Gaming and Leisure Properties Inc

NASDAQ:GLPI

Earnings Call Transcript 2018-Q4

[Operator]

Greetings, and welcome to the Gaming and Leisure Properties, Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Joe Jaffoni, Investor Relations. Thank you. Please go ahead.

[Joe Jaffoni, Investor Relations]

Thank you, Brenda, and good morning everyone and thank you for joining Gaming and Leisure Properties, Fourth Quarter 2018 Earnings Call and Webcast. The press release distributed earlier this morning is available in the Investor Relations section on our website at www.glpropinc.com.

On today's call 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, Senior Vice President of Development and Interim Chief Financial Officer at Gaming and Leisure Properties'. Also joining today’s call are Desiree Burke, Chief Accounting Officer; Brandon Moore, Senior VP, General Counsel and Secretary, Steven Ladany, VP Finance and Matthew Demchyk, Senior Vice President of Investments.

With that, it’s my pleasure to turn the call over to Peter Carlino. Peter

[Peter Carlino, Chairman, Chief Executive Officer]

Well, thank you Joe and good morning everyone. We are of course very pleased to report on the conclusion of another outstanding year at Gaming and Leisure Properties.

As highlighted in our earnings release, we completed $1.5 billion of new investment, at the same time diversifying our tenant base with the addition of Eldorado Resorts and Boyd Gaming. In the process we added as indicated eight new properties and increased our real-estate revenue by $155 million.

I'll make the observation that we sometimes are questioned about our “pipeline” and note that some of our competitors rely heavily upon that thought. We've never had a pipeline and yet we have managed to do a terrific job over the last five years, building what we think as the outstanding company in this industry.

But as usual today we have most of our senior management team here with you. I'm going to turn the program over to Steve in just a moment. He'll introduce Matt Demchyk who will, as the last person to join us, will make a few comments to introduce himself and then we’ll move quickly to your questions and our team is here to answer them as best we can.

So with that, Steve.

[Steve Snyder]

Thank you, Peter, and good morning everyone. Before I get in to just a couple of highlights the house cleaning matter, we also filed this morning our annual report on form 10-K with the Securities and Exchange Commission. So you have that information available to you, as well as the Press Release.

Just a few highlights on the Press Release: I would point out that our fourth quarter results as it relates to EBITDA and AFFO per share, we’re right on the guidance that we issued in conjunction with our third quarter of 2018 earnings release.

Additionally just a couple of highlights. You can see you on a year-over-year basis some of those highlights. You are looking at adjusted EBITDA was at 17.3% increase on a year-over-year basis and AFFO per share for the quarter at an increase of 9.1% on a year-over-year basis. So as Peter mentioned, we were very pleased with the performance of the business during the quarter.

Just moving on to some things that aren't in the press release that I want to highlight, giving you a portfolio update. As you are aware we've got no variable rent reset here in calendar 2019. The Penn lease did have its variable reset last year and we will not see that again until 2023, and the balance of the leases in the portfolio do have to buy any other – every two year reset and amended Pinnacle lease and the Boyd lease and the Eldorado lease, which will not be effected until the next reset 2020.

Highlighting a couple of lease coverage factors for our Master Lease, the Penn Master Lease on a trailing 12 month basis at 12.31 [ph] was covering at 1.88 times. The amended Pinnacle Master Lease on a trailing 12 basis at year end was covering at 1.83 times and the third Penn lease, the Meadows lease was at 1.92 coverage or trailing 12 as of calendar year-end 2018.

As to the Boyd Master Lease, you heard from Boyd in their third quarter earnings call and you'll hear from them on their fourth quarter earnings call next week. But in their third quarter call they indicated that for the balance of 2018 they expected lease coverage to approach 2 times. And finally Eldorado, whom you'll hear from in two weeks, did close into the Tropicana acquisition at rent coverage that was nearly 2 times.

