Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) Q4 2020 Earnings Conference Call February 19, 2021 9:00 AM ET

Company Participants

Joe Jaffoni - Investor Relations
Peter Carlino - Chairman & Chief Executive Officer
Desiree Burke - Senior Vice President, Chief Accounting Officer & Treasurer
Matthew Demchyk - Senior Vice President & Chief Investment Officer
Brandon Moore - Executive Vice President, General Counsel & Secretary
Steve Ladany - Senior Vice President and Chief Development Officer

Conference Call Participants

Barry Jonas - Truist Securities
Greg McGinniss - Scotiabank
Jay Kornreich - SMBC
Daniel Adam - Loop Capital
Thomas Allen - Morgan Stanley
David Katz - Jefferies
RJ Milligan - Raymond James
Shaun Kelley - Bank of America
John Massocca - Ladenburg Thalmann
John DeCree - Union Gaming
Robin Farley - UBS

Operator

Greetings and welcome to Gaming and Leisure Properties' Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

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

Joe Jaffoni

Thank you, Sherri and good morning everyone and thank you for joining Gaming and Leisure Properties' fourth quarter 2020 earnings call and webcast. The press release distributed yesterday afternoon is available on the Investor Relations section of 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. The 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 its risk factors and forward-looking statements contained in the company's filings with the SEC, including its 10-Q, the earnings release, and 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 Peter is joined by 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 now my pleasure to turn the call over to Peter Carlino, your host. Peter, please go ahead.

Peter Carlino

Well, thank you, Joe and welcome to all who have dialed in this morning. Let me start by saying that 2020 was a bizarre year, I think, for all of us and I'm just glad to be on this side of a brand new year.

But there's some good things that came out of last year for the company, we, in many respects had one of the most successful, if not the most successful year we have had in -- since our spin into GLPI. I think part of the good news is that we have proved what we've been saying all along that the real strength of gaming is in the regions, not in Las Vegas. We've always -- in the regional area sold at a discount.

Look, I get it. The Wynn is illustrative spectacular property. Love to own it, but I'd rather have, frankly, if we're interested in return on investment, the kind of properties that we build at Penn, the kind of properties that are in the GLPI portfolio.

We will -- and did collect 100% of our rents this year, which is terrific in the worst of times, which is what we have said all along would be the case. And we did a number of things as well to -- along some undisclosed, by the way, to strengthen relationships with each of our tenants.

Notably, as you know, we provided the ability with a range credit to help Penn at a time when Navy solvency was a question. That move has proven to be spectacularly successful, obviously, great for us because our tenant is stronger by leaps and downs. But moreover, you can see what's happened within. So we have to feel particularly good. We acted swiftly, we acted early. There were a lot of questions about that at the time, but we thought it was the right thing to do in the long run. And boy, that’s proved to be a great, great result.

Along the way, let me just highlight a couple of things because the things as I look at a summary here in front of me, but so far back in 2020 almost forgot that have occurred. I'll remind you that we did enter into a membership interest purchase agreement with Penn for the Hollywood Casino in Perryville.

With Caesars, just quickly go through a couple of these things. We amended the Tropicana Master Lease with Ceasars to remove variable rent components, provide a fixed escalation and permit replacement of Tropicana, Evansville and/or Greenville at the time, as well as the removal of Belle of Baton Rouge. Complex and difficult things, but we got that accomplished for them.

We exchanged Tropicana Evansville for the Isle Casino Hotel in Waterloo, the Isle Casino Hotel in Bettendorf. We entered into a repurchase agreement, which is very cool to pick up the Evansville property again. It was gone, and we're thrilled to say we got it back, which was not a foregone conclusion in a lease with Bally's, formerly Twin River Holdings. And then we permitted a transfer of Belle of Baton Rouge to Casino Queen, which is owned by Standard General.

Moving on quickly, we entered into a membership purchase agreement to sell operations at Hollywood Casino Baton Rouge. We agreed to the terms of a new master lease between Hollywood Casino, Baton Rouge and Casino Queen. And finally, we entered into an agreement provided a $4 million recovery of unsecured loan, previously written-off by the company with Casino Queen.

With Bally's, we enter into an agreement to acquire Dover Downs in Delaware, terrific. We're excited about that, agreed to the terms of the new master lease that would include Dover Downs in the Tropicana Evansville, and we help to broaden our tenant base further, which is always an objective for us.

Miscellaneous stuff, I almost forgot, and we acquired Lumière Place in St. Louis, which we converted from an unsecured loan, that's way back, but that's a massive accomplishment more than you might guess that we're quite excited about. We acquired the Belterra property in Cincinnati from Boyd Gaming in satisfaction of a loan. We also notably received approval to go land side with our Hollywood Casino property in Baton Rouge. We're working on that right now.

But I will say what appear to us that GLPI is the only REIT to announce and sign a real estate acquisition following the COVID announcement last year. So as I look back on this, it was a pretty strong year for us. We're as hungry and interested and hard-working now as ever, so I can get that commercial. And one has to feel pretty good about the regional gaming business and the regional REIT business as well.

With that, I've already said more than I use, I'd like to say upfront. I'm looking at Desiree, and I'm going to ask her to make – or highlight a few points as she thought you should be aware of.

Desiree Burke

Thanks, Peter. Good morning, everyone, and thank you for taking the time to join our call. Our performance for the quarter was good, as we're ahead of all of our key metrics compared to the fourth quarter of 2019, due to the fact that we fully collected the Casino Queen rent in the fourth quarter and combined with our rent deferral agreement of $4.6 million.

