Gaming and Leisure Properties Inc (GLPI) 2014 Q4 法說會逐字稿

Greetings, and welcome to the Gaming and Leisure Properties' Fourth-Quarter 2014 Earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Cara Smith from ICR. Thank you. You may begin.

Good morning. We would like to thank you for joining us today for Gaming and Leisure Properties' fourth-quarter 2014 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.

Examples of forward-looking statements 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 these forward-looking statements contained in the Company's filings with the SEC. And the definitions and reconciliations of non-GAAP financial measures contained in the Company's earnings release.

On this morning's conference call, we are joined by Peter Carlino, Chairman and Chief Executive Officer, and Bill Clifford, Chief Financial Officer of Gaming Leisure Properties Inc. Also joining are Steve Snyder, Senior Vice President of Development, Desiree Burke, Chief Accounting Officer, and Brandon Moore, Senior Vice President, General Counsel and Secretary.

Now I'd like to turn the call over to Peter Carlino. Peter?

Thanks, Kara, and good morning, everyone. As usual, and as you've heard, we have most of our team here so that we can answer any questions that you may have.

We're happy to report a good year for us in most respects. We have largely completed our separation from Penn and our shared services agreement, which was a big focus over the course of the year to become completely independent, and I think we're just about there.

I think we wound up a very good year. It could have been a great year if we could have come to a happier resolve with the Meadows transaction that we previously announced. As you know, that now is the subject of litigation, which is unfortunate.

I think I'd characterize that pretty well in previous calls, so I'll leave out the editorial comments. But I'll let Brandon to take a couple minutes in just a bit, just to bring that up to date and where we are.

It's been a pretty active year for us. We've looked at a lot of stuff. It's fun at our and to read the press and see what the analysts are thinking about what we're doing or not doing.

I want to emphasize we have always in the past, that if it's out there and you've thought about it, we've looked at it. It's as simple as that. You can write that down.

The trick of course is, finding the right transactions. And I'm also saddened, and I want to emphasize this, that we'd rather do no deal then do a bad deal. Any fool can do a bad deal.

We're interested in accretive transactions. Our focus is on the long-term to build a successful company, a profitable company, and you'd be digging your way out of bad deals for a very long time.

Most of you who have followed us over a period of time know, we're not gun shy, we're not afraid to stick our necks out, but we also won't do anything foolish. That's been our consistent record over the last 20 years, and so it shall remain.

Also to answer another question, we've said that we're focused on the gaming industry, that is the case. It's also the case that we've already looked at a couple of transactions outside the gaming business.

That's not our first choice or our second choice. But if things appear and they are accretive meet all the other criteria that we would want to meet, then sure, we haven't closed the door on anything. So that we're probably in a mode right now of very aggressively looking at a whole bunch of stuff.

And I want to emphasize one point, Bill will probably spend a little time with it as well. These are very difficult transactions to accomplish, because there's multiple parts. It's not like we can just buy a company, and offer a price, and maybe even do it in a hostile way.

That's not possible because we're buying a part of a company, namely the real estate, and you need a whole lot of information to make those kind of transaction work. So in this sector, in the gaming sector, it is a much more complicated process. That having been said, I think it is important that we do care a lot, that you recognize how hard we're working at a whole host of things even as we sit here today.

Bill, do want to add something to that?

Well actually, I think you covered it really well. Listen, I think the concept of what we are trying to accomplish is obviously solving for tax issues associated with separating real estate out of a normally a C Corp. And doing so in a way that doesn't just create an enormous drainage.

Plus, you've got to look at how you're going to be able to make all of that work with the tenant. In many cases, where the existing operator is looking to sell their entire business, that requires a third party. Any time, and it's no different than anything else, negotiating between two people is difficult, enter a third and things get even more complex.

But, all doable. Time-consuming, but doable.

And I think the other component is, is that what's also in the back of everybody's minds is the concept that everybody is going to do and follow our footsteps. I think that it sounds easy, it's not.

But the reality is, is that does enter -- create some issues in terms of us being successful at getting transactions done. Because some people think that they're going to follow in our footsteps, and they will inevitably try. But we continue to persevere, and we continue to work hard at it and there's a number of transactions that are in various stages of discussion.

But, that's probably about as far as I want to go.

Yes, that's as far as we can go. Brandon, do you want to take a second and talk about the litigation that we have. Just a few words?

