GLPI Q3 2026 Earnings Call Transcript

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DATE

Friday, Oct. 30, 2026

CALL PARTICIPANTS

• Chairman and Chief Executive Officer - Peter Carlino
• President and Chief Operating Officer - Brandon Moore
• Chief Financial Officer and Treasurer - Desiree Burke
• Senior Vice President, Chief Development Officer - Steve Ladany
• Senior Vice President, Corporate Strategy and Investor Relations - Carlo Santarelli
• Investor Relations - Joseph Jaffoni

TAKEAWAYS

• Total Revenue -- $435.4 million, representing a 9.5% increase compared to $397.6 million in the third quarter of 2025.
• Adjusted Funds From Operations (AFFO) -- $311.7 million, growing 10.5% year over year reflecting transaction activity and ongoing development funding.
• Adjusted EBITDA -- $413.9 million, rising 13% from $366.4 million in the prior-year period.
• Non-GAAP Diluted AFFO Per Share -- $1.04, an increase of 7.2% from $0.97 in the same quarter last year.
• Full Year 2026 AFFO Guidance -- $1.222 billion to $1.225 billion, updated from the previous range of $1.219 billion to $1.225 billion.
• Full Year 2026 AFFO Per Share Guidance -- $4.11 to $4.12, incorporating additional development fundings of approximately $265 million.
• Bally's Lincoln Acquisition -- $700 million, representing an 8% capitalization rate for the real property assets of the Rhode Island resort.
• Bally's Chicago Commitment -- $940 million, with $640.7 million funded as of Sept. 30, 2026, for the project scheduled to open in the first half of 2027.
• Cordish Virginia Development -- $467 million, including a $27 million land acquisition and $440 million in construction funding at an 8% capitalization rate.
• PENN Aurora Funding -- $216.3 million, completing a $225 million commitment at a 7.75% capitalization rate for the landside development project.
• Leverage Ratio -- 4.8x, remaining below the company's target range of 5 to 5.5x.
• Common Stock Issuance -- $351.0 million, raised through the settlement of a forward sale agreement for 7,589,487 shares in June 2026.
• Senior Notes Issuance -- $800 million, issued in March 2026 at a 5.625% coupon due in 2036 to repay term loan borrowings.
• Cash Income Growth -- $47 million, resulting from property acquisitions and lease escalations during the period.
• Lease Rent Coverage -- 1.61 to 2.46x, across the company's master leases as of the end of the prior quarter.
• Chicago Cash Income -- $12 million, representing the incremental cash revenue generated by the Chicago lease funding during the quarter.
• Lincoln Cash Income -- $14 million, representing the increase in cash income attributed to the Bally's Lincoln acquisition.
• PENN Development Funding -- $8 million, in additional cash income from funding Joliet, Aurora, and M Resort projects.
• Sunland Park Acquisition -- $3.8 million, in cash income resulting from the strategic acquisition.
• Annualized Dividend -- $3.28 per share, providing an 8.6% yield based on the period-end stock price.
• Hard Rock Rockford Repayment -- $16.0 million, in principal repaid to the company on June 30, 2026.
• Prologis Joint Venture -- $61 million, in capital account credit for the contribution of land at the former Hollywood Casino Joliet site.
• Variable Rent Adjustments -- $3.3 million, representing the expected total percentage rent decline for 2027, with $2.2 million of the impact occurring in 2026.
• Stable Lease Coverage -- nine of 13 leases reported by the company remained stable or expanded in rent coverage during the period ending June 30, 2026.
• Cap Rate Market Trends -- Management noted that regional gaming cap rates have widened by approximately 75 basis points compared to recent large-scale transactions.

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RISKS

• Carlino stated, "triple net REIT equity valuations have been, to say the least, disappointing," noting the impact of market volatility on the company's cost of capital.
• Moore noted, "it's somewhat unfortunate that the city took the position it did," regarding political factors impacting the hotel construction timeline at the Bally's Chicago site.
• Moore stated, "should they default on their debt, at GLPI, we would have some legal rights under the leases to take action," addressing the potential risks associated with Bally's Corporation's financial status.

SUMMARY

Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) reported record quarterly performance driven by acquisition activity and development project funding. Management stated that the company's regional gaming focus provides stable results despite volatility in debt and equity capital markets. The company updated its full-year guidance to reflect increased development spending and the impact of completed transactions. Management indicated that it remains focused on maintaining a disciplined balance sheet and prioritizing accretive transactions that align with its underwriting standards.

• The joint venture with Prologis to develop the former Hollywood Casino Joliet site into a distribution park allows the company to monetize non-earning land assets through a phased development over approximately five years.
• Santarelli stated, "that casino operation is still on schedule to open in the first half of 2027," referring to the ongoing construction of the Bally's Chicago project which is approximately two-thirds complete.
• Carlino stated, "the revenues coming out of regional markets are essentially bulletproof," emphasizing that employment trends remain the primary driver of regional gaming performance compared to destination markets.
• Burke stated, "we're funding it with free cash flow and with debt for the most part because we don't like the price of our equity," explaining the company's current capital allocation and financing strategy for its development pipeline.
• The company continues to cultivate relationships with tribal gaming operators and smaller private operators to maintain a healthy pipeline of sale-leaseback and development opportunities.

INDUSTRY GLOSSARY

• Triple-Net Lease: A lease agreement where the tenant is responsible for all facility maintenance, insurance, taxes, and utilities.
• AFFO (Adjusted Funds From Operations): A non-GAAP financial measure used by REITs to measure operating performance, calculated by adjusting FFO for recurring capital expenditures and non-cash items.
• REIT (Real Estate Investment Trust): A company that owns, operates, or finances income-producing real estate.
• Capitalization Rate (Cap Rate): The ratio of a property's annual net operating income to its purchase price or value.
• Master Lease: A single lease agreement that covers multiple properties, often including cross-collateralization provisions.
• Adjusted EBITDAR: A financial metric representing earnings before interest, taxes, depreciation, amortization, and rent, used to assess a tenant's ability to cover lease payments.

Full Conference Call Transcript

Operator: Greetings and welcome to the Gaming and Leisure Properties Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. It is now my pleasure to introduce your host, Joe Jaffoni, Investor Relations. Thank you, sir. You may begin.

Joseph Jaffoni: Thank you, Christine and good morning, everyone, and thank you for joining Gaming and Leisure Properties Third Quarter 2026 Earnings Call and Webcast. The press release distributed yesterday afternoon is available in the Investor Relations section on our website at www.glpropinc.com. In addition to the third quarter press release, GLPI also posted a supplemental earnings presentation, which highlights the events of the quarter, recent developments and future considerations that can also be accessed 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.

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 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 of Gaming and Leisure Properties. 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 Carlo Santarelli, Senior Vice President, Corporate Strategy and Investor Relations. With that, it's my pleasure to turn the call over to Peter Carlino. Peter, please go ahead.

Peter Carlino: Well, thank you, Joe and good morning, everyone. Happy once again to report another strong quarter here at GLPI. And I would note that despite volatility in both the debt and equity capital markets, our tenant operations and our businesses remained stable as evidenced by our AFFO growth, again, exceeding 10% in the third quarter. Importantly, 19 (sic) [ 9 ] of the 13 leases we report remained stable or expanded in coverage for the period ending June 30, with healthy growth exhibited across the regional gaming environment again in the third quarter. So the gaming world is very, very strong. Our growth was again driven by a combination of transaction activity and ongoing development capital funding.

Notably, our funding for Bally's Chicago casino remains on schedule with the casino remaining on track for a first half of 2027 opening. With respect to the Cordish Live! Virginia project, we acquired the land associated with the facility in the first quarter and began funding the project in the -- the entire project in the third quarter. To date, the performance of the temporary facility bodes very well for our underwriting of this development towards which we will fund $467 million. I should also note that we continue to see a healthy runway of growth from our development pipeline.

And despite the current capital markets and the climate that we're facing right now, transaction activity remains healthy as we evaluate a range of potential transactions. Our balance sheet remains nicely positioned, providing us with flexibility in an environment like the present in which triple net REIT equity valuations have been, to say the least, disappointing. Importantly, despite our leverage capacity providing flexibility, our underwriting principles remain unchanged. We continue to prioritize healthy long-term leases at an accretive spread to our cost of capital. Nothing remarkable in that, all good stuff. With that, I turn it over to Desiree.

Desiree Burke: Good morning. Just one clarification. It's 9 of 13 of our properties have rent coverage that either exceeds the prior quarter or equal to the prior quarter. And then I just will start out and talk to you about our income results. So for the third quarter of '26, our total income from real estate exceeded the third quarter of '25 by almost $38 million. This growth was driven primarily by $47 million in increases in cash income resulting from acquisitions and escalations. For Bally's, the acquisition of Bally's Lincoln real estate increased our cash income by $14 million. The Chicago lease increased our cash income by $12 million. The Belle development increased cash income by $1 million.

For PENN, the Joliet funding, Aurora funding and M Resort funding increased cash income by $8 million. The Sunland Park strategic acquisition increased cash income by $3.8 million. The Dry Creek, Ione and Cordish Virginia loans increased cash income by $4 million and the recognition of escalators and percentage rent adjustments on our leases added approximately $3.8 million of cash income. The combination of noncash income items from revenue gross-ups, investment and lease adjustments and straight-line rent adjustments results in a collective year-over-year decrease of $9.1 million. Our operating expenses increased by $65 million, mainly due to noncash adjustments in the provision for credit losses.

Included in our release is our full year 2026 guidance of between $1.22 billion (sic) [ $1.22 billion ] and $1.225 billion or $4.11 to $4.12 per diluted share and OP unit. The guidance does not include the impact of future transactions. However, it does include additional development funding of approximately $265 million, bringing our total development spend for 2026 to $800 million. From a balance sheet perspective, our leverage ratio is at 4.8x, slightly below our target level of 5 to 5.5x and our rent coverage ratios on our master leases range from 1.61 to 2.46x as of the end of the prior quarter. With that, I'll turn it back to Peter or open up for questions.

Peter Carlino: Yes. I think we're ready for questions. So Christine, please open the floor.

Operator: [Operator Instructions] Our first question comes from the line of Greg McGinniss with Scotiabank.

Greg McGinniss: Just wanted to touch on Bally Chicago, where the company talked about kind of scaling back their investment in that property, obviously, still making the vast majority of it. But how does that make you guys feel about the underwriting you did there? What your expectations were going in relative to the property that you'll end up with?

Brandon Moore: Greg, this is Brandon. I'll start with that. I think the underwriting hasn't changed. So what they're doing in Chicago to slow down the development of the hotel for political reasons or otherwise, doesn't change how we view the market or how we ultimately think that property will perform. I think it's somewhat unfortunate that the city took the position it did and put Bally's in the position to have competition potentially that it didn't think it would have. I think it's unfortunate for us that they slowed down the construction of that, that may delay the opening of the full complement of rooms.

But ultimately, when that property fully ramps, I don't think we have a different view here as to how it will perform.

Carlo Santarelli: Again, I'll just add to that. From GLPI's perspective, our capital funding is going out on the same schedule it was. That casino operation is still on schedule to open in the first half of 2027. The incremental amenities, obviously, are included in our original underwriting and we believe all of those will be developed as previously expected just over perhaps a little bit longer time than we previously contemplated.

Desiree Burke: Yes. And lastly, I'll just add that we did underwrite the chance of VLTs in Chicago. So we still feel good about our underwriting and the rent coverage that we expect.

Greg McGinniss: Okay. And then just switching gears to the Prologis joint venture. Is there any way for you guys at this point, I mean, I guess it's free cash flow funding in terms of if you were to do additional investment there, how to fund that accretively to increase your ownership?

Brandon Moore: Well, we should point out that the Prologis deal is on the property of the former Joliet -- Hollywood Joliet site. So that's property we already had on our balance sheet. We were utilizing that in a transaction rather than selling it to potentially generate a lot of excess income out of that from what we would have achieved if we just sold it on the market and fee simple. If the question is, are there opportunities to expand on that relationship, I would say perhaps. We've developed a good relationship with the Prologis team. I think we're all excited about the potential project in Joliet.

We obviously have excess land on our -- in several of our properties but that's mostly leased to our tenants. And so I won't tell you that there's a huge supply of potential sites on our balance sheet but I wouldn't say that there is none. So we'll continue to see how that relationship expands as we develop it but we're excited about the opportunity in Joliet.

Desiree Burke: And I think your question was about our investment level. And I think our agreement allows us, as we've disclosed to up to 30%. We can't tell you exactly what that will be because it depends on the opportunity and what is developed at the site, whether it's an -- whether it's just done prefab and we don't know who the tenant is or it's done specifically for a specific tenant but we would have the right to invest up to 30%.

Peter Carlino: Let me note that this is a terrific piece of property that -- and we are fortunate to align with a terrific partner, experienced partner. And this is going to unfold over a period of years but it's going to create a great deal of value. We have a high degree of confidence in that. So this is kind of a freebie. Just one of those lucky things we're able to do, moved quickly to take advantage of the ground when we got it back. And I've looked at the layout of what is anticipated. So I -- we couldn't be happier and has been said, we will look for other opportunities in that portfolio.

Only good news with this one.

Operator: Our next question comes from the line of Jamie Feldman with Wells Fargo.

James Feldman: Guess just sticking with Prologis, I mean, first venture into industrial, just with interest rates moving, transaction markets getting shakier and just listening to conference calls across all of REITs, there are some property types more than others that maybe people need capital. Does this open you up -- anything we can read into doing this deal? It sounds like it's on a site you had but does it -- are you considering doing more outside of your core wheelhouse?

Carlo Santarelli: I think simplistically, this was a unique situation where we had a very attractive land parcel. I think it was a monetizable asset that was otherwise going to likely generate very little value for us. We found a great partner to go forward and do it. As Brandon and Peter alluded to earlier, there might be some other opportunities within the portfolio for us to do similar things. But I think from your perspective, it's probably better to think about this as more of a one-off and taking advantage of an opportunity that presented itself for us.

Peter Carlino: We don't see a downside here at all. It's only good news.

James Feldman: Okay. And then just in terms of the JV structure, that's new also. How do you think -- I mean, you made the comment before about disappointing REIT equity prices. How do you just think about JVs going forward and ways to grow the balance sheet of the business?

Brandon Moore: I think generally, we've seen JVs employed in the net lease area. I think we've taken a look at that. We haven't seen anything compelling in that for our portfolio. But look, I think it's one of the multiple things we have at our disposal that we could potentially utilize if we have a need for capital and we don't feel like we're being supported by the equity market. So at the present time, I would view that as something we've all collectively gotten a lot smarter on in the last 3 or 4 months. And I think we understand it well.

And if it's something that we can utilize to our advantage in the future, you may see us do that. But I wouldn't read through the JV of Prologis to be the same. I think that, that JV was a situation where it was the best structure. It's what Prologis preferred to get into that structure. And I think the read-through you should have there is, if we're going to step outside of gaming, we're going to seek to do it with folks that know what they're doing. And clearly, Prologis is at the tip of the spear when it comes to developing these industrial sites.

Operator: Our next question comes from the line of Smedes Rose with Citi.

Bennett Rose: I wanted to ask just a little bit about, I guess, your kind of cost of capital, which like a lot of names in the space are -- is a little more challenged now. And with the shares trading at a high dividend yield and a 20% discount to at least consensus NAV, any thoughts on putting in a share repurchase program? Do you think you -- I mean, I think one of the overhangs is probably concerns around Bally's and the going concern language. Any kind of comments you can provide around your confidence in Bally's at this juncture? And maybe just other ways that you might be able to attack the steep discount that your shares trading at?

Carlo Santarelli: There's a lot there.

Peter Carlino: Those are 2 different questions. Very different.

Bennett Rose: First question and my follow-up in one.

Carlo Santarelli: Well, let's -- I think we'll talk about maybe the Bally's stuff first. I think the way that we think about the relationship with Bally's is in parts. There are 2 leases that are each 9 figures of annual rental stream. Those leases, as you can see, are covered at 1.98 and 2.13x. We feel very good about that. Chicago, as we discussed earlier on this call, is progressing nicely towards the first half opening. We feel good about that. Obviously, there's some other smaller pieces of business that we have with them but all of which we feel relatively good about.

As it relates to the buyback and obviously acknowledging why you're asking and it's clearly topical right now, you're right. Our cost of both equity and debt capital have gotten -- have deteriorated over the last several months. I think it's something that we think about, we talk about internally. We measure it against other opportunities with the pipeline that we have in place today that's already been established. I don't necessarily think it's something we're running to do but I think it's something we do discuss routinely and we'll continue to do so.

Peter Carlino: My quick reaction is that a buyback is always the last resort. It's when you run out of all of the hope and you decide to fold your tent. So we've got a nice pipeline that the team, Steve and Brandon and -- are working on and feel pretty confident that there's opportunity out there. The current pricing won't last forever. There's some debate around the table about how long it might last. But so long as we can do accretive transactions and put them on the books, we're going to do that.

Operator: Our next question comes from the line of Brad Heffern with RBC.

Brad Heffern: Peter, just following on, on your comment there. Are there accretive transactions that you're looking at now that would work on this current cost of equity?

Peter Carlino: I think we're saying yes. I mean -- or we don't do them. I mean it's that simple. Steve, why don't you -- all right, go ahead.

Desiree Burke: Or we just don't use equity, right? As we've said and looking at our development pipeline, we're funding it with free cash flow and with debt for the most part because we don't like the price of our equity, to be honest and it is way too low. So accretive to our cost of equity is one question, accretive in general that we could put up a good deal for our shareholders is another one, which I definitely think we can do by using the strength of our balance sheet.

Steven Ladany: Yes, I'd agree. I mean I think it's pretty apparent that the -- our cost of capital has increased at a unproportional rate to the cap rate you could probably push through on a transaction with a counterparty. The reality is, as Desiree said, there are a number of ways that we can structure a deal to still make sure we're achieving accretion on a economic basis. I would say, I think the benefit we have right now in the marketplace is, this opportunity allows us to focus in a little more on qualitative features of transactions and be a little more discerning on that side.

So I think whether that's looking at new tenant relationships, which bring about additional value to us, demographics or location, geographic diversification that maybe we don't have today or that would benefit us and even property attributes, the opportunity to target a category killer or a property that doesn't have a competitive set nearby. Things like that, that are credit enhancing are now effectively at a discount because the market is -- the price of everything has backed up, cap rates are higher. And the question is, can you get now a better asset for a price you would have paid for a lesser asset previously? And I think the answer is possibly.

Brandon Moore: The moral of the story is, Brad, we're still open for business.

Brad Heffern: Okay. Great. Appreciate the clarification there. And then on Bally's, talked a decent amount about it already. But just I'm wondering they have the going concern language added to the 10-Q but then they've also recently gotten additional capital or have an agreement in place for that. Can you talk about how those events have changed your view of the credit risk level there, if it has at all?

Brandon Moore: Yes, Brad, this is Brandon. I don't think our overall view of their credit risk has changed. In other words, we weren't totally surprised to see that in the 10-Q because we understand where Bally's sits. We remain optimistic with Bally's as a tenant in the going concern aspects because they have a lot of assets on the balance sheet that we feel will likely be monetized if they need to in order to proceed with their projects across the country. Those are very good projects. Chicago, New York will be very lucrative for them. Las Vegas is sort of a wait and see for them, I believe.

But we believe that they have tools at their discretion to get to cash flow in Chicago, which I think is their first priority. It's not something that we're excited about. There wasn't a disclosure that we were excited to see but I don't think it's changed our view of them on the whole at the present time.

Peter Carlino: On balance, we have other Bally's properties, as you well know and they're all doing fine. So that I -- the underlying credit, I guess, from our point of view, if push gets to shove, is positive from our point of view. We hope it doesn't get there but that value is there.

Brandon Moore: Yes. I think if we look at the downside scenario, if we had to reposition these properties based on the coverages that Carlo has outlined earlier on the call, we feel very confident that we would be able to reposition those assets. And quite frankly, Chicago is so far along. There would be several -- or there -- I should say there are several parties who would be interested in Chicago if Bally's decided that it could not, would not or cannot proceed with that project. So we feel good about the Bally's assets we have regardless of the fact that they filed this going concern 10-Q.

Operator: Our next question comes from the line of Haendel St. Juste with Mizuho.

Ravi Vaidya: This is Ravi Vaidya on the line for Haendel. I had another follow-up on Bally's. There's a lot of articles that came out talking about the fines imposed on Star Entertainment Group in Australia. It's about a $260 million fine. Given Bally's relationship with Star, is Bally's responsible for paying this? And in your view, how does this impact liquidity, credit and maybe their funding sources for their -- for a few of their projects that are ongoing right now?

Carlo Santarelli: Yes. So Ravi, thanks for the question. Just to back up here, when, obviously, the Bally's team made the investment in Star, it was eyes wide open that there was a significant overhang of a fine. I actually think that the end result is more than fine. Bally's Corp. is completely unrelated to this investment. So I think what you're looking at is a situation at Star that is isolated to Star. And for the most part, that business has started to certainly improve since new management has taken over. There is cash there on the balance sheet to go towards this fine. I believe they have up to 19 months to pay the fine.

And I believe the business has started to produce some elements of cash flow to handle it. So as far as we are concerned, the Star investment has no bearing on anything that necessarily relates to us in terms of Bally's Corp. funding and Bally's Corp.'s U.S. operations.

Ravi Vaidya: Got it. I appreciate the clarification there. And you mentioned earlier about cap rates moving up and there seems to be a greater appetite for acquisitions and more deals. How much would you say have, cap rates have moved up, say, versus a year ago in the regional markets that you're targeting?

Steven Ladany: Honestly, if you look at the last large-scale transaction that was announced was not a year ago, and it was the Golden transaction at a 7.5% cap rate. I think if you brought that market -- if you brought that transaction or a similar transaction to market today and there is no way it's sub 8%. I don't think there's any way possible it is. And I would -- it'd be hard -- I'd be hard-pressed to kind of guess what it would be. But based on that, I'd say you're probably in the neighborhood of 75 basis points wider. That's not a year.

Operator: Our next question comes from the line of Barry Jonas with Truist.

Barry Jonas: Appreciate the color on the pipeline. But as you think about it, I'm wondering if you see opportunities to acquire maybe already leased gaming real estate from other property owners looking to recycle capital rather than just originating new sale leasebacks with operators?

Steven Ladany: Yes, Barry, it's Steve. We -- by all means, we definitely have an interest in acquiring real estate. At the same time, I would say our underwriting might not be aligned with prior underwriting. So I think that, that's to say, yes, by all means, I'd love to buy some other real estate. I might decide, when the team looks at it, we might decide that an asset that currently pays and I'm making something up, $25 million of rent really should only be paying $15 million of rent because circumstances may have changed. Maybe there's competitive threats that have come in and impacted it, maybe escalation has been too high. We're not really sure.

But by all means, we would definitely take a look at this. I just don't think it's as easy as plug and play because our underwriting standards are not necessarily aligned with some of our competitors.

Barry Jonas: Great. And then just a follow-up. Any updates on tribal discussions? And I know you guys have built out relationships over the past few years. So wondering if discussions would extend to maybe outside of just tribal lands onto looking at commercial deals.

Steven Ladany: I apologize, Barry, I missed the first part. Could you say it again?

Barry Jonas: Just looking for an update on your tribal discussions and wondering if those relationships could extend beyond -- for deals outside of tribal lands.

Steven Ladany: Yes. By all means, the relationships we're building with the tribes have definitely been progressing. It's just not -- it's not a rapid transaction. It's -- there's just not a lot of velocity. There's a lot of -- and there's a lot of educational aspects and teaching aspects that go into it to getting -- and building the relationship to get someone comfortable. I think though that the dialogue is definitely expanding. I think we've tried to do -- spend time explaining that there is a way to monetize the asset possibly on tribal land and utilize the proceeds to expand beyond that.

And I think that has resonated with some tribes, especially the ones that are more well capitalized who -- and some of which have maybe already made investments off of the tribal location to start with. So I think there's a continued opportunity. I think we just need to kind of get some momentum and build it as we go.

Operator: Our next question comes from the line of Robin Farley with UBS.

Robin Farley: I know you've covered a lot of this already but just going back to Bally's Chicago for a moment. If there -- and I think you've been very involved in sort of directly overseeing the construction there. But if there were delays in the opening, can you kind of remind us in that scenario where there's a delay, what the impact would be to GLPI and how that would play out?

Brandon Moore: Robin, this is Brandon. I think from a high level, virtually no impact to GLPI in the sense that when our dollars are funded, we're getting paid for those dollars real time. So what it will do if it's delayed further, will delay the point in time where Bally's starts to realize some cash flow from the asset. And that ultimately plays into this going concern and liquidity concern. So I think directly to GLPI, won't change our income off the project. it will potentially change the time at which Bally's starts to receive income of its own and that will put further pressure on our financial situation.

So I think that is more of an indirect impact but certainly one that we're focused on.

Operator: Our next question comes from the line of David Katz with Jefferies.

David Katz: It -- listening to all of the gaming conversations with management teams and just looking at where the industry is, it feels as though we could be on the front end of a pretty meaningful period of regional asset trading. We may be in the midst of it now but in the early stages of it. Do you feel that, that's the case? Are you seeing more deal flow in its very earliest stages? And is that a fair assessment on your part? And obviously, how does that -- how are you positioning yourself to participate?

Steven Ladany: Well, David, obviously, Churchill is out publicly with their process. So that's obviously one that you're aware of. I think separate from that, I think there are some private processes that are currently brewing that we're aware of. And I think there's like been a logical transition. If you go back a number of years, a lot of the large-scale regional gaming operators were going down a path of divestiture programs, then I think the world changed and the focus became online, iGaming, sports betting and the like. And I think this is just kind of a natural progression back to where we were. So I do think you're right that we will see some regional properties changing hands.

I think from our perspective, it's twofold. One, we're trying to make sure we maintain all of our relationships with the folks who might be the divested -- divesting parties. At the same time, we're trying to build and cultivate relationships with some new smaller private type gaming operators who are interested in expanding and growing. And so I think it's just the life cycle that we're continuing to work through. And I think it's -- you got to have -- you have to have relationships on both sides to get as many looks as possible.

