Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) Q4 2024 Earnings Conference Call February 21, 2025 11:00 AM ET

Company Participants

Joe Jaffoni - Investor Relations
Peter Carlino - Chairman and CEO
Brandon Moore - President and COO
Desiree Burke - Chief Financial Officer and Treasurer
Steve Ladany - Senior Vice President and CDO
Matthew Demchyk - Senior Vice President and CIO

Conference Call Participants

Brad Heffern - RBC Capital Markets
Ron Kamdem - Morgan Stanley
Barry Jonas - Truist Securities
John Kilichowski - Wells Fargo
Greg McGinnis - Scotiabank
Ravi Vaidya - Mizuho
David Katz - Jefferies
Michael Herring - Green Street Advisors
Caitlin Burrows - Goldman Sachs
Todd Thomas - KeyBanc Capital Markets
Mitch Germain - Citizens JMP
Chad Beynon - Macquarie
Rich Hightower - Barclays
Daniel Guglielmo - Capital One Securities
Robin Farley - UBS
Colin Mansfield - CBRE Institutional Research

Operator

Greetings, and welcome to the Gaming and Leisure Properties, Inc. Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentations.

As a reminder, this conference is being recorded. It is now my pleasure to introduce Joe Jaffoni, Investor Relations. Please go ahead.

Joe Jaffoni

Thanks, Paul. Good morning, everyone, and thank you for joining Gaming and Leisure Properties, Inc.'s fourth quarter 2024 earnings call and webcast. The press release distributed yesterday afternoon is available in the Investor Relations section on our website, www.glpropinc.com. On this morning's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. Forward-looking statements may include those related to revenue, operating income, and guidance, as well as non-GAAP financial measures such as FFO and AFFO. As a reminder, forward-looking statements represent management's current estimates, and the company assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to risk factors and forward-looking statements contained in the company's filings with the SEC, including its 10-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 at Gaming and Leisure Properties, Inc. Also joining today's call are Brandon Moore, President and Chief Operating Officer, Desiree Burke, Chief Financial Officer and Treasurer, Steve Ladany, Senior Vice President, 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. Peter, please go ahead.

Peter Carlino

Well, thank you, Joe, and good morning, everyone. We are, of course, pleased to present another strong quarter, which is well summarized in our earnings release. I should highlight that projections this quarter were especially difficult because there are so many variables that hear a bit from Desiree who has to deal with those every day.

Nonetheless, the estimates that we have put out we believe are, with great pain, a fair representation of what we see going forward. What large difficulty do we have is that even when we're committed to a project, we can't determine when funds are gonna be drawn because that rests with our tenants. So that we could only estimate to the best of our ability.

Nonetheless, we are prepared to handle all of the known demands that you folks are aware of, and we have capacity to handle some things that may be on the horizon. I wanna emphasize that we are committed to the gaming space, and with the sense that it's the best vehicle for us to develop and maintain long-term dependable rock-solid cash flow. So with that in mind, Desiree, I'm looking across the table and you're on.

Desiree Burke

Okay. Thank you, Peter. Good morning.

For the fourth quarter of 2024, our total income from real estate exceeded the fourth quarter of 2023 by over $20 million. This growth was driven by increases in cash rent of over $20 million resulting from acquisitions and escalations. For example, the Tioga acquisition increased their cash income by $3.6% million, the Rockford loan increased cash income by $2.8% million. The strategic acquisition increased cash income by $2.3% million. The Valley Chicagoland increased cash income by $5 million.

Valley's Tropicana funding by $1 million, and Valley's Kansas City Shreveport increased by $1.4% million. We also had the Ion loan, which increased our cash income by $400,000. And obviously the recognition of our percentage rent adjustments and escalation, which added approximately $6.2% million of cash income.

The combination of non-cash revenue gross-ups, investment and lease adjustments, and adjustments partially offset these increases, driving a collective year-over-year decrease of $2.3% million. Our operating expenses increased by $7.7% million mainly resulting from non-cash adjustments in the provision for credit losses primarily due to increases in the commercial real estate index projections. For the company's development properties, we will capitalize interest and deferral rent received during development for financial reporting purposes.

However, we will add the rent back and deduct the capitalized interest in deriving at AFFO. In today's release, we gave full-year guidance ranging from $3.83% per share to $3.88% per diluted share in OP units. Please note that this guidance does not include the impact of future transactions.

However, it does include our anticipated of approximately $400 million for the development projects and the expectation to settle our forward sale agreements in June of 2025. From a review of the notes last night, it appears our 2025 AFFO guidance is slightly below consensus due to a number of factors. The timing of our forward share settlement, which you should assume June 1st, the amount and timing of our development funding, which we should assume $400 million weighted towards the end of the year, interest expense assumptions, which there are multiple changes during 2024 that will impact 2025 interest expense, including all the bond issuances, the bond repayments, as well as the new revolving loan, which I will note that it's subject to a Bally's guarantee and part of their tax strategy and will remain outstanding.

We will redeem the $850 million 5.25% bond on March 3rd of 2025. Our rent coverage ratios do remain strong, ranging from 1.79% to 2.55% on our master leases as of the end of the prior quarter. With that, I'll turn the call back to Peter.

