ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Operations
GLPI is a self-administered and self-managed Pennsylvania REIT. The Company was formed from the 2013 tax-free spin-off of the real estate assets of 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 the TRS Properties and then spun-off GLPI to holders of Penn's common and preferred stock in 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. In addition, during 2020, the Company and Tropicana LV, LLC, a wholly owned subsidiary of the Company which holds the real estate of Tropicana Las Vegas, elected to treat Tropicana LV, LLC as a “taxable REIT subsidiary”. 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 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.
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 December 31, 2020, GLPI's portfolio consisted of interests in 48 gaming and related facilities, including the TRS Segment, the real property associated with 33 gaming and related facilities operated by Penn, the real property associated with 7 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 24.3 million square feet. As of December 31, 2020, our properties were 100% occupied. We expect to continue growing our portfolio by pursuing opportunities to acquire additional gaming facilities to lease to gaming operators under prudent terms.
Amended Pinnacle Master Lease, Boyd Master Lease and Belterra Park Lease
In April 2016, the Company acquired substantially all of the real estate assets of Pinnacle for approximately $4.8 billion. GLPI originally leased these assets back to Pinnacle, under the Pinnacle Master Lease, the term of which expires on April 30, 2031, with no purchase option, followed by four remaining 5-year renewal options (exercisable by the tenant) on the same terms and conditions. On October 15, 2018, the Company completed the previously announced Penn-Pinnacle Merger 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. 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 and entered into 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 the tenant) 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 the Belterra Park Loan with Boyd in connection with Boyd's acquisition of Belterra Park. In May 2020, the Company acquired the real estate of Belterra Park in satisfaction of the Belterra Park Loan, subject to 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 annual rent is comprised of a fixed component, part 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 in excess of a contractual baseline.
The Meadows Lease
The real estate assets of the Meadows are leased to Penn pursuant to the Meadows Lease. The Meadows Lease commenced on September 9, 2016 and has an initial term of 10 years, with no purchase option, and the option to renew for
three successive 5-year terms and one 4-year term (exercisable by the tenant) on the same terms and conditions. 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 million, at which point the escalator will be reduced to 2% annually thereafter.
Amended and Restated Caesars Master Lease and Lumière Place Lease
On October 1, 2018, the Company closed its previously announced transaction to acquire certain real property assets from Tropicana and certain of its affiliates pursuant to the Real Estate Purchase Agreement dated April 15, 2018 between Tropicana and GLP Capital, which was subsequently amended on October 1, 2018. 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 from Tropicana for an aggregate cash purchase price of $964.0 million, exclusive of transaction fees and taxes. Concurrent with the Tropicana Acquisition, 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, Caesars and a wholly-owned subsidiary of Caesars and leased the GLP Assets from the Company pursuant to the terms of the Caesars Master Lease. Additionally, on October 1, 2018, the Company entered into the CZR loan in connection with Caesars’s acquisition of Lumière Place. The CZR loan was satisfied and replaced with the Lumière Place Lease on September 29, 2020, the initial term of which 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 subject to an annual escalator of up to 2% if certain rent coverage ratio thresholds are met. 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, Waterloo, 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 (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. On December 18, 2020, the Company and Caesars completed an Exchange Agreement with subsidiaries of Caesars in which Caesars transferred to the Company the real estate assets of Waterloo and Bettendorf in exchange for the transfer by the Company to Caesars of the real property assets of Tropicana Evansville, plus a cash payment of $5.7 million.
Tropicana Las Vegas
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 from Penn in exchange for rent credits of $307.5 million, which were applied against future rent obligations due under the parties' existing leases during 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. 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.
Morgantown Lease
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 that were utilized by Penn in the fourth quarter of 2020. The Company is leasing the land back to an affiliate of Penn pursuant to the Morgantown Lease for an initial annual rent of $3.0 million, provided, however, that (i) on the opening date and on each anniversary thereafter the rent shall be increased by 1.5% annually (on a prorated basis for the remainder of the lease year in which the gaming facility opens) for each of the following three lease years and (ii) commencing on the fourth anniversary of the opening date and for each anniversary thereafter, (a) if the CPI increase is at least 0.5% for any lease year, the rent for such lease year shall increase by 1.25% of rent as of the immediately preceding lease year, and (b) if the CPI increase is less than 0.5% for such lease year, then the rent shall not increase for such lease year subject to escalation provisions following the opening of the property.
Hollywood Casino Baton Rouge
On November 25, 2020, the Company entered into a definitive agreement to sell the operations of our Hollywood Casino Baton Rouge to Casino Queen Holding Company Inc. ("Casino Queen") for $28.2 million. The Company will retain ownership of all real estate assets at Hollywood Casino Baton Rouge and will simultaneously enter into a master lease with Casino Queen, which will include the Casino Queen property in East St. Louis that is currently leased by us to them and the Hollywood Casino Baton Rouge facility. The initial annual cash rent will be approximately $21.4 million and the lease will have an initial term of 15 years with four 5 year renewal options exercisable by the tenant. This rental amount will be increased annually by 0.5% for the first six years. Beginning with the seventh lease year through the remainder of the lease term, if the CPI increases by at least 0.25% for any lease year then annual rent shall be increased by 1.25%, and if the CPI increase is less than 0.25% then rent will remain unchanged for such lease year.Additionally, the Company will complete the current landside development project that is in process and the rent under the master lease will be adjusted upon delivery to reflect a yield of 8.25% on GLPI's project costs. The Company will also have a right of first refusal with Casino Queen for other sale leaseback transactions up to $50 million over the next 2 years. Finally, upon the closing of the transaction, which is anticipated to occur in mid 2021, subject to regulatory approvals and customary closing conditions, GLPI will forgive the Casino Queen Loan which has been previously written off in return for a one-time cash payment of $4 million.
Hollywood Casino Perryville
On December 11, 2020, Penn agreed 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, 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 assets of the Perryville facility to Penn pursuant to a lease providing for initial annual rent of $7.77 million, $5.83 million of which will be subject to escalation provisions beginning in the second lease year through the fourth lease year and shall increase by 1.50% and then to 1.25% for the remaining lease term. The escalation provisions beginning in the fifth lease year are subject to CPI being at least 0.5% for the preceding lease year.
As of December 31, 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 the Casino Queen property which is leased back to a third-party operator on a triple-net basis pursuant to the Casino Queen Lease. 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 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 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.
Our Competitive Strengths
We believe the following competitive strengths will contribute significantly to our success:
Geographically Diverse Property Portfolio
As of December 31, 2020, our portfolio consisted of 48 gaming and related facilities, including 45 rental properties, the TRS Segment. Our portfolio, including our corporate headquarters building, comprises approximately 24.3 million square feet and approximately 5,700 acres of land and is broadly diversified by location across 16 states. We expect that our geographic diversification will limit the effect of a decline in any one regional market on our overall performance.
Financially Secure Tenants
Three of the company's tenants, Penn, Caesars and Boyd, are leading, diversified, multi-jurisdictional owners and managers of gaming and pari-mutuel properties and established gaming providers with strong financial performance. All three of these tenants raised significant amounts of capital in 2020 to bolster their liquidity positions in response to COVID-19. Additionally, all of the aforementioned tenants are publicly traded companies that are subject to the informational filing requirements of the Securities Exchange Act of 1934, as amended, and are required to file periodic reports on Form 10-K and Form 10-Q and current reports on Form 8-K with the Securities and Exchange Commission ("SEC"). Readers are directed to Penn's, Caesar's and Boyd's respective websites for further financial information on these companies.
Long-Term, Triple-Net Lease Structure
Our real estate properties are leased under long-term triple-net leases guaranteed by our tenants, pursuant to which the tenant is responsible for all facility maintenance, insurance required in connection with the leased properties and the business conducted on the leased properties, including coverage of the landlord's interests, taxes levied on or with respect to the leased properties (other than taxes on our income) and all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.
Resilient Regional Gaming Characteristics
We believe that the recession resulting from COVID-19 pandemic has illustrated the resiliency of the regional gaming market. In spite of all our properties being forced to close during mid-March 2020, the Company collected all contractual rents, inclusive of rent credits, due in 2020. Furthermore, our tenants' results since they have reopened has been strong and in some cases better than prior to COVID-19, due to their increased focus on cost efficiencies and decreasing and/or eliminating lower margin amenities. Although we are unable to predict whether these results will continue, we believe that our assets should generate substantial cash flows well into the future for both ourselves and our tenants.
Flexible UPREIT Structure
We have the flexibility to operate through an umbrella partnership, commonly referred to as an UPREIT structure, in which substantially all of our properties and assets are held by GLP Capital or by subsidiaries of GLP Capital. Conducting business through GLP Capital allows us flexibility in the manner in which we structure and acquire properties. In particular, an UPREIT structure enables us to acquire additional properties from sellers in exchange for limited partnership units, which provides property owners the opportunity to defer the tax consequences that would otherwise arise from a sale of their real properties and other assets to us. As a result, this structure potentially may facilitate our acquisition of assets in a more efficient manner and may allow us to acquire assets that the owner would otherwise be unwilling to sell because of tax considerations. We believe that this flexibility will provide us an advantage in seeking future acquisitions.
Experienced and Committed Management Team
Our management team has extensive gaming and real estate experience. Peter M. Carlino, our chief executive officer, has more than 30 years of experience in the acquisition and development of gaming facilities and other real estate projects. Through years of public company experience, our management team also has extensive experience accessing both debt and equity capital markets to fund growth and maintain a flexible capital structure.
Segment Information
Consistent with how our Chief Operating Decision Maker (as such term is defined in ASC 280 - Segment Reporting) reviews and assesses our financial performance, we have two reportable segments, GLP Capital and the TRS Segment. The GLP Capital reportable segment consists of the leased real property and represents the majority of our business. The TRS Segment consists of our operations at Hollywood Casino Perryville and Hollywood Casino Baton Rouge, as well as the real estate of Tropicana Las Vegas we acquired in 2020.
Executive Summary
Financial Highlights
We reported total revenues and income from operations of $1,153.2 million and $809.3 million, respectively, for the year ended December 31, 2020, compared to $1,153.5 million and $717.4 million, respectively, for the year ended December 31, 2019. The major factors affecting our results for the year ended December 31, 2020, as compared to the year ended December 31, 2019, were as follows:
•Total income from real estate was $1,050.2 million and $1,025.1 million for the years ended December 31, 2020 and 2019, respectively. Total income from real estate increased by $25.1 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019, primarily due to favorable non-cash straight line rent adjustments on our Amended Pinnacle Master Lease, Boyd Master Lease and Amended and Restated Caesars Master Lease. Additionally current year results were positively impacted by higher building base rents as the majority of our leases incurred escalators in 2019. This was partially offset by lower percentage rent from the Amended Pinnacle Master Lease and Boyd Master Lease which reset on May 1, 2020 and the Meadows Lease which reset on October 1, 2020 as well as lower ground rents due to the casino closures related to COVID-19. Finally, 2020 results were negatively impacted by lower percentage rent on the Penn Master Lease due to the temporary closures of Hollywood Casino Columbus and to a lesser extent, Hollywood Casino Toledo from mid-March 2020 to June 19, 2020.
•Net revenues for our TRS Properties decreased by $25.4 million for the year ended December 31, 2020, as compared to the prior year, due to decreased revenues at both TRS Properties. The largest driver of the decrease resulted from the temporary closures of the properties during 2020 due to COVID-19. The TRS Properties were closed in mid-March 2020. Hollywood Casino Baton Rouge reopened to the public on May 18, 2020 and Hollywood Casino Perryville reopened on June 19, 2020 with various restrictions to limit capacity in accordance with regulatory requirements.
