Gaming and Leisure Properties Inc

NASDAQ:GLPI

Earnings Call Transcript 2020-Q1

[Operator]

Welcome to Gaming and Leisure Properties First Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I would now like to turn the conference over to Joe Jaffoni with JCIR. Thank you. You may begin.

[Joe Jaffoni, JCIR]

Thank you, Sherry, and good morning, everyone, and thank you for joining Gaming and Leisure Properties' first quarter 2020 earnings call and webcast.

The press release distributed yesterday afternoon is available on 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 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 first quarter 10-Q and 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; 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; and Matt Demchyk, Senior VP of Investments.

With that, it's my pleasure to turn the call over to Peter Carlino. Peter, please go ahead.

[Peter Carlino, Chairman and CEO]

Thank you, Joe, and good morning everyone, and thank you for joining us today.

With us, as Joe indicated, is most of our senior management team who are equally available to fill in the blanks where Steve and I may miss something or some detail.

So with the outset, I want to say that this is not the first quarter call that I expected to make at the start of this year. We and our tenants were off to a terrific start, until the unimagined impact of the COVID-19 virus changed everything. We've just concluded a tremendously successful 2019 as you would know, but what a difference a week or two can make.

We saw our entire portfolio of assets completely closed, which happened virtually overnight. So we move quickly to try to understand what this shutdown could mean to our tenants and ultimately to us and figure out how to decisively mitigate any risk to our business.

We recognize that Penn National is our largest tenant was critical to our success going forward. Not knowing how long this crisis might last, we made a judgment that we needed a plan that we believe to carry us safely in the 2021. We've met several times with the Penn team, the Penn National team to fully understand their situation and work to craft a plan that would give us both companies the ability to outlast any plausible closure period.

To that end, again, as you would know, we purchased the Tropicana Las Vegas on - I believe very favorable terms in a transaction where Penn received credit for a approximately five months of prepaid rent and consider that - for that property beyond an outright sale which is - it would be perhaps a priority one, there may be a number of attractive options that we might consider.

At the same time we negotiated a new ground lease at Morgantown and by the way that property is under roof stalled, now of course, like so much else, but it's at a terrific location, one of the new properties at a cap rate - at a 10 cap.

We got a lease modification a number of things we were anxious to, to change with Penn. We got master lease renewals, Penn and we struck an option for Penn to buy Perryville and just a number of favorable things that came out of this whole package.

This outcome accomplished our original goal of giving us and our lenders and our shareholders visibility and predictability around Penn's rent payments through the end of this year. It also will ensure that our shareholders remain economically whole, which is a huge focus of ours from beginning. We weren't giving away something, we got true value and I think we got great value for that period of time.

We received almost 99% of our overall cash rent in April with payments in full from Penn, from Eldorado and Boyd. Casino Queen is yet to be settled, but we have had a constructive dialogue with their ownership group today and we believe that that should or could lead to a favorable outcome.

One of the most difficult parts of addressing the impact of the COVID outbreak was the decision to furlough the majority of our casino employees in Baton Rouge and Perryville, which really was a very, very painful but sadly necessary choice. We have maintained employee benefits at least through the end of this month. And we have retained certain personnel to help us plan for reopening as soon as safely possible.

Getting our employees back to work is a huge priority for us. And we believe as many of you may be seen, there'll be news soon that some of our tenants, all of our tenants, facilities may open as early as in the next couple of weeks, albeit with initial restrictions. It could be tough, we don't know yet. And I think we expect to have a lot more clarity on where this is going to go even by the end of this month as states feel increasing pressure to make decisions choices if we all see it happening.

So for additional insurance, you saw that we drew down our revolver this quarter, and we received approval from our directors to change the composition of our second quarter dividend to 80% stock, and 20% cash, which is an obvious choice to preserve cash to enhance our liquidity and flexibility given the impossibility of knowing precisely when these facilities will open, or how quickly they will ramp.

So the change was made in conjunction with a reset to our quarterly dividend run rate as well. The election to reduce the quarterly dividend was made -it really in an abundance of caution. There's no magic to that number. It is a reasoned carefully thought out number, but it's not the final word. We could well adjust positively later but we think that prudence suggested that we take a cautious view.

These actions along with others, as Steve Snyder will outline in his following comments should see us through. Our properties are extremely critical to the states where our tenants do business. The tax revenue that they generate is extremely important to most of them, especially now. So we expect great pressure for states to open their properties as quickly as they think, safely possible.

And then finally, you know, thinking about this, as I talk to you all this morning, you know, I want to say I've been at this business and its predecessors for a very long time. I was Penn National's President when it opened in 1972. And I lead our public offering in 1994. And through those years, I have weathered many, many challenges, though this one, I must say, he is like no other.

But we have a highly talented team here at Gaming and Leisure Properties who are more than up to successfully navigating through this crisis. So we do all that we must to ensure that when this all ends, we're on our way to being bigger, better and stronger than ever.

So we believe that there will likely be much greater opportunity for favorable asset purchases as we begin to return to normalcy and that the journey to regain our previous success will be both gradual, but certain. And through this all you can expect us to maintain the same focus discipline for which we have long been admired. With same company, we always work, very careful.

With that, Steve?

[Steve Snyder, CFO]

Thank you, Peter. And good morning, everybody.

Recognizing these are very unique circumstances that we find ourselves in, let me just get one housecleaning thing out of the way. First, we did file our Quarterly Report on SEC Form 10-Q last evening with the Securities and Exchange Commission. So there's an exhaustive detail in that tentative to the degree - I'll file questions after this call.