Finally, as it relates to both lease portfolio, the real-estate portfolio in the quarter, we reversed the interest that we had accrued previously on the loan to Casino Queen and we’ve seized accruing income, we’ve seized accruing interest income on the Casino Queen loan and have restated that balance back to its original balance of $13 million on the balance sheet.

The company has hired some investment banking firm. They are in the process of evaluating strategic options which we are staying on top of and actively monitoring the process. So we do expect to see some activity there, which will hopefully bring a stronger focus to the operating performance of the asset.

Lastly as it relates to the portfolio, the taxable REIT subsidiary, we did see in the quarter an impairment charge related to an impairment of the goodwill associated with the Baton Rouge property. The Baton Rouge market obviously has suffered from underlying deterioration which was really accelerated last June 1when the smoking ban went into effect in East Baton Rouge Parish and we thought it was appropriate after testing it from an accounting standpoint, take the impairment charge which you see reflected in the press release.

Finally, I want to touch a little bit on the balance sheet. All that information is included but the highlights on the balance sheet are that 84% of our data is fixed rate. Just under 16% of our debt is variable rate at an average interest expense of just over 5%. We have no debt maturities for calendar 2019. Our next liquidity need is out in November of 2020. So we think we clearly have ample runway and great flexibility on the balance sheet to continue to manage our business proactively.

Lastly, I’ll touch on the guidance which you see included at the back of the press release. We are guiding for the first quarter to an 8% year-over-year increase in AFFO per share and for calendar 2019 we've provided a low and a high range of guidance, which is driven by the revenue assumptions which you’ll also see in the press release. So on the low side no escalator, on the high side all possible escalators in 2019 kicking in, and obviously those are bound by a 7% increase in the AFFO per share on the low side and an 8.5% increase on the high side. So we will of course be refining that as the year goes on, and we’ll hear from our tenants further as to the likelihood in the implementation of the escalator in those leases.

I do want to turn it over. You saw a press release earlier, two weeks ago. We have expanded and broadened the senior management team here at the company and we are very excited to have Matt Demchyk join us. Before turning it over to Matt just for some brief comments, I also do want to highlight for those on the call, you heard from our new Investor Relations firm JCIR, and their representative Joe Jaffoni at the beginning of the call, and I also want to welcome Joe to the team and look forward to his contribution.

So with that, I’m going to ask Matt just to touch briefly on his background, and give you folks an introduction. So go ahead Matt.

[Matt Demchyk, Senior Vice President of Investments]

Thank you, Steve. I'm very excited at the opportunity to work closely with Peter and Steve and a team of motivated people here that I still highly respect and I’m appreciative of their welcoming extent towards having an additional differentiated perspective at the decision making table. My number one goal here is to utilize the viewpoint that I've developed over my investing career to help maximize the company's risk adjusted returns on capital and ensure that we continue to deploy capital exclusively into portfolio enhancing accretive transaction.

Given the importance of our cost of equity to our business class, I'm also going to be personally focused on pro-actively engaging with investors to help ensure that they are well informed about the merits of our business and to serve as a friendly conduit for feedback, and I'm looking forward to seeing many of you and meeting those who I don't yet know over the coming months.

At the end of the day, our objective is to build the most durable cash flow stream and a triple net leased REIT sector. And with that, I'll turn the call back.

[Peter Carlino, Chairman, Chief Executive Officer]

Thank Matt. With that Brenda, if you wouldn’t mind opening the line for questions.

[Operator]

Certainly [Operator Instructions]. Our first question is from the line of Joe Greff with J.P. Morgan.

[Unidentified Analyst]

Hey guys, this is actually Dan [inaudible] on for Joe Greff. Good morning and thanks for taking my question. So just given the recent volatility in the financial market, how would you characterize the discussions with property sellers and their expectations here? Did you say there's any real changes from say six or nine months ago?

[Peter Carlino, Chairman, Chief Executive Officer]

I don’t think so. I mean look, there’s not a huge line of people looking to sell today. I mean there’s a lot of activity in and around this space, but I think things are pretty consistent with where they've been. Steve?