•Total operating expenses decreased by $92.2 million for the year ended December 31, 2020, as compared to the prior year, primarily driven by a non-cash gain on the disposition of property related to the Evansville swap transaction of $41.4 million, the $13 million loan impairment charge recorded on the Casino Queen Loan in 2019, lower land rights and ground lease expense due primarily to the acceleration of amortization of expense related to the ground lease for the closure of the Resorts Casino Tunica property and lower ground rents due to the casino closures from COVID-19 and decreased expenses at both TRS Properties during 2020 due to the temporary closures from COVID-19. Finally, depreciation expense declined due primarily to the acceleration of $10.3 million related to the closure of the Resorts Casino Tunica property in 2019.
•Other expenses, net decreased by $22.1 million for the year ended December 31, 2020, as compared to the prior year, primarily due to lower interest expense resulting from the refinancing of long term debt.
•Net income increased by $114.8 million for the year ended December 31, 2020, as compared to the prior year, primarily due to the variances explained above.
Segment Developments
The following are recent developments that have had or are expected to have an impact on us by segment:
GLP Capital
•Due to temporary casino closures that occurred during 2020 as a result of COVID-19, for our leases that contain variable rent which is reset on varying schedules depending on the lease, we would expect downward resets. In the aggregate, the portion of our cash rents that are variable represented approximately 15% of our 2020 full year cash rental income. Of that variable rent, approximately 29% resets every five years which is associated with our Penn Master Lease and Casino Queen Lease, 41% resets every two years and 30% resets monthly which is associated with the Penn Master Lease (of which approximately 51% is subject to a floor or $22.9 million annually for Hollywood Casino Toledo). The percentage rent in the Penn Master Lease decreased by $4.0 million for the year ended December 31, 2020 compared to the year ended 2019 due to the temporary closures of Hollywood Casino Columbus and to a lesser extent, Hollywood Casino Toledo from mid-March 2020 to June 19, 2020, which was partially offset by the strong reopening performance of these properties in the third quarter of 2020 as well as the benefit Hollywood Casino Toledo experienced due to the
Detroit, Michigan gaming market being closed until August 5, 2020 and being closed once again from November 18, 2020 to December 23, 2020.
•The variable rent resets in the Amended Pinnacle Master Lease and the Boyd Master Lease reset for the two year period ended April 30, 2020, which resulted in a $5.0 million and a $1.4 million reduction in annual variable rent on each of these leases, respectively, which will prevail for the subsequent two year period through April 30, 2022. In addition, the Meadows Lease variable rent reset occurred in October 2020 which lowered variable rent annually by $2.1 million. The Caesars Master Lease variable rent reset was scheduled to occur in October 2020; however, the variable rent component was removed in its entirety commencing with the third lease year in connection with the Amended and Restated Caesars Master Lease. We have no other variable resets scheduled to occur until 2022.
•The fact that several wholly-owned subsidiaries of Penn lease a substantial number of our properties which account for a significant portion of our revenue, pursuant to two master leases and a single property lease.
•On April 16, 2020, we acquired from Penn the real property assets of Tropicana Las Vegas in return for $307.5 million in rent credits. There can be no assurance that we will realize a return on this investment.
•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 that were utilized in 2020. The Company is leasing the land back to an affiliate of Penn pursuant to the Morgantown Lease for an initial annual rent of $3.0 million, provided, however, that (i) on the opening date and on each anniversary thereafter the rent shall be increased by 1.5% annually (on a prorated basis for the remainder of the lease year in which the gaming facility opens) for each of the following three lease years and (ii) commencing on the fourth anniversary of the opening date and for each anniversary thereafter, (a) if the CPI increase is at least 0.5% for any lease year, the rent for such lease year shall increase by 1.25% of rent as of the immediately preceding lease year, and (b) if the CPI increase is less than 0.5% for such lease year, then the rent shall not increase for such lease year subject to escalation provisions following the opening of the property.
•In connection with the Exchange Agreement with Caesars described earlier, whereby the Company acquired Waterloo and Bettendorf to replace Tropicana Evansville under the Amended and Restated Caesars Master Lease, the Company recorded a non-cash gain of $41.4 million in the fourth quarter of 2020, which represented the difference between the fair value of the properties received compared to the carrying value of Tropicana Evansville and the cash payment of $5.7 million made to Caesars.
•On October 27, 2020, the Company entered into a series of definitive agreements pursuant to which a subsidiary of Bally's 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 Bally's 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 Bally's, for a cash purchase price of approximately $144.0 million. At the closing of the transactions, which is expected in mid-2021, subject to regulatory approvals, the Tropicana Evansville and Dover Downs Hotel and Casino facilities will be added to the Bally's Master Lease. The Company anticipates that the Bally's Master Lease will have an initial term of 15 years, with no purchase option, followed by four five-year renewal options (exercisable by the tenant) on the same terms and conditions. Rent under the Bally's 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 the Consumer Price Index. On November 6, 2020, the Company issued 9.2 million common shares at $36.25 to partially finance the funding required for this transaction.
TRS Segment
•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, reduced competition from non-gaming leisure related activities and federal stimulus benefits.
•As previously discussed, the Company has entered into definitive agreements to sell the operations of the TRS Properties while maintaining the real estate assets and in turn entering into lease agreements with the operators. These transactions are subject to customary closing conditions and regulatory approvals and are anticipated to close in mid-2021.
•On April 16, 2020, the Company and certain of its subsidiaries acquired the real property associated with the Tropicana Las Vegas from Penn. This asset has been placed in the Company's TRS Segment. 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.
Critical Accounting Estimates
We make certain judgments and use certain estimates and assumptions when applying accounting principles in the preparation of our consolidated financial statements. The nature of the estimates and assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to change. We have identified the accounting for leases, income taxes, and real estate investments as critical accounting estimates, as they are the most important to our financial statement presentation and require difficult, subjective and complex judgments.
We believe the current assumptions and other considerations used to estimate amounts reflected in our consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations and, in certain situations, could have a material adverse effect on our consolidated financial condition.
Leases
As a REIT, the majority of our revenues are derived from rent received from our tenants under long-term triple-net leases. Currently, we have master leases with Penn, Caesars and Boyd under which we lease thirty one, six and three properties, respectively, to these tenants. We also have a long-term lease with Casino Queen and separate single property leases with Penn, Caesars and Boyd. The accounting guidance under ASC 842 is complex and requires the use of judgments and assumptions by management to determine the proper accounting treatment of a lease. We perform a lease classification test upon the entry into any new tenant lease or lease modification to determine if we will account for the lease as an operating or sales-type lease. The revenue recognition model and thus the presentation of our financial statements is significantly different under operating leases and sales-type leases.
Under the operating lease model, as the lessor, the assets we own and lease to our tenants remain on our balance sheet as real estate investments and we record rental revenues on a straight-line basis over the lease term. This includes the recognition of percentage rents that are fixed and determinable at the lease inception date on a straight-line basis over the entire lease term, resulting in the recognition of deferred rental revenue on our consolidated balance sheets. Deferred rental revenue is amortized to rental revenue on a straight-line basis over the remainder of the lease term. The lease term includes the initial non-cancelable lease term and any reasonably assured renewal periods. Contingent rental income that is not fixed and determinable at lease inception is recognized only when the lessee achieves the specified target.
Under the sales-type lease model, however, at lease inception we would record an investment in sales-type lease on our consolidated balance sheet rather than recording the actual assets we own. Furthermore, the cash rent we receive from tenants is not entirely recorded as rental revenue, but rather a portion is recorded as interest income and a portion is recorded as a reduction to the lease receivable. Under ASC 842, for leases with both land and building components, leases may be bifurcated between operating and sales-type leases. To determine if our real estate leases trigger full or partial sales-type lease treatment we conduct the five lease tests outlined in ASC 842 below. If a lease meets any of the five criteria below, it is accounted for as a sales-type lease.
1) Transfer of ownership - The lease transfers ownership of the underlying asset to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of a nominal fee, for example, the minimum required by statutory regulation to transfer title.
2) Bargain purchase option - The lease contains a bargain purchase option, which is a provision allowing the lessee, at its option, to purchase the leased property for a price which is sufficiently lower than the expected fair value of the property at the date the option becomes exercisable and that is reasonably certain to be exercised.
3) Lease term - The lease term is for the major part of the remaining economic life of the underlying asset. However, if the commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be used for purposes of classifying the lease.
4) Minimum lease payments - The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset.
5) Specialized nature - The underlying asset is of such specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.
Additionally, the adoption of ASC 842 requires us to record right-of-use assets and lease liabilities on balance sheet for the assets we lease from third-party landlords, including equipment and real estate. As a lessee, we utilize our own incremental borrowing rate as the discount rate utilized to determine the initial lease liability and right-of-use asset we record on balance sheet, as well as the lease's classification as an operating or finance lease, using the same tests outlined above. Although both operating and finance leases result in the same right-of-use asset and lease liability being recorded on balance sheet at lease inception, the expense profile of the two lease types differs, in that expense is straight-lined over the term of an operating lease, while the expense profile under a finance lease is front-loaded. Furthermore, expense under the operating lease model is classified simply as lease expense, whereas the finance lease model breaks the expense into the interest expense and asset amortization expense.
The tests outlined above, as well as the resulting calculations, require subjective judgments, such as determining, at lease inception, the fair value of the underlying leased assets, the residual value of the assets at the end of the lease term, the likelihood a tenant will exercise all renewal options (in order to determine the lease term), the estimated remaining economic life of the leased assets, and an allocation of rental income received under our Master Leases to the underlying leased assets. A slight change in estimate or judgment can result in a materially different financial statement presentation.
Income Taxes
We elected on our U.S. federal income tax return for our taxable year that began on January 1, 2014 to be treated as a REIT and we, 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. and Penn Cecil Maryland, Inc. as a "taxable REIT subsidiary" effective on the first day of the first taxable year of GLPI as a REIT. In addition, during 2020, the Company and Tropicana LV, LLC, a wholly owned subsidiary of the Company which holds the real estate of Tropicana Las Vegas, elected to treat Tropicana LV, LLC as a “taxable REIT subsidiary”. We intend to continue to be organized and to operate in a manner that will permit us to qualify as a REIT. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to shareholders determined without regard to the dividends paid deduction and excluding any net capital gain, and meet the various other requirements imposed by the Code relating to matters such as operating results, asset holdings, distribution levels, and diversity of stock ownership.
As a REIT, we generally will not be subject to federal income tax on income that we distribute as dividends to our shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate income tax rates, and dividends paid to our
shareholders would not be deductible by us in computing taxable income. Any resulting corporate liability could be substantial and could materially and adversely affect our net income and net cash available for distribution to shareholders. Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT. It is not possible to state whether in all circumstances we would be entitled to this statutory relief.
Our TRS Segment is able to engage in activities resulting in income that would not be qualifying income for a REIT. As a result, certain activities of the Company which occur within our TRS Segment are subject to federal and state income taxes.
Real Estate Investments
Real estate investments primarily represent land and buildings leased to the Company's tenants. Real estate investments that we received in connection with the Spin-Off were contributed to us at Penn's historical carrying amount. We record the acquisition of real estate at fair value, including acquisition and closing costs. The cost of properties developed by GLPI includes costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy. We consider the period of future benefit of the asset to determine the appropriate useful lives. Depreciation is computed using a straight-line method over the estimated useful lives of the buildings and building improvements. If we used a shorter or longer estimated useful life, it could have a material impact on our results of operations.
