Q1 2024 Gaming and Leisure Properties Inc Earnings Call

Participants

Brandon John Moore; COO, General Counsel & Secretary; Gaming and Leisure Properties, Inc.

Desiree A. Burke; CFO & Treasurer; Gaming and Leisure Properties, Inc.

Matthew R. Demchyk; Senior VP & CIO; Gaming and Leisure Properties, Inc.

Peter M. Carlino; Chairman of the Board & CEO; Gaming and Leisure Properties, Inc.

Steven L. Ladany; Senior VP & Chief Development Officer; Gaming and Leisure Properties, Inc.

Barry Jonathan Jonas; Gaming Analyst ; Truist Securities, Inc., Research Division

Caitlin Burrows; Research Analyst; Goldman Sachs Group, Inc., Research Division

Chad C. Beynon; Head of US Consumer, SVP and Senior Analyst; Macquarie Research

Chris Darling; Senior Analyst of Lodging; Green Street Advisors, LLC, Research Division

Daniel Edward Guglielmo; Research Analyst; Capital One Securities, Inc., Research Division

David Brian Katz; MD and Senior Equity Analyst of Gaming, Lodging & Leisure; Jefferies LLC, Research Division

David Hargreaves

Elmer Chang; Associate; Scotiabank Global Banking and Markets, Research Division

Jay Bradley Kornreich; Analyst; Wedbush Securities Inc., Research Division

John G. DeCree; Director and Head of North America Equity & High Yield Research; CBRE Securities, LLC, Research Division

Ravi Vijay Vaidya; VP; Mizuho Securities USA LLC, Research Division

Robin Margaret Farley; MD and Research Analyst; UBS Investment Bank, Research Division

Ronald Kamdem; Equity Analyst; Morgan Stanley, Research Division

Smedes Rose; Director & Senior Analyst; Citigroup Inc., Research Division

Todd Michael Thomas; MD & Senior Equity Research Analyst; KeyBanc Capital Markets Inc., Research Division

Joseph N. Jaffoni; Founder & President; JCIR

Presentation

Operator

Ladies and gentlemen, good morning, and welcome to the Gaming and Leisure Properties, Inc. First Quarter 2024 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Joe Jaffoni, Investor Relations. Please go ahead, sir.

Joseph N. Jaffoni

Thank you, Ryan, and good morning, everyone, and thank you for joining Gaming and Leisure Properties First Quarter 2024 Earnings Call and Webcast. The press release distributed yesterday afternoon is available on the Investor Relations section on our website at 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 the risk factors and forward-looking statements contained in the company's filings with the SEC, including the Form 10-K and 10-Q and in the earnings release as well as the definitions and reconciliations of non-GAAP financial measures contained in the company's earnings release.
On this morning's call, we are joined by Peter Carlino, Chairman and Chief Executive Officer of Gaming and Leisure Properties. Also joining today's call are Brandon Moore, Chief Operating Officer, General Counsel and Secretary; Desiree Burke, Chief Financial Officer and Treasurer; Steven 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.

Peter M. Carlino

Well, thanks, Joe, and good morning, everyone. As usual, let me call your attention to my written comments in our release, which highlights that this has been a steady quarter for us, during which we strengthened our balance sheet in anticipation for what we would hope to deliver through the balance of this year. And in the last paragraph of my comments, which I'll briefly quote.
In 2023, we completed over $1.1 billion of transactions, including over $760 million traditional real estate acquisitions and $337 million of loan funding commitments. The overall 2023 transaction value, despite a challenged market environment, reflects our creativity in creating comprehensive financing solutions for our tenant partners. Our 2023 addition set the stage for financial growth in 2024 and beyond. So that I can say that, look, we're now working on a number of transactions, both small and larger. And I think you -- most of you recognize what we do is highly complex, and it requires a great deal of careful restructuring and often regulatory approval.
Nonetheless, we expect that our performance will level out acceptably well, as it always has, over the next -- over the balance of this year and beyond. So we feel pretty good about that. And one final gratuitous comment I'll throw in that, as a large shareholder, I couldn't be more delighted with the growth in our dividends over these last years and our announcement this quarter as well.
So with that, I'm going to turn it over to Desiree Burke to make some comment. Desiree?

Desiree A. Burke

Thanks, Peter, and good morning, everybody. I'm just going to highlight for the group, what's happening in our income statement for the quarter. For the first quarter, our total income from real estate exceeded the first quarter of '23 by over $20 million. This growth was driven by the Tioga acquisition, which increased cash rental income by $2.2 million; the Rockford acquisition, which increased cash rental income by $3.1 million; the Casino Queen Marquette acquisition and the Baton Rouge landside development, which increased cash rental income by $2.3 million; the recognition of escalators and percentage rent adjustments on our leases, which added approximately $3.5 million of cash rent; the combination of noncash investment lease adjustments and straight-line rent adjustments, which drove a collective year-over-year increase of $9.4 million.
As far as operating expenses go, they increased by $30 million, but that was primarily due to a noncash increase in the provision for credit losses. Our PENN amended Pinnacle and Boyd Master Leases have rent resets that are occurring on May 1, 2024. We continue to expect that these resets will result in increased percentage rent adjustments of between $4 million and $5 million annually. In addition, we expect to receive full escalation on these contingent escalation leases, which will result in $6.5 million of additional rent annually. Finally, the amended PENN Master Lease is subject to contingent escalation as well on November 1 of '24 and if obtained in full would result in $4.2 million of annual rent.
Included in today's release is our AFFO guidance ranging from $3.71 to $3.74 per diluted share in OP units. Please note that this guidance does not include the impact of future transactions. We have invested in a 0 coupon 6-month treasury bill that matures in August of 2024 at an implied yield of 5.32%. So in addition to the cash that you see on our balance sheet, we also have this treasury bill. Our rent coverage remains strong, ranging from 1.98 to 2.71 in our Master Leases as of the end of the prior quarter.
With that, I'll turn it over to Matt for comments.

