Desiree Burke: I mean, I agree that it has impacted our tenants, but it hasn’t impacted our rent. Our rent is fairly fixed across our portfolio. And so — and you’re right, you have to consider their margins when you’re doing the underwriting, but we definitely do that. And as we said, we have really strong rent coverage still at every property. So it hasn’t impacted us, and it will first impact the tenant before it will impact GLPI.
Peter Carlino: Yes. One of the advantages we have is that we’re gaming people. I mean that’s kind of who we are. So that when we look at these markets, we know them we spent decades understanding them so that I do think we bring an understanding of risk and location and all the things that we consider as part of our underwriting.
Connor Siversky: Yes. Right. Understood. And just to clarify, I’m asking that question in the context of rent coverage, but I understand your points there. And then second, maybe just taking a more abstract look at the world, but a couple of interesting things in net lease earnings this week. So on one end, you had to read temper expectations. They’re not really penalized by investors. On the other end, we saw some accretive transactions take place that were not well received. So from the perspective of GLPI as we look into 2024, is there any sense out there that it could make sense to put on the brakes even if accretion is apparent, if it’s just not an asset where you’re comfortable taking on that kind of risk. And then maybe specifically, if we look at Bally’s, for example, I mean, we have an operator that seems to have a challenged cost of capital, there are expansion plans that need to be funded.
So does this open up the door for GLPI to become the preferred funding source and maybe a couple of attractive opportunities on that end? And then maybe taking it a step further, is it worth taking on a degree of what could be perceived as corporate-level risk for assets that are performing well at the property level?
Matthew Demchyk: I’ll take the first part, Connor. I mean, we live with a foot over the gas and a foot put over the brakes. The last year, I mean, someone asked last call, “It’s been 12 months, why didn’t you do anything?” And I’ll say here, one of the deals that we didn’t get, we were exactly the same at cap rate, but we wanted more coverage to your question about how do you think about risk. We’ve done it before it was popular or in fashion. So that mentality is not going to change in this environment. And I suspect we did Rockford not long ago. And every feedback item we heard was positive because it checked those boxes, not just am I OpEx short-term GAAP accretive, but people agree with us, this is long-term accretive to the value of your company.
Thanks for doing this. And when you think about smaller deals that we kind of bite-size match fund in a balanced way, but expect to have similar responses as long as the risk profile fits what we’re mandated to try and find. And I’ll give Peter the second…
Peter Carlino: Go ahead. What you’re going to say. Steve?
Steven Ladany: Well, so I’ll try to answer 2 and 3 and then people can help out where needed. So the second question was around Bally’s and opportunities of funding. Look, I think I think with respect to development transactions, whether it’s Bally’s, Rockford, player to be named later. I think we look at these things twofold. One is, how do we reduce the construction risk. So we’re going to look at what’s our level of oversight. Do we have a seat at the table to help make decisions, monitor the budget, how closely can we be to kind of foot in the door on the ground and at the table to control the budgeting experience. Secondly, we have obviously a lot of experience between Jim and Peter and the rest of the team here. And then lastly, we’re going to look at contractual and procedural protections to make sure that we have everything buttoned up so that there are no surprises and there’s no budget bust or overrun or something in that nature.
Now once we get through all that, if it still somehow makes sense and we can feel comfortable that the risks are manageable, then we have to get a commensurate return to balance that and offset that risk. So I think it’s a large process. I’m giving you a circuitous answer, that until we do all that work and can get our head and hands around all of that information on any development project I could not tell you whether something makes sense or doesn’t make sense. And rest assured, if we get to the point where we feel comfortable with the risk and we feel like the return we’re getting is commensurate with the risk, then you’ll probably hear about the transaction. So that’s kind of how we go about the underwriting process on the development side.
With respect to a corporate deal versus a property level deal, I mean, I think right now, there are a number of gaming companies that are seeing their share prices impacted by things that are at the corporate level, whether it be growth opportunities, interactive opportunities and the like. And I think in many of those cases, if you look at our master lease performance, we have very strong rent coverage. So I think in situations where we’re comfortable with the underlying properties and who’s running them and how they run them in the future long-term cash flow prospects, we are comfortable still transacting on those bases. I think, though, it depends on the corporate level, it depends on what’s going on in the corporate level. I don’t think we’re — you’re going to see us run into a burning building.
So if there’s a pending bankruptcy coming I’m not sure how quickly or eager we’re going to be to step in and buy property because it’s covering at 2.5 times, only to find ourselves going through some process. So I think it depends on the pendulum of opportunity where things sit. But ultimately, we’re underwriting the assets we own. We’re comfortable with the assets we own. And one of the things we consider when we look at transactions is, would someone else be willing to run these properties and operate these properties and step into this lease if this party that we’re currently working with was no longer there. And so if that’s a yes, then it makes the underwriting decision significantly different.
Operator: Next question comes from the line of Robin Farley with UBS. Please go ahead.
Robin Farley: Great. A lot of my questions have been asked already. I guess just circling back to the issue of potential non-gaming. Can you describe a little bit more? You said you looked at something and it wasn’t really a fit for you. Is there any more color on kind of what made it not fit for your goals? And then were you suggesting — you made a comment about, when there are a lot of bidders for something that it’s — not necessarily something that you’d end up doing. Are you suggesting that, that was the case for that nongaming transaction? Or I didn’t know if that comment was unrelated.
