Gaming and Leisure Properties, Inc. (GLPI) Earnings Call Transcript & Summary

Greetings, and welcome to the Gaming and Leisure Properties Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. It is now my pleasure to introduce your host, Joe Jaffoni, Investor Relations. Thank you, sir. You may begin.

Thank you, Christine, and good morning, everyone, and thank you for joining Gaming and Leisure Properties Third Quarter 2026 Earnings Call and Webcast. The press release distributed yesterday afternoon is available on the Investor Relations section on our website at www.glpropinc.com. In addition to the third quarter press release, GLPI also posted a supplemental earnings presentation, which highlights the events of the quarter, recent developments and future considerations that can also be accessed at www.glpropinc.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. Forward-looking statements may include those related to revenue, operating income and financial guidance as well as non-GAAP financial measures such as FFO and AFFO. As a reminder, forward-looking statements represent management's current estimates, and the company assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to risk factors and forward-looking statements contained in the company's filings with the SEC including its 10-Q and in the earnings release as well as the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release. On this morning's call, we are joined by Peter Carlino, Chairman and Chief Executive Officer of Gaming and Leisure Properties. Also joining today's call are Brandon Moore, President and Chief Operating Officer; Desiree Burke, Chief Financial Officer and Treasurer; Steven Ladany, Senior Vice President and Chief Development Officer; and Carlo Santarelli, Senior Vice President, Corporate Strategy and Investor Relations. With that, it's my pleasure to turn the call over to Peter Carlino. Peter, please go ahead.

Well, thank you, Joe, and good morning, everyone. Happy once again to report another strong quarter here at GLPI. And I would note that despite volatility in both the debt and equity capital markets, our tenant operations and our businesses remained stable as evidenced by our AFF growth again exceeding 10% in the third quarter. Importantly, 19 of the 13 leases reportedly remain stable or expanded in coverage for the period ending June 30. And with healthy growth exhibited across the regional gaming environment again in the third quarter. So the gaming world is very, very strong. Our growth was again driven by a combination of transaction activity and ongoing development capital funding. Notably, our funding for Bally's Chicago casino remains on schedule with the casino remaining on track for first half of 2027 opening. . With respect to the Live! Casion & Hotel Virginia project, we acquired the land associated with the facility in the first quarter and began funding the project and the entire project in the third quarter. To date, the performance of the temporary facility bodes very well for our underwriting of this development towards which we will fund $467 million. I should also note that we continue to see a healthy runway of growth from our development pipeline. And despite the current capital markets and the climate that we're facing right now, transaction activity remains healthy. as we evaluate a range of potential transactions. Our balance sheet remains nicely positioned, providing us with flexibility in an environment like the present which triple net REIT equity valuations have been, to say the least, disappointing. Importantly, despite our leverage capacity providing flexibility, our underwriting principles remain unchanged. We continue to prioritize healthy long-term leases and an accretive spread to our cost of capital. Nothing remarkable in that. It's all good stuff. With that, I turn it over to Desiree.

Just one clarification. It's 9 of 13 of our properties have rent coverage that either exceeds the prior quarter or equal to the prior quarter. And then I just will start out and talk to you about our income results. So for the third quarter of $26 million. Our total income from real estate exceeded the third quarter of $25 million by almost $38 million. This growth was driven primarily by $47 million and increases in cash income resulting from acquisitions and escalations. For Bally's, the acquisition of Bally's Lincoln real estate increased our cash income by $14 million. The Chicago lease increased our cash income by $12 million. The Belle development increased cash income by $1 million. For Penn, the Joliet funding, Aurora funding and M Resort funding increased cash income by $8 million. The Sunland Park strategic acquisition increased cash income by $3.8 million. The Dry Creek I own and Virginia loans increased cash income by $4 million. and the recognition of escalators and percentage rent adjustments on our leases added approximately $3.8 million of cash income. A combination of noncash income items from revenue gross ups, investment in lease adjustments and straight-line rent adjustments results in a collective year-over-year decrease of $9.1 million. Our operating expenses increased by $65 million, mainly due to noncash adjustments in the provision for credit losses. Included in our release is our full year 2026 guidance of between $1.22 billion and $1.225 billion or $4.11 to $4.12 per diluted share in OP unit. The guidance does not include the impact of future transactions. However, it does include additional development funding of approximately $265 million, bringing our total development spend for 2026 to $800 million. From a balance sheet perspective, our leverage ratio is at 4.8x, slightly below our target level of 5 to 5.5x and our rent coverage ratios on our master leases range from 1.61 to 2.46 as of the end of the prior quarter. With that, I'll turn it back to Peter to open up for questions.

Yes. I think we're ready for your questions. So Christine, please open the floor. .

