Gaming and Leisure Properties, Inc. Price & Performance (GLPI)

The press release distributed yesterday afternoon is available in the Investor Relations section on our website www.glpropinc.com. On this morning'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 [indiscernible] as well as non GAAP financial measures such as FFO and AFFO. As a reminder, forward looking statements represent management's current estimates, and the company assumes no obligation to update any forward looking statements in the future. We encourage listeners to review the more detailed discussions related to risk factors and forward looking statements contained in the company's filings with the SEC including its 10 Q and in the earnings release as well as the definitions and reconciliations of non GAAP financial measures contained in the company's earnings release. On this morning's call, we are joined by Peter Carlino, Chairman and Chief Executive Officer of Gaming and Leisure Properties Also joining today's call are Brandon Moore, President and Chief Operating Officer Desiree Burke, Chief Financial Officer and Treasurer Steve Ladney, Senior Vice President and Chief Development Officer and Matthew Demczak, Senior Vice President and Chief Investment Officer.

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

Thank you, Joe, and good morning, everyone. We are, of course, pleased to present another strong quarter. Which is well summarized in our earnings I should highlight that projections this quarter especially difficult because there are so many variables that you'll hear a bit from Desiree who has to deal with those every day. Nonetheless, the estimates that we have put out we believe are with great pain fair representation of what we see going forward. One large difficulty that we have is that even when we're committed to a project, We can't determine when funds are going to be drawn because that rests with our Tenants so that we could only estimate to the best of our ability Nonetheless, we are prepared to handle all of the known demands that you folks are aware of And we have capacity to handle some things that may be on the horizon. I want to emphasize we are committed to the gaming space. And with the sense that it's the best vehicle for us to develop and maintain long term dependable rock solid cash flow. So with that in mind, Desiree, I'm looking across the table and you're on. Okay. Thank you, Peter.

Good morning.

For the fourth quarter of twenty twenty four, our total income from real estate had exceeded the fourth quarter of twenty twenty three by over $20,000,000 This growth was driven by increases in cash rent of over $22,000,000 resulting from acquisitions and escalation. For example, the Tioga acquisition increased our cash income by $3,600,000 The Rockford loan increased cash income by $2,800,000 The strategic acquisition increased cash income by $2,300,000 The Valley Chicago land increased cash income by $5,000,000 Valley's Tropicana funding by $1,000,000 and Valley's Campus City Shreveport increased by $1,400,000 We also had the Ion loan, which increased our cash income by $400,000 dollars and obviously the recognition of our percentage rent adjustments and escalation which added approximately $6,200,000 of cash income. The combination of non cash revenue gross up investment in lease adjustments and straight line adjustments partially offset these increases. Driving a collector's year over year decrease of $2,300,000 Our operating expenses increased by $7,700,000 mainly resulting from non cash adjustments in the provision for credit losses primarily due to increases in the commercial real estate index projections. For the company's development properties, we will capitalize interest and deferral rent received during development for However, we will add the rent back and deduct the capitalized interest in deriving at AFFO.

In today's release, we gave full year guidance ranging from $3.83 per share to $3.88 per diluted share in OP units. Please note that this guidance does not include the impact of future transactions However, it does include our anticipated funding of approximately $400,000,000 for the development projects and the expectation to settle our forward sale agreements in June of twenty twenty five. From a review of the notes last night, appears our 2025 AFFO guidance is slightly below consensus due to a number of factors. The timing of our forward share settlement, which you should assume June 1, the amount and timing of our development funding, which we should assume $400,000,000 weighted towards the end of the year, interest expense assumptions which there are multiple changes during 2024 that will impact 2025 interest expense including all the bond issuances, the bond repayments, as well as the new revolving loan, which I will note that it's subject to a Bali's guarantee and part of their tax strategy and will remain outstanding. We will redeem the $850,000,000 $5.25 bond on March three of 'twenty five. Our rent coverage ratios do remain strong ranging from 179 to two fifty five on our master leases as of the end of the prior With that, I'll turn the call back to Peter.

