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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to         
Commission File Number:  001-36124 
Gaming and Leisure Properties, Inc.
(Exact name of registrant as specified in its charter) 
Pennsylvania46-2116489
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
 845 Berkshire Blvd., Suite 200
Wyomissing, PA 19610
(Address of principal executive offices) (Zip Code)
 
610-401-2900
(Registrant’s telephone number, including area code)
 Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareGLPINasdaq
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No
 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  No 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act: 
Large accelerated filer Accelerated filer 
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
TitleJuly 27, 2020
Common Stock, par value $.01 per share217,829,837



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Forward-looking statements in this document are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Gaming and Leisure Properties, Inc. ("GLPI") and its subsidiaries (collectively, the "Company") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include information concerning the Company’s business strategy, plans, goals and objectives.
 
Forward-looking statements in this document include, but are not limited to, statements regarding the extent and duration of the economic disruptions related to the novel coronavirus COVID-19 ("COVID-19") global pandemic on our tenants' operations and our taxable real estate investment trust ("REIT") subsidiaries' ("TRS") operations. In addition, statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "projects," "estimates," "plans," "may increase," "may fluctuate," and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are generally forward-looking in nature and not historical facts. You should understand that the following important factors could affect future results and could cause actual results to differ materially from those expressed in such forward-looking statements:

COVID-19 has had, and is expected to continue to have, a significant impact on our tenants' financial conditions and operations. As a result of the outbreak, our casino operations and those of our tenants were forced to close temporarily as federal, state and local officials have undertaken various steps to mitigate the spread of infections from COVID-19. Although the majority of our tenants operations have re-commenced operations, if our tenants are forced to reclose their operations due to future increases in the spread of COVID-19, our tenants may have difficulties in funding their rent obligations to us thereby requesting rent deferrals or receipt of non-cash assets in return for rent concessions;

the extent of time it may take for our tenants' operations and our casino operations to normalize;

the impact that the sharp increase in unemployment levels and uncertainty with respect to the future state of the economy could have on discretionary consumer spending, including on casino operations;
the current and uncertain future impact of the COVID-19 outbreak, including its effect on the ability or desire of people to gather in large groups (including in casinos), which is expected to impact our financial results, operations, outlooks, plans, goals, growth, cash flows, liquidity, and stock price;

unforeseen consequences related to United States government stimulus packages or a failure to mitigate the sharp economic downturn from COVID-19;

our ability to realize significant value for the real property assets of Tropicana Las Vegas which we acquired from Penn National Gaming, Inc. ("Penn") in return for $307.5 million of rent credits;

the availability of and the ability to identify suitable and attractive acquisition and development opportunities and the ability to acquire and lease the respective properties on favorable terms;

the degree and nature of our competition;

the ability to receive, or delays in obtaining, the regulatory approvals required to own and/or operate our properties, or other delays or impediments to completing our planned acquisitions or projects;

our ability to maintain our status as a REIT, given the highly technical and complex Internal Revenue Code (the "Code") provisions for which only limited judicial and administrative authorities exist, where even a technical or inadvertent violation could jeopardize REIT qualification and where requirements may depend in part on the actions of third parties over which the Company has no control or only limited influence;

the satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other requirements on a continuing basis in order for the Company to maintain its REIT status;

the ability and willingness of our tenants, operators and other third parties to meet and/or perform their obligations under their respective contractual arrangements with us, including lease and note requirements and in some cases, their obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities;

1

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the ability of our tenants and operators to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation to satisfy obligations under their existing credit facilities and other indebtedness;

the ability of our tenants and operators to comply with laws, rules and regulations in the operation of our properties, to deliver high quality services, to attract and retain qualified personnel and to attract customers;

the satisfaction of the loan made to Eldorardo Resorts Inc. (now doing business as Caesars Entertainment Corporation (NASDAQ: CZR), ("Caesars") by way of substitution of one or more additional Caesars properties acceptable to Caesars and the Company, which will be transferred to the Company;

the ability to generate sufficient cash flows to service our outstanding indebtedness;

the access to debt and equity capital markets, including for acquisitions or refinancings due to maturities;

adverse changes in our credit rating;

fluctuating interest rates and the potential phasing out of the London Interbank Offered Rate after 2021;

the impact of global or regional economic conditions;

the availability of qualified personnel and our ability to retain our key management personnel;

GLPI's obligation to indemnify Penn and its subsidiaries in certain circumstances if the spin-off transaction described in Note 1 to the condensed consolidated financial statements fails to be tax-free;

changes in the United States tax law and other state, federal or local laws, whether or not specific to real estate, REITs or the gaming, lodging or hospitality industries;

changes in accounting standards;

the impact of weather or climate events or conditions, natural disasters, acts of terrorism and other international hostilities, war or political instability;

other risks inherent in the real estate business, including potential liability relating to environmental matters and illiquidity of real estate investments; and

additional factors as discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (our "Annual Report"), in this Quarterly Report on Form 10-Q and Current Reports on Form 8-K as filed with the United States Securities and Exchange Commission.
 
Certain of these factors and other factors, risks and uncertainties are discussed in the "Risk Factors" section in the Company’s Annual Report and this Quarterly Report on Form 10-Q. Other unknown or unpredictable factors may also cause actual results to differ materially from those projected by the forward-looking statements. Most of these factors are difficult to anticipate and are generally beyond the control of the Company.
 
You should consider the areas of risk described above, as well as those set forth in the "Risk Factors" section in the Company’s Annual Report and this Quarterly Report on Form 10-Q, in connection with considering any forward-looking statements that may be made by the Company generally. Except for the ongoing obligations of the Company to disclose material information under the federal securities laws, the Company does not undertake any obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless required to do so by law.

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GAMING AND LEISURE PROPERTIES, INC. AND SUBSIDIARIES
 
TABLE OF CONTENTS
 
   
 
 
 
 
 
   
   
   
   
   
   
   
   
   
   
   
   
 

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Gaming and Leisure Properties, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share data)
 
June 30,
2020
December 31, 2019
(unaudited)
Assets
Real estate investments, net$7,049,408  $7,100,555  
Property and equipment, used in operations, net90,888  94,080  
Real estate of Tropicana Las Vegas, net306,715  —  
Real estate loans246,000  303,684  
Right-of-use assets and land rights, net831,552  838,734  
Cash and cash equivalents74,050  26,823  
Prepaid expenses2,582  4,228  
Goodwill16,067  16,067  
Other intangible assets9,577  9,577  
Deferred tax assets6,561  6,056  
Other assets32,025  34,494  
Total assets$8,665,425  $8,434,298  
Liabilities
Accounts payable$1,124  $1,006  
Accrued expenses3,766  6,239  
Accrued interest58,150  60,695  
Accrued salaries and wages3,493  13,821  
Gaming, property, and other taxes1,632  944  
Income taxes payable266    
Lease liabilities
182,856  183,971  
Long-term debt, net of unamortized debt issuance costs, bond premiums and original issuance discounts
5,768,330  5,737,962  
Deferred rental revenue515,495  328,485  
Deferred tax liabilities307  279  
Other liabilities27,241  26,651  
Total liabilities6,562,660  6,360,053  
Shareholders’ equity
Preferred stock ($.01 par value, 50,000,000 shares authorized, no shares issued or outstanding at June 30, 2020 and December 31, 2019)
    
Common stock ($.01 par value, 500,000,000 shares authorized, 217,821,237 and 214,694,165 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively)
2,178  2,147  
Additional paid-in capital3,955,293  3,959,383  
Accumulated deficit(1,854,706) (1,887,285) 
Total shareholders’ equity 2,102,765  2,074,245  
Total liabilities and shareholders’ equity $8,665,425  $8,434,298  
 
See accompanying notes to the condensed consolidated financial statements.
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Gaming and Leisure Properties, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
 
         
 Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
Revenues    
Rental income$245,749  $248,563  $495,156  $496,241  
Interest income from real estate loans6,240  7,201  13,556  14,394  
Total income from real estate
251,989  255,764  508,712  510,635  
Gaming, food, beverage and other9,979  33,249  36,738  66,242  
Total revenues261,968  289,013  545,450  576,877  
Operating expenses    
Gaming, food, beverage and other4,858  19,168  21,361  38,190  
Land rights and ground lease expense5,781  15,229  13,859  24,478  
General and administrative13,223  15,984  29,211  33,224  
Depreciation57,390  67,865  113,953  126,443  
Loan impairment charges      13,000  
Total operating expenses81,252  118,246  178,384  235,335  
Income from operations180,716  170,767  367,066  341,542  
Other income (expenses)    
Interest expense(69,474) (76,523) (141,478) (153,251) 
Interest income273  248  469  337  
Losses on debt extinguishment(5)   (17,334)   
Total other expenses(69,206) (76,275) (158,343) (152,914) 
Income before income taxes111,510  94,492  208,723  188,628  
Income tax (benefit)/expense (840) 1,459  (521) 2,585  
Net income$112,350  $93,033  $209,244  $186,043  
Earnings per common share:    
Basic earnings per common share$0.52  $0.43  $0.97  $0.87  
Diluted earnings per common share$0.52  $0.43  $0.97  $0.86  
 
See accompanying notes to the condensed consolidated financial statements.

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Gaming and Leisure Properties, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(in thousands, except share data)
(unaudited)
 
 Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Total
Shareholders’
Equity
 SharesAmount
Balance, December 31, 2019214,694,165  $2,147  $3,959,383  $(1,887,285) $2,074,245  
ATM Program issuance of common stock, net of costs
7,971    310  —  310  
Restricted stock activity
405,093  4  (8,352) —  (8,348) 
Dividends paid ($0.70 per common share)
—  —  —  (150,796) (150,796) 
Net income
—  —  —  96,894  96,894  
Balance, March 31, 2020215,107,229  $2,151  $3,951,341  $(1,941,187) $2,012,305  
ATM Program offering costs
—  —  (83) —  (83) 
Restricted stock activity
12,056    4,062  —  4,062  
Dividends paid ($0.60 per common share)
2,701,952  27  (27) (25,869) (25,869) 
Net income
—  —  —  112,350  112,350  
Balance, June 30, 2020217,821,237  $2,178  $3,955,293  $(1,854,706) $2,102,765  
 
 Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Total
Shareholders’
Equity
 SharesAmount
Balance, December 31, 2018214,211,932  $2,142  $3,952,503  $(1,689,038) $2,265,607  
Stock option activity
26,799    592  —  592  
Restricted stock activity
406,769  4  (5,327) —  (5,323) 
Dividends paid ($0.68 per common share)
—  —  —  (146,202) (146,202) 
Net income
—  —  —  93,010  93,010  
Balance, March 31, 2019214,645,500  $2,146  $3,947,768  $(1,742,230) $2,207,684  
Restricted stock activity
27,635  1  4,181  —  4,182  
Dividends paid ($0.68 per common share)
—  —  —  (146,212) (146,212) 
Net income
—  —  —  93,033  93,033  
Balance, June 30, 2019214,673,135  $2,147  $3,951,949  $(1,795,409) $2,158,687  

See accompanying notes to the condensed consolidated financial statements.

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Gaming and Leisure Properties, Inc. and Subsidiaries
 Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six months ended June 30,20202019
Operating activities  
Net income$209,244  $186,043  
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization119,993  138,939  
Amortization of debt issuance costs, bond premiums and original issuance discounts5,363  5,790  
(Gains) losses on dispositions of property(7) 13  
Deferred income taxes(1,018) (466) 
Stock-based compensation8,299  8,508  
Straight-line rent adjustments10,322  17,287  
Deferred revenue recognized(130,811)   
Losses on debt extinguishment17,334    
Loan impairment charges  13,000  
(Increase), decrease  
Prepaid expenses and other assets1,934  (2,312) 
Increase, (decrease)  
Accounts payable118  (2,340) 
Accrued expenses271  1,305  
Accrued interest(2,545) 8,079  
Accrued salaries and wages(10,328) (8,890) 
Gaming, property and other taxes688  (98) 
Income taxes266    
Other liabilities590  (777) 
Net cash provided by operating activities229,713  364,081  
Investing activities  
Capital maintenance expenditures(1,141) (1,547) 
Proceeds from sale of property and equipment7  190  
Net cash used in investing activities(1,134) (1,357) 
Financing activities  
Dividends paid(176,665) (292,414) 
Taxes paid related to shares withheld for tax purposes on restricted stock award vestings
(12,585) (9,057) 
Proceeds from issuance of stock from ATM Program net of offering costs227    
Proceeds from issuance of long-term debt1,868,735  155,000  
Financing costs(9,479) (236) 
Repayments of long-term debt(1,835,838) (217,061) 
Premium and related costs paid on tender of senior unsecured notes(15,747)   
Net cash used in financing activity(181,352) (363,768) 
Net increase in cash and cash equivalents47,227  (1,044) 
Cash and cash equivalents at beginning of period26,823  25,783  
Cash and cash equivalents at end of period$74,050  $24,739  
 
See Note 17 to the condensed consolidated financial statements for supplemental cash flow information and noncash investing and financing activities.
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Gaming and Leisure Properties, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
 
1.              Business and Operations
 
Gaming and Leisure Properties, Inc. ("GLPI") is a self-administered and self-managed Pennsylvania real estate investment trust ("REIT"). GLPI (together with its subsidiaries, the "Company") was incorporated on February 13, 2013, as a wholly-owned subsidiary of Penn National Gaming, Inc. (NASDAQ: PENN) ("Penn"). On November 1, 2013, Penn contributed to GLPI, through a series of internal corporate restructurings, substantially all of the assets and liabilities associated with Penn’s real property interests and real estate development business, as well as the assets and liabilities of Hollywood Casino Baton Rouge and Hollywood Casino Perryville (which are referred to as the "TRS Properties"), and then spun-off GLPI to holders of Penn's common and preferred stock in a tax-free distribution (the "Spin-Off"). The assets and liabilities of GLPI were recorded at their respective historical carrying values at the time of the Spin-Off in accordance with the provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 505-60 - Spinoffs and Reverse Spinoffs ("ASC 505").

The Company elected on its United States ("U.S.") federal income tax return for its taxable year that began on January 1, 2014 to be treated as a REIT and GLPI, together with its indirect wholly-owned subsidiary, GLP Holdings, Inc., jointly elected to treat each of GLP Holdings, Inc., Louisiana Casino Cruises, Inc. (d/b/a Hollywood Casino Baton Rouge) and Penn Cecil Maryland, Inc. (d/b/a Hollywood Casino Perryville) as a "taxable REIT subsidiary" ("TRS") effective on the first day of the first taxable year of GLPI as a REIT. In connection with the Spin-Off, Penn allocated its accumulated earnings and profits (as determined for U.S. federal income tax purposes) for periods prior to the consummation of the Spin-Off between Penn and GLPI. In connection with its election to be taxed as a REIT for U.S. federal income tax purposes, GLPI declared a special dividend to its shareholders to distribute any accumulated earnings and profits relating to the real property assets and attributable to any pre-REIT years, including any earnings and profits allocated to GLPI in connection with the Spin-Off, to comply with certain REIT qualification requirements.

