Participants

Joe Jaffoni; Investor Relations; Gaming and Leisure Properties Inc

Peter Carlino; Chairman of the Board, President, Chief Executive Officer; Gaming and Leisure Properties Inc

Desiree Burke; Chief Financial Officer, Treasurer; Gaming and Leisure Properties Inc

Matthew Demchyk; Senior Vice President, Chief Investment Officer; Gaming and Leisure Properties Inc

Steven Ladany; Senior Vice President, Chief Development Officer; Gaming and Leisure Properties Inc

Brandon Moore; Chief Operating Officer, General Counsel, Company Secretary; Gaming and Leisure Properties Inc

Brad Heffern; Analyst; RBC Capital Markets

Ron Kamdem; Analyst; Morgan Stanley

Barry Jonas; Analyst; Truist Securities, Inc.

John Kilichowski; Analyst; Wells Fargo Securities, LLC

Greg McGinniss; Analyst; Scotiabank GBM

Ravi Vaidya; Analyst; Mizuho

David Katz; Analyst; Jefferies

Michael Herring; Analyst; Green Street Advisors

Caitlin Burrows; Analyst; Goldman Sachs

Todd Thomas; Analyst; KeyBanc Capital Markets Inc.

Mitch Germain; Analyst; Citizens JMP

Chad Beynon; Analyst; Macquarie Capital, Inc.

Rich Hightower; Analyst; Barclays

Daniel Guglielmo; Analyst; Capital One Securities, Inc

Robin Farley; Analyst; UBS

Colin Mansfield; Analyst; CBRE

Presentation

Operator

Greetings and welcome to the Gaming and Leisure Properties fourth-quarter 2024 earnings conference call.
(Operator Instructions)
As a reminder, this conference is being recorded.
It is now my pleasure to introduce Joe Jaffoni, Investor Relations. Please go ahead.

Joe Jaffoni

Thanks, Paul, and good morning, everyone, and thank you for joining Gaming and Leisure Properties' fourth-quarter 2024 earnings call and webcast.
The press release distributed yesterday afternoon is available in the Investor Relations section on our website at www.glpropinc.com.
On this morning's call, management's prepared remarks, and the 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 at 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 Matthew Demchyk, Senior Vice President and Chief Investment Officer.
With that, it's now my pleasure to turn the call over to Peter Carlino. Peter, please go ahead.

Peter Carlino

Well, thank you, Joe, and good morning, everyone.
We are, of course, pleased to present another strong quarter which is well summarized in our earnings release.
I should highlight that projections this quarter were especially difficult because there are so many variables that you'll hear a bit from Desiree who has to deal with those every day. Nonetheless, the estimates that we have put out we believe are with great pain, fair representation of what we see going forward.
One large difficulty that we have is that even when we're committed to a project, we can't determine when funds are going to be drawn because that rests with our tenants. So that we can only estimate to the best of our ability.
Nonetheless, we are prepared to handle all of the known demands that you folks are aware of, and we have capacity to handle some things that may be on the horizon. I want to emphasize that we are committed to the gaming space and with the sense that it's the best vehicle for us to develop and maintain long-term dependable rock solid cash flow.
So with that in mind, Desiree, I'm looking across the table and you're on.

Desiree Burke

Okay. Thank you, Peter. Good morning.
For the fourth quarter of '24, our total income from real estate had exceeded the fourth quarter of 2023 by over $20 million. This growth was driven by increases in cash rent of over $22 million resulting from acquisitions and escalation.
For example, the Tioga acquisition increased their cash income by $3.6 million, the Rockford Loan increased cash income by $2.8 million, the strategic acquisition increased cash income by $2.3 million, the Bally's Chicago land increased cash income by $5 million, Bally's Tropicana funding by $1 million, and Bally's Kansas City Shreveport increased by $1.4 million.
We also had the Ione loan, which increased our cash income by $400,000, and obviously, the recognition of our percentage rent adjustments and escalation, which added approximately $6.2 million of cash income. The combination of non-cash revenue gross ups, investment and lease adjustments and straightline adjustments partially offset these increases, driving a collective year over year decrease of $2.3 million.
Our operating expenses increased by $7.7 million, mainly resulting from non-cash adjustments in the provision for credit losses, primarily due to increases in the commercial real estate index projections. For the company's development properties, we will capitalize interest and deferral rent received during development for financial reporting purposes.
However, we will add the rent back and deduct the capitalized interest in deriving at AFFO. In today's release, we gave full year guidance ranging from $3.83 per share to $3.88 per diluted share and OP units. Please note that this guidance does not include the impact of future transactions.
However, it does include our anticipated funding of approximately $400 million for the development projects and the expectation to settle our forward sale agreements in June of '25. From a review of the notes last night, it appears our 2025 AFFO guidance is slightly below consensus due to a number of factors.
The timing of our forward share settlement, which you should assume June 1, the amount and timing of our development funding, which we should assume $400 million weighted towards the end of the year, interest expense assumptions, which there are multiple changes during 2024 that will impact 2025 interest expense, including all the bond issuances, the bond repayments, as well as the new revolving loan, which I will note that it's subject to a Bally's guarantee and part of their tax strategy and will remain outstanding.
We will redeem the $850 million 5.25% bond on March 3 of '25. Our rent coverage ratios do remain strong, ranging from 1.79 to 2.55 on our master leases as of the end of the prior quarter.
With that, I'll turn the call back to Peter.

