In addition to historical facts or statements of current conditions, this presentation contains forward-looking statements that involve risk and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company’s current expectations and beliefs but are not guarantees of future performance. As such actual results may vary materially from expectations.
The risks and uncertainties associated with the forward-looking statements are described in the company’s filings with the Securities and Exchange Commission, including the Company’s reports on Form 8-K, Form 10-K, Form 10-Q and Form S-11.
GLPI assumes no obligation to publicly update or revise any forward-looking statements.
This presentation includes “Non-GAAP financial measures” within the meaning of SEC Regulation G. A reconciliation of all Non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found at www.glpropinc.com in the Recent News section and financial schedules available on the Company’s website.
Safe Harbor
2 Gaming & Leisure Properties Inc.
Geographically Diversified Portfolio
National portfolio of high quality casino properties across 13 states
Cash Flow Strength and Stability
Long-term cross-collateralized master lease with strong rent coverage
Strong Operating Company Tenant
Deep regional operating expertise and market leading brand
High Barriers to Entry
New supply restrained by rigorous gaming licensing standards
Proven and Experienced Management Team
Industry expertise combined with disciplined investment management approach
Conservative Financial Approach
Committed to maintaining a strong balance sheet
Investment Highlights
Opportunity for Long Term Growth
Acquisition opportunities within gaming and two current projects under development
3 Gaming & Leisure Properties Inc.
First real estate company focused on gaming assets
Spun-off from Penn National Gaming (NYSE:PENN) November 2013
REIT election expected effective for the 2014 tax year
17 Properties leased back to PENN though a triple-net master lease
Approximately 6.5 million total square feet of building space owned
Over 3,000 acres of land and 2,600 hotel rooms
Two properties owned and operated in a taxable REIT subsidiary
Casino Queen in East St. Louis, IL recently acquired and leased back to its existing operators
Focus on growth and diversification
Two facilities under construction in Ohio; expected to open in the fall of 2014
Intention to actively pursue acquisition and development opportunities in regional gaming and adjacent leisure markets
Disciplined, market-tested management team
Significant development and acquisition track record
Management has over 45 years of combined gaming & leisure real estate experience
Company Overview
4 Gaming & Leisure Properties Inc.
Experienced Management Team…
Peter Carlino – Chairman of the Board and Chief Executive Officer •Serves as the Chairman and CEO of GLPI in addition to the Chairman of Penn National Gaming’s Board of Directors •Served as Penn's Chairman since April 1994 •CEO of Penn from April 1994 until GLPI was spun out to shareholders on November 1, 2013
William Clifford – Chief Financial Officer, Secretary and Treasurer •Serves as GLPI’s Chief Financial Officer, Secretary and Treasurer •Served as Penn National Gaming’s Senior Vice President-Finance and Chief Financial Officer since October 2001 •Served as the Chief Financial Officer and Senior Vice President of Finance for Sun International Resorts, Inc., Paradise Island, Bahamas, the Financial, Hotel and Operations Controller for Treasure Island Hotel and Casino in Las Vegas, the Controller for Golden Nugget Hotel and Casino, Las Vegas, and the Controller for the Dunes Hotel and Casino, Las Vegas
45 years of combined Gaming, Lodging & Leisure experience in numerous industry cycles
Able to leverage industry relationships to source acquisitions
Hold ~15% of shares outstanding – fully aligned with shareholders
5 Gaming & Leisure Properties Inc.
…With a Proven Track Record of Growth…
6 Gaming & Leisure Properties Inc.
1972
Grand Opening
of Penn National
Race Course
2003
Acquired
Hollywood
Casino Corp.
2001
Acquired Casino
Rouge and Casino
Rama Mgt.