As a result of the Spin-Off, GLPI owns substantially all of Penn’s former real property assets (as of the consummation of the Spin-Off) and leases back most of those assets to Penn for use by its subsidiaries, under a unitary master lease, a triple-net operating lease with an initial term of 15 years (expiring October 31, 2028), with no purchase option, followed by four 5-year renewal options (exercisable by Penn) on the same terms and conditions (the "Penn Master Lease"), and GLPI also owns and operates the TRS Properties through an indirect wholly-owned subsidiary, GLP Holdings, Inc. In April 2016, the Company acquired substantially all of the real estate assets of Pinnacle Entertainment, Inc. ("Pinnacle") for approximately $4.8 billion. GLPI originally leased these assets back to Pinnacle, under a unitary triple-net lease with an initial term of 10 years (expiring April 30, 2026), with no purchase option, followed by five 5-year renewal options (exercisable by Pinnacle) on the same terms and conditions (the "Pinnacle Master Lease"). On October 15, 2018, the Company completed its previously announced transactions with Penn, Pinnacle and Boyd Gaming Corporation ("Boyd") to accommodate Penn's acquisition of the majority of Pinnacle's operations, pursuant to a definitive agreement and plan of merger between Penn and Pinnacle, dated December 17, 2017 (the "Penn-Pinnacle Merger"). Concurrent with the Penn-Pinnacle Merger, the Company amended the Pinnacle Master Lease to allow for the sale of the operating assets of Ameristar Casino Hotel Kansas City, Ameristar Casino Resort Spa St. Charles and Belterra Casino Resort from Pinnacle to Boyd (the "Amended Pinnacle Master Lease") and entered into a new unitary triple-net master lease agreement with Boyd (the "Boyd Master Lease") for these properties on terms similar to the Company’s Amended Pinnacle Master Lease. The Boyd Master Lease has an initial term of 10 years (from the original April 2016 commencement date of the Pinnacle Master Lease and expiring April 30, 2026), with no purchase option, followed by five 5-year renewal options (exercisable by Boyd) on the same terms and conditions. The Company also purchased the real estate assets of Plainridge Park Casino ("Plainridge Park") from Penn for $250.0 million, exclusive of transaction fees and taxes, and added this property to the Amended Pinnacle Master Lease. The Amended Pinnacle Master Lease was assumed by Penn at the consummation of the Penn-Pinnacle Merger. The Company also entered into a mortgage loan agreement with Boyd in connection with Boyd's acquisition of Belterra Park Gaming & Entertainment Center ("Belterra Park"), whereby the Company loaned Boyd $57.7 million. In May 2020, the Company acquired the real estate of Belterra Park in satisfaction of the loan, subject to a long-term lease (the "Belterra Park Lease") with a Boyd affiliate operating the property. The Belterra Park Lease has an initial term that expires on April 30, 2026 and has 5 separate renewal options for five years each, exercisable at the tenants' option. See Note 12 for further details.

In addition to the acquisition of Plainridge Park described above, on October 1, 2018, the Company closed its previously announced transaction to acquire certain real property assets from Tropicana Entertainment Inc. ("Tropicana") and certain of its affiliates pursuant to a Purchase and Sale Agreement dated April 15, 2018 between Tropicana and GLP Capital L.P., the operating partnership of GLPI ("GLP Capital"), which was subsequently amended on October 1, 2018 (as amended,
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the "Amended Real Estate Purchase Agreement"). Pursuant to the terms of the Amended Real Estate Purchase Agreement, the Company acquired the real estate assets of Tropicana Atlantic City, Tropicana Evansville, Tropicana Laughlin, Trop Casino Greenville and the Belle of Baton Rouge (the "GLP Assets") from Tropicana for an aggregate cash purchase price of $964.0 million, exclusive of transaction fees and taxes (the "Tropicana Acquisition"). Concurrent with the Tropicana Acquisition, Eldorado Resorts, Inc. (now doing business as Caesars Entertainment Corporation (NASDAQ: CZR) ("Caesars")), acquired the operating assets of these properties from Tropicana pursuant to an Agreement and Plan of Merger dated April 15, 2018 by and among Tropicana, GLP Capital, Eldorado Resorts, Inc. and a wholly-owned subsidiary of Eldorado Resorts, Inc. and leased the GLP Assets from the Company pursuant to the terms of a new unitary triple-net master lease with an initial term of 15 years, with no purchase option, followed by four successive 5-year renewal periods (exercisable by the tenant) on the same terms and conditions (the "Caesars Master Lease"). On June 15, 2020, the Company amended the Caesars Master Lease subject to certain regulatory approvals which were received on July 23, 2020. See Note 12 for a description of this amendment.

Additionally, on October 1, 2018, the Company made a loan to Caesars in the amount of $246.0 million (the "CZR loan") in connection with Caesars acquisition of Lumière Place Casino and Hotel ("Lumière Place") (and together with the Tropicana Acquisition, the "Tropicana Transactions"). The CZR loan bears interest at a rate equal to (i) 9.09% until October 1, 2019 and (ii) 9.27% until its maturity. On the one-year anniversary of the CZR loan, the mortgage evidenced by a deed of trust on the Lumière Place property terminated and the loan became unsecured and will remain unsecured until its final maturity on the two-year anniversary of the closing. On June 24, 2020, the Company received approval from the Missouri Gaming Commission to own the Lumière Place real estate. The Company anticipates closing on this transaction and entering into a new lease for this asset prior to the CZR loan October 1, 2020 maturity date.