Peter Carlino

Thanks, Desiree.
I did say a lot of variables and I think that Desiree's highlighted many of them.
Matthew, you have some notes that you'd like to share?

Matthew Demchyk

Sure. Thanks, Peter, and good morning, everyone.
Our results for the fourth quarter and full year reflect the continued success of our strategy, rooted in a conservative financial approach, our prudent capital allocation mentality, and our unique ability to generate value through both deal origination and our creation of bespoke deal structures.
A strong financial position provided the flexibility to stay proactive throughout this past year. The capital deployed in 2024 has purposefully laid the groundwork for growth extending well into 2025 and beyond. Our tenant relationships remain a powerful competitive advantage, enabling us to identify and act on opportunities that others may overlook.
By year's end, we secured a meaningful share of all announced gaming real estate transactions, including our innovation in the tribal gaming world, proof that our strategy is bearing fruit. This positions us well to continue uncovering new opportunities in 2025 and beyond.
These relationships are also the cornerstone of our long-term growth. Each partnership unlocks future possibilities, creating a powerful compounding effect as time moves on. While gaming real estate is still a relative newcomer in the broader real estate world, the strength and consistency of cash flow from our gaming real estate portfolio, especially in periods of market volatility, continue to provide valuable data points.
These data points, coupled with the end to end transparency of our cash flows and our lease coverage position us to continue driving the revaluation of our cash flows in relation to other sectors of the wider real estate market.
Looking ahead, our focus remains resolute, prudently deploying capital to maximize long-term value for all shareholders, and our goal is simple, to drive lasting and durable intrinsic value per share.
I'll turn it back to Peter.

Peter Carlino

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

Question and Answer Session

Operator

(Operator Instructions)
Brad Heffern, RBC Capital Markets.

Brad Heffern

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

Desiree Burke

Yeah. So we're giving the $400 million in total only -- obviously, a big chunk of that is the Chicago project for 2025. I don't think it's affecting the timing of the project. It's just our expectation of when we fund our tenants.
So they will put money out first and then we will reimburse them. So there might be a lag to what you're thinking.

Peter Carlino

Yeah. Look, these projects are underway. They're committed. There's no doubt that they're going to happen. What we can't say, and I said that in my opening comment, just can't tell you what the pace is going to be. We take a guess. Then we talk with our tenants. Do our best to understand what may be possible, but what you got is our best guess.

Brad Heffern

And then obviously, the Bally's Casino Queen deal has been closed. Can you walk through any positives or negatives that you see from that now that the deal is closed?

Peter Carlino

I think it's all positive, but anybody want to comment? Huge success.

Steven Ladany

Yeah. I can provide I guess some thoughts, and if anyone else wants to join in.
Look, I think generally speaking, we do view this as a positive. I think the -- I think it gives the company overall a newfound consideration and valuation that they can utilize as they move forward from the equity valuation standpoint, which is not necessarily directly impacting us, but we'll provide them potential for growth going forward that maybe didn't exist before.
I think ultimately, our relationship with Bally's and even with the CQ folks is as strong as it's kind of ever been. I think we continue to look at different opportunities to work with them on things that are currently in play as well as future opportunities.
So we view this as an expansion of the relationship. This is still -- the same players are all still around and we look forward to expanding the relationship going forward.

Operator

Ron Kamdem, Morgan Stanley.

Ron Kamdem

Just two quick ones from sort of my end.
I'd just love to hear a little bit more about sort of the pipeline and sort of how conversations are going. Obviously, you had a little bit of a volatility in the rate environment in December and into this year. Just curious, just high level, how conversations are flowing if they fell off or not.

