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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 September 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) 
Pennsylvania 46-2116489
(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 class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $.01 per share GLPI Nasdaq
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 filer Smaller 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.
Title October 23, 2020
Common Stock, par value $.01 per share 220,705,735



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 had, and may 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 undertook various steps to mitigate the spread of infections from COVID-19. Although the majority of our tenants' operations have recommenced to strong results and our tenants have improved their liquidity profiles, there can be no assurance whether these encouraging results will continue in future periods, particularly with the potential for increased transmission of COVID-19 as the weather becomes cooler over the next several months;

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;

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;

1

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 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.

2

GAMING AND LEISURE PROPERTIES, INC. AND SUBSIDIARIES
 
TABLE OF CONTENTS
 
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3



 
Gaming and Leisure Properties, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share data)
 
September 30,
2020
December 31, 2019
(unaudited)
Assets
Real estate investments, net $ 7,240,311  $ 7,100,555 
Property and equipment, used in operations, net 89,319  94,080 
Real estate of Tropicana Las Vegas, net 305,773  — 
Real estate loans —  303,684 
Right-of-use assets and land rights, net 828,130  838,734 
Cash and cash equivalents 105,894  26,823 
Prepaid expenses 2,195  4,228 
Goodwill 16,067  16,067 
Other intangible assets 9,577  9,577 
Deferred tax assets 5,654  6,056 
Other assets 34,063  34,494 
Total assets $ 8,636,983  $ 8,434,298 
Liabilities
Accounts payable $ 842  $ 1,006 
Accrued expenses 4,643  6,239 
Accrued interest 83,165  60,695 
Accrued salaries and wages 4,417  13,821 
Gaming, property, and other taxes 769  944 
Income taxes payable 26  — 
Lease liabilities
182,466  183,971 
Long-term debt, net of unamortized debt issuance costs, bond premiums and original issuance discounts
5,752,252  5,737,962 
Deferred rental revenue 368,850  328,485 
Deferred tax liabilities 334  279 
Other liabilities 29,943  26,651 
Total liabilities 6,427,707  6,360,053 
Shareholders’ equity
Preferred stock ($.01 par value, 50,000,000 shares authorized, no shares issued or outstanding at September 30, 2020 and December 31, 2019)
—  — 
Common stock ($.01 par value, 500,000,000 shares authorized, 220,697,128 and 214,694,165 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively)
2,207  2,147 
Additional paid-in capital 3,960,861  3,959,383 
Accumulated deficit (1,753,792) (1,887,285)
Total shareholders’ equity 2,209,276  2,074,245 
Total liabilities and shareholders’ equity $ 8,636,983  $ 8,434,298 
 
See accompanying notes to the condensed consolidated financial statements.
4

Gaming and Leisure Properties, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
 
        
  Three Months Ended September 30, Nine Months Ended September 30,
  2020 2019 2020 2019
Revenues        
Rental income $ 267,555  $ 248,789  $ 762,711  $ 745,030 
Interest income from real estate loans 5,574  7,206  19,130  21,600 
Total income from real estate
273,129  255,995  781,841  766,630 
Gaming, food, beverage and other 34,425  31,617  71,163  97,859 
Total revenues 307,554  287,612  853,004  864,489 
Operating expenses        
Gaming, food, beverage and other 18,175  18,549  39,536  56,739 
Land rights and ground lease expense 8,084  9,094  21,943  33,572 
General and administrative 22,514  15,042  51,725  48,266 
Depreciation 58,080  57,302  172,033  183,745 
Loan impairment charges —  —  —  13,000 
Total operating expenses 106,853  99,987  285,237  335,322 
Income from operations 200,701  187,625  567,767  529,167 
Other income (expenses)        
Interest expense (70,179) (75,111) (211,657) (228,362)
Interest income 22  235  491  572 
 Losses on debt extinguishment (779) (21,014) (18,113) (21,014)
Total other expenses (70,936) (95,890) (229,279) (248,804)
Income before income taxes 129,765  91,735  338,488  280,363 
Income tax expense 2,639  1,188  2,118  3,773 
Net income $ 127,126  $ 90,547  $ 336,370  $ 276,590 
Earnings per common share:        
Basic earnings per common share $ 0.58  $ 0.42  $ 1.55  $ 1.29 
Diluted earnings per common share $ 0.58  $ 0.42  $ 1.55  $ 1.29 
 
See accompanying notes to the condensed consolidated financial statements.

5

Gaming and Leisure Properties, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(in thousands, except share data)
(unaudited)
 
  Common Stock Additional
Paid-In
Capital
Accumulated
Deficit
Total
Shareholders’
Equity
  Shares Amount
Balance, December 31, 2019 214,694,165  $ 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  (8,352) —  (8,348)
Dividends paid ($0.70 per common share)
—  —  —  (150,796) (150,796)
Net income
—  —  —  96,894  96,894 
Balance, March 31, 2020 215,107,229  $ 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, 2020 217,821,237  $ 2,178  $ 3,955,293  $ (1,854,706) $ 2,102,765 
ATM Program offering costs
—  —  (50) —  (50)
Restricted stock activity
102,441  5,646  —  5,647 
Dividends paid ($0.60 per common share) 2,773,450  28  (28) (26,212) (26,212)
Net income
—  —  —  127,126  127,126 
Balance, September 30, 2020 220,697,128  $ 2,207  $ 3,960,861  $ (1,753,792) $ 2,209,276 
 
  Common Stock Additional
Paid-In
Capital
Accumulated
Deficit
Total
Shareholders’
Equity
  Shares Amount
Balance, December 31, 2018 214,211,932  $ 2,142  $ 3,952,503  $ (1,689,038) $ 2,265,607 
Stock option activity
26,799  —  592  —  592 
Restricted stock activity
406,769  (5,327) —  (5,323)
Dividends paid ($0.68 per common share)
—  —  —  (146,202) (146,202)
Net income
—  —  —  93,010  93,010 
Balance, March 31, 2019 214,645,500  $ 2,146  $ 3,947,768  $ (1,742,230) $ 2,207,684 
Restricted stock activity
27,635  4,181  —  4,182 
Dividends paid ($0.68 per common share)
—  —  —  (146,212) (146,212)
Net income
—  —  —  93,033  93,033 
Balance, June 30, 2019 214,673,135  $ 2,147  $ 3,951,949  $ (1,795,409) $ 2,158,687 
    ATM Program offering costs —  —  (239) —  (239)
Stock option activity
—  —  —  —  — 
Restricted stock activity
9,721  —  3,845  —  3,845 
Dividends paid ($0.68 per common share) —  —  —  (146,208) (146,208)
Net income
—  —  —  90,547  90,547 
Balance, September 30, 2019
214,682,856  $ 2,147  $ 3,955,555  $ (1,851,070) $ 2,106,632 

See accompanying notes to the condensed consolidated financial statements.