Matthew R. Demchyk

Thanks, Desiree, and thanks, everyone, for joining us this morning. Our focus on stability and dependability continues to show in the consistency of GLPI's cash flows and the solid 4-wall coverage across our leases. Our business model is built to navigate business cycles, including economic and interest rate volatility. History suggests that heightened volatility often leads to opportunity for those who are prepared. At GLPI, we have worked hard to prepare.
Our leverage and liquidity are at levels that strengthen and support our business model. We've got normalized debt-to-EBITDA in the mid-4s, a staggered maturity profile, our next unsecured maturity not due until mid-next year and significant available liquidity between a revolver and quarter end cash position. We have positioned the company to have optionality on incremental capital sourcing for transactions as they arise.
Our track record of creativity makes us an ideal choice for counterparties, who would benefit from bespoke financing solutions. Our partners want not only to solve the current needs, but also to have a partner who can predictably continue to meet them well into the future. We've always been a dependable capital partner and in the current backdrop, the value of that dependability has gone up. As potential counterparties need to do things, we are here, ready for them, willing and able. We are focused on closing opportunities to prudently deploy our shareholders' capital.
I'll now turn the call back to Peter.

Peter M. Carlino

Thanks, Matthew, and thanks Desiree. I think you all have a pretty clear picture of who we are and where we're headed. So with that, operator, would you please open the floor to questions.

Question and Answer Session

Operator

(Operator Instructions) Our first question is from the line of Greg McGinniss with Scotiabank.

Elmer Chang

This is Elmer Chang, on with Greg. If you look across the regional markets at the properties still owned by gaming operators and those that want to expand still, what is the realistic investable market size that would still meet your desirable investment criteria? And maybe the real estate is desirable, but initial attrition is limited. So how much are you willing to give up on initial cash yields for potentially better growth from rent escalators?

Peter M. Carlino

I don't think there's any sort of opportunity, if I understand your question correct. We see a horizon of some pretty, I hesitate to say juicy, but good opportunities with partners and others that we have on the drawing board on a constant basis.
But let me ask Matt to opine on that answer.

Matthew R. Demchyk

Sure. I mean, when you think about the opportunity set, I'd really think of our job is figuring out structures and ways and the approaches to make most every asset work for us. Remember, we've got Master Leases, and we've got a lot of other structuring tools in our tool chest that have consistently made really high-quality cash flow. Every one of these deals tends to be, at least the ones we do, directly originated and with a lot of accommodations for solves on the other side. So I think of most all of the asset out there over a long period of time as part of our opportunity set.
The big question is what the catalyst is on the other side for someone to do something? And right now, I mean, there's different buckets. If you have someone who's rolling up assets, developing assets, maybe redeveloping a large scale, there's a more natural opening for someone like us. And the reality that these assets generate a lot of cash flow means that, that sense of urgency isn't necessarily there for everyone. And it's our job to be ready if and when it arises.
And the other reality is this year, we've got a presidential election and the amount of volatility that could come up as we get closer and concerns around tax changes maybe that's another bucket to think about. I mean that's where the Cordish deal ultimately came from.

Elmer Chang

Got it. Okay. Makes sense. And I guess speaking, do you have catalysts or an operator to do something? I just -- given recent Bally's news of the credit rating being downgraded as a negative outlook. How have conversations changed maybe around the potential investment opportunities, both new and those embedded within the pipeline, due to the tighter financing environment?

Steven L. Ladany

This is Steve. I'll try to take a shot at that. So I think (inaudible) remove from Bally's, though I would include them in this comment. I think all of our counterparties, whether they're current tenants or potential tenants in the future, I think all of our counterparties have seen the increased debt costs last longer than I think they maybe had hoped for or at least anticipated. And I think as time has more on and the hopeful desire for rates to be back to a much lower level has somewhat dissipated, I think people started to come to more of a realization that higher rates might be around longer, and therefore, it has started to kind of somewhat reset the way potential sellers have thought about cap rates.
Now don't run with that in that, I'm not saying that people have immediately pushed themselves from an expectation of 7.5% to 8.75%. But I think we have seen people become a little more realistic with respect to pricing expectation. And it has meant that cap rate expectation has started to move higher, excuse me.

Operator

Next question is from the line of Ronald Kamdem with Morgan Stanley.