Steven Ladany

Yeah, look, I think -- Steve, I'll jump in again.
I think from a broad scale, massive M&A transaction that's multiple billions of dollars, I think those conversations have not picked back up due to the rate environment on one level. I think though the broader market, more generally speaking, has been pretty active.
We've had a lot of discussions and been looking at a lot of different things ranging from commercial domestic sale leaseback to commercial domestic development and redevelopment to tribal discussions and international.
So we continue to see a lot of things out there. What becomes actionable and finally gets served up and announced is very different. I will tell you the largest operators seem to be most focused on their own properties at this time.
You saw that through Boyd's announcement about how well Treasure Chest is doing and their fact that they might take Par-A-Dice landside. And I think others are starting to pursue the same mentality and take the same tact.
So I think the largest guys in the country are going to kind of focus on repositioning assets to enhance the customer experience, which obviously helps the top line. At the same time, provides operational efficiency when you do things like move landside.

Ron Kamdem

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

Desiree Burke

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

Operator

Barry Jonas, Truist Securities.

Barry Jonas

I was wondering if you could talk a little bit about the pipeline for co-investment with Cordish. And are there potential opportunities to swap your equity into real estate at some point?

Steven Ladany

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

Peter Carlino

Yeah. I mean it's pretty obvious that it's a relationship we want to continue. And we feel pretty good about where we have been with those folks.
They're very aggressive and excited about the prospects for the future. So we do that in the most positive light.

Barry Jonas

And then maybe a question for Matt. Can you talk about your plans on the equity side for your '25 business plan given your '25 or even '26 capital needs?

Matthew Demchyk

Yeah. Barry, we came into the year with a strong cash position. I mean we've got a lot out currently on our forward. So if you look at the forward, all the cash and the treasure we have on the balance sheet, it really covers the business plan for 2025 when you think about the ins and the outs, including our free cash flow we're going to generate.
So we're really into the, hey, how do we prudently look forward into the next -- on a forward 12 month or 18 month basis into the next chapter of spend. And on that, I'd say we're going to continue doing what we've done.
We'll be methodical. We'll be balanced. We certainly have tools in our tool chest to help us lock in some of our capital as we move forward closer to the spend along the way. So we have greater certainty of what spread we're ultimately going to deliver for shareholders.
But I wouldn't give any further detail beyond that. We have a lot of optionality.

Operator

John Kilichowski, Wells Fargo.

John Kilichowski

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

Desiree Burke

The $400 million contemplates the Belle, which we have been developing and we have announced. It contemplates the Ione funding and it contemplates Chicago as well as Marquette. We don't have anything in for the PENN transactions at this time.
That's a forward transaction that we don't know the timing of.

John Kilichowski

And then secondly, just kind of high level, and this may be out there, they're not -- there might not be much. But this administration has done a lot. It's the first month or so. I'm curious if there's anything that's on the table that we should be aware of as far as regional gaming is concerned or anything else they're doing that may be impacting your business.

Peter Carlino

I haven't heard of anything, certainly nothing negative. I'm looking around the table. Folks, anybody?

Desiree Burke

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

John Kilichowski

Anything positive?

Peter Carlino

No. Nothing positive or negative. So.

Desiree Burke

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

Matthew Demchyk

And I'd say at a macro level, if they can't actually get their arms around the deficit and the national debt, and at least evidence to the outside world they care, definitely doesn't hurt. There's some uphill battle to deal with the current position.
And I think the people in there are really qualified to work on it. So that's a plus. And I think you could also see a scenario where if they are very effective with right sizing the government workforce and if some of those people are in some of these states where we hope that new licenses might come about, oftentimes, the state has to pay the unemployment.
And that, depending on how large the magnitude is, could be a drag on some of the state budgets, opening the door to maybe a little more receptivity to gaming opportunities. We'll have to see how that plays out in the new license context, but that's like two or three steps removed.
So let's wait and see here a few more months of what happens.

Peter Carlino

Yeah. I don't think anybody at this table has any special insights. Maybe if you get a line on that, give us a call. Would you please?

John Kilichowski

We'll do.

Operator

Greg McGinniss, Scotiabank.

Greg McGinniss

Looking at the Amended Pinnacle lease, saw rent coverage drop below the escalator threshold this quarter, and it's now closer to its pre-pandemic level. What are the challenges facing those properties and is guidance assuming that escalator is or is not achieved?