Peter Carlino

Thanks, Desiree. I did say a lot of variables that I think Desiree's highlighted. Many of them.

Matthew, you have some notes that you'd like to share.

Matthew Demchyk

Sure. Thanks, Peter. Good morning, everyone.

Our results for the fourth quarter and full year reflect the continued success of our strategy rooted in a conservative financial approach, our prudent capital allocation mentality, and our unique ability to generate value through both deal origination and our creation of bespoke deal structures. Our strong financial position provided the flexibility to stay proactive throughout this past year. The capital deployed in 2024 has purposely laid the groundwork for growth extending well into 2025 and beyond.

Our tenant relationships remain a powerful competitive advantage, enabling us to identify and act on opportunities that others may overlook. By year's end, we secured a meaningful share of all announced gaming real estate transactions, including our innovation in the tribal gaming world. Proof that our strategy is bearing fruit.

This positions us well to continue uncovering new opportunities in 2025 and beyond. These relationships are also the cornerstone of our long-term growth. Each partnership unlocks future possibilities, creating a powerful compounding effect as time moves on.

While gaming real estate is still a relative newcomer in the broader real estate world, the strength and consistency of cash flow from our gaming real estate portfolio, especially in periods of volatility, continue to provide valuable data points. These data points coupled with the end-to-end transparency of our cash flows and our lease coverage, position us to continue driving the revaluation of our cash flows in relation to other sectors of the wider real estate market. Looking ahead, our focus remains resolute, prudently deploying capital to maximize long-term value for all shareholders, and our goal is simple: to drive lasting and durable intrinsic value per share.

I'll turn it back to Peter.

Peter Carlino

Thanks, Matthew. With that, Paul, will you open the floor to Q&A.

Operator

Thank you. Now be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue.

You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.

Thank you. Our first question is from Brad Heffern with RBC Capital Markets.

Brad Heffern

Hey. Everyone. Thanks for taking the questions.

$400 million of fundings this year is maybe a little less than I would have thought. Can you just break down that figure by project. And has there been any slippage in timing on those projects versus what maybe you expected three or six months ago that's affecting that figure.

Desiree Burke

Yeah. So I'm we're giving the $400 million in total only. Obviously, a big chunk of that is the Chicago project for 2025.

I don't think it's affecting the timing of the project. It's just our expectation of when we fund our tenants. So they will put money out first, and then we will reimburse them.

So there might be a lag to what you're thinking.

Peter Carlino

Yeah. Look. These projects are underway.

They're committed. There's no doubt that it's they're gonna happen. What we can't say, and I said that in my opening comment, just can't tell you what the pace is gonna be.

We take a guess to when we talk with our tenants. Our best to understand what may be possible. But you what you got is our best guess.

Brad Heffern

Okay. Got it. And then, obviously, the Bally's Casino Queen deal has been closed.

Can you walk through any positives or negatives that you see from that now that the deal is closed.

Peter Carlino

I think it's all positive, but anybody wanna Yeah. Huge success.

Matthew Demchyk

Yeah. I can I can provide, I guess, some thoughts. And if anyone else wants to join in.

Look, I think I think generally speaking, we we do view this as a positive. I think the think it gives the company overall a a newfound consideration and valuation that they can utilize as they move forward. From the from the equity valuation standpoint.

Which is not necessarily directly impacting us, but we'll provide them potential for growth going forward that maybe didn't exist before. I think ultimately our relationship with Bally's and even with with the CQ folks as as strong as it's kind of ever been. Think we continue to look at different different opportunities to work with them.

On things that are currently in in play as well as future opportunities. So we view this as an expansion of the relationship. This still the the same players are all still around and and we look forward to expanding the relationship going forward.

Brad Heffern

Okay. Appreciate it. Thank you.

Our next question is from Ronald Kamdem with Morgan Stanley. Please proceed with your question.

Ronald Kamdem

Hey. Just two quick ones from sort of my end. I just love to hear a little bit more about sort of the pipeline and sort of how conversations are going.

Obviously, you had a little bit of a volatility in the rate environment. In December and into this year just You know, curious just high level how conversations are flowing, if they fell off or not. Thanks.

Steve Ladany

Yeah. Look, I think it's Steve. I'll jump in again.

I think I think from a broad scale, you know, massive M&A transaction, that's multiple billions of dollars. I think those conversations have not picked back up due to due to the rate environment on on one level. I think though the the broader market more generally speaking has been pretty active.

We've had a lot of the discussions and been looking at a lot of different things, you know, ranging from commercial, domestic, sale leaseback to commercial domestic development and redevelopment to to tribal discussions and international. So we we continue to to see a lot of things out there. What becomes actionable and finally gets served up and announced is is very different.

I will tell you the largest operator seem to be most focused on their own properties at this time. You you saw that through Boyd's announcement about how well Treasure Chest is doing and their fact that they might take Paradise land side and I think others are starting to pursue the same mentality and take the same tax. So I think the largest guys in the country are gonna kinda focus on repositioning assets, to enhance the customer experience.

Obviously helps the top line at the same time provides operational efficiency when you do things like move Landside.

Ronald Kamdem

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

Desiree Burke

So we have Most of our debt is bond related, so they're all fixed rates. We do have $932 million of variable rate debt. And honestly, we use the SOFR forward curve, and we have 1.3% on top of that is our spread.