[Steve Snyder]

You know Dan, to your question, obviously year end there was tremendous volatility throughout the calendar quarter four that I'm not sure seller's expectations adjusted based on that volatility. As we are starting here in calendar 2019, again I don't know that sellers expectations have been reset based on the general economic environment. It certainly feels to us generally that we are in the late innings of the economic cycle; time will tell. So you'll always see opportunistic owners looking for the chance to monetize their interest in gaming assets or other real property assets, but right now I would suggest that the level of activity is certainly not what it was before Q4 of last year.

[Peter Carlino, Chairman, Chief Executive Officer]

Yeah, look I think sellers’ interest are idiosyncratic. They really are – I mean people sell for all kinds of different reasons. The people we are talking to now that are good prospects, but you got to want to do it, so that's an ongoing debate sometimes that takes place over time and occasionally those situations where somebody wants to do something quickly and – but all reasons are different. I don't think much changed on the high pricing side. I think Steve pretty well indicated.

[Unidentified Analyst]

Alright, thanks for that. And then just one more quick one; given your stats rebound pretty significantly from the close and is actually at the highest level in nearly 18 months. How should we think about your willingness to use the ATM here?

[Peter Carlino, Chairman, Chief Executive Officer]

Dan, it’s unlikely. I mean it's a tool that we have available to us. We guided folks to where we hoped to take the leverage of the company and expect to take the leverage to the company during calendar 2019. We are certainly going to get back within the band of where we have guided the rating agency from a leverage perspective without any activity on the ATM. The way the board thinks about it right is that a current yield on the equity that it’s still 450 basis points wide of the 10 year treasury. We think there is still dislocation in the equity value of the company.

[Unidentified Analyst]

Alright, thanks so much. That’s it from me.

[Peter Carlino, Chairman, Chief Executive Officer]

Thank you.

[Operator]

The next question is actually from the line of Carlo Santarelli with Deutsche Bank.

[Carlo Santarelli, Deutsche Bank]

Hey everybody, and thanks. Peter and Steve, we’ve spoken in the past about the equity trading multiple relative to peers, as well as you know relative to the broader triple net spectrum and I know you guys have talked a lot about 2019, you know making an effort to be in front of investors and what not and trying to close that gap.

So my question is kind of two-fold. As you think about 2019 and the multiple gap given your advantage kind of cost of debt, do you feel as though there is an opportunity you know to go out and be competitive in acquisitions with the multiple where it is and secondly, do you feel as though there are others in the triple net industry who are looking at this space and recognizing their equity trading multiple is that it’s such a distinct premium that it might be worth spending more time looking at this space.

[Peter Carlino, Chairman, Chief Executive Officer]

It’s sort of a round-about way I guess to get to a – look, we are totally self-focus. I mean we don't waste a lot of time thinking about what others are doing. We just came off a year where we've made some very – done a couple of very accretive transactions to demonstrate that whatever one thinks about upgrading multiple, it hasn't stopped us from doing business. So I take that as a given.

I kind of don't care. I mean look, do we want to do a better job to shareholders? Absolutely! But our focus primarily is building AFFO safely, rationally and carefully, and moving that dividend ahead year-in and year-out. I mean that as a large shareholder of this company, I am manically focused on. We don't build monuments, we’re building income and that's frankly what drives us here.

So I don't see any difference this year from next. We have competitors out there, God bless them. They'll do what they do and we'll do what we do and I have absolute confidence in that.

[Steve Snyder]

Yeah Carl, let me just touch on both your questions. Just from a competitive standpoint, we obviously do you have a cost to capital disadvantage that we are going to work hard in 2019 to close that gap, but you should assume that given the relationship that we’ve developed over the decade that we've been in the gaming business, that we will continue to have opportunities that will be unique to us based on those relationships. So expect us to continue to work hard and work smart.

As it relates to other triple nets and what they might see or what their view might be of the resiliency of the cash flow that our portfolio generates from a regional gaming perspective or from those regional gaming markets, that's something obviously to stay tuned for. Peter laughed at me when I go into meetings and tell people our occupancy is 100%, but it is today and it will be 30 years from now.