Sure. So there was, in December, we encountered a procedural issue that we could not have anticipated when we filed in the federal district court that required us to withdraw our suit and refile in a state court. Which we did in January.

And in the meantime, we've made, what we believe to be, a compelling offer to settle the dispute with the Cannery folks that we assume they're considering. But at the present time, we're really preparing for litigation. We believe in our suit, and we'll continue down that path until something changes.

It is too bad in many respects because it is a quality property. Albeit, if we've now discovered with some issues, but it's a quality property that we'd be delighted to own under the right terms and circumstances. So, no prediction about where that's going to go, as Brandon said, we like our case or frankly we wouldn't have filed it.

That's one segment of the year come and gone, but we've all moved on to other possibilities. So look it's the frustrating part of the call for us in the sense that you all want information, and we'd love to give you information. But we are clearly constrained in commenting on virtually anything we are doing.

So with that, why don't we open the floor to questions, and see how close we can get to the answers you want to hear. One second, operator. [And] do you want to add anything on the financial side?

Sure. And relative to what we're seeing in the recent gaming trends, think we would mirror what you've probably heard in other company's discussions, specifically Penn's.

Certainly our properties, our two TRS properties, are doing well. They had a very good December. Clearly, that was a little bit of what helped our results in the fourth quarter.

As far as Penn, the escalator, there was a partial escalator contribution from Penn. And as I think we mentioned on the call last time, I knew we were close. Obviously, I didn't have access to the Penn's daily operating reports or financial statements, but knowing that where things were going I felt like there was a chance we would get there.

Relative to the Queen, I think the Queen is paying the rent nicely. They paid down almost $10 million worth of their debt last year, so that property is doing really well.

And as we look forward, I think that we're hopeful that although we're dealing with the same public information everybody else is. There's just a sense that the regional gaming trends seem to be firming, if not maybe even turning the corner. But that might be a little too optimistic.

It's very difficult to read into a trend of one or two months. I think December and January and last year the weather was incredibly poor. This year, obviously the snowstorms that have come through were not nearly as devastating as what we experienced last year.

I'm really looking forward, quite candidly, to seeing where we end up in the second quarter. The first quarter, I think, is always tough on a year-over-year basis given the weather comparisons, calendars, and everything else that goes on in that first quarter. But by the second quarter, I think we'll have a really good read on what's happening with the regional gaming trends.

Okay, Bill, thanks. Okay now, let's take your questions.

(Operator Instructions)

Joel Simkins, Credit Suisse.

Peter, I guess this first question is for you. I'm just curious on what you're making of this trend of seeing companies like El Dorado and now Golden Gaming go from private to public. And your broader thoughts on that, and does that crowd out or potentially create longer-term opportunities for you guys?

It probably creates more opportunity. Bill, we were just talking as a group earlier getting ready for this call. And you look at, I think there's an expectation that in the gaming space, or at least in the REIT world, that there's going to be a deal a week.

Those of you who follow the Gaming Institute, recognize that, A, this is a smaller industry to be sure. Many fewer players, and there never were more than a couple of deals a year in any case. Now, there tend to be larger deals, which we kind of like. So that we're not doing 20 deals a year, we might do 1 or 2 good sized transactions.

So, we look at the field and still believe that there is potential here, irrespective of what others are doing. I don't think we're concerned about what's happening in the industry.

It's going to play out, and then there will be prospects there too. So the public or private thing probably doesn't matter to us, because we can structure either way.

Sure.

Listen, Steve would tell you that we'd love to do some deal with upper units. It's one of the things that we're working on right now -- that we're working on. Let's leave it at that.

So I Think we'd love to be able to demonstrate that there are many ways that we can do this, and in fact we'll -- I think you'll see all combinations of things as things unfold. Again, this is still relatively early days. I realize it's been a year and a couple months since we started this, but we're happy with where we are. We could always be happier, but we're doing fine.

And this might be a follow-up for you Peter if not for Steve. Is there any hot button jurisdictional expansion opportunity you're tracking for 2015, or is it going to remain fairly quiet in places like Texas and Kentucky?

In terms of new potential, we'd certainly look at that as well. We're certainly active in Massachusetts and poking around out there. We're active in New York, didn't end up on the winning end of that.

So we could be a player with partners in new jurisdictions. I think we've said that before. But remember, there's not a lot of new jurisdictions opening up.

Texas, God knows, it's a great gaming state. Why those folks won't come around, I have no idea. But you understand the politics as well as we do.