6

Gaming and Leisure Properties, Inc. and Subsidiaries
 Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine months ended September 30, 2020 2019
Operating activities    
Net income $ 336,370  $ 276,590 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 181,094  199,261 
Amortization of debt issuance costs, bond premiums and original issuance discounts 8,032  8,597 
(Gains) losses on dispositions of property (3) 50 
Deferred income taxes (84) (528)
Stock-based compensation 16,652  12,353 
Straight-line rent adjustments 5,394  25,930 
Deferred revenue recognized (272,529) — 
Losses on debt extinguishment 18,113  21,014 
Loan impairment charges —  13,000 
(Increase), decrease    
Prepaid expenses and other assets 1,363  (2,123)
Increase, (decrease)    
Accounts payable (164) (2,345)
Accrued expenses 84  780 
Accrued interest 22,470  39,195 
Accrued salaries and wages (9,404) (6,795)
Gaming, property and other taxes (175) 47 
Income taxes 26  — 
Other liabilities 3,292  (1,340)
Net cash provided by operating activities 310,531  583,686 
Investing activities    
Capital maintenance expenditures (1,629) (2,256)
Proceeds from sale of property and equipment 15  210 
Net cash used in investing activities (1,614) (2,046)
Financing activities    
Dividends paid (202,877) (438,622)
Taxes paid related to shares withheld for tax purposes on restricted stock award vestings
(15,291) (9,057)
Proceeds from issuance of stock from ATM Program net of offering costs 177  (239)
Proceeds from issuance of long-term debt 2,076,383  1,312,853 
Financing costs (11,641) (10,005)
Repayments of long-term debt (2,060,850) (1,417,918)
Premium and related costs paid on tender of senior unsecured notes (15,747) (18,879)
Net cash used in financing activities (229,846) (581,867)
Net increase (decrease) in cash and cash equivalents 79,071  (227)
Cash and cash equivalents at beginning of period 26,823  25,783 
Cash and cash equivalents at end of period $ 105,894  $ 25,556 
 
See Note 17 to the condensed consolidated financial statements for supplemental cash flow information and noncash investing and financing activities.
7

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.

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 (NYSE: BYD) ("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,
8

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 bore 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. On June 24, 2020, the Company received approval from the Missouri Gaming Commission to own the Lumière Place real estate in satisfaction for the CZR loan. The Company closed this transaction on September 29, 2020 and entered into a new triple net lease for this asset whose initial term expires October 31, 2033, with no purchase option, followed by four successive 5-year renewal periods (exercisable by the tenant) on the same terms and conditions (the "Lumière Place Lease").

On April 16, 2020, the Company and certain of its subsidiaries acquired 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 September 30, 2020, GLPI’s portfolio consisted of interests in 46 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 6 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 24.1 million square feet and were 100% occupied at September 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. Our properties began reopening at limited capacity in May and by early July nearly all had resumed operations at limited capacity. As of the date of this filing, the only property that had not reopened was Zia Park Casino in the Penn Master Lease.

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 nine months ended September 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
9

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 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 43 rental properties and the corporate headquarters building and is summarized as follows:
 
September 30,
2020
December 31,
2019
  (in thousands)
Land and improvements $ 2,590,904  $ 2,552,285 
Building and improvements 6,014,276  5,749,211 
Total real estate investments 8,605,180  8,301,496 
Less accumulated depreciation (1,364,869) (1,200,941)
Real estate investments, net $ 7,240,311  $ 7,100,555 
10


The 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 and the acquisition of the real estate of Lumière Place in satisfaction of the CZR loan in September 2020 for $57.7 million ($11.7 million of which was allocated to land and land improvements and $46.0 million to building and improvements) and $246.0 million ($26.9 million of which was allocated to land and land improvements and $219.1 million to building and improvements), respectively.



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: 
September 30,
2020
December 31,
2019
  (in thousands)
Land and improvements $ 30,499  $ 30,492 
Building and improvements 117,187  116,904 
Furniture, fixtures, and equipment 111,626  118,766 
Construction in progress 219  120 
Total property and equipment 259,531  266,282 
Less accumulated depreciation (170,212) (172,202)
Property and equipment, net $ 89,319  $ 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 acquired 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, and October. Penn will otherwise continue making cash rent payments to GLPI for the month of April, 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 and nine months ended September 30, 2020 depreciation expense of $0.9 million and $1.7 million was recorded. Additionally, deferred rent of $307.5 million was recorded at the acquisition date, with $141.7 million and $272.5 million of deferred rent recognized during the three and nine months ended September 30, 2020.

The Tropicana Las Vegas assets are summarized below:
September 30, 2020
(in thousands)
Land and improvements $ 226,160 
Building and improvements 81,340 
Total real estate of Tropicana Las Vegas 307,500 
Less accumulated depreciation (1,727)
Real estate of Tropicana Las Vegas , net $ 305,773 
11



7. Receivables

Real Estate Loans

As discussed in Note 1, the Company historically had the CZR loan outstanding which was utilized by Caesars in connection with its acquisition of Lumière Place. On June 24, 2020, the Company received approval from the Missouri Gaming Commission to own the Lumière Place real estate in satisfaction of the CZR loan, subject to the Lumière Place Lease, and closed this transaction on September 29, 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 bore 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 September 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 nine months ended September 30, 2019.
At September 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 September 30, 2020, Casino Queen has made partial payments 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

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):

September 30, 2020 December 31, 2019
Right-of use assets - operating leases $ 182,520  $ 184,063 
Land rights, net 645,610  654,671 
Right-of-use assets and land rights, net $ 828,130  $ 838,734 

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:

September 30,
2020
December 31,
2019
(in thousands)
Land rights $ 694,077  $ 694,077 
Less accumulated amortization (48,467) (39,406)
Land rights, net $ 645,610  $ 654,671 


As of September 30, 2020, estimated future amortization expense related to the Company’s land rights by fiscal year is as follows (in thousands):
13



Year ending December 31,
2020 (remainder of year) $ 3,020 
2021 12,081 
2022 12,081 
2023 12,081 
2024 12,081 
Thereafter 594,266 
Total $ 645,610 

Lease Liabilities

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

Year ending December 31,
2020 (remainder of year) $ 3,440 
2021 13,759 
2022 13,707 
2023 13,638 
2024 13,617 
Thereafter 644,059 
Total lease payments $ 702,220 
Less: interest (519,754)
Present value of lease liabilities $ 182,466 

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 September 30, Nine Months Ended September 30,
2020 2019 2020 2019
(in thousands)
Operating lease cost $ 3,458  $ 3,909  $ 10,625  $ 11,722 
Variable lease cost (1)
1,651  2,319  2,461  6,823 
Short-term lease cost 203  254  425  765 
Amortization of land right assets 3,021  3,020  9,061  15,516 
Total lease cost $ 8,333  $ 9,502  $ 22,572  $ 34,826 

(1) Variable lease costs for the nine months ended September 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 as well as a small portion of operating lease costs are recorded in
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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:

September 30, 2020
Weighted average remaining lease term - operating leases 53.04 years
Weighted average discount rate - operating leases 6.7%


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

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
(in thousands)
Cash paid for amounts included in the measurement of leases liabilities:
  Operating cash flows from operating leases (1)
$ 436  $ 1,373 
Right-of-use assets obtained in exchange for new lease obligations:
   Operating leases $ 12  $ 197 

(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: 
September 30,
2020
December 31,
2019
  (in thousands)
Unsecured $1,175 million revolver
$ —  $ 46,000 
Unsecured term loan A-1 —  449,000 
Unsecured term loans A-2 424,019  — 
$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 
$700 million 4.00% senior unsecured notes due January 2031
700,000  — 
Finance lease liability 893  989 
Total long-term debt 5,799,912  5,786,163 
Less: unamortized debt issuance costs, bond premiums and original issuance discounts (47,660) (48,201)
Total long-term debt, net of unamortized debt issuance costs, bond premiums and original issuance discounts
$ 5,752,252  $ 5,737,962 
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The following is a schedule of future minimum repayments of long-term debt as of September 30, 2020 (in thousands): 
Within one year $ 134 
2-3 years 424,307 
4-5 years 1,750,316 
Over 5 years 3,625,155 
Total minimum payments $ 5,799,912 
 
Senior Unsecured Credit Facility

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 million Term Loan A-1 facility, with a maturity date of April 28, 2021. At September 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, on June 25, 2020, 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. On August 18, 2020, the Company borrowed an additional $200 million of 4.00% unsecured senior notes due in January 2031 priced at a premium to par. The Company utilized the net proceeds from this additional borrowing to repay indebtedness under the Term Loan A-1 facility.