So as people do start to focus on the stability of our underlying tenant, the fact that in most cases we got guarantors on master leases that have equity market caps of $3 billion plus, I think people will look at the valuation spread between us and other triple net single tenant net lease guys and that gap, if smart people are alerted to it, it will over time close. This is my speculation for this morning’s call.

[Peter Carlino, Chairman, Chief Executive Officer]

Yeah, I’m looking to finish this business. I like the revenue we generate here. I like our earnings profile. We pay the best dividend in the business. It's the only gaming reason I would own as an individual, period, and we need to get more folks to understand that and frankly that's in part why Matt us here, to beef up our team and work with that side of things.

[Carlo Santarelli, Deutsche Bank]

Thank you very much guys.

[Peter Carlino, Chairman, Chief Executive Officer]

Thanks Carlo.

[Operator]

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

[Barry Jonas, Sun Trust]

Hi guys. I just wanted to clarify on the guidance range you are assuming – I guess the variance is based on whether the rent escalates or hits. That’s what Penn did guide that it will be hit and you just started your leases with Boyd and Eldorado. So is there a real risk potentially that you don't hit it or you are just being conservative.

[Peter Carlino, Chairman, Chief Executive Officer]

Barry, we're being conservative. We've had some experiences over the last five or six years where we assumed some things were going to happen and did not. Only our operators have clear visibility into what the operating performance is of their portfolio. So as it relates to the variable rent associated with the Ohio casinos and as it relates to the escalators, we've taken an approach that some will call overly conservative. I think it's prudent to wait until they actually hit to start banking.

[Steve Snyder]

Yeah, a reminder, we get no non-public information. So we know in essence what you know. In a sense, at the same time with what our tenants are doing, so we don't have an advantage here.

[Barry Jonas, Sun Trust]

Got it. And then just you know look, we’ve been asking you guys for years about going into non-gaming, you know purchasing non-gaming assets. Just a question, you know do you think we're any closer to seeing a deal outside of gaming and what could that potentially look like?

[Peter Carlino, Chairman, Chief Executive Officer]

Let me take a shot at that. Look, I think it is probably inevitable that anybody who is now at gaming week will someday be something else or include something else, because I don't know whether that runway of opportunity is going to be three years or five years, but it's not forever in any large or material way, so that's quite possible.

We continue to look at all kinds of adjacencies and verticals and I mean – but we haven't seen it yet. And in one perverse sense, we're in the business of buying revenue, and if we can be persuaded that revenue in any particular sector, it's as rock solid as the revenue we have here in the gaming world, sure we’d take the leap and tell the story and hopefully it would be exactly correct. But despite the fact I think we've looked from day one in our five plus years as a REIT, we have not seen anything that yet has risen to the top. So you know we’ll continue to look and we'll see, but again, it's all about – I think Matt said it well in his summary, it's all about rational safe growth and not, you know not safe.

We are not in the business of building monuments; I can't emphasize that enough. We don't feel any particular pressure to grow at a particular rate through this or that. I just want to make sure as a shareholder that my dividend this year or next year is not one penny less than it is this year and hopefully somewhat more as we move forward. So that remains our total focus.

[Barry Jonas, Sun Trust]

Great! Thank you so much.

[Peter Carlino, Chairman, Chief Executive Officer]

Thanks Barry.

[Operator]

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

[Wes Tate, UBS]

Yes hey, this is Wes Tate who is coming in for Rob Farley today. I just wanted to talk about the two new Hollywood properties and maybe if you can comment on how you think those would fit into GLPI’s portfolio. They are scheduled to open in 2020.

[Peter Carlino, Chairman, Chief Executive Officer]

On the Penn that’s in Morgantown and York, I assume you are talking about – you know I don't think we really know how that's going to shape up and its part of an ongoing discussion I guess with Penn, its tied to our lease and so forth. I don't think they need us if that’s the implication. Will that grow into our Master Lease, I think not. They would prefer, since they have the cash and the financing available just to do it because they will, so I'm not expecting. I think the bigger question is what impact might it have on our existing Penn National.