Ronald Kamdem

Great. That's it for me. Thanks.

Operator

Thank you. Our next question is from Barry Jonas with Truist Securities. Please proceed with your question.

Barry Jonas

Thanks. Can you talk about the pipeline for co-investment with Cordish. And are there potential opportunities to swap your equity into real estate some point.

Thanks.

Steve Ladany

We continue to have a very good dialogue with Cordish, an ongoing Obviously, they've been very active, not only in the gaming space, but also the non-gaming space. So, I think, I think with respect to the equity component, I think we continue to have dialogues with them around that. And whether there's a whether there's a clear-cut opportunity to reposition an investment dollar from equity to real estate, I think is is gonna be transaction specific and something that obviously as a REIT our long-term goal is to own real estate How we get there and and how we yeah.

Ultimately, how we get there could take different different modes and different paths, but that is our ultimate goal.

Peter Carlino

Yeah. I mean, it's pretty obvious. It's a relationship we wanna continue.

And we feel pretty good about where we have been with those folks excited. They're very aggressive and and excited about the prospects for the future. So we view that in the most positive light.

Barry Jonas

That's great. And then maybe a question for Matthew. Can you talk about your plans on the equity side for your 2025 business plan.

Given your 2025 or even 2026 capital needs.

Matthew Demchyk

Yeah. Barry, we came into the year with a strong cash position. I mean, you know, we've got a lot out currently on our forward.

So if you look at the forward all the the cash and the treasure we have on the balance sheet, it really covers the the business plan for 2025 when you think about the ins and the outs. Including our free cash flow we're gonna generate. So we're really into the hey.

How do we prudently look forward into the next you know, on a forward twelve month or eighteen month basis into the next chapter of spend, And on that, I'd I'd say we're gonna continue doing what we've done. Be methodical. We'll be balanced.

We certainly have tools in our tool chest to help us lock in some of our capital as we move forward closer to the spend along the way. So we have greater certainty of what spread we're ultimately gonna deliver for shareholders. But I wouldn't give any further detail beyond that.

A lot of optionality.

Barry Jonas

Perfect. Thanks so much, guys.

Operator

Thank you. Our next question is from John DeCree with Wells Fargo. Please proceed.

John DeCree

Thank you. Good morning. Apologies, Peter.

Your your first comment on the guide, we talked about the $400 million of investments, and I understand that the vast majority of that seems to be the development timing in Chicago. And I just wanna make make sure I understood your comments correctly. Does it contemplate any contribution from the Casino Queen, the stadium, Aurora Pen, and the ION loan.

Desiree Burke

The $400 million contemplates the bell. Which we have been developing and we have announced. It contemplates the ION funding, and it contemplates Chicago as well as Marquette.

We don't have anything in for the Penn transactions at this time. That's a forward transaction that we don't know the timing of.

John DeCree

Okay. Thank you. That's helpful.

And then secondly, just kind of high level, And this may be out there. They're not there might not be much, but this administration has done a lot. It's the first, you know, month or so.

I'm curious if there's anything that's on the table that we should be aware of as far as regional gaming is concerned or anything else they're doing that may be impacting your business.

Peter Carlino

I haven't heard of anything Certainly nothing negative. I'm looking around the table. Folks.

Anybody.

Matthew Demchyk

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

Desiree Burke

Mhmm.

Matthew Demchyk

And Nick Bader.

Peter Carlino

No. Nothing positive or negative.

Matthew Demchyk

So it's Positive if he can save, you know, billions of dollars of wasted funds. I guess it's positive for our country as a whole, but no. Nothing specific to GLPI.

Matthew Demchyk

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

There's some there's some uphill battle. To to deal with the current position. And I think the people in there are really qualified to work on it.

So that's a plus. And I I think you could also see a scenario where if they are very effective, with rightsizing the government workforce, And if some of those people are in some of these states where we hope that new licenses might come about. Oftentimes, the state has to pay the unemployment, and that depending on the how large the magnitude is, could be a drag.

Of some of the state budgets opening the door to maybe a little more receptivity to to gaming opportunities. We'll have to see how that plays out in the new license context. But that's, like, two or three steps removed.

So let's let's wait and see here a few more months of what happens. Yeah. I don't think anybody at this table has any any special insights.

Oh, shit. Maybe you get a a line on that, give us a call. Would you, please.

John DeCree

Will will do. Alright. Thank you, guys.

Operator

Our next question is from Greg McGinnis with Scotiabank. Please proceed with your question.

Greg McGinnis

Hey. Good morning. I was looking at the amended Pinnacle lease solvent coverage drop below the escalator threshold.

Quarter and it's now closer to its pre-pandemic level. What are the challenges facing those properties and is guidance assuming that FFO.

Desiree Burke

Yeah. So the low end of the guidance is assumes it is not achieved. The high end assumes it is achieved.

I do think the footnote that we have You know, on that adjusted revenue to rent ratio of 1.79% is important. What it says is that Plain Ridge is gets excluded in the calculation of the actual escalator of adjusted revenue to rent. Whereas when they report to us, they report all the properties that are in the lease, which includes Plainridge.