Ronald Kamdem

Just 2 quick ones. Starting on the pipeline commentary about doing $1.1 billion last year, which is roughly 70%, 75% traditional versus sort of funding commitments, maybe as you're thinking about the pipeline going forward, is that sort of the right mix of opportunities? How is that sort of evolving and so forth?

Peter M. Carlino

I guess a smart answer is, we'll let you know when we get there. But look, this is so completely unpredictable as I made in my introductory comments. We're looking at some modest deals. I call them inflation fighters. And then we're looking at some larger transactions as well. And I think that's kind of the way it's always been. We've managed to scrounge something out of the woodwork, year in and year out, and we expect it's going to be more of the same.
So the fact that this has been quiet to the early part of '24, shouldn't suggest for a moment there isn't a ton of stuff going on here. It's somebody here around the table, and I don't remember which of you all had noted the analogy, and it's sort of like a duck going -- little duck going across the pond. It looks smooth and effortless. But down below the water, he is frantically paddling. We're always frantically paddling here. So I'll stick with that answer.

Ronald Kamdem

Great. And then my second one, if I may, on the guidance, maybe just high level, can you talk about any moving pieces between NOI, interest costs, looks like the treasury investment, how does that impact the guidance? And also, if you could talk about the Lincoln asset and an update there.

Peter M. Carlino

Okay. Des?

Desiree A. Burke

So from a guidance perspective, we use the SOFR curve, forward-looking, to estimate our high and low end of our guidance, and that is our largest moving part as well as the fact that we have the preannounced transactions for Rockford and the timing of the funding of that transaction also impacts the high end of the guidance. And then as far as Bally's Lincoln, I don't think we have any new information to provide at this time. We still have our option out there. But if we don't have any information to know when, they might actually be able to sell us that asset.

Peter M. Carlino

We haven't exhausted everybody yet, have we? Operator? Are we still connected?

Matthew R. Demchyk

Peter, I can hear you.

Desiree A. Burke

Brian?

Brandon John Moore

So Joe, I think we understand that everybody that's dialed into the line can probably still hear us, but we don't have an operator to filter the questions through to us. So we apologize for just the delay...

Joseph N. Jaffoni

Hang on a second. We're trying to contact the operator. I don't know why he's not responding.

Operator

Ladies and gentlemen, I apologize for the technical difficulty. Standby. One moment please. Again, ladies and gentlemen, we do apologize for the technical difficulties. We do have a question coming from the line of Todd Thomas from KeyBanc.

Todd Michael Thomas

Can you hear me okay? All right. First question, just Brandon, Matt, I just wanted to go back, if we could, real quick to some of the commentary around asset pricing. And I'm just curious as you look ahead and look at kind of what you're seeing out there, underwriting in the pipeline, whether you would expect to be deploying capital at higher yields than, say, the 8.3% for Tioga as you sort of look ahead, assuming the environment does not change from here.

Matthew R. Demchyk

I'd say more broadly, that's -- each one of these deals is so unique, and it's really hard to come up with a homogenous answer. I don't know that rates have changed in the last few months based on some of the volatility. But I also think that level represents what's possible in an environment like this. And unfortunately, you'll have to see some headlines to see where we kind of land things with folks. We always try to get the most possible but obviously, there's a negotiation in 2 sides of it that get us to the finish line.

Steven L. Ladany

Yes. This is Steve. And I think last quarter, I didn't pull the notes to see what I said, but I think I said something along the lines of, I don't expect to see deals north of 9% cap rates, and I don't expect to see deals south of 7%. And I think that remains true at this point. And I think everything else Matt said is spot on.

Todd Michael Thomas

Okay. Does the more recent backup in rates, does that impact plans at all regarding either sort of redevelopments or expansions that you and your operator partners have maybe been contemplating in any way, either sort of activity levels altogether or time line?

Steven L. Ladany

I think the backup in rates actually increases the amount of dialogue we have with some of our partners. Obviously, as you would assume, when they're contemplating a capital improvement at an asset that we own with them and lease to them, they have a couple of pockets to take cash from or seek cash from for those projects and one of which is borrowing cost. And so if we go turn back the clock a few years, the borrowing cost was always significantly inside of whatever cap rate we could offer from a financing perspective. That's no longer the slam dunk that it used to be. And so I think we've seen an increase in dialogue, and I think that will continue as we move forward here.

Matthew R. Demchyk

Yes, Todd, one of the interesting dynamics we've seen playing out or are seeing in real time with the Fed not cutting as people might have expected, is we've got an inverted yield curve. So people that are borrowing short based on SOFR, our permanent capital on sticker price is a lot closer to what they might be thinking about or better than that versus in an environment where we are "a little more normal."

Todd Michael Thomas

Okay. That's helpful. And just lastly, Desiree, what do you do with the funds from the 0 coupon T-bill at maturity? And what's the rate that you're earning on cash relative to the 5.32%. I'm assuming it's relatively close, but what's assumed in guidance with those funds at maturity?