At September 30, 2020, the Amended Credit Facility had a gross outstanding balance of $424.0 million, consisting of the $424.0 million Term Loans A-2 facility. No amounts were outstanding under the Revolver. Additionally, at September 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 September 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 Facility will enable the lenders under the Amended Credit Facility to accelerate the loans and terminate the commitments thereunder.

At September 30, 2020, the Company was in compliance with all required financial covenants under the Amended Credit Facility. Additionally, the Company entered into an amendment at March 30, 2020 with the Company's credit facility lenders which permits the fair value of non-cash assets received for rental payments from our tenants to be recognized within net operating income to the extent earned in accordance with GAAP for debt covenant purposes as well as the inclusion of cash in the definition of unencumbered assets.

Senior Unsecured Notes

In the first quarter of 2020, the Company redeemed all $215.2 million aggregate principal amount of the Company’s outstanding 4.875% senior unsecured notes due in November 2020 and all $400 million aggregate principal amount of the
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Company’s outstanding 4.375% senior unsecured notes due in April 2021, incurring a loss on the early extinguishment of debt related to the redemption of $17.3 million, primarily for call premium charges and debt issuance write-offs.

On June 25, 2020, the Company issued $500 million of 4.00% senior unsecured notes due January 2031 priced at a slight discount to par to repay indebtedness under its Revolver. On August 18, 2020 the Company issued an additional $200 million of 4.00% senior unsecured notes due January 2031 at a premium to repay Term Loan A-1 indebtedness, incurring a loss on the early extinguishment of debt of $0.8 million, related to debt issuance write-offs. These bond offerings have extended the maturities of our long-term debt.

At September 30, 2020, the Company had $5,375.0 million of outstanding senior unsecured notes (the "Senior Notes"). Each of the Company's Senior Notes contain covenants limiting the Company’s ability to: incur additional debt and use its assets to secure debt; merge or consolidate with another company; and make certain amendments to the Penn Master Lease. The Senior Notes also require the Company to maintain a specified ratio of unencumbered assets to unsecured debt. These covenants are subject to a number of important and significant limitations, qualifications and exceptions.
 
At September 30, 2020, the Company was in compliance with all required financial covenants under its Senior Notes.


10. Fair Value of Financial Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are classified based upon the level of judgment associated with the inputs used to measure their fair value. ASC 820 - Fair Value Measurements and Disclosures ("ASC 820") establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). The levels of the hierarchy related to the subjectivity of the valuation inputs are described below:

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. 

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets, such as interest rates and yield curves that are observable at commonly quoted intervals. 

Level 3: Unobservable inputs that reflect the reporting entity's own assumptions, as there is little, if any, related market activity.
        
    The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy.

Assets and Liabilities Measured at Fair Value
 
The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate.

Cash and Cash Equivalents
 
The fair value of the Company’s cash and cash equivalents approximates the carrying value of the Company’s cash and cash equivalents, due to the short maturity of the cash equivalents.

Deferred Compensation Plan Assets

The Company's deferred compensation plan assets consist of open-ended mutual funds and as such the fair value measurement of the assets is considered a Level 1 measurement as defined under ASC 820. Deferred compensation plan assets are included within other assets on the condensed consolidated balance sheets.


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Real Estate Loans

The fair value of the real estate loans approximates the carrying value of the Company's real estate loans, as collection on the outstanding loan balances is reasonably assured. The fair value measurement of the real estate loans is considered a Level 3 measurement as defined under ASC 820.

Long-term Debt
 
The fair value of the Senior Unsecured Notes are estimated based on quoted prices in active markets and as such are Level 1 measurements as defined under ASC 820. The fair value of the obligations in our Amended Credit Facility is based on indicative pricing from market information (Level 2 inputs).

The estimated fair values of the Company’s financial instruments are as follows (in thousands):
  September 30, 2020 December 31, 2019
  Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Financial assets:        
Cash and cash equivalents
$ 105,894  $ 105,894  $ 26,823  $ 26,823 
Deferred compensation plan assets
31,298  31,298  28,855  28,855 
Real estate loans
—  —  303,684  303,684 
Financial liabilities:        
Long-term debt:        
Senior unsecured credit facility 424,019  424,019  495,000  493,533 
Senior unsecured notes 5,375,000  5,802,923  5,290,174  5,707,996 

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
There were no liabilities measured at fair value on a nonrecurring basis during the nine months ended September 30, 2020 and 2019.  There were no assets measured at fair value on a nonrecurring basis during the nine months ended September 30, 2020; however, assets measured at fair value on a nonrecurring basis during the nine months ended September 30, 2019 are described below.
Loan Receivable
During the first quarter of 2019, the Company recorded an impairment charge of $13.0 million related to the write-off of the principal due to the Company under the Casino Queen Loan. 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 repay the remaining term loan principal balance of $13.0 million due to the Company, this amount was written off and an impairment charge was recorded in the condensed consolidated statement of income for the nine months ended September 30, 2019. See Note 7 for further details surrounding the Casino Queen Loan.

11.              Commitments and Contingencies
 
Litigation

The Company is subject to various legal and administrative proceedings relating to personal injuries, employment matters, commercial transactions, and other matters arising in the normal course of business. The Company does not believe that the final outcome of these matters will have a material adverse effect on the Company’s consolidated financial position or results of operations. In addition, the Company maintains what it believes is adequate insurance coverage to further mitigate the risks of such proceedings. However, such proceedings can be costly, time consuming, and unpredictable and, therefore, no assurance can be given that the final outcome of such proceedings may not materially impact the Company’s financial condition or results of operations. Further, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters. 

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12. Revenue Recognition

As of September 30, 2020, 19 of the Company’s real estate investment properties were leased to a subsidiary of Penn under the Penn Master Lease, an additional 12 of the Company's real estate investment properties were leased to a subsidiary of Penn under the Amended Pinnacle Master Lease, 6 of the Company's real estate investment properties were leased to a subsidiary of Caesars under the Caesars Master Lease and the Lumière Place Lease and 4 of the Company's real estate investment properties were leased to a subsidiary of Boyd under the Boyd Master Lease and the Belterra Park Lease. Additionally, the Meadows real estate assets are leased to Penn under a single property triple-net lease (the "Meadows Lease") and the Casino Queen real estate assets are leased back to the operator under the Casino Queen Lease.