In addition, we had several non-cash items that are included in our P&L that I though I should highlight. First, as Peter mentioned, we had the Caesars exchange transaction where we exchanged the Tropicana Evansville and received Bettendorf Waterloo. In return, we had to recognize a non-cash gain of $41.4 million in our income statement.

Second, we had some straight-line rent adjustments in the quarter, and those are, we're just deferring less rent as a result of the accounting rules than what we had in the past. For more information on that, note 14 in our 10-K has a lot of details about how we will recognize that rent deferral over the next several years.

The percentage rent reset for Meadows occurred on October 1, and the rent reset was down by $500,000 for the quarter or a full $2.1 million for a full year. This is our last percentage rent reset until 2022. Obviously, excluding the Ohio percentage ramp for Casino Columbus and Toledo, which as we've disclosed, Toledo is in a rent for $22.9 million.

Additionally, our two TRS properties continued with strong results. Their net revenue and adjusted EBITDA were booked up $1.3 million and $2.4 million compared to a year ago. We continue to see strong spend per visit, which is more than offsetting the reduced attendance levels. Our net income, FFO, AFFO and adjusted EBITDA for the fourth quarter were all ahead of the prior year, which is detailed throughout our release.

And with that, I'll turn it over to Matt.

Peter Carlino

Yes. And Matt, you want to add a few thoughts as well, please.

Matthew Demchyk

Sure. Yes. First, turning to our balance sheet. Just after the third quarter call, we completed a successful equity raise to prefund our value transaction, delivering on our promise of prudent balance sheet management. And as a result, our balance sheet is characterized by a robust liquidity and thoughtful leverage.

In addition, our long-dated unsecured debt yields continue to trade materially inside those of our peers. This is a valuable validation by the debt markets of the safety inherent in our business model, and a clear benefit to the weighted average cost of capital, that we can utilize for transactions. Based on the strength of our position, the theme for 2021 at GLPI, that is being offensively postured.

As we navigate opportunities, we remain prudently disciplined in our focus on achieving a margin of safety and our appetite remains voracious. Our team's decade’s deep relationships across the gaming sector and our unique track record of being creative and structuring win-win solutions for counterparties, both stand to be competitive advantages. Our team is committed to making the most of the opportunity set in 2021.

As I wrap up, I'd like to take a step back for perspective. More than a decade ago, before we or our asset class existed, the global financial crisis tested cash flow resilience across the economy and the real estate world. Real estate asset classes that were newer quickly became battle tested. New winners and losers became evident, and at times, contrary to traditionally held expectations. In the many years since, pricing trends and institutional interest has come to reflect the durability demonstrated amidst challenges.

As the old saying goes, the hammer shatters glass but forges steel. Of late, the entire world has been subject to the wrath of the new and different hammer, unique and challenging backdrop presented by COVID-19 has resulted in yet another significant test for a broader economy and across the spectrum of real estate assets.

And thus far, triple net gaming assets, especially regional ones, like found in our portfolio, have collectively proven far more resilient and the vast majority of real estate that’s currently considered to be of institutional quality. While the case study is still being written, it will undoubtedly serve as an important signpost on the path towards institutionalization and multiple compression for gaming real estate. Multiple expansion for gaming real estate.

And with that, I'd like to hand the call back to Peter.

Peter Carlino

Thanks, Matt. So in summary, I think 2020 was a great year for GLPI, and I can't say, I'm sad about leaving it, as we move into 2021, but it was a very impactful year. So with that, we will open the floor to questions and perhaps create an opportunity to hear from the rest of our team present today. So operator, would you please go ahead.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question is from Barry Jonas with Truist Securities. Please proceed.

Barry Jonas

Hey guys, good morning.

Peter Carlino

Hi, Barry.

Barry Jonas

Hey. Let's just start with the current M&A environment. I would love to get any updates there, what the pipeline looks like and any notable changes over the past 90 days?

Peter Carlino

Why don't I -- I'm looking across, it's Steve Ladany. Look, there's life out there, but I'll leave it to Steve to tell you what he feels he can.

Steve Ladany

Sure. Yeah. Good morning, Barry. I think from a technical perspective as far as the M&A landscape in front of us. On the non-gaming side, we continue to see a myriad of opportunities coming across our desk. As you'd imagine, gaming has held up wonderfully during the COVID experience, but other non-gaming areas of the leisure space, etcetera have not. So there's a number of opportunities that continue to come across our desk. However, as Peter has said many times before, we continue to believe that gaming presents us with the best opportunity for outsized returns a risk-reward basis. So as much as we are looking at other opportunities, the M&A landscape in the gaming space continues to be very active. And there are a number of discussions we continue to have with a number of parties, both existing and potential new operators.

Barry Jonas

Great. Great. That's really helpful. And then just as a follow-up, can you give us the status on the Belle of Baton Rouge. I know Caesar sold it to Casino Queen, and it was removed from our master lease with no adjustment to the rent. I'm just curious what your -- if you guys still own it or what the status is there? And if there's any opportunity for incremental rent down the road? Thanks.

Peter Carlino

Brandon, you want to please take the part of that regulatory piece?