Desiree A. Burke

So at maturity, we're going to use the funds to repay the $400 million bond that comes due on September 1. And the 5.32% is very close to what we get for our normal cash deposit. Right now, we're at like 5.24%, I think, that number changes by the day though, but...

Todd Michael Thomas

Right. Okay. All right. Got it. Thank you.

Operator

Our next question is coming from the line of Barry Jonas with Truist Securities.

Barry Jonathan Jonas

Maybe talk about the competitive environment you're seeing out there right now for deals? Is it kind of the same basis or any new players out there?

Peter M. Carlino

I never think that we compete with anybody, frankly. The reality is, yes, sometimes there are other players around a particular transaction. But that coined phrase, a couple of years back that most of our transactions are bespoke where we discuss or find a way to provide something special, different, more effective in the aggregate to a particular partner. And I think we've done that. We're not always the "cheapest", it's certainly not our goal. I used to say, I never wanted to be the winner in an auction because the winner often loses. It's just not our goal.
What we seek to do is find transactions that give us a spread. It's not real complicated to our cost of capital. And so far, we've been able to do that in any environment. So each transaction is unique. Each of our partners has a special desire. And plus, I'll add one other suggestion too, in a recent discussion we had with a tenant. They do business with us because they like us. and they have confidence in us. And we have a good reputation of being a good partner. All that figures into it, and it's more than just dollars and cents.

Barry Jonathan Jonas

Got it. Got it. And then maybe one for Desiree. I get it's noncash, but can you provide more color on the change in the allowance for credit losses. Just trying to understand if there are any wider ramifications down the road here or it's all just accounting?

Desiree A. Burke

Yes. So that number is very volatile. And this quarter, in particular, it was more the macroeconomic environment and assumptions around the commercial real estate index and where that is heading that caused the charge. I would say it's more accounting than anything. It has nothing to do with performance of our properties that are in our investment and financing lease line, which requires the reserve.

Operator

Our next question is coming from the line of Daniel Guglielmo with Capital One Securities.

Daniel Edward Guglielmo

The first one, you all have a well-diversified portfolio with around 8 public and private operator tenants. And I'm sure you guys are talking with them on a regular basis. I'm just curious in those conversations, are there broader themes that they're all thinking through? Or is it kind of a mixed bag?

Peter M. Carlino

Steve, why don't you take that?

Steven L. Ladany

Sure Look, I think that each company is in a different state. So I think they are similar themes as far as operating efficiency, focus and expansion of their properties to drive additional revenues. Those are -- those themes are consistent. Where they start to deviate is some of the tenants are a little more focused on growth by way of maybe new jurisdictions that are opening up. Some are focused more on online platforms and things of that nature. So each one has a specific focus that's kind of taking some of the timeshare from them. But overall and overarching, they're all focused on the brick-and-mortar business generating additional cash flow and ultimately paying our rent, which is what we're most focused on as well so.

Daniel Edward Guglielmo

Okay. Great. And the next one is a little bit more like modeling focus. So we've talked about the dry capital powder you all had and just thinking through the cash outlays for the next few years, should we be putting that capital to work as like potential development projects, acquisitions, a bit of both. We don't have insight into the so-called inflation fighter deals. So I just want to give you guys credit there. Any insight there would be helpful.

Peter M. Carlino

I'm not sure what we can say. I'll maybe turn that over to Steve for a moment. Look, it's all of the above. We expect to be doing all those things, large, small, development, property acquisitions, everything. And I think everything in that list is on our plate right now.

Steven L. Ladany

Yes. I don't know if I can give you any better insight. Obviously, we -- the transactions, as Peter's opening remarks commented on, these are complex transactions that do take time. And if I -- even if I told you everything that I thought in my head that I sit here today and I think could possibly happen, I know for a fact, some of that's never going to happen. And the other things that I don't know about today are going to close. So it's very difficult for me to give you precise advice on how to best forecast us going forward.

Operator

Our next question is coming from the line of Smedes Rose with Citi.

Smedes Rose

I wanted to go back to something you talked a little bit about on your last call, we're working with kind of generational owners who are looking to efficiently pass along wealth and take advantage of tax structures, et cetera. And I'm just wondering if those conversations are kind of live and well. And have they changed at all with the upcoming election that Matt mentioned at the beginning of the call, some of those tax rules will be -- supposedly expire next year, depending on who's President. I'm just wondering if there's any more urgency or if people are kind of waiting to see how -- who comes in.

Steven L. Ladany

Yes. In my discussions and experiences, I think that the urgency that we saw last go round has not kind of picked up again at this point. So there were some discussions, which definitively were significantly more interesting heading into Biden's election and focus around potential changes that could happen there. I think this time, I haven't heard the same dialogue or rhetoric coming from the counterparties. I also think, like in many cases, these aren't folks that are going to be impacted by a small change in the inherence tax threshold or something of that nature these people have significantly more wealth that's already been planned for and things like that.
So I think in many cases, it's a matter of understanding from the state planning perspective, where they're at, where the things lie. And then honestly, it also matters what their health is like because let's be honest, a step-up in basis is a different and more interesting concept if you think it's something that might come to fruition in the near term than something that's further off.
So these are all ongoing discussions. There's no specific point in time that's caused people to jump. But they're -- it's constant front of mind for people, and it's an avenue that I think we can continue to pursue going forward.

