Ladenburg Thalmann. Please proceed with your question..

Good morning..

Good morning..

So as you look at some of the transactions that might come out of the Eldorado, Caesars merger and probably just larger operator M&A activity generally, it seems like those have tended to be focused on kind of lower EBITDA properties sold to smaller operators looking to kind of scale up their operations.

So maybe what is unique about underwriting those transactions versus some of the larger deals you did in the last couple of years?.

It's certainly important to have the right operator in place that's got a plan that can actually add value to the assets and make sure that they're durable and stable over time. And then, it comes down to the locations, the underlying markets and how we construct the portfolio and a master lease around those.

So as long as we get comfortable with a lot of those similar attributes that we look at in a larger transaction, we can be in a good place.

And remember, given the shifts in the industry and the focus on larger properties by some of the public players, I mean there is an opportunity set that ultimately should lend itself to some smart folks that can really give the attention due to some of these properties that maybe of the radar for some larger operators that could create value for both the operator and for us as a landlord if they execute a business plan well, but it really comes down to that execution of the business plan and having the right person in the seat..

I can tell you that the guys have spent a fair amount of time this year, maybe more than ever, talking with cultivating new potential operating partners in the industry and that's almost an everyday process. It stepped up this year and ongoing, and we feel pretty good about that. So that's a good question, and we're very focused on it..

Okay.

And then on the detail side, looking at the balance sheet given the current interest rate environment, is there any thought towards maybe swapping and even potentially recasting and extending of the term on the Term Loan A?.

Yes, John, look, our biggest responsibility is to prudently manage the balance sheet. So you should assume that given the move in the 10-year treasury rate from 310 in November of last year to 1.74, 1.73 this morning, certainly has our attention.

If we had reacted to everyone who was coming and pitched us on locking in, converting hedging, take your pick in terms of what you call it, we probably would've been at a much higher rate because they started way back in the early spring. So we do monitor all the time the credit markets.

And obviously, given the $1 billion maturity that is due November of next year at 4 and 7%-8%, we do see some opportunity both from an interest rate savings perspective and an opportunity from just locking in longer tenure -- longer duration interest rates.

So we are looking at those kinds of things, but at this point in time, we don't have anything to share with you..

Okay. And then, on the kind of acquisition side again, as you go out and talk to some of these operators.

I mean are you getting any new I guess pushbacks or kind of reasons why they might be cautious about utilizing an OpCo/PropCo structure?.

Cautious or reasons why. Look, there's a wide spectrum, right, from guys that own all of their real estate to folks that own very little if any of their real estate and are very comfortable from an operating standpoint. So there are different business philosophies that are out there.

Some folks do feel that owning the real estate gives them a little bit greater cushion.

We're not going to change their views, but I do think that people are waking up when they see reactions to OpCo/PropCo M&A activity that results in the operators seeing equity value appreciation to the fact that maybe there is some portion of their portfolio that they don't need to own and can create greater operating leverage, but there is no uniform opinion out there as you would expect..

And the most frequent catalyst is the distinct opportunities, so if you'll look at most, all the recent transactions that have occurred except for one I can think of, I mean they've all involved REIT and OpCo/PropCo split just based on the state of the market and pricing in the market. So I'd almost argue it's more of an embrace.

It's just a question of when the catalyst come up to facilitate it. That's a good point because, look, it's going to be harder for buyers to execute a transaction if they don't have a REIT partner. Never going to get to the pricing..

Understood. That’s it for me. Thank you very much..

Thanks..

Thank you. At this time, I'd like to turn the conference back to Mr. Carlino for closing comments..

Well, that makes it simple and easy. Thanks to all very much for dialing in this quarter. We'll anxiously look forward to talking to you next round. Thanks very much..

Operator, thank you..

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation..