And so that’s part of the excitement part of the opportunity that we potentially see together in the future. And some of the distress or malaise that may be coming from that sector.
Greg McGinniss: Okay. And just a final one for me. may not have an answer on this one, but have you guys been in talks with MGM about their perceived likelihood of receiving the license at Empire City and your potential investment there? Any updates?
Edward Pitoniak: John?
John Payne: Yes. We — well, first of all, MGM has been a great partner since we were able to acquire MGP and those assets. And obviously, the New York process is going on right now. There’s some who believe, as you said, that the two current racinos will get two of the three licenses. And should MGM be one of those, and they’re looking to build that business, and we see an opportunity to use our capital to build and get incremental rent. We’ll absolutely talk to the partner about that. So we’ll just have to see grain how this process plays out over the coming years.
Greg McGinniss: All right. Thanks, everyone.
Operator: Our next question comes from Smedes Rose with Citi. Your line is open.
Smedes Rose: Hi, thanks. I just wanted to ask you a little bit about how you think about the scope of the opportunity with Bowlero over time, I guess, against coverage levels, I think you said about 3.2x coverage. So a lot of cushion in there, but where would you sort of be comfortable, I guess, continuing to kind of buy up their EBITDA and converting it into rent relative to the coverage levels.
David Kieske: Smedes we studied — as you heard us say, we studied the business in the company for a couple of years now. And the their ability to go into an asset with very low 4-wall coverage and transformed that asset into very high 4-wall coverage, gives us a lot of conviction in the business. And then obviously, with the master lease and the corporate guarantee that we get out of the — incremental protection we get gives us a lot of comfort. So that’s the area that we target, how kind of high 2s, 4-wall coverage, low 3s and then obviously, the corporate guarantee. And they’re a growth-minded operator who understands the merits of a sale-leaseback model and ensures that they have the capital available to grow their business and the way shapes or forms that they want to do and they want to size the rent in a way that gives them protection to make sure that they’re creating and benefiting from all the upside that they generate, given their business model and the economics that they do produce.
Smedes Rose: Okay. And then I just wanted to ask about the balance sheet. Leverage just ticked up slightly to 5.7 from 5.6. And you still have the split rating between S&P and Moody’s. What do you think are kind of — what’s the kind of the path, I guess, with Moody’s? I mean did they want to see continued diverse diversification away from gaming? Or — and I guess, kind of what’s the sort of leverage metric that you think that they would need to see in order to move into investment grade?
David Kieske: Yes, Smedes, just to hit on your first point. I mean the leverage ticked up quarter-over-quarter really good cash went down, right? If you look at our supplement quarter-over-quarter debt only went up $55 million. That was the fund of Century Canada asset and cash went down $230 million. As Ed talked about the equity and the cash out the door to fund the acquisitions that we closed during the quarter. So really a de minimis move in leverage Look, in terms of Moody’s, it’s a continual education and it’s just — it takes time, all right? We’ve been around for six years. We’re educating the agencies on the gaming net lease model educating Moody’s in particular, on gaming tenants. And as we’ve talked about, I think with many of you in the past, they took our rating up two notches when we did our inaugural investment grade offering back in April of 2022, we’ve been in touch with them consistently, and we will — for an agency to make a move, it often takes an event.
So we’re hopeful in the coming months or a period of time, there will be an acknowledgment of the sanctity of our cash flows and an upgrade coming. And it’s — there’s really no real kind of black and white trigger. It’s a little bit of just do what you say, say what you do and continue to prove the merits of your business model, which we have been very, very diligent and working hard at.
Smedes Rose: Okay. Thank you
Operator: Our next question comes from Chris Darling with Green Street. Your line is open.
Chris Darling: Thanks. Good morning, everyone. Going back to the pricing environment, but thinking about traditional gaming real estate, specifically. It seems like there’s been this dynamic over the past, call it, 18 months or so, where gaming real estate has been positively repriced relative to traditional commercial real estate. And I wonder if that dynamic is still playing out in your mind? Or if you think cap rates are maybe moving in a more commensurate fashion 10-year right now?
Edward Pitoniak: Yes, Chris, good to talk to you. I think the honest answer would be, we don’t know. The most recent trade in big box gaming, obviously, was a realty income investment in Bellagio, where I believe it took place at –
John Payne: 5.2%.
Edward Pitoniak: 5.2% cap rate. So exactly to your point. There’s not a lot of the real estate categories covered by Green Street, where you’re seeing those kinds of cap rates right now, perhaps outside of industrial and maybe data centers. So there is resilience there. But beyond that Bellagio investment, I don’t think we have a lot of data to point at. But I do think, going back to what John has been saying, about the vitality, especially of Las Vegas, where so much of our capital is invested. There’s really no other place on or like it. And it may sound a bit trivial, but I’ll point to, for instance, PINK, having just performed last week at Allegion announcing, I want a residency in Las Vegas, and I want it now because she’s recognizing as a global artist that Las Vegas is the place for global artists to situate themselves right now because of the drawing power that Las Vegas has on a global basis.
So you’re seeing a resiliency of economic activity that should constitute some degree of resilience of value that you’re not obviously going to see in a lot of other sectors where you are facing either secular headwinds or supply-demand imbalance.
John Payne: Yes. Ed, the other thing that’s unique in the gaming business right now than other businesses, right, is that the operating performance of a lot of these casinos, particularly in the city you called out in Las Vegas are doing incredibly well. right? So yes, there’s a lot of volatility in the markets, but their core business is really performing quite well. So we’ll see how this plays out.
Chris Darling: Appreciate all the thoughts. That’s it for me.
John Payne: Thank you, Chris.
Operator: We now turn to Nate Crossett with BNP. Your line is open.
Nate Crossett: Hi, good morning. Maybe just one quick one on the balance sheet. If you could just maybe remind us the guidance for your leverage band and then just address like talking about debt maturities for next year, I know you mentioned the swaps, but can you just tell us how you’re thinking about addressing that maturity? What would the term be? And maybe where you think you could price money today?