Obviously, this is a very unique earnings call and the quarter we are reporting, even though it was reasonably strong, and we achieved really all of our objectives in spite of our businesses being closed for two weeks during the quarter. This quarter really isn't the focus. The focus is on the steps we've taken to preserve value in light of the unprecedented velocity and depth of the disruption to the economy that has resulted in significant impacts on our and our tenants businesses.

COVID-19 has affected everyone, and as a company, we must look at the current circumstances through the events of its impact on our employees, our tenants and their employees, the communities in which our facilities operate, our creditors and all of our stakeholders as we rapidly adapt to a world that's evolving more quickly than we could have ever imagined.

Historically, the cadence of our earnings calls has been to follow our public tenants after they've provided us with four wall coverage's for the completed quarter to incorporate that critical measure of four wall coverage into our release. In an effort to provide more timely transparency, we felt it better to not wait given the impact that zero revenue months have in the near term on the coverage's of our tenants lease obligations. We will continue to work with all of our tenants to forbear covenant defaults, resulting from these closures as long as a collaborative dialogue continues with our tenants.

To highlight some of the steps that we've taken, and Peter mentioned a few of these, we've done extensive scenario analysis and had frequent discussions with all of our tenants, as well as with all of our credit groups. As you saw from the Penn transactions, the series of transactions that were announced, we had prior to announcing that transaction, gotten the cut of cooperation of our banks, and amending our credit facility agreement to allow us to recognize non-cash receipts as cash revenue for purposes of all covenant calculations.

We also withdrew our guidance given the lack of predictability relating to our monthly variable rents and our Columbus Ohio asset, the upcoming variable rent resets that we will be seeing under our master leases, the lack of escalator realizations here in light of the COVID-19 pandemic, and the TRS performance due to the duration of closings and reopening trajectory of our facilities.

We drew the amounts available under our revolving credit facility to provide enhanced liquidity, providing a quarter end cash position of nearly $560 million, which has been enhanced by the receipt of cash rents in April.

Finally, as Peter mentioned, we made the very difficult decision to furlough nearly 550 of our TRS employees, which was a very difficult decision to make but what we've done is we've continued to pay their benefits. We've committed to paying their benefits through the end of May and we'll evaluate this as May progresses, as we gain hopefully greater visibility as to the timing of the re-openings.

We've maintained the minimum staffing levels for security purposes, but also maintaining staffing levels to prepare for the reopening of these facilities and to provide for the appropriate sanitary and hygiene protocols to be prepared for the safe opening of these businesses for both our employees and our customers.

Lastly, we outlined in detail the financial impact to the company of zero facility revenue months, and the impact on the contractual rent adjustments just from the standpoint of our expense structure. Obviously, you all know our average monthly interest expense is about $23.5 million. We've taken the G&A in the company down below $2 million per month. And as disclosed in the press release, we've reduced the expenses in our taxable read subsidiary to under $1 million per month. So our total monthly cash burn on average is just over $26 million.

A real quick portfolio update, Peter mentioned that the Casino Queen did not pay its April rent. As you recall, they had an item pending in front of the Illinois Gaming Control Board in January for a change in ownership of that business. Given the impact of COVID-19, the change in ownership of that business has been slowed down. We are in very productive conversations with the sponsor of that reorganization of the business, who has also now the secured lender of that business, and we do contemplate a deferred rent agreement as part of the recapitalization of that business as it proceeds forward once that facility does reopen.

In Ohio, we were fortunate to get the Ohio racing commission to give approval to our ownership of the Belle Terre Park real estate, and we're working with Boyd to complete the transaction to include that real estate as owned real estate on our portfolio rather than the mortgage.

For the current quarter as Peter mentioned, our Board approved yesterday a dividend policy that reflects the impact of the current closures on the business. We're also changing as Peter mentioned the composition of our second quarter dividend to be paid 80% in stock to provide for a matching of our non cash distributions to non cash rent receipts.

The temporary step also provides a reasonable cushion to maintain our leverage targets and provide future balance sheet flexibility. Obviously, the goal on taking these steps is to both strengthen our current position, while also providing value enhancing opportunities in the future among things like evaluating alternatives with respect to our own acreage as a result of the Penn transaction.

We consider the current environment to be a temporary interruption in an asset class that - as Peter mentioned is essential to the state and local governments in which these facilities operate given the significant tax generation and employment provided by these facilities. We're very confident that the regional markets and our tenants will lead the way in the recovery of these assets when they do reopen. Social distancing in the form of virtual weddings or virtual happy hours or a virtual NFL Draft will not become the new norm. It's simply the current norm, which we and our tenants are planning for activity will return to these casino floors.

Finally, before I turn it over to you operator for questions-and-answers, I want to call out our team members. The folks at GLPI and in our taxable read subsidiary have really stood up and have shown their dedication and talent through these very trying circumstances. Our property management implementing the furloughs, our property management team working with our effective team members and seeking the support that's available out there, making donations of food and beverage to the local food bank down in Baton Rouge. We've taken significant steps to help all of us try and get through these uncertain times because there will be another side to this.

So with that operator, I would turn it over to you for questions-and-answers.

[Operator]

[Operator Instructions] Our first question is from Carlo Santarelli with Deutsche Bank. Please proceed.

