Gaming and Leisure Properties Inc (GLPI) 2021 Q3 法說會逐字稿

Greetings. Welcome to the Gaming and Leisure Properties, Inc. Third Quarter 2021 Earnings Conference Call. (Operator Instructions) Please note this conference is being recorded.

I will now turn the conference over to your host, Joe Jaffoni, Investor Relations. Thank you. You may begin.

Thank you, Hilary, and good morning, everyone, and thank you for joining Gaming and Leisure Properties Third Quarter 2021 Earnings Call and Webcast. The press release distributed yesterday afternoon is available on 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 materially from those discussed today. Forward-looking statements may include those related to revenue, operating income and financial guidance as well as non-GAAP financial measures such as FFO and AFFO. As a reminder, forward-looking statements represent management's current estimates and the company assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to risk factors and forward-looking statements contained in the company's filings with the SEC, including its 10-Qs and the earnings release as well as 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. And also joining today's call are Desiree Burke, Senior Vice President and Chief Accounting Officer and Treasurer; Brandon Moore, Executive Vice President, General Counsel and Secretary; Steve Ladany, Senior Vice President and Chief Development Officer; and Matthew Demchyk, Senior Vice President and Chief Investment Officer.

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

Thank you, Joe. Well, good morning, everyone, and welcome to our third quarter earnings call. My introductory comments will be brief as usual since our press release is extremely thorough. And secondly, I woke up this morning with a wretched cold that makes it difficult for me to talk. However, I did want to highlight that this is an excellent quarter for us and with more to come in announced transactions as we get into the first quarter of -- as we close out the fourth quarter this year and get into the first quarter of next year.

As you can see, we remain focused on strengthening our balance sheet at favorable levels as we get down to what we like around here to call fighting weight in preparation for whatever may be our next opportunity. There are several announced transactions on the near horizon subject to regulatory approval and the usual timing complications. But as you know, timing for these events is not completely knowable. But you can expect that we will have closed pretty much everything that we've talked about, no later than the first quarter of next year, and we expect to wrap up a pretty exciting 2021 in a very strong and positive way. So -- but let me -- I'm going to bail out and let Desiree Burke highlight some financial issues that I know she stayed up late and burn the midnight oil to do. Go ahead.

Thanks, Peter. Good morning. Our third quarter results outperformed the third quarter of 2020 as income from operations increased by $24 million over the same period last year. That was primarily due to we had a gain on the sale of Perryville's operations of $15.6 million. That would be $11.3 million net of tax and the receipt of $1.9 million in Perryville rent resulting from the new lease with Penn. Closing the Bally's transaction on June 3 of this year, which increased our income by $10 million for the quarter. The reduction in G&A expenses of around $7 million due to the 2020 severance and stock compensation charges related to our previous CFO, which obviously were not repeated, escalators on our Pinnacle Boyd and Belterra leases that became effective on May 1, which added $1.5 million, an increase in rent related to Casino Queen of $2 million, and that's primarily related to the timing of the cash collections on this lease. You may recall that they deferred some of their rent in 2020 related to COVID. Morgantown rent from our new lease with Penn that began in the fourth quarter of last year. These positive variances were offset by the loss of Perryville operations, noncash straight-line rent adjustments of approximately $4 million, lower percentage rent of about $2 million on our Penn Master lease, Caesars lease and Meadows lease due to the prior year competition closures in the Toledo market, which benefited Penn's property last year as well as the impact of the prior year's resets that were negatively impacted by the casino closures from COVID-19.

With respect to Perryville, I wanted to mention that this has been recorded in our TRS segment, the rent on Perryville that is. As we've disclosed, we are in the process of closing our anticipated transaction with Casino Queen, which is pending regulatory approval to sell the operations of Hollywood Casino Baton Rouge and lease the real estate back to Queen. Once this is completed, we'll be able to finalize the tax consequences of unwinding our TRS operations and rental income will then become part of the REIT as we report. So for now, it's in our TRS, and we have footnoted that throughout the document. But in the future, we expect it to come into our REIT.

Finally, as we continue to expect a full escalator from Penn on their master lease, and it becomes effective November 1, 2021, and it will increase annual rent by $5.6 million of which $900,000 will be reflected in 2021.

With that brief summary, I'm going to turn it back to Peter.

Thanks, Des. Desiree highlighted the pending sale of Baton Rouge to Casino Queen, and that is just hanging out there with some regulatory issues that have to get solved. It kills me to part with that property because it's one of our long-term successes from the years we bought it from Carnival. With the approval of the folks at Queen, we are of course going landside and dramatically expanding that property, which is in our judgment, now speaking with an operator's hat, if you will, even though that's not what we will do going forward, it's going to be a just a terrific property. We think it's going to be highly competitive in that market.