We continually monitor events and circumstances that could indicate that the carrying amount of our real estate investments may not be recoverable or realized. The factors considered by the Company in performing these assessments include evaluating whether the tenant is current on their lease payments, the tenant’s rent coverage ratio, the financial stability of the tenant and its parent company, and any other relevant factors. When indicators of potential impairment suggest that the carrying value of a real estate investment may not be recoverable, we estimate the fair value of the investment by calculating the undiscounted future cash flows from the use and eventual disposition of the investment. This amount is compared to the asset's carrying value. If we determine the carrying amount is not recoverable, we would recognize an impairment charge equivalent to the amount required to reduce the carrying value of the asset to its estimated fair value, calculated in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). We group our real estate investments together by lease, the lowest level for which identifiable cash flows are available, in evaluating impairment. In assessing the recoverability of the carrying value, we must make assumptions regarding future cash flows and other factors. Factors considered in performing this assessment include current operating results, market and other applicable trends and residual values, as well as the effect of obsolescence, demand, competition and other factors. If these estimates or the related assumptions change in the future, we may be required to record an impairment loss.
Results of Operations
The following are the most important factors and trends that contribute or may contribute to our operating performance:
•The fact that several wholly-owned subsidiaries of Penn lease a substantial number of our properties, pursuant to two master leases and two single property leases and account for a significant portion of our revenue.
•The risks related to economic conditions, including uncertainty related to COVID-19 and the effect of such conditions on consumer spending for leisure and gaming activities, which may negatively impact our gaming tenants and operators and the variable rent and annual rent escalators we receive from our tenants as outlined in the long-term triple-net leases with these tenants.
•The ability to refinance our significant levels of debt at attractive terms and obtain favorable funding in connection with future business opportunities.
•The fact that the rules and regulations of U.S. federal income taxation are constantly under review by legislators, the IRS and the U.S. Department of the Treasury. Changes to the tax laws or interpretations thereof, with or without retroactive application, could materially and adversely affect GLPI's investors or GLPI.
The consolidated results of operations for the years ended December 31, 2020 and 2019 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
$
|
1,153,165
|
|
|
$
|
1,153,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
343,891
|
|
|
436,050
|
|
|
|
|
Income from operations
|
809,274
|
|
|
717,423
|
|
|
|
|
Total other expenses
|
(299,686)
|
|
|
(321,778)
|
|
|
|
|
Income before income taxes
|
509,588
|
|
|
395,645
|
|
|
|
|
Income tax expense
|
3,877
|
|
|
4,764
|
|
|
|
|
Net income
|
$
|
505,711
|
|
|
$
|
390,881
|
|
|
|
In accordance with the SEC's recent amendments to modernize and simplify Regulation S-K, the Company has omitted the discussion comparing its operating results for the year ended December 31, 2019 to its operating results for the year ended December 31, 2018 from its Annual Report on Form 10-K for the year ended December 31, 2020. Readers are directed to Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2019 for these disclosures.
Certain information regarding our results of operations by segment for the years ended December 31, 2020 and 2019 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
Income (Loss) from Operations
|
|
|
Year Ended December 31,
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
|
|
|
(in thousands)
|
|
|
|
GLP Capital
|
$
|
1,050,166
|
|
|
$
|
1,025,082
|
|
|
|
|
$
|
792,467
|
|
|
$
|
694,215
|
|
|
|
|
TRS Segment
|
102,999
|
|
|
128,391
|
|
|
|
|
16,807
|
|
|
23,208
|
|
|
|
|
Total
|
$
|
1,153,165
|
|
|
$
|
1,153,473
|
|
|
|
|
$
|
809,274
|
|
|
$
|
717,423
|
|
|
|
FFO, AFFO and Adjusted EBITDA
Funds From Operations ("FFO"), Adjusted Funds From Operations ("AFFO") and Adjusted EBITDA are non-GAAP financial measures used by the Company as performance measures for benchmarking against the Company’s peers and as internal measures of business operating performance, which is used as a bonus metric. The Company believes FFO, AFFO and Adjusted EBITDA provide a meaningful perspective of the underlying operating performance of the Company’s current business. This is especially true since these measures exclude real estate depreciation and we believe that real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time.
FFO, AFFO and Adjusted EBITDA are non-GAAP financial measures that are considered supplemental measures for the real estate industry and a supplement to GAAP measures. The National Association of Real Estate Investment Trusts defines FFO as net income (computed in accordance with GAAP), excluding (gains) or losses from sales of property and real estate depreciation. We define AFFO as FFO excluding stock based compensation expense, the amortization of debt issuance costs, bond premiums and original issuance discounts, other depreciation, amortization of land rights, straight-line rent adjustments, losses on debt extinguishment, and loan impairment charges, reduced by maintenance capital expenditures. Finally, we define Adjusted EBITDA as net income excluding interest, taxes on income, depreciation, (gains) or losses from sales of property, stock based compensation expense, straight-line rent adjustments, amortization of debt issuance costs, bond premiums and original issuance discounts, amortization of land rights, losses on debt extinguishment, and loan impairment charges.
FFO, AFFO and Adjusted EBITDA are not recognized terms under GAAP. These non-GAAP financial measures: (i) do not represent cash flows from operations as defined by GAAP; (ii) should not be considered as an alternative to net income as a measure of operating performance or to cash flows from operating, investing and financing activities; and (iii) are not alternatives to cash flows as a measure of liquidity. In addition, these measures should not be viewed as an indication of our ability to fund our cash needs, including to make cash distributions to our shareholders, to fund capital improvements, or to make interest payments on our indebtedness. Investors are also cautioned that FFO, AFFO and Adjusted EBITDA, as presented, may not be comparable to similarly titled measures reported by other real estate companies, including REITs due to the fact that not all real estate companies use the same definitions. Our presentation of these measures does not replace the presentation of our financial results in accordance with GAAP.
The reconciliation of the Company’s net income per GAAP to FFO, AFFO, and Adjusted EBITDA for the years ended December 31, 2020 and 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
(in thousands)
|
|
Net income
|
$
|
505,711
|
|
|
$
|
390,881
|
|
|
|
|
(Gains) losses from dispositions of property
|
(41,393)
|
|
|
92
|
|
|
|
|
Real estate depreciation
|
220,069
|
|
|
230,716
|
|
|
|
|
Funds from operations
|
$
|
684,387
|
|
|
$
|
621,689
|
|
|
|
|
Straight-line rent adjustments
|
4,576
|
|
|
34,574
|
|
|
|
|
|
|
|
|
|
|
|
Other depreciation
|
10,904
|
|
|
9,719
|
|
|
|
|
Amortization of land rights
|
12,022
|
|
|
18,536
|
|
|
|
|
Amortization of debt issuance costs, bond premiums and original issuance discounts (1)
|
10,503
|
|
|
11,455
|
|
|
|
|
Stock based compensation
|
20,004
|
|
|
16,198
|
|
|
|
|
Losses on debt extinguishment
|
18,113
|
|
|
21,014
|
|
|
|
|
|
|
|
|
|
|
|
Loan impairment charges
|
—
|
|
|
13,000
|
|
|
|
|
|
|
|
|
|
|
|
Capital maintenance expenditures
|
(3,130)
|
|
|
(3,017)
|
|
|
|
|
Adjusted funds from operations
|
$
|
757,379
|
|
|
$
|
743,168
|
|
|
|
|
Interest, net
|
281,573
|
|
|
300,764
|
|
|
|
|
Income tax expense
|
3,877
|
|
|
4,764
|
|
|
|
|
Capital maintenance expenditures
|
3,130
|
|
|
3,017
|
|
|
|
|
Amortization of debt issuance costs, bond premiums and original issuance discounts (1)
|
(10,503)
|
|
|
(11,455)
|
|
|
|
|
Adjusted EBITDA
|
$
|
1,035,456
|
|
|
$
|
1,040,258
|
|
|
|
(1) Such amortization is a non-cash component included in interest, net.
The reconciliation of each segment’s net income per GAAP to FFO, AFFO, and Adjusted EBITDA for the years ended December 31, 2020 and 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GLP Capital
|
|
|
|
TRS Segment
|
|
|
|
Year Ended December 31,
|
|
Year Ended December 31,
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
(in thousands)
|
|
|
|
Net income (loss)
|
|
$
|
508,060
|
|
|
$
|
382,184
|
|
|
|
|
$
|
(2,349)
|
|
|
$
|
8,697
|
|
|
|
|
(Gains) losses from dispositions of property
|
|
(41,402)
|
|
|
8
|
|
|
|
|
9
|
|
|
84
|
|
|
|
|
Real estate depreciation
|
|
220,069
|
|
|
230,716
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
Funds from operations
|
|
$
|
686,727
|
|
|
$
|
612,908
|
|
|
|
|
$
|
(2,340)
|
|
|
$
|
8,781
|
|
|
|
|
Straight-line rent adjustments
|
|
4,576
|
|
|
34,574
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other depreciation
|
|
1,972
|
|
|
1,992
|
|
|
|
|
8,932
|
|
|
7,727
|
|
|
|
|
Amortization of land rights
|
|
12,022
|
|
|
18,536
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
Amortization of debt issuance costs, bond premiums and original issuance discounts (1)
|
|
10,503
|
|
|
11,455
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
Stock based compensation
|
|
20,004
|
|
|
16,198
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
Losses on debt extinguishment
|
|
18,113
|
|
|
21,014
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan impairment charges
|
|
—
|
|
|
13,000
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital maintenance expenditures
|
|
(186)
|
|
|
(22)
|
|
|
|
|
(2,944)
|
|
|
(2,995)
|
|
|
|
|
Adjusted funds from operations
|
|
$
|
753,731
|
|
|
$
|
729,655
|
|
|
|
|
$
|
3,648
|
|
|
$
|
13,513
|
|
|
|
|
Interest, net (2)
|
|
265,597
|
|
|
290,360
|
|
|
|
|
15,976
|
|
|
10,404
|
|
|
|
|
Income tax expense
|
|
697
|
|
|
657
|
|
|
|
|
3,180
|
|
|
4,107
|
|
|
|
|
Capital maintenance expenditures
|
|
186
|
|
|
22
|
|
|
|
|
2,944
|
|
|
2,995
|
|
|
|
|
Amortization of debt issuance costs, bond premiums and original issuance discounts (1)
|
|
(10,503)
|
|
|
(11,455)
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
1,009,708
|
|
|
$
|
1,009,239
|
|
|
|
|
$
|
25,748
|
|
|
$
|
31,019
|
|
|
|
(1) Such amortization is a non-cash component included in interest, net.
(2) Interest expense, net for the GLP Capital segment is net of an intercompany interest elimination of $16.0 million and $10.4 million for the years ended December 31, 2020 and 2019.
Net income, FFO, AFFO, and Adjusted EBITDA for our GLP Capital segment were $508.1 million, $686.7 million, $753.7 million and $1,009.7 million, respectively, for the year ended December 31, 2020. This compared to net income, FFO, AFFO, and Adjusted EBITDA, for our GLP Capital segment of $382.2 million, $612.9 million, $729.7 million and $1,009.2 million, respectively, for the year ended December 31, 2019. The increase in net income in our GLP Capital segment was primarily driven by a $73.2 million decrease in operating expenses from a gain on the disposition of property related to the Evansville swap transaction of $41.4 million in 2020, lower land right and ground lease expense due to the acceleration of these items for the Penn closure of its Resorts Casino Tunica property in 2019 and a $13.0 million loan impairment charge related to the Casino Queen Loan in 2019. The Company also had a $27.7 million decrease in other expenses, resulting from lower interest expense due to refinancing activities and lower debt extinguishment charges, along with a $25.1 million increase in income from real estate.