Desiree. I did say a lot of variables that I think Desiree has highlighted. Many of them. Matthew, you have some notes that you'd like to share. Sure. Thanks, Peter. Good morning, everyone. Our results for the fourth quarter and full year reflect the continued success of our strategy rooted in a conservative financial approach, our prudent capital allocation mentality and our unique ability to generate value through both deal origination and our creation of bespoke deal structures. Our strong financial position, provided the flexibility to stay proactive throughout this past year. The capital deployed in 2024 has purposefully laid the groundwork for growth extending well into 2025 and beyond. Our tenant relationships remain a powerful competitive advantage. Enabling us to identify and act on opportunities that others may overlook. By year's end, we secured a meaningful share of all announced gaming real estate transactions, including our innovation in the tribal gaming world, proof that our strategy is bearing fruit. This positions us well to continue uncovering new opportunities in 2025 and beyond. These relationships are also the cornerstone of our long term growth. Each partnership unlocks future possibilities Gaming a powerful compounding effect as time moves on. While gaming real estate is still a relative newcomer, in the broader real estate world, the strength and consistency of cash flow from our gaming real estate portfolio especially in periods of market volatility, continue to provide valuable data points.

These data points coupled with the end to end transparency of our cash flows and our lease coverage position us to continue driving the revaluation of our cash flows in relation to other sectors of the wider real estate market. Looking ahead, our focus remains resolute prudently deploying capital to maximize long term value for all shareholders and our goal is simple, to drive lasting and durable intrinsic value per share. I'll turn it back to Peter. Thanks, Matthew. With that, Paul, will you open the floor to Q and A?

Thank you. We'll now be conducting a question and answer session. Thank you. Our first question is from Brad Heffern with RBC Capital Markets. Hey, good morning everyone. Thanks for taking the question. The $400,000,000 of fundings this year is maybe a little [indiscernible] And has there been any slippage in timing on those projects? Versus what maybe you expected three or six months ago that's affecting that figure? [indiscernible] giving the $400,000,000 in total only Obviously, a big chunk of that is the Chicago project for 2025.

I don't think it's affecting the timing of the project. It's just our expectation of when we fund our tenants. So they will put money out first and then we will reimburse them. So there might be a lag to what you're thinking.

Look, these projects are underway. They're committed. There's no doubt that they're going to happen. What we can't say and I said that in my opening comment just can't tell you what the pace is going to be. We take a guess and we talk with our tenants, do our best to understand what may be possible. But what you got is our best Okay. Got it. And then obviously the Ballys Casino Queen deal has been closed Can you walk through any positives or negatives that you see from that now that the deal is closed? I think it's all positive, but anybody want to comment Yes.

Huge success. Yes, I can provide, I guess, some thoughts if anyone else wants to join in. Look, I think generally speaking, we do view this as a positive. I think the I think it gives the company overall a new found consideration and valuation that they can utilize as they move forward. From the equity valuation standpoint. Which is not necessarily directly impacting us, but we'll provide them potential for growth going forward that maybe didn't exist before. I think ultimately our relationship with Bali's and even with with the CQ folks is as strong as it's kind of ever been. I think we continue to look at different opportunities to work with them. On things that are currently in play as well as future opportunities. So view this as an expansion of the relationship. This is still the the same players are all still around and we look forward to expanding the relationship going forward. [indiscernible] Thank you. Our next question is from Ron Candon with Morgan Stanley. Hey, just two quick ones from sort of my end. I just love to hear a little bit more about sort of the pipeline and sort of how conversations are Gaming.

Obviously, you had a little bit of a volatility in the rate environment.

In December and into this year, just curious just high level how conversations are flowing, if they fell off or not? [indiscernible] think, it's Steve, I'll jump in again. I think from a broad scale massive M and A transaction that's multiple billions of dollars. I think those conversations have not picked back up due to the rate environment. One's level. I think though the broader market, more generally speaking, has been pretty active. We've had a lot of discussions and been looking at a lot of different sale leaseback to commercial domestic development and redevelopment to tribal discussions and international. So we continue to see a lot of things out there. What becomes actionable and finally gets served up and announced is very different I will tell you the largest operator seem to be most focused on their own properties at this time. You saw that through Boyd's announcement about how well Treasure Chest is doing and their fact that they might take up Paradise land side. And I think others are starting pursue the same mentality and take the same tact. So I think the largest guys in the country are going to kind of focus on repositioning assets to enhance the customer experience, which obviously helps the top line at the same time provides operational efficiency when you do things like move Landsite.

Great.

And just Gaming back to the guidance chance you can provide any color on just interest costs and NOI growth, any other sort of color what's going into those assumptions would be helpful. Thanks.

So we have Most of our debt is bond related, so they're all fixed rates. We do have nine thirty two million of variable rate debt. And honestly, we use the so for the forward curve and we have 1.3% on top of that is our spread.

Thank you. Our next question is from Barry Jonas with Truist Please proceed with your I was wondering if you could talk a little bit about the pipeline for co investment with Cordish.

And are there potential opportunities to swap your equity into real estate at some Thanks.

