Investments and Acquisition Activities

ACDL Equity Method Investments: In August 2011, we invested $95 million in ACDL in exchange for a minority ownership interest, which is accounted for under the equity method, and the right to manage a future resort to be built in Vietnam. As a minority shareholder of ACDL, our ability to control the management, record keeping, operations and decision making of ACDL is limited. During the year ended December 31, 2012, we invested an additional $15.6 million in ACDL as part of a $60 million capital raise. Subsequent to the $60 million capital raise, ACDL completed an additional $30 million capital raise during the year ended December 31, 2012 with the majority shareholder, and we did not participate. As a result, our equity interest in ACDL is approximately 24.0% at December 31, 2012, assuming conversion of all preferred stock, exercise of all warrants and the exercise of all options. We retain an option to participate in our pro-rata share of the $30 million capital raise, which would offset our dilution if exercised.

Because the financial statements of ACDL are not available to incorporate with our financial statements in the applicable time period, we record our allocable share of income or loss on a one-quarter lag. Since ACDL is a development stage entity, its results included no revenues and a net loss of $21.6 million (unaudited) for the trailing twelve months ended September 30, 2012. From our original acquisition date in August 2011 to September 30, 2011, ACDL incurred no revenue and a net loss of $3.4 million (unaudited). During years ended December 31, 2012 and 2011, our proportional share of ACDL's losses totaled $5.8 million and $0.6 million, respectively.

ACDL summarized unaudited balance sheet information is as follows:



	September 30,
	2012		2011
	(in millions)
Current assets	$	79.0	$	72.1
Total assets	$	371.6	$	223.2
Current liabilities	$	62.5	$	23.8
Contingently redeemable shares	$	314.0	$	260.3
Total liabilities	$	457.1	$	295.1

Our cash investment in ACDL exceeds our proportional share of the net book value of ACDL. The excess value relates to the Investment Certificate and the potential future earnings of ACDL. The portion of this difference attributable to the fair value of the Investment Certificate will be amortized over the term of the Investment Certificate, or 50 years, which amortization will be included in our determination of income or loss from equity method investments. The portion of this difference attributable to equity method goodwill will not be amortized.

We have capitalized interest on our investment in ACDL because ACDL has not begun its principal operations. ACDL currently has activities in progress to commence these planned operations, and is using all funds to acquire assets for the future operations. Once ACDL completes construction of the first phase of this operation, the investment will no longer qualify for capitalization of interest, which we expect to occur in the first quarter of 2013. Capitalized interest on this investment was $8.4 million and $3.4 million for the years ended December 31, 2012 and 2011, respectively.

In August 2012, we entered into a stock option agreement with ACDL. Under the terms of the stock option agreement, we were granted an option to purchase common shares of ACDL at a predetermined exercise price. The option granted by ACDL was made to support certain administrative services we plan to render on behalf of ACDL under a yet-to-be negotiated services agreement. The option vests and becomes exercisable on a pro-rata daily basis over a 5-year term from the grant date. Portions of the option that are not vested and exercisable are subject to cancellation and termination provisions outlined within the stock option agreement. As of December 31, 2012, we recorded $0.3 million related to the vested portion of these options, included in "Other assets" and "Other accrued liabilities" in our Consolidated Balance Sheet.

ACDL's wholly-owned Vietnamese subsidiary, Ho Tram Project Company Limited ("HTP"), is currently constructing and developing the first phase of the first resort of the Ho Tram Strip complex of destination integrated resorts and this phase of the project is substantially complete. In 2008, ACDL received an Investment Certificate from the Government of Vietnam for the development of the Ho Tram Strip, which outlined deadlines to complete phases of the development. HTP obtained an Official Letter from the Provincial Government extending the deadline for developing the Ho Tram Strip under the Investment Certificate. HTP is currently in default of the deadlines set out in the Official Letter for completing the first phase of the first resort and golf course.

ACDL and HTP have applied to amend the Investment Certificate to incorporate the deadlines provided for in the Official Letter into the Investment Certificate and to extend further the deadlines for completing the first phase of the first resort and the golf course, which would, if approved, remedy the default. The amendment would, among other things, confirm the project's entitlement to operate prized games upon completion and opening of the first phase of the first resort as provided for in the Official Letter. The process to approve the amendment to the Investment Certificate has been slower than ACDL had expected and as of this filing, has not been approved.

While the Provincial Government has indicated its support for this amendment and ACDL expects the amendment to the Investment Certificate to be granted, there can be no assurance that it will be granted and, if so, as to the timing of such amendment. Additionally, delays in the establishment of regulatory protocols could delay the start of operation of the prized games.

ACDL has advised us that certain issues have arisen with respect to the funding of the first phase of the first resort. HTP is reliant upon a $175 million credit facility (the "HTP Credit Facility") from a syndicate of Vietnamese banks (the "HTP Lenders") to fund this first phase of the first resort of its Ho Tram Strip resort project. The HTP Lenders have suspended funding under the HTP Credit Facility until the amendment to the Investment Certificate has been granted. Through December 31, 2012, HTP had drawn approximately $83.7 million (unaudited) on the HTP Credit Facility.

