XML 40 R33.htm IDEA: XBRL DOCUMENT

Real Estate Portfolio (Tables)

12 Months Ended

Dec. 31, 2019

The following is a summary of the balances of our real estate portfolio as of December 31, 2019 and 2018:



(In thousands)	December 31, 2019			December 31, 2018
Minimum lease payments receivable under direct financing and sales-type leases ⁽¹⁾	$	31,460,712		$	27,285,943
Estimated residual values of leased property (unguaranteed)	2,525,469			2,135,312
Gross investment in direct financing and sales-type leases	33,986,181			29,421,255
Unamortized initial direct costs	42,819			22,822
Less: Unearned income	(23,294,755		)	(20,528,030		)
Net investment in direct financing and sales-type leases	10,734,245			8,916,047
Investment in operating leases	1,086,658			1,086,658
Total Investments in leases, net	11,820,903			10,002,705
Land	94,711			95,789
Total Real estate portfolio	$	11,915,614		$	10,098,494

____________________

(1) Minimum lease payments do not include contingent rent, as discussed below, that may be received under the Lease Agreements.

Schedule of Components of Direct Financing and Operating Leases

The following table details the components of our income from direct financing, sales-type and operating leases:



	Year Ended December 31,					Period from October 6, 2017 to December 31, 2017
(In thousands)	2019		2018			Period from October 6, 2017 to December 31, 2017
Income from direct financing and sales-type leases	$	822,205	$	741,564		$	150,171
Income from operating leases	43,653		47,972			11,529
Total leasing revenue	865,858		789,536			161,700
Direct financing and sales-type lease adjustments ⁽¹⁾	239		(45,404		)	(8,443		)
Total contractual leasing revenue	$	866,097	$	744,132		$	153,257

____________________

(1) Amounts represent the non-cash adjustment to income from direct financing and sales-type leases in order to recognize income on an effective interest basis at a constant rate of return over the term of the leases as well as the amortization of capitalized transaction and leasing costs.

Schedule of Future Minimum Lease Payments for Operating and Capital Leases

At December 31, 2019, minimum lease payments owed to us for each of the five succeeding years under direct financing, sales-type and operating leases are as follows:



(In thousands)	Minimum Lease Payments ⁽¹⁾
2020	$	953,949
2021	960,374
2022	971,004
2023	985,938
2024	998,222
Thereafter	28,024,506
Total	$	32,893,993

____________________

(1) Minimum lease payments do not include contingent rent, as discussed below, that may be received under the Lease Agreements.

Schedule of Material Lease Provisions Of Lease Agreements

The following is a summary of the material lease provisions of the Hard Rock Cincinnati Lease Agreement:



($ In thousands)
Lease Provision		Term
Initial term		15 years
Renewal terms		Four, five-year terms
Current annual rent ⁽¹⁾		$42,750
Escalator commencement		Lease year two
Escalator ⁽²⁾		Lease years 2-4 - 1.5% Lease years 5-15 - The greater of 2% or the change in consumer price index (“CPI”) unless the change in CPI is less than 0.5%, in which case there is no escalation in rent for such lease year
Variable rent commencement/reset		Lease year 8
Variable rent split ⁽³⁾		80% Base Rent and 20% Variable Rent
Variable rent percentage ⁽³⁾		4%

____________________

(1)The amount represents the current annual base rent payable for the current lease year which is the period from September 20, 2019 through September 30, 2020.

(2) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP. No such rent has been recognized for the years ended December 31, 2019 and 2018.

(3) Variable rent is not subject to the escalator and is calculated as an increase or decrease of the average of net revenues for lease years 5 through 7 compared to the average net revenue for lease years 1 through 3, multiplied by the Variable rent percentage.The following is a summary of the material lease provisions of our lease with a subsidiary of JACK Entertainment which commenced on January 24, 2020, the date of acquisition:



($ In thousands)
Lease Provision		Term
Initial term		15 years
Renewal terms		Four, five-year terms
Current annual rent ⁽¹⁾		$65,880
Escalator commencement		Lease year two
Escalator ⁽²⁾		Lease years 2-3 - 1.0% Lease years 4-6 - 1.5% Lease Years 7-15 - The greater of 1.5% or the change in consumer price index (“CPI”) capped at 2.5%
Net revenue to rent ratio floor		4.9x in any lease year (commencing in lease year 5) - if the coverage ratio is below the stated amount, there is no escalation in rent for such lease year
Variable rent commencement/reset		Lease year 8 and 11
Variable rent split ⁽³⁾		80% Base Rent and 20% Variable Rent
Variable rent percentage ⁽³⁾		4%

____________________

(1)The amount represents the current annual base rent payable for the current lease year which is the period from January 24, 2020 through January 31, 2021.