So our expectation is that it should be a little bit higher when you exclude Plain Ridge. The 1.79% isn't exactly how the escalator is calculated, if that helps. At all.

Greg McGinnis

Okay. Alright. So it I I understand.

So so Plain Ridge, is that most likely a lower rent coverage ratio, but it's not actually at the end of the day, it doesn't actually impact whether or not the escalators achieves.

Desiree Burke

That's great.

Greg McGinnis

And then on the know, one final one on the funding assumption. Funding has been dispersed for the stadium. So far.

So I'm curious why there's not more of an assumption there or you is, you know, the $48 million all that you're expecting to to spend.

Peter Carlino

I'm looking at Brandon who's been silent here. Not unhappily silent, but.

Brandon Moore

Oh, I've been content to sit and listen here for a little bit. But look, I I think Vegas is proceeding as we would have expected as far as the timeline goes. That being said, the development of the mass the integrated resort around the now more certain stadium location and development.

Is still taking place. So I think, ultimately, what we're asked to fund will depend on what is being constructed in conjunction with the stadium, and I think that's still unclear at the moment. So we've committed up to $175 million.

We've spent the $48 million on the demolition as we agreed we would. And we're waiting to hear from Bally's to better understand the development and what might be expected from us for the remaining $125 million and potentially more or less depending on what they're doing. So I think right now, it's just too early to tell.

Peter Carlino

But they are encased on the issue, so that would be Yeah. We can assure you.

Greg McGinnis

Okay. Sorry. Just one one more follow-up on that.

It is on the the Penn commitments, I guess right. So that that payment would happen at the end of end of the construction process. Is there any expectation that they may not come to you for that capital or are you guys assuming that it it will happen.

Matthew Demchyk

Just on the I think I think as it relates to Penn so just to be clear, they could take the funding earlier in the process. So far, we've expected that it's likely to come towards the end of the process based on where they are, but they could conceivably take it before. The Aurora funding is required. The other three projects are not required. So, technically, they could not take the funding for those three projects.

We don't have any reason to believe that they will or they won't at this point. We just are following their timeline of construction, and that's what's pushed out the potential funding of these projects. Beyond 2025 at this point.

But it it's not impossible that they would call us and seek funding for those projects earlier than that if if for some reason they decided to do so.

Peter Carlino

In one perverse sense, I'm delighted they have to cash flow to Be patient. So.

Greg McGinnis

Mhmm. Okay. Because they know they're financially strong.

Operator

Thank you. Our next question is from Haendel St. Juste with Mizuho.

Please proceed with your question.

Ravi Vaidya

Hi. Good morning, guys. This is Ravi on the line for Haendel.

Hope you guys are doing well. Can you describe this new funding agreement with Penn. How likely is it you think that you'll be so fund the $150 million.

And I guess the 7% is a little lower than some of the other funding deals you had in the past. Can you offer some more color on that, please.

Matthew Demchyk

Yeah. We can offer a little bit of color on that. I I think this is not the typical funding commitment you're seeing across the rest of our portfolio.

Penn Penn had asked us in connection with the discussions we were having around the non-compete for Chicago. To provide funding for them at a a competitive rate for that project, which we agreed to do. So our agreement to fund at that rate is not indicative of the rates that we think are competitive or that we'll be doing in the future.

This was in connection with the negotiation we had. As as I'm sure you know, their leases have non-compete provisions in it, and the Bally's down Chicago project was within that non-competitive zone. And so so that was just part of that negotiation.

I wouldn't read too much into that beyond that. And as whether or not they'll take it, I think if they if they go if they move, they'll probably take it. If they don't, they won't.

Either way, it's probably okay with us.

Ravi Vaidya

Alright. Just and maybe just one more here. Can you with the adjustment that happened with the the Rockford loan with the the lower rate across significantly shorter term, Can you can you kinda give more color as to what happened there.

Who initiated the amendment and what that process was like.

Brandon Moore

David. Sure. Yeah.

So so look, I I think the reality is that the property opened up on budget, on time. It's it's performing exceedingly well. And a number of a number of other lenders approached approached the owner, Ship Group, and and offered to refinance and we had a negotiation, and we decided we wouldn't mind having the loan out standing for a little bit longer at a at an accretive rate to us. So we had the option of getting repaid and having no additional income coming from that loan or or taking a slightly lower rate and continuing to get the income.

So that's that was the decision.

Matthew Demchyk

In an interesting way, I mean, we end up as you think about it, to Steve's point, with it open and doing so well, with an as good or maybe even better risk adjusted return. On the second bite of the apple versus letting him prepay it and go with the bank. And frankly, that rate isn't fair to say, Steve.

We kinda bet in the middle. We didn't need to go all the way to where banks were. So we valued the relationship and the fact that we'd be a turnkey and simple solution.

Ravi Vaidya

Got it. Thank you for the color, guys.

Operator

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

David Katz

Hi. Good morning. Always wondering about morning.

About Native America and any updated thoughts you have in in terms of know, that TAM and that opportunity and whether we might see You know, more of you know, more of what we have already I'm just getting the updated thoughts there. Please.

Matthew Demchyk

Yeah. I think, David, the TAM itself, I don't think our views have changed. So the the TAM is what we what we expected it to be.