[Carlo Santarelli, Deutsche Bank]

Hi, Peter and Steve. Thank you very much for all the color. If I could just start with - as you guys think about the transaction that you've already made with Penn, and you think about the go-forward from here, and clearly, there is a range of outcomes that are very difficult to handicap from just about any perspective. But acknowledging properties will start to reopen here in the coming weeks. How are you guys thinking about the ramp and potentially what levers they are left with some of your primary tenants or larger tenants in the event that we do experience a potentially slower ramp that doesn't necessarily translate to positive cash flows or cash flows that exceed the ability to kind of make rent payments down the road. Are other levers left to pull or other types of creative transactions that you guys are potentially contemplating?

[Peter Carlino, Chairman and CEO]

Well, you had actually a multi-part question. Let's start first with the Tropicana transaction itself and what we got for it. I mean, it's a 35 acre site and probably Penn remain if you will in Las Vegas is a terrific location, MGM and doing a lot of stuff around it that we think lends the value.

The tenants said previously that they were looking to sell that property. So that's not a new idea. And they were in active discussions with a number of people about that before all this happened. And by the way, significantly higher prices and what we're talking about today. Now, that doesn't necessarily mean anything for the future but we think that we got more than fair value at the number that we've identified, and we're going to have to play it out.

There may be some other things that I won't get into today that we could do with that property. The point is, we own it, we control it, and by the way, a simple sale would be fine. In the end, we weren't paid. We think we've got paid. We now have then had to monetize that in the form of hard cash rent. So that's about all I can say at the moment other than Steve, what would you add?

[Steve Snyder, CFO]

Yes, Carlo, obviously your question is what's left on the shelf if there is something necessary, and no one has visibility on when and nobody has any clear visibility on how these facilities will ramp back up.

We are in a constant dialogue with all of our major tenant - with all of our tenants. And we recognize none of our tenants plan their balance sheets for zero revenue months, none of our tenants came into 2020 with a business plan for a series of zero revenue months. So we will continue the dialogue with all of our tenants, we will look at and evaluate any and all alternatives that they would like us to consider but clearly the discussion is going to be if there is any kind of short-term compromise, it will come with long term gains.

Because we do at the end of the day, we own these facilities, we own these bricks-and-mortar, and we do feel we have a portfolio of really the best operators in the business in terms of realizing the maximum opportunity that exists in this asset class. So I'm not trying to avoid your question. It's one that doesn't have a clear answer. As you can imagine, all we can do is share with you the thought process.

[Peter Carlino, Chairman and CEO]

Yes, let me add. You asked about the ramp question. That is of course the toughest answer to provide because the truth is none of us know. You have announcements like yesterday, I saw that the Governor in Illinois said [indiscernible] for casinos. And they said, somewhere down the road, we'll talk about it. So it's indefinite.

And you have others, of course, looking to open much sooner. And then the next question is with what kind of restrictions, 10%, 50% all these things are unknown, and they're going to differ from state-to-state. But then consider something like West Virginia, we know is very anxious to get open. We're hugely important as an industry in that state that might put pressure on our governor here in Pennsylvania as an example to get this show on the road a lot faster than at this instance it seems he will.

So all this is a trip into the unknown, I'm utterly confident that all these places are going to get up and running sooner rather than later. And the only unknown is just how slowly will they come back. We don't know. Gamblers are in pretty active group, desperate group. People are locked up in their houses, and I suspect they're going to come in and assess their numbers we might first imagine. So that's my best and only answer to that.

[Matt Demchyk, Senior VP of Investments]

And Carlo, this is Matt, I'd also add on the topic, I mean, our operators are obviously in a lot better solvency positions across the board than they were just a few weeks ago. Penn in large part to this transaction, but they've taken meaningful steps to really address the circumstances and lose their cash burn to an important and comfortable place.

But I'd also point out to Steve's comments. I mean, you can look at a few signposts that were really relevant in Penn deal, and continue to be relevant for us to appreciate how we're thinking. And it was really getting to a point of economic wholeness for our shareholders with an opportunity for upside that we're really obligated to get for our shareholders wherever possible for any deviation from the norm.

And the bottom line question in all these decisions for us is, is the company's long-term value more or less after the decision is made versus before? And with Penn that we were very confident that that answers is, yes. And so I hope that gives a little extra color on how we think about things.

[Carlo Santarelli, Deutsche Bank]

That does. Thank you, guys. Thanks for all the color, and could I just ask one follow up, which I think will be a much simpler question. The monthly resets in Columbus and Toledo with the Greektown deal there is a floor under Toledo little less than 50% of the monthly rent I believe that you get from those two assets. How much lower is that slower than kind of where you were trending say in 2019 with respect to just that the monthly rent on the Toledo pieces that disclose somewhere or is that something you guys could provide?

[Peter Carlino, Chairman and CEO]

It is in the queue, it's $22.9 million is the floor.

[Carlo Santarelli, Deutsche Bank]

On an annualized?

[Peter Carlino, Chairman and CEO]

For Toledo, I'm sorry.

[Carlo Santarelli, Deutsche Bank]

Great, thank you.

[Operator]

Our next question is from Nick Yulico with Scotiabank. Please proceed.

[Nick Yulico, Scotiabank]

I just want to touch on the dividend. Peter, you did mention that. You could maybe adjust the dividend positively later. You didn't mention negatively. So can you just give us a feel for how the board thought about adjusting the dividends in light of obviously you had already the Penn transaction but if there is any other rent relief you might have to give to your other operators. How should we think about that your comfort level there?