Contract
2000
Acquired Casino
Magic and
Boomtown Biloxi
1997
Acquired Charles
Town Races
1996
Acquired Pocono
Downs Racetrack 2005
Acquired Argosy
Gaming
2004
Acquired Bangor
Historic Track
2007
Acquired Zia
Park Casino
1994
PENN Initial
Public Offering
…And an Eye Towards Creating Shareholder Value…
7 Gaming & Leisure Properties Inc.
In 2007 PENN entered into agreement to sell the Company to Fortress Investment Group and Centerbridge Partners for $67 per share
The all-cash transaction represented a total value of approximately $8.9 billion including repayment of debt
Sale price would have resulted in a 30% premium to shareholders
Macro events led to the termination of the agreement in July 2008
PENN received a $225 million termination fee and well as a $1.25 billion
investment in the form of zero-coupon preferred equity
Preferred equity, which was to have been redeemed in July 2015, was repurchased / converted in the recent spin transaction
…Through Even the Toughest Periods
8 Gaming & Leisure Properties Inc.
2008
Grand Opening
of Hollywood
Casino PNRC
Grantville, PA
2009
Grand Opening of
New Hollywood
Casino
Lawrenceburg, IN
2008
Grand Opening
of Slot Operations
at Bangor, ME
2010
Grand Opening of
Hollywood Casino
Perryville, MD
2011
Acquired M Resort
Las Vegas, NV
2012
Grand Opening of
Hollywood Casino
Kansas Speedway
2012
Grand Opening of
Hollywood Casino
Toledo, OH
2012
Grand Opening of
Hollywood Casino
Columbus, OH
2012
Acquired Hollywood
Casino St. Louis,
MO
Fall 2014
Expected Grand
Opening of
Hollywood at
Mahoning Valley
Race Track
Fall 2014
Expected Grand
Opening of
Hollywood at
Dayton Raceway
In light of the termination of the private equity transaction, PENN explored alternatives to create shareholder value including a spin-off of assets into a PROPCO “REIT”
Despite challenging economic circumstances, PENN continued to grow through acquisition and development while pursing the REIT spin-off
2013 GLPI
Completes
Spin off
from
PENN
Spin-off Transaction Overview & Highlights
Separated real estate and non-real estate holdings in tax free spin-off
Entered into master lease agreement with PENN to operate the assets
Exchanged $975 million of Series B Redeemable Preferred Stock at $67 per
share into non-voting PENN common shares
Following the exchange, PENN purchased $397 million of the non-voting PENN
common stock at $67 per share and redeemed $252 million other Preferred
Stock at par in order to satisfy related party tenant rules
GLPI declared and paid a dividend of $11.84 per share to purge historical
earnings and profits as required to achieve REIT status
Reduces Cost of Capital
Facilitates Acquisitions
Improves Financial Efficiency (Margins,
ROE)
9 Gaming & Leisure Properties Inc.
¹ Based on Total Debt / Adjusted EBITDA ² Based on Adjusted EBITDA / Interest Expense
Transaction Rationale
Premium REIT valuation / Lower Cost of Capital
GLPI trades at EBITDA multiple premium to regional gaming companies and has a lower cost of capital
Regulatory Concentration Contraint Removed
GLPI faces reduced FTC/Regulatory constraints in owning properties in same jurisdiction
Access to Diverse Capital
GLPI has access multiple sources to fund growth including preferred, equity/linked, secured & unsecured instruments
Opportunity to Grow Portfolio
First mover and balance sheet advantage allow GLPI to source meaningfully accretive deals quickly
Diversification Opportunities Exist
Potential to work with multiple gaming operators to expand tenant base
Enhanced Credit Profile
Through spin-off GLPI has a greatly enhanced credit profile
10 Gaming & Leisure Properties Inc.
Payment of Earnings & Profits Purge
11 Gaming & Leisure Properties Inc.
On February 18th GLPI completed its purge of approximately $1.05 billion in
accumulated earnings and profits
Approximately $11.84 per share was distributed in cash and stock
Dividend totaled $210 million in cash plus 22 million additional shares
GLPI intends to elect REIT tax status for the 2014 tax year
The Company expects that on completion of the purge that it has satisfied all
of the requirements to qualify as a REIT
Addition to the MSCI US REIT Index expected effective February 28, 2014
Broad Geographic Presence
Multi-jurisdictional REIT portfolio with 20 assets in 13 jurisdictions
GLPI has deep market knowledge and has been through lengthy gaming license process in each of the states in which the company operates
12 Gaming & Leisure Properties Inc.
Hollywood Mahoning
Argosy Casino Sioux City
Hollywood Casino Aurora
Argosy Casino Alton
Hollywood Casino Bay St. Louis
Boomtown Biloxi
Charles Town Races & Slots
Hollywood Casino Lawrenceburg
Hollywood Casino Toledo
Hollywood Casino at Penn National Race Course
Hollywood Slots Hotel and Raceway
Argosy Casino Riverside
Hollywood Casino Tunica
Hollywood Casino Perryville
Hollywood Casino Columbus
Hollywood Casino St.