The increase in income from real estate in our GLP Capital segment was primarily due to favorable non-cash straight-line rent adjustments of $30.0 million on our Amended Pinnacle Master Lease, Boyd Master Lease and Amended and Restated Caesars Master Lease in accordance with ASC 842. We also experienced higher building base rents as the majority of our leases incurred escalators in 2019. This was partially offset by lower percentage rent resets that occurred on May 1, 2020 for the Amended Pinnacle Master Lease of $3.3 million and the Boyd Master Lease of $0.9 million due primarily to the impact of the casino closures from COVID-19, lower percentage rent of $4.0 million on the Penn Master Lease due to the temporary closure of Hollywood Casino Columbus and to a lesser extent, Hollywood Casino Toledo from mid-March 2020 to June 19, 2020 due to COVID-19, and lower percentage rent on the Meadows Lease as the variable rent reset occurred in October 2020 which decreased percentage rent by $0.5 million.
The decrease in operating expenses in our GLP Capital segment for the year ended December 31, 2020 as compared to the prior year period was primarily from a gain on the disposition of property related to the Evansville swap transaction of $41.4 million along with lower depreciation expense and land right amortization expense in our REIT segment of $24.1 million primarily from lower rent expense on the Company's long term ground leases due to the impact of COVID-19 and the acceleration of depreciation and amortization in 2019 resulting from the closing of Penn's Resorts Casino Tunica property. Additionally, there was a loan impairment charge of $13.0 million for the year ended December 31, 2019 related to the Casino Queen Loan. These items were partially offset by charges of $6.3 million associated with severance and stock based compensation acceleration charges for the departure of our former chief financial officer.
The decrease in other expenses, net for the year ended December 31, 2020 compared to the prior year was driven by lower interest expense from our refinancing activities that occurred in the third quarter of 2019 and first quarter of 2020 and lower debt extinguishment charges compared to the prior year.
The increase in FFO for our GLP Capital segment for the year ended December 31, 2020 is due to the items described above, excluding gains from the disposition of property and real estate depreciation. The increase in AFFO is due to the items described above, excluding the impact of straight-line rent adjustments, loan impairment charges and the other items listed on the previous table.
The net loss of $2.3 million for our TRS Segment for the year ended December 31, 2020 as compared to the net income of $8.7 million for the prior year is primarily related to the impact of the mandated closures of our facilities during mid-March 2020 to May and June 2020 due to COVID-19 along with an increase in depreciation expense related to the acquisition of Tropicana Las Vegas.
Revenues
Revenues for the years ended December 31, 2020 and 2019 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Percentage
|
|
|
|
2020
|
|
2019
|
|
Variance
|
|
Variance
|
|
Rental income
|
|
$
|
1,031,036
|
|
|
$
|
996,166
|
|
|
$
|
34,870
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from real estate loans
|
|
19,130
|
|
|
28,916
|
|
|
(9,786)
|
|
|
(33.8)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total income from real estate
|
|
1,050,166
|
|
|
1,025,082
|
|
|
25,084
|
|
|
2.4
|
%
|
|
Gaming, food, beverage and other
|
|
102,999
|
|
|
128,391
|
|
|
(25,392)
|
|
|
(19.8)
|
%
|
|
Total revenues
|
|
$
|
1,153,165
|
|
|
$
|
1,153,473
|
|
|
$
|
(308)
|
|
|
—
|
%
|
Total income from real estate
For the years ended December 31, 2020 and 2019, total income from real estate was $1,050.2 million and $1,025.1 million, respectively, for our GLP Capital segment. In accordance with ASC 842, the Company records revenue for the ground lease rent paid by its tenants with an offsetting expense in land rights and ground lease expense within the consolidated statement of income as the Company has concluded that as the lessee it is the primary obligor under the ground leases. The Company subleases these ground leases back to its tenants, who are responsible for payment directly to the landlord.
Total income from real estate increased $25.1 million, or 2.4%, for the year ended December 31, 2020, as compared to the year ended December 31, 2019. As previously discussed, this was primarily due to favorable non-cash straight line rent adjustments on our Amended Pinnacle Master Lease, Boyd Master Lease and the Amended and Restated Caesars Master Lease in accordance with ASC 842. Additionally the current year was positively impacted by higher building base rents as the majority of our leases incurred escalators in 2019. This was partially offset by lower ground lease rents due to the impact of COVID-19, lower percentage rent from the Amended Pinnacle Master Lease and Boyd Master Lease which reset on May 1, 2020 and the Meadows Lease which reset on October 1, 2020. Finally, the year ended December 31, 2020 was negatively impacted by lower percentage rent on the Penn Master Lease due to the closures of Hollywood Casino Columbus and to a lesser extent, Hollywood Casino Toledo.
The reason for the decline in interest income from real estate loans was due to the CZR loan and Belterra Park Loan both being satisfied in 2020 as the Company acquired the real estate subject to the Lumière Place Lease and the Belterra Park Lease. See Note 8 in the Notes to the Consolidated Financial Statements for further details.
Details of the Company's income from real estate for the year ended December 31, 2020 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
Penn Master Lease
|
|
Amended Pinnacle Master Lease
|
|
Caesars Master Lease
|
|
Lumiere Lease
|
Boyd Master Lease
|
|
Belterra Lease
|
PENN - Meadows Lease
|
|
Casino Queen Lease
|
|
PENN Morgantown Lease
|
Total
|
|
Building base rent
|
$
|
279,406
|
|
|
$
|
227,201
|
|
|
$
|
62,156
|
|
|
$
|
5,828
|
|
$
|
75,643
|
|
|
$
|
1,783
|
|
$
|
15,811
|
|
|
$
|
9,101
|
|
|
$
|
—
|
|
$
|
676,929
|
|
|
Land base rent
|
93,969
|
|
|
71,256
|
|
|
15,916
|
|
|
—
|
|
11,785
|
|
|
1,263
|
|
—
|
|
|
—
|
|
|
750
|
|
194,939
|
|
|
Percentage rent
|
82,595
|
|
|
28,452
|
|
|
10,020
|
|
|
—
|
|
10,308
|
|
|
1,211
|
|
10,637
|
|
|
5,424
|
|
|
—
|
|
148,647
|
|
|
Total cash rental income (1)
|
$
|
455,970
|
|
|
$
|
326,909
|
|
|
$
|
88,092
|
|
|
$
|
5,828
|
|
$
|
97,736
|
|
|
$
|
4,257
|
|
$
|
26,448
|
|
|
$
|
14,525
|
|
|
$
|
750
|
|
$
|
1,020,515
|
|
|
Straight-line rent adjustments
|
8,926
|
|
|
(10,555)
|
|
|
(2,980)
|
|
|
—
|
|
(1,448)
|
|
|
(808)
|
|
2,289
|
|
|
—
|
|
|
—
|
|
(4,576)
|
|
|
Ground rent in revenue
|
2,317
|
|
|
5,770
|
|
|
5,299
|
|
|
—
|
|
1,519
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
14,905
|
|
|
Other rental revenue
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
192
|
|
|
—
|
|
|
—
|
|
192
|
|
|
Total rental income
|
$
|
467,213
|
|
|
$
|
322,124
|
|
|
$
|
90,411
|
|
|
$
|
5,828
|
|
$
|
97,807
|
|
|
$
|
3,449
|
|
$
|
28,929
|
|
|
$
|
14,525
|
|
|
$
|
750
|
|
$
|
1,031,036
|
|
|
Interest income from mortgaged real estate
|
—
|
|
|
—
|
|
|
—
|
|
|
16,976
|
|
—
|
|
|
2,154
|
|
—
|
|
|
—
|
|
|
—
|
|
19,130
|
|
|
Total income from real estate
|
$
|
467,213
|
|
|
$
|
322,124
|
|
|
$
|
90,411
|
|
|
$
|
22,804
|
|
$
|
97,807
|
|
|
$
|
5,603
|
|
$
|
28,929
|
|
|
$
|
14,525
|
|
|
$
|
750
|
|
$
|
1,050,166
|
|
(1) Included in cash rental income were rent credits of $337.5 million that were recognized in connection with the Tropicana Las Vegas and Morgantown transactions with Penn. See Note 7 in the Notes to the Consolidated Financial Statements for additional information.
Gaming, food, beverage and other revenue
Gaming, food, beverage and other revenue for our TRS Properties decreased by $25.4 million, or 19.8%, for the year ended December 31, 2020, as compared to the year ended December 31, 2019. These properties were closed in mid-March 2020 due to COVID-19. Hollywood Casino Baton Rouge reopened to the public on May 18, 2020 and Hollywood Casino Perryville reopened on June 19, 2020 with various restrictions to limit capacity in accordance with regulatory requirements. Results since reopening have exceeded the corresponding periods in the prior years as spend per visit has increased which has more than offset lower visitation levels.
Operating Expenses
Operating expenses for the years ended December 31, 2020 and 2019 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Percentage
|
|
|
|
2020
|
|
2019
|
|
Variance
|
|
Variance
|
|
Gaming, food, beverage and other
|
|
$
|
56,698
|
|
|
$
|
74,700
|
|
|
$
|
(18,002)
|
|
|
(24.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Land rights and ground lease expense
|
|
29,041
|
|
|
42,438
|
|
|
(13,397)
|
|
|
(31.6)
|
%
|
|
General and administrative
|
|
68,572
|
|
|
65,385
|
|
|
3,187
|
|
|
4.9
|
%
|
|
Gains (losses) from disposition of properties
|
|
(41,393)
|
|
|
92
|
|
|
(41,485)
|
|
|
(45,092.4)
|
%
|
|
Depreciation
|
|
230,973
|
|
|
240,435
|
|
|
(9,462)
|
|
|
(3.9)
|
%
|
|
Loan impairment charges
|
|
—
|
|
|
13,000
|
|
|
(13,000)
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
343,891
|
|
|
$
|
436,050
|
|
|
$
|
(92,159)
|
|
|
(21.1)
|
%
|
Gaming, food, beverage and other expense
Gaming, food, beverage and other expense for our TRS Properties decreased by approximately $18.0 million, or 24.1%, for the year ended December 31, 2020, as compared to the year ended December 31, 2019, primarily due to the impact of COVID-19, which temporarily forced our TRS Properties to close as previously discussed.
Land rights and ground lease expense
Land rights and ground lease expense includes the amortization of land rights and rent expense related to the Company's long-term ground leases. Land rights and ground lease expense decreased by $13.4 million, or 31.6%, for the year
ended December 31, 2020, as compared to the year ended December 31, 2019, primarily due to the acceleration of amortization expense of $6.3 million related to the closure of Penn's Resorts Casino Tunica property in 2019 and lower ground lease rents paid by our tenants in 2020 that are based on the facilities' revenues which declined due to the impact of COVID-19. We sublease these ground leases back to our tenants, who are responsible for payment directly to the applicable landlord. These amounts are required to be recorded in both revenue and expense within the consolidated statements of income as we have concluded that as the lessee the Company is the primary obligor under the ground leases.
General and administrative expense
General and administrative expenses include items such as compensation costs (including stock-based compensation awards), professional services and costs associated with development activities. General and administrative expenses increased by $3.2 million, or 4.9%, for the year ended December 31, 2020, as compared to the year ended December 31, 2019. This is primarily attributable to the negative impact from severance and stock acceleration charges of $6.3 million, related to the departure of our former chief financial officer which were partially offset by lower payroll costs primarily attributable to the temporary closures of our TRS Properties due to COVID-19 and lower bonus expense.
Gains and losses from dispositions of property
In connection with the Exchange Agreement with Caesars, whereby the Company acquired Waterloo and Bettendorf to replace Tropicana Evansville under the Amended and Restated Caesars Master Lease, the Company recorded a non-cash gain of $41.4 million in the fourth quarter of 2020 which represented the difference between the fair value of the properties received compared to the carrying value of Tropicana Evansville and the cash payment of $5.7 million.
Depreciation expense
Depreciation expense decreased by $9.5 million, or 3.9%, to $231.0 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019, primarily due to the closure of the Resorts Casino Tunica property in 2019 which resulted in the acceleration of $10.3 million of depreciation expense to bring the net book value related to the building value of this property to zero.