So let's face it, I think the industry has matured significantly. And now you're going to see a lot of consolidation, trading of assets, and so forth, and I think that's where it's going. New growth, it's going to be pretty limited.

Steven Kent, Goldman Sachs.

Just a couple of questions. You mentioned that you might look at other real estate opportunities. Would it still be broadly within the leisure sector, and what kinds of competition do you see out there?

And then, just separately, and I don't know that much about litigation or how these things work. But does the Cannery litigation slow down deal traction? So what I mean by that, when you're sitting across from somebody, are the sellers bringing that up as an issue, some kind of fear from the seller?

No, I think we're long past that. I think once we explain the circumstances that were involved there, it's quickly forgotten. I think all of us would look at a situation like that through our own eyes.

Would we react in a similar fashion, and once they understand the facts, that's a three-second conversation. So, no, it's not been a factor at all. Steve, you're out there telling the story every day.

Everybody understands that the circumstances around the Meadows transaction are absolutely unique to that transaction and that seller.

We've done a lot of transactions over the years. We've never had a situation like this before, where what was represented turned out to be something very different. So again, I don't want to get into the particulars, but just never had a situation like this before.

So unfortunate, but it is what it is. We've forgotten it. It will, like all things, get resolved in some fashion.

And then the second question on just other opportunities out there, and how far a field do you go? Or to stay within the realm of leisure probably?

This morning, the half serious answer is, we go anywhere in a triple net capacity as long as it's accretive and secure and all the -- nothing -- the fundamentals are the same. Is the cash flow stable? Is it going to be there for the long term?

Is it accretive? Is it going to build value for shareholders? It's not real complicated. In one sense, it's not a complicated business.

And it is in an industry that we can develop the expertise to make sure that we understand what we're doing within the industry is the other criteria that we factor in. And whether that comes in the form of existing expertise within the entity, or whether that's something that we think is fairly easily outsourcable. So that we recognize that we're not in an industry that we're a novice at.

Obviously, we're very cognizant of the fact that the gaming industry has its own nuances, and we would expect that every other industry does as well. And so we would expect that if we were looking at something that has to be an industry where we could have or secure the outside expertise we need to make sure we're running the business appropriately.

A think that answers it well. We appreciate the drum beat for deals, deals, deals. Who wouldn't like to do lots of deals?

But, as I've said time and time again, any fool can do a bad deal. The trick is to be disciplined, and to wait until you get the right deal. So it just gets no more complicated than that.

Dmitri Zapatos, Barclays.

You guys talked a little bit about the potential stabilization of regional gaming revenue. But does that make you more or less optimistic that you'll be able to get deals done looking forward to next year and beyond?

Well, it certainly makes it a lot easier from our perspective to do a transaction. Because at the end of the day, what we're offering up is a 15 years with 4 or 5 year renewals. And clearly knowing that or seeing a sense that the industry is stabilizing and improving makes it much easier, at least mentally on our end to wander into a transaction.

So, I say it's good. I think it's also good from a tenant's perspective, because they're looking at a fixed rent payment obligation as well. And so if they get the sense that their business is getting healthier, I actually think it's good.

But the counter to that is, obviously if their business is getting better, they might think that they can wait a little while and sell later at a higher price. So you have a counterbalance that you've got -- so I wouldn't say it's all -- they offset each other. And I would say on balance it's better to have good trends, but there's obviously the other side of the coin as well.

Well, no buyer wants to buy into falling cash flows. So, I think Bill said it best. That there are some counters to that, but by and large, you want to be buying into a successful trend.

And just a follow up on that. Is the assumption that we should be using going forward for structuring any deals still 50/50 equity debt, or has that changed? Just some color on that.

We haven't changed our viewpoints in terms of making sure that we've got a rock solid balance sheet and financial statements, or financial ratios. We're still committed to hopefully getting a complete investment grade ratings for our credit facilities. And I would expect that whatever transaction we do would be very much along the lines of what we've talked about with 50/50.

Great. And then just one quick, small item. Do you think there's going to be any impact or benefit to the smoking bans in Iowa and now in New Orleans? Just thinking about the Baton Rouge property, could there be some benefit maybe even in Mississippi?

We don't have a problem -- well, I guess from a TRS perspective, our Baton Rouge property, certainly, it's helpful that New Orleans has a smoking ban. Although I think it's on the margins, I don't think it is going to be --

It's a long drive to have a smoke.