Matthew R. Demchyk

And Smedes, Tioga is an example of something that came from that kind of bucket if you want to think about it that way. And as Peter mentioned, it's a situation where someone wanted to work with us specifically, and we got risk-adjusted returns for our shareholders that were -- we'd argue better than market based on the structuring and all the other things we bring.

Smedes Rose

Okay. And then I just wanted to ask you, you talked a little bit about Bally's sort of broadly. But I mean, are you -- would you be interested in being kind of a solution to their problem. I mean, they've talked about needing financing to complete their Chicago, the permanent casino there. I mean is that something that you would -- a road you'd be interested in going down? Or maybe you can't say, but I'm just curious for so...

Peter M. Carlino

I've been looking for an opportunity to get Brandon more involved. So Brandon, we're going to dump that -- we all have answers, right...

Brandon John Moore

I was perfectly comfortable here leading into that question. Look, I think the Chicago project and Chicago market in generally is a complicated analysis. And I think we are in dialogue with Bally's and all the projects and things we're working on. And then Chicago is something that turns out to be, in our estimation, good for our shareholders and a good opportunity based on the build, based on the market. I wouldn't rule it out as something we would consider investing in. I don't think we have enough information today, and I don't think we're far enough along in that to say that we definitively would or we would not. But I can tell you that we are looking at it. That's about all we could say on Chicago.

Operator

Our next question is coming from the line of Jay Kornreich with Wedbush Securities.

Jay Bradley Kornreich

Can you highlight the time line you see for funding additional ROI opportunities at properties within the current portfolio, such as the amended PENN Lease and the Casino Queen Marquette?

Peter M. Carlino

Do you want to take that, Brandon?

Brandon John Moore

I can. I don't think there's really been any change in our anticipated time line of the funding of those projects. We still anticipate that PENN will probably fund their projects off their own balance sheet to start those projects. And at some point in that process, they'll look to us for funding, maybe closer to the end of that process. That being said, with the way the markets have been, depending on where they are, they could knock on our door and ask for funding sooner. But at this point in time, we're not expecting any change in that. And I think Marquette is a similar time line. I'm not sure where they stand in permitting and the things they're working on there. It's a much smaller cash outlay. But I think we'd expect that probably to begin in the latter half of this year.

Peter M. Carlino

There's a number of those opportunities that we're looking forward to. And in one sense, we take some comfort in knowing that they're out, they are likely to occur, and we need something on a [dance card] down the road. And we expect lots of opportunity to unfold in near time.

Jay Bradley Kornreich

Okay. I appreciate that. And then just as a follow-up, following the development funding for the Hard Rock Casino in Rockford, are you seeing additional opportunities for new casino developments around the country? And if so, kind of what -- what is your level of interest for being involved in those more speculative, but higher interest construction financing opportunities?

Peter M. Carlino

Well, our interest is very high, as you might guess. Look, we're skilled casino developers as well. We bring that skill to the table, understanding markets, understanding cost. We've built a ton of casinos around the country. I've got the same team right here at GLPI. So we're well equipped and you can assume that it's -- I used to say on the PENN calls, when I was over there, when questioned about, are you looking at this? Are you looking at that? My answer then and now is, if it's alive and breathing, you can imagine we're looking at it.

Operator

Our next question is coming from the line of Haendel St. Juste with Mizuho Securities.

Ravi Vijay Vaidya

This is Ravi Vaidya, on the line for Haendel. You have some percentage rents coming up here for the PENN Pinnacle Lease and the Boyd Lease. Can you give us some color as to how those assets have been performing?

Peter M. Carlino

Des?

Desiree A. Burke

Yes. I think in my opening remarks, I mentioned that the PENN Pinnacle and Boyd Master Leases rents resets that were occurring this year, we're still expecting $4 million to $5 million of an increase Additionally, we're expecting to get the contingent escalation on those leases as well, and that would result in $6.5 million of escalation.

Ravi Vijay Vaidya

Got it. And just one more here. But we've been tracking foot traffic data and other metrics like that. And I noticed that there's been -- just broadly across gaming, there's been a bit of a decline in footfall. What have you been noticing across your portfolio? And have you seen anything impact rent coverages (inaudible)?

Desiree A. Burke

No. I mean, in our earnings release, we do provide the latest rent coverage that we've been given by our tenants, Pages 12 and 13, but they are still extremely strong. Our lowest rent coverage is at 198 and our highest on the Master Lease side is at 271. So some have come down. Some have actually gone up. The 198 on the PENN Lease was 195 last quarter. But even the ones that are going down, it's small, a few basis points, not anything large at this point. But as I said, those numbers are as of December 31, we are on a quarter lag to receiving the rent coverage, hence, certain properties haven't reported yet. So they are as of December 31. So the first quarter, we do understand there were some weather issues at properties, but we don't expect significant changes in our coverage.

Ravi Vijay Vaidya

But have you seen foot traffic down at your properties?

Desiree A. Burke

Yes. We don't have any properties to see foot traffic. So we have to rely on the same things that you all do, which is when our tenants report.