(2) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP.

(3) Variable rent is not subject to the escalator and is calculated for lease year 8 as an increase or decrease of the average of net revenues for lease years 5 through 7 compared to the average net revenue for lease years 1 through 3 and for lease year 11 as an increase or decrease of the average of net revenues for lease years 8 through 10 compared to the average net revenue for lease years 5 through 7, multiplied by the Variable rent percentage.

The following is a summary of the material provisions of the Penn National Lease Agreements:



($ In thousands)
Lease Provision	Margaritaville Lease Agreement	Greektown Lease Agreement
Initial term	15 years	15 years
Renewal terms	Four, five-year terms	Four, five-year terms
Current annual rent ⁽¹⁾	$23,544	$55,600
Escalation commencement	Lease year two	Lease year two
Escalation	2% of Building base rent, subject to the net revenue to rent ratio floor	2% of Building base rent, subject to the EBITDAR to rent ratio floor
Performance to rent ratio floor ⁽²⁾	6.1x net revenue commencing lease year two	1.85x EBITDAR commencing lease year two
Percentage rent ⁽³⁾	$3,000 (fixed for lease year one and two)	$6,400 (fixed for lease year one and two)
Percentage rent reset	Lease year three and each and every other lease year thereafter	Lease year three and each and every other lease year thereafter
Percentage rent multiplier	The product of (i) 4% and (ii) the excess (if any) of (a) the average annual net revenue of a trailing two-year period preceding such reset year over (b) a threshold amount (defined as 50% of LTM net revenues prior to acquisition)	The product of (i) 4% and (ii) the excess (if any) of (a) the average annual net revenue of a trailing two-year period preceding such reset year over (b) a threshold amount (defined as 50% of LTM net revenues prior to acquisition)

____________________

(1) In relation to the Margaritaville Lease Agreement, the amount represents current annual base rent payable for the current lease year which is the period from February 1, 2020 through January 31, 2021. In relation to the Greektown Lease Agreement, the amount represents current annual base rent payable for the current lease year which is the period from May 23, 2019 through May 31, 2020.

(2) In February 2020 the performance basis of such ratio was adjusted from a 1.9x EBITDAR ratio to a 6.1x net revenue ratio. In the event that the net revenue or EBITDAR to rent ratio coverage is below the stated floor, the escalation will be reduced to such amount to achieve the stated net revenue or EBITDAR to rent ratio coverage, provided that the amount shall never result in a decrease to the prior year’s rent. In relation to the Greektown Lease Agreement, the EBITDAR to rent ratio floor is conditioned upon obtaining a favorable private letter ruling from the Internal Revenue Service.

(3) Percentage rent is subject to the percentage rent multiplier. After the percentage rent reset in lease year three, any amounts related to percentage rent are considered contingent rent in accordance with GAAP. No such rent has been recognized for the years ended December 31, 2019 and 2018.

The following is a summary of the material provisions of the Caesars Lease Agreements (which does not reflect the modifications to the Caesars Lease Agreements contemplated in connection with the closing of the Eldorado Transaction):



($ In thousands)
Lease Provision ⁽¹⁾	Non-CPLV Lease Agreement and Joliet Lease Agreement	CPLV Lease Agreement	HLV Lease Agreement
Initial Term	15 years	15 years	15 years
Renewal Terms	Four, five-year terms	Four, five-year terms	Four, five-year terms
Current annual rent ⁽²⁾	$508,534	$207,745	$89,157
Escalator commencement	Lease year two	Lease year two	Lease year two
Escalator ⁽³⁾	Lease years 2-5 - 1.5% Lease years 6-15 - Consumer price index subject to 2% floor	Consumer price index subject to 2% floor	Lease years 2-5 - 1% Lease years 6-15 - Consumer price index subject to 2% floor
EBITDAR to Rent Ratio floor ⁽⁴⁾	1.2x commencing lease year 8	1.7x commencing lease year 8	1.6x commencing lease year 6
Variable Rent commencement/reset	Lease years 8 and 11	Lease years 8 and 11	Lease years 8 and 11
Variable Rent split ⁽⁵⁾	Lease years 8-10 - 70% Base Rent and 30% Variable Rent Lease years 11-15- 80% Base Rent and 20% Variable Rent	80% Base Rent and 20% Variable Rent	80% Base Rent and 20% Variable Rent
Variable Rent percentage ⁽⁵⁾	4%	4%	4%

____________________

(1) All capitalized terms used without definition herein have the meanings detailed in the applicable Caesars Lease Agreements.