It's a long drive. For some of the customers that are really not in the New Orleans market that might be making a choice between the Baton Rouge market and the New Orleans market, that could be helpful. Is about as far as I think that would go.

As relative to Mississippi, I suppose that would be a Penn issue. Again, I'm sure it's helpful. Anytime you've got the ability to provide smoking environment for customers who like to smoke, that's an advantage over someone who doesn't.

But I don't know that it's going to be -- it's still a long ways from New Orleans to over to the Mississippi state line. So, I think it's helpful but I don't -- we're not tweaking any of our forecasts for that affect.

Thomas Allen, Morgan Stanley.

It seems like every quarter we talk about character [stakes] for deals. Just wanted to get your updated thinking on doing truly transformational deals, so single transactions that are close to your current enterprise value. And if they were on the gaming front, how receptive are other large gaming companies in discussing deals with you? Thanks.

Now how can we answer a question like that? I just rest my case where it began. When we look at everything, large or small, we'll take a look at something that is three times our size if it can make sense and we can figure out how to refinance it properly.

So that size, as I did indicate earlier, there are not a lot of easy deals. So it's a lot simpler to work at something bigger than to work at something smaller. But we're looking at things both large and small right now, Steve. And, looking at a transactions, frankly, that meet a variety of finance approaches.

Yes, Thomas, to your question. I don't see us ever doing some of the things that we've seen others in the triple net space doing. Which is large transactions that are neutral from an accretion standpoint, just to get the scale.

We are going to, as Peter said, continue to remain disciplined, look for opportunities to enhance our shareholder value. So that suggests to you, or should, that we're not looking at our enterprise multiple as a valuation parameter for an acquisition.

Very helpful, thank you. And then just on Ohio, you guys are more levered to the performance of that market given the monthly reset event. Any initial thoughts on the market following the Racino openings? Thanks.

Columbus and Toledo are the two properties particularly that are affected by the 20%. Listen, I think we get the same data you get, quite honestly. So obviously, I've always believed that a new market takes time and should have healthier growth prospects.

I think we're behind it on the Racinos. They're all be open, so we'll be anniversarying those. And I think that has clearly muted what would have been a very nice robust growth rate, certainly in the Columbus market as well as Toledo.

But at the end of the day, I don't have access to the daily information. And I certainly don't have access to marketing plans or anything else that -- what's going on at the two properties. But I do think that as we've anniversaried, that we should see some reasonably decent results and I think that's what's reflected in our forecast.

Perfect. Then just finally a housekeeping question for the benefit for all of us. Just on the $2.4 million compensation expense related to the one time dividend, just confirming on the adjusted EBITDA line, that negatively impacted adjusted EBITDA, right?

That's correct.

Okay, perfect. Yes, I thought so. Just wanted to make sure.

Shaun Kelley, Bank of America Merrill Lynch.

So I just wanted to follow-up. Bill, in your prepared remarks, you mentioned that one of the issues that makes the transaction a little bit more difficult is the fact that other guys are trying to follow in your footsteps. And I was wondering if you could just help us understand that a little better.

Is that because the assets themselves or those companies themselves are not available to you guys or looking to do deals? Or is that because sellers are waiting for competition?

It's hard to say. I don't think sellers are specifically waiting for competition. And I do think that obviously when people are off pursuing their own paths, that they're obviously less inclined to want to talk to us.

Just as a general matter, is really where I was coming from on that. But nothing too deep there.

Don't need to make it deeper than it is. My second question would just be on probably more for Peter. But I'm curious, you've spoken in the past, and this is digging back a while, but very specifically about some of your views on Louisiana.

And I am curious, is Louisiana a market where just because of the Texas risk, you'd really be unwilling or unlikely to do a deal? Or is that not a dealbreaker as you look at the risk around the eventual possibility of Texas legalizing gaming?

That's an interesting question. We gave up the Hollywood property in Shreveport early on because I judged, as I like to say, I got in a plane and flew from Shreveport to Texas and there weren't even cows in between. So that like any military operation, you can cut supply lines really easily if Texas gets gaming, you can write off that Western Louisiana market.

And that is the case now. It's turned out that others maybe made a better judgment, because it's still no gaming in Texas. Will it happen? Absolutely.