Peter M. Carlino

Yes, we get no non-public information, none, 0. So we get it as you get it, frankly.

Operator

Our next question is coming from the line of Chad Beynon with Macquarie.

Chad C. Beynon

I wanted to focus on Vegas, I guess, Clark County in general. A few operators opened up in the fourth quarter, one in the burbs and then one on the strip. Can you just update us in terms of your appetite and conversations in and around Las Vegas?

Peter M. Carlino

Well, I guess you're, of course, asking about the Trop project or the broad commentary on what's going on in Las Vegas. I don't know. Steve, why don't you take that one? I'm just...

Steven L. Ladany

Yes, I'm not -- I'm not sure if he was asking about the Trop, I'm sure that will be a Part B question. But the part -- from a Part A perspective, you're alluding to Fontainebleau and [Durango]. Look, I think from a casino property that's currently constructed and operating mature assets, et cetera, new assets, I think we continue to have an interest in not only Las Vegas, but in downtown and in the locals market. Obviously, we're anxiously watching performance there. Obviously, Boyd reported last night, and we'll see Red Rock's information as Durango continues to mature. So we're anxiously watching that. We're interested in those markets. It's an area where we don't have as much exposure. We have VM Resort. But we continue to have an interest there, and we'll continue to be active if opportunities present themselves.

Chad C. Beynon

Thank you for that, and sorry for the confusing question. Separately, in the past couple of years, the IPO markets have been pretty quiet. It looks like there's been a couple in the past couple of weeks. I'm not sure if that continues, and this is kind of the green shoot moment. But when markets are more -- are busier, how does that impact conversations and kind of pricing that you have with public or private tenants?

Steven L. Ladany

I personally don't think that the -- I don't think whether the IPO market is hot or cold or is all that relevant to our space as far as acquiring casino properties from operators. I think that may drive operators to consolidate or a private operator to pursue acquiring or reverse merging into a public, if in fact the IPO market is not there for them, but -- and there are a number of smaller gaming operators that exist. But we talk to all those parties as potential tenants of ours, and we talk to private guys as well. So I think from a real estate acquisition perspective, I don't see the equity markets availability or lack thereof to the tenant to be a driver of our market or our acquisition pipeline.

Operator

Our next question is coming from Robin Farley with UBS.

Robin Margaret Farley

Two questions. One is just I think that this has been a couple of quarters now that you've increased the provision for credit losses. So has it pretty consistently been what you're saying, where it's just sort of the formula that you use for that and nothing related to performance and the sort of I think, sort of a small trend here. And then also, I think you kind of addressed this question, but you talked about looking at a number of potential transactions small and large. Do you have the capacity or desire to do all of them? Or are you weighing some versus others? Or could we see multiple -- everything that you're looking at potentially not precluding everything else. That's what I want to ask.

Peter M. Carlino

Yes, why don't you take the first part.

Desiree A. Burke

Robin, I'll start. On the provision from almost actually, last quarter, we had a reduction of some provision for [loan] loss, believe it or not, based on the macroeconomic assumptions. So -- and again, I will reiterate this is all macroeconomics. It is not specific to our individual lease properties. The rent coverage is still very similar to where it was last quarter, and it's not driving that provision for loan loss. It's completely macroeconomic, and it moves in all different directions, which is why it's a noncash add back to AFFO for us. If someone else want to...

Peter M. Carlino

To the second question, would we limit what we do? We'll never pass it off if we can do it, any good transaction, which means a proper spread to our cost of capital, large, small, everything in between. And we're looking at properties at various scales now. So, I think we find a way and to do anything that we think is good for the company, good for shareholders, hasn't changed. And that's one of the reasons why we've kept our balance sheet strong so that we could act quickly if need be. So we have a lot of capacity. We are hungry as ever. And no this -- we would do anything that makes sense.

Operator

Our next question is coming from David Katz with Jefferies.

David Brian Katz

Everyone, thanks for working me in. I appreciate it. Covered a lot of ground already, but I want to go back to the -- was it a duck reference? Because it does seem as though the deal market has been relatively quiet or at least it looks that way to us. And I think you're suggesting that it may not be. But my question is what are the sort of key barriers to things getting done? Is it cost of capital? Is it underwriting conviction or something else? And if it's a combination of all of the above, help us maybe apportion what the headwinds are to seeing some more announcements and more things getting done because it's not just in gaming, it's an all of hospitality.

Peter M. Carlino

I don't know that we feel -- I'll let others opine, but I don't know that we feel any headwinds, really. It's just the normal complexity of timing, when does the -- our prospective partner want to affect the transaction, how it gets structured. When we -- if it's a development project, we may need a lot more information. These things take time and unfold over time. So no, I don't think we feel any particular headwind. There's a lot of stuff, and I'll stick by my paddling fast illustration because we really are on a number of things and some that we expect to unfold as the months proceed. So...

David Brian Katz

And if I can...

Peter M. Carlino

It's kind of -- David -- anybody else around the table want to -- I've got get some heads shaking here. So that's it. But go ahead.