Carlo Santarelli: David, this is Carlo. I'll just add to Steve's comments. Obviously, I think if you look year-to-date, especially from operators who've already reported in the third quarter and operators, obviously, who reported second quarter, you're seeing very solid EBITDAR performance from regional portfolios. And you look across the valuations of a lot of these regional operators, they aren't great. And I think to Steve's point, that does beget -- some people maybe thinking to shuffle things or see where they could find incremental value.

Operator: Our next question comes from the line of Todd Thomas with KeyBanc.

Todd Thomas: Peter or maybe Desiree, if equity is off the table at the current valuation here, when you work through remaining fundings and commitments through '27 primarily, how much incremental investment capacity do you have using free cash flow in the balance sheet? And should we still assume that 5 to 5.5x is the right leverage target? Or has anything changed around your tolerance for leverage?

Desiree Burke: No, nothing's changed. When we fund all of the transactions that we have out there through '27 and '28, we'll still be at the low end of our 5 to 5.5x leverage. So no change there.

Brandon Moore: The second part of it, I think, Todd, there is -- because of that and where we fall into that historical range, there is some dry powder in there for us to do deals using leverage above and beyond the current pipeline we have. So I don't think we have any intention at all of even going -- even considering going above 5.5x. But we have quite a bit of dry powder in there to get there. So as Steve said earlier, if we find good accretive transactions that are assets that we believe long term are assets that we'll benefit from in our portfolio, we do have some dry powder there with which to work.

Carlo Santarelli: Yes, Todd, you could run the math, as Desiree said, low end of that range. So even if you wanted to take some fraction of 0.5 turn and look at the capacity that, that creates at some fictitious cap rate type of transaction, you'll recognize there's considerable dry powder for incremental.

Todd Thomas: Okay. Sounds good. And then I wanted to just go back to the Prologis joint venture. Can you help us sort of frame up or think about the value creation on that opportunity? GLPI is receiving a $61 million capital account credit for the land at 20%. What could that 20% interest ultimately represent once the project is fully developed or stabilized?

Desiree Burke: I -- we can't disclose that information yet. We don't even know who our ultimate tenant will be of the JV, right? So -- but what I will tell you is the way to look at it is, we took a non-earning asset that was sitting on our balance sheet, which was land in Joliet and we now put it into a structure that will ultimately earn a very healthy return. So I would just look at it as a net-net positive. There is no negative to this. This was a non-earning asset.

Carlo Santarelli: Yes, Todd. And for modeling purposes, as Desiree said, I mean, Prologis is in the early stages of this. They are going to run this process, the development, the agreements and partnerships and whatnot. We will learn more along the way. And presumably, at some point in the future, as their negotiations and their tenanting and stuff gets further along the line, we'll presumably be in a place to be able to help you a little bit more from a modeling perspective.

Peter Carlino: We could have sold the ground outright for -- I could tell you but I won't. But for a generous price. Obviously, we made the conclusion that over time, this is going to be a whole lot more valuable, particularly tied to a partner who is as strong as they are. So this is something just kind of -- we've -- I've mentally put it aside, cultivate it and let it grow over the next 5 years.

Operator: Our next question comes from the line of Caitlin Burrows with Goldman Sachs.

Caitlin Burrows: A couple of questions ago, you guys were talking about that you do have some dry powder capacity for incremental deals. So I guess just as you think of that forward pipeline, wondering if you could give any comments on whether you would put those discussions into the category of sale leaseback, development, redevelopment? Just trying to think of what could be next.

Steven Ladany: I'd put -- this is Steve. I'd put the majority of that discussion in the sale-leaseback bucket. We do have some conversations with folks about whether it be greenfield or redevelopment. I would not say that's the lion's share of the discussions that are ongoing at this time. I think the majority of people have the projects that were floating around out in the universe have been funded, many of which have been opened. So states like Louisiana, Illinois, I think a lot of those projects are well on their way. So those opportunities are fewer and far between. But we are having some conversation on that front but the lion's share of conversations have been straight traditional sale-leaseback.

Caitlin Burrows: Got it. Okay. And then on the lease coverage side of things, I know you guys talked about it early in the call and I'm sure probably make you feel better and you talked about some incremental moves higher recently. But I guess if you look year-over-year, Bally's but also Caesars and Cordish, those came down. So wondering if you could give any commentary on whether it's at what point lower coverage concerns you or even just the direction of them and how you consider that, whether it's over a quarter or year basis?

Carlo Santarelli: Yes. So I mean, look, I think the direction of travel and the easier way to look at this since it's all LTM EBITDAR and LTM rent is sequentially because, for example, you'll have some leases that maybe had a tough fourth quarter and we're kind of cycling through that right now. I do think if you look across the entirety of the coverage portfolio, Caesars was one that clearly got a lot of attention. We did see a nice bump as of the end of the 2Q in coverage there as that continues to stabilize. I think we talked about it earlier this year that, that portfolio specifically had a tough fourth quarter at one specific asset.

On a whole, I think the coverage story is strong and it's kind of improving of late. What I would also note is, you look across the earnings of those who reported Caesars being one, Churchill Downs being another, Boyd being another, not all tenants but all showing a low to mid-single-digit regional EBITDAR growth cadence in the third quarter, which generally bodes well since we're reporting to you on a 1 quarter lag.