[Steve Snyder]

Yeah Wes, let me try and address that. Obviously one of the facilities that they are developing is a leasehold improvement in York, so there would be no opportunity for us there. Given the fact that there is no opportunity there, they seem to be as Peter mentioning, client that’s developed the Morgantown facility themselves. You will see in our master lease with Penn National that we do have a non-compete provision in that master lease. That non-compete provision extends 60 miles from GLPI owned facilities that Penn leases pursuant to the master lease.

Inside or if they do or when they do open a competing facility inside that non-compete zone, the variable rents will no longer be reset downward. In other words, there will be a floor that will be put in place on the variable rent at that facility as a result of the competing facility for all periods into the future. So that’s the remedy that Penn is aware of and has acknowledged that exists for us in lieu of owning the competing facility.

[Wes Tate, UBS]

Okay, great, thank.

[Operator]

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

[David Katz, Jefferies]

Hi, good morning everyone.

[Peter Carlino, Chairman, Chief Executive Officer]

Good morning.

[David Katz, Jefferies]

I wanted to just go back to your appetite for acquisitions and sort of pose a question that comes up frequently, which is that you know while larger scale properties and you know say just to use Las Vegas hypothetically, you know it may not generate the stability or the returns that regional properties do. Is there an inherent or perceived value that you know drives higher multiples for let's say Las Vegas strip property or some other market that you know would translate into your valuation at the end of the day.

And you know it's one of those real estate you know notions again that we discuss on a regular basis and you know so much of the discussion has been about – is about your valuation and why it is, where it is and what make the change. I just wanted to pose the question and get your views.

[Peter Carlino, Chairman, Chief Executive Officer]

Yeah, that's an interesting observation. I mean my quick answer is, it ought to and that’s maybe a flip, but who cares where it is, how reliable the earnings are. I mean it could be the shack on the beach I jokingly say at some of our meetings and I'm actually serious. You can find me the shack on the New Jersey Shore somewhere, parked in the middle of the beach and had a reliable cash flow and we knew it was rock solid.

Would I want that? Absolutely, absolutely! Do I care about a monument in Las Vegas that's producing half the cash flow on a given investment, no. Now all I have to say, we're not unaware of the fact that there is a scene to Vegas properties that commands a bigger premium, always has been and so forth. I think in part, so we would take that, we're cognizant of that. But I think we've also done a better job on the road with rating agencies and with investors of trying to get them to understand the stability of our regional property.

So the fact is that some of these places are really spectacular. I don't think there's a whole world of people out there that just don’t recognize the scale of what is out in the world beyond Las Vegas. So we’re… [Audio Gap]

Through up and down cycles in the regional market relative to 2008, 2009 in Las Vegas. There's really no comparison. If you look at the underlying beneficiary, the states are the partners with the operators in these regional businesses. They can't, nor will they in those limited license markets which most of them are, allowed these businesses not to be successful.

And then finally when you look at the free cash flow generation of the operators in the regional markets compared to the Las Vegas operators where the maintenance capital expenditures, the CapEx expenditures that get folks make in their buildings is really over the top, really limiting the free cash flow generation of Las Vegas asset.

We really like where we are positioned as a company and we like the portfolio of operators that we have on our master leases. So we're not going to chase a Las Vegas Strip asset with the expectation that our multiples will be rerated, because we just don't believe that the market fully understands and appreciates what we have here at GLPI.

[David Katz, Jefferies]

Got it. I hope you appreciate the question, I definitely appreciate the answers and hi Matt, and good luck.

[Matt Demchyk, Senior Vice President of Investments]

Thank you.

[Peter Carlino, Chairman, Chief Executive Officer]

Thanks David.

[Operator]

Our next question is from the line of Daniel Adam with Nomura.

[Daniel Adam, Nomura]

Hi, good morning everyone.