Desiree Burke

Yes. So the low end of the guidance assumes it is not achieved. The high end assumes it is achieved. I do think the footnote that we have on that adjusted revenue to rent ratio of 1.79 is important. What it says is that Plainridge gets excluded in the calculation of the actual escalator of adjusted revenue to rent, whereas when they report to us, they report all the properties that are in the lease, which includes Plainridge.
So our expectation is that it should be a little bit higher when you exclude Plainridge. So the 1.79 isn't exactly how the escalator is calculated, if that helps at all.

Greg McGinniss

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

Desiree Burke

That's correct.

Greg McGinniss

And then on the -- one final one on the funding assumption. Funding has been dispersed for the stadium so far. So I'm curious whether it's not more of an assumption there or are you -- is the $48 million all that you're expecting to spend?

Peter Carlino

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

Brandon Moore

No. I've been content to sit and listen here for a little bit.
But look, I think Vegas is proceeding as we would have expected as far as the timeline goes. That being said, the development of the master plan and the integrated resort around the now more certain stadium location and development is still taking place.
So I think ultimately, what we're asked to fund will depend on what is being constructed in conjunction with the stadium. And I think that's still unclear at the moment. So we've committed up to 1.75. We've spent the $48 million on the demolition as we agreed we would.
And we're waiting to hear from Bally's to better understand the development and what might be expected from us for the remaining 1.25 and potentially more or less depending on what they're doing. So I think right now, it's just too early to tell.

Peter Carlino

But they are engaged on the issue. So that way, we can assure you.

Greg McGinniss

Just one more follow up on that is on the PENN commitments, I guess, right, so that payment would happen at the end of the construction process. Is there any expectation that they may not come to you for that capital, or are you guys assuming that will happen?

Brandon Moore

I think as it relates to PENN, so just to be clear, they could take the funding earlier in the process. So far, we've expected that it's likely to come towards the end of the process based on where they are, but they could conceivably take it before the Aurora funding is required.
The other three projects are not required. So technically, they could not take the funding for those three projects. We don't have any reason to believe that they will or they won't at this point. We just are following their timeline of construction, and that's what's pushed out the potential funding of these projects beyond 2025 at this point.
But it's not impossible that they would call us and seek funding for those projects earlier than that if for some reason they decided to do so.

Peter Carlino

In one perverse sense, I'm delighted they have the cash flow to be patient. So. Good to know they're financially strong.

Operator

Haendel St. Juste, Mizuho.

Ravi Vaidya

This is Ravi Vaidya on the line for Haendel.
Can you describe this new funding agreement with PENN? How likely is it do you think that you'll be able to fund the $150 million? And I guess the 7% is a little lower than some of the other funding deals you've had in the past. Can you offer some more color on that, please?

Brandon Moore

Yeah. We can offer a little bit of color on that.
I think this is not the typical funding commitment you're seeing across the rest of our portfolio. PENN had asked us in connection with discussions we were having around the non-compete for Chicago to provide funding for them at a competitive rate for that project which we agreed to do.
So our agreement to fund at that rate is not indicative of the rates that we think are competitive or that we'll be doing in the future. This was in connection with the negotiation we had, as I'm sure you know their leases have non-compete provisions in it, and the Bally's Downtown Chicago project was within that non-competitive zone.
And so that was just part of that negotiation. I wouldn't read too much into that beyond that.
And as for whether or not they'll take it, I think if they go -- if they move, they'll probably take it. If they don't, they won't. Either way, it's probably okay with us.

Ravi Vaidya

And maybe just one more here. Can you -- with the adjustment that happened with the Rockford loan, with the lower rate but also significantly shorter term, can you kind of give more color as to what happened there? Who initiated the amendment and what that process was like?

Peter Carlino

Steve.

Steven Ladany

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

Matthew Demchyk

In an interesting way, I mean we end up, if you think about it, to Steve's point with it open and doing so well, with an as good or maybe even better risk adjusted return on the second bite at the apple versus letting them pre-pay and go with the bank.
And frankly, on rate, is it fair to say, Steve, we kind of bet in the middle? We didn't need to go all the way to where banks were? So we valued the relationship and the fact that we'd be a turnkey in a simple solution.

Operator

David Katz, Jefferies.

David Katz

I'm always wondering about Native America and any updated thoughts you have in terms of that TAM and that opportunity and whether we might see more of what we have already? Just any updated thoughts there, please.