David Brian Katz

So look, what I wanted to follow up with is, we've had definitely a prospective change on the cost of capital, right? I think 90 days ago, we would have expected a downward bias in interest rates. That would be a little less the case. Is that issue in isolation more or less of a problem? Or are these just more circumstantial than anything else?

Peter M. Carlino

Well, it hasn't been so far, but...

Desiree A. Burke

You're absolutely right. I mean the expectations on the rates have obviously come in and they are not -- we started the year with 5 rate reductions, and then we went to 3. And now consensus is probably one and later on in the year and in December, possibly. But look, we price each transaction with an accretion analysis and make sure that we're getting enough incremental benefit for our shareholders for the risk that we're taking. And we base that off of specific financings. And as we see said, we've gotten our balance sheet ready for some of these acquisitions, and we've raised capital in a better market than where our current price is trading today. So I guess to answer your question, we consider all of that where the rates are going, and we still believe we can get accretive transactions completed.

Matthew R. Demchyk

I take a multiyear approach to thinking about the balance sheet, David. So when we think about our leverage level, it took us a while to get where we are. And now we've got full optionality when we think about incremental funding. So we've worked hard to reduce friction for capital raising, reduce cost of capital raising. And to Robin's question, if we have something of scale to do, we're very confident we can raise the capital because we are so disciplined and people appreciate that in the way they step up and we actually raise capital for folks.

Operator

Our next question is coming from Caitlin Burrows with Goldman Sachs.

Caitlin Burrows

Just a quick one, Peter. Back in the beginning, you mentioned the growth in the dividend. So I guess with the yield as high as it is now, I'm wondering if you or someone could talk about how you think of the dividend decisions to increase it and the outlook going forward? Like do you expect it to track AFFO growth or anything else we should keep in mind?

Peter M. Carlino

I'll let Desiree, take it...

Desiree A. Burke

Of course, at this point, I do think it should attract AFFO growth. We do have a taxable income distribution requirement that we monitor. As we do acquisitions, sometimes that affects the taxable income estimate that we have. Clearly, when we have partnerships, and we do some of the unit transactions that changes the trajectory of our taxable income that we're estimating. But I do expect that for the most part, should be driven off of the AFFO growth.

Operator

Our next question is coming from John DeCree with CBRE.

John G. DeCree

Well, maybe I'll try to ask one that you've answered a few times a little differently. I think a recent question, Peter, you've mentioned that you don't really see any headwinds to getting deals done. So maybe to ask that differently, is there anything that you look to or look at you could see as a potential catalyst to perhaps stimulate activity. I guess we all have kind of focused on interest rates, but is there anything else that you see out there that might get things moving a little bit more than we've seen so far?

Peter M. Carlino

Well, I'll reiterate, I don't -- the cost of capital has not affected. I'm looking around the table, nothing that we've looked at done so far. I don't see that as an obstacle going forward, at least for the foreseeable future. Transactions that we're grappling with are all unfolding in normal time. The challenge is, of course, none of these things move quickly. We thought you wouldn't know this because we couldn't announce it, but we thought we might accomplish Tioga in last year. But it just takes time. It takes what time it takes so that the nature of what we do is just complicated.
But it's the partner's desire to get something done. I mean, for example, well more than a year ago, we announced the opportunity with PENN around Columbus, around the -- in Las Vegas or Henderson and Aurora and Joliet and all those things. But just now starting to happen. And it's just the nature of the business that we're in. These are big assets, complex transactions, but we feel pretty confident that we'll get our fair share going forward. And we'll meet the kind of growth targets that you all are used to seeing.

John G. DeCree

Then maybe a quick follow-up on a specific item. We're paying attention to probably most people, that is the casino industry and everyone has absorbed quite a bit of OpEx cost inflation last 18 months. And interesting, Peter, given your history on the operations side as well, does higher costs motivate the industry or casino operators to maybe look at M&A as a way to scale and reduce costs. Could we see on the other side of this OpEx increase over the last 2 years as a possible motivator for more M&A among your partners?

Peter M. Carlino

The quick answer for me is I haven't a clue of what [they are] thinking. I honestly don't. We certainly -- even PENN, we haven't any reason to believe that they're not -- I think they are proceeding the pace with all the projects that they've got, and they've got the longest list that's on our list, so to speak. But others are there as well. So do I think M&A is an answer? I don't see it, but I'm looking around the table to see if anyone has a different view.

Brandon John Moore

I think the short answer is what you said is we don't know. I think could be. It could be an answer to some of what they have on their balance sheets and what they're looking at, but it's not something we've seen, but it doesn't mean that it isn't.

Operator

Our next question is coming from the line of Chris Darling with Green Street.

Chris Darling

First, just a quick clarification for Desiree. Regarding the percentage rent resets, can you remind me, are those already contemplated in your guidance range? Or does the current guidance range only account for the base rent escalations?

Desiree A. Burke

No. So the high end of the range includes the contingent escalators that I mentioned. And the percentage rent resets, they're both -- they're all in there.