[Peter Carlino, Chairman, Chief Executive Officer]

Good morning.

[Daniel Adam, Nomura]

I have two questions related to the goodwill impairment charge you took in the fourth quarter. First, I'm wondering if your assessment there was entirely related to the smoking ban impact at Baton Rouge or were there other factors at play like increased competitive pressures for example? The second one is given that I think you guys test for asset impairments annually on October 1. I'm just wondering why the charge wasn't called out when you reported third quarter results in November? Thanks.

[Steve Snyder]

No Daniel, it’s a fair question, let me go into the facts first. I mean the Baton Rouge market had a wonderful year in 2016 and early 2017 unfortunately as a result the FEMA activity from flooding that occurred in the Baton Rouge market. That dislocated many families but brought in a lot of economic development and economic activity. So from 2016 through early 2017 we saw really robust activity in that marketplace.

Starting at the beginning of calendar 2018 we started to see as a burn off or run-off if you will of that activity, a real decline in economic activity in Baton Rouge that was accelerated as it related to gaming when that June 1 smoking ban went into effect Parish wide.

In terms of testing any earlier for the impairment, we really did want to wait and see if the underlying economics ever recovered and once we got to year-end, it was clear to us that with the combination of the underlying fundamentals and the smoking ban, there was really not an opportunity for that market to return to where it had been in 2016 in 2017. So that's really what's going on down there and the timing associate with the evaluation.

[Peter Carlino, Chairman, Chief Executive Officer]

So on that part again, let me add Steve to that. I mean Baton Rouge is one of the best investment that we on the Penn side ever made. It’s a terrific little property. It has – my recollection is we bought about $23 million in cash flow there and over the years boy! It is been an interesting sedge ride. Never bad, but Katrina for example, we were up over $60 million of cash flow, which is stunning. So if you look at the history of that, it's been up and down and up and down and Steve points much of its unfortunately weather related and bad event related.

So as the last one they kind of start it to unwind and market returned to normal. You saw an impact of course, but the smoking ban to be sure, look we warned them down there, absolutely warned them that it is going to be a disaster. Some of these states [inaudible] who are anti-smoking; I get it, I'm not a smoker, but don't kind of get that it has a dramatic impact. This is probably one of the biggest impact. Well not just the property we owned. It’s those other properties as well in the market, it's been a devastation for them.

Maybe they will wise up, maybe they won’t, but I think looking at the county people across the table from me, after enough time to look at it, evaluate it, make to decision and lets just take that. The good news is, we'll do better later.

[Steve Snyder]

Yeah Daniel, the only other thing I would add is, the goodwill came over as spend back in 2013. So this is something as you point out in our K we disclosed, we test every year and we tested it this year in light of the performance and it just felt like it was time to take this non-cash charge.

[Daniel Adam, Nomura]

Great! Thanks a lot guys.

[Peter Carlino, Chairman, Chief Executive Officer]

Thank you.

[Operator]

[Operator Instructions] And your question is from the line of John Massocca with Ladenburg Thalmann.

[John Massocca, Ladenburg Thalmann]

Good morning.

[Peter Carlino, Chairman, Chief Executive Officer]

Good morning.

[Steve Snyder]

Hey John how are you doing?

[John Massocca, Ladenburg Thalmann]

Good. As you kind of look at potential investment opportunities, do you think there's an opportunity to initially speaking more with regards to things that may happen in the future rather than anything recent, but do buy improvements your tenants may put in place your existing properties or is that put too much pressure on coverage’s for you guys and make your contingent rent hurdles too unreliable?

[Peter Carlino, Chairman, Chief Executive Officer]

No John, in fact they have an obligation to come to us to ask us if we're interested in providing financing whenever they are doing any significant leasehold improvements and we've heard from our legacy tenants that it's a little early for that the new guys that came in as tenants in Q4. But those are things that we do evaluate; there's not been anything that’s actionable?