Brandon Moore

Yeah. I think, David, the TAM itself, I don't think our views have changed. So the TAM is what we expected it to be. We've had a lot of productive meetings with tribes over the course of the last couple of months. And the opportunities range from refinancing existing debt to expansion opportunities at existing cash flowing properties to relocations to greenfield developments.
So the spectrum of potential opportunities is pretty broad. We continue to dig into these. Now that we've had these meetings and there's a mutual desire to move forward and explore them further, we've entered into a number of NDAs. And we'll continue to drill down on these to see what, if any, deals we want to do and they -- and the tribes want to do that will be positive for our cash flow moving forward.
It's really -- I'll anticipate the next question, what are the magnitude of those deals and how many of them are there? I think it's a little too early for us to predict that. So as far as how big and how many, we don't know.
But I will say there is a lot of interest in the tribal communities to understand better what this financing opportunity is and what it may be able to offer.

Operator

Michael Herring, Green Street Advisors.

Michael Herring

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

Steven Ladany

Yeah. We haven't had conversations around that project with them. They have a JV partnership there. We have spoken with them in other jurisdictions that they're either pursuing or have been awarded. But look, I think we believe that the project in New Hampshire will be successful.
It's a very well located property in that state. It's a state that we have looked at before. And I think they might have one of the best locations. So look, obviously, we would love to have conversations there, but I think that we have to respect their current partnership.

Michael Herring

And just one quick one. I saw that the Boyd lease was extended. They exercised their five-year option. Just curious if there was anything or any particular reason for that decision coming over a year earlier also just assuming there are no any adjustments to that lease that wouldn't be visible to us.

Desiree Burke

Yeah. There are no adjustments to the lease. It is simply an extension. And they did have -- they do have a requirement to advise us whether or not they're going to extend. They did it a little bit early, but there's nothing special about it.
We're excited, obviously, but there's nothing. There's no reason for it.

Operator

Caitlin Burrows, Goldman Sachs.

Caitlin Burrows

I have another question on the development funding. So it looks like the Belle, Chicago, Marquette, in your documents they all mention an amount up to kind of X dollars and then the Ione loan is a delayed draw. So if we think about those quoted amounts, is it that you might not reach those full amounts or do you think you will, and that's just a technicality if that makes sense?

Desiree Burke

Yeah. It's really around the timing of when we'll reach those. I do think we will reach the amounts we expect to --

Steven Ladany

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

Brandon Moore

Keep in mind, we're funding hard cost. So for some reason, if the scope of that project were to change and the hard cost would come in under, it's possible that we would fund less. We don't see that happening. Those projects appear to be on the same budget and scope as before.
But I think that's why you see a lot of the up to numbers. We're trying to focus on the hard cost, real property development parts of these projects.

Caitlin Burrows

And then just on the timing. Even earlier, you guys mentioned how some of them might be slower than we might expect because it's like the tenant pays and then you reimburse them. So when like Chicago says that the spend is by year end '26 and the Belle as an example, says it'll be completed by September '25, is that your funding or would your funding be potentially somewhat later than that?

Desiree Burke

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

Peter Carlino

In any construction project, as you would know, costs are always back-ended. I mean it's just, the Belle's come in late or -- and you could expect that while we think the top number will be achieved, I think we said it now four or five times today, knowing exactly how the draws are going to come is we have no perfect insight.

Caitlin Burrows

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

Desiree Burke

So our development funding on many of our projects is different. It's not a loan. The Ione project happens to be a loan. But the Marquette project, the Belle project, and the Chicago project are all owned real estate that the funding turns into rent or is rent in the long run.
So it does not end like you would think in a normal term loan.

Matthew Demchyk

If the properties hit pro forma, we end up with a basis that's favorable to market. In other words, as the cash flow is generated. If you were to wait five years and then step in later in the game, you'd likely pay a lot more for the real estate.
So when we're direct funding, we're locking in our basis, which should lead to better coverage over time if the other pieces fall into place.

Operator

Todd Thomas, KeyBanc Capital Markets.

Todd Thomas

Desiree, you talked about the variable rate debt that's outstanding today. Some of that's related to the tax strategies or the tax that you're providing, that you mentioned. Obviously, a lot of uncertainty with the new administration, but there is talk about a higher -- for longer interest rate environment.
And I'm just curious if you can speak to the strategy of maintaining that floating rate debt exposure versus swapping it out. And how much more exposure you expect to have over time? And and how much more you'd be willing to tolerate?