And we should also point out that our coverages across the board from our various tenants have never been better. I mean you know well, the success that these regional properties are having pretty much across the board, and that has certainly inured to our benefit, adding an extra margin of safety that we feel really good about.

With that, let me ask Matt to make a few comments that I know he would like to add.

Sure. Thanks, Peter, and good morning, everyone. With this release, we feel as well positioned as ever and excited about our business plan on an absolute and a relative basis. During the quarter, we bolstered our offensive capacity, issuing $182 million of equity through our ATM program for net proceeds of $49.75 a share. And to Peter's point, our balance sheet is now at better than fighting weight and has robust liquidity.

Reviewing the additional capital as dry powder to be allocated for future opportunities. And to that end, our pipeline is active, and we're very pleased with the opportunity set. In looking at our existing portfolio, the robust fundamentals that have been brought up and we've been talking about for the past few quarters, and our properties are now better reflected in the updated trailing 12 coverage numbers, each of our master leases being above 2x coverage and eclipsing pre-pandemic levels. And these results also result in our cash flow being more protected and valuable.

Of note, during the quarter, we also saw a large-scale M&A transaction at MGP that represents another milestone in the institutionalization of our asset class. The overall portfolio includes a subset of regional properties that traded at what most estimate to be about a 6 cap rate. The transaction validates our long-held thesis that regional assets when thoughtfully structured with strong credit support and rent coverage or of institutional quality and deserving of true institutional multiples. With cap rates continuing to compress across much of the real estate world, regional gaming assets are both as expensive as ever and still one of the, if not the, most attractive risk return propositions in all of real estate.

In short, with the preeminent portfolio of regional assets and existence, we at GLPI own most of the houses in a very appealing neighborhood. Going forward, our efforts remain focused on unearthing and creating opportunities to grow our cash flows and increasing long-term intrinsic value per share.

With that, I'll hand it back to Peter.

Matt, thanks very much. Desiree and Matt, thank you for your comments. With that, operator, let's open the floor to questions.

(Operator Instructions) Our first question is from Todd Thomas of KeyBanc Capital Markets.

This is Ravi Vaidya on the line for Todd Thomas. With where the stock is today, the company's cost of capital has improved. Does this make you think differently about investments and the return you target? Would you be more aggressive underwriting assets given the lower cost of capital?

I'll take a whack at that, although Matt will surely have a comment and perhaps others around the table. I don't think it's a matter of being more aggressive. It's just getting an adequate return. So bigger number in our stock price gives us a more valuable currency. It's as simple as that. Our goal and mandate is to find a spread to our cost of capital. That's the whole issue. So bigger is better. Matt, do you want to add anything to that?

I think you put it well, Peter. I mean the more equipped we are with a better cost of capital, the more, I guess, on an absolute basis, our bid can be competitive, but it all comes down to a spread. That's our business model. And one area I'll point out that we're not willing to be aggressive on is getting some sort of margin safety in the deals we do. You know that that's one of the things that we hang our hat on. And whether pricing moves up or down, there are going to be other aspects, whether it's a guarantee or 4-wall coverage or some other support to make the value of our cash flows even more, you're going to continue to see us be creative in the way we structure things to try and maximize value for shareholders and find things where we can clear the market.

So look, we would not be more aggressive. We are extremely aggressive people, but we're very disciplined in making sure that the transactions we do provide a return to our shareholders. It's as simple as that. So yes, you're absolutely right. Better price opens the door to more opportunity.

Just one more here. There's been institutional -- there's been an increase in institutional capital and private equity coming into the space. But for one-off single asset targeting mostly (inaudible). Are you seeing institutional capital look at regional assets on a single asset basis? And do you expect to see new entrants in this space and the increase in competition around these assets?

Matt, why don't you do that?

I mean we've certainly been on the radar for a while. And you know there's some structural things that give us a bit of a competitive moat, whether it's licensing or just the portfolio benefits of folding something into what we have versus someone starting from scratch. But we have seen on the margin some folks poking around. There was one small deal that we turned down a couple of times that traded to someone else a month back. But beyond that, I haven't seen any large-scale movements into the space. But over time, it does seem to be inevitable that more capital will be interested. So we're kind of in a Nirvana period. We get most of the opportunity set for us, but over time, there's this backlog of capital that should ultimately further rerate our assets.

Got you. Sorry, just one more here. Would you consider deploying these proceeds from ATM or maybe just your overall investment pipeline into nongaming at this point? Are you -- have you considered it?

The quick answer is, an easy answer is, sure. But we've been saying that for the last 8 years since our spin. It falls into the same category of what I had outlined before. Show us the right spread to capital to our cost of capital, show us the kind of certainty that we would want over a long, long-term lease and the kind of coverage and credit support. Matt kind of highlighted it all, all the things you would immediately think of, show us all of that, and yes, we're up for anything. And we continue to look at various things. This happens. We're in one of the absolute best classes of investment in the planet. And it's tough when you're already #1 asset class, say, we, to drop down the #2, 3 or 4. So look, some day, I suspect that may happen, but -- and we'll continue to look. But you now know with clarity what our requirements are.