Brandon Moore

Yeah. Yeah. That transaction is not yet closed. So I think they've announced that Caesars has agreed to sell the Belle Baton Rouge operations to the Standard general Casino Queen team, but that's subject to regulatory approval by the Louisiana Gaming Control Board still. Our intention is to continue to own that property. So currently, that property is still in the Ceasars lease. If that transaction is approved in Louisiana, we'll remove it from the lease and put it in a separate lease with the new standard general team. But our intentions at the moment are to continue growing that property.

Peter Carlino

And there's no adjustment to the Caesars master lease, if that transaction does occur and that property comes out.

Barry Jonas

Got it. Okay. Just wait and see. All right. Thank you so much guys.

Peter Carlino

Thanks, Barry.

Operator

Our next question is from Greg McGinniss with Scotiabank. Please proceed.

Greg McGinniss

Hey, Good morning. Peter, we've been getting a lot of questions from investors regarding the CIO and CDO roles, as they seem a bit complicitous. Can you please walk us through the need for creating both those roles? And how responsibilities are split between the two?

Peter Carlino

We've had a couple of questions like that, Greg, along the way. But look, it's actually in our minds, pretty straightforward. Steve's job primarily is the source opportunity within the gaming world with, which he's quite familiar.

And Matt, I'm simplifying this is to look at it's place in our portfolio, it's valuation, it's financing and all the elements that relate to -- well, if we have an interest in a property, what does it look like? How do we fit it in our balance sheet? Do we pre-finance? So you've seen some evidence of that already, that's max influence.

So, I can appreciate the confusion, but they're really two different roles. The guy out on the road, if you will, by phone or in person is Steve. The guy on the phone, if you will, who works this is Matt. So, -- but look, the two work together, our team works together. And functionally, frankly, it's working fine.

Greg McGinniss

Okay. Thank you. And then, for a follow-up, the questions on these calls are so often focused on the acquisition pipeline. And I don't really feel like breaking tradition this morning. Are there any casino assets that are currently for sale and being marketed right now? And if so, what kind of EBITDA, do those assets generate?

Steve Ladany

To clarify, the question was, are there currently casinos being marketed?

Greg McGinniss

Yeah.

Steve Ladany

Right. Yeah. I mean, there are many opportunities, obviously, we're under NDA, but I can give you a sense. I mean, there are some that are not so private, that have been public lease, very large-scale assets that are for sale on the Las Vegas strip. But there's also individual, smaller, single property assets that exist as well. And in between those two, are portfolio trades that could occur with multi properties. I mean, I think one of the things that we are seeing is that with the margin improvement of these properties, I think the sellers are trying to figure out where they're, in fact, going to land as far as a run rate. And that's part of the complication on the buyer side as well is the new operator, if in fact it's a wholesale transaction needs to also contemplate where they believe margins will settle in.

Greg McGinniss

All right. Thank you.

Peter Carlino

Yeah. You know, we don’t have to answer that clearly. Its -- there's always activity of one sort or another. Actual activity is another matter. So I mean, our job, as I've said for many, many years is to -- we look at everything. If it's alive and breathing, you've heard me say this many times before. You can imagine we're looking at it.

What's doable is always another matter. And when you get the seller's interest aligned, I mean, if you were to go out now and say, what's for sale? Well, I don't know, I think I can find that property you're selling, the strip you could probably buy.

But these things evolve as they do. And our job, frankly, is just to be ready, prepared financially. That's a big role that Matt plays, of course, to make sure that we're -- as he said earlier, offensively positive to be ready as opportunity appears. So, I mean, that we are.

Greg McGinniss

All right, I appreciate Peter. Thank you.

Operator

Our next question is from Jay Kornreich with SMBC. Please proceed.

Jay Kornreich

Hey, good morning. I guess, sticking with the acquisition pipeline. Can you just provide any update on your dialogue with Bally's either around potential sale the status within their current casino portfolio or further expansion with you?

Steve Ladany

The -- sure, I mean, Bally's is no different than our other tenants and that we talk to them very frequently, about different opportunities, whether they are within their current existing portfolio or potential opportunities to expand. I mean, I think, the world has come to recognize that they have been growing pretty rapidly and looking at expansion.

So, we are constantly talking to them about what opportunities exists, what markets they may be interested in and what things we can help them shake loose. So, yes, we're in constant dialogue.

Peter Carlino

Yes. They're look -- they're hungry buyers. I think, as Steve says, they're very hungry. And we want to be their partner of choice. So we work at that very hard.

Jay Kornreich

Okay. And then, I guess, moving towards Casino Queen, which was your trouble tenant, and now you have a master lease with them. They pay back the deferred rent $4 million of the loan, and you have this rule for agreement. Can you maybe just provide an update on their performance and is this an operator that you'd like to expand further with?

Peter Carlino

You want take that Steve -- side.

Steve Ladany

Sure. So, I think, one clarification I would make is that the master lease would exist, post their acquisition of our TRS property. So, currently that's still in a single asset lease. I think the -- we're very comfortable with the management team. They are -- they're experienced. They've worked in very competitive marketplaces like Vegas locals markets.

And so, I think, we're comfortable that they have the talent and necessary and required to continue to manage these properties and get the most out of the performance. And as far as they're interested in growing, I think it's very similar to what you've heard with respect to Bally', I mean, I think they're interested in acquiring assets, expanding their footprint.

And I think they'll continue to look to enhance the reach especially on the sports betting and iGaming side as well which you've seen with the renaming of the Casino Queen asset to address things.

Jay Kornreich

Okay. Thanks very much. That's it for me.

Peter Carlino

Thank you.