Peter Carlino

I like that.

Desiree Burke

Yeah. So I do expect the $932 million to remain outstanding, as I mentioned, because it is related to our Bally's guarantee. We do have the Lincoln property acquisition. That's $735 million which will also be subject to that same Bally's guarantee potentially.
And that is about all that I would expect for that variable rate. And we do look at swaps. The amount -- the cost of the swap vis-a-vis the cost of what we're paying on the debt, it's just -- it doesn't make sense for us right now, but we do look at that on a regular basis.

Todd Thomas

So guidance does not include anything related to swaps. I mean is there any intention in the future to layer in swaps or begin reducing that exposure potentially with Lincoln increasing that variable rate debt? I mean just given generally fixed rate longer term nature of your cash flows, I'm just curious how you're approaching that.

Desiree Burke

Like I said, we're open to it. And as we do increase, and right now, it's only around 12% of our entire debt stack is variable rate. As that does increase, if Lincoln does come on, we'll certainly reconsider whether or not we want to enter into a swap, to swap to fixed rates, depending on rates where they are.
And what you said, what happens with this administration and what happens with rates during '25.

Operator

Mitch Germain, Citizens JMP.

Mitch Germain

Did the Ione transaction, I'm curious how it was received. And did it create additional inquiries -- incoming inquiries from other tribes?

Brandon Moore

Yes. So the short answer, Mitch is yes. The Ione transaction did generate a lot of attention. And the leadership of Ione is very well respected in the tribal community. And that also has led to some additional conversations and credibility to both our team here and the structure that we're offering in general.
So yeah, that has been very, very helpful to us. And the more tribes we meet with, the more interest we're getting. So we'll continue to meet with tribes and look at opportunities. And we'll be thoughtful about them and try to fine tune the structure that we have with Ione into a more long term structure that we might be willing to roll out with more volume.
So we'll see if these conversations continue. We're underwriting tribes. They're underwriting us. There's a lot of different levels of opportunity out there just like there is in commercial gaming. And not every tribe would be a tribe we'd be willing to underwrite in a long term scenario.
And quite frankly, I don't think every tribe out there would be willing to engage with us on trust land in a transaction. So we'll see how much there is in the coming months, but I think so far, we're pretty optimistic about what we're hearing and seeing.

Mitch Germain

And one more for me. Maybe just can we just walk through the cap interest accounting? And then I'm just curious, when you start recognizing revenue, is anything changing? So maybe just kind of is it just really the balance outstanding that you're funding on the Belle by your average -- weighted average interest rate? Like how should we think about this adjustment going forward?

Desiree Burke

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

Mitch Germain

It does. So as Marquette and Chicago start spending, that amount is going to continue to rise. Is that the way to think about it?

Desiree Burke

Absolutely. Yes.

Mitch Germain

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

Desiree Burke

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

Matthew Demchyk

And one reminder, Mitch and everyone. If you look at the Belle, you've got the capitalized interest piece Desiree mentioned. But on the revenue side, there's effectively a step up. So there's nothing being collected on the rent side there until June 1 of this year.
And then whatever the prevailing dollars out, 9% of that will be the rent amount that starts beginning in June and then ratchet up as we get up to that $111 million total. So the earnings power of the asset right now beginning of this year isn't captured.
And then we'll kick in close to full or full depending on how much we've deployed at the time.

Operator

Chad Beynon, Macquarie.

Chad Beynon

Just one for me, please.
You mentioned that the conversations are pretty active with commercial operators with potential sale leasebacks. So I guess my question is, at this point, obviously, they're not meeting to waste anyone's time. What what's the hesitation? Is it more gaming specific? Meaning high gaming, threats, margin, plateauing, or do you think it's just the timing of where we are in the cycle and maybe some uncontrollables that caused some of the hesitation of getting some of these deals across the goal line?

Peter Carlino

I'd still give a philosophically the way you think about this. There have been a couple of -- timing is everything. You've got to have a seller or someone willing to do a sale leaseback with their asset for some reason or another.
I mean I'd just put it that way, some reason or another. I can remember a particular asset would be known to you all, where the owner said, I don't want to do that with you guys because I can't put the money anywhere. I've got so much cash. And then he was telling the truth. I have absolutely so much cash that I don't know.
And over a period of years, we had the conversation year in, year out. I finally just threw in the towel and walked away. But a few years later, that person made a deal with somebody else because times change. The lesson, of course, there is, you never give up until either you or they die, I guess.
You stick with it. But the point also is, who knows what variables lead to availability of an asset. So we stay close to the hoop, and try to be there when that day comes around. So some people do it for state reasons where you can fathom all the possibilities, but it's just a matter of, am I prepared to do this today?
It's the best answer I can give you.