Louis
Casino Queen
Black Gold Casino at Zia Park
Hollywood Casino Joliet
Hollywood Casino Baton Rouge
Hollywood Dayton
M Resort
Casinos Owned & Operated
Casino
Current Jurisdictions
Projects Under Development
High Barriers to Entry
Capital Intensive Assets
Extensive Management Experience
Creates first mover advantage in real estate asset class
Access to Capital
REIT status allows lower cost of capital
Regulatory Advantage
Only REIT with regulatory approval in multiple gaming jurisdictions
13 Gaming & Leisure Properties Inc.
Opportunity for Long-Term Growth
• Sale Leasebacks and Acquisitions
• Target assets in domestic regional and destination gaming markets with stable revenue and reliable cash flow
• Attractive opportunity for private or public single or multi-site operators
• Attractive financing alternative
• Utilize UPREIT structure to defer tax consequences
• Ability to retain PENN as asset operator or seek third party operator
• PENN Master lease has escalator and percentage rent components
• Growth in PENN rental payment through annual escalator
• Retained ability to benefit from performance of owned properties
• Balance sheet will support ability to explore additional growth options
Sale Leaseback
With Third Party Operator
Acquisitions With PENN or
Another Operator
Greenfield Development
New Asset Categories
14 Gaming & Leisure Properties Inc.
Opportunity to Consolidate Existing Casino Assets
139
118
257
0
50
100
150
200
250
Commercial Gaming Assets
Held by Publicly Traded Companies
Commercial Gaming Assets
Held by Privately Held Companies
Total
Commercial Gaming Assets
The only REIT focused on the casino market, with considerable industry expertise
Significant market opportunity
Over 250(1,2) commercial gaming facilities in the United States
Approximately 140 are owned by public companies, that may consider monetizing the
assets to focus on operating opportunities
Many gaming facilities are located in areas where regulatory constraints limit operator
expansion
¹ American Gaming Association, company websites, SEC filings and state gaming regulatory boards. ² Represents only domestic gaming (and excludes Native American) properties. Figures exclude assets owned by Penn
and properties in South Dakota due to their small size. Nevada property count only includes publicly traded companies (equity and debt) with $12 million or more of gaming revenue.
15 Gaming & Leisure Properties Inc.
Casino Queen Highlights Robust Acquisition Opportunity
16 Gaming & Leisure Properties Inc.
Approximately one month after spin-off, GLPI announced its first acquisition Casino Queen in East St. Louis was acquired for $140 million
Property is leased back on a triple-net basis for approximately $14 million in rent per year
GLPI provided a new five year $43 million term loan at 7%
Adds a quality asset with stable market share to GLPI portfolio
Provides further diversification and strengthens cash flows
Demonstrates GLPI’s ability to become consolidator and provider of financing solutions to
highly levered regional gaming operators
Development Pipeline
(1) $ in millions
Project Scope Planned Capital
Spend(1)
Amount Spent to Date
(12/31/13) (1)
Completion Date
Hollywood at Mahoning Valley Race Track
Austintown, OH
$100 $25.9 Fall
2014
Hollywood at Dayton Raceway
Dayton, OH
$89.5 $26.2 Fall
2014
Pipeline:
$190M of development coming on line in the fall of 2014
Management targets a 9-11% yield on cost for development projects
17 Gaming & Leisure Properties Inc.
Strong Operating Company Tenant
High quality, capital intensive assets with recognized brand and loyal customer base