On April 16, 2020, the Company and certain of its subsidiaries closed on its previously announced transaction (the "Tropicana Acquisition") to acquire the real property associated with the Tropicana Las Vegas Casino Hotel Resort ("Tropicana Las Vegas") from Penn in exchange for $307.5 million of rent credits to be applied against future rent obligations. This asset has been placed in our TRS subsidiary. See Note 6 for further details related to this transaction.

GLPI’s primary business consists of acquiring, financing, and owning real estate property to be leased to gaming operators in triple-net lease arrangements. As of June 30, 2020, GLPI’s portfolio consisted of interests in 45 gaming and related facilities, including the TRS Properties and Tropicana Las Vegas, the real property associated with 32 gaming and related facilities operated by Penn, the real property associated with 5 gaming and related facilities operated by Caesars, the real property associated with 4 gaming and related facilities operated by Boyd and the real property associated with the Casino Queen in East St. Louis, Illinois.  These facilities are geographically diversified across 16 states, contain approximately 23.3 million square feet and were 100% occupied at June 30, 2020.

In the first quarter of 2020, it became clear that there was a global outbreak of a new strain of novel coronavirus COVID-19 ("COVID-19"). The global, domestic and local response to the COVID-19 outbreak continues to evolve rapidly. Thus far, responses to the COVID-19 outbreak have included mandates from federal, state and/or local authorities that required temporary closures of or imposed limitations on the operations of non-essential businesses. All of the Company's tenants' casino operations, in addition to the Company's two TRS Properties, were closed in mid-March. As of July 30, 2020, 43 out of our 45 total properties, (including the properties we own and operate in our TRS) have reopened at limited capacity.

2.              Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included.

The condensed consolidated financial statements include the accounts of GLPI and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses for the reporting periods. Actual results could differ from those estimates.

Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, particularly given the uncertainty related to the COVID-19 outbreak described in Note 1. The notes to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019 (our "Annual Report") should be read in conjunction with these condensed consolidated
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financial statements. The December 31, 2019 financial information has been derived from the Company’s audited consolidated financial statements.

The Company’s significant accounting policies are described in Note 2 of the notes to the consolidated financial statements included in the Company’s Annual Report and since the date of those financial statements, the Company has not had any significant changes to these accounting policies that have had a material impact on the Company's financial statements.

3.    New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (a consensus of the FASB Emerging Issues Task Force) ("ASU 2018-15"). This ASU clarifies that entities should follow the guidance for capitalizing implementation costs incurred to develop or obtain internal-use software to account for implementation costs of cloud computing arrangements that are service contracts. ASU 2018-15 does not change the accounting for the service component of a cloud computing arrangement. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company's adoption of ASU 2018-15 did not have an impact on its condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This ASU introduces a new model for estimating credit losses for certain types of financial instruments, including mortgage and other loans receivable, amongst other financial instruments.  ASU 2016-13 sets forth an "expected credit loss" impairment model to replace the current "incurred loss" method of recognizing credit losses, which is intended to improve financial reporting by requiring timely recording of credit losses on loans and other financial instruments. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 15, 2018. The impact of the adoption of this pronouncement was immaterial.

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform ("ASU 2020-04"). Reference rates such as London Interbank Offered Rate ("LIBOR") are widely used in a broad range of financial instruments and other agreements. Regulators and market participants in various jurisdictions have undertaken efforts, generally referred to as "reference rate reform", to eliminate certain reference rates and introduce new reference rates that are based on a larger and more liquid population of observable transactions. As a result of this reform initiative, certain widely used rates such as LIBOR are expected to be discontinued. ASU 2020-04 provides optional expedients for applying the guidance for contract modifications or other situations affected by reference rate reform, specifically addressing the accounting for modifications of contracts within the scope of ASC Topics 310 on receivables, ASC 470 on debt, and ASC 842 on leases and ASC subtopic 815-15 on embedded derivatives. The Company is in the process of evaluating this pronouncement on its condensed consolidated financial statements.

4.              Real Estate Investments
 
Real estate investments, net, represents investments in 42 rental properties and the corporate headquarters building and is summarized as follows:
 
June 30,
2020
December 31,
2019
 (in thousands)
Land and improvements$2,563,974  $2,552,285  
Building and improvements5,795,205  5,749,211  
Total real estate investments8,359,179  8,301,496  
Less accumulated depreciation(1,309,771) (1,200,941) 
Real estate investments, net$7,049,408  $7,100,555  

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Increase in real estate investments is due to the Company acquiring the real estate of Belterra Park in satisfaction of the loan in May 2020.

5.              Property and Equipment Used in Operations
 
Property and equipment used in operations, net, consists of the following and primarily represents the assets utilized in the TRS Properties: 
June 30,
2020
December 31,
2019
 (in thousands)
Land and improvements$30,499  $30,492  
Building and improvements116,922  116,904  
Furniture, fixtures, and equipment119,520  118,766  
Construction in progress458  120  
Total property and equipment267,399  266,282  
Less accumulated depreciation(176,511) (172,202) 
Property and equipment, net$90,888  $94,080  

        
6. Tropicana Las Vegas Acquisition

As previously discussed in Note 1, the impact of COVID-19 resulted in casino-wide closures at all of our tenants. As a result of COVID-19, on April 16, 2020, the Company and certain of its subsidiaries closed on the Tropicana Acquisition to acquire the real property associated with the Tropicana Las Vegas from Penn in exchange for $307.5 million of rent credits, which are to be applied for rent due under the parties' existing leases for the months of May, June, July, August, October and a portion of November. Penn will otherwise continue making cash rent payments to GLPI for the month of April (which was received in full), September, November and December 2020.