Loan impairment charges
On March 17, 2017 the Company provided the Casino Queen Loan to CQ Holding Company, to partially finance its acquisition of Lady Luck Casino in Marquette, Iowa. During 2018, the operating results of Casino Queen declined substantially and Casino Queen defaulted under its senior credit agreement and also the Casino Queen Loan. As a result, the operations of Casino Queen were put up for sale during the fourth quarter of 2018. At December 31, 2018, active negotiations for the sale of Casino Queen's operations were taking place and full payment of the principal was still expected, due to the anticipation that the operations were to be sold in the near term for an amount allowing for repayment of the full $13.0 million of loan principal due to GLPI.
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 Casino Queen Loan to be repaid. Therefore, the Company recorded an impairment charge of $13.0 million through the Consolidated Statement of Income for the year ended December 31, 2019 to reflect the write-off of the Casino Queen Loan.
Other income (expenses)
Other income (expenses) for the years ended December 31, 2020 and 2019 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Percentage
|
|
|
|
2020
|
|
2019
|
|
Variance
|
|
Variance
|
|
Interest expense
|
|
$
|
(282,142)
|
|
|
$
|
(301,520)
|
|
|
$
|
19,378
|
|
|
(6.4)
|
%
|
|
Interest income
|
|
569
|
|
|
756
|
|
|
(187)
|
|
|
(24.7)
|
%
|
|
Losses on debt extinguishment
|
|
(18,113)
|
|
|
(21,014)
|
|
|
2,901
|
|
|
(13.8)
|
%
|
|
Total other expenses
|
|
$
|
(299,686)
|
|
|
$
|
(321,778)
|
|
|
$
|
22,092
|
|
|
(6.9)
|
%
|
Interest expense
For the year ended December 31, 2020, interest expense related to our fixed and variable rate borrowings was $282.1 million, as compared to $301.5 million in the year ended December 31, 2019. Interest expense decreased primarily due to refinancing activities, such as the issuance of $400 million of 3.35% senior unsecured notes due 2024 and $700 million of 4.000% senior unsecured notes due 2030 during the third quarter of 2019. These proceeds were utilized to repay higher cost unsecured borrowings with near term maturities. Interest expense also benefited from the first quarter 2020 redemption of $215.2 million of 4.875% senior unsecured notes that were due in November 2020 and $400.0 million of 4.375% of senior unsecured notes that were due in April 2021, which were funded by borrowings under our revolving credit facility. Towards the end of the first quarter of 2020, we fully drew down our revolving credit facility by borrowing just over $530 million to increase liquidity levels given the near term uncertainty associated with COVID-19. We subsequently repaid all of our outstanding advances on our revolving credit facility on June 25, 2020, with cash on hand and the net proceeds from our 4.00%, $500 million unsecured note issuance due in January 2031 and Term Loan A-2 borrowings. On August 18, 2020, we raised an additional $200 million of 4.00%, unsecured notes at a premium to par and used the proceeds to repay Term Loan A-1 borrowings. Although these latter two transactions had a negative impact on interest expense they further increased the duration and fixed rate nature of our debt profile.
Losses on debt extinguishment
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 Company's outstanding 4.375% senior unsecured notes due in April 2021, resulting in the retirement of such senior notes. The Company recorded losses on the early extinguishment of debt related to the current year retirements of $18.1 million for the year ended December 31, 2020 primarily for call premium charges and debt issuance write-offs.
On September 12, 2019, the Company completed a cash tender offer (the "2019 Tender Offer") to purchase its $1,000 million aggregate principal amount 4.875% Senior Unsecured Notes due 2020 (the "2020 Notes"). The Company received early tenders from the holders of approximately $782.6 million in aggregate principal of the 2020 Notes, or approximately 78% of its outstanding 2020 Notes, in connection with the 2019 Tender Offer at a price of 102.337% of the unpaid principal amount plus accrued and unpaid interest through the settlement date. Subsequent to the early tender deadline, an additional $2.2 million in aggregate principal of the 2020 Notes was tendered at a price of 99.337% of the unpaid principal amount plus accrued and unpaid interest through the settlement date, for a total redemption of $784.8 million of the 2020 Notes. The Company recorded a loss on the early extinguishment of debt related to the 2019 Tender Offer, of approximately $21.0 million, for the difference between the reacquisition price of the tendered 2020 Notes and their net carrying value.
Taxes
Our income tax expense decreased $0.9 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019. During the year ended December 31, 2020, we had income tax expense of approximately $3.9 million, compared to income tax expense of $4.8 million during the year ended December 31, 2019. Our income tax expense is primarily driven from the operations of the TRS Segment, which are taxed at the corporate rate. Our effective tax rate (income taxes as a percentage of income before income taxes) was 0.8% and 1.2% for the years ended December 31, 2020 and 2019, respectively.
Liquidity and Capital Resources
Our primary sources of liquidity and capital resources are cash flow from operations, borrowings from banks, and proceeds from the issuance of debt and equity securities.
Net cash provided by operating activities was $428.1 million and $750.3 million during the years ended December 31, 2020 and 2019, respectively. The decrease in net cash provided by operating activities of $322.2 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019 was primarily due to a decrease in cash receipts from tenants and customers of $361.6 million, partially offset by $21.9 million and $13.4 million decreases in cash paid for operating expenses and interest, respectively. The decrease in cash receipts collected from our tenants and customers for the year ended December 31, 2020 as compared to the corresponding period in the prior year was primarily due to the recognition of $337.5 million in non-cash rent recognized in connection with the Tropicana Las Vegas and Morgantown transactions and the impact of COVID-19, which forced our TRS Properties to temporarily close in mid-March 2020 until May and June of 2020. The reason for the decline in cash paid for operating expenses is primarily attributable to the temporary closures of our TRS properties.
Investing activities used net cash of $9.5 million and $2.8 million during the years ended December 31, 2020 and 2019, respectively. Net cash used in investing activities during the year ended December 31, 2020 primarily consisted of capital expenditures of $3.1 million and $5.9 million for the acquisition of real estate assets primarily relating to the Evansville swap transaction. Net cash used in investing activities during the year ended December 31, 2019 primarily consisted of capital expenditures of $3.0 million, partially offset by proceeds from sales of property and equipment of $0.2 million.
Financing activities provided net cash of $63.2 million during the year ended December 31, 2020 and used net cash of $746.4 million during the year ended December 31, 2019. Net cash provided by financing activities for the year ended December 31, 2020 was driven by $2,076.4 million of proceeds from the issuance of long-term debt and $320.9 million of net proceeds from the issuance of common stock. During the year ended December 31, 2020, we issued approximately 9.2 million shares of our common stock in a primary equity offering and approximately 0.1 million shares of common stock through our ATM. This was partially offset by repayments of long-term debt of $2,060.9 million, dividend payments of $230.5 million, $15.7 million of premium and related costs paid on the tender of senior unsecured notes, taxes paid related to shares withheld for tax purposes on restricted stock award vestings of $15.3 million and financing costs of $11.6 million.
Net cash used in financing activities for the year ended December 31, 2019 was driven by repayments of long-term debt of $1,477.9 million, dividend payments of $589.1 million, $18.9 million of premium and related costs paid on the tender of senior unsecured notes, taxes paid related to shares withheld for tax purposes on restricted stock award vestings, net of stock option exercises of $9.1 million and financing costs of $10.0 million, partially offset by $1,358.9 million of proceeds from the issuance of long-term debt. During the year ended December 31, 2019, the Company issued $1,100.0 million par value in new senior unsecured notes, completed a cash tender for a portion of our 2020 Notes, partially repaid borrowings under our Term Loan A-1 and revolving credit facilities and launched a $600 million ATM Program.
Capital Expenditures
Capital expenditures are accounted for as either capital project or capital maintenance (replacement) expenditures. Capital project expenditures are for fixed asset additions that expand an existing facility or create a new facility. The cost of properties developed by the Company include costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy. Capital maintenance expenditures are expenditures to replace existing fixed assets with a useful life greater than one year that are obsolete, worn out or no longer cost effective to repair.
During the years ended December 31, 2020 and 2019 we spent approximately $3.1 million and $3.0 million respectively, for capital maintenance expenditures. The majority of the capital maintenance expenditures were for slot machines and slot machine equipment at our TRS Properties. Our tenants are responsible for capital maintenance expenditures at our leased properties.
Debt
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.
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 December 31, 2020, the Amended Credit Facility had a gross outstanding balance of $424.0 million, consisting of the $424.0 million Term Loan A-2 facility. No amounts were outstanding under the Revolver. Additionally, at December 31,
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.
The interest rates payable on the loans are, at the Company's option, equal to either a LIBOR rate or a base rate plus an applicable margin, which ranges from 1.0% to 2.0% per annum for LIBOR loans and 0.0% to 1.0% per annum for base rate loans, in each case, depending on the credit ratings assigned to the Amended Credit Facility. At December 31, 2020, the applicable margin was 1.50% for LIBOR loans and 0.50% for base rate loans. In addition, the Company is required to pay a commitment fee on the unused portion of the commitments under the Revolver at a rate that ranges from 0.15% to 0.35% per annum, depending on the credit ratings assigned to the Amended Credit Facility. At December 31, 2020, the commitment fee rate was 0.25%. The Company is not required to repay any loans under the Amended Credit Facility prior to maturity and may prepay all or any portion of the loans under the Amended Credit Facility prior to maturity without premium or penalty, subject to reimbursement of any LIBOR breakage costs of the lenders. The Company's wholly owned subsidiary, GLP Capital is the primary obligor under the Amended Credit Facility, which is guaranteed by GLPI.
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 December 31, 2020, the Company was in compliance with all required financial covenants under the Amended Credit Facility.
Senior Unsecured Notes
At December 31, 2020, the Company had an outstanding balance of $5,375.0 million of senior unsecured notes (the "Senior 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 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 at an issue price equal to 98.827% of the principal amount 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 an issue price equal to 103.824% of the principal amount 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.
On August 29, 2019, the Company issued $400 million of 3.35% Senior Unsecured Notes maturing on September 1, 2024 at an issue price equal to 99.899% of the principal amount (the "2024 Notes") and $700 million of 4.00% Senior Unsecured Notes maturing on January 15, 2030 at an issue price equal to 99.751% of the principal amount (the "2030 Notes"). Interest on the 2024 Notes is payable semi-annually on March 1 and September 1 of each year, commencing on March 1, 2020. Interest on the 2030 Notes is payable semi-annually on January 15 and July 15 of each year, commencing on January 15, 2020. The net proceeds from the sale of the 2024 Notes and 2030 Notes were used to (i) finance the Company's cash tender offer to purchase its 4.875% Senior Unsecured Notes due 2020 (described below) (ii) repay outstanding borrowings under the Company's revolving credit facility and (iii) repay a portion of the outstanding borrowings under the Company's Term Loan A-1 facility.
On September 12, 2019, the Company completed a cash tender offer (the "2019 Tender Offer") to purchase its $1,000 million aggregate principal amount 4.875% Senior Unsecured Notes due 2020 (the "2020 Notes"). The Company received early tenders from the holders of approximately $782.6 million in aggregate principal of the 2020 Notes, or approximately 78% of its
outstanding 2020 Notes, in connection with the 2019 Tender Offer at a price of 102.337% of the unpaid principal amount plus accrued and unpaid interest through the settlement date. Subsequent to the early tender deadline, an additional $2.2 million in aggregate principal of the 2020 Notes was tendered at a price of 99.337% of the unpaid principal amount plus accrued and unpaid interest through the settlement date, for a total redemption of $784.8 million of the 2020 Notes. The Company recorded a loss on the early extinguishment of debt related to the 2019 Tender Offer, of approximately $21.0 million, for the difference between the reacquisition price of the tendered 2020 Notes and their net carrying value.