[Peter Carlino, Chairman and CEO]

We of course, we don’t have the answers to any of those questions. I'll let Steve walk through the logic that got us to the number we selected. We just took a conservative view, I used to say when our rent ends but we are not in the gambling business, our customer's maybe we're not. And that certainly applies on the Gaming and Leisure side of things. We're try to be open, we try to be extra transparent all that you've seen over the years you've followed us.

So we just look at the logic and say, well, things aren't going up any too quickly. Let's look at a number that looks sustainable, under almost all measures, all those and to your other points could it be worse. Well, sure. I mean, if nobody opens, and this goes on forever, I mean, who knows what will happen?

So, but we are taking that view, we were much more optimistic? Take a look at Pennsylvania. Our two properties in Pennsylvania provide over $250 million annually to the state. And that's before income taxes, that's before corporate tax, that’s before everything. So those two properties in the balance generate almost $2 billion for the state of Pennsylvania, you can bet somewhere up there and the governor's office, they're thinking about how they get this back. So that's what we rely on ultimately, but just how it's going to play out God knows.

[Steve Snyder, CFO]

And, Nick, just a follow up on your question a little bit, in dealing with our board, in presenting this to our board, we basically looked at what the contractual impact is going to be on our business as a result of these months of negative EBITDA, and what that meant in terms of coverage's, what that means in terms of the resets of our leases, what it means for the operating performance in our taxable read subsidiary.

So we think we arrived at a set - a point for our dividend that is reasonable in light of the current circumstances. And will allow us to get back to growth trajectory in terms of returning capital to shareholders in light of where the balance sheet is. Because at the end of the quarter, you see we got well below 5.5 times net leverage, which has been our target.

So we're inside of our target ranges, we've got a very solid relationship with our bank credit group. And we think this messaging to all of our constituents signifies our willingness to make difficult decisions. And really an approach that allows us a nice runway going forward to get back to the trajectory, but we all need to wait and see exactly when these things open and how they open before we can arrive at a conclusion and tell you with certainty, that this is it. No more.

[Nick Yulico, Scotiabank]

Okay, appreciate that. And just my second question has to do with your other operators Boyd, Eldorado. Have you had any conversations with them about rent deferrals? And do you expect to receive full May rent from them?

[Steve Ladany, SVP]

At this point in time, we certainly do hope to receive full May rent since we are now at May 1. Everyone is certainly focused on maintaining the flexibility to get reopened and get reopened as quickly as possible, and therefore they don't want to trip any covenants. So you saw Penn got covenant relief when they announced our transaction. As you can imagine, if someone fails to pay rent, and there's a default under a lease, that is likely to be across default under existing credit documents.

So everyone is very focused on not allowing for a default that would cause an acceleration of a lease obligation or cause acceleration of any credit facilities that they currently have. So at this point in time, we are in a constant dialogue with all of our tenants. But really as it relates to May, everybody is really now focusing more on opening and obviously the open, you've got to pay occupancy costs.

[Operator]

Our next question is from Thomas Allen with Morgan Stanley. You may proceed.

[Thomas Allen, Morgan Stanley]

So Peter, you know this industry better than anyone else probably. What do you think the outcome will be from a state-by-state perspective of, the weaker state budget and potential more state legislation?

[Peter Carlino, Chairman and CEO]

By new state legislation that you think in taxes?

[Thomas Allen, Morgan Stanley]

I mean, taxes, expansion, shift to online I mean, how you thinking about it?

[Peter Carlino, Chairman and CEO]

Again, you know as much as I do about what's out there and possible and frankly, anything is possible. I hate giving vague answers, but this is one-time in my life where I have no freaking clue and of where this is all going to go. And I think it's going to be very different state-to-state. I mean, I'll make one observation that those states led by Republican Governors seem to be a little bit more ambitious.

But you make your own conclusion about that to get these places up and running, then some others, and in fairness, some of the Northeast states have been harder hit than some of the Western and Southern states. So it's going to be all over the lot. Some states are in big trouble. Illinois for example, just said they don't know where they're going to open and offered no guidance, yet their estate is in one of the worst conditions in the U.S. So I mean, this is just an unknown.

[Steve Snyder, CFO]

But, Thomas to your question I do think internet wagering, I do think sports wagering, I think things that were being contemplated before COVID-19 are going to be accelerated. I don't think that anybody expects that taxes will jump - tax rates will jump because obviously the operators have been significantly impacted by this event. So raising taxes on an industry that's already been impacted is negatively feels like a sort of an attempt to get blood from a stone.

And we know that all of our operators in the entire industry is certainly lobbying heavily to make sure that the industry comes back and gets back to where it was in 2019. So I see opportunities for enhancements. I don't see a real risk immediately of a wide expansion of additional facilities in states or anything like that. Only because I do believe that these state legislators will first try and protect their legacy industries and then of course, try and get them back as quickly as possible.

[Thomas Allen, Morgan Stanley]

No that’s helpful, thank you. And - this is a follow-up and - hasn't experienced change your thinking about your long-term leverage targets at all?

[Peter Carlino, Chairman and CEO]

Look, that's a great question, given how benign the interest rate environment had been, and I do think the interest rate environment is going to be pretty favorable going forward. I mean with a 10-year Treasury at 60 basis points. Obviously, people have made the argument should you have leverage and clearly financial leverage is something that we as a REIT are going to employ. What is the right leverage level, we felt quite comfortable.