[Operator Instructions] Our first question comes from the line of Greg McGinniss with Scotiabank.

Just wanted to touch on Bally Chicago, where the company talked about kind of scaling back their investment in that property, obviously, still making the vast majority of it. But how does that how does that make you guys feel about the underwriting you did there? What your expectations were going in relative to the property that you'll end up with?

This is Brandon. I'll start with that. I think the underwriting hasn't changed. So what they're doing in Chicago to slow down the development of the hotel for political reasons or otherwise, it doesn't change how we view the market or how we ultimately think that property will perform. I think it's somewhat unfortunate that the city took the position it did and put valleys in the position to have competition potentially that I didn't think it would add I think it's unfortunate for us that they slowed down the construction of that they may delay the opening of the full complement of rooms. But ultimately, when that property fully ramps, I don't think we have a different view here as to how it will perform.

Again, I'll just add to that. From GLPI's perspective, our capital funding is going out on the same schedule it was that casino operation is still on schedule to open in the first half of the incremental amenities, obviously are included in our original underwriting, and we believe all of those will be developed as previously expected, just over perhaps a little bit longer time than we previously contemplated.

Yes. And lastly, I'll just add that we did underwrite the chance of Bally in Chicago. So we still feel good about our under the rent coverage that we expect.

Okay. And then just switching gears to the Prologis joint venture. Is there any way for you guys at this point? I mean, I guess, it's free cash flow funding in terms of if you were to do additional investment there. how to fund that accretively to increase your ownership?

Well, we should point out that the Prologis deal is on the property of the former Hollywood Joliet site. So that's property we already had on our balance sheet. We were utilizing that in a transaction rather than selling it to potentially generate a lot of excess income out of that from what we would have achieved if we just sold it on the market in fee simple. If the question is, are there opportunities to expand on that relationship, I would say perhaps. We've developed a good relationship with the Prologis team. I think we're all excited about the potential project in Joliet. We obviously have excess land on our -- in several of our properties, but that's mostly leased to our tenants. And so I won't tell you that there's a huge supply of potential sites on our balance sheet, but I wouldn't say that there is none. So we'll continue to see how that relationship expands as we develop it, but we're excited about the opportunity in Joliet.

And I think your question was about our investment level. And I think our agreement allows us, as we've disclosed up to 30%. We can't tell you exactly what that will be because it depends on the opportunity and what is developed at the site, whether it's -- whether it's just on prefab and we don't know who the tenant is or it's done specifically for a specific tenant. -- but we would have the right to invest up to 30%.

Yes, let me note that this is a terrific piece of property and we are fortunate to align with a terrific partner experienced partner. And this is going to unfold over a period of years, but it's going to create a great deal of value. We have a high degree of confidence in that. So this is kind of a free be. This is one of those lucky things we're able to do, move quickly to take advantage of the ground when we got it back. And I've looked at the layout of what is anticipated. So I -- we couldn't be happy and has been said, we will look for other opportunities in our portfolio. .

Our next question comes from the line of Jamie Feldman with Wells Fargo.

Great. I guess just sticking with Prologis, I mean first venture into industrial, just with interest rates moving, the transaction markets getting shaker and just listening to conference calls across all of REITs. There's some property types more than others that maybe people need capital. Does this open you up, anything we can read into doing this deal? It sounds like it's not a site you had, but does it -- are you considering doing more outside of your core wheelhouse?

Yes. I think simplistically, this was a unique situation where we had a very attractive land parcel. I think it was a monetizable asset that was otherwise going to likely generate very little value for us. We found a great partner to go forward and do it, as Brandon and Peter alluded to earlier. -- there might be some other opportunities within the portfolio for us to do similar things. But I think from your perspective, it's probably better to think about this as more of a one-off and taking advantage of an opportunity that presented itself for us.

We don't see a downside here at all. It's only good news.

Okay. And then just in terms of a JV structure, that's new also. How do you think -- I mean you made the comment before about disappointing REIT equity prices, how do you just think about JVs going forward and ways to grow the balance sheet of the business?

I think generally, we've seen JVs employed in the net lease area. I think we've taken a look at that. We haven't seen anything compelling in that for our portfolio. But look, I think it's one of the multiple things we have at our disposal that we could potentially utilize if we have a need for capital, and we don't feel like we're being supported by the equity market. So at the present time, I would view that as something we all collectively gotten a lot smarter on in the last 3 or 4 months. And I think we understand it well. And if it's something that we can utilize to our advantage in the future. You may see us do that. But I wouldn't read through the JV of Prologis to be the same. I think that JV was a situation where it was the best structure. It's what Prologis preferred to get into that structure. And I think the read-through you should have there is if we're going to step outside of gaming, we're going to seek to do it with folks that know what they're doing. And clearly, Prologis is at the tip of the spear when it comes to developing these industrial sites.