What we have done is work with our tenants to monetize for our benefit and for our tenants benefit in certain cases unutilized or un-reutilized land and this has been disclosed publicly in Saint Louis. We sold off what is now just north of the 25 acre parcel that’s been developed into an entertainment and then ice skating center that will be the practice facility for the St Louis Blues and have about a 3,000 or 4,000 seat venue for live events that will be programmed by Live 8. So that's really more of an opportunity for us than adding incremental capital to any of our existing facilities, although we do look at it all the time.

[Peter Carlino, Chairman, Chief Executive Officer]

Yeah, lots of project we are examining through them.

[John Massocca, Ladenburg Thalmann]

And how big is the opportunity? It seems like it’s kind of in terms of excess land parcels just maybe something that can be delevering at the margins, maybe improve. You know as something with like the ice skating rink, like bring in extra traffic at the Casino, but it's not really a game changer rule. Is that a fair assessment?

[Peter Carlino, Chairman, Chief Executive Officer]

No, it is not by any stretch of the imagination do not think of it as a game changer, but think of it at the margins as things that we can continue to do that drive greater efficiency in the overall portfolio.

[Steve Snyder]

Yeah look, given the scale of our business today, this is good news and bad news. We've done a terrific job of building this company, that's the good news. The bad news is moving the battlefield forward is a lot more challenging to find things – but look, we are always willing to hit singles. I've come around recently saying we will do some funds. As long as it’s moving the ball down the field and adding pennies even to our AFFO and our dividend each and every year, that's enough to make me happy.

And look, we are always looking for the home run? Absolutely, we are swing away but you got to see it clearly but we are perfectly content to do modest transactions as well.

[John Massocca, Ladenburg Thalmann]

Understood. And speaking of some of the modest transactions, I mean what kind of consent would Casino Queen need to get from you guys in order to facilitate some kind of strategic activity. I know it’s a little brought in general at this point, but is there any potential there that if someone came in and was interested in operating these properties that you may be able to leverage more transactions out of that kind of a situation?

[Peter Carlino, Chairman, Chief Executive Officer]

That's highly possible. I mean as the landlord in that building in Saint Louis, any substitute tenant does need our approval.

[John Massocca, Ladenburg Thalmann]

Understood! That’s it from me. Thank you very much.

[Peter Carlino, Chairman, Chief Executive Officer]

Thank you.

[Steve Snyder]

Thank you, John.

[Operator]

Our next question comes from the line Cameron McKnight with Credit Suisse.

[Cameron McKnight, Credit Suisse]

Hi, good morning. Thanks very much. A question for Steve, you've got about 1 billion of notes that were issued in mid-‘14 that are coming to you later on next year. Given that you are now investment grade, what's your best guess in terms of where you could refinance that paper?

[Steven Snyder]

On 10 year probably plus 260 Cam, 250 to 260, so a low five handle.

[Cameron McKnight, Credit Suisse]

Got it, thanks very much, and then a slightly broader question. In terms of the broader portfolio now, any assets in particular that a flashing amber or red in terms of terms of potential supply growth.

[Steven Snyder]

The areas that Penn addressed on their call last week, Blackhawk is the one place, because the monarch guys are investing a lot of capital in that market.

None of the newer – the Boston facility, when it opens, if there's a southeastern mass facility that ever opens, we set playing rates when we bought it as a $25 million annual occupants cost with no upside or downside. So there is no reason to be cautious or concerned there.

So those are really the only areas. I'm looking around the table, that's my memory, but those are the only areas right now that have us at least monitoring any potential situation.

[Cameron McKnight, Credit Suisse]

Okay, that's perfect. Thanks very much.

[Peter Carlino, Chairman, Chief Executive Officer]

Thank you, Cam.

[Operator]

It seems we have no further questions at this time. I'd like to turn the floor back over to management for closing comments.

[Peter Carlino, Chairman, Chief Executive Officer]

Well, thanks operator. I thank you all for dialing in today. We're happy to close this quarter out pretty happily and see you next quarter. Thank you.

[Operator]

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