We've had a lot of productive meetings with tribes over the course of the last couple of months. And the and the opportunities range from refinancing existing debt, to expansion opportunities at existing cash flow and properties, to relocations to greenfield development. So the the spectrum of potential opportunities is pretty broad.

We continue to dig into these now that we've had these meetings and there's a mutual desire to move forward and explore them further, we've entered in a number of NDAs, and we'll continue to drill down on these to see what, if any, deals we wanna do and they and the tribes wanna do that will be positive for our cash flow moving forward. It's really I'll I'll anticipate the next question. Know, what are the magnitude of those deals and how many of them are there.

I think it's a little too early for us predict that. So so as far as how big and how many, we don't know. But but I will say there is a lot of interest in the tribal communities to understand better what this financing opportunity is and what it may be able to offer.

David Katz

Very helpful. Thank you.

Operator

Thank you. Our next question is from Michael Herron with Green Street Advisors. Please proceed with your question.

Michael Herron

Hey. Good morning. Thanks for taking my question.

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

Steve Ladany

Yeah. We we yeah. We haven't had we haven't had conversations around that project with them.

They have a JV. Partnership there. We have spoken with them in other that they're either pursuing or have been awarded But look, I think I think we believe that the project in New Hampshire will be will be successful.

It's a it's a very well located property in that state. It's a state that we have looked at before, and I think they they might have the they might have one of the best locations. So so look, we obviously, we we we would love to have conversations there, but I I think that we have to we have to respect their their current partnership.

Michael Herron

Understood. Thank you. And just one quick one.

I, you know, saw that the Boyd lease was extended they've exercised their five-year option. Curious if there was anything or any particular reason for that decision coming over a year earlier Also, just assuming there are no any adjustments to that lease, that wouldn't be visible to us.

Desiree Burke

Yeah. There are no adjustments to the lease. It is simply an extension, and they did have they do have a requirement to advise us whether or not they're going to extend.

They did it a little bit early, but there's there's nothing you know, special about it. We're excited, obviously, but there's nothing there's no reason for it.

Michael Herron

Okay. Thank you.

Operator

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

Caitlin Burrows

Hi, everyone. I have another question on the development funding. So it looks like, like, the Bell Chicago market in your documents, they all mentioned an amount up to kinda x dollars.

And then the ION loan is a delayed drop. So if we think about those quoted amounts Is it that you might not reach those full amounts, or do you think you will. And that's just a technicality.

If that makes sense.

Desiree Burke

Yeah. And it's really around the timing of when we'll reach those I do think we will reach the amounts we expect this year.

Brandon Moore

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

Caitlin Burrows

Okay. Keep keep in mind, we're funding hard costs. So for some reason, if scope of that project were to change and the hard cost would come in under, it it's possible that we would fund less.

We don't see that happening. Those projects appear to be on the same budget and scope as before, but I think I think that's why you see a lot of the up two numbers. We're trying to focus on the hard cost real property development parts of these projects.

Caitlin Burrows

Okay. And then just on the timing, even earlier, you guys mentioned how some of them might be slower than we might expect because it's, like, the tenant pays and then you reimburse them. So when, like, Chicago says that the spend is by year-end 2026, and the bell is an example, says it'll be completed by September 2025.

Is that your funding, or would your funding be potentially somewhat later than that.

Desiree Burke

We could fund beyond the opening date for sure. I mean, there has to be a closeout of the project to know what the exact spend on those hard costs are. So it could definitely be beyond the opening date.

In any construction project, as you would know, costs are always back-ended. I mean, it just the bills give in Leave. Per and you could expect that while we think the top number will be achieved, I think we said it now four or five times today.

Knowing exactly how this the draws are gonna come, Is Yep. It's We have no perfect insight.

Caitlin Burrows

I got it. Sounds good. And then maybe just bigger picture on the development funding kind of business.

As you think about the opportunities that you guys have and how it compares versus more traditional acquisition or sale leasebacks, the development funding, those obviously get repaid. So when you think of, like, the future portfolio for GLPI and the recurring nature of income, how does this sort of development funding compare in your view versus, like, acquisitions.

Desiree Burke

So our development funding on many of our projects is different. It's not alone. The ION project happens to be alone, but the Marquette project, the Bell project, and the Chicago project are our own.

All owned real estate that the funding turns into rent or is rent in the long run. So it it does not end like you would think in a normal term loan.

Matthew Demchyk

Okay. So if the property is if the property is hit pro forma, we end up with a basis that's favorable to market. In other words, as the cash flow is generated, if if you were to wait five years and then step in, later in the game, you'd likely pay a lot more for the real estate.

So when we're direct funding, we're locking in our basis. Should lead to better coverage over time of the other pieces fall into place.

Caitlin Burrows

Makes sense. Thanks.

Operator

Thank you. Our next question is from Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.

Todd Thomas

Hi. Thanks. Desiree, you you talked about the variable rate debt that's outstanding today.

Some of that's related to the the tax strategies or or the tax that you're providing that you mentioned. You know, obviously, a lot of uncertainty with the new administration, but there is talk about a higher for longer rate environment. And I'm just curious if you can speak to the strategy of maintaining that floating rate debt exposure versus swapping it out.