The Company may redeem the Senior Notes of any series at any time, and from time to time, at a redemption price of 100% of the principal amount of the Senior Notes redeemed, plus a "make-whole" redemption premium described in the indenture governing the Senior Notes, together with accrued and unpaid interest to, but not including, the redemption date, except that if Senior Notes of a series are redeemed 90 or fewer days prior to their maturity, the redemption price will be 100% of the principal amount of the Senior Notes redeemed, together with accrued and unpaid interest to, but not including, the redemption date. If GLPI experiences a change of control accompanied by a decline in the credit rating of the Senior Notes of a particular series, the Company will be required to give holders of the Senior Notes of such series the opportunity to sell their Senior Notes of such series at a price equal to 101% of the principal amount of the Senior Notes of such series, together with accrued and unpaid interest to, but not including, the repurchase date. The Senior Notes also are subject to mandatory redemption requirements imposed by gaming laws and regulations.
The Senior Notes were issued by GLP Capital, L.P. and GLP Financing II, Inc. (the "Issuers"), two wholly-owned subsidiaries of GLPI, and are guaranteed on a senior unsecured basis by GLPI. The guarantees of GLPI are full and unconditional. The Senior Notes are the Issuers' senior unsecured obligations and rank pari passu in right of payment with all of the Issuers' senior indebtedness, including the Credit Facility, and senior in right of payment to all of the Issuers' subordinated indebtedness, without giving effect to collateral arrangements.
The 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 December 31, 2020, the Company was in compliance with all required financial covenants under its Senior Notes.
Finance Lease Liability
The Company assumed the finance lease obligations related to certain assets at its Aurora, Illinois property. GLPI recorded the asset and liability associated with the finance lease on its consolidated balance sheet. The original term of the finance lease is 30 years and it will terminate in 2026.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarized financial information for Subsidiary Issuers and Parent Guarantor
|
|
|
As of December 31, 2020
|
|
As of December 31, 2019
|
|
Real estate investments, net
|
$
|
2,720,767
|
|
|
$
|
2,514,806
|
|
|
Real estate loans
|
—
|
|
|
246,000
|
|
|
Right-of-use assets and land rights, net
|
121,866
|
|
|
181,593
|
|
|
Cash and cash equivalents
|
480,066
|
|
|
4,281
|
|
|
Long term debt, net of unamortized debt issuance costs, bond premiums and original issuance discounts
|
5,754,689
|
|
|
5,737,962
|
|
|
Accrued interest
|
72,285
|
|
|
60,695
|
|
|
Lease liabilities
|
58,654
|
|
|
89,856
|
|
|
Deferred rental revenue
|
265,891
|
|
|
271,837
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2020
|
|
For the year ended December 31, 2019
|
|
Revenues
|
$
|
580,428
|
|
|
$
|
575,451
|
|
|
Income from operations
|
446,708
|
|
|
384,170
|
|
|
Interest expense
|
(282,142)
|
|
|
(301,520)
|
|
|
Net income
|
146,323
|
|
|
61,734
|
|
The financial information presented above is that of the subsidiary issuers and parent guarantor and the financial information of non-issuer subsidiaries has been excluded. The financial information of subsidiary issuers and the parent guarantor has been presented on a combined basis; however, the only asset on the parent guarantor balance sheet is its investment in subsidiaries which is not included in the presentation above in accordance with the disclosure requirements.
We had no off-balance sheet arrangements at December 31, 2020 and 2019.
Distribution Requirements
We generally must distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, in order to qualify to be taxed as a REIT (assuming that certain other requirements are also satisfied) so that U.S. federal corporate income tax does not apply to earnings that we distribute. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT but distribute less than 100% of our REIT taxable income, determined without regard to the dividends paid deduction and including any net capital gains, we will be subject to U.S. federal corporate income tax on our undistributed net taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our shareholders in a calendar year is less than a minimum amount specified under U.S. federal income tax laws. We intend to make distributions to our shareholders to comply with the REIT requirements of the Code.
While the Company's Board of Directors declared a cash dividend of $0.70 for the first quarter of 2020, quarterly dividends of $0.60 per share on the Company's common stock were declared for both the second, third and fourth quarters. These dividends consisted of a combination of cash and shares of the Company's common stock. The cash component of the dividend (other than cash paid in lieu of fractional shares) did not exceed 20% in the aggregate, or $0.12 per share, with the balance, or $0.48 per share, payable in shares of the Company's common stock. This quarterly dividend level reflected the impact of the COVID-19 closures on the Company's business.
LIBOR Transition
The majority of our debt is at fixed rates and our exposure to variable interest rates is currently limited to our revolving credit facility and our Term Loan A-2. Both of these debt instruments are indexed to LIBOR which is expected to be phased out during late 2021 through mid-2023. The discontinuance of LIBOR would affect our interest expense and earnings. The borrowings under our Amended Credit Facility will be subject to the expected LIBOR transition. LIBOR is currently expected
to transition to a new standard rate, the Secured Overnight Financing Rate (“SOFR”). We are currently monitoring the transition and cannot be certain whether SOFR will become the standard rate for our variable rate debt.
Outlook
Based on our current level of operations and anticipated earnings, we believe that cash generated from operations and cash on hand, together with amounts available under our Amended Credit Facility, will be adequate to meet our anticipated debt service requirements, capital expenditures, working capital needs and dividend requirements. During 2020, we refinanced our near term debt obligations and as such have no significant obligations coming due until 2023 and we issued common shares in advance of the planned 2021 closing of the Bally's transaction. We also announced a project to move our Hollywood Casino Baton Rouge property landside in early 2022. On December 15, 2020, we announced that Penn had exercised its option to acquire the gaming operations at Hollywood Casino Perryville for $31.1 million and that we entered into an agreement to sell the gaming operations of Hollywood Casino Baton Rouge for $28.2 million to Casino Queen. The Company will retain ownership of the real estate assets at Hollywood Casino Baton Rouge and will simultaneously enter into the Casino Queen Master Lease. Rent under the Casino Queen Master Lease will be adjusted upon completion of the project to reflect a yield of 8.25% on the Company's project costs. Both transactions are expected to close in the second half of 2021, subject to regulatory approvals and other customary closing conditions.
In addition, we expect the majority of our future growth to come from acquisitions of gaming and other properties to lease to third parties. If we consummate significant acquisitions in the future, our cash requirements may increase significantly and we would likely need to raise additional proceeds through a combination of either common equity (including under our ATM Program) and/or debt offerings. Our future operating performance and our ability to service or refinance our debt will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. See "Risk Factors-Risks Related to Our Capital Structure" of this Annual Report on Form 10-K for a discussion of the risk related to our capital structure.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Gaming and Leisure Properties, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Gaming and Leisure Properties, Inc. and Subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of income, changes in shareholders’ equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control -- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 19, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Lease Classification - Lease Term - See Note 14 to the financial statements
Critical Audit Matter Description
The Company performs a lease classification test upon the entry into any new tenant lease or lease modification to determine if the Company will account for the lease as an operating, sales-type lease, or direct financing lease. The accounting guidance under ASC 842 is complex and requires the use of judgments and assumptions by management to determine the proper accounting treatment of a lease. The lease classification tests and the resulting calculations require subjective judgments, such as determining the likelihood a tenant will exercise all renewal options, in order to determine the lease term. A slight change in estimate or judgment can result in a material difference in the financial statement presentation.
Given the significant judgments made by management to determine the expected lease term, we performed audit procedures to assess the reasonableness of such judgments, which required a high degree of auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the judgments surrounding the determination of lease term for any new or reassessed lease included the following, among others:
•We tested the effectiveness of the controls over management’s assessment of the likelihood a tenant would exercise all renewal options.
•We evaluated the significant judgments management made to determine the expected lease term by:
◦Evaluating the significance of the leased assets to the tenant’s operations by examining available information including tenant’s financial statements.
◦Evaluating the Company’s historical pattern of tenant lease modifications by examining both confirming and contradictory evidence.
◦Obtaining lease agreements to examine material lease provisions considered by management in their analysis.
/s/ Deloitte & Touche
New York, New York
February 19, 2021
We have served as the Company's auditor since 2016.
Gaming and Leisure Properties, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Real estate investments, net
|
$
|
7,287,158
|
|
|
$
|
7,100,555
|
|
|
Property and equipment, used in operations, net
|
80,618
|
|
|
94,080
|
|
|
Assets held for sale
|
61,448
|
|
|
—
|
|
|
Real estate of Tropicana Las Vegas, net
|
304,831
|
|
|
—
|
|
|
Real estate loans
|
—
|
|
|
303,684
|
|
|
Right-of-use assets and land rights, net
|
769,197
|
|
|
838,734
|
|
|
Cash and cash equivalents
|
486,451
|
|
|
26,823
|
|
|
Prepaid expenses
|
2,098
|
|
|
4,228
|
|
|
Goodwill
|
—
|
|
|
16,067
|
|
|
Other intangible assets
|
—
|
|
|
9,577
|
|
|
|
|
|
|
|
Deferred tax assets, net
|
5,690
|
|
|
6,056
|
|
|
Other assets
|
36,877
|
|
|
34,494
|
|
|
Total assets
|
$
|
9,034,368
|
|
|
$
|
8,434,298
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Accounts payable
|
$
|
375
|
|
|
$
|
1,006
|
|
|
Accrued expenses
|
398
|
|
|
6,239
|
|
|
Accrued interest
|
72,285
|
|
|
60,695
|
|
|
Accrued salaries and wages
|
5,849
|
|
|
13,821
|
|
|
Gaming, property, and other taxes
|
146
|
|
|
944
|
|
|
|
|
|
|
|
Lease liabilities
|
152,203
|
|
|
183,971
|
|
|
Long-term debt, net of unamortized debt issuance costs, bond premiums and original issuance discounts
|
5,754,689
|
|
|
5,737,962
|
|
|
Deferred rental revenue
|
333,061
|
|
|
328,485
|
|
|
Deferred tax liabilities
|
359
|
|
|
279
|
|
|
Other liabilities
|
39,985
|
|
|
26,651
|
|
|
Total liabilities
|
6,359,350
|
|
|
6,360,053
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 13)
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
Preferred stock ($.01 par value, 50,000,000 shares authorized, no shares issued or outstanding at December 31, 2020 and December 31, 2019)
|
—
|
|
|
—
|
|
|
Common stock ($.01 par value, 500,000,000 shares authorized, 232,452,220 and 214,694,165 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively)
|
2,325
|
|
|
2,147
|
|
|
Additional paid-in capital
|
4,284,789
|
|
|
3,959,383
|
|
|
Accumulated deficit
|
(1,612,096)
|
|
|
(1,887,285)
|
|
|
Total shareholders’ equity
|
2,675,018
|
|
|
2,074,245
|
|
|
Total liabilities and shareholders’ equity
|
$
|
9,034,368
|
|
|
$
|
8,434,298
|
|
See accompanying Notes to the Consolidated Financial Statements.