Desiree Burke: Furthermore, I would add, our rent coverages are really strong. They're not what you see in other areas. Like we're sitting here talking about a low coverage of 1.61x. That is still a strong coverage where a tenant would be happy with the return that they're getting. And on the high end, we have 3s out there. So I am not at all concerned with that rent coverage. And I will tell you, if you look back a year or even pre-COVID, we're not far off of where we were at that point in time. So I feel very confident in our rent coverage right now.

Brandon Moore: Our demise has been much overexaggerated here. I think our leases are in very good shape.

Operator: Our next question comes from the line of Ronald Kamdem with Morgan Stanley.

Ronald Kamdem: Great. I just -- sorry to go back to Bally's. Just a 2-parter. One is, with the going concern language, is there sort of any ripple effects on the leases, right, whether it's minimums or anything like that? Like does that change anything on the lease front? And then two, just on Bally Chicago. Obviously, there's been a lot of headlines and so forth. But what do you guys -- like what are the data points we should be looking at about the reception of the project and how it's going to ramp?

Desiree Burke: So from a lease perspective, obviously, we have rent coverage ratios that they can't go below, that are all disclosed in our release, right, as far as the default goes. And as we just said, out of 1.98 and 2.13x, they're nowhere near anything that would default their leases because our investments in Bally's -- we're not really investing in the corporate entity. We're investing in specific assets that are performing very well. That's the first half of your question.

Brandon Moore: I'll just add. We do have in our leases defaults related to their material indebtedness. So should they default on their debt, at GLPI, we would have some legal rights under the leases to take action. I'm not saying we would or would not, depending on the circumstances. But just to be clear, we do have that right built into many of our leases. Sorry, Desiree. I don't know, what was the second part of your question?

Ronald Kamdem: Just trying to get some tea leaves on the Chicago opening. What are the data points saying about the reception of the assets? What are you guys tracking? What are you looking at?

Carlo Santarelli: Yes. So I mean, I think, Ronald, there's a lot of obviously, media articles written about this project. I saw one the other day that talked about the site being slow. We know there to be close to 1,000 workers and everything is moving at full speed on that project. I think that as it continues to kind of progress, we've gotten more and more comfortable with that first half '27 opening. I don't think a lot has changed in terms of how we think about the underwriting. Desiree mentioned earlier on this call, VLTs were always part of our underwriting case.

I don't know that there's been anything necessarily incremental that would change the way we think about the ultimate returns, barring the delay on the full completion of the amenities associated with the project and maybe that pushing back that full ROI that we originally contemplated, which again, as Brandon mentioned earlier, has no impact on when rent revenue -- rent income is coming to GLPI.

Steven Ladany: Just -- this is Steve. Just to give you a little context on the construction progress because that could be helpful maybe as well. The overall project is roughly 2/3 complete. That's the overall project, that's inclusive of everything, even the parts you've heard that are delayed. So 2/3 of the project is complete and there are over 1,000 daily workers on site. Importantly, the hotel structure, that's the part that everyone knows was delayed but that entire structure as well as the casino are expected to be weather tight by December. So there is still work going on, on the hotel to make sure it's weather tight. And so that's all expected to happen by December.

And if that does happen according to plan, as we're expecting, that will make all of the progress throughout the winter months in Chicago that much easier for everyone working indoors. So those are kind of some of the things we're looking at on the construction side and we're eager to be able to report to you that, that weather tightening has occurred.

Ronald Kamdem: Great. That's helpful. I guess my last one and maybe it's a quick one. Just can you remind us the variable rate reset for what they ended up being for this year and what we should look for, for next year?

Desiree Burke: Yes. So we do not have any rent resets in 2028. So you don't need to look at anything for next year. And the percentage rent decline for 2027 is $3.3 million, of which $2.2 million will happen in '26 but a full year will be the $3.3 million in '27.

Operator: Our next question comes from the line of Chad Beynon with Macquarie.

Chad Beynon: Wanted to get your take on your appetite on the Strip given some of the results we've seen this summer, which may just be a return to seasonality. I think we've all been spoiled the past couple of years, some of the seasonal patterns have changed but it certainly highlights the negative operating leverage that we see in Vegas and destination markets versus the regional markets. But yes, would just love to hear your thoughts.

Peter Carlino: Just -- let me share just my general philosophy about Las Vegas. It's great when it's great and it's really crummy when it's crummy. None of that rubs off on the regional markets. I've been saying for many, many years, as you all know, that the revenues coming out of regional markets are essentially bulletproof. The only one thing in my many years of experience looking at these markets that affects performance and that is employment. If there's a significant run of unemployment, that will impact a local property. But by and large, the revenues are bulletproof and I stand by that. I think time and the decades have proven to be right.

So we're not worried about the regional market. As I say, Vegas, it's great when it's great. I'll say that again and not so cool when it goes the other way. But it's a different world from what we mostly deal with. And we don't compare ourselves with what goes on there. It's a shame that impacts in Vegas affect people's perceptions about what goes on in the regional market but they aren't the same.

Chad Beynon: Okay. And then with the midterms next week, it doesn't look like there's a lot of potential bills that would impact you guys directly, a number of sports betting bills and some small things around the edges that would obviously change to blue or red and that could have a derivative impact. But anything else that you guys are keeping an eye on for next week that would kind of cycle into your business?