Operator

Our next question is from Daniel Adam with Loop Capital. Please proceed.

Daniel Adam

Hi. Good morning. Thanks for taking my question.

Peter Carlino

Good morning.

Daniel Adam

So, this is, I believe, the first earnings call where Penn's market cap is larger than GLPI’s, roughly 80% larger. Peter, I'm just curious, what do you make of that dynamic if anything?

Peter Carlino

I think it’s great. Terrific. Look, it's always nice to have a tenant that is well-capitalized and this time Penn clearly is. Look, I mean, I founded Penn so as you well know. And seeing it grow and do what it has been able to do and it’s been transformative, is quite remarkable.

By the way, the question hasn't been asked yet, but it's an opportunity for me to sort of jump right to it and that is this. I think what they're doing with the Barstool brand is an enormous enhancement to the bricks-and-mortar properties that we own. Feel very confident about that. Penn is committed to build out Barstool-themed facilities at its properties. I think that rollout has begun now. People are social animals. I think you're going to find, whatever else is done on the Internet, that's a guy placing a bet on a football game on a Saturday money in his driveway. You're going to find a tremendous lift.

I'm utterly satisfied in the properties that we own as well. And it's going to help change the demographic of who comes and plays in these facilities and so forth. So I couldn't be more excited about what's going on at Penn. I think it's a huge plus for us at GLPI. And it's – Brandon is going to say.

Brandon Moore

I'd just say, well, it's exactly why we did what we did, when COVID hit in early 2020, was to assist our largest tenant in ensuring their long-term success. And I think what's happened with Penn since that transaction that we did for Tropicana, Las Vegas, to help them out in the time of need, has benefited them greatly and therefore, benefited us greatly.

Peter Carlino

And I think they're going to prove, the ability to be profitable and are well before any other player in the field. And that's a huge advantage that they expect to capitalize on. So look, the company is well run, they have ambitious goals. It's – I couldn't feel better about what's happening with Penn. Again, it all inures to our benefit in having a strong, well capitalized tenant.

Daniel Adam

Okay. Great. That makes a lot of sense. And then I guess, related to that, any update on the timing and level of interest in the possible sale of the Trump in Vegas? Thanks.

Peter Carlino

Yeah. Look, there are others. I mean, Steve is a lot closer to it than I am, although Matt also has had contact with people. There has been a shocking number to my mind, I'll use that word, people coming out of the wood work, signing NDAs to take a look at it. Now a lot of them, I will say, or what I call the dollar down, dollar a week crowd, with transactions that wouldn't interest us at all, because they can't.

We're not intending to take any risk whatsoever. We're looking for a cash buyer. It's possible we could participate in something, but never to put our capital at risk. Never. I can't underscore that enough. So there's some pretty good activity out there. It's – who knows, again, got to caveat that with, who knows what we'll get to the signing line. But I would say that, it's been pretty impressive. Steve, do you want to comment?

Steve Ladany

Yeah. I'll just add. We have a very – we have – there's a few parties that have shown very strong interest. And so we continue to work on that. But I would also add that, the Coke transaction that just occurred at the Fountain Blue, we view as a very positive signal for our ability to exercise our sales process.

Peter Carlino

Anything – would you want to add anything, Matt? Any thoughts?

Matthew Demchyk

Yes. The one other thought that's relevant is just we're seeing signs of a little loosening in the debt markets for developments, which is another encouraging development in that market. And I'll just remind everyone that, every potential buyer is looking at meaningful redevelopment plan there to help maximize the potential of the assets. So that's going to be an important element for anyone who buys it. And I'll remind everyone, we're in a balance sheet position, but we don't have to do anything. So we're going to wait until we have a good deal on hand, if and when we'll move forward.

Peter Carlino

That says it well. So look, we never want to promote stuff that frankly would mislead you in any way at all. Until we know, it's certain -- it's not certain. But I will tell you, and in honesty, we're kind of heartened by the level of activity has perked up as we have gotten into 2021 with some serious buyers. So, that's what we can report today.

Daniel Adam

Great. Very encouraging. Thanks, guys.

Peter Carlino

Thank you.

Operator

Our next question is from Thomas Allen with Morgan Stanley. Please proceed.

Thomas Allen

Hey. Good morning. Can you just update us on your dividend? You announced in the release that you're going to go back to being a full cash dividend payer. But just, kind of, how you're thinking about it, medium to long-term? Thank you.

Peter Carlino

Well, we're thinking about it a lot, but I'm going to give you half-an-answer, because, unfortunately, timing has just not worked out well for us. We have a board meeting next week to discuss the dividend. In fact, I think I'm looking at our General Counsel. We should be prepared to get an announcement out next week, Brandon, should we not?

Brandon Moore

Yes, I expect it will be next week.

Peter Carlino

Yes. We expect we will. Look, we have said cash dividend, 2021, and you can count on that. The precise amount that we've also said, we're not going backwards. So the goal, of course, is to move forward. But we can't get ahead of the Board. And all I can say is, by the end of next week, you should have an answer.

Look, you recall, I am, first and foremost, a shareholder in this company. And my thoughts are completely aligned with what's best for shareholders. I want to move the highest possible dividend at the earliest possible time, consistent with prudence in this good sense. So we're going to look at it carefully.

And remember, the goal is to build value, to build dividend income over the years. We've done that all along. We’re back to that, just how far, how fast we can push it; we'll let you know shortly. But you can expect the cash dividend going forward.