We continue to have a very good dialogue with Cordish, an ongoing Obviously, they've been very active, not only in the gaming space, but also the non gaming space. So, I think think with respect to the equity component, I think we continue to have dialogues with them around that. And, whether there's a clear cut opportunity to reposition and invest is is going to be transaction specific and something that obviously as a REIT our long term goal is to own real estate How we get there and how we ultimately how we get there could take different different modes and different paths, but that is our ultimate goal. Yes. I mean, it's pretty obvious. It's a relationship we want to continue. And we feel pretty good about where we have been with those folks excited. They're very aggressive and excited about the prospects the future. So we view that in the most positive light That's great. And then maybe a question for Mac. Can you talk about your plans on the equity side for your 25 business plan?

Given your 25 or even 26 capital needs?

Yes. Barry, we came into the year with a strong cash position. I mean, you know we've got a lot out currently on our forward So if you look at the forward or the cash and the treasure we have on the balance sheet, it really covers the business plan for 2025, when you think about the ins and the outs. Including our free cash flow we're going to generate So we're really into the hey, how do we prudently look forward into the next on a forward twelve month or eighteen month basis into the next chapter of spend And on that, I'd say we're going to continue doing what we've done. We'll be methodical. We'll be balanced. We certainly have tools in our tool chest to help us lock in some of our capital as we move forward closer to the spend along the way. So we have greater certainty of what spread we're ultimately going to deliver for shareholders.

But I wouldn't give any further detail beyond that.

A lot of optionality.

Perfect. Thanks so much guys. Thank you.

Our next question is from John Kulicowski with Wells Fargo. Thank you. Good morning. Apologies, Peter. Your first comment on the guide, we talked about $400,000,000 of investments and I understand that the vast majority seems to be the development timing in Chicago. And I just want to make sure I understood your comments does it contemplate any contribution from the Casino Queen, the stadium, Aurora Penn and the I own loan?

The $400,000,000 contemplates the bell which we have been developing and we have announced. It contemplates the I ON funding and it contemplates Chicago as well as Marquette. We don't have anything in for the Penn transactions at this time. That's a forward transaction that we don't know the timing of.

Okay. That's helpful. And then secondly, just kind of high level, And this may be out there, there might not be much, but this administration has done a lot. It's the first month or so. I'm curious if there's anything that's on table that we should be aware of as far as regional gaming is concerned or anything they're doing that may be impacting your business?

I haven't heard of anything certainly nothing negative looking around the table.

Folks, anybody?

Not at all. I haven't heard anything that impacts the REITs per se. And Nick Basler?

No, nothing positive or negative. So it's positive if he can save billions of dollars of wasted funds. I guess it's positive for our country as a whole, but no, nothing specific to GLP.

I'll just say at a macro level, if they can't actually get their arms around the the deficit and the national debt and at least evidence in the outside world they care.

Definitely doesn't hurt. There's some uphill battle to to deal with the current position. And I think the people in there are really qualified to work on it. So that's a plus.

I think you could also see a scenario where if they are very effective, with rightsizing the government workforce, And if some of those people are in some of these states where we hope that new licenses might come about. Oftentimes the state has to pay the unemployment and that depending on how large the magnitude is, could be a drag of some of the state budgets opening the door to maybe a little more receptivity to gaming opportunities. We'll have to see how that plays out in the new license context. But that's like two or three steps removed. So let's wait and see here a few more months of what happens. Yes. I don't think anybody at this table has any any special insights. Maybe if you get a line on that, give us a call, would you please?

Will do.

All right.

Thank you, guys. Our next question is from Greg McGinnis with Scotiabank.

Hey, good morning.

Looking at the amended Pinnacle lease, saw rent coverage drop below the escalator threshold this quarter and it's now closer to its pre pandemic level.

What are the challenges facing those properties? And is guidance assuming that FFO not achieved?

Yes. So the low end of the guidance is assumes it is not achieved. The high end assumes it is achieved. I do think the footnote that we have on that adjusted revenue to rent ratio of $179,000,000 is important. What it says is that Plain Ridge gets excluded in the calc the actual escalator of adjusted revenue to rent, whereas when they report to us, they report all the properties that are in the lease, which includes Plain Ridge. So our expectation is that it should be a little bit higher when you exclude Plain Ridge. So the 179 isn't exactly how the escalator calculated, if that helps [indiscernible] Okay. All right. So I understand. So [indiscernible] most likely a lower rent coverage ratio, but it's not actually at the end of the day, it doesn't actually impact whether or not the escalators achieves.

That's great. And then on the one final one on the funding assumption. Funding has been dispersed for the stadium so far. So I'm curious whether it's not more of an assumption there or Is the $48,000,000 all that you're expecting to spend?