Carlo Santarelli: Yes, Chad, I mean, I think there's a couple of things that we'll pay attention to. I think your overall synopsis is broadly accurate, some governors' races that might change the tone of how certain states are viewing certain things. You have the pari-mutuel stuff in Virginia. Obviously, the Cordish Live! project that we have would be something to pay attention to. Both of those counties are 2-plus hour drives away. So we don't really think that has any impact on what we have going there. And then you have the ballot initiatives in Northeast Indiana.

Again, if you look at the map, there's not a lot of competition within a 80-, 90-mile radius of where those 3 counties are located. So I think overall, pretty quiet. And like you said, a little bit more relevance for some of the OSB stuff and things along those lines.

Operator: Our next question comes from the line of Jason Wayne with Barclays.

Jason Wayne: Just a quick one. Is there any update on the A's stadium project? So how far along are those discussions? And do you have any better picture of what GLPI's role could look like there?

Brandon Moore: This is Brandon. The A's stadium itself, I think, is progressing nicely. I think they're on track to open that stadium with -- assuming there's a first pitch in baseball in 2028, I think they're on track to do that. We're getting to the point in that project where certain infrastructure improvements for the integrated resort are being permitted. GLPI has not been asked at the present time, or I should say we haven't committed to anything in addition to the $125 million we have remaining. And so we're really waiting to see how that best can be deployed on the site.

We haven't ruled out some additional funding but I think there's a lot that we need to see and answers that we need to have in order to understand the overall project before we're willing to commit more capital to it. So I think we continue to be in a position where we're ready to fund when that's needed and we're just waiting to understand how that integrated resort is going to unfold.

Operator: Our next question comes from the line of David Hargreaves with Barclays.

David Hargreaves: I'm wondering if you have any position on historical racing machines at [ random ] park in Massachusetts, whether those are permissible or not?

Steven Ladany: Well, we -- I don't think we have an opinion on it at this point in time. We're aware of the efforts to try to get the legislation done. We know that it would -- there would be some ancillary impact to Plainridge that would be positive. But that's the extent of our involvement.

David Hargreaves: Got it. And then we've been beating this Bally Chicago thing to death. But I'm just wondering if there's any room count that -- do you know how many rooms they'll have when they open up?

Brandon Moore: We don't at the present time. I mean we just looked at their HCA. I mean we've heard that Bally's comment publicly that they intend to comply with the HCA. The HCA has a minimum number of rooms in it. So we would expect it to open with those but we haven't gotten into the details on opening day.

Operator: Our next question comes from the line of Daniel Guglielmo with Capital One Securities.

Daniel Guglielmo: Just one for me. I think heading into the back half of this year, there was nervousness around discretionary spending with gas prices high but it doesn't feel like it has fully materialized. So can you just talk a little bit more about what you're hearing from the regional operators on the ground and what gives you all and them the confidence to continue deploying capital for growth?

Carlo Santarelli: Yes. Thanks, Daniel. It's Carlo. So I think, look, obviously, it's a valid concern. Peter and the team and I were just discussing earlier, employment really is the biggest driver of regional gaming. If you look at the cadence of 2026, again, in the third quarter, you're going to see gaming revenue up a little bit over 2%. It was up a little bit over 2% in the first quarter. It was up closer to 3% in the second quarter. If you look at kind of the third quarter property EBITDAR, I think Caesars reported up 4%. Boyd's same-store was up close to 3%. Monarch up 2%, Churchill Downs up 4%.

So I think there's a lot of concerns around there. Obviously, gas prices, cost of everything is up for people but you're just not seeing it manifest in gaming results.

Operator: Our next question comes from the line of Colin Mansfield with CBRE.

Colin Mansfield: Just one question for me. Maybe a pivot to outside gaming. I would love to get your updated thoughts on how you're thinking about potential opportunities, let's say, in the leisure space. If you look in that environment right now, there's, I think, several operators where your cost of capital is much more attractive than what their cost of debt or equity might be. There might be some that are facing some idiosyncratic issues or hiring restructuring advisers. So I'm just kind of curious the attractiveness of anything outside of gaming right now. Has anything in your view changed?

Or are you seeing more opportunities where you might be opportunistically able to provide your cost of capital to some of these real estate heavy names that might be facing a little stress right now?

Brandon Moore: I'll jump in, Colin, appreciate the question. I think nothing has changed in our approach to nongaming -- venturing into nongaming. It's going to have to be something that we find both accretive and we have -- we're able to acquire the expertise to grow it. And so I do think there are some opportunities out there. We continue to look at those. But if you see us venture outside of gaming, as we've done with Prologis, we'll seek to do it with folks that know what they're doing and can help us grow in that whatever business we enter into.

So I think you're right, there are some probably some more opportunities out there but our philosophy and approach hasn't changed.

Peter Carlino: Let me add, too, we haven't run out of gaming opportunities yet. I think Brandon said earlier, talks about our demise have been greatly exaggerated. And so as long as we can stick to our knitting, we're going to do that. We never give up looking at other things. It's part of what we're challenged to do but we're blessed to be able to continue with what we know best.

Operator: We have no further questions at this time. Mr. Carlino, I'd like to turn the floor back over to you for closing comments.

Peter Carlino: Thank you very much, Christine. And thank you all for dialing in and we will look forward to seeing you next quarter. Bye-bye.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

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