Gaming and Leisure Properties, Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
1,031,036
|
|
|
$
|
996,166
|
|
|
$
|
747,654
|
|
|
Income from direct financing lease
|
|
—
|
|
|
—
|
|
|
81,119
|
|
|
Interest income from real estate loans
|
|
19,130
|
|
|
28,916
|
|
|
6,943
|
|
|
Real estate taxes paid by tenants
|
|
—
|
|
|
—
|
|
|
87,466
|
|
|
Total income from real estate
|
|
1,050,166
|
|
|
1,025,082
|
|
|
923,182
|
|
|
Gaming, food, beverage and other
|
|
102,999
|
|
|
128,391
|
|
|
132,545
|
|
|
Total revenues
|
|
1,153,165
|
|
|
1,153,473
|
|
|
1,055,727
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
Gaming, food, beverage and other
|
|
56,698
|
|
|
74,700
|
|
|
77,127
|
|
|
Real estate taxes
|
|
—
|
|
|
—
|
|
|
88,757
|
|
|
Land rights and ground lease expense
|
|
29,041
|
|
|
42,438
|
|
|
28,358
|
|
|
General and administrative
|
|
68,572
|
|
|
65,385
|
|
|
70,819
|
|
|
(Gains) losses from dispositions of properties
|
|
(41,393)
|
|
|
92
|
|
|
309
|
|
|
Depreciation
|
|
230,973
|
|
|
240,435
|
|
|
137,093
|
|
|
Loan impairment charges
|
|
—
|
|
|
13,000
|
|
|
—
|
|
|
Goodwill impairment charges
|
|
—
|
|
|
—
|
|
|
59,454
|
|
|
Total operating expenses
|
|
343,891
|
|
|
436,050
|
|
|
461,917
|
|
|
Income from operations
|
|
809,274
|
|
|
717,423
|
|
|
593,810
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
Interest expense
|
|
(282,142)
|
|
|
(301,520)
|
|
|
(247,684)
|
|
|
Interest income
|
|
569
|
|
|
756
|
|
|
1,827
|
|
|
Losses on debt extinguishment
|
|
(18,113)
|
|
|
(21,014)
|
|
|
(3,473)
|
|
|
Total other expenses
|
|
(299,686)
|
|
|
(321,778)
|
|
|
(249,330)
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
509,588
|
|
|
395,645
|
|
|
344,480
|
|
|
Income tax expense
|
|
3,877
|
|
|
4,764
|
|
|
4,964
|
|
|
Net income
|
|
$
|
505,711
|
|
|
$
|
390,881
|
|
|
$
|
339,516
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
2.31
|
|
|
$
|
1.82
|
|
|
$
|
1.59
|
|
|
Diluted earnings per common share
|
|
$
|
2.30
|
|
|
$
|
1.81
|
|
|
$
|
1.58
|
|
See accompanying Notes to the Consolidated Financial Statements.
Gaming and Leisure Properties, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Total
Shareholders’
Equity
|
|
|
Shares
|
|
Amount
|
|
|
|
|
Balance, December 31, 2017
|
212,717,549
|
|
|
$
|
2,127
|
|
|
$
|
3,933,829
|
|
|
$
|
(1,477,709)
|
|
|
$
|
2,458,247
|
|
|
Stock option activity
|
1,007,750
|
|
|
10
|
|
|
19,805
|
|
|
—
|
|
|
19,815
|
|
|
Restricted stock activity
|
486,633
|
|
|
5
|
|
|
(1,131)
|
|
|
—
|
|
|
(1,126)
|
|
|
Dividends paid ($2.57 per common share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(550,435)
|
|
|
(550,435)
|
|
|
Adoption of new revenue standard
|
—
|
|
|
—
|
|
|
—
|
|
|
(410)
|
|
|
(410)
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
339,516
|
|
|
339,516
|
|
|
Balance, December 31, 2018
|
214,211,932
|
|
|
2,142
|
|
|
3,952,503
|
|
|
(1,689,038)
|
|
|
2,265,607
|
|
|
ATM Program offering costs, net of issuance of common stock
|
1,500
|
|
|
—
|
|
|
(255)
|
|
|
—
|
|
|
(255)
|
|
|
Stock option activity
|
26,799
|
|
|
—
|
|
|
592
|
|
|
—
|
|
|
592
|
|
|
Restricted stock activity
|
453,934
|
|
|
5
|
|
|
6,543
|
|
|
—
|
|
|
6,548
|
|
|
Dividends paid ($2.74 per common share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(589,128)
|
|
|
(589,128)
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
390,881
|
|
|
390,881
|
|
|
Balance, December 31, 2019
|
214,694,165
|
|
|
2,147
|
|
|
3,959,383
|
|
|
(1,887,285)
|
|
|
2,074,245
|
|
|
Issuance of common stock, net of costs
|
9,207,971
|
|
|
92
|
|
|
320,781
|
|
|
|
|
320,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock activity
|
528,285
|
|
|
5
|
|
|
4,706
|
|
|
|
|
4,711
|
|
|
Dividends paid ($2.50 per common share)
|
8,021,799
|
|
|
81
|
|
|
(81)
|
|
|
(230,522)
|
|
|
(230,522)
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
505,711
|
|
|
505,711
|
|
|
Balance, December 31, 2020
|
232,452,220
|
|
|
$
|
2,325
|
|
|
$
|
4,284,789
|
|
|
$
|
(1,612,096)
|
|
|
$
|
2,675,018
|
|
See accompanying Notes to the Consolidated Financial Statements.
Gaming and Leisure Properties, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
Operating activities
|
|
|
|
|
|
|
|
Net income
|
|
$
|
505,711
|
|
|
$
|
390,881
|
|
|
$
|
339,516
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
242,995
|
|
|
258,971
|
|
|
148,365
|
|
|
Amortization of debt issuance costs, bond premiums and discounts
|
|
10,503
|
|
|
11,455
|
|
|
12,167
|
|
|
(Gains) losses on dispositions of property
|
|
(41,393)
|
|
|
92
|
|
|
309
|
|
|
Deferred income taxes
|
|
451
|
|
|
(755)
|
|
|
(522)
|
|
|
Stock-based compensation
|
|
20,004
|
|
|
16,198
|
|
|
11,152
|
|
|
Straight-line rent adjustments
|
|
4,576
|
|
|
34,574
|
|
|
61,888
|
|
|
Deferred rent recognized
|
|
(337,500)
|
|
|
—
|
|
|
—
|
|
|
Losses on debt extinguishment
|
|
18,113
|
|
|
21,014
|
|
|
3,473
|
|
|
Loan and goodwill impairment charges
|
|
—
|
|
|
13,000
|
|
|
59,454
|
|
|
(Increase) decrease,
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
(6,628)
|
|
|
(6,070)
|
|
|
(673)
|
|
|
(Decrease), increase
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
(1,252)
|
|
|
(1,775)
|
|
|
1,670
|
|
|
Accrued interest
|
|
11,590
|
|
|
15,434
|
|
|
12,020
|
|
|
Accrued salaries and wages
|
|
(5,908)
|
|
|
(3,189)
|
|
|
6,201
|
|
|
Gaming, property and other taxes and other liabilities
|
|
6,815
|
|
|
472
|
|
|
(587)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
428,077
|
|
|
750,302
|
|
|
654,433
|
|
|
Investing activities
|
|
|
|
|
|
|
|
Capital project expenditures
|
|
(474)
|
|
|
—
|
|
|
(20)
|
|
|
Capital maintenance expenditures
|
|
(3,130)
|
|
|
(3,017)
|
|
|
(4,284)
|
|
|
Proceeds from sale of property and equipment
|
|
15
|
|
|
200
|
|
|
3,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of real estate assets
|
|
(5,898)
|
|
|
—
|
|
|
(1,243,466)
|
|
|
Originations of real estate loans
|
|
—
|
|
|
—
|
|
|
(303,684)
|
|
|
Collections of principal payments on investment in direct financing lease
|
|
—
|
|
|
—
|
|
|
38,459
|
|
|
Net cash used in investing activities
|
|
(9,487)
|
|
|
(2,817)
|
|
|
(1,509,784)
|
|
|
Financing activities
|
|
|
|
|
|
|
|
Dividends paid
|
|
(230,522)
|
|
|
(589,128)
|
|
|
(550,435)
|
|
|
Taxes paid for shares withheld on restricted stock award vestings
|
|
(15,293)
|
|
|
(9,058)
|
|
|
7,537
|
|
|
Proceeds from issuance of common stock, net
|
|
320,873
|
|
|
(255)
|
|
|
—
|
|
|
Proceeds from issuance of long-term debt
|
|
2,076,383
|
|
|
1,358,853
|
|
|
2,593,405
|
|
|
Financing costs
|
|
(11,641)
|
|
|
(10,029)
|
|
|
(32,426)
|
|
|
Repayments of long-term debt
|
|
(2,060,884)
|
|
|
(1,477,949)
|
|
|
(1,164,117)
|
|
|
Premium and related costs paid on tender of senior unsecured notes
|
|
(15,747)
|
|
|
(18,879)
|
|
|
(1,884)
|
|
|
Net cash provided by (used in) financing activities
|
|
63,169
|
|
|
(746,445)
|
|
|
852,080
|
|
|
Net increase (decrease) in cash and cash equivalents, including cash classified within assets held for sale
|
|
481,759
|
|
|
1,040
|
|
|
(3,271)
|
|
|
Less decrease in cash classified within assets held for sale
|
|
(22,131)
|
|
|
—
|
|
|
—
|
|
|
Net increase/decrease in cash and cash equivalents
|
|
459,628
|
|
|
1,040
|
|
|
(3,271)
|
|
|
Cash and cash equivalents at beginning of period
|
|
26,823
|
|
|
25,783
|
|
|
29,054
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
486,451
|
|
|
$
|
26,823
|
|
|
$
|
25,783
|
|
See Note 20 to the Consolidated Financial Statements for supplemental cash flow information.
Gaming and Leisure Properties, Inc.
Notes to the Consolidated Financial Statements
1. Business and Basis of Presentation
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. ("Penn"). On November 1, 2013, Penn contributed to GLPI, through a series of internal corporate restructurings, substantially all of the assets and liabilities associated with Penn’s real property interests and real estate development business, as well as the assets and liabilities of Hollywood Casino Baton Rouge and Hollywood Casino Perryville (which are referred to as the "TRS Properties") and then spun-off GLPI to holders of Penn's common and preferred stock in a tax-free distribution (the "Spin-Off"). The assets and liabilities of GLPI were recorded at their respective historical carrying values at the time of the Spin-Off in accordance with the provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 505-60 - Spinoffs and Reverse Spinoffs ("ASC 505").
The Company elected on its United States ("U.S.") federal income tax return for its taxable year that began on January 1, 2014 to be treated as a REIT and GLPI, together with its indirect wholly-owned subsidiary, GLP Holdings, Inc., jointly elected to treat each of GLP Holdings, Inc., Louisiana Casino Cruises, Inc. (d/b/a Hollywood Casino Baton Rouge) and Penn Cecil Maryland, Inc. (d/b/a Hollywood Casino Perryville) as a "taxable REIT subsidiary" ("TRS") effective on the first day of the first taxable year of GLPI as a REIT. In addition, during 2020, the Company and Tropicana LV, LLC, a wholly owned subsidiary of the Company which holds the real estate of Tropicana Las Vegas, elected to treat Tropicana LV, LLC as a TRS, which together with the TRS Properties and GLP Holdings, Inc. is the Company's TRS Segment (the "TRS Segment"). 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.
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 December 31, 2020, GLPI’s portfolio consisted of interests in 48 gaming and related facilities, including the TRS Properties, the real property associated with 33 gaming and related facilities operated by Penn, the real property associated with 7 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 Holding Company Inc. ("Casino Queen") in East St. Louis, Illinois. These facilities, including our corporate headquarters building, are geographically diversified across 16 states and contain approximately 24.3 million square feet. As of December 31, 2020, the Company's properties were 100% occupied. GLPI expects to continue growing its portfolio by pursuing opportunities to acquire additional gaming facilities to lease to gaming operators under prudent terms.
Penn Master Lease and Casino Queen Lease
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 the term of which expires October 31, 2033, with no purchase option, followed by three remaining 5-year renewal options (exercisable by the tenant) on the same terms and conditions (the "Penn Master Lease"), and GLPI also owns and operates the TRS Segment. GLPI leases the Casino Queen property in East St. Louis back to its operators on a triple-net basis on terms similar to those in the Penn Master Lease (the "Casino Queen Lease").