I'm looking at Brandon who's been silent here.

Not unhappily silent, but I've been content to sit and listen here for a little bit. But look, I think Vegas is proceeding as we would have expected as far as the timeline goes. That being said, the development of the mass integrated resort around the now more certain stadium location and development is still taking place. So I think ultimately what we're asked to fund will depend on what is being constructed in conjunction with the stadium and I think that's still unclear at the moment. So we've committed up to $175,000,000 We've spent the $48,000,000 on the demolition as we agreed we would. And we're waiting to hear from Bally's to better understand the development and what might be expected from us for the remaining $125,000,000 and potentially more or less depending on what they're doing. So I think right now it's just too early to tell.

But they are engaged on the issue. So that much we can assure you.

Okay. Sorry, just one more. Follow-up on that. On the Penn commitments, I guess, right, so that payment would happen at the end of end of the construction process. Is there any expectation that they may not come to you for that capital or are you guys assuming that it will happen?

Just on the I think as it relates to Penn, so just to be clear, they could take the funding earlier in the process. So far, we've expect that it's likely to come towards the end of the process based on where they are, but they could conceivably take it before The Aurora funding is required. The other three projects are not required. So technically, they could not take the funding for those three We don't have any reason to believe that they will or they won't at this point. We just are following their timeline of construction and that's what's pushed out the potential funding of these projects beyond 2025 at this point. But it's not impossible that they would call us and seek funding for those projects earlier than that if for some reason they decide to do so.

In one perverse sense, I'm delighted they have the cash flow to So Okay. There's another, they're financially strong.

Thank you. Our next question is from Handel St. Juste with Mizuho. Please proceed with your question.

Hi, good morning, guys. This is Robbie Vaidyan on the line hope you guys are doing well. Can you describe this new funding agreement with Penn How likely is it you think that you'll be able to fund the $150,000,000 And I guess the 7% is a little lower than some of the other funding deals you've had in the past. Can you offer some more color on that, please?

Yes, we can offer a little bit of color on that. I think this is not the typical funding commitment you're seeing across the rest of our portfolio. Penn had asked us in connection with discussions we were having around the non compete for Chicago. To provide funding for them at a competitive rate for that project, which we agreed to do. So our agreements to fund at that rate is not indicative of the rates that we think are competitive or that we'll be doing in the future. This was in connection with the negotiation we had, as I'm sure you know, their leases have non compete provisions in it and the value Downtown Chicago project was within that non competitive zone. And so that was just part of that negotiation. I wouldn't read too much into that beyond And as to whether or not they'll take it, I think if they move, they'll probably take it. If they don't, they won't. Either way is probably okay with us.

All right. Just maybe just one more here. Can you with the adjustment that happened with the Rockford loan with the the lower rate, but also significantly shorter term Can you kind of give more color as to what happened there? Who initiated amendment and what that process was like? David, Sure.

Yes. So look, I think the reality is that the property opened up on budget, on time. It's performing exceedingly well.

And a number of other lenders approached approached the ownership group and offered to refinance had a negotiation and we decided we wouldn't mind having the loan outs [indiscernible] at an accretive rate to us. So we had the option of getting repaid and having no additional income coming from that loan or taking a slightly lower rate and continuing to get the income.

In an interesting way, I mean, we end up as you think about it, to Steve's point with it open and doing so well, as good or maybe even better risk adjusted return.

On the second bite of the apple versus letting him prepay and go with the bank. Frankly on rate, is it fair to say Steve, we kind of bet in the middle. We didn't need to go all the way to where banks were. So we value the relationship and the fact that we'd be a turnkey and simple solution.

Got it. Thank you for the color guys. Thank you.

Our next question is from David Katz with Jefferies. Hi, good morning.

Always wondering about good morning, about Native America and any updated thoughts you have in terms of that TAM and that opportunity and whether we might see more of more of what we have already Just any updated thoughts there Yes. I think David, the TAM itself, I don't think our views have changed. So the TAM is what we expected it to be. We've had a lot of productive meetings with tribes over the course of the last couple of months. And the opportunities range from refinancing existing debt to expansion opportunities at existing cash flowing properties, to relocations to greenfield development. So the spectrum potential opportunities is pretty broad. We continue to dig into these now that we've had these meetings and there's a mutual desire to move forward and explore them further. We've entered into a number of NDAs and we'll continue to drill down on these to see what if any deals we want to do and the tribes want to do that will be positive for our cash flow moving forward.