Our next question is from Barry Jonas of Truist Securities.

Maybe just a general question. I would love to get your thoughts how the M&A pipeline is looking just in the current environment. Have you seen any noticeable change in interest levels for sellers?

Steve Ladany, would you take that?

Sure. Look, I think the prospects in U.S. regional gaming remained bountiful. I think there's a number of different potential pipeline opportunities for us, and we continue to be very active. I think as the national operators continue to strategically expand their footprints to enhance their omnichannel strategies, I think there's opportunities there, both in existing projects as well as new development transactions. The smaller high-quality operators have performed exceptionally well over the last 12 months. So as you imagine, they have very low leverage. They're flushed with excess cash flow.

So I think they'll continue to start to look to expand. I think the tax law changes could impact the way some closely held operators view the future, whether that's through sale leaseback or divestiture. So I think that's another opportunity. And as we look internationally, I think we've looked at transactions on 4 continents this year. So we think there's a huge opportunity in international. It hasn't lined up for us yet, but it's an area we continue to look in as well. So I think there's a lot of opportunities. There's a lot of folks that are starting to kind of turn the corner as far as operations are now what they are, run rates are strong and cash flow and liquidity is enhanced. So I expect to be seeing a number of transactions on the forefront.

That's great. Really appreciate that color. And then just as a follow-up, Peter or anyone, would love to get your thoughts on this debate around iGaming longer-term cannibalizing land-based gaming and sort of as one of the largest landlords out there, how you think about that in terms of your longer-term strategy?

That's a fair question. I mean the totally honest answer is we really don't know. We really don't know because we're in the early stages. However, early results are very positive that this has had little impact on the bricks and sticks that this is complementary. I know if you were to talk to Penn National about their thoughts, iGaming has enhanced their ability to drag people into the properties with incentives and so of that drag and send customers to come to their bricks-and-mortar facility. And in fact, as you know, they're rolling out a significant number of these with a pretty significant investment around their Barstool theme sportsbooks and so forth. And of course, this all ties into iGaming.

We see it more as an adjunct. I think from a public policy point of view, what you're going to find is that this is going to be a lot more gambling, a whole lot more, for better or for worse. There's really a lot more. But in the end, if you want to be placing every bet that you're going to place on particularly iGaming, Blackjack or do you want to be at the table with some people and a drink in your hand and a lot of activity and energy. It's interesting.

I look at the Cordish facilities, the live facilities, non-gaming facilities that they have, they're sports-oriented. No gambling going on, yet the energy and these places are packed, which tells me that there is a desire for people to be part of the energy, part of the scene, watching the sports and getting involved. So I think it's just more of an adjunct, frankly, to create more business for the bricks-and-mortar facility. That's my prediction, but time will tell.

Yes, Barry. And it's been really interesting to see. I mean we've seen it in a lot of other sectors where people were actually online only and realize that it's so important to connect with your customer in a physical way. And that's for things like glasses, think about Warby Parker opening up physical facilities. And here, you've got something so inherently experiential, connecting with your customer in a physical setting gives you stickiness, gives you profitability. I mean part of it is intuitive, but part of it's factual. I mean what we're seeing early on is the reality that if the operators can get people to go through multiple channels, the customer lifetime value goes up by multiples. So the interesting thing is they're actually incented to take people that come in through the online channels and steer them to the bricks and mortar.

So long term, the relevance of bricks and mortar and the overall delivery, to Peter's point, should only go up. And it will be interesting to see if some of the online-only folks appreciate that over time and actually go the other direction and start getting bricks and mortar. And at the end of the day, all that means for us is higher values, more relevance and better cash flow for our shareholders.

Our next question is from Smedes Rose from Citi.

It's Smedes. I'm actually on with Michael, I think, Michael, you want to go ahead?

Did you hear that?

Okay. Sorry. Can you hear me now?

We can hear you, Smedes. You said you might be on with Michael.

Yes, I think maybe he's not on. I just -- I wanted to ask you, you started out talking about the -- having a balance sheet that's prepared to be more on offense. And I'm just wondering, could you maybe talk about what you see as your capacity here sort of on the dry powder side if you were to move forward with the transaction?

And then if you could just talk a little bit more, you mentioned some of the opportunities, whether it's new development or smaller operators coming to market for tax law reasons or potential tax changes. Could you talk about kind of what's more interesting to you or kind of where you feel like you'd be able to sort of strike sooner?

Yes, Smedes. I mean, I'll hit the balance sheet first. I mean, we've historically talked about having a leverage range of 5 to 5.5 as our target. And that's 1 metric. I'd also point out, think about percent of value of assets and our assets are certainly getting more valuable over time. and then think about fixed charge coverage given where rates are. You put all those things together, you can back into it, but pro forma for all these moving pieces, there's certainly a decent amount of leverage capacity on the balance sheet, especially driven by these ATM proceeds. And thoughtfully, we'll be able to integrate that into the next transaction.