Thomas Allen

Perfect. Thanks. And then -- and just a clarification on Casino Queen. So, you’ve gone back to receiving $3.6 million a quarter of rent. There was a catch-up payment in the fourth quarter for what wasn't paid in the third and second, and then once the Baton Rouge deal closes and it goes to that $21.4 million run rate. Is that right?

Peter Carlino

Des, do you want to?

Desiree Burk

Yes. So, yes, you're correct. We collected $4.6 million of deferred rent in the fourth quarter. So our rent as of 2020 is fully collected. They were closed in 2021. So we have a small deferral that will -- we expect to collect in 2020 when the sale of the Baton Rouge property is finalized. And, yes, your number is correct, that it goes to the increased rent once the deal closes.

Peter Carlino

Yes. It's tied to the other transaction with certainty, so that we'll get paid. Hopefully, they'll remain open as going forward. But even if they don't, we still get paid.

Thomas Allen

But for the next couple of quarters until the deal closes, it should be $3.6 million of rent? But then, given they close for a period of time, maybe slightly lower in the short-term? Is that what I'm hearing?

Desiree Burk

Yes, yes. It's about $2 million of rent that was deferred for January and February, but then they'll go back to cash since they reopened their property. And that $2 million, we expect to collect during 2020 when we close on the transaction.

Peter Carlino

But in any case, we will collect.

Desiree Burk

Yes.

Peter Carlino

We're certain of that.

Thomas Allen

Okay. Yes, got it. Just want to make sure we’re modeling correctly. Thank you.

Operator

Our next question is from David Katz with Jefferies. Please proceed.

David Katz

Hi. Good morning everyone.

Peter Carlino

David, good morning.

David Katz

Good morning. So look, your comments are quite clear about the Las Vegas strip and a preference elsewhere within regional gaming. I'm just trying to think through other avenues of growth on the margin where there might be sort of elements of specific regional properties such as a hotel or a retail element right outside of just owning the casino four walls and whether those kinds of opportunities are out there and interesting in some way?

Peter Carlino

David, they certainly are interesting and they are out there. We continue to talk with Penn. I think we've brought that up before about a hotel in, say, Columbus and some other development that could occur. Some of our -- I'd say, some of our open property, undeveloped property has had interest recently for different kinds of uses. We certainly had offers to sell some.

But as I like to say, we're not really in the sale business. We're in the income business. And not to say, we wouldn't sell for some generous price, we might have to suck it up and take the money. But our real goal is to build revenue over time. And yes, we are actually looking at a variety of things, and time will tell.

David Katz

And just to follow that up, if we were to sort of qualify between owning sort of a new hotel, right, or participating. I think you've said no participating in development of any kind, right? That's sort of putting capital at risk. So you'd be sort of owning the real estate on normalized or mature assets rather than sort of new issuances. Is that fair?

Peter Carlino

We do a new property with a credit, tenant. I mean, we're not taking the risk. The risk is going to go elsewhere. So somebody is going to step up, who's going to be able to support it. Again, I've long said it on the Penn side, you will remember, I love saying it again. We are not in the gambling business. Our customers might be, but we are not, and that never is going to change. We don't take risk that we can avoid.

David Katz

I understand. Thanks very much.

Peter Carlino

Thank you.

Operator

Our next question is from RJ Milligan with Raymond James. Please proceed.

RJ Milligan

Hey, good morning guys. I was wondering if you could just walk us through how we should think about both the escalators and the variable rent components in 2021 and 2022, given we're coming off such a low EBITDA year in 2020?

Peter Carlino

Des, we're looking in your direction to that.

Desiree Burke

Right. So if you look at the release, we have a table in the release that speak about the performance of the adjusted revenue to rent ratio for most of our tenants, and it describes how escalation would occur if it, in fact, did occur. So it is at least five weeks view on what you expect to happen in 2021, I would say that we're not expecting escalators in 2021 for the most part, but we could be surprised. I mean, I'm looking at information that is related to 2020 and either projections for all of our tenants and how they perform in 2021 is unknown at this time. But as far as variable rent resets -- for such rent resets, we're done with those for 2021, there are no percentage rent resets; the next ones are in 2022. And we have a lot of data together before them to know what those resets will look like.

Peter Carlino

Yeah. I should have started with just a brief comment. I want to get it in commercial for our financial and our legal team here that we've always prided ourselves on releases that have provided an enormous amount of detail. And it's -- we've put as much in that as you can possibly take in the time to read. So there is a lot of detail, and hopefully that can answer it.

RJ Milligan

Okay. Yes, that was helpful. Thank you.

Peter Carlino

Thank you.

Operator

Our next question is from Shaun Kelley with Bank of America. Please proceed.

Shaun Kelley

Hi. Good morning, everyone. I just wanted to get some thoughts on maybe the depth. As we're thinking about the buyer pool and M&A environment broadly, I think we're starting to see some new people arrive on the operating front as well. And I specifically want to get your, kind of, take on some of the Native American operators looking at the OpCo side of transactions and what that might mean for the broader depths of the buying and selling market or the transaction market, if anybody had any thoughts there?

Peter Carlino

Well, it's a good thing. And we have entertained conversations with such folks over time, nothing at the moment actionable. Steve, do you want to add any thoughts to that?