And how much more exposure you expect to have over time and and how much more you'd be willing to tolerate.

Desiree Burke

Yeah. So you know, I do expect the $932 million to remain outstanding as I mentioned because it is related to a guarantee. We do have the Lincoln property acquisition That's $735 million, which will also be subject to that Same values guaranteed potentially.

And that is about all that I would expect for that variable rate. And we do look at swaps. The the amount of the the cost of the swap vis a vis the cost of what we're paying on the debt It's just it doesn't make sense for us right now, but we do look at that on a regular basis.

Todd Thomas

Okay. So guidance does not include anything related to swaps. I mean, is there any intention in the future to to layer in swaps or begin reducing that exposure, you know, with Lincoln.

Increasing that variable rate debt. I mean, just given given, you know, generally fixed rate longer term of your cash flows, I'm just curious how you're how you're approaching that.

Desiree Burke

Like I said, we're open to it. And as we do increase I think right now, it's only around 12% of their entire debt stack. As variable rate.

As as that does increase, if Lincoln does come on, we'll certainly reach reconsider whether or not we want to enter into a swap to swap to fixed rates. Depending on rates where they are and and what you said, what happens with this administration and what happens with rates storing twenty five.

Todd Thomas

Okay. Thank you.

Operator

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

Mitch Germain

Thank you, Hugh. Did the ion transaction I'm curious how it was received and did it create additional inquiries incoming inquiries from other traps.

Matthew Demchyk

Yes. So so the short answer, Mitch, is yes. The IOWN transaction did generate a lot of attention.

And the leadership of Ione is very well respected in the tribal community and that also has led to some additional conversations and credibility to both our team here and the and the structure that we are offering in general. So, yeah, that has been very, very helpful to us. And the more tribes we meet with, the more interest we're getting.

So we'll continue to meet with tribes and look at opportunities and we'll be thoughtful about them and try to fine-tune the structure that we have with ION into a more long-term structure structure that we might be might be willing to roll out with more volume. So we'll see if these if these conversations continue. You know, we're we're we're underwriting tribes. They're underwriting us.

There's a lot of different levels of opportunity out there just like there is in commercial gaming and not every tribe would be a tribe we'd be willing to underwrite in a long-term scenario. And quite frankly, I don't think every tribe out there would be willing to engage with us on trust land in a transaction. So We'll we'll see how much there is in the coming months, but I think so far, we we're pretty we're pretty optimistic about what we're hearing and seeing.

Mitch Germain

Great. And one more for me. Maybe, Desiree, can can we just walk through the cap interest accounting.

And then I'm just curious when you start recognizing revenue, is anything changing. So maybe just kinda is it just really the balance outstanding that you're funding on the bell by your average with average interest rate, like, how should we think about this That's exactly right. Adjustment going forward.

Desiree Burke

Yeah. So while a project is under construction, the rules of fire to take the total spend times your average interest rate, and that's the amount that you're gonna capitalize per month, which means you're reducing your interest expense in your putting that on your balance sheet as an asset. Going forward, that asset will depreciate once it opens, and you will stop deferring your income and stop capitalizing your interest once that project opens, and instead you would have full interest expense coming through and you will have depreciation.

That makes sense. That answer your question.

Mitch Germain

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

Desiree Burke

Absolutely. Yes.

Mitch Germain

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

Desiree Burke

Yeah. That's why I have decided to reduce AFFO for the capitalized interest. In other words, show that cash that was actually paid and show the income that has deferred for GAAP show that actually as it's paid to for exact.

Matthew Demchyk

And one reminder mentioned in everyone, if you look at the bell, you've got the capitalized interest piece Desiree mentioned. But on the revenue side, there's a a there's effectively a step up. So there's nothing being collected on the rent side there in so June first of this year, And then whatever the prevailing dollars out, nine percent of that will be the rent amount.

It starts beginning in June and then ratchet up as we get up to that $111 million total. So the earnings power of the asset right now you know, beginning of this year isn't captured, and then we'll kick in. Close to full or full depending on how much we have deployed at the time.

Thank you.

Operator

Our next question is from Chad Beynon with Macquarie. Please proceed with your question.

Chad Beynon

Morning. Thanks for taking my question. Just one for me, please.

You mentioned that the the conversations are pretty active with commercial, operators with potential, sale leasebacks. So I guess my question is, at this point, you know, obviously, there they're they're not meeting to waste anyone's time. What what's the hesitation.

Is it more gaming specific. Meaning, iGaming threats, margin, plateauing, do you think it's just the the timing of where we are in the cycle and maybe some uncontrollables that cause some of the hesitation of of getting some of these deals across the goal line. Thanks.

Peter Carlino

You know, I don't give you a Philosophically, the way I think about this, there have been a couple of kids with this time, he is everything. You've gotta have a a a a seller or someone willing to do a sale leaseback with their asset For some reason or another. I mean, just put it that way.

Some reason or another. I can remember a particular asset you would be known to you all. Where the the owner said, I don't wanna do that with you guys because I can't put the money anywhere.

I've got so much cash and then he was telling the truth. I have absolutely so much cash that I don't know And over a period of years, we had the conversation year in, year out. Finally just threw in the towel and walked away.