It's really I'll anticipate the next question, what are the magnitude of those deals and how many of them are there? I think it's a little too early for us to predict that. So So as far as how big and how many, we don't know. But I will say there is a lot of interest communities to understand better what this financing opportunity is and what it may be able to offer.

Very helpful. Thank you.

Our next question is from Michael Herron with Green Street Advisors.

Question. Hey, good morning. Thanks for taking my question. Just following up from earlier on the Cordish agreement to co invest on with the 20% equity Some of the reports have been plans to develop a New Hampshire historical horse racing development and just curious what your guys' thoughts are on that segment of the business, if you believe it's a viable segment? And I'm also just kind of curious if that even falls under the scope of that agreement given the 20% equity investment requires a new license to be included.

Yes. We haven't had conversations around that project with them. They have a JV. Partnership there. We have spoken with them in other jurisdictions that they're either pursuing or have been awarded. But look, I think we believe that the project in New Hampshire will be will be successful. It's a very well located property in that state. It's a state that we have looked at before. And I think they might have one of the best locations. So look, we obviously, we we would love to have conversations there, but I think that we have to respect their current partnership.

Understood. Thank you. And just one quick one. I saw that the Boyd lease was extended, then to exercise their five year option. Just curious if there was anything any particular reason for that decision coming over a year earlier Also just assuming there are no any adjustments to that lease that wouldn't be visible to us?

There are no adjustments to the lease. It is simply an extension and they did have they do have a requirement to advise us whether or not they're going to extend. They did it a little bit early, but there's there's nothing special about it. We're excited, obviously, but there's nothing. There's no reason for it.

Okay. Thank you.

Thank you. Our next question is from Caitlin Burrows with Goldman Sachs. Please proceed.

Hi, everyone. I have another question on the development funding. So it looks like the Bell Chicago market in your documents, they all mentioned an amount up to kind of X dollars. And then the ION loan is a delayed drop. So as we think about those quoted amounts is it that you might not reach those full amounts? Or do you think you will and that's just a technicality. If that makes sense? Yes. It's really around the timing of when we'll reach those I do think we will reach the amounts we expected.

I agree. I would I would expect us to reach the top amounts on each of those projects.

Okay. Keep in mind, we're funding hard costs. So for some reason, if the scope of that project were to change and the hard costs would come in under, it's possible possible that we would fund less. We don't see that happening. Those [indiscernible] two numbers. We're trying to focus on the hard cost real property development parts of these projects.

Okay. And then just on the Gaming, even earlier, you guys mentioned how some of them might be slower than we might expect because it's like the tenant pays and then you reimburse them. So when like Chicago says that the spend is by year end 'twenty six and the Bell is an example, says it will be completed by September 25. Is that your funding or would your funding be potentially somewhat later than that? We could fund beyond the opening date for sure and there has to be a closeout of the project to know what the exact spend on those hard costs are. So it could definitely be beyond the opening date.

In any constructed project, as you would know, costs are always back ended. I mean, it just the bills Gaming per and you could expect that while we think the top number will be achieved, I think we said it now four or five times today. Knowing exactly how the draws are going to come is [indiscernible] We have no perfect insight.

I got it.

Sounds good. And then maybe just bigger picture on the development funding kind of business. As you think about the opportunities that you guys have and how it compares versus more traditional acquisition or sale leasebacks, the development funding, those obviously get repaid. So when you think of like the future portfolio for GLP and the recurring nature of income, how does this sort of development funding come in your view versus like acquisitions?

So our development funding on many of our projects is different. It's not alone. The ION project happens to be alone, but the Marquette project, the Bell project and the Chicago project are our own owned real estate that the funding turns into rent or is rent in the long run. [indiscernible] does not end like you would think in a normal term loan.

Okay.

And if the property if the properties hit pro form a, we end up with a basis that's favorable to market. In other words, as the cash flow is generated, if you were to wait five years and then step in later in the Gaming, you'd likely pay a lot more for the real estate So when we're direct funding, we're locking in our basis should lead to better coverage over time of the other pieces fall into place.

Makes sense. Thanks.

Thank you.

Our next question is from Todd Thomas with KeyBanc Capital Markets.

Hi, thanks. Desiree, you talked about the variable rate debt that's outstanding today. Some of that's related to the tax strategies or the tax that you're providing that you mentioned. Obviously, a lot of higher for long interest rate environment. And I'm just curious if you can speak to the strategy of that floating rate debt exposure versus swapping it out? And how much more exposure you expect to have over time and how much more you'd be willing to tolerate [indiscernible] I do expect the $932,000,000 to remain outstanding as I mentioned because it is related to a Valley's guarantee. We do have the Lincoln property acquisition that's $735,000,000 which will also be subject to to that same Valleys guarantee potentially And that is about all that I would expect for that variable rate. And we do look at swaps. The The amount of the cost of the swap vis a vis the cost of what we're paying on the debt It's just it doesn't make sense for us right now, but we do look at that on a regular basis.