Hollywood Casino at Lawrenceburg ~634,000 property square footage
2,907 gaming machines and 80 table games
Hollywood Casino Columbus ~354,075 property square footage
3,015 gaming machines and 78 table games
Hollywood Casino at Penn National RC ~451,758 property square footage
2,469 gaming machines and 53 table games
Hollywood Casino at Charles Town ~511,249 property square footage
3,500 gaming machines and 110 table games
18 Gaming & Leisure Properties Inc.
Strong Operating Company Tenants
Disciplined capital investments & improvements = Strong ROICs
Young Portfolio – 12 of 20 assets are less than 10 years old(1)
(1) Includes properties which have undergone significant renovation
19 Gaming & Leisure Properties Inc.
Cash Flow Strength & Stability With PENN Lease
Lease Structure:
“Triple Net” Master Lease: PENN will be responsible for maintenance capital expenditures, property taxes, insurance and other expenses
All properties subject to the lease will be cross-defaulted / guaranteed
PENN will remain responsible for acquisition, maintenance, operation and disposition of all (including gaming) FF&E and personal property required for operations
Term and Termination:
15 years, with four 5-year extensions at PENN’s option
Causes for termination by lessor include lease payment default, bankruptcy and/or loss of gaming licenses
At the end of lease term, PENN will be required to transfer the gaming assets (including the gaming licenses) to successor tenant for fair market value, subject to regulatory approval
Provisions for orderly auction-based transition to new operator at the end of the lease term if not extended
Rent:
Fixed base rent component with annual escalators (subject to minimum rent coverage of 1.8x) plus:
Fixed percentage rent component for the facilities (other than Hollywood Casino Toledo and Hollywood Casino Columbus) reset every 5 years to equal 4% of the average net revenue for such facilities for the trailing 5 years
Ohio’s (Toledo and Columbus) performance components will be established monthly with land rent set at 20% of monthly net revenues (represents less than 10% of PENN rent)
Capital Expenditures:
PENN required to maintain properties and spend a minimum of 1% of net revenues on maintenance capital (including FF&E and capitalized personal property required for operations) annually
Structural projects will generally require GLPI consent
Other: Obligations under the Master Lease will be guaranteed by PNG and certain of its subsidiaries
Certain rights of first offer as well as radius restrictions on competition
20 Gaming & Leisure Properties Inc.
Low Cost Rated Debt
Ratings on company’s credit facility and bonds are currently BBB-/Ba1 with stated goal of investment grade rating
Attractive, Stable Yield
Targeted 80% AFFO payout ratio, with growth coming from acquisitions and percentage rent components
Ample Capacity on Credit Facility to Fund Growth
At 12/31/13 the company has $700 million available on its revolver
Manageable Debt Maturity Schedule
First tranche of maturities in 2018
Measured Financial Approach To Support Growth
21 Gaming & Leisure Properties Inc.
Fully Leased /Movement Away From Single Tennant Risk
100% Tenant Occupancy / Recent Acquisition of Casino Queen highlights effort to move away from single tenant concentration in portfolio
Strong Financial Flexibility and Balance Sheet (2)
Low leverage and ample liquidity to
fund growth
$700 million available under revolving
credit facility
$285 million cash
Attractive in-place debt
4.7 % weighted average cost of debt
Manageable maturity schedule with
no maturities until 2018
(1) Effective January 28, 2014 the interest rate on the Revolver and Term Loan A decreased to L + 150 (2) Data as of 12/31/2013. (3) 2014 projection per press release dated 2/20/14 (4) Pro Forma for OH tracks set to open in the fall of 2014
22 Gaming & Leisure Properties Inc.
Projected
EBITDA (3)
Projected
Adjusted Funds From Operations (3)
First Quarter Dividend Per Share
Debt to Adjusted EBITDA (4)