Steve Ladany

Sure. So I think we're going to continue to see the trend. I think a number of the Native American tribal gaming enterprises are well-capitalized and looking for areas to reinvest their capital in industries that they're comfortable with, which at this point is definitely gaming. So I think it's something that we're going to continue to see, I think there's also a number of instances with some of the casino expansion that's been proposed in different jurisdictions like Alabama and Nebraska where some of that could also come into play. So it's an area we're focused on, we're looking at, and we continue to try to build out relationships there, because I think it is an opportunity for growth going forward.

Shaun Kelley

Great. And Steve, my other question, it referred to something you mentioned earlier about some of the challenge in underwriting right now is this -- the flux that sort of the margin profile of a number of casinos find themselves in, hopefully, it's largely a good thing. But I just wanted to get your thoughts on what do you think the long-term implication on valuation is from this -- what many people are viewing as a bit of a structural change in margin? And just thinking, will this result in potentially higher overall valuations and similar metrics, or could it result in higher rent coverage ratios, or just how are you thinking this might actually start to play out?

Steve Ladany

Well, I don't have my crystal ball. But if I had to guess, I would suggest it probably -- for new transactions, which I'm assuming that's what you're asking me about. So on a new potential transaction; I don't think it necessarily changes the rent coverage that's underwritten by a landlord and a tenant. And I don't think it necessarily changes the valuation that the landlord or the tenant would pay on a multiple basis. I think what changes is that now you're -- there's more cash flow. And, therefore, when you multiply the larger EBITDA times, all those factors, you're just going to get to a higher total valuation. So I think that's the main driver. I mean, separate from that, I think a lot of value is going to be determined by the opco, and that's going to be driven right now by whether there's sports betting or iGaming on the forefront in that jurisdiction or did the property already cut skin deals and there's no opportunity, or is it wide open and the operator that acquires the asset now has market access. So, I think those are some of the variables that will continue to drive some of the valuation anomalies.

Peter Carlino

Let me squeeze in one thought about that. These are still early days, and we all see these margins reduced occupancies, higher margins; it's a bizarre -- it's an incredible anomaly, a very positive one. And I think it's going to be much sustainable. Is it completely sustainable? Well, time is going to have to tell.

So, from a buyer's perspective, buying off numbers today is probably involves some level of risk or judgment, or however you might want to look at it. But I do think because I get that question a lot, is this sustainable? And I think, they're not going back to where they were. They found that they can operate these operating companies much more efficiently. But is it going to remain where it is. And that's still an early unknown. That's my view.

Shaun Kelley

Thank you very much.

Operator

Our next question is from David Gallagher [ph] with Green Street. Please proceed.

Unidentified Analyst

Good morning, everyone. Thanks for taking my question. Just a follow-up on Penn, obviously, market cap growth over the last year has been tremendous. And certainly, they're in a much healthier liquidity position now than, say, a year ago.

And moving forward with that relationship, does that change how you view rent coverage at all? Understanding if these are obviously long-term leases and property level dynamics are important. Does that change how you view rent coverage?

Peter Carlino

Anybody want to opine on that?

Desiree Burke

I mean the rent coverage is specific to the lease and the property that's in the lease. So, no that would not have an impact on what we would expect for rent coverage on the lease.

Unidentified Analyst

Yes, I think just to clarify what I meant. Just, I would say, would you be willing to -- coverage? Yes. Given the corporate are a little bit stronger?

Peter Carlino

I figure that's where you're going, yes. Maybe, it's best most, I can say, but maybe, but not much. I mean I think we're comfortable in the range we are. Matt, what do you think?

Matthew Demchyk

It's not our intention to take less. I mean, we haven't looked at the corporate level coverage. We've been focused on the four-wall coverage for all the right reasons historically. So, I think going forward, you'll see us continue to focus on four-wall coverage. Because at the end of the day, it's a duplicative benefit, right? You get the greater of the corporate coverage or the asset coverage. And as we move forward, I think that discipline will serve us well.

Peter Carlino

Well, even though they're in a master lease, I think we've always looked at four-wall coverage. Some of our competitors have been a little less vigorous in that area, but we prefer to have four-wall coverage that we feel good about.

Matthew Demchyk

Yes. Ultimately, the corporate coverage really speaks to the multiple that the cash flow should trade at, right? Because this is very senior lean in their capital stack, but at the end of the day, they got to view it as a business unit like everyone else would. And when it comes up for renewal, it's going to depend on how profitable those assets are. And that's why we have the highest four-wall coverage and we focused on that out of our peer set.

Unidentified Analyst

Got it. That makes sense. Just a quick follow-up, the right of first refusal for Casino Queen, can you give us a maybe some potential opportunities that could arise with that relationship with Casino Queen and that right of first refusal?

Steve Ladany

It's hard to say at this point, to be totally honest. I think it's -- I think they are focused on closing out the two transactions that they've announced that they've signed, one with us and one with Caesars. And so I think they continue to look to try to find areas to grow, but I don't have a good sense to be able to give you any guidance around what that means on a quantative.

Peter Carlino

I do get the sense in talking with their principles that they're committed to doing more business with us. That is for a variety of reasons. And I think it's pretty clear that's the intent. So we're staying tuned with what they're up to and anxious to help if and when we can.

Unidentified Analyst

Thank you everyone.

Peter Carlino

Happily, they're very aggressive. It's great. Good to have a hungry partner.

Operator

Our next question is from John Massocca with Ladenburg Thalmann. Please proceed.

John Massocca

Good morning.

Peter Carlino

Good morning.