An affiliate of Penn will continue to operate the casino and hotel business of the Tropicana Las Vegas pursuant to a triple net lease with GLPI for nominal rent for the earlier of two years (subject to three one-year extensions at the Company's option) or until the Tropicana Las Vegas is sold. The Company will conduct a sale process with respect to the Tropicana Las Vegas, with Penn receiving 75% of the net proceeds above $307.5 million (plus certain taxes, expenses and costs) if a sale agreement is signed during the first 12 months following closing and 50% of net proceeds above $307.5 million (plus certain taxes, expenses and costs) if a sale agreement is signed during the subsequent 12 months following closing. Penn will not be entitled to receive any net sale proceeds if the relevant sale agreement is signed at any time after 24 months from closing.

The Company recorded an initial land and building value of $226.2 million and $81.3 million, respectively. During the three months ended June 30, 2020, depreciation expense of $0.8 million was recorded. Additionally, deferred rent of $307.5 million was recorded at the acquisition date, with $130.8 million of deferred rent recognized during the three months ended June 30, 2020.

The Tropicana Las Vegas assets are summarized below:
June 30, 2020December 31, 2019
(in thousands)
Land and improvements$226,160  $  
Building and improvements81,340    
Total real estate of Tropicana Las Vegas307,500    
Less accumulated depreciation(785)   
Real estate of Tropicana Las Vegas , net$306,715  $  



7. Receivables

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Real Estate Loans

At June 30, 2020, the Company has one loan, the CZR loan, the proceeds of which were used to acquire Lumière Place. Specifically, on October 1, 2018, Caesars purchased Lumière Place from Tropicana for a cash purchase price of $246.0 million, exclusive of transaction fees, financing for which was provided by the Company in the form of the CZR loan. The CZR loan had an interest rate equal to 9.09% until October 1, 2019, and then increased to 9.27% until its maturity. Until the one-year anniversary of the closing, the CZR loan was secured by a first mortgage lien on Lumière Place. On the one-year anniversary of the CZR loan, the mortgage evidenced by a deed of trust on the Lumière Place property terminated and the CZR loan became unsecured and will remain unsecured until its final maturity on the two-year anniversary of the closing. On June 24, 2020, the Company received approval from the Missouri Gaming Commission to own the Lumière Place real estate and intends to close on the acquisition prior to October 1, 2020.

On October 15, 2018, Boyd purchased the real estate assets of Belterra Park from Pinnacle for a cash purchase price of $57.7 million, exclusive of transaction fees. Financing for the transaction was provided by the Company in the form of a $57.7 million secured mortgage loan on Belterra Park (the "Belterra Park Loan"). The Belterra Park Loan bears interest at an initial rate equal to 11.11% and matures in connection with the expiration of the Boyd Master Lease (as may be extended at the tenant's option to April 30, 2051). In May 2020, the Company acquired the real estate of Belterra Park in satisfaction of the loan, subject to the Belterra Park Lease.

Loan Receivable

In January 2014, the Company completed the asset acquisition of the real property associated with the Casino Queen in East St. Louis, Illinois.  GLPI leases the property back to Casino Queen on a triple-net basis on terms similar to those in the Company's existing master leases. The lease has an initial term of 15 years and the tenant has an option to renew it at the same terms and conditions for four successive five-year periods (the "Casino Queen Lease").

Simultaneously with the Casino Queen acquisition, GLPI provided Casino Queen with a $43.0 million, 5-year term loan at 7% interest, pre-payable at any time, which, together with the sale proceeds, completely refinanced and retired all of Casino Queen’s outstanding long-term debt obligations. On March 13, 2017, the outstanding principal and interest on this loan was repaid in full and GLPI simultaneously provided a new unsecured $13.0 million, 5.5-year term loan (the "Casino Queen Loan") to CQ Holding Company, Inc., an affiliate of Casino Queen ("CQ Holding Company"), to partially finance its acquisition of Lady Luck Casino in Marquette, Iowa. The Casino Queen Loan bears an interest rate of 15% and is pre-payable at any time.

On June 12, 2018, the Company received a Notice of Event of Default under the senior credit agreement of CQ Holding Company from the secured lender under such agreement, which reported a covenant default under its senior secured agreement. Under the terms of that agreement, when an event of default occurs, CQ Holding Company is prohibited from making cash payments to unsecured lenders such as GLPI. Therefore, beginning in June 2018 and through June 30, 2020, the interest due from CQ Holding Company under the Company's Casino Queen Loan was paid in kind. In addition to the covenant violation noted above under its senior credit agreement, CQ Holding Company also had a payment default under the senior credit agreement. Furthermore, the Company notified Casino Queen of events of default under the Casino Queen Loan, related to financial covenant violations during the year ended December 31, 2018.
During 2019, the operating results of Casino Queen continued to decline, the secured debt of Casino Queen was sold to a third-party casino operator at a discount and the Company no longer expected the loan to be repaid. Thus, because the Company did not expect Casino Queen to be able to repay the remaining term loan balance of $13.0 million due to the Company, this amount was written off and an impairment charge was recorded for the six-months ended June 30, 2019.
At June 30, 2020, Casino Queen was in violation of the rent coverage ratio required under the Casino Queen Lease and was in payment default in April 2020. The Company provided notice and a reservation of rights to Casino Queen and its secured lenders of such default. At June 30, 2020, Casino Queen has made a partial payment on its rental obligations and the Company is working on a deferred rental agreement. The Company is recording income as cash rental payments are received on the Casino Queen Lease.