Okay. So guidance does not include any [indiscernible] to layer in swaps or begin reducing that exposure? Potentially with Lincoln increasing that variable rate debt, I mean, just given given generally fixed rate longer term nature of your cash flows I'm just curious how you're approaching that Like I said, we're open to it. And as we do increase, I think right now, it's only around 12% of their entire debt stack is variable rate. As that does increase, if Lincoln does come on, we'll certainly reconsider [indiscernible] where they are and what you said, what happens with this administration and what happens with rates Okay. Thank you.

Our next question is from Mitch Germain with Citizens JMP. Please proceed with your question.

Thank you, Hugh.

Did the Ion transaction I'm curious how it was received and did it create additional inquiries, incoming inquiries from other tribes?

Yes. So the short answer, Mitch, is yes. The I own transaction did generate a lot of attention and the leadership of Ione is very well respected in the tribal community and that also has led to some additional conversations and credibility to both our team here and the structure that we are offering in general. So yes, that has been very, very helpful to us. And the more tribes we meet with, the more interest we're getting. So we'll continue to meet with tribes and look at opportunities and we'll be thoughtful about them and try to fine tune the structure that we have with Ione into a more long term structure that we might might be willing to roll out with more volume. So we'll see as these conversations continue. We're underwriting tribe They're underwriting us. There's a lot of different levels of opportunity out there just like there is in commercial gaming and not every tribe would be a tribe we'd be willing to underwrite in a long term scenario. And quite frankly, I don't think every tribe out there would be willing to engage with us on trust land in a transaction. So We'll see how much there is in the coming months, but I think so far we're pretty optimistic about what we're hearing and seeing.

Great. And one more for me, maybe just Ray, can we just walk through the cap interest accounting? And then I'm just curious when you start recognizing revenue, is anything changing? So maybe just kind of is it just really the balance outstanding that you're funding on the bell by your average weighted average interest rate like how should we think about this adjustment going forward? [indiscernible] [indiscernible] a project is under construction, the rules of fire to take the total spend times your average interest rate and that's the amount that you're going to capitalize per month, which means you're reducing your interest expense in your putting that on your balance sheet as an asset. Going forward, that asset will depreciate once it opens and you will stop your income and stop capitalizing your interest once that project opens and instead you would have full interest expense coming through and you will have depreciation. That makes sense.

That answered your question.

It does.

So as Mark had and Chicago start spending that amount is going to continue to rise. Is that the way to think about it?

Absolutely, yes.

So you're basically smoothing out any adjustment to when the assets come online, it's not going to be any real lumpiness to your interest expense, you're just kind of smoothing that out. Is that the way to think about it?

Yes, that's why I have decided to reduce AFFO for the capitalized interest. In other words, show that cash that was actually paid and show the income that has deferred for GAAP, show that actually as it's paid to for exactly that reason to remove that lumpiness.

And one reminder, Mitch and everyone, if you look at the bell, got the capitalized interest piece Desiree mentioned. On the revenue side, there's effectively a step up. So there's nothing being collected on the rent side there until June one of this year.

And then whatever the prevailing dollars out 9% of that will be the rent amount. [indiscernible] beginning in June and then ratchet up as we get up to that $111,000,000 total. So the earnings power of the asset right now Gaming of this year isn't captured and then we'll kick in close to full or full depending on how much we have deployed at the time. Thank you. Our next question is from Chad Beynon with Macquarie.

Hi, good morning. Thanks for taking my question. Just one for me, please.

You mentioned that the conversations are pretty active with commercial operators with potential sale leasebacks. So I guess my question is, at this point, obviously, there they're not meeting to waste anyone's time. What's the hesitation? Is it more gaming specific, meaning high Gaming, threats, margin, plateauing, do you think it's just the timing of where we are in the cycle and maybe some uncontrollables that caused some of the hesitation of getting some of these deals across the goal line? Thanks. [indiscernible] Philosophically, the way I think about this, there have been a couple of with this Gaming is everything.

You've got to have a seller or someone willing to do a sale leaseback with their asset for some reason or another. I mean, just put it that way, some reason or another. I can remember a particular asset would be known to you all where the owner said, I don't want to do that with you guys because I can't put the money anywhere. I've got so much cash and then he was telling the truth. I have absolutely so much cash that I don't know And over a period of years, we had the conversation year in, year out. I finally just threw in the towel and walked away. But a few years later, that person made a deal with somebody else because times change. Lesson, of course, there is you never give up until either you or they die, I guess.