The obligations under the Penn Master Lease and Amended Pinnacle Master Lease, as well as the Meadows Lease, are guaranteed by Penn and, with respect to each lease, jointly and severally by Penn's subsidiaries that occupy and operate the facilities covered by such lease. Similarly, the obligations under the Caesars Master Lease are jointly and severally guaranteed by Caesars and by most of Caesar's subsidiaries that occupy and operate the facilities leased under the Caesars Master Lease. The obligations under the Boyd Master Lease are jointly and severally guaranteed by Boyd's subsidiaries that occupy and operate the facilities leased under the Boyd Master Lease.
The rent structure under the Penn Master Lease includes a fixed component, a portion of which is subject to an annual 2% escalator if certain rent coverage ratio thresholds are met, and a component that is based on the performance of the facilities, which is adjusted, subject to certain floors (i) every five years to an amount equal to 4% of the average net revenues of all facilities under the Penn Master Lease (other than Hollywood Casino Columbus and Hollywood Casino Toledo) during the preceding five years, and (ii) monthly by an amount equal to 20% of the net revenues of Hollywood Casino Columbus and Hollywood Casino Toledo during the preceding month, although Hollywood Casino Toledo has a monthly percentage rent floor which equals $22.9 million annually.

Similar to the Penn Master Lease, the Amended Pinnacle Master Lease also includes a fixed component, a portion of which is subject to an annual 2% escalator if certain rent coverage ratio thresholds are met and a component that is based on the performance of the facilities, which is adjusted, subject to certain floors, every two years to an amount equal to 4% of the average annual net revenues of all facilities under the Amended Pinnacle Master Lease during the preceding two years. The Amended Pinnacle Master Lease reset on May 1, 2020 which resulted in an annual decline of $5.0 million.

On June 15, 2020, the Company amended and restated the Caesars Master Lease (as amended, the "Amended and Restated Caesars Master Lease") to, (i) extend the initial term of 15 years to 20 years, with renewals of up to an additional 20 years at the option of Caesars, (ii) remove the variable rent component in its entirety commencing with the third lease year, (iii) in the third lease year increase annual land base rent to approximately $23.6 million and annual building base rent to approximately $62.1 million, (iv) provide fixed escalation percentages that delay the escalation of building base rent until the commencement of the fifth lease year with building base rent increasing annually by 1.25% in the fifth and sixth lease year, 1.75% in the seventh and eighth lease years and 2% in the ninth lease year and each lease year thereafter, (v) subject to the satisfaction of certain conditions, permit Caesars to elect to replace the Tropicana Evansville and/or Tropicana Greenville properties under the Amended and Restated Caesars Master Lease with one or more of Caesars Gaming Scioto Downs, The Row in Reno, Isle Casino Racing Pompano Park, Isle Casino Hotel – Black Hawk, Lady Luck Casino – Black Hawk, Isle Casino Waterloo, Isle Casino Bettendorf or Isle of Capri Casino Boonville, provided that the aggregate value of such new property, individually or collectively, is at least equal to the value of Tropicana Evansville or Tropicana Greenville, as applicable (see Note 18 for further discussion) (vi) permit Caesars to elect to sell its interest in Belle of Baton Rouge and sever it from the Amended and Restated Caesars Master Lease (with no change to the rent obligation to the Company), subject to the satisfaction of certain conditions, and (vii) provide certain relief under the operating, capital expenditure and financial covenants thereunder in the event of facility closures due to pandemics, governmental restrictions and certain other instances of unavoidable delay. The effectiveness of the Amended and Restated Caesars Master Lease was subject to the review of certain gaming regulatory agencies and the expiration of applicable gaming regulatory advance notice periods which were received on July 23, 2020.

This modification was accounted for as a new lease which the Company concluded continued to meet the criteria for operating lease treatment. As a result, the existing deferred revenue at the time of the amendment of $21.2 million will be recognized to the income statement over the Amended and Restated Caesars Master Lease's new initial lease term, which now expires in September 2038. The Company has concluded the renewal options of up to an additional 20 years at the tenants' option are not reasonably certain of being exercised as failure to renew would not result in a significant penalty to the tenant. In addition, the guaranteed fixed escalations in the new initial lease term will be recognized on a straight line basis.

The Boyd Master Lease includes a fixed component, a portion of which is subject to an annual 2% escalator if certain rent coverage ratio thresholds are met, and a component that is based on the performance of the facilities, which is adjusted,
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subject to certain floors, every two years to an amount equal to 4% of the average annual net revenues of all facilities under the Boyd Master Lease during the preceding two years. The Boyd Master Lease reset on May 1, 2020 which resulted in an annual rent decline of $1.5 million.

In May 2020, the Company acquired the real estate of Belterra Park in satisfaction of the loan, subject to the Belterra Park Lease. 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. The Belterra Park Lease rent terms are consistent with the Boyd Master Lease in that the rent includes a fixed component which totals $4.6 million, $2.7 million of which is subject to an annual escalator of up to 2% if certain rent coverage ratio thresholds are met and a component that is based on the performance of the facilities, which is adjusted, subject to certain floors, every two years to an amount equal to 4% of the average annual net revenues of Belterra Park during the preceding two years.

On September 29, 2020, the Company acquired the real estate of Lumière Place in satisfaction of the CZR loan, subject to the Lumière Place Lease, whose initial term expires on October 31, 2033 and has 4 separate renewal options of five years each, exercisable at the tenants' option. The Lumière Place Lease rent is $22.8 million annually and is subject to an annual escalator of up to 2% if certain rent coverage ratio thresholds are met.

The Meadows Lease contains a fixed component, subject to annual escalators, and a component that is based on the performance of the facility, which is reset every two years to an amount determined by multiplying (i) 4% by (ii) the average annual net revenues of the facility for the trailing two-year period. The Meadows Lease contains an annual escalator provision for up to 5% of the base rent, if certain rent coverage ratio thresholds are met, which remains at 5% until the earlier of ten years or the year in which total rent is $31.0 million, at which point the escalator will be reduced to 2% annually thereafter. The percentage rent reset for the two year period ended September 30, 2020 recently concluded which will result in an annual reduction of $2.1 million.

The rent structure under the Casino Queen Lease also includes a fixed component, a portion of which is subject to an annual 2% escalator if certain rent coverage ratio thresholds are met, and a component that is based on the performance of the facility, which is reset every five years to an amount equal to the greater of (i) the annual amount of non-fixed rent applicable for the lease year immediately preceding such rent reset year and (ii) an amount equal to 4% of the average annual net revenues of the facility for the trailing five-year period.

Furthermore, the Company's master leases provide for a floor on the percentage rent described above, should the Company's tenants acquire or commence operating a competing facility within a restricted area (typically 60 miles from a property under the existing master lease with such tenant). These clauses provide landlord protections by basing the percentage rent floor for any affected facility on the net revenues of such facility for the calendar year immediately preceding the year in which the competing facility is acquired or first operated by the tenant. For example, a percentage rent floor of $22.9 million per year was triggered on Penn's Hollywood Casino Toledo property as a result of Penn's May 2019 purchase of the operations of the Greektown Casino-Hotel in Detroit, Michigan.

In addition to rent, as triple-net lessees, all of the Company's tenants are required to pay the following executory costs: (1) all facility maintenance, (2) all insurance required in connection with the leased properties and the business conducted on the leased properties, including coverage of the landlord's interests, (3) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor) and (4) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.