I think the 2 key takeaways are a, last quarter, we made it clear, we got the fighting weight. We were not delevering for the sake of making our balance sheet even stronger for its own end. I mean this is about playing offense. And b, as we move forward, we're going to be able to not overequitize depending on the size of the transaction. And we'd like to adopt and we are adopting the model most triple nets use to prefund and be prepared for what might be in the opportunity pipeline.

To your second question, we've certainly at least underlined a few things, as Steve did a great job of pointing out, some of the trends in the backdrop that gave us some level of appreciation that in the not-too-distant future, we should be able to deploy some of those proceeds. And I mean the opportunities are the same. Can we create a situation a bespoke solution for a counterparty, ideally off market, that gives us access to assets that diversify the portfolio, that give us a new operator with strategic upside and different possibilities over the future. And it comes back to where I started. I mean increasing long-term intrinsic value per share. And you could be sure, given the opportunity set, we've been busy in dialogue to see which of those things we can perfect as far as which ones we might do, stay tuned.

Yes. We use that last time, stay tuned. Look, obviously, we raised that -- those funds with the thought that there are things on the horizon that we might, underscore might, be able to accomplish. Time will tell.

Our next question is from Haendel St. Juste of Mizuho.

So Peter, I guess it's no secret at least amongst investors that you were a company A on the MGP proxy. So I was hoping you could talk us through your thought process when it comes to approaching major acquisitions, mergers like an MGP. And what it means for how you navigate the company going forward? And then also, I'm wondering if it keeps you up at night knowing that you might have missed out on something so transformational, generational so unique.

That's a fair -- that's a very interesting question. I like when people talk about a strategic transaction, which is usually an excuse for doing a lousy deal. It was strategic. Well, great. The problem in our business is that we don't have any operating leverage, either the deal makes sense the day we sign it and execute it or it doesn't, and then you live with it forever.

Look, we're as hungry as we always were. Those assets made more sense candidly to us than they did to VICI, be really honest about it, would have balanced out our portfolio. We already have the biggest domestic portfolio, would have been perfect. The problem is simply, we couldn't make the numbers work in a manner that we felt confident for our shareholders, period. And you've all heard me say time and time again, there is no deal we have to do, no transaction that is a must for us. If there isn't an appropriate spread, if the risk can't be managed in a manner that we feel comfortable with our shareholders' money, then we're not going to do it.

And so frankly, in the end, it wasn't too hard for us to conclude, we're going to be bailing out or at least move it to a price that makes sense for our shareholders. Now that means we don't get the transaction, so be it. And we'll move on to something else. I have absolute confidence that we made the right choice. The thing did not pencil. And as I like to say, if the deal doesn't make sense on paper, you can bet it isn't going to make sense, I'm putting it into plain and simple, when you actually go and do it. So this did not penciled for us, and it was in the end. But look, we -- I'll say this to -- for our shareholders that we burned a lot of midnight oil and a lot of cash, frankly, as well to run that thing to ground 19 ways from Sunday, and we did.

So God bless them. It's a better deal for them than it would have been for us. And I think they've kind of helped point the direction toward the kind of values that we think do exist in the properties we currently own. So God bless them, have a grand time, and it wasn't through lack of effort that we didn't go there.

I'll just add, Haendel, you look at this team and what they've been able to accomplish over the years, mostly before I've been here, looking at Pinnacle, at GLPI, looking at rolling up things back at Penn. I mean there's been an incredible amount of thoughtful forward-leaning M&A over the years. And when you say, could you sleep at night, I'd argue we've got a structure that really ensures we look at everything from all angles. I mean we function as a partnership. Everyone's got diverse background, experience, viewpoint, it all goes into the funnel. And at the end of the day, I mean I've been doing this long enough to -- I mean all Peter's points are spot on. For a triple-net company, I mean, it's accretion, it's numbers. I mean that's your key starting point. Think about the future growth impact, think about the benefits of portfolio diversification, put it all in and see what's possible but with discipline. I mean that's how companies over time have really heard themselves missing on the discipline, and that's one thing. Peter brought it up 2 or 3 times already on this call. That's one thing we hang our hat on. We are a disciplined company.

Just to say in my years with Penn, you get the question. You're looking at X or you're looking at Y. And I would say always, always, if it's alive and breathing, you can assume we're looking at it. Now we've been a little more forthright in this case, you know we're looking at it and beyond that. So consistent with what we said, just didn't pencil. So we're moving on to what's next.