The rating agencies felt quite comfortable, our creditors felt quite comfortable with where we were. And I look at this again as a temporary interruption and really just a very sound underlying business. So we have - that's a discussion that was had with the Board as part of the dividend policy. And the dividend policy does preserve the flexibility to migrate further and further down the leverage scale as you can imagine.

[Operator]

Our next question is from Barry Jonas with SunTrust. Please proceed.

[Barry Jonas, SunTrust]

Just wanted to go deeper into the Tropicana maybe it's too soon, but can you talk about the level of interest you're seeing here from potential buyers? And I guess with that, how are you thinking about timing, if you're going to sell it given you'll keep more proceeds, the longer it takes?

[Peter Carlino, Chairman and CEO]

The first order of business is to get paid convert what we have to cash. So there was an ongoing arrangement as I said Penn was actively working out, not mentioned the broker who's involved, but had an agreement to represent this property for sale. There was significant interest at a much, much higher price than where we are. And we of course have now full control of what that disposition gets to be.

We insisted that Penn keep it up in operating it's kind of hard to sell a house that got no furniture in it. And they've agreed to do that. And - they cover all expenses so the carry costs that we have to deal with [indiscernible] by them. It's really hard to know I don't think there's somebody tomorrow at 9 o'clock although there may be, there may be for all or part of that property. Remember, a lot of interest in the frontage there.

So we're just exploiting that it's just too early to say we've got a bigger concerns and that's getting - working with our Penn to get these properties open, get our properties open in Perryville and Baton Rouge. But soon as we see that there's a forward momentum within an Aspen and Las Vegas is coming back and so forth. We will and we've been in touch with those folks, but we'll make the awkward press. We can sell it early, I think that’s what we’ll do.

[Steve Ladany, SVP]

Yes Barry, let me just add to that. I mean by any metric in a normal market environment, looking at comps that are in Las Vegas, whether it's off script properties, like the REO or the Hard Rock that have traded in recent years, given our basis in this asset at under $9 million an acre for 35 acres of land that is the corner of Las Vegas, Boulevard and Tropicana, Boulevard. And the hotel rooms and the amenities that are on that facility.

We feel that we've got a very significant cushion to realize incremental value as a result of the transaction at an appropriate time. It's just that right now, as you can imagine, everybody is waiting to see where things are going to go. So to Peter's point, it's not like you should expect anything to show up tomorrow you should expect us to look for value maximizing opportunities with respect to those holdings.

[Matt Demchyk, Senior VP of Investments]

We’ll take a good offer tomorrow somebody owed the big one [indiscernible] very well.

[Barry Jonas, SunTrust]

Got it. And then just a second for me, how does this crisis kind of influence your thoughts about additional M&A within gaming and I guess does it influence your thoughts on eventually doing something outside of gaming as well, but from a geography within gaming I guess where I'm getting at?

[Peter Carlino, Chairman and CEO]

Well how to know what’s going to shake loose. I mean, I don't think it changes our ambitions one bit.

[Steve Snyder, CFO]

And Barry, look I'm anxious as we all are obviously, to get to the other side of this. But I think people will come to appreciate the stability that exists in the cash flows from these regional gaming assets once they do reopen, and once they do get back to a more normalized operating environment. So again, as we've spoken in the past, there's pretty high hurdle in terms of finding other assets that have the same characteristics and have the same cash flow quality, as the portfolio that we have been able to build.

So it's a high standard, but we will continue to be focused on increasing shareholder value as we continue to grow our business.

[Operator]

Our next question is from Joe Greff with JPMorgan. Please proceed.

[Joe Greff, JPMorgan]

Peter, does it make sense to use some of your liquidity to invest new equity in your tenant. You can think of it as an insurance policy that has depreciation potential. Are there any restrictions for GLPI to do that?

[Peter Carlino, Chairman and CEO]

Joe, there are related party tenant issues that would limit us to owning up to 10% of a tenant. It's an interesting thought, one that we've had discussions about in the past. It's not one that we have taken action on at this point in time. But suffice it to say it is a component of any discussion that we've had with Penn as an example in discussing any kind of or the transaction that you saw as print.

So looking at those kinds of opportunities, taking advantage of the liquidity that we do have are certainly things that we would consider subject to the REIT constraints that exist.

[Matt Demchyk, Senior VP of Investments]

So I mean look, you can always assume that we're thinking about everything. It’s a point I've made for many, many years. If it's alive and breathing, we're looking at it. If it's, in this case as you had frame that question, sure we looked at it, maybe should have stepped up when the prices hit bottom, just a short while ago, happily, it's going back in a better direction. But all things are possible, if it makes sense for our company.

[Joe Greff, JPMorgan]

Got it. And then, Steve, looking back at last year for Columbus and Toledo and the math that I have for Columbus rent last year was about $25 million and Toledo was something like low 20s. Is that sort of?

[Steve Snyder, CFO]

Yes, the floor was set based on 2018. The floors 22.9 as disclosed in the Q, it’s correct.

[Joe Greff, JPMorgan]

And then in terms of those specific property rent contributions last year?

[Steve Snyder, CFO]

Yes - based on the percentages that were disclosed in the press release, yes.

[Operator]

Our next question is from Jay Kornreich with SMBC. Please proceed.

[Jay Kornreich, SMBC]

Just a follow-up on the sports betting, as Penn made sizeable investments into support betting with partial sports and other similar players. You guys are viewing these types of no-touch gaming going forward in terms of the recovery and people continue to worry about social distancing?