You stick with it. But the point also is who knows what variables lead to availability of an asset. So we stay close close to the hoop and try to be there when that day comes around. So some people do it for estate reasons, well, you can fathom all the possibilities. But it's just a matter of am I prepared to do this [indiscernible] It's the best answer I can give you.

Yes. So you think the potential tenant partner still feel great about the growth of the business overall? Guess is the point that I'm getting at.

Well, Steve, if you want to add something to that?

Well, I think the potential tenant partners that are most active in dialogue now are not the publicly traded gaming companies. So like there are a lot of assets that are held by private enterprises, families, sole proprietors, and have been passed on through generations or for not. And those are I think are the bigger opportunity in regional gaming is our is talking and meeting with the private guys who many cases haven't done this in the past. So is there a learning curve that takes place And then there's ultimately, as Peter pointed out, a timing aspect that has to align. And so at times, they can borrow money cheaper than this or they don't like the idea of selling the real estate or there's some likes to have the parcel, so they come and look at the horses every once in a while, kinds of stuff that goes on. And at some point in time, it all all the moons will align [indiscernible] continue to have a lot of active dialogue. Continues to be a lot of interest. Obviously, this is a a way to unlock a lot of value for for a company or a family if they willing to move forward with the transaction and all of the underwriting aspects make sense for us to move forward with the transaction.

So I'm very optimistic about the the future opportunities that lie ahead.

We just have to be constantly looking and constantly active. Thanks. Appreciate it, Buzz.

Thank you. Our next question is from Rich Hightower with Barclays.

Hi, good morning guys.

Covered a lot of ground. So just one for me, but maybe Desiree, just I think maybe for the benefit of everybody here from a modeling perspective, We've talked a lot about interest expense. Just to flip it to the interest income side, obviously, you guys carried a lot of cash last year that has changed. I think the interest accruing from the Zebra coupon bond is gone away. So just help us understand the modeling on the interest income side. Thank you.

Yes. So the interest income side, obviously, we will have much less interest income in twenty twenty five than we had in 2024. We did come into the year with over $1,000,000,000 of cash but we will be on March 3, as I mentioned, repaying $850,000,000 bond. So a lot of our cash will decline at that time.

And then the rest of the year is kind of based on how much we fund and our free cash flow and on top of that, the forward that we're going to call on June 1. So it's fluid throughout 2025, but it's certainly much lower than what you saw in Okay. That's helpful. And then just to be clear, the zero coupon bond that was accruing to some extent on the income statement even though it was non cash in the time, just to be clear?

Absolutely, yes. That was in interest income during '24. That's correct.

Okay, great. Thank you.

Our next question is from Daniel Gugliemu with Capital One Securities.

Please proceed with your question.

Hi, everyone. Thanks for taking my questions. One more on the Penn relationship. Could Ameris be the start of more kind of Penn property redevelopment projects Or have you had any additional conversations with them around that potential?

So I I think I'll jump in if anyone else has had anything. Yes, I think the answer is yes They have started dialogue around the number of projects. I don't know if any will actually go forward. I don't think they've made definitive decisions, but they are reviewing their entire portfolio. And I would tell you, I think that most gaming operators right now are. The performance that we've seen out of Baton Rouge's redevelopment, out of the treasure chest development by Boyd, a number of these properties have seen all kinds of upside both on the top line and on the bottom line. So I suspect that others and Penn will continue to evaluate their for opportunities to enhance it.

Well, Penn has made some major commitments as we know And I would guess that they'll wait and see how some of the hotel development unfolds. And if it's successful, as they hope and expect, then could easily see the Maddy more. I know a little bit more about that but suffice it, I can't speak to them But they're not afraid to invest capital in bricks and mortar, which is pleasing to us.

Great. I really appreciate you and your partner are doing a lot of building and I expect, Jim and Tina are on the ground in Chicago.

What's your sense of the current construction environment kind of across those projects? Is there anything of note around timelines, labor, supply chains? Any color would be helpful. [indiscernible] As far as labor and the actual construction I haven't heard of any hiccups yet. I'll tell you frankly, we have had some suppliers of materials that might be from outside of The United the domestic United States that have either added a premium based on a tariff assumption or have alerted folks that their bid was excluding any type of tariff impact. So I think that there is a reality that that some certain companies that might be domiciled outside of The United days.

May ultimately be impacted in bidding processes against companies that are within The United States, but that's just the reality of it.

That's really helpful. Thank you.

Our next question is from Robin Farley with UBS.