Chris Darling

Okay. And then maybe just more broadly for the group. Probably one aspect, I don't think we've covered is just how your own internal underwriting standards may have changed. And I ask thinking not only -- to the last question about operating expenses and kind of the growth there in remaining a little bit stickier, but also what I think remains a pretty difficult backdrop for consumer savings, discretionary spending. So curious how your own internal underwriting standards may have changed thinking about some of those factors?

Peter M. Carlino

Well, look, we're as rigorous as ever. Any fool can do a bad deal, and we don't want to be on that list of foolish people. So we're pretty rigorous in how we consider, what we're willing to do with our capital. So I don't expect that we'll make any adjustment there at all. There was another nuance to your question, I think I've forgotten, so...

Steven L. Ladany

Well, I think we'll continue to focus on the rent coverage. And to your point on the OpEx side of things, I think we will make sure that you're not going to see us doing a deal that's sub 1.8x rent coverage. And we have not done that historically, but I think even more we're going to be scrutinizing rent coverages to ensure that what we're looking at historically and in the last 12 months, is what we would assume and believe to be the forecasted performance going forward and in the future. So I do think that's an area where you might see transactions start to look and feel a little different is that we're going to obviously have to make sure we're underwriting not only for the past, but for the future a little more carefully.

Peter M. Carlino

Yes. Let me suggest we're very aggressive around our analysis and in a number of cases, have and will continue to higher outside consultants to analyze a market in the same way we would if we were doing a project or an expansion or something ourselves so that we have as much third-party judgment as well. So it's -- no, I can't emphasize enough. Nothing in the current climate has changed, maybe down the road. But at the moment, it's business as usual standards the same.

Brandon John Moore

Yes, I think the current climate affects pricing and the way we think about it and the way we think about pricing these deals more so that it affects our underwriting process. So the process is the same. It's just the outcome can be a little bit different in how we price these transactions based upon the risk profile that we determined through that underwriting process.

Chris Darling

Okay. All helpful comments. Just one last quick one, thinking about the Rockford development. Anything new you can share in terms of the developers' intentions in terms of perhaps selling the property over time?

Steven L. Ladany

With respect to the sale or potential sale of the building improvements, we have not had further conversations with them about that, and they have not expressed an interest to pursue those discussions while they're under construction. So we have no update to provide on that.

Peter M. Carlino

I think the construction is going well.

Steven L. Ladany

Construction is -- on time and on budget.

Operator

The next question is coming from David Hargreaves with Barclays.

David Hargreaves

I appreciate your clarity on the rent coverage comments before. Those are useful. Lincoln came up in the conversation earlier. And I'm wondering if the Mashpee Wampanoag decision that recently came up, how you view that and if it factors into your appetite for that transaction?

Steven L. Ladany

Sure. So look, I think with respect to that decision, I think at this time, I'm not -- well, I probably should comment on. I think we'll see if that does ultimately come to fruition or not. I think only time will tell and a lot depends on presidential elections and things of that nature. Outside of that, I think that asset, Lincoln as an asset is one that we've always looked at it as a premier property in that region. We believe that Bally's as well as other gaming operators look at it as a premier property in that region. And it's one that, of course, we would want to own.
We also own the Tiverton asset and Plainridge, which are all in that area as well. And so clearly, we will be very closely monitoring what we think the ultimate impact is to each of those properties across the various tenants that own them as we move forward in that area.

David Hargreaves

And then turning to Vegas, I mean, the numbers have been so strong. I'm wondering if you had any insight as to sort of the timing of the Tropicana closure. And if you were consulted about it. I mean was it running EBITDA negative? I wonder why now closing it? And if you had any thoughts.

Peter M. Carlino

Yes, I'm going to let Brandon handle that. It was positive. So I think that the performance -- I mean it just wasn't part of the long-term strategy for that parcel. But go ahead, Brandon, please.

Brandon John Moore

Well, I think that's right. I mean it was positive, but in order to back -- to work backwards from the first pitch in the [A's] stadium, I think you'd find that the closing of the Tropicana was pretty much right on time. So that's been closed to make way for the liquidation of the assets. And ultimately, the demolition of the property, which gets a shovel in the ground in 2025 to begin the A's project and the integrated resorts. So I don't think it was a matter of closing it early because to save costs and expenses, I think it was a matter of on-time closure. And with the employees in that market knowing that, that casino was closing, I think Bally's would tell you they're having a difficult time keeping appropriate staff in there to keep that project open. So I don't think it was a function of it performing poorly. I think it's just timing of this project and process.

David Hargreaves

Okay. I might have misunderstood. I thought the original plans had caused -- called for keeping it open for a while, maybe that had changed.

Brandon John Moore

You would have to ask Bally's that question. I don't think we, here at GLPI, had any expectation that it would be open any longer than what it was.

Matthew R. Demchyk

Of course.

Peter M. Carlino

I think we could take -- Joe, one more question or operator.

Operator

I apologies we appear to have no additional questions at this time. So I would like to pass the floor back over to Mr. Carlino for any additional concluding remarks.

Peter M. Carlino

Well, the timing is perfect. We're looking at our clock and the hour has told. So look, we thank all of you who have joined us today and appreciate your interest and support. So with that, thanks very much. See you next quarter.

Operator

Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time.