HTP has expected, and continues to expect, to draw fully on the HTP Credit Facility to fund the first phase of the first resort. In addition, ACDL plans to obtain a working capital credit facility after a successful resolution of the pending amendment to the Investment Certificate.

ACDL has also advised us that based on revised projections of the working capital from the manager of the first resort, it is likely that it will be necessary for HTP to obtain additional capital beyond the previously disclosed $35 million yet-to-be-committed working capital facility. This would be required even assuming the resumption of funding under existing financing commitments from the HTP Lenders and the majority shareholder. The amount of additional working capital needs is still under review. If the HTP Lenders are not prepared to provide the $35 million working capital credit facility or if additional working capital is required, additional funding will have to be obtained. Given the uncertainties surrounding its Investment Certificate and its existing lending agreements, it is uncertain if HTP will be able to secure such working capital facility.

ACDL has been expecting to open the first phase of the MGM Grand Ho Tram Beach in the first quarter of 2013. While the application for the amendment is progressing through the government review and approval process, it is taking longer than expected and its approval is uncertain.

In light of the foregoing, we have concluded the carrying value of our investment has experienced a decline in value, and we have recorded an impairment of approximately $25 million as of December 31, 2012. To estimate fair value, we used a discounted cash flow analysis based on estimated future results of ACDL and market indicators of terminal year capitalization rates. Should the delay in obtaining the amendment to the Investment Certificate and the resumption of funding by the HTP Lenders continue for a prolonged period of time, additional write-downs of our investment in ACDL may be required.

Other Equity Method Investment: During 2012, we committed to invest $2.0 million in Farmworks, a land re-vitalization project in downtown St. Louis. We received credit for approximately $10.0 million towards our obligation to invest $50.0 million in St. Louis as a result of this transaction. This investment is accounted for under the equity method. As of December 31, 2012, we have invested $0.4 million, which is included in "Equity method investments" on our Consolidated Balance Sheets.

Retama Park Racetrack: On April 25, 2012, we entered into agreements to execute a series of transactions to acquire 75.5% of the equity of RPL, the owner of the racing license for Retama Park Racetrack. Under the terms of the agreements, we acquired certain bonds (the "RDC Bonds") and promissory notes (the "RDC Notes") issued by the Retama Development Corporation ("RDC") and a 50% interest in additional rights to operate and receive revenue from expanded gaming in the future (the "Gaming Enhancement Rights") (collectively, the "Acquired Property") for cash consideration of $7.8 million. We also have provided a bridge loans and a supplemental promissory note totaling $2.9 million to RDC, included in "Other assets" in our Consolidated Balance Sheet at December 31, 2012.

The cash consideration for the Acquired Property was allocated to the individual RDC Bonds, RDC Notes and Gaming Enhancement Rights based on their relative fair values, which required the estimation of individual fair values on the acquisition date using a discounted cash flow analysis. The RDC Bonds are debt securities classified as held-to-maturity investments as we have the positive intent and ability to hold these securities to maturity.

In January 2013, we closed on the acquisition of 75.5% of the equity of Pinnacle Retama Partners, LLC ("PRPLLC"), which is a reorganized limited liability company formerly known as RPL. The Company paid cash consideration of $15 million along with a contribution of a portion of the Acquired Property. In addition, the Company entered into a management contract with RDC to manage the day-to-day operations of Retama Park. In conjunction with the closing of the acquisition, RDC repaid the bridge loans and supplemental promissory note, along with all associated accrued interest, at the time of closing, totaling $2.9 million.

Heartland Poker Tour: On July 2, 2012, we closed on an agreement to purchase substantially all of the assets of Federated Sports & Gaming, Inc. and Federated Heartland, Inc., owners of the Heartland Poker Tour and other related assets and intellectual property, for total consideration of $4.6 million. The purchase was accounted for as a business combination. The purchase price for the assets of Federated Sports & Gaming Inc. and Federated Heartland, Inc. was allocated based upon estimated fair values of the assets, with the excess of the purchase price over the estimated fair values of the assets acquired recorded as goodwill. The allocation of fair value was finalized during the fourth quarter of 2012.

Other Investments: We have short-term investments in corporate bonds classified as held-to-maturity investments, as we have the positive intent and ability to hold these securities to maturity. At December 31, 2012, we hold $4.4 million in corporate bonds and $4.5 million in sales tax increment bonds issued through the City of Reno, included in "Held-to-maturity securities" and "Other Assets, net" in our Consolidated Balance Sheet. It is not likely that we will be required to sell these investments prior to the recovery of the amortized cost.

Ameristar Acquisition: In December 2012, we entered into a definitive agreement to acquire all the outstanding shares of Ameristar for $26.50 per share in cash, representing a total enterprise value of $2.8 billion. The acquisition is expected to close by the end of third quarter of 2013, subject to closing conditions and regulatory approvals.