And benefited when I add, Haendel, I mean back to the point I made in the intro, benefited by this light that's been shown now on the regional aspect through MGP. And our stock has done well and enabled us to put the balance sheet in shape to be opportunistic. So in an indirect way, we're actually benefiting from what's happened, and it leads in part to us being now well positioned to do whatever the next thing might be.

Yes, great point. Actually leads me to my next question. I wanted to talk about the read-through from the MGP deal, but also the -- I guess where you assess regional cap rate today to be. We've seen cap rate compression all around this elsewhere in real estate, 50 basis points or more over the last quarter or so in a lot of asset classes. Where are the one-off or reasonable casino trades? And what's your sense of the cap rate?

I'll say broadly, and I'm not going to negotiate against myself on the call. So there's no numbers. But I will say the trends continue in regional assets just like everything else. The capital markets are very supportive. And rest assured, there's been compression in cap rates. So the last deals we saw, we did an 8 3, we did an 8. MGP did a 7.5 and then this large subset of properties went at a 6. The first 3 were off market. The last one was unique. So there's kind of your bookends. And I want to go back to the stay-tuned comment on what might be the art of the possible. And we'll see if we're the ones to deliver the next print, time will tell.

Our next question is from Jay Kornreich of SMBC.

Earlier in the year, you announced several acquisitions in ROFRs with Bally's. And I'm just curious if you can give any high-level comments for additional near-term opportunities you may see with this partner?

Steve, do you want to do that?

Sure. Look, I think with Bally's, there's constant dialogue across back and forth between the companies and the different folks. I think they continue to be acquisitive. They obviously closed Gamesys very recently, and that was a major focus for them. So now on the other side of Gamesys, I think between them incorporating their omnichannel strategy and looking to continue to be acquisitive, I think there's future opportunities for us with them. I think they continue to look at new jurisdictions as well, which is partly what was driving the ROFR state selection So I think you'll continue to see us working closely with them.

Okay. And then as the sports betting market continues to grow and Penn National expands their presence, in addition to aiding rent coverage, do you see any external growth opportunities this may provide you?

Hard to know. I mean, right now, they don't need a lot of cash. They're pretty flush and their opportunities are open. I mean right now, they're spending in a relatively modest amounts as they build out pretty aggressively the Barstool themed facilities in their existing casinos. So -- and there has been some discussion about hotels in a couple of locations. We certainly love to participate in that if we could get to the right place. I think that is a possibility with them and perhaps with some others that we are discussing.

So I would hope somewhere down the road, we actually get to do that. They're pretty busy with a very complex agenda, as you know, right now and focus on getting their -- well, I was going to say, focusing on their iGaming and sports betting and so forth. But if I think about it, they're equally focused on their bricks-and-mortar facilities because they've got a pretty expansive program around the country to roll out these places. So time will tell. I mean we make it clear that we have capital available. We talk regularly with them and others. And so as usual, I give you my amorphous answer or my amorphous nonanswer because we just don't know. But we're always focused on that opportunity.

Our next question is from Neil Malkin of Capital One Securities.

Happy to be on the call. First question, given the emphasis on a lot of these operators building out omnichannel, digitization, et cetera. I want to talk about iGaming, sports betting, et cetera. These are all big initiatives to endeavor and are very costly as well. And I'm just wondering if you think the need to raise proceeds to do these things will shake loose or necessitate some potential Las Vegas Strip or Las Vegas sales in a Holdco form at which point you might take a look at that with perhaps a new operator to gain a foothold on the strip and potentially willing to pay up to get there, so it would kind of preserve your basis just given your -- obviously, your very regional centric, which is great. But obviously, Las Vegas market has been very strong even with no international. So if you could just elucidate that, that would be great.

That's a very specific question, Neil.

If there's somebody you want us to talk with.

Which I'm sure we're happy to and probably are if that backdrop is the case. I'll just say broadly to the extent trends evolve and companies need money and they evaluate the alternatives, whether it's equity, debt or preferred permanent capital like ours, we're certainly part of the conversation. And if we can find ways to help facilitate interactive efforts by buying real estate, it's exactly what we did in our last deal with Bally's when we backstopped the Gamesys acquisition. They got what they want strategically, and we were able to get access to assets and give them permanent capital. We're certainly open to being creative around doing that. But as far as we can really go...

And it's clear what Bally's is going to do with the Trop site in Las Vegas. I know -- well, actually, I know a fair amount about what they're thinking, but it's certainly not pinned down and nothing I can share. We would hope and see a potential opportunity to participate with one or other of the concepts that they have in mind for the site. We'd like to be helpful. Perhaps they'll need us, maybe they won't. Again, but you can rest assured that we're talking with them all the time about where that might go. So yes, there's been some pretty significant conversations. Time will tell. So we're looking always to -- for places to put money that we think we can invest safely.