Great. Thank you. Peter, I heard in your opening remarks, you're sort of your quarterly comment about how much you prefer the gaming industry for for the deals that you would do. Is it fair to say that especially with maybe this sort of whole Tribal segment getting unlocked that your probably further from looking outside of gaming than you ever than the JOKA ever has been before. Is that kind of fair to say in terms of thinking about whether you go outside of gaming? And Robin, we've had that conversation with you and others over many, many years now. We look at stuff. I mean, we look at everything. We've gotten into the development business a bit. We've actually appeared down kind of the loan business, but all centered around Gaming. We look at and we'll continue to look at other things now and always. But while we have what we've got in front of us, gaming opportunity, I've never found a region to go elsewhere.

If we can find a better deal, we would certainly do it. It's not that we don't look or consider, the better we're not looking, but consider other things. Gaming space is terrific. I've been arguing for years. Gaming revenues are bullish.

And they've proven to be close to bulletproof as any revenue on any property in The United States.

So while we can still do this, I don't know why we go elsewhere.

Yes, Robin, the analogy I think of, it's like we're down in a mine there's this vein of gold and we keep digging deeper and we don't know how deep it goes.

And we just keep going and there's more of it. And now we hit a second one with the tribal piece So our goal is to find the most attractive risk adjusted returns and to Peter's point, they continually happen to be in gaming. There's only two big players that are looking at these opportunities and a lot of these if we're good about it, it's only one. And out the economy. And if we're bidding against ten, twenty, 30 people, we can't monetize all of our competitive advantages outside of Gaming, similarly to what we've done inside gaming to date. Might that change? I mean, might our valuation and our cost of capital shift so much compared to the other players that maybe have changed the equation. Sure, over long periods of time. But right now, we're pretty happy with all the things in front of us.

Well, the good news is so many of our existing tenants are doing more stuff.

I mean, to put it in the vernacular, more stuff. They've got more deals going.

And we want to be part of that. So Yes.

And I think on the Tribal side, I'll just a moment of caution on the Tribal side. We're exploring this to determine if there are viable structures that we can translate into volume, right. And so we're still working on that. So we are optimistic. I don't want to suggest that we're not, but I also I just want to be careful that we don't know how deep that is at the moment. So more to come on that. And I'm not discrediting the commercial side or any of that. I just want to be careful on the tribal side that everybody understands still working through that. And as we start to put deals on the board, I think it will become more evident as to how deep that opportunity is.

Okay, great. Super helpful. Thanks. And then just one small thing. Can you and I apologize if I missed this. I don't think I heard it. Could you talk about where you expect that provision for credit loss to be in 2025.

Yes. So we did not project the provision for credit loss in $25,000,000 We projected out of zero. The big change for 2024 was really adding new leases and having to set up a provision for those new leases. Look, very detailed file that we use a third party to help us estimate those credit losses. It's based off of one hundred years of data where does the market see the commercial real estate index going? What are the loan to value value ratios because those financing leases are looked at as loans in this from an accounting perspective, a lot of macro environmental items that we just can't predict. So we start out with a zero change to our reserve for credit losses on those leases and we see what happens as the year goes through. Again, it's a non cash item that gets added back for AFFO, so it would have no impact [indiscernible] Okay, great. So in other words, nothing to I think you're off to 25%.

Okay, great. Thank you.

Thank you. Our last question is from Colin Mansky with CBRE Institutional Research.

Hey, everybody. Thanks for taking my question. Just one more for me Gaming back going back to Chicago. I guess what's the company's sort of willingness to potentially invest more capital or commit more capital to the project? I know know there's an S-one IPO process out there right now for a minority stake being sold for Chicago subsidiary that may have some legal issues with it, that are being explored. So I guess if it came to it, what's the company's willingness to commit more capital to the project if needed.

Perfect question for Brandon.

I think the bottom line is it's too early for us to say whether or not we would commit more capital to this project because it takes shape we'll consider that. But right now, we've committed what we've committed at the $940,000,000 and that's what we expect to spend. The $100,000,000 I don't think that creates a significant hole in the Valley's cap [indiscernible] [indiscernible] If it fails because of legal reasons, impact the project generally or require us to come out of pocket with any additional funds. But if we're asked, we'll evaluate it at the time and we've not been asked.

Great. Thanks everybody. Perfect answer. [indiscernible] thank you to all who have dialed in this morning This was a kind of a fun and momentous quarter for us. Good quarter and we hope we've got equally good news next quarter. So see you then. Operator, thank you.

This concludes today's conference. May disconnect your lines at this time. Thank you for your participation.