John Massocca

So what is your view on guidance going forward? Is that something you would feel comfortable providing again after some of these outstanding deals close, or might that be somewhat more contingent on a normalized operator environment, given how that impacts escalators?

Peter Carlino

That's a very fair question. It's when we're kicking around hot and heavy here, it will be a Board discussion shortly as well. Look, while we have the TRSs out there kind of in limbo, not sure when precisely they're going to close, and that obviously would have some big impacts. We just don't think it's investors' best interest to have us put something out there that could be wildly depending upon timing of closings and so forth, wrong. When we're free and have closed those transactions, and we're down the pure REIT operations, I think that's something we can well consider. I'm looking at Desiree, I think shaking her head in a positive way. So what do you think?

Desiree Burke

No. I agree. So right now, we have the Bally's transaction also, which would be $10 million a quarter in rents, right? So not knowing the timing of the sale of TRS operations, not knowing the timing of the closing of the Bally's transaction, we just thought its better to get more clarity around those things before reconsidering guidance.

Peter Carlino

Yeah. But we'll take a serious look at it post these transactions.

John Massocca

Great. Makes plenty of sense. And then building on Greg's question earlier in the call, there is one kind of traditional C-level position, if you will that you don't have still at the company. But I guess as you think about the expertise that you have in kind of the CIO -- CIO, CEO positions. Do you think you need to hire a CFO at this point?

Peter Carlino

Well, the quick answer is the proof of the pudding. We haven't because we don't. We really don't need such a person. Now look, we're going to have to fill that role at some point along the way. We put that issue on hold. I mean, right now, we function is kind of the office of CFO with Desiree, Matt and Steve, fully capable and the rest of our team internally of doing, as you can see, everything that needs to be done, there's no lack of talent capability or anything. We run the company like this forever. But it looks like a hole in the program, and we got to pop a name in there at some point, and we will, but we're not under any pressure to do it.

And I think the proofs in the pudding. You're looking at it today, I mean, we pride ourselves on precision with what we present over all the years that I've been in this business. And our team has been together for a pretty long time. So that's really the best answer I can provide. When you have as much talent as we have here, we interviewed some very capable people. But, it almost has to be that this team looks across the table and says, 'Wow, you've got Harry. And then, you got George, or you got -- but it has to be somebody so compelling that exceeds the capability that we've got here.' And so for the moment, we're kind of going to play with the office of CFO. We haven't announced it publicly that way, but it might help you to know. For the moment, at least, that's how we're thinking about it.

John Massocca

Okay. I mean, you think about the asset class, it's a pretty easily manageable asset class. And so you have this group of talented people around. You mean, CFO is an extra cost but it's not a huge extra cost, but it is extra cost. I mean, is there any thoughts maybe just either not filling it at all or just changing a title in order to kind of not add the extra G&A, if you will?

Peter Carlino

The answer is yes, and maybe. Got it.

John Massocca

Okay.

Peter Carlino

We're actively thinking about that, right now. But, I think you know and you can see, that we have all the capability in this company that we need --

John Massocca

Sure.

Peter Carlino

-- to do what we do.

John Massocca

And then, just a quick modeling question, with regards to Casino Queen, I know, you put that on cash accounting in 2Q. Are they back, on an accrual basis today, and as of 4Q 2020?

Desiree Burke

No. They're still on a cash accounting basis. Once you elect, you have to stay with that. So they're on cash accounting.

John Massocca

So that repayment, that $4.7 million, I mean, that is going to get backed out again in -- sorry, in 1Q 2021?

Desiree Burke

You would not expect another $4.6 million in 4Q, 2021, that's right. Because there will not be $4.6 million of deferred rents at that time. As we said earlier --

John Massocca

Okay.

Desiree Burke

-- there's about $2 million that will be deferred, out of the first quarter that we expect to collect sometime, during 2021. But it's not $4.6 million.

John Massocca

So if I think about the relative impact, though, from 4Q 2020 to 1Q 2021, I mean, is that $6 million of -- or so of rent, given what they paid in 4Q? And given what they're not going to pay in 1Q? And the fact, it's all cash?

Desiree Burke

Yes. That's correct. You would…

John Massocca

Okay.

Desiree Burke

-- lose $4.6 million that you collected in fourth quarter plus, their normal rent that was in the fourth quarter. You would not expect to see it, all in the first quarter, other than another $1.2 million for March.

John Massocca

Okay. That's it for me. Thank you all very much.

Peter Carlino

Thank you.

Operator

[Operator Instructions] Our next question is from John DeCree with Union Gaming. Please proceed.

John DeCree

Good morning, everyone. Thanks for taking my question.

Peter Carlino

Good morning.

John DeCree

Peter, I think in an earlier comment, you've mentioned that, a lot of folks have kind of come by and taken a peak at Tropicana, but really not serious buyers or just perusing. I'm curious, if you are seeing that, on the sell-side as well, for stuff that you're looking at? Are there really motivated sellers, or are people just kind of putting a sign out, hoping did they catch a lofty price and aren’t particularly motivated?

Peter Carlino

Yes. Look, by the way, just to correct one point on the folks that are looking at, Trop. It's not that they have serious buyers. They just don't have serious cash. That's the difference. I think they're quite serious about running the asset, just not on terms that we're willing to accept.

So, look, there's not a whole lot of stuff falling off the trees in the gaming world right now, not surprising. There are some things that we look at. Look, we peaked out some -- we had a great year last year, in a year that we wouldn't have imagined would be the case.