Chad Beynon

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

Peter Carlino

Well, Steve, do you want to add something to that?

Steven Ladany

Well, I think the potential tenant partners that are most active in dialogue now are not the publicly traded gaming companies. So like there are a lot of assets that are held by private enterprises, families, sole proprietors, and have been passed on through generations or not.
And those I think are the bigger opportunity in regional gaming is are is talking and meeting with the private guys who in many cases haven't done this in the past. So it's a learning curve that takes place, and then there's ultimately, as Peter pointed out, a timing aspect that has to align.
And so at times, that they're -- they can borrow money cheaper than this, or they don't like the idea of selling the real estate or their son likes to have the parcel. So they come and look at the horses every once in a while, like kinds of stuff that goes on.
And at some point in time and all the moons will align. But we continue to have a lot of active dialogue. There continues to be a lot of interest. Obviously, this is a way to unlock a lot of value for a company or a family if they are willing to move forward with the transaction.
And all of the underwriting aspects make sense for us to move forward with the transaction. So I'm very optimistic about the future opportunities that lie ahead. We just have to be constantly looking and constantly active.

Operator

Rich Hightower, Barclays.

Rich Hightower

Covered a lot of ground. Just one for me. But maybe Desiree, just I think maybe for the benefit of everybody here, from a modeling perspective, we've talked a lot about interest expense, just to flip it to the interest income side. Obviously, you guys carried a lot of cash last year. That has changed.
I think the interest accruing from the zero coupon bond is gone away. So just help us understand the modeling on the interest income side.

Desiree Burke

Yeah. So the interest income side, obviously, we will have much less interest income in 2025 than we had in 2024. We did come into the year with over $1 billion of cash. But we will be on March 3, as I mentioned, repaying $850 million bond.
So a lot of our cash will decline at that time. And then the rest of the year is kind of based on how much we fund and our free cash flow. And on top of that, the forward that we're going to call on June 1.
So it's fluid throughout 2025, but it's certainly much lower than what you saw in '24.

Rich Hightower

And then just to be clear, the the zero coupon bond, that was accruing to some extent on the income statement even though it was non cash at the time just to be clear?

Desiree Burke

Absolutely. Yes. That was in interest income during '24. That's correct.

Operator

Daniel Guglielmo, Capital One Securities.

Daniel Guglielmo

One more on the PENN relationship. Could Ameristar be the start of more kind of PENN property redevelopment projects, or have you had any additional conversations with them around that potential?

Steven Ladany

So I think I'll jump in and if anyone else, feel free to add anything.
Yes, I think the answer is yes. They have started dialogue around the number of projects. I don't know if any will actually go forward. I don't think they've made definitive decisions. But they are reviewing their entire portfolio.
And I would tell you, I think that most gaming operators right now are. The performance that we've seen out of Baton Rouge's redevelopment out of the Treasure Chest development by Boyd, a number of these ad properties have seen all kinds of upside both on the top line and on the bottom line.
So I suspect that others and PENN will continue to evaluate their entire portfolio for opportunities to enhance it.

Peter Carlino

Well, PENN has made some major commitments as we know. And I would guess that to wait and see how some of the hotel development unfolds. And if it's successful as they hope and expect, then I could easily see them adding more.
I know a little bit more about that. But suffice it to say, I can't speak for them. But they're not afraid to invest capital in bricks and mortar, which is, pleasing to us.

Daniel Guglielmo

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

Steven Ladany

Yeah. As far as labor and the actual construction, I haven't heard of any hiccups yet. I'll tell you frankly, we have had some suppliers of materials that might be from outside of the domestic United States that have either added a premium based on a tariff assumption or have alerted folks that their bid was excluding any type of tariff impact.
So I think that there is a reality that some certain companies that might be domiciled outside of the United States may ultimately be impacted in bidding processes against companies that are within the United States, but that's just the reality of it.

Operator

Robin Farley, UBS.

Robin Farley

Peter, I heard in your opening remarks, you're sort of -- your quarterly comment about how much you prefer the gaming industry for the deals that you would do. Is it fair to say that, especially with maybe this sort of whole tribal segment getting unlocked, that you're probably further from looking outside of gaming than you ever than GLPI ever has been before?
Is that kind of fair to say in terms of thinking about whether you go outside of gaming?