Of course it's going to happen, like it's happened everywhere else, as New Jersey has discovered, as Rhode Island. I just got -- someone sent me the newspaper or the Providence Journal I guess, and showing massive pictures of the Penn facility. In fact, there's a multi-page spread in Providence.

Providence now and this Massachusetts property that's going to be devastating to, and it will, to Rhode Island. That's just the nature of things. So there will be a few holes that are filled in that are going to impact people.

But back to your specific question, I don't know what the timing is in Louisiana. Would I myself be a buyer of a single property in Western Louisiana that wasn't part of a giant portfolio or something like that? Absolutely not. I just wouldn't, because never is a long time.

As I look back myself, and just a moment's reflection here. I've been around the racing business for 40 something years, 1972 when I started in Penn National as President. And I look at that and say as we look at 15 year leases and 20 releases, I remind the guys, that comes fast guys.

Way faster than you dream, and way faster than you think. So you've got to have a long-term view about what's going to happen in these markets, because we're committing to long-term capital. And maybe that's more of an answer than you wanted, but that's the way we think about it.

I think that's really helpful. And my last question then would be also on Louisiana, but totally different spin. You do have some exposure there because of Baton Rouge, and I'm carries on your thoughts around energy and the exposure to that.

Have you guys seen any impact at your TRS property as a result of the declining oil price, and maybe any secondary impacts there two people? And I'm thinking you more from the negative perspective than from the positive where might benefit the consumer elsewhere.

Right. Baton Rouge is not really -- it's the state capital. I don't think that it's particularly heavy in the oil industry. It's got a little bit of stuff going on in the periphery, but it's not a major driver of the local Baton Rouge economy. So, the answer to that question is that we're not really seeing anything that would indicate that it's a problem for the Baton Rouge property.

It's really we'd never build a hotel there. It's a 30-minutes at end property. It's a distinctly locals property, and I don't think there's anything happening in that market that changes that.

And as Bill well pointed out, it's the state capital. There's a certain stability that one has there.

Now, it's pretty competitive in that market, but listen, think our folks at that property have done a terrific job in maintaining cash flow there in a highly competitive setting. So given the competitive set there, I must say, we're very pleased what they're doing there.

Joe Greff, JPMorgan Chase and Company.

At this point, I think most of the questions have been exhausted. But I'll ask a question that was asked somewhat differently earlier. Are you seeing any seller reluctance diminish just because of the fundamentals turning over the last few months, or is that just more thinking that could happen? Thank you.

I think there -- no, I think Steve can probably answer the question better than I can. But don't think there's been an enormous shift.

Remember, our operating, our model, our financing model, has a lot of operating leverage in it. So to the degree sellers get comfortable that they've got -- that they've halted the deteriorating performance trends, in theory, it should over time give them a lot more comfort looking at a transaction similar to those that we've done.

So, I'm optimistic, but we've only got right now probably 6 to 8 weeks of really some regional impact under our belt. It's just too early to call a trend.

Carlo Santarelli, Deutsche Bank.

I just have one quick follow-up as it pertains to deals. When you guys originally came out with the REIT structure, and I'm thinking back to earlier last year. Could you talk about the level of reverse inquiries from operators?

Just to put it in an example, someone coming to you and saying, hey look. If you're looking for a partner make sure that we're on your list of to call. Has that changed at all since maybe some of the early days?

No, Carlo, I don't think it's changed. I think what people recognize is that if they're going to sell their building, there are significant tax consequences that they need to get their arms around. They need to understand their own allocation of basis, and there's a lot of accounting and tax that is associated with it.

So I don't think the volume of inquiries has changed. I think people are recognizing or coming to recognize the complexities that are associated with it.

Let me interject one thing too. I think that, at least in my thought, that we would see a lot more demand for sale lease back kind of arrangement were people would choose to remain.

Now that's still out there. We're talking to people right now about such arrangements.

But I think it is safe to stay, Steve, that more than not, folks are interested in selling the business outright. Which then puts us in a position, as Bill alluded earlier, to having -- and that isn't something we are addressing that we've got to have third-party operators.

And that's specifically, actually I apologize if I missed both. That's who I was talking about. Maybe the third-party operators coming to you guys saying hey need a partner on these things, we would certainly like to get a look. Have you seen any change in the case of the --?

No, that stepped up. I think it's safe to say we've got more prospects now than we had in the beginning. So, no, I think we've got people who are willing to work with us with the right transaction, and that's actually been more positive, Steve.

Very much so.