There are things we're looking at, but you know, you've got to dig in scratch, it's a -- I mean, it's – is I like to say there's not a lot of the easy pickings. You know, when I started in this business and it was in the -- in 1994 and form Penn National Gaming out of a little racetrack in Harrisburg, Pennsylvania.

There were companies galore all over the place because it was the early days, in the riverboat business as you know and companies left and right and we swept up a lot of them in fact between we own – if not most of the good ones in the Penn portfolio or many of them for sure in the regional world. Those aren't out there in those numbers. So you're seeing a lot of one-off opportunities, but it's all timing. There are people that have assets -- single assets that we'd love to have in our portfolio, but until they're really ready or have a need or for state reasons, all you can do is really kind of hang close.

Our former CFO, Bill Clifford used to have a line -- I kind of liked it a lot. And I – so, I quote him and credit him and that is this, a guy is riding down the road and he rides by your house. He looks at the window and says, wow, that is a beautiful looking house. And he goes jumps, pulls his car over to the curb. He runs up to the front door, bangs on the door. You come to the door, and he says, you've got a beautiful house and I really want to have it. And you say, but it's not for sale. And he says, but well you don't get it. I you know I really, really want it. And he goes with this again. It's not for sale.

Well maybe if that little iteration went back and forth for a while, there is a price which you would run into the back room and grab your keys and say, here it is. But by and large, it's all a matter of timing. And our job is to stay close to opportunity to reach that moment when it may appear. And also frankly the cost of agent for who say, we want to work with Penn or with GLPI because those guys have their act together. They can do tough complex multi company transactions, etcetera, etcetera. So that's kind of the way we look at it.

But it's not like these deal is useful, take a look at last year, how many deals got signed besides what we did. Not much. So, you got to make -- you got to fight for it, you got to scratch for it every day. I'm not trying to be overdramatic, but that's pretty well characterizes what we are charged with doing.

John Massocca

Understood that’s helpful, Peter. If I can ask one more? Matt, I think, it was earlier you've mentioned that – a lot of the folks that are looking at Tropicana, are considering a redevelopment plan. So I just wanted to confirm that comment. And then my question is, of the folks that seems to be most interested, are you seeing interest from casino companies -- traditional casino companies, is it financial sponsors -- your third-party real estate developers like we've seen perhaps at the northern end of the strip get involved before just kind of curious where you're seeing the most interest?

Matthew Demchyk

Yes, so I'll take the second part first and the answer is all of the above. And we've got a diverse set of interests from folks from a lot of different specialties. And the key thing, I'd point out is you've got 35.1 acres that are some of the most strategic acres on the strip right now that are primed for redevelopment. And what the Coke folks are doing and what we'll see happen on the strip over the next decade, really this is an important piece of that.

And so yes, everybody is looking at redevelopment. I mean there's so much underutilized acreage there and there's so much upside to the operations from taking more market share. I think everyone is thinking about how to make it most relevant for the upcoming decade or two. And as you see the benefits of the -- of the latest field not far away and that end of the strip coming to life, I think, you're going to see something really interesting happen there. And we've been privy to some of the what the plans might look like and they're all interesting and compelling.

Peter Carlino

Yeah. Look, it's likely a multiuse development, as you would imagine from residential retail, the whole enhanced casino, et cetera, et cetera. So it's the kind of folks who would do that that are most serious about this opportunity.

John DeCree

Got it. Thanks so much for all that color. And thanks again.

Peter Carlino

Thank you. How we’re doing time wise? We have time for one or two more questions.

Operator

We have one more left, which is Robin Farley with UBS. Please proceed.

Robin Farley

Great. Thanks for fitting me in. Most of my questions have been answered. But just going back to your earlier comment about potential transactions. You mentioned the strip. And it seemed like it was more than just the trough you were referring to. Is there interest out there from buyers and working with you to do something with an existing strip operation, not a redevelopment opportunity, but just more typical of the type of transactions you've done?

Peter Carlino

Steve, do you want to take that?

Steve Ladany

Certainly. So look, at different points in time, there've been different interested operators, and obviously, the market has continued to evolve. I think there's -- there are some highly integrated destination resorts that sit on the strip that are at any one point in time being marketed. And as we think through those and have discussions with potential operators, we're always interested and willing to look at transactions. And different times, we've had different folks that have come forward, and we pursue things with them. So we'll look at anything, and we constantly talk to current and new potential operators about possible transactions.

Peter Carlino

Yeah. Look, maybe I can make clear, we're not anti-strip. I mean, it's some wonderful properties there just has to be underwritten differently. You've got a whole different cost structure. And when those hotels, for example, are empty, they are empty. And you've got enormous cost drag and so forth. It's not, let's say, a property in Toledo, Ohio, where you don't even have a hotel, cost structure is so entirely different and the ability to make money is so much simpler. It's just more complex. So we're up for anything. And we would do anything, but why you just have a different view of how you put it together.

Robin Farley

Okay, great. Thank you very much.

Peter Carlino

Thank you, Robin.

Operator

And that does conclude our question-and-answer session. I would like to turn the call back over to management for closing remarks.

Peter Carlino

Operator, thank you very much, and thank you all for dialing in today. As I said, last year was a surprisingly successful year for us. We're charging ahead in 2021, hoping we get through COVID and get out the other side. So we're optimistic about this year, and look forward to talking with you next quarter. Thanks, again.

Operator

Thank you. This does conclude today's conference. You may disconnect your lines at this time. And thank you for your participation.