The Company determined, based on facts and circumstances prevailing at the time of each lease's inception, that neither Penn nor Casino Queen could continue as a going concern without the property(ies) that are leased to them under the Penn Master Lease and Casino Queen Lease, respectively. At lease inception, all of Casino Queen's revenues and substantially all of Penn's revenues were generated from operations in connection with the leased properties. There are also various legal restrictions in the jurisdictions in which Penn and Casino Queen operate that limit the availability and location of gaming facilities, which makes relocation or replacement of the leased gaming facilities restrictive and potentially impracticable. Moreover, under the terms of the Penn Master Lease, Penn must make renewal elections with respect to all of the leased property together; the tenant is not entitled to selectively renew certain of the leased property while not renewing other property. Accordingly, the Company concluded that failure by Penn or Casino Queen to renew the Penn Master Lease or Casino Queen Lease, respectively, would impose a significant penalty on such tenant such that renewal of all lease renewal options appeared at lease inception to be reasonably assured. Therefore, the Company concluded that the term of the Penn Master Lease and the Casino Queen Lease is 35 years, equal to the initial 15-year term plus all four of the 5-year renewal options.
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On October 15, 2018, in conjunction with the Penn-Pinnacle Merger, the Pinnacle Master Lease was amended by a fourth amendment 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. As a result of this amendment, the Company reassessed the lease's classification and determined the Amended Pinnacle Master Lease qualified for operating lease treatment under ASC 840. Therefore, subsequent to the Penn-Pinnacle Merger, the Amended Pinnacle Master Lease is treated as an operating lease in its entirety. Because the properties under the Amended Pinnacle Master Lease did not represent a meaningful portion of Penn's business at the time Penn assumed the Amended Pinnacle Master Lease, the Company concluded that the lease term of the Amended Pinnacle Master Lease is 10 years, equal to the initial 10-year term only.

Because the Meadows Lease was a single property lease operated by a large multi-property operator, GLPI concluded it was not reasonably assured at lease inception that the operator would elect to exercise all lease renewal options. Therefore, the Company concluded that the lease term of the Meadows Lease is 10 years, equal to the initial 10-year term only. In conjunction with the Penn-Pinnacle Merger, Penn assumed the Meadows Lease from Pinnacle. The accounting for the Meadows Lease, including the lease term, was not impacted by the change in tenant. Based upon similar fact patterns, the Company concluded it was not reasonably assured at lease inception that Caesars or Boyd would elect to exercise all lease renewal options under the Caesars Master Lease and the Boyd Master Lease as the earnings from these properties did not represent a meaningful portion of either Caesars or Boyd's business at lease inception. Therefore, the Company concluded that the lease term of the Caesars Master Lease was 15 years and the lease term of the Boyd Master Lease is 10 years, equal to only the initial terms of such master leases.


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Details of the Company's rental income for the three and nine months ended September 30, 2020 was as follows (in thousands):
Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
Building base rent (1)
$ 167,362  $ 500,431 
Land base rent 48,065  143,566 
Percentage rent (2)
42,690  112,708 
Total cash rental income $ 258,117  $ 756,705 
Straight-line rent adjustments 4,928  (5,394)
Ground rent in revenue 4,476  11,239 
Other rental revenue 34  161 
Total rental income $ 267,555  $ 762,711 

(1) Building base rent is subject to the annual rent escalators described above.

(2) Percentage rent is subject to the certain floors as described above.

As of September 30, 2020, the future minimum rental income from the Company's rental properties under non-cancelable operating leases, including any reasonably assured renewal periods, was as follows (in thousands):

Future Rental Income Future Rental Payments Receivable Straight-Line Rent Adjustments Future Income to be Recognized Related to Ground Leases (Non Cash) Future Income to be Recognized Related to Operating Leases
Year ending December 31,
2020 253,693  814  3,010  257,517 
2021 1,014,961  3,255  12,045  1,030,261 
2022 987,266  22,124  12,051  1,021,441 
2023 961,807  30,877  12,057  1,004,741 
2024 929,486  30,008  12,063  971,557 
Thereafter 13,411,936  246,801  123,028  13,781,765 
Total $ 17,559,149  333,879  174,254  18,067,282 

The table above presents the cash rent the Company expects to receive from its tenants (incorporating the events that were completed on October 1, 2020 discussed in Note 18), offset by adjustments to recognize this rent on a straight-line basis over the lease term. The Company also includes the future non-cash revenue it expects to recognize from the fixed portion of tenant paid ground leases in the table above.
The Company may periodically loan funds to casino owner-operators for the purchase of real estate. Interest income related to real estate loans is recorded as interest income from real estate loans within the Company's condensed consolidated statements of income in the period earned. At September 30, 2020, the Company no longer has any loans outstanding. See Note 7 for additional details.
Gaming, Food, Beverage and Other Revenues
Gaming revenue generated by the TRS Properties mainly consists of revenue from slot machines, and to a lesser extent, table game and poker revenue. Gaming revenue is recognized net of certain sales incentives, including promotional allowances in accordance with ASC 606 - Revenue from Contracts with Customers. The Company also defers a portion of the revenue received from customers (who participate in points-based loyalty programs) at the time of play until a later period when the points are redeemed or forfeited. Other revenues at our TRS Properties are derived from our dining, retail and certain other ancillary activities.

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13. Earnings Per Share
 
The Company calculates earnings per share ("EPS") in accordance with ASC 260 - Earnings per Share ("ASC 260"). Basic EPS is computed by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period, excluding net income attributable to participating securities (unvested restricted stock awards). Diluted EPS reflects the additional dilution for all potentially-dilutive securities such as stock options, unvested restricted shares and unvested performance-based restricted shares. In accordance with ASC 260, the Company includes all performance-based restricted shares that would have vested based upon the Company’s performance at quarter-end in the calculation of diluted EPS. Diluted EPS for the Company's common stock is computed using the more dilutive of the two-class method or the treasury stock method.

The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the three and nine months ended September 30, 2020 and 2019: 
        
  Three Months Ended September 30, Nine Months Ended September 30,
  2020 2019 2020 2019
  (in thousands)
Determination of shares:        
Weighted-average common shares outstanding 218,042  214,683  216,140  214,658 
Assumed conversion of restricted stock awards 110  127  56  96 
Assumed conversion of performance-based restricted stock awards
695  515  716  464 
Diluted weighted-average common shares outstanding 218,847  215,325  216,912  215,218 

The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the three and nine months ended September 30, 2020 and 2019: 
        
  Three Months Ended September 30, Nine Months Ended September 30,
  2020 2019 2020 2019
  (in thousands, except per share and share data)
Calculation of basic EPS:        
Net income $ 127,126  $ 90,547  $ 336,370  $ 276,590 
Less: Net income allocated to participating securities (152) (138) (406) (420)
Net income attributable to common shareholders $ 126,974  $ 90,409  $ 335,964  $ 276,170 
Weighted-average common shares outstanding 218,042  214,683  216,140  214,658 
Basic EPS $ 0.58  $ 0.42  $ 1.55  $ 1.29 
Calculation of diluted EPS:        
Net income $ 127,126  $ 90,547  $ 336,370  $ 276,590 
Diluted weighted-average common shares outstanding 218,847  215,325  216,912  215,218 
Diluted EPS $ 0.58  $ 0.42  $ 1.55  $ 1.29 
Antidilutive securities excluded from the computation of diluted earnings per share (in shares)
6,892  —  38,459  57,494 

14.              Shareholders' Equity

Common Stock

On August 14, 2019, the Company commenced a continuous equity offering under which the Company may sell up to an aggregate of $600 million of its common stock from time to time through a sales agent in "at the market" offerings (the "ATM Program"). Actual sales will depend on a variety of factors, including market conditions, the trading price of the Company's common stock and determinations of the appropriate sources of funding. The Company may sell the shares in
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amounts and at times to be determined by the Company, but has no obligation to sell any of the shares in the ATM Program. The ATM Program also allows the Company to enter into forward sale agreements. In no event will the aggregate number of shares sold under the ATM Program (whether under any forward sale agreement or through a sales agent), have an aggregate sales price in excess of $600 million. If the Company enters into a forward sale contract, the Company expects to physically settle such forward sale agreement with the forward purchaser on one or more dates specified by the Company prior to the maturity date of that particular forward sale agreement, in which case the aggregate net cash proceeds at settlement will equal the number of shares underlying the particular forward sale agreement multiplied by the relevant forward sale price. However, the Company may also elect to cash settle or net share settle a particular forward sale agreement, in which case proceeds may or may not be received or cash may be owed to the forward purchaser.