Our next question comes from the line of Smedes Rose with Citi.

I wanted to ask just a little bit about, I guess, your kind of cost of capital, which like a lot of names in the space is a little more challenged now. And with the shares trading at a high dividend yield and a 20% discount to at least consensus NAV. Any thoughts on putting in a share repurchase program, do you think you -- I mean, I think one of the overhangs is probably concerns around values and the going concern language. Any kind of comments you can provide around your confidence in value at this juncture? And maybe just other ways that you might be able to attack the steep discount that you share trading at.

There are 2 different questions. Very different. I think we'll talk about maybe the Bally stuff first. I think the way that we think about the relationship with Bally's is in parts. There are 2 leases that are each 9 figures of annual rental stream. Both leases, as you can see, are covered at 1.98 and 2.13x. We feel very good about that. Chicago, as we discussed earlier on this call is nicely towards the first half opening. We feel good about that. Obviously, there's some other smaller pieces of business that we have with them, but all of which we feel relatively good about. As it relates to the buyback and obviously acknowledging why you're asking, and it's clearly topical right now. You're right, our cost of both equity and debt capital have gotten have deteriorated over the last several months. I think it's something that we think about, we talk about internally, we measure it against other opportunities with the pipeline that we have in place today that's already been established. I don't necessarily think it's something we're running to do, but I think it's something we do discuss routinely, and we'll continue to do so.

Yes. My quick reaction is that a buyback is always the last resort. It's when you run out of all of the hope and you decide to [indiscernible] . So we've got a nice pipeline that the team, Steve and Brandon are working on it and feel pretty confident that there's opportunity out there. The current pricing won't last forever. There is some debate around the table, but how long it might last. But so long as we can do accretive transactions and put them on the books, we're going to do that.

Our next question comes from the line of Brad Heffern with RBC.

Peter, just following on your comment there. Are there accretive transactions that you're looking at now that would work on this current cost of equity?

I think we're saying yes. I mean -- or we don't do them. It's that simple.

Steve, why don't you -- go ahead.

Are we just don't use equity, right? As we've said and looking at our development pipeline, we're funding it with free cash flow and with debt for the most part, because we don't like the price of our equity to be honest, and it is way too low. So accretive to our cost of equity is one question accretive in general, that we could put up a good deal for our shareholders is another one, which I definitely think we can do by using the strength of our balance sheet.

Yes, I'd agree. I mean I think it's pretty apparent that the -- our cost of capital has increased a unproportional rate to the cap rate, you could probably push through on a transaction with a counterparty. The reality is, as Desiree said, there are a number of ways that we can structure a deal to still make sure we're achieving accretion on an economic basis. I would say, I think the benefit we have right now in the marketplace is this opportunity allows us to focus in a little more on qualitative features of transactions and be a little more discerning on that side. So I think whether that's whether that's looking at new tenant relationships, which bring about additional value to us demographics or location, geographic diversification that maybe we don't have today or that would benefit us and even property attributes, the opportunity to target a category killer or a property that doesn't have a competitive set nearby, Things like that, that are credit-enhancing are now effectively at a discount because the market is -- the price of everything has backed up. Cap rates are higher. And the question is, can you get now a better asset for a price you would have paid for a lesser asset previously? And I think the answer is possibly.

We're still open for business.

Okay. Great. I appreciate the clarification there. And then on Bally's, I talked a decent about it already, but just I'm wondering they had the going concern language added to the 10-Q, but then they've also recently gotten additional capital or have an agreement in place for that. Can you talk about how those events have changed your view of the credit risk level there, if it has at all?

Brad, this is Brandon. I don't think our overall view of their credit risk has changed. In other words, we weren't totally surprised to see that in the 10-Q because we understand where Bally sits. We remain optimistic with Bally's as a tenant in the going concern aspect because they have a lot of assets on the balance sheet that we feel will likely be monetized if they need to in order to proceed with their projects across the country. Those are very good projects. Chicago and New York will be very lucrative for them. Las Vegas. It's sort of a wait and see for them, I believe, but we believe that they have tools at their discretion to get to cash flow in Chicago, which I think is their first priority. It's not something that we're excited about. It wasn't a disclosure that we were excited to see, but I don't think it's changed our view of them on the whole at the present time.

Yes. On balance, we have other Bally's properties, as you well know, and they're all doing fine. So that the underlying credit, I guess, from our point of view, gets the shove, is positive from our point of view. We hope it doesn't get there. But .

That value is there.

Yes. I think if we look at the downside scenario, if we had to reposition these properties based on the coverages that Carlo has outlined earlier on the call, feel very confident that we would be able to reposition those assets. And quite frankly, Chicago is so far along. There would be several or the -- I should say, there are several parties who would be interested in Chicago at Bally has decided that it could not, would not or cannot proceed with that project. So we feel good about the Valley's assets we have, regardless of the fact that they filed this going concern 10-Q.