Peter Carlino

And Robin, we've had that -- this conversation with you and others over many, many years now. We look at stuff. I mean we look at everything. We've gotten into the development business of it. We actually appeared now in kind of the loan business, but yeah, all centered around gaming.
We look at. And we'll continue to look at other things now and always. But while we have what we've got in front of us, gaming opportunity, I've never found a reason to go elsewhere. If we can find a better deal, we would surely do it.
It's not that we don't look or consider a better way. We're not looking, but consider other things. Gaming space is terrific. I've been arguing for years that gaming revenues are bulletproof. And they've proven to be close to bulletproof as any revenue on any property in the United States.
So while we can still do this, I don't know why we'd go elsewhere.

Matthew Demchyk

Yeah. Robin, yeah, the analogy I think of it's like we're down in a mine and there's this vein of gold and we keep digging deeper and we don't know how deep it goes. And we just keep going and there's more of it. And now we've hit a second one with the tribal piece.
So our goal is to find the most attractive risk adjusted returns. And to Peter's point, they continually happen to be in gaming. There's only two big players that are looking at these opportunities. And a lot of these, if we're good about it, it's only one.
And outside of this, there's a lot of people competing. You've got a lot of smart people. There's a lot of money in the economy. And if we're bidding against 10, 20, 30 people, we can't monetize all of our competitive advantages outside of gaming, similarly to what we've done inside gaming to date.
Might that change? I mean might our valuation and our cost of capital shift so much compared to the other players that maybe it changed the equation? Sure. Over long periods of time. But right now, we're pretty happy with all the things in front of us.

Peter Carlino

Well, the good news is, so many of our existing tenants are doing more stuff. I mean to put it in the vernacular, more stuff, they got more deals going. And we want to be part of that. So.

Brandon Moore

Yeah. And I think on the tribal side, I'll just, a moment of caution on the tribal side. We're exploring this to determine if there are viable structures that we can translate into volume, right? And so we're still working on that. So we are optimistic. I don't want to suggest that we're not.
But I also -- I just want to be careful that we don't know how deep that is at the moment. So more to come on that. And I'm not discrediting the commercial side or any of that. I just want to be careful on the tribal side that everybody understands we're still working through that.
And as we start to put deals on the board, I think it'll become more evident as to how deep that opportunity is.

Robin Farley

And then just one small thing. Can you, and I apologize if I missed it, I don't think I heard it. Did you talk about where you expect that provision for credit loss to be in 2025?

Desiree Burke

Yeah. So we did not project the provision for credit loss in '25. We projected at a zero. The big change for 2024 was really adding new leases and having to set up a provision for those new leases.
Look, it's a very detailed file that we use a third party to help us estimate those credit losses. It's based off of 100 years of data. Where does the market see the commercial real estate index going? What are the loan to value ratios, because those financing leases are looked at as loans in this context from an accounting perspective.
A lot of macro environmental items that we just can't predict. So we start out with a zero change to our reserve for credit losses on those leases. And we see what happens as the year goes through, as again, it's a non-cash item that gets added back for AFFO. So it would have no impact anyway.

Robin Farley

So in other words, nothing to I think about '25.

Operator

Colin Mansfield, CBRE Institutional Research.

Colin Mansfield

Just one more for me going back to Chicago. I guess what's the company's sort of willingness to potentially invest more capital or commit more capital to the project? I know there's an S-1 IPO process out there right now for a minority state being sold for the Chicago subsidiary that may have some legal issues with it that are being explored.
So I guess if it came to it, what's the company's willingness to commit more capital to the project if needed?

Peter Carlino

Perfect question for Brandon.

Brandon Moore

I think the bottom line is it's too early for us to say whether or not we would commit more capital to this project because if it takes shape, we'll consider that. But right now, we've committed what we've committed at the $940 million. And that's what we expect to spend.
The $100 million, I don't think that creates a significant hole in the Bally's capital structure. I think that IPO process is a very creative way to get a lot of folks in the community involved in the project and give them a piece of that project.
If it fails because of legal reasons, we don't have any reason to believe that will impact the project generally or require us to come out of pocket with any additional funds. But if we're asked, we'll evaluate it at the time and we've not been asked.

Peter Carlino

Well, thank you to all who have dialed in this morning.
This is a kind of a fun and momentous quarter for us, good quarter. And we hope we've got equally good news next quarter. So see you then.
Operator, thank you.

Operator

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