Okay. And the other one for me is related to the structure of your leases. You guys talked a lot about kind of being -- I don't know if conservative is the right word, but making sure you have a good yield to start because that's kind of what you live with, kind of using your words. But I wonder if you maybe take a little bit of a different stance and try to structure maybe be a little bit more aggressive with your purchase price or your underwriting. But put in more favorable lease terms in terms of no thresholds, minimum escalators, things along those lines to sort of help your overall growth trajectory against the other part of the equation. And then if those opportunities exist for amending the leases in your current portfolio.

Yes. There was a lot there. So I'll start and if we miss the part, maybe somebody else can hop in. I think the simple answer is our underwriting and the way in which we underwrite is specific to each circumstance. But yes, I would say, is overarching conservative. Our goal is not to end up in a renegotiation with a tenant down the line, whether that's year 5 or year 25. Terms of leases in the most recent transactions have been extended, as you probably noticed. Therefore, in order to underwrite the transaction and feel comfortable that we're not going to be reducing our rent down the line or finding a new tenant, we need to underwrite with a certain level of conservatism. And that's the way we run our business, and that's the way we go about transactions. Anybody else have anything?

Heads are nodding around the table, so I think our team is at least satisfied with that answer.

Our next question is from David Katz of Jefferies.

Good to hear that it sounds like there may be some fruit brought to bear from all of your efforts going forward. But I'm curious about the degree to which your competition for those deals has evolved over the recent past also. Domestically, I'd say we probably feel like we have a good sense of who's out there and who you're up against internationally, which you mentioned, we may not. If you could talk a little bit about that, that would be helpful.

David, I don't really waste a lot of time thinking about quote competition. We don't participate very often in straight out auctions, if you will, the highest place because as I've been fond of saying for many, many years about this our business and, frankly, anything, whether it's an art auction or a car auction, often the winner loses. I hate to be in a situation where we want to pay the highest price for anything. And if you looked at our business over the years, we generally find other ways to get transactions done that tend not to be auction situations. And I'm going to stand by that. I mean if the world goes to straight-up auctions in every transaction, probably an ugly place to be, and we try not to go there. And I think the stuff we're working on even now that doesn't require us to be in a straight-up auction.

I mean you saw -- earlier, we talked about MGP, straight-up auction. Do we want to win that? Probably not. Could we have? Yes, but I don't think any of our shareholders would have been very happy. So it's just not the place we want to be. And today and in the past, we've always found a way to find different ways to get transactions done. And I'm not going to go through them all, but you've seen plenty of evidence. So I'm going to stand by that.

Yes. I'll pick up, David. I mean we've got a different tool chest even if new people show up. Remember, as a REIT, we've got the capacity for OP units, whether if someone wanted to do something creative on the tax front. And separately, we've also illustrated, to Peter's point, tremendous creativity. I mean it really is a bespoke solution, not a prepackage, could give us the highest dollar for some real estate. And we've done it now a number of times with more people in the market. Can pricing shift a little? Maybe. But will the relevance of our approach stand? Of course.

I mean pricing has changed for sure, and one has to offer something competitive. But people do business with more than just a flat out the highest price. There are many other elements that go into it. And as you see how we're able to leverage what we've done with Bally's through a variety of transactions, we did something for them. They did something for us. And that's kind of the way it works.

Yes. We've added ideas and structures that sometimes our counterparties didn't appreciate were possible over time and created win-win ways for us both to benefit.

Right. I appreciate that. So I just want to follow up and make sure my takeaway is correct, which is that the things that you have out there on the board are really not predominantly competitive auction-based circumstances, they're a bit different.

It's a mix, David, but the ones that are more likely to fall for us are the ones that are differentiated.

Our next question is from Spenser Allaway of Green Street.

You guys mentioned you looked at deals on 4 different continents this year. So when you are betting international gaming opportunities, can you just provide a little color on what was enticing about those? And then also, what were some of the biggest deterrents in moving ahead with some of those?

Sure. This is Steve. Look, I think as far as what's interesting is it's an opportunity for us to expand our tenant roster. There are some very high-quality gaming operators that are not located in the United States of America. So there's an opportunity to expand your tenant roster. There's an opportunity to get additional growth profile and potentially expand further in that geography or continent. So those were all things that attracted us to some of these opportunities.

To be totally frank and honest, the biggest deterrent is that not every other country operates the same way as the United States tax code. And therefore, there are a number of circumstances where through extensive tax structuring and diligence, you find yourself in a position where you're going to have tax leakage, and you must consider that in the transaction. So that's kind of one of the major things that we have to work through each time we look at one of these and to be frank, every country is a little different. So it's a lot of time and effort put into these things, and there's a huge opportunity there, and we're going to continue to pursue it.

Yes. You might look back a bit and remember that I bought at Penn the -- among other things, the management contract at Casino Rama in Ontario. Great opportunity. The company did extraordinarily well with that. However, I think we spent -- Des, I'm looking at you, how many -- a decade-plus fighting between the governments, the U.S. wouldn't agree with Canada, Canada wouldn't agree with U.S. I can't tell you how much -- how many brain cells were burned just trying to navigate that fight between the 2 countries. So there are complications of getting these things done. And so you have to approach them eyes wide open.