I don't think it was ever negative, but it's pretty strong right now.

And it boils back to the earlier point that people are getting more comfortable with the operating leverage that's built into our approach to a transaction.

I just look at Penn as a shareholder, and as an outside observer. They're doing very well coming through these tough times, I think and this transition very well.

And I'm very optimistic that Penn is going to have a terrific year, and look pretty good a year from now. So, and I think that's going to make people more comfortable when they recognize that, hey, the world doesn't come to an end. You're still running your business.

There's tons and tons of businesses that I point out that our asset free that make a lot of money. And in the end, what are you buying? You're buying sustained and sustainable earnings.

No more complicated than that. We like the model, we think it works, we have players who want to work with us. So just going to have to keep working at these things until we get the right deal structure.

George Smith, Davenport Asset Management.

Peter, I was glad to hear you mention the willingness to look outside gaming. And wondering if you could just compare the volume of deals that you're seeing there, and maybe talk about how they're being sourced? And within that, it would certainly seem as though you guys have a lot of expertise running hotels, and I wonder how fertile the hospitality industry might be?

I guess to be completely honest, I don't think we're looking outside the industry. We're really not.

There's plenty of gaming stuff that we have at hand. Again, at the risk of just saying this one time too many, we're running a public company. Our responsibility is to shareholders.

We will do whatever it takes. I used to say in the early Penn days that look, we'll build in the gaming business, first racing, then gaming and maybe someday it will be widgets.

Fortunately, we didn't have to go to widgets, or widget in a sense is what we've just done and split the Company for shareholder's benefit, and formed this REIT. But now, I'll say the same thing. It will be widgets in the end if we have to, but it will be the last thing that we'll do.

We've had some things that have crossed our desks submitted by others, and looked seriously at a couple things. I don't think we've looked particularly in the hotel space. It tends to be very competitive.

And again, can it be accretive? Is it going to be safe and stable? The same criteria apply.

These are triple net leases. We're really talking about the ability of cash flow and the financial structure, and there's not much more to it. So show us the right deals or help us -- we'll find the right deals, and we'll do it.

I wouldn't rule out anything reasonable, but for the moment, were not looking. We have enough, frankly, in the gaming space right now that we're very involved with. So if we ever run out of that, then we'll let you know.

And coming back to third-party operators, as I think about Penn potentially being one of them. Is that in a way preferred in that it's easier under the existing structure, or do you think there's this desire to have a different third-party operator for the purposes of diversification? Or does it just come down to who's willing to pay the most for the rights?

It's as simple as that. Penn is something that we can talk to. And remember, any of the bigger companies are conflicted in so many markets. That's a problem, and that necessitates do we go out and talk to others.

Is Penn -- would Penn be looked at favorably here? Of course, absolutely. But are they exclusively so? Absolutely not. In fact, I can't emphasize that enough.

They're are just one of 20 others that have expressed interest in that we and Steve are working with. So if it makes sense, great, and if they are willing to pay up, great. But that's what it is going to take.

Bill, on the dividend, it appears as though we're now set at a quarterly run rate it looks like around $0.55. And I guess the only variability going forward would just be any fluctuations in Ohio revenue?

Yes, it's 4.5%, just to be technically accurate on the dividend for the quarter which comes out to a run rate annualized at [$2.18]. Looking forward, I think the variability there's only really two items that can affect our AFFO or FFO, and that's the TRS, at least for this year. The TRS operating results out of Baton Rouge and Prairieville, and then the variable rent in Columbus and Toledo, everything else is fixed.

And we could end up, I suppose I should talk a little bit about the escalator. For purposes of our guidance, we've assumed there's no escalator. Obviously, there's a long time between now and the end of October.

So we remain hopeful, but just we felt that it was more prudent to reflect guidance without the escalator. And obviously as we go along, we'll be able to see that we should end up with -- we'll see where we are is probably the best description of what will happen with the escalator. But I'm hopeful.

Just remind me what it would take for it to kick in, and then how meaningful it would be.

We need a rent coverage of [$1.8 million] in rent, and then meaningful-wise it comes to about $5 million a year. The full escalator -- like this year we didn't end up with a full escalator. So to the extent that the ratio is very really tight to the [$1.8 million], you could end up with up to $5 million is probably the best way to look at it.

Up to $5 million. And we're at what 120 million shares out?

117 million.

Kevin Coyne, Goldman Sachs.