In connection with the ATM Program, the Company engaged a sales agent who may receive compensation of up to 2% of the gross sales price of the shares sold. Similarly, in the event the Company enters into a forward sale agreement, it will pay the relevant forward seller a commission of up to 2% of the sales price of all borrowed shares of common stock sold during the applicable selling period of the forward sale agreement.
During the three and nine months ended September 30, 2020, the Company sold zero shares and 7,971 shares of its common stock under the ATM Program at an average price of $45.90 per share, which generated gross proceeds of approximately $0.4 million (net proceeds of approximately $0.2 million). As of September 30, 2020, the Company had $599.6 million remaining for issuance under the ATM Program and had not entered into any forward sale agreements.

Dividends

The following table lists the dividends declared and paid by the Company during the nine months ended September 30, 2020 and 2019:
Declaration Date Shareholder Record Date Securities Class Dividend Per Share Period Covered Distribution Date
Dividend Amount (1)
(in thousands)
2020
February 20, 2020 March 6, 2020 Common Stock $ 0.70  First Quarter 2020 March 20, 2020 $ 150,574 
April 29, 2020 May 13, 2020 Common Stock $ 0.60  Second Quarter 2020 June 26, 2020 $ 129,071 
August 6, 2020 August 17, 2020 Common Stock $ 0.60  Third Quarter 2020 September 25, 2020 $ 130,697 
2019
February 19, 2019 March 8, 2019 Common Stock $ 0.68  First Quarter 2019 March 22, 2019 $ 145,954 
May 28, 2019 June 14, 2019 Common Stock $ 0.68  Second Quarter 2019 June 28, 2019 $ 145,978 
August 20, 2019 September 6, 2019 Common Stock $ 0.68  Third Quarter 2019 September 20, 2019 $ 145,984 
(1) Dividend distributed on June 26, 2020 was paid $25.8 million in cash and $103.2 million in stock (2,697,946 shares at $38.2643). Dividend distributed on September 25, 2020 was paid $26.2 million in cash and $104.5 million in stock (2,767,704 shares at $37.7635). For accounting purposes, since the Company is in an accumulated deficit position the value of the stock dividend was recorded at its par value.
In addition, for both the three and nine months ended September 30, 2020 and 2019, dividend payments were made to GLPI restricted stock award holders in the amount of $0.2 million and $0.6 million, respectively. Dividends distributed to the Company's employees on June 26, 2020 were paid $33 thousand in cash and $153 thousand in stock (4,006 shares at $38.2643). Dividends distributed to the Company's employees on September 25, 2020 were paid $32 thousand in cash and $217 thousand in stock (5,746 shares at $37.7635).


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15. Stock-Based Compensation
 
The Company accounts for stock compensation under ASC 718 - Compensation - Stock Compensation, which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This expense is recognized ratably over the requisite service period following the date of grant. The fair value of the Company's time-based restricted stock awards is equivalent to the closing stock price on the day prior to grant. The Company utilizes a third party valuation firm to measure the fair value of performance-based restricted stock awards at grant date using the Monte Carlo model.
 
As of September 30, 2020, there was $4.5 million of total unrecognized compensation cost for restricted stock awards that will be recognized over the grants' remaining weighted average vesting period of 1.56 years. For the three and nine months ended September 30, 2020, the Company recognized $4.5 million and $8.0 million of compensation expense associated with these awards, compared to $1.7 million and $5.8 million for the three and nine months ended September 30, 2019. The increase from prior year is primarily related to the stock acceleration charges related to the departure of our former chief financial officer.

The following table contains information on restricted stock award activity for the nine months ended September 30, 2020:
  Number of Award
Shares
Outstanding at December 31, 2019 316,971 
Granted 275,456 
Released (323,128)
Canceled (7,999)
Outstanding at September 30, 2020 261,300 
 
Performance-based restricted stock awards have a three-year cliff vesting with the amount of restricted shares vesting at the end of the three-year period determined based upon the Company’s performance as measured against its peers.  More specifically, the percentage of shares vesting at the end of the measurement period will be based on the Company’s three-year total shareholder return measured against the three-year total shareholder return of the companies included in the MSCI US REIT index and the Company's stock performance ranking among a group of triple-net REIT peer companies. The triple-net measurement group includes publicly traded REITs, which the Company believes derive at least 75% of revenues from triple-net leases. As of September 30, 2020, there was $11.1 million of total unrecognized compensation cost, which will be recognized over the performance-based restricted stock awards' remaining weighted average vesting period of 1.87 years.  For the three and nine months ended September 30, 2020, the Company recognized $3.9 million and $8.7 million of compensation expense associated with these awards, compared to $2.1 million and $6.5 million for the three and nine months ended September 30, 2019. The increase from prior year is primarily related to the stock acceleration charges related to the departure of our former chief financial officer.

The following table contains information on performance-based restricted stock award activity for the nine months ended September 30, 2020:
Number of 
Performance-Based Award Shares
Outstanding at December 31, 2019 1,383,334 
Granted 504,000 
Released (561,667)
Canceled (131,673)
Outstanding at September 30, 2020 1,193,994 


16.       Segment Information

Consistent with how the Company’s Chief Operating Decision Maker (as such term is defined in ASC 280 - Segment Reporting) reviews and assesses the Company’s financial performance, the Company has two reportable segments, GLP Capital (a wholly-owned subsidiary of GLPI through which GLPI owns substantially all of its assets) and the TRS Properties. The GLP Capital reportable segment consists of the leased real property and represents the majority of the Company’s business. The TRS
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Properties reportable segment consists of Hollywood Casino Perryville, Hollywood Casino Baton Rouge and Tropicana Las Vegas.

The following tables present certain information with respect to the Company’s segments.

  Three months ended September 30, 2020 Three months ended September 30, 2019
(in thousands)
GLP Capital (1)
TRS Properties Total
GLP Capital (1)
TRS Properties Total
Total revenues $ 273,129  $ 34,425  $ 307,554  $ 255,995  $ 31,617  $ 287,612 
Income from operations 192,369  8,332  200,701  181,947  5,678  187,625 
Interest expense 65,720  4,459  70,179  72,510  2,601  75,111 
Income before income taxes 125,892  3,873  129,765  88,657  3,078  91,735 
Income tax expense 206  2,433  2,639  196  992  1,188 
Net income 125,686  1,440  127,126  88,461  2,086  90,547 
Depreciation 55,595  2,485  58,080  55,544  1,758  57,302 
Capital maintenance expenditures 11  477  488  —  709  709 
 
Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019
(in thousands)
GLP Capital (1)
TRS Properties Total
GLP Capital (1)
TRS Properties Total
Total revenues $ 781,841  $ 71,163  $ 853,004  766,630  $ 97,859  $ 864,489 
Income from operations 557,751  10,016  567,767  510,884  18,283  529,167 
Interest expense 200,137  11,520  211,657  220,558  7,804  228,362 
Income (loss) before income taxes 339,990  (1,502) 338,488  269,882  10,481  280,363 
Income tax expense 515  1,603  2,118  461  3,312  3,773 
Net income (loss) 339,475  (3,105) 336,370  269,421  7,169  276,590 
Depreciation 165,420  6,613  172,033  177,786  5,959  183,745 
Capital maintenance expenditures 155  1,474  1,629  2,252  2,256 

(1)              Interest expense is net of intercompany interest eliminations of $4.5 million and $11.5 million for the three and nine months ended September 30, 2020, respectively, compared to $2.6 million and $7.8 million for the three and nine months ended September 30, 2019, respectively.