Yes. And to be clear, to the extent we did it, it would be in a country with rule of law and long black robes and established property rates. And all those economics to Steve's point, are looked at on a net effective basis to us.

Yes. Years ago, I had a transaction that we could have penciled in Cambodia. Just pass it on. I don't know anybody knows that, but this is a story. And it turned out that the bulk of this facility's business came from Thailand. It's right across the border. I mean this facility is right across the border. Well, it turns out that Thailand had a requirement that the border got shut down at, I don't know, call it, 6:00 or 7:00 but it was a limited time. Well, a line item that they have in their business was paying off the guards or whoever the heck they paid off, to let people in.

Now that's perfectly okay over there. But needless to say, there's no way as a public company or an American company, we would even consider such a thing even though it's perfectly normal and reasonable for them. So there are all these things that one has to be aware of. And of course, we packed in that opportunity and moved on. So yes, we look but it's often difficult.

Okay. That all makes a ton of sense. I guess when you consider kind of all the opportunities that, Steve, that you mentioned access to more tenants, more growth opportunities. And then you also layer in the hurdles you were speaking about the corresponding tax or regulatory hurdles, which region or regions do you think offer the most feasible and attractive kind of opportunities for you guys at this time?

Well, to just broadly say, I mean I think regions that feel and look most similar to the United States ultimately feel and look most reasonable to us. I mean we have not looked in some areas, but it's not been because we're prejudicial. We've just -- opportunities have presented themselves, and that's kind of dictated where we've gone. So we're not searching out specific continents or specific countries, we just happen to see an opportunity present itself and then we go and start to roll up our sleeves.

Our next question is from Daniel Adam of Loop Capital Markets.

Given the sheer magnitude of casino M&A and sale leaseback activity that we've seen over the past 8 years since the spin, I'm wondering, Peter, if you could update us by quantifying how big realistically the domestic opportunity for gaming real estate assets is today versus what it was 8 years ago.

Well, that's a fair -- that's an interesting question, probably a good question. I mean is there more or is there less? Some of the low-hanging fruit has disappeared. There's little doubt about that. And so I have sometimes described our efforts as less standing under the opportunity tree with a blanket just having things fall down in the blanket, which we capture to actually being in the mining business. We're digging deep to find these opportunities, but they evolve over time. There are people, private individuals who have some properties that we like that we've been talking to over a period of time. And -- but it's a question of when and under what circumstances and what might motivate them to sell or to make -- or to do a transaction like this. And that changes over time. So what you do is stay close. So is there more or less?

I'm going to say it's just different, about the same, but these things are sporadic. You've seen some big transactions occur and you're not likely to see too many of those again. But there are a lot of facilities around the United States that are open for opportunity. I don't know. Steve, would you comment on that? Feel any different?

No. The only thing I would add, Peter, is I do think as more jurisdictions legalize gambling, it presents a whole new opportunity. And I would say, like we're not stating where we believe Texas will or won't go. But the fact is if Texas goes, those are going to be legitimate properties that are going to cost billions of dollars. So as much as some of the inventory has been taken off the shelf along the strip, I think there are a number of opportunities which may present themselves in the coming years.

Yes, it's a very, very good point because I know what some of our tenants are doing in some of these various states, and they're investing significant time, significant money to try to get these things over the top. And look, the day will come where every place, Texas included, will have gaming. It's inevitable. Pick the obvious ones, Georgia, I mean you just keep going. It's going to be hard to find a place that doesn't have it ultimately. So that is a whole category that I didn't think of right away.

Okay. Great. That all makes sense. And then just one more for you, Peter. I wanted to circle back on industry consolidation. I'm curious if there's a price or a valuation where you'd be willing to sell the company, particularly given the size of some of these real estate private equity funds and their clear willingness to transact at sub-5% cap rates in certain instances. Is there a price that would make sense to GLPI private?

Well, look, that's a difficult question. Look, we're a public company, there's always a price, there's always a price. I have to give you that answer. But you have to measure it against what we think is the runway that we've got, what's best for our shareholders, period, including me as a shareholder now. I think we're still the third, fourth -- third largest shareholder in this company with a major stake. So is there a price? Yes. Of course, there's always a price. And that's the only answer I can give you, even if I wanted to give you a different one. So yes, there's always a price. But I don't see it. And we believe strongly that there's so much more value to be created in this machine that we've crafted over the last 8 years that we've got a long way to go.

Our next question is from John Massocca of Ladenburg Thalmann.

So think about the total addressable market, I mean if we kind of slice it up into different sections. One of the areas that hasn't had a lot of real estate transaction activity is the Las Vegas locals market. Is there some reason for that other than just simply owners and operators not really needing the capital at this point in time in your mind?