8. Lease Assets and Lease Liabilities

Lease Assets

12


The Company is subject to various operating leases as lessee for both real estate and equipment, the majority of which are ground leases related to properties the Company leases to its tenants under triple-net operating leases. These ground leases may include fixed rent, as well as variable rent based upon an individual property’s performance or changes in an index such as the CPI, and have maturity dates ranging from 2028 to 2108, when considering all renewal options. For certain of these ground leases, the Company’s tenants are responsible for payment directly to the third-party landlord. Under ASC 842, the Company is required to gross-up its condensed consolidated financial statements for these ground leases as the Company is considered the primary obligor. In conjunction with the adoption of ASU 2016-02 on January 1, 2019, the Company recorded right-of-use assets and related lease liabilities on its condensed consolidated balance sheet to represent its rights to use the underlying leased assets and its future lease obligations, respectively, including for those ground leases paid directly by our tenants. Because the right-of-use asset relates, in part, to the same leases which resulted in the land right assets the Company recorded on its condensed consolidated balance sheet in conjunction with the Company's assumption of below market leases at the time it acquired the related land and building assets, the Company is required to report the right-of-use assets and land rights in the aggregate on the condensed consolidated balance sheet.

Land rights, net, represent the Company's rights to land subject to long-term ground leases. The Company obtained ground lease rights through the acquisition of several of its rental properties and immediately subleased the land to its tenants. These land rights represent the below market value of the related ground leases. The Company assessed the acquired ground leases to determine if the lease terms were favorable or unfavorable, given market conditions at the acquisition date. Because the market rents to be received under the Company's triple-net tenant leases were greater than the rents to be paid under the acquired ground leases, the Company concluded that the ground leases were below market and were therefore required to be recorded as a definite lived asset (land rights) on its books.
Components of the Company's right-of use assets and land rights, net are detailed below (in thousands):

June 30, 2020
Right-of use assets - operating leases$182,921  
Land rights, net648,631  
Right-of-use assets and land rights, net$831,552  

Land Rights

The land rights are amortized over the individual lease term of the related ground lease, including all renewal options, which ranged from 10 years to 92 years at their respective acquisition dates. Land rights net, consist of the following:

June 30,
2020
December 31,
2019
(in thousands)
Land rights$694,077  $694,077  
Less accumulated amortization(45,446) (39,406) 
Land rights, net$648,631  $654,671  


As of June 30, 2020, estimated future amortization expense related to the Company’s land rights by fiscal year is as follows (in thousands):

Year ending December 31,
2020 (remainder of year)$6,041  
202112,081  
202212,081  
202312,081  
202412,081  
Thereafter594,266  
Total$648,631  
13



Lease Liabilities

At June 30, 2020, maturities of the Company's operating lease liabilities were as follows (in thousands):

Year ending December 31,
2020 (remainder of year)$6,884  
202113,752  
202213,704  
202313,638  
202413,617  
Thereafter644,059  
Total lease payments$705,654  
Less: interest(522,798) 
Present value of lease liabilities$182,856  

Lease Expense

Operating lease costs represent the entire amount of expense recognized for operating leases that are recorded on the condensed consolidated balance sheet. Variable lease costs are not included in the measurement of the lease liability and include both lease payments tied to a property's performance and changes in an index such as the CPI that are not determinable at lease commencement, while short-term lease costs are costs for those operating leases with a term of 12 months or less.

The components of lease expense were as follows:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
(in thousands)
Operating lease cost$3,472  $3,920  $7,167  $7,813  
Variable lease cost (1)
(652) 2,068  810  4,504  
Short-term lease cost(5) 273  222  511  
Amortization of land right assets3,020  9,406  6,040  12,496  
Total lease cost$5,835  $15,667  $14,239  $25,324  

(1) Variable lease costs for the three months ended June 30, 2020 included a true up of the monthly rental payments paid by our tenants on certain ground leases that are based on estimated current year annual performance which were impacted by casino closures due to COVID-19. As discussed previously, under ASC 842, the Company is required to gross up its financial statements by recording both expense and revenue (recorded within rental income on the condensed consolidated statements of income) for these payments since the Company is considered the primary obligor.

Amortization expense related to the land right intangibles, as well as variable lease costs and the majority of the Company's operating lease costs, are recorded within land rights and ground lease expense in the condensed consolidated statements of income. The Company's short-term lease costs are recorded in both gaming, food, beverage and other expense and general and administrative expense in the condensed consolidated statements of income, while a small portion of operating lease costs is also recorded in both gaming, food, beverage and other expense and general and administrative expense in the condensed consolidated statements of income.