[Peter Carlino, Chairman and CEO]

So the question is what. What we see is a potential or where do you think - we think it's headed.

[Jay Kornreich, SMBC]

No, yes.

[Steve Snyder, CFO]

Yes, if I understand your question correctly, it's basically did these remote because [ph] I think your question was not unique to sports betting, but was more about internet wagering or am I wrong?

[Jay Kornreich, SMBC]

Yes, both of them.

[Steve Snyder, CFO]

Yes. And clearly all of our tenants are looking at internet platforms for both their sports wagering as well as in Pennsylvania and New Jersey full blown casino gaming. And each of them has basically identified that as a real source of customer ID, customer acquisition and customer retention. So it would feed, the real estate would feed, the internet business would feed our bricks and mortar business, as they continue to develop that internet presence, because they're able to identify people at a relatively low cost.

That they might not otherwise have identified and be able to drive them into the facility. So if the question is will sports wagering grow? Yes. Will internet wagering grow? Yes. What impact will it have on our real estate? We expect over time, it becomes a value driver for our tenants in terms of driving incremental traffic into our buildings and therefore increasing and improving the performance under our leases.

[Jay Kornreich, SMBC]

Got it, that helpful. And then just one follow-up with Penn's option to buy the Perryville operations and then leased the real estate for $7.77 million I believe. I'm just curious if you guys know or announced the cap rate that got you to that $7.77 million?

[Steve Snyder, CFO]

No, we haven't what we done and the discussions that we had with Penn were really around what the performance of Perryville will look like, impacted by the category for licensed facilities here in Pennsylvania when they open. So it's really a question - its two questions. What's the multiple on the OpCo right at the 31 plus million dollars that we're selling the OpCo for? And then what is the cap rate on the underlying lease? And those are going to be determined as we get closer to closing based on the actual performance of the facility.

[Peter Carlino, Chairman and CEO]

Yes, remember, both Morgantown and New York are within range of a - large industrial base. So something we have to account for, they have to account for.

[Operator]

Our next question is from David Katz with Jefferies. Please proceed.

[David Katz, Jefferies]

I do want to go back to a couple of the prior questions. And just go a little bit farther quite frankly, because I find it to be one of the more philosophical management teams about this, right. We do consider this to be a temporary set of conditions. But like in many events, whether it's personally or corporately, we would have to be changed on the other side in some way, right?

And how do we answer the question of how the company prepares or positions itself for the next pandemic or for a potential resurgence that may or may not occur, hopefully not obviously in September. And specifically from how you look at a tenant and tenant coverage and more specifically, how you think about leverage I know you touched on it with various question, but is four to five, the new five to six - and that's ultimately what I'd love to hear your perspectives on?

[Peter Carlino, Chairman and CEO]

I'll take the first part I think Steve [indiscernible].

[Steve Snyder, CFO]

Okay.

[Peter Carlino, Chairman and CEO]

Look, I am often said to those of you who have seen me on the road and or come and visit us here, through many years of this in the racing business and so forth, been through many ups and downs. That you got to consider that Maslow's hierarchy meetings as I like to say, its food, its shelter, and it's gambling. It's almost that. In fact to every recession that we've had over the years, but 2008, 2009 timeframe, we actually went up during that period of time, people found it relief and entertainment and so forth.

And I have absolute confidence. We'll get back to full shoulder-to-shoulder playing in time. Now, what I can’t guess at is how long is it going to take the people have the confidence to do it. My bet is going to be shorter than many think, but it is going to take a while, it’s going to take a while, but a lot of fear sold out there. A lot may depend on which state, which place, what the risk level is, people intuitively know that. So I'm going to be very optimistic about ultimate performance. What I just can't speculate on is how long is, it going to take to get there.

[Steve Snyder, CFO]

Look David, you're asking the right questions, right? Does this affect our decision making in the future and it has to. I mean the bottom line living through an experience like this is going to affect everyone's decision making in the future. Are we going to materially modify the way we approach this business. Look we own the buildings, at the end of the day these buildings are key revenue drivers for the states in which they operate.

So we're very comfortable that there's an alignment of interest between the states, the regulators, our operators, and ourselves in bringing these businesses back as soon and as on as an accelerated a performance level as possible. But I mean, all that being said, are we going to be better prepared for it next shutdown. I don't know that this is going to cause us to plan for future shutdowns, but time will tell.

[Operator]

Our next question is from Shaun Kelley with Bank of America. Please proceed.

[Shaun Kelley, Bank of America]

So I just had a couple of more specific ones. So - the first one is just on the stock versus cash dividend, Steve. I think there was a sense in there that said something about you only planning to pay the stock dividend in the periods when you're realizing non-cash rent payments. Can you just elaborate a little bit on exactly what that means?

[Steve Snyder, CFO]

Yes no, as I said in my comments Shaun, I mean distributing cash in distributions when we're not receiving cash rent, obviously, is a levering transaction. And that's something we did not want to go, that's a path we did not want to go down. You know from the disclosures that the Penn agreement provides for cash, non-cash rent credits, in the months that are outlined May, June, July, August, October and November.

So there are impacts in each of the next three quarters, the current one and the next two, based on those non-cash rent receipts. So that that was the point with that statement that we're aligning the distribution of equity with the receipt of non-cash rents. And obviously for us what that does then is that that creates a tremendous amount of flexibility for the company, when we do realize the value in Tropicana.