But, you know, a few years later, that person made a deal with somebody else because time's changed. Lesson, of course, there is you never give up until either you or they die, I guess. You stick with it.

But the point also is who knows what variables lead to availability of an asset. So we stay close close to the hoop and and try to be there when that day comes around. So some so they people do it for estate reasons that well, you can fathom all the possibilities, but it's just a matter of, am I prepared Do this.

Today. It's the best answer I can give you.

Chad Beynon

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

Peter Carlino

Well, Steve, you wanna add something to that.

Steve Ladany

Well, I think the potential tenant partners that are most active in dialogue now are not the publicly traded gaming companies. So, like, a there are a lot of assets that are held by private enterprises, families, sole proprietors, you know, and have been passed on in through generations or for not. And those are, I think, are the bigger opportunity in regional gaming is there are is talking and meeting with the private guys who many cases haven't done this in the past So is the learning curve that takes place and then there's ultimately, as Peter pointed out, a timing aspect that has to align.

And so at times, you know, that they're they can borrow money cheaper than this. Or they don't like the idea of selling the real estate, or, you know, I don't there's their son likes to have the parcel so they come and look at the horses every once in a while, like, kinds of stuff that goes on and at some point in time, it all all the moons will align. But we we continue to have a lot of active dialogue. There continues to be a lot of interest.

Obviously, this is a a way to unlock a lot of value for for a company or a family if they if they are willing to move forward with the transaction and and all of the underwriting aspects make sense for us to move forward with the transaction. So I'm I'm very optimistic about the the future opportunities that lie ahead. We just have to be, you know, constantly looking and and and constantly active.

Chad Beynon

Thanks. Appreciate it, Buzz.

Operator

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

Rich Hightower

Hey. Good morning, guys. Covered a lot of ground.

Just one for me, but maybe Desiree, just I think maybe for the benefit of everybody here, you know, from a modeling perspective, we've talked a lot about interest expense. Just to flip it to the interest income side, obviously, you guys carried a lot of cash. Last year that that has changed.

I I think the interest accruing from the Zebra coupon bond is gone away. So just help us understand the modeling on the interest income side. Thank you.

Desiree Burke

Yeah. So the interest income side, obviously, we will have much less interest income in 2025 than we had in 2024. We did come in the year with over a billion dollars of cash, but we will be on March 3rd, as I mentioned, repaying $850 million bond.

So a lot of our cash will decline at that time. And then the rest of the year is kind of based on how much we fund and you know, our free cash flow. And on top of that, they forward that we're going to call on June 1st.

So it's fluid throughout 2025, but it's certainly much lower than what you saw in 2024.

Rich Hightower

Okay. That that's helpful. And then and then just to be clear, the the zero coupon bond that that was accruing to some extent on the income statement even even though it was non-cash at the time.

Just to be clear.

Desiree Burke

Absolutely. Yes. That was in interest income during 2024.

That's correct.

Rich Hightower

Okay. Great. Thank you.

Operator

Our next question is from Daniel Guglielmo with Capital One Securities. Please proceed with your question.

Daniel Guglielmo

Hi, everyone. Thanks for taking my questions. One more on on the Penn relationship.

Could Ameristar be the start of more kind of Penn property redevelopment projects, or have you had any additional conversation with them around that potential.

Brandon Moore

So so I I think I'll just in if anyone else has had anything. Yes. I think the answer is yes.

They've they've they've started dialogue around the number of projects. I don't know if any will actually go forward. I don't think they've made the definitive decisions, but they are reviewing their entire portfolio.

And I would tell you, I think that most Gaming operators right now are. The performance that we've seen out of bat Rouge's redevelopment, out of the treasure chest development. But, boy, a number of these properties have seen seen all kinds of upside both on the top line and on the bottom line.

So I I suspect that that others and Penn will continue to evaluate their entire portfolio. For opportunities to to enhance it.

Peter Carlino

Well, Penn's been made some major commitments as we know and I would guess that they'll wait and see how some of the hotel development unfolds. And if it's successful, as they hope and expect, then, could easily see the Maddy more. I I know a little bit more about that.

But suffice it. I can't speak to them They're not afraid to invest capital in bricks and mortar, which is pleasing to us.

Daniel Guglielmo

Great. I yeah. I really appreciate all all that color.

And then kinda as a follow-up to that, you and your partners are doing a lot of building, and I expect, Jim and Tina are on the ground in Chicago. What's your sense of the current construction environment kind of across those projects. Is there anything of note around timelines, labor, supply chains.

Any color would be helpful.

Brandon Moore

Yeah. You know, as far as labor and and the actual I haven't heard of any any hiccups yet. I I'll I'll tell you frankly, we have had some supply materials that that might be from outside of the United the domestic United States that have either added a a premium based on a tariff assumption or have alerted folks that their bid was was excluding any type of tariff impact.

So I think that there is a reality that that some certain companies that might be domiciled outside of the United States may ultimately be impacted in bidding processes against companies that are within the United States, but that's just the reality of it.

Daniel Guglielmo

That's really helpful. Thank you.

Operator

Our next question is from Robin Farley with UBS. Proceed with your question.

Robin Farley

Great. Thank you. Peter, I heard in your opening remarks, you're sort of your quarterly comment about how much you prefer the gaming industry for for the the deals that you would do.