17.       Supplemental Disclosures of Cash Flow Information and Noncash Activities

Supplemental disclosures of cash flow information are as follows:
  Three Months Ended September 30, Nine Months Ended September 30,
  2020 2019 2020 2019
(in thousands)
Cash paid for income taxes, net of refunds received
$ 1,945  $ 1,418  $ 1,054  $ 4,102 
Cash paid for interest
$ 43,647  $ 41,163  $ 182,257  $ 180,494 

Noncash Investing and Financing Activities

On January 1, 2019, in conjunction with its adoption of ASU 2016-02, the Company recorded right-of-use assets and related lease liabilities of $203 million on its condensed consolidated balance sheet to represent its rights to underlying assets and future lease obligations. On April 16, 2020, the Company acquired from Penn the real property associated with the Tropicana Las Vegas in exchange for rent credits of $307.5 million. Additionally, in the nine months ended September 30, 2020, the Company acquired the real property of Belterra Park in satisfaction of the real estate loan of $57.7 million held on the property, subject to the Belterra Park Lease and acquired the real property of Lumière Place in satisfaction of the $246.0 million loan subject to the Lumière Place Lease. Additionally, see Note 14 for a description of the stock dividend that has been distributed in 2020. The Company did not engage in any other noncash investing or any noncash financing activities during the nine months ended September 30, 2020 and 2019.



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18.       Subsequent Events

On October 1, 2020, the Company and Penn closed on their previously announced transaction whereby GLPI acquired the land under Penn's gaming facility under construction in Morgantown, Pennsylvania in exchange for $30.0 million in rent credits. The Company is leasing the land back to an affiliate of Penn for an initial annual rent of $3.0 million, subject to escalation provisions following the opening of the property. Additionally on October 1, 2020, Penn exercised the next scheduled five-year renewals under both the Penn Master Lease and the Amended Pinnacle Master Lease.

As described in Note 12, the Caesars Amended and Restated Master Lease permits Caesars, subject to the satisfaction of certain conditions, to elect to replace the Tropicana Evansville and/or Tropicana Greenville properties under the lease with one or more properties owned by Caesars, provided that the aggregate value of such new property or properties, individually or collectively, is at least equal to the value of Tropicana Evansville or Tropicana Greenville, as applicable. On October 27, 2020, the Company entered into an Exchange Agreement with subsidiaries of Caesars that own, respectively, the Isle Casino & Hotel, Waterloo, Iowa ("Waterloo") and the Isle Casino & Hotel, Bettendorf, Iowa ("Bettendorf"). Pursuant to the terms of the agreement, Caesars will transfer to the Company the real estate assets of the Waterloo and Bettendorf properties in exchange for the transfer by the Company to Caesars of the real property assets of the Tropicana Evansville, plus a cash payment of $5.72 million. At the closing of the exchange transaction, which is expected by end of 2020, the Waterloo and Bettendorf facilities will be added to the Caesars Amended and Restated Master Lease and the rent will increase by approximately $520,000 annually.

On October 27, 2020, the Company entered into a series of definitive agreements pursuant to which a subsidiary of Twin River Worldwide Holdings, Inc. (“Twin River”) (NYSE: TRWH) will acquire 100% of the equity interests in the Caesars subsidiary that currently operates Tropicana Evansville and the Company will reacquire the real property assets of Tropicana Evansville from Caesars for a cash purchase price of approximately $340.0 million. In addition, the Company entered into a real estate purchase agreement with Twin River pursuant to which the Company will purchase the real estate assets of the Dover Downs Hotel & Casino, located in Dover, Delaware which is currently owned and operated by Twin River, for a cash purchase price of approximately $144.0 million. At the closing of the transactions, which are expected in mid-2021, subject to regulatory approvals, the Tropicana Evansville and Dover Downs Hotel and Casino facilities will be added to a new master lease between the Company and Twin River (the “Twin River Master Lease”). The Company anticipates that the Twin River Master Lease will have an initial term of 15 years, with no purchase option, followed by four five-year renewal options (exercisable by Twin River) on the same terms and conditions. Rent under the Twin River Master Lease will be $40.0 million annually and is subject to an annual escalator of up to 2% determined in relation to the annual increase in Consumer Price Index.

Twin River is a multi-jurisdictional owner of gaming and racing facilities, including slot machines, video lottery terminals and various casino table games, and restaurant and hotel facilities. Twin River is a publicly traded company (NYSE: TRWH) that is subject to the informational filing requirements of the Securities and Exchange Act of 1934, as amended, and is required to file periodic reports on Form 10-K and Form 10-Q with the Securities and Exchange Commission.



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Our Operations

Gaming and Leisure Properties, Inc. ("GLPI") is a self-administered and self-managed Real Estate Investment Trust ("REIT"). The Company was formed from the 2013 tax-free spin-off of the real estate assets of Penn National Gaming, Inc. (NASDAQ: PENN) ("Penn") and was incorporated in Pennsylvania on February 13, 2013, as a wholly-owned subsidiary of 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 Company elected on its U.S. federal income tax return for its taxable year that began on January 1, 2014 to be treated as a REIT and the Company, together with an indirect wholly-owned subsidiary of the Company, 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" effective on the first day of the first taxable year of GLPI as a REIT. 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 owns and operates the TRS Properties through its indirect wholly-owned subsidiary, GLP Holdings, Inc. The assets and liabilities of GLPI were recorded at their respective historical carrying values at the time of the Spin-Off.

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, 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, Inc. (NYSE: BYD) ("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 for these properties on terms similar to the Company’s Amended Pinnacle Master Lease (the "Boyd 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 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, 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 rent terms are consistent with the Boyd Master Lease. The current annual rent is $6.4 million, which is comprised of fixed component which totals $4.6 million, $2.7 million of which is subject to an annual escalator of up to 2% if certain rent coverage ratio thresholds are met and a component that is based on the performance of the facilities that currently totals $1.8 million, which is adjusted, subject to certain floors, every two years to an amount equal to 4% of the average annual net revenues of Belterra Park during the preceding two years.

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, 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
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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"). Additionally, on October 1, 2018, the Company entered into a loan agreement with Caesars in connection with Caesars's acquisition of Lumière Place, whereby the Company loaned Caesars $246.0 million (the "CZR loan"). The CZR loan bore 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. On June 24, 2020, the Company received approval from the Missouri Gaming Commission to own the Lumière Place property in satisfaction of the CZR loan. On September 29, 2020, the transaction closed and we entered into a new triple net lease with Caesars (the "Lumière Place Lease") whose initial term expires on October 31, 2033 with 4 separate renewal options of five years each, exercisable at the tenants' option. The Lumière Place Lease rent is $22.6 million annually and is subject to an annual escalator of up to 2% if certain rent coverage ratio thresholds are met.