Supplemental Disclosures Related to Leases

Supplemental balance sheet information related to the Company's operating leases was as follows:

June 30, 2020
Weighted average remaining lease term - operating leases53.23 years
Weighted average discount rate - operating leases6.7%
14




Supplemental cash flow information related to the Company's operating leases was as follows:

Three Months Ended June 30, 2020Six Months Ended June 30, 2020
(in thousands)
Cash paid for amounts included in the measurement of leases liabilities:
  Operating cash flows from operating leases (1)
$449  $937  
Right-of-use assets obtained in exchange for new lease obligations:
   Operating leases$  $185  

(1) The Company's cash paid for operating leases is significantly less than the lease cost for the same period due to the majority of the Company's ground lease rent being paid directly to the landlords by the Company's tenants. Although GLPI expends no cash related to these leases, they are required to be grossed up in the Company's financial statements under ASC 842.

9.              Long-term Debt
 
Long-term debt is as follows: 
June 30,
2020
December 31,
2019
 (in thousands)
Unsecured $1,175 million revolver
$  $46,000  
Unsecured term loan A-1224,981  449,000  
Unsecured term loans A-2424,019    
$1,000 million 4.875% senior unsecured notes due November 2020
  215,174  
$400 million 4.375% senior unsecured notes due April 2021
  400,000  
$500 million 5.375% senior unsecured notes due November 2023
500,000  500,000  
$400 million 3.35% senior unsecured notes due September 2024
400,000  400,000  
$850 million 5.25% senior unsecured notes due June 2025
850,000  850,000  
$975 million 5.375% senior unsecured notes due April 2026
975,000  975,000  
$500 million 5.75% senior unsecured notes due June 2028
500,000  500,000  
$750 million 5.30% senior unsecured notes due January 2029
750,000  750,000  
$700 million 4.00% senior unsecured notes due January 2030
700,000  700,000  
$500 million 4.00% senior unsecured notes due January 2031
500,000    
Finance lease liability925  989  
Total long-term debt5,824,925  5,786,163  
Less: unamortized debt issuance costs, bond premiums and original issuance discounts(56,595) (48,201) 
Total long-term debt, net of unamortized debt issuance costs, bond premiums and original issuance discounts
$5,768,330  $5,737,962  

The following is a schedule of future minimum repayments of long-term debt as of June 30, 2020 (in thousands): 
Within one year$225,113  
2-3 years424,303  
4-5 years1,750,313  
Over 5 years3,425,196  
Total minimum payments$5,824,925  
 
Senior Unsecured Credit Facility

15


Prior to June 25, 2020, the Company's senior unsecured credit facility (the "Credit Facility") consisted of a $1,175 million revolving credit facility (the "Revolver"), with a maturity date of May 21, 2023, and a $449 millionTerm Loan A-1 facility, with a maturity date of April 28, 2021. At June 30, 2020, the interest rate on the term loan facility and Revolver was LIBOR plus 1.50%.

The Company fully drew down on its Revolver in the first quarter of 2020 to increase its liquidity position and repay certain senior unsecured notes as described below. On June 25, 2020, the Company entered into an amendment to the Credit Facility (as amended, the "Amended Credit Facility" which extended the maturity date of approximately $224 million of outstanding Term Loan A-1 facility borrowings to May 21, 2023, which term loans are now classified as a new tranche of term loans (Term Loans A-2). Additionally, the Company borrowed incremental Term Loans A-2 totaling $200 million. Furthermore, the Company also closed on an offering of $500 million of 4.00% unsecured senior notes due in January 2031 priced at a slight discount to par. The Company utilized the proceeds from these two financings along with cash on hand to repay all outstanding obligations under its Revolver.

At June 30, 2020, the Amended Credit Facility had a gross outstanding balance of $649.0 million, consisting of the $225.0 million Term Loan A-1 facility and the $424.0 million Term Loans A-2 facility. No amounts were outstanding under the Revolver. Additionally, at June 30, 2020, the Company was contingently obligated under letters of credit issued pursuant to the Amended Credit Facility with face amounts aggregating approximately $0.4 million, resulting in $1,174.6 million of available borrowing capacity under the Revolver as of June 30, 2020.

The Amended Credit Facility contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of GLPI and its subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations or pay certain dividends and other restricted payments. The Amended Credit Facility contains the following financial covenants, which are measured quarterly on a trailing four-quarter basis: a maximum total debt to total asset value ratio, a maximum senior secured debt to total asset value ratio, a maximum ratio of certain recourse debt to unencumbered asset value and a minimum fixed charge coverage ratio. In addition, GLPI is required to maintain a minimum tangible net worth and its status as a REIT. GLPI is permitted to pay dividends to its shareholders as may be required in order to maintain REIT status, subject to the absence of payment or bankruptcy defaults. GLPI is also permitted to make other dividends and distributions subject to pro forma compliance with the financial covenants and the absence of defaults. The Amended Credit Facility also contains certain customary affirmative covenants and events of default, including the occurrence of a change of control and termination of the Penn Master Lease (subject to certain replacement rights). The occurrence and continuance of an event of default under the Amended Credit Facili