(2) In relation to the Non-CPLV Lease Agreement, Joliet Lease Agreement and CPLV Lease Agreement, the amount represents the current annual base rent payable for the current lease year which is the period from November 1, 2019 through October 31, 2020. In relation to the HLV Lease Agreement the amount represents current annual base rent payable for the current lease year which is the period from January 1, 2020 through December 31, 2020.

(3) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP. No such rent has been recognized for the years ended December 31, 2019 and 2018.

(4) In the event that the EBITDAR to Rent Ratio coverage is below the stated floor, the Escalator of the respective Caesars Lease Agreements will be reduced to such amount to achieve the stated EBITDAR to Rent Ratio coverage, provided that the amount shall never result in a decrease to the prior year’s rent. The EBITDAR to Rent Ratio floor is conditioned upon obtaining a favorable private letter ruling from the Internal Revenue Service. The coverage floors, which coverage floors serve to reduce the rent escalators under the Caesars Lease Agreements in the event that the “EBITDAR to Rent Ratio” coverage is below the stated floor, will be removed upon execution of the amendments to the Caesars Lease Agreements in connection with the closing of the Eldorado Transaction.

(5) Variable Rent is not subject to the Escalator and is calculated as an increase or decrease of Net Revenues, as defined in the Caesars Lease Agreements, multiplied by the Variable Rent percentage.

The following is a summary of the material lease provisions of the Century Portfolio Lease Agreement:



($ In thousands)
Lease Provision		Term
Initial term		15 years
Renewal terms		Four, five-year terms
Current annual rent ⁽¹⁾		$25,000
Escalator commencement		Lease year two
Escalator ⁽²⁾		Lease years 2-3 - 1.0% Lease years 4-15 - The greater of 1.25% or the change in consumer price index (“CPI”)
Net revenue to rent ratio floor		7.5x commencing lease year six - if the coverage ratio is below the stated amount the escalator will be reduced to 0.75%
Variable rent commencement/reset		Lease year 8 and 11
Variable rent split ⁽³⁾		80% Base Rent and 20% Variable Rent
Variable rent percentage ⁽³⁾		4%

____________________

(1)The amount represents the current annual base rent payable for the current lease year which is the period from December 6, 2019 through December 31, 2020.

Schedule Of Capital Expenditure Requirements Under Lease Agreements

The following table summarizes the capital expenditure requirements of the respective tenants under the Caesars Lease Agreements (which does not reflect the modifications to the Caesars Lease Agreements contemplated in connection with the closing of the Eldorado Transaction, including the inclusion of the Harrah’s New Orleans, Harrah’s Atlantic City and Harrah’s Laughlin properties in the Non-CPLV Lease Agreement):



Provision	Non-CPLV Lease Agreement and Joliet Lease Agreement	CPLV Lease Agreement	HLV Lease Agreement
Yearly minimum expenditure	1% of net revenues ⁽¹⁾	1% of net revenues ⁽¹⁾	1% of net revenues commencing in 2022
Rolling three-year minimum ⁽²⁾	$255 million	$84 million	N/A
Initial minimum capital expenditure	N/A	N/A	$171 million (2017 - 2021)

____________________

(1) The lease agreement requires a $100 million floor on annual capital expenditures for CPLV, Joliet and Non-CPLV in the aggregate. Additionally, annual building & improvement capital improvements must be equal to or greater than 1% of prior year net revenues.

(2) CEOC is required to spend $350 million on capital expenditures (excluding gaming equipment) over a rolling three-year period, with $255 million allocated to Non-CPLV, $84 million allocated to CPLV and the remaining balance of $11 million to facilities covered by any Formation Lease Agreement in such proportion as CEOC may elect. Additionally, CEOC is required to expend a minimum of $495 million on capital expenditures (including gaming equipment) across certain of its affiliates and other assets, together with the $350 million requirement.

The following table summarizes the capital expenditure requirements of Penn National, Hard Rock, Century Casinos and JACK Entertainment under the Penn National Lease Agreements, Hard Rock Cincinnati Lease Agreement, Century Portfolio Lease Agreement and JACK Cleveland/Thistledown Lease Agreement, respectively:



Provision	Penn National Lease Agreements	Hard Rock Cincinnati Lease Agreement	Century Portfolio Lease Agreement	JACK Cleveland/Thistledown Lease Agreement
Yearly minimum expenditure	1% of net revenues based on rolling four-year basis	1% of net revenues	1% of net gaming revenues ⁽¹⁾	Initial minimum of $30 million ⁽²⁾ Thereafter - 1% of net revenues on a rolling three-year basis

____________________

(1) Minimum of 1% of net gaming revenue on a rolling three-year basis for each individual facility and 1% of net gaming revenues per fiscal year for the facilities collectively.

(2) Initial minimum required to be spent from the period commencing April 1, 2019 through December 31, 2022.