On April 16, 2020, the Company and certain of its subsidiaries closed on its previously announced transaction to acquire the real property associated with the Tropicana Las Vegas Casino Hotel Resort ("Tropicana Las Vegas") from Penn in exchange for rent credits of $307.5 million, which were applied against future rent obligations due under the parties' existing leases and as of the date of this filing have been fully utilized.

On June 15, 2020, the Company entered into an agreement, subject to regulatory approvals, to amend and restate the Caesars Master Lease (as amended, the "Amended and Restated Caesars Master Lease") to, (i) extend the initial term of 15 years to 20 years, with renewals of up to an additional 20 years at the option of the Caesars, (ii) remove the variable rent component in its entirety, commencing with the third lease year, (iii) in the third lease year increase annual land base rent to approximately $23.6 million and annual building base rent to approximately $62.1 million, (iv) provide fixed escalation percentages that delay the escalation of building base rent until the commencement of the fifth lease year with building base rent increasing annually by 1.25% in the fifth and sixth lease year, 1.75% in the seventh and eighth lease years and 2% in the ninth lease year and each lease year thereafter, (v) subject to the satisfaction of certain conditions, permit Caesars to elect to replace the Tropicana Evansville and/or Tropicana Greenville properties under the Amended and Restated Caesars Master Lease with one or more of Caesars Gaming Scioto Downs, The Row in Reno, Isle Casino Racing Pompano Park, Isle Casino Hotel – Black Hawk, Lady Luck Casino – Black Hawk, Isle Casino Waterloo, Isle Casino Bettendorf or Isle of Capri Casino Boonville, provided that the aggregate value of such new property, individually or collectively, is at least equal to the value of Tropicana Evansville or Tropicana Greenville, as applicable (see Note 18 to the Condensed Consolidated Financial Statements for further discussion), (vi) permit Caesars to elect to sell its interest in Belle of Baton Rouge and sever it from the Amended and Restated Caesars Master Lease, subject to the satisfaction of certain conditions, and (vii) provide certain relief under the operating, capital expenditure and financial covenants thereunder in the event of facility closures due to pandemics, governmental restrictions and certain other instances of unavoidable delay. The Caesars Amended and Restated Master Lease became effective on July 23, 2020 when all of the necessary regulatory approvals were received and notice periods were satisfied.

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 September 30, 2020, GLPI's portfolio consisted of interests in 46 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 6 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, including our corporate headquarters building, are geographically diversified across 16 states and contain approximately 24.1 million square feet. As of September 30, 2020, our properties were 100% occupied.

As of September 30, 2020, the majority of our earnings are the result of the rental revenues we receive from our triple-net master leases with Penn, Boyd and Caesars. Additionally, we have rental revenue from triple-net leases on the following properties: the Casino Queen property which is leased back to a third-party operator (the "Casino Queen Lease"), the Meadows property which is leased to Penn (the "Meadows Lease"), the Belterra Park property which is leased to an affiliate of Boyd and the Lumière Place property which is leased to Caesars. In addition to rent, the tenants are required to pay the following executory costs: (1) all facility maintenance, (2) all insurance required in connection with the leased properties and the business conducted on the leased properties, including coverage of the landlord's interests, (3) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor) and (4) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.

Additionally, in accordance with Accounting Standards Codification ("ASC") 842, we record revenue for the ground lease rent paid by our tenants with an offsetting expense in land rights and ground lease expense within the condensed
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consolidated statement of income as we have concluded that as the lessee we are the primary obligor under the ground leases. We sublease these ground leases back to our tenants, who are responsible for payment directly to the landlord.

Gaming revenue for our TRS Properties is derived primarily from gaming on slot machines and to a lesser extent, table game and poker revenue, which is highly dependent upon the volume and spending levels of customers at our TRS Properties. Other revenues at our TRS Properties are derived from our dining, retail and certain other ancillary activities.
Recent Developments and Business Outlook
COVID-19

The spread of the novel coronavirus (COVID-19) and the recent developments surrounding the global pandemic are having material negative impacts on the global and United States economies that have resulted in an unprecedented drop in economic activity. In mid-March 2020, many businesses in the United States were forced to close by state governments in an effort to limit the spread of COVID-19, which resulted in record unemployment claims. As the U.S. economy began to reopen in the second quarter the unemployment rate, which was approximately 3.5% at the beginning of 2020, declined from its April 2020 peak of 14.7% to a still relatively high level of 7.9%. Additional impacts and recent developments include:

During the initial stages of the COVID-19 outbreak, federal, state and local government officials took steps to require various non-essential businesses to close to slow the spread of COVID-19. In mid-March 2020, all casinos were closed across the country, which in turn had a significant negative impact on our tenants' and our own operating results. Although the majority of casinos have reopened throughout the country, it is possible that individual jurisdictions may elect to close them again (as was done in Arizona) to mitigate continued increases in COVID-19 cases. In addition, although the results of our tenants operations since they have reopened have been quite strong, the continuation of these impressive results is uncertain, given the extent of damage to the economy. Our major tenants have raised significant amounts of liquidity through public capital market transactions recently and are all current on their rental obligations. However, if our tenants' properties are required to be closed again for an extended period of time, it is possible that our tenants may not be able to service their rent obligations. We may elect to enter into rent deferral agreements or accept non-cash assets to satisfy rent obligations in a manner similar to the transaction with Penn, which is discussed below.
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. We 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. In addition, on October 1, 2020, we completed the acquisition of the land under Penn's gaming facility under construction in Morgantown, Pennsylvania, in exchange for $30 million in rent credits. We are leasing the property back to an affiliate of Penn for an initial annual rent of $3.0 million, subject to escalation provisions following the opening of the property to the public. Penn will guaranty the performance of its affiliates under the Tropicana Las Vegas and Morgantown leases.

The Company granted Penn the exclusive right until December 31, 2020 to purchase from the Company the operations of our Hollywood Casino Perryville, located in Perryville, Maryland, for $31.1 million, with the closing of such purchase, provided Penn exercises its option and subject to regulatory approvals, expected to occur during calendar year 2021 on a date selected by Penn with reasonable prior notice to the Company unless otherwise agreed by both parties. Upon closing, the Company will lease the real estate of the Perryville facility to Penn pursuant to a lease providing for initial annual rent of $7.77 million, subject to escalation provisions.

On October 1, 2020 Penn exercised the next scheduled five-year renewals under each of its two master leases with the Company, and the terms of the master lease covering Penn’s Hollywood Casino at Penn National Racecourse, located in Grantville, Pennsylvania, will be amended to provide the Company with protection from any adverse impact on the lease escalation provisions resulting from decreased net revenues from such facility.

Also, the Company granted Penn the option to exercise an additional five-year renewal term at the end of the lease term for each of the two master leases, subject to certain regulatory approvals.

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The Company's wholly-owned and operated TRS Properties closed in mid-March 2020 due to the COVID-19 outbreak. Our property in Baton Rouge reopened on May 18, 2020 and our property in Perryville, Maryland reopened on June 19, 2020 with enhanced safety protocols and capacity restrictions. To date, both properties have performed well in spite of lower attendance levels; however we are unable to predict whether this will continue as we believe results have benefited from pent up demand and federal stimulus benefits.