Is is it fair to say that, especially with maybe this sort of whole tribal segment getting unlocked that you're probably further from looking outside of gaming than you ever or than, you know, the Jiffy or ever has been before. Is that kinda fair to say in terms of thinking about whether you go outside of gaming.

Peter Carlino

You know, and, Robin, we've had that this conversation with you and others over many, many years now. We look at stuff. I mean, we look at everything.

We've gotten into the development business a bit. We we've actually appeared now in kind of a loan business, but all centered around gaming. We look at and we'll continue to look at other things now and always But while we have what we've got in front of us, gaming opportunity, I've never found a region to go elsewhere.

So if we can find a better deal, we we would surely do it. It's not that we don't look. Or consider.

The better we're we're not looking, but consider other things. Gaming space is terrific. I've been arguing for years.

Gaming revenues are are bullet and they've proven to be Close to bulletproof is any revenue in any property in the United States. So while we can still do this, I don't know why we go elsewhere.

Matthew Demchyk

Yeah. Robin, I'll yeah. The analogy I think of, it's like we're down in a mine there's this vein of gold, and we keep digging deeper, and we don't know how deep it goes. And we just keep going, and there's just more of it.

And now we hit a second one with the tribal piece. So our goal is to find the most attractive risk adjusted returns. And to Peter's point, they continually happen to be in gaming.

There's only there's only two big players that are looking at these opportunities, and a lot of these, you know, if we're if we're good about it, it's only one. And out of this, there's a lot of people competing. You got a lot of smart people. There's a lot of money in the economy.

And if we're bidding against ten, twenty, thirty people, we can't monetize all of our competitive advantages outside of gaming, similarly to what we've done inside gaming to date. Might that change. I mean, might our our our valuation and our cost of capital shift so much compared to the other players that maybe have changed the equation, sure, over long periods of time.

But right now, we're pretty happy with all the things in front of us.

Peter Carlino

Well, good news is so many of our existing tenants are doing more stuff. I mean, not to put it in the vernacular, more stuff. They got more deals going.

And we wanna be part of that. So.

Matthew Demchyk

Yeah. I yeah. And I think on the tribal side, I'll just a moment of caution on the tribal side.

You know, we're exploring this to determine if there if there are viable structures that we can translate into volume. Right. And so we're still working on that. So we are optimistic.

I don't wanna suggest that we're not, but I also I just wanna be careful that you know, we don't know how deep that is at the moment. So more to come on that. And I'm and I'm not discrediting the commercial side or any of that.

I just wanna be careful on the tribal travel side that everybody understands we're still working through that. And as we start to put deals on the board, I think I think it'll become more evident as to how deep that opportunity is.

Robin Farley

Okay. Great. No.

Super helpful. Thanks. And then and then just just one small thing.

Can you and I apologize if I if I missed this. I don't I don't think I heard it. Did you talk about we expect that provision for credit loss should be in in 2025.

Desiree Burke

Yes. So we did not project the provision for credit loss in 2025. We projected out of zero.

The big change for 2024 was really adding new leases and having to set up a provision for those new leases. You know, look, it's a very detailed file that we use a third party to help us estimate those credit losses. It's based off of a hundred years of data.

Where does the market see the commercial real estate index going. What are the loan to value ratio. Ratios.

Because the those financing leases are looked at as loans in this context. From an accounting perspective. A lot of macro environmental items that you know, we just can't predict.

So we we start out with a zero change to our reserve for credit losses on those leases, and we see what happens as the year goes through. As again, it's a noncash item that gets added back for AFFO, so it would have no in Anyway,.

Robin Farley

Okay. Great. So in other words, not nothing nothing I think you're off for 2025.

Okay. Great. Thank you.

Operator

Thank you. Our last question is from Colin Mansfield with CBRE Institutional Research. Please proceed with your question.

Colin Mansfield

Hey, everybody. Thanks for taking my question. Just one more for me going back going back to Chicago.

I guess, what's the company's sort of willingness to potentially know, invest more capital or commit more capital to the project. I know you know, there's a an s one IPO process out there right now for a minority stake being sold for Chicago subsidiary that may know, have some legal issues with it that are being explored. So I guess if it came to it, you know, what's the company's willingness to to commit more capital to the project if needed.

Brandon Moore

Perfect question for Brandon. I I think the bottom line is it's too early for us to to say whether or not we would commit more capital to this project because it takes shape. Know, we'll consider that.

But right now, we we've committed what we've committed at the $940 million and that's that's what we expect to spend. The $100 million, I don't think that creates a significant hole in the Bally's capital structure. I think that that IPO process is a very creative way to get a lot of folks in the community involved in the project and give them a piece of that project.

If it fails because of legal reasons, we don't have any reason to believe that that will impact the the the project generally or require us to come out of pocket with any additional funds. But if if we're asked, we'll we'll evaluate it at the time, and we've not been asked.

Colin Mansfield

Great. Thanks, everybody.

Peter Carlino

Perfect answer. Well, thank you to all who have dialed in this morning. This is a a kind of a fun and and momentous quarter for us.

Good quarter. And, we hope we've got equally good news next quarter. So see you then.

Operator, thank you.

Operator

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