Because we're going to take that onto the balance sheet or have taken that onto the balance sheet as a non-income producing asset at this point in time and will amortize its value In those non-cash rent receipts or non-cash rent credits over these months.

[Shaun Kelley, Bank of America]

So Steve, would that allow you to do exactly with that tee up for the possibility of like a one-time special dividend to return some of those proceeds to catch back up if Tropicana was actually monetized appreciate you know, we've already talked about the circumstances actually do that could take a while. But is that the sort of underlying implication?

[Steve Snyder, CFO]

Look that is an alternative, obviously, if it's a liquidity event, and we've got substantial liquidity from our sale. We'll evaluate at that point in time based on market conditions. The best deployment of that capital, whether it's for value enhancing transactions, deleveraging or returning it to shareholders.

[Shaun Kelley, Bank of America]

Helpful, thank you. And then just one other follow-up and sort of also more on the technical side would be, the broader liquidity profile. So obviously, you've drawn down the line, you've given your cash balances and you're able to preserve a lot through the dividend move. But I believe the credit facility does come due in April of next year. So you could just talk about that and any other flexibility levers you have on the liquidity front. And specifically, you could comment on an ATM program do you have one and is it something? How do you think about using it if you do?

[Steve Snyder, CFO]

Yes, just to clarify the $1.175 billion revolver is not due until 2023 May. There is a $449 million term loan A1 maturity in April of next year. So obviously, given the continued contractual payments of rents, there is no liquidity issue. Yes there is a liquidity issue. We have only unsecured debt, so there's an ability to incur secured debt. We do have an accordion feature under our existing - unsecured credit facility with the bank group that allows for up to $2.5 billion under that accordion feature.

And as you saw from the amendments that the banks agreed to in anticipation of the Penn transactions, we've stayed in constant dialogue with our bank group. And they are well aware of our situation and quite supportive of us as a company. So we think, we're going to have - there are no liquidity issues on the horizon even with that $449 million maturity in April of next year.

[Peter Carlino, Chairman and CEO]

Let me add one small part to that just a simple thought. And that is this as you measure use of cash and capital. In the six years that we have spun from Penn, I've been particularly pleased with the dividend growth that we've managed each and every year. As we got just - last quarter, last year at $0.70 a quarter. As one of the largest shareholders in this company that enthused us and I'm wildly enthused about that.

I want to get back there as quickly as we possibly can. So cash dividends mean a lot to me. That having being said, the stability and safety of this company matters more, making sure that we maintain the spending the engine. So I might even say that maintaining proper leverage is probably the larger driving force. And if we take care of that, do it properly, dividends will be fine. So that's philosophical point of view I'd share it that way.

[Operator]

Our next question is from Jordan Bender with Macquarie. Please proceed.

[Jordan Bender, Macquarie]

In terms of the dividend, I think you guys typically target paying out roughly 80% of your AFFO or somewhere in that range. Over the next couple of quarters, do you plan on staying within that range? Thanks.

[Steve Snyder, CFO]

Jordan, given the uncertainty that exists in the world today, we've set the $0.60 at a lower payout ratio than historical norms based on our internal modeling. We just think it's the prudent approach to take at this point in time. So, we need to get through these next couple of quarters, but we are and that has been set at a more conservative approach than the historical 80% of AFFO payout ratio.

[Operator]

Our next question is from Robin Farley with UBS. Please proceed.

[Robin Farley, UBS]

A lot of my questions have been asked already, I guess thinking about how the pandemic may kind of limit for a while the opportunity for others to sell real estate to GPI because EBITDA and therefore, rent levels would be so low. I guess in the past, others have suggested that maybe a combination with other gaming REITs would make sense. I guess, I’m wondering in this environment with maybe some - kind of a change in what opportunities might be out there? If you have any thoughts on that, that are different now?

[Peter Carlino, Chairman and CEO]

Weasel out of that question by simply saying that it's kind of too early to know, maybe by two quarters from now, I'll have a good answer or a better answer for that. But we're just focused right now on getting this company back on firm ground again and that's our driving force. There's really nothing else is important to me anyway. Steve?

[Steve Snyder, CFO]

No, Robin you're asking obviously the appropriate question in light of the current circumstances. Goal number one is obviously to preserve and protect the assets of the company. Goal number two is to look for accretive ways to enhance shareholder value. And you can rest assured as I've said in the past we will always Look at any opportunity that is shareholder value enhancing.

[Operator]

Our next question is from John DeCree with Union Gaming. Please proceed.

[John DeCree, Union Gaming]

I think you touched on that just about all. But I wanted to ask about some other dialogues that you may have had with casino operators whether it be your tenants or partners you haven't yet reached an agreement with and REITs being new to the space relatively speaking as a financing partner. And we've seen loan markets with pretty wide spreads, particularly for smaller operators?

Has anyone approached you, have you had discussions about providing some liquidity whether it's through loans or buying call options or anything a little bit more creative than outright asset sales like? I guess the short question is, are casino operators in this environment, looking to you as more of a financing partner than they have in the past in terms of just outright asset sales and is something like that interesting to?

[Peter Carlino, Chairman and CEO]

No John, it's a great question. And obviously, the debts of the disruption that we're all facing does create opportunity for us. And we will look at and continue to be engaged in dialogues with folks that are looking to extend their liquidity runways. Right now, everybody is still going through the shock for lack of a better term of what this dislocation has meant. They're more focused on working with their existing creditors, their existing stakeholders, whomever it might be even the small private operators, rather than looking at just outright asset sales, but I think that's just a matter of time before those discussions accelerate and really kind of increasing frequency.