On my mind, it's pretty simple. Just look who has those properties, and they aren't sellers, not easily and not at a price that any rational person would pay. But go ahead, Steve.

No, I was actually going to say, I think you answered your own question. I mean Red Rock and Boyd are the main owners of the locals market in Vegas, and they've been that way for years. And every -- us and I'm sure all of our competitors talk to them. And so it's not for lack of trying. But to date, they've been comfortable owning and operating. And so that's kind of the story there.

And it's not some underwriting difference between what you think the stability of the cash flows are versus the operators?

Not at all.

Not at all.

And then I know we've kind of been asking this question in a different -- a number of different ways. But just on pricing, I mean was there a change as you talk to kind of tenants and potential tenants and how they viewed pricing for their, say, largely regional assets after some of the public print on some of these larger Las Vegas transactions became public. I mean did that impact the other side of the table's view on pricing at all? Or has it been pretty stable since those were announced over the last couple of months?

At a high level, I'd say not necessarily. I mean if you look at the private market, there's been, I'd argue a compression of cap rates over the last, I don't know, 1 year or 2 years that we haven't seen in prints because they've been off market. And to the extent we're going to see new transactions, I assume they're going to follow that line. So in other words, our Bally's deals, public deals that had no uniqueness and were fully marketed down the line, no strategic benefits, they would have been at very different cap rates. But remember how we got those deals. At first one, we got control of an asset. We put together an operator. We added other things into it to make no cash out of pocket. So if you look at a market clearing cap rate back then, it would have been much lower.

I think, Matt, I agree with you directionally. I think the only nuance would be if I think there are certain regional assets that people view -- the owner's view as comparable to Las Vegas Strip type assets. And in those instances, I think those owners definitely have paid attention to what's been printed publicly, and I think they definitely have a different perception around value.

Yes, I have to say the same, Matt, thinking about it. I mean those large properties are owned exclusively by pretty sophisticated folks, companies or individuals. They know exactly what's going on and they're going to get the highest price they can reasonably get. So it's gone in that direction, there's no doubt about it, which benefits us in many ways. But yes, you're not walking off with the kind of stuff we did in the early days. There's no doubt about that. So -- but that's okay. And as long as we get recognition for the value in our company, we can be competitive.

Our next question is from Robin Farley of UBS.

Just wanted to circle back on your comments in the release about kind of diversifying. Is that just a geographic diversity and you talked about looking at other continents? Or is there some thought that outside of the gaming sector might be of interest?

Robin, I think it's something I addressed earlier. I mean we're always looking. And that does not overstated, probably once -- used to be once a week, at least once a month, one of our banks will come in and talk about X or Y or Z opportunity in some non-gaming sector. And we look at them pretty carefully. As I've said earlier, the problem is we're in such a great spot now spoiled by very, very, very high-quality cash flow and certainty and long term and on and on. There aren't many things that kind of fit that bill.

And we just have -- as long as there's opportunity in front of us in the gaming sector, I think we're going to stay close to our knitting. We'll continue to look at other things. If you ask me, do I think someday we'll be someplace else? I think probably. But we've got a ways to go yet in the space where we are comfortable. And I think as we look at other things, we also are going to stay -- keep close to our knitting.

Okay. No, that's helpful. And then also just had a question, and I did miss, there's a conflicting call so if you comment on this, but is there -- do you think that further consolidation in gaming REITs could make sense? Not suggesting that's going to happen this moment. But I mean would that make sense to you?

Who you're going to consolidate with? There's only one other.

Well, exactly.

I mean, look, if I felt we ran out of -- look, if they want to make us a gigantic offer, I suppose as a public company, I have to answer as I answered earlier, there's always a possibility, but it would have to be pretty -- something pretty fulsome to say the least. But look, I don't think that's a huge advantage to them. We have a runway. We don't view ourselves as competing with them for the most part, certainly not for single assets. Any comment, Steve? Okay. Yes, I'm looking around the table to see if anyone wants to augment.

Because I'm just wondering if that would actually make it may be less expensive for bidding up future property acquisitions if there were only on triple-net bid out there for it.

It would be kind of a sad world if there are only one entity in that space. I don't think that's good for anybody, probably also not good for sellers. They wouldn't like to see that.

Yes. No, not good for sellers, but that's why I wonder if it made sense for the buyer.

We have reached the end of the question-and-answer session. I will now turn the call back over to Mr. Peter Carlino for closing remarks.

Well, thanks to everybody who dialed in today. I hope our comments were, as always, frank and maybe even useful to give you a sense of kind of where we are and what we're doing. We feel very good about where we are this year, going to wind up a very good year, we believe. And I think we're on good footing as we get into next year. So as I think I said last time, stay tuned and look forward to seeing you next quarter. Thanks so much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.