I just wanted to revisit I think some comments you've made on prior calls just to make sure it's still the case. I believe you said when you're looking at a larger portfolio that number, one, you'd want the manager in place. And number two, that you would prefer to have a sole manager as opposed to piecemeal operators signed up. Is that still the case?

Of course you'd always prefer a sole manager if you could. The reality is for a larger portfolio, that's not likely to be the case. So that it would require a couple of operators.

Look, we're operating -- we're working with that presumption, and indeed we have identified people to do those things. So at the various things we're looking at, I think it's safe to say that we've identified operator groups that would work just fine. One is ideal, if takes more than one, we'll do that, whatever it takes.

Great, that's helpful. Thank you. And just a follow up in that process if it was a larger portfolio and you didn't have 100% wind up in advance, would you consider letting the TRS grow a little bit in the short term to put some assets in there, and then find managers down the road?

Sure. The quick answer is yes. We certainly wouldn't miss out on a large transaction because there was a couple of stragglers that didn't fit in with an existing operator. And that the goal would be to make that a temporary situation.

In other words, depending on facts and circumstances maybe because there's a need, you can't run a public process sometimes. You might very well have to commit yourself to taking on an operating role for a couple of properties or whatever, and then as soon as the process is public you've then immediately shift into the mode finding somebody.

I think our approach would be that it should be a fairly small percentage of the portfolio not a large percentage of the portfolio that's unresolved on that issue. But assuming it was small, absolutely.

Tayo Okusanya, Jefferies.

Most of my questions have been answered. But just wanted to find out, with all the conversation about Pinnacle splitting into two companies and Caesar also possibly splitting into an opco propco, just curious if you feel that ends up changing the landscape somewhat in regards to your acquisition outlook? Or whether you have any concerns it creates additional competition going forward?

The quick answer is, let's see what happens. We can't predict what the landscape is going to look like, the business world changes every day. Let's see what happens with those companies, and we'll hang around the hoop. And, Bill?

Well I think both of those companies are quite a ways off from actually getting ready to be able to be competitive in the REIT space. I think both, from what I understand and the public information anyway, that I would expect that both of those are not going to be 2015 issues. Probably be later than that.

And also I think even coming out, from what I've been able to gather from the public information, I think both of those companies will have higher costs of debt and higher costs -- and should trade at lower multiple. Obviously, who knows on the last one. That's a subjective issue.

But pretty comfortable that they will both have higher cost to debt. So I think we'll be in a position to at least be in an advantaged position relative to them when and if they get there.

Andrew Berg, Post Advisory Group.

One housekeeping question, what were the total dividends for this year?

So it was $2.48 of ordinary, and then we had the E&P dividend at the beginning of the year. It's $1.51 billion, which came out to [$11.85], something like that.

And you said that you think you're going to $2.18 right now scheduled dividends for this year?

Yes, well in last year's number there was $0.40, which was a one-time of which $0.35 was a cleanup after we had an agreement with the IRS relative to the E&P [perk]. So we ended up doing a supplemental dividend for $0.35, and then $0.05 came from -- actually as a result to some of the restructurings that we did inside the TRS. Which created some taxable income at the parent that we had to distribute.

Just a really a one-off, it wasn't a recurring. That $0.05 wasn't recurring.

And then CapEx this year, I think with everything was about [$140 million], which you said $100 million was projects. How should we think about CapEx for the fiscal year we're in now?

We've got about $9 million worth of CapEx for next year, a big chunk of that is slot machines for Prairieville.

Okay. And availability under the revolver?

Availability under the revolver, we are at roughly $444 million. And I would expect this year that assuming we don't get any transactions closed that that will grow. As we're only distributing 20% of our -- for 80% of our free cash flow, which leaves 20% that we'll be using to pay down the revolver throughout the year.

We've reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further closing comments.

We thank you all for joining us this morning. I hope we've left you with a generally positive view of what we're working on here. There's a lot in the soup, and we're looking forward to 2015 and we will see how it plays.

Look, this is not, as we say, I kind of miss the Penn calls we used to do. We could talk about properties and regions in all kinds of good stuff. Here, what's your next-- politicians, this is what's your next year. Which as I think we violated.

And the gaming space is never going to be an everyday occurrence. But I feel pretty confident we're going to get to where we need to be, and we'll do so in the same disciplined manner that we have in the past.

So with that, thanks a lot. We'll see you next quarter.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.