Our next question comes from the line of Haendel St. Juste with Mizuho.

This is Ravi Vaidya for Haendel. I had another follow-up on Bally's. There's a lot of articles that came out there talking about the fines imposed on Si Entertainment Group in Australia. It's about a $260 million fine. Given Bally's relationship with Star, is Bally responsible for paying this? And in your view, how does this impact liquidity, credit and maybe their funding sources for their for a few other projects that are ongoing right now?

Yes. So Ravi, thanks for the question. Just to back up here, when obviously, the Valley's team made the investment in the Star was eyes wide open that there was a significant overhang of a fine. I actually think that the end result is more than fine. Bally's Corp is completely unrelated to this investment. So I think what you're looking at is a situation at STAR that is isolated to STAR. And for the most part, that business has started to certainly improve since new management has taken over. There is cash there on the balance sheet to go towards this fine. I believe they have up to 19 months to pay the fine, and I believe the business has started to produce some elements of cash flow to handle it. So as far as we are concerned, the Star investment has no bearing on anything that necessarily relates to us in terms of Bally's core funding and ValuCorp's U.S. operations.

Got it. I appreciate the clarification there. And you mentioned earlier about cap rates moving up and that there seems to be a greater appetite for acquisitions and more deals. How much would you say if cap rates have moved up, say, versus a year ago in the regional markets that you're targeting?

Honestly, if you look at the last large-scale transaction that was announced was not a year ago, and it was the Golden transaction at a 7.5% cap rate. I think if you brought that market -- if you brought that transaction or a similar transaction in the market today, there's no way it's I don't think there's any way possible it is. And I would -- it would be -- I'd be hard-pressed to kind of guess what it would be. But based on that, I'd say you're probably in the neighborhood of 75 basis points wider. That's not a year.

Our next question comes from the line of Barry Jonas with Truist.

I appreciate the color on the pipeline. But as you think about it. I'm wondering if you see opportunities to acquire maybe already leased gaming real estate from other property owners looking to recycle capital rather than just originating new sale leasebacks with operators.

Yes, Barry, it's Steve. We -- by all means, we definitely have an interest in acquiring real estate. At the same time, I would say our underwriting might not be aligned with prior underwriting. So I think that's to say, yes, by all means, I'd love to buy some other real estate. I might decide when the team looks at it, we might decide that an asset that currently pays and I'm making something up $25 million of rent really should only be paying $15 million of rent because circumstances may have changed. Maybe there's competitive threats that have come in and impacted it, maybe escalation has been too high. we're not really sure. But by all means, we would definitely take a look at this. I just don't think it's as easy as plug and play because our underwriting standards are not necessarily aligned with some of our competitors.

Great. And then just a follow-up. Any updates on tribal discussions? And I know you guys have built out relationships over the past few years. So wondering if discussions would extend to maybe outside of just tribal lands on to looking at commercial deals.

[indiscernible] I missed the first part. Could you say it again?

Just looking for an update on your trial discussions and wondering if those relationships could extend beyond for deals outside of tribal land?

Yes. By all means, the relationships we're building with the tribes have definitely been progressing. It's just not -- it's not a rapid transaction there's just not a lot of velocity. There's a lot of educational aspects and teaching aspects that go into it to getting -- and building the relationship to get someone comfortable I think, though, the dialogue is definitely expanding. I think we've tried to do spend time explaining that there's a way to monetize the asset possibly on tribal land and utilize the proceeds to expand beyond that. And I think that has resonated with some drives, especially the ones that are more well capitalized and some of which have maybe already made investments off of off of the travel location to start with. So I think there's a continued opportunity. I think we just need to kind of get some momentum and build it as we go.

Our next question comes from the line of Robin Farley with UBS.

I know you've covered a lot of this already, but just going back to Bally's Chicago for a moment. If there -- and I think you've been very involved in sort of directly overseeing the construction there. But if there were to raise in the opening, can you kind of remind us in that scenario where there's delay what the impact would be to GLPI and how that would play out?

Robin, this is Brandon. I think from a high level, virtually no impact to GLPI in the sense that when our dollars are funded, we're getting paid for those dollars real time. So what it will do, if it's delayed further, will delay the point in time where Bally starts to realize some cash flow from the asset -- and that ultimately plays into this going concern and liquidity concerns. So I think directly to GLPI won't change our income off the project it will potentially change the time at which Valley starts to receive income of its own, and that will put further pressure on our financial situation. So I think that is more of an indirect impact, but certainly one that we're focused on.

Our next question comes from the line of David Katz with Jefferies.