$432.6 $301.3 $0.52 5.7X
December 31, 2013
Interest Rate Balance
Unsecured Term Loan A (1) L + 175 300,000
Unsecured $700m Revolver (1) L+ 175 -
Senior Notes Due 2018 4.375% 550,000
Senior Notes Due 2020 4.875% 1,000,000
Senior Notes Due 2023 5.375% 500,000
2,350,000$
Structure Promotes Stable Cash Flow
23 Gaming & Leisure Properties Inc.
Master lease provides for cross collateralization and cross default protection
Leases are ‘triple-net’
Current rent coverage is in excess of 1.8x
Exposure to regional gaming trends mitigated
- Approx. 80% of PENN rent is permanently fixed
- Approx. 10% of PENN rent is fixed for five years
- Less than 10% of PENN rent is variable monthly
Diverse asset ownership across multiple markets
Geographically Diversified Portfolio
National portfolio of high quality casino properties across 13 states
Cash Flow Strength and Stability
Long-term cross-collateralized master lease with tenant parent guarantee and strong rent coverage
Strong Operating Company Tenant
Deep regional operating expertise and market leading brand
High Barriers to Entry
New supply restrained by rigorous gaming licensing standards
Proven and Experienced Management Team
Industry expertise combined with disciplined investment management approach
Conservative Financial Approach
Committed to maintaining a strong balance sheet
Investment Highlights
Opportunity for Long Term Growth
Large target opportunity within gaming and in adjacent markets / Current projects under development
24 Gaming & Leisure Properties Inc.
Transaction Mechanics
(1) Taxable REIT Subsidiary conducts activity that generates non-qualifying REIT income. (2) At the end of the lease term, Penn has the right to sell the applicable gaming license
necessary to operate the facilities at fair market value, subject to regulatory approval.
Public Shareholders
GLPI (REIT) PNG (OpCo)
Dividends (E&P &
Ordinary)
Lease Payments Mostly Non-REIT
qualifying assets
7 racetracks
Casino Rama management contract
Kansas JV
Gaming Licenses, FF&E, Intellectual Property Rights and Misc. (2)
REIT Assets
17 gaming assets leased to PNG (OpCo) under a “triple net” Master Lease
TRS (1)
2 Operating Assets
Perryville, MD
Baton Rouge, LA
Public Shareholders
1. Hollywood Casino at Charles Town Races
2. Hollywood Casino Lawrenceburg
3. Hollywood Casino at Penn National Race Course
4. Hollywood Casino Aurora
5. Hollywood Casino Joliet
6. Argosy Casino Riverside
7. Argosy Casino Alton
8. Hollywood Casino Tunica
9. Hollywood Casino Bay St. Louis
10. Argosy Casino Sioux City
11. Boomtown Biloxi
12. Hollywood Slots Hotel and Raceway
13. Black Gold Casino at Zia Park
14. M Resort
15. Hollywood Casino Toledo
16. Hollywood Casino Columbus
17. Hollywood Casino St. Louis
Leasehold assets
26 Gaming & Leisure Properties Inc.
Definitions and Reconciliation of Non-GAAP Measures to GAAP
Adjusted EBITDA, or earnings before interest, taxes, stock compensation, insurance recoveries and deductible charges, depreciation and amortization, gain or loss on disposal of assets, and other income or expenses, and inclusive of gain or loss from unconsolidated affiliates, is not a measure of performance or liquidity calculated in accordance with GAAP Adjusted EBITDA information is presented as a supplemental disclosure. Adjusted EBITDA should not be construed
as an alternative to operating income, as an indicator of the Company's operating performance, as an alternative to cash flows from operating activities, as a measure of liquidity, or as any other measure of performance determined in accordance with GAAP.
The Company has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in adjusted EBITDA.
Adjusted EBITDA is presented as a supplemental disclosure as this measure is considered by many to be a better indicator of the Company’s operating results than diluted net income (loss) per GAAP. A reconciliation of the Company’s adjusted EBITDA to net income (loss) per GAAP, as well as the Company’s adjusted EBITDA to income (loss) from operations per GAAP, is included in the Company’s news announcements and financial schedules available on the Company’s website.
Funds From Operations (“FFO”) is equal to net income, excluding gains or losses from sales of property, plus real estate depreciation FFO is defined by NAREIT (the National Association of Real Estate Investment Trusts, the trade organization for
REITs) as “the most commonly accepted and reported measure of REIT operating performance.” Adjusted Funds From Operations (“AFFO”) is defined as FFO plus stock based compensation expense reduced by
maintenance capex. A reconciliation of FFO and AFFO to net income (loss) per GAAP is included in the news announcements and
financial schedules available on the Company’s website. FFO and AFFO do not represent cash flow from operations as defined by GAAP, should not be considered as an
alternative to net income as defined by GAAP and is not indicative of cash available to fund all cash flow needs.
Notwithstanding the foregoing, GLPI’s measures of adjusted EBITDA, adjusted EBITDAR, FFO and AFFO may not be comparable to similarly titled measures used by other companies
27 Gaming & Leisure Properties Inc.