[Operator]

Our next question is from John Massocca with Ladenburg Thalmann. Please proceed.

[John Massocca, Ladenburg Thalmann]

As we kind of think about the withdrawal of guidance. I mean, I guess what would you potentially need to see in the kind of market on a macroeconomic basis to or even within your portfolio can be kind of comfortable reinstituting a new guidance?

[Steve Snyder, CFO]

Yes look, it's a great question. I'd like to think we're more transparent than almost anyone else in the triple net space given that we've got almost all public company tenants that you can read through and we are pretty elaborate in terms of spelling out all of the terms of our leases. So I think everyone can model pretty effectively our business given the moving parts that are better in our business. In terms of returning to issuing guidance look we're going to be going through a couple of quarters here, where our tenants coverages as I mentioned or implied in my opening comments are going to be below thresholds that are required under our leases.

So I think we've got to get back to a much more normalized operation. So I wouldn't want you to take away from this phone call that as soon as these facilities reopen, we're going to be reinstituting guidance, we just need to see where things first open, then stabilize and ultimately normalize before we are probably going to feel comfortable given what we've just lived through.

[Peter Carlino, Chairman and CEO]

Yes, let me say this as well, that these rollouts are going to be very, very, very different state-to-state. And that's the problem. We just have to see how it evolves. But I guarantee you that not all states will be alike not all states will move with equal speed, not all states will bring customers back as quickly as some others. So again we scratch our head here. What do we say, what we don't want to do is give misleading information. So we'd rather be silent for the moment until we actually have something we think we can firmly tell you.

[John Massocca, Ladenburg Thalmann]

Understood. And then maybe kind of longer-term philosophically, as you kind of come out of the current economic situation and understanding that the Perryville option that was granted to PENN was part of a larger transaction. I mean has your view on having TRS properties change at all because of what's occurred over the last couple of months. I mean is the agreement with PENN may be an indication of some willingness there to potentially divest of those assets?

[Peter Carlino, Chairman and CEO]

We've always had that willingness if it made sense, if it made sense. Look we're not operators. That was never goal number one, it was part of the requirement for our spin. That having been said, if it makes sense, I think said publicly before to facilitate a transaction to bring another Opco back in the day after, let's say Perryville goes to PENN, we would do that. So we have no, we kind of like having our fingers in the gaming side, working with people, keeping our remembering the gaming right now underlies our entire business.

So I don't necessarily want to lose touch. We just think it's the right move to get us back to a pure REIT status today, but we'll have no hesitation to do something else in the future.

[Steve Snyder, CFO]

And John, that goes both ways. Maybe people haven't focused on it, but we're actually bringing the Tropicana into our TRS because it is non-income producing and because it's not we're bringing it in, not necessarily with an expectation of owning it for a long period of time. So moving assets out of, moving assets into, operating or real assets into the TRS are going to continue to be tools that we will employ.

[John Massocca, Ladenburg Thalmann]

It's just a clarification at that last comment that you're not liable for any of the PENN is going to essentially take all the risks associated with the actual EBITDA of that property?

[Steve Snyder, CFO]

Absolutely.

[John Massocca, Ladenburg Thalmann]

Okay, okay. Just want to make sure…

[Steve Snyder, CFO]

Being electric, you name it all taxes. God bless him. It's all there.

[John Massocca, Ladenburg Thalmann]

Just wanted to make sure. And then one last clarification, you kind of alluded to it a little bit with some of the earlier questions and in the press release, but the rent credits are not going to flow through AFFO, I’m thinking about correct?

[Steve Snyder, CFO]

No, no they are.

[John Massocca, Ladenburg Thalmann]

They are…

[Steve Snyder, CFO]

Because they're flowing through the income statement. So they're going to be flowing through the income statement and as I mentioned, and as is disclosed in the press release, we did get agreement from our credit facility providers to treat those as an equivalent of cash since GAAP requires us to.

[John Massocca, Ladenburg Thalmann]

No, it’s eventually the cash impacts of not having that cash rent is not going to be reflected in AFFO or will it be reflected in AFFO?

[Steve Snyder, CFO]

It will be reflected in AFFO as a cash equivalent.

[John Massocca, Ladenburg Thalmann]

Okay, that answer my question. Thank you very much. That's it from me.

[Steve Snyder, CFO]

Thank you, John. Take care.

[Operator]

And our final question is from Spencer Allaway with Green Street Advisors. Please proceed.

[Spencer Allaway, Green Street Advisors]

One of your peers reported a notable impact from the current expected credit losses accounting standard. Do you guys anticipate looking at similar allowance for potential credit losses or a subsequent write-down in the value of any of your real estate this year?

[Steve Snyder, CFO]

We did, we evaluated our loans. We unlike the party that you're referencing treat our leases as operating leases. So it was only on the loan portfolio and given the short duration of the loan portfolio, we didn't see an impact that was material enough where that rose to a level of materiality excuse me.

[Operator]

And that concludes our question-and-answer session. I would like to turn the call back over to Peter Carlino for closing remarks.

[Peter Carlino, Chairman and CEO]

We will make them short. I again want to thank you all for dialing in today, these are very interesting times. But we here at GLPI are very optimistic about the future. Thank you very much.

[Operator]

Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.