Amended Pinnacle Master Lease, Boyd Master Lease and Belterra Park Lease
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 the term of which expires on April 30, 2031, with no purchase option, followed by four remaining 5-year renewal options (exercisable by the tenant) on the same terms and conditions (the "Pinnacle Master Lease"). On October 15, 2018, the Company completed its previously announced transactions with Penn, Pinnacle and Boyd Gaming Corporation ("Boyd") to accommodate Penn's acquisition of the majority of Pinnacle's operations, pursuant to a definitive agreement and plan of merger between Penn and Pinnacle, dated December 17, 2017 (the "Penn-Pinnacle Merger"). Concurrent with the Penn-Pinnacle Merger, the Company amended the Pinnacle Master Lease to allow for the sale of the operating assets of Ameristar Casino Hotel Kansas City, Ameristar Casino Resort Spa St. Charles and Belterra Casino Resort from Pinnacle to Boyd (the "Amended Pinnacle Master Lease") and entered into a new unitary triple-net master lease agreement with Boyd (the "Boyd Master Lease") for these properties on terms similar to the Company’s Amended Pinnacle Master Lease. The Boyd Master Lease has an initial term of
10 years (from the original April 2016 commencement date of the Pinnacle Master Lease and expiring April 30, 2026), with no purchase option, followed by five 5-year renewal options (exercisable by the tenant) 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 (the "Belterra Park Loan"). In May 2020, the Company acquired the real estate of Belterra Park in satisfaction of the Belterra Park 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 annual rent is comprised of a fixed component, part 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 in excess of a contractual baseline.
The Meadows Lease
The real estate assets of the Meadows are leased to Penn pursuant to the Meadows Lease. The Meadows Lease commenced on September 9, 2016 and has an initial term of 10 years, with no purchase option, and the option to renew for three successive 5-year terms and one 4-year term (exercisable by the tenant) on the same terms and conditions. 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 million, at which point the escalator will be reduced to 2% annually thereafter.
Amended and Restated Caesars Master Lease
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 (the "Real Estate Purchase Agreement") dated April 15, 2018 between Tropicana and GLP Capital L.P. ("GLP Capital"), the operating partnership of GLPI, 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, Caesars and a wholly-owned subsidiary of Caesars 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 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 ("Waterloo"), Isle Casino Bettendorf ("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 (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. On December 18, 2020, the Company and Caesars completed an Exchange Agreement with subsidiaries of Caesars in which Caesars transferred
to the Company the real estate assets of Waterloo and Bettendorf in exchange for the transfer by the Company to Caesars of the real property assets of Tropicana Evansville, plus a cash payment of $5.7 million. This resulted in a non-cash gain of $41.4 million which represented the difference between the fair value of the properties received compared to the carrying value of Tropicana Evansville and the cash payment made.
Lumière Place Lease
On October 1, 2018 the Company entered into a loan agreement with Caesars in connection with Caesars’s acquisition of Lumière Place Casino ("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") the initial term of which expires on October 31, 2033, with 4 separate renewal options of five years each, exercisable at the tenants' option. The Lumière Place Lease's rent is subject to an annual escalator of up to 2% if certain rent coverage ratio thresholds are met.
Tropicana Las Vegas
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 Segment. See Note 7 for further details related to this transaction.
Morgantown Lease
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 which were fully utilized by Penn in the fourth quarter of 2020. The Company is leasing the land back to an affiliate of Penn for an initial annual rent of $3.0 million, provided, however, that (i) on the opening date and on each anniversary thereafter the rent shall be increased by 1.5% annually (on a prorated basis for the remainder of the lease year in which the gaming facility opens) for each of the following three lease years and (ii) commencing on the fourth anniversary of the opening date and for each anniversary thereafter, (a) if the Consumer Price Index ("the CPI") increase is at least 0.5% for any lease year, the rent for such lease year shall increase by 1.25% of rent as of the immediately preceding lease year, and (b) if the CPI increase is less than 0.5% for such lease year, then the rent shall not increase for such lease year subject to escalation provisions following the opening of the property (the "Morgantown Lease").
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. 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. However, in the fourth quarter, increased spread of COVID-19 led some jurisdictions to impose temporary closures once again. As of the date of this filing, only one of our properties remains closed.
The 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 U.S. Generally Accepted Accounting Principles ("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 may differ from those estimates. Certain prior period amounts have been reclassified to conform to the current period presentation, specifically gains and losses from dispositions of properties were previously classified within General and administrative expenses and are now presented separately on the Consolidated Statements of Income.
2. Summary of Significant Accounting Policies
Real Estate Investments
Real estate investments primarily represent land and buildings leased to the Company's tenants. The Company records the acquisition of real estate assets at fair value, including acquisition and closing costs. The cost of properties developed by the Company include costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy. The Company considers the period of future benefit of the asset to determine the appropriate useful lives. Depreciation is computed using a straight-line method over the estimated useful lives of the buildings and building improvements which are generally between 10 to 31 years.
The Company continually monitors events and circumstances that could indicate that the carrying amount of its real estate investments may not be recoverable or realized. The factors considered by the Company in performing these assessments include evaluating whether the tenant is current on its lease payments, the tenant’s rent coverage ratio, the financial stability of the tenant and its parent company, and any other relevant factors. When indicators of potential impairment suggest that the carrying value of a real estate investment may not be recoverable, the Company estimates the fair value of the investment by calculating the undiscounted future cash flows from the use and eventual disposition of the investment. This amount is compared to the asset's carrying value. If the Company determines the carrying amount is not recoverable, it would recognize an impairment charge equivalent to the amount required to reduce the carrying value of the asset to its estimated fair value, calculated in accordance with GAAP. The Company groups its real estate investments together by lease, the lowest level for which identifiable cash flows are available, in evaluating impairment. In assessing the recoverability of the carrying value, the Company must make assumptions regarding future cash flows and other factors. The factors considered by the Company in performing this assessment include current operating results, market and other applicable trends and residual values, as well as the effect of obsolescence, demand, competition and other factors. If these estimates or the related assumptions change in the future, the Company may be required to record an impairment loss.
Property and Equipment Used in Operations
Property and equipment are stated at cost, less accumulated depreciation and represent assets used by the Company's TRS Properties and certain corporate assets. Maintenance and repairs that neither add materially to the value of the asset nor appreciably prolong its useful life are charged to expense as incurred. Gains or losses on the disposal of property and equipment are included in the determination of income.
Depreciation of property and equipment is recorded using the straight-line method over the following estimated useful lives:
|
|
|
|
|
|
|
|
|
|
|
Land improvements
|
|
15 to 34 years
|
|
Building and improvements
|
|
5 to 31 years
|
|
Furniture, fixtures, and equipment
|
|
3 to 31 years
|
Leasehold improvements are depreciated over the shorter of the estimated useful life of the improvement or the related lease term. The estimated useful lives are determined based on the nature of the assets as well as the Company's current operating strategy.
The Company reviews the carrying value of its property and equipment for possible impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based upon the estimated undiscounted future cash flows expected to result from its use and eventual disposition. If the Company determines the carrying amount is not recoverable, it would recognize an impairment charge equivalent to the amount required to reduce the carrying value of the asset to its estimated fair value, calculated in accordance with GAAP. In estimating expected future cash flows for determining whether an asset is impaired, assets are grouped at the individual property level. In assessing the recoverability of the carrying value of property and equipment, the Company must make assumptions regarding future cash flows and other factors. The factors considered by the Company in performing this assessment include current operating results, market and other applicable trends and residual values, as well as the effect of obsolescence, demand, competition and other factors. If these estimates or the related assumptions change in the future, the Company may be required to record an impairment loss for these assets.
Real Estate Loans and Other Loans Receivable
The Company may periodically loan funds to casino owner-operators for the purchase of gaming related real estate and/or operations. Loans for the purchase of real estate assets of gaming-related properties are classified as real estate loans on the Company's consolidated balance sheets, while loans for an operator's general operations are classified as loans receivable on the Company's consolidated balance sheets. Loans receivable are recorded on the Company's consolidated balance sheets at carrying value which approximates fair value since collection of principal is reasonably assured. Interest income related to real estate loans is recorded as interest income from real estate loans within the Company's consolidated statements of income in the period earned, whereas interest income related to other loans receivable is recorded as non-operating interest income within the Company's consolidated statements of income in the period earned.
Prior to the adoption of Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), the Company evaluated loans for impairment when it was probable that it would not be able to collect all amounts due according to the contractual terms of the agreement. All amounts due under the contractual terms of the agreement means that both contractual interest payments and contractual principal payments will be collected as scheduled in the loan agreement. Indicators of impairment may include delinquent payments, a decline in the credit worthiness of a debtor, or a decline in the underlying property/tenant’s performance. The Company measures loan impairment based upon the present value of expected future cash flows discounted at the loan’s original effective interest rate. The determination of whether loans are impaired involves judgments and assumptions based on objective and subjective factors. If an impairment occurs, the Company will reduce the carrying value of the loan and record a corresponding charge to net income.
The Company's adoption of Accounting Standards Update ASU 2016-13 on January 1, 2020 (as described in Note 3) did not result in the Company recording any allowances against its real estate loans for expected losses. The Company has no outstanding loans as of December 31, 2020. See Note 8 for further details.
Lease Assets and Lease Liabilities
The Company determines whether a contract is or contains a lease at its inception. A lease is defined as the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Right-of-use assets and lease liabilities are recorded on the Company's consolidated balance sheet at the lease commencement date for operating leases in which the Company acts as lessee. Right-of-use assets represent the Company's rights to use underlying assets for the term of the lease and lease liabilities represent the Company's future obligations under the lease agreement. Right-of-use assets and lease liabilities are recognized at the lease commencement date based upon the estimated present value of the lease payments. As the rate implicit in the Company's leases (in which the Company acts as lessee) cannot readily be determined, the Company utilizes its own estimated incremental borrowing rates to determine the present value of its lease payments. Consideration is given to the Company's recent debt issuances, as well as publicly available data for instruments with similar characteristics, including tenor, when determining the incremental borrowing rates of the Company's leases.
The Company includes options to extend a lease in its lease term when it is reasonably certain that the Company will exercise those renewal options. In the instance of the Company's ground leases associated with its tenant occupied properties, the Company has included all available renewal options in the lease term, as it intends to renew these leases indefinitely. The Company accounts for the lease and nonlease components (as necessary) of its leases of all classes of underlying assets as a single lease component. Leases with a term of 12 months or less are not recorded on the Company's 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.
Right-of-use assets and land rights are monitored for potential impairment in much the same way as the Company's real estate assets, using the impairment model in ASC 360 - Property, Plant and Equipment. If the Company determines the carrying amount of a right-of-use asset or land right is not recoverable, it would recognize an impairment charge equivalent to the amount required to reduce the carrying value of the asset to its estimated fair value, calculated in accordance with GAAP.
Cash and Cash Equivalents
The Company considers all cash balances and highly-liquid investments with original maturities of three months or less to be cash and cash equivalents.
Prepaid Expenses and Other Assets
Prepaid expenses consist of expenditures for goods or services before the goods are used or the services are received. These amounts are deferred and charged to operations as the benefits are realized and primarily consist of prepayments for insurance, property taxes and other contracts that will be expensed during the subsequent year. It also includes transaction costs that will be allocated to purchase price upon the closing of an asset acquisition. Other assets primarily consists of accounts receivable and deferred compensation plan assets (See Note 13 for further details on the deferred compensation plan).
Goodwill and Intangible Assets
The Company's goodwill and intangible assets are the result of the contribution of Hollywood Casino Baton Rouge and Hollywood Casino Perryville in connection with the Spin-Off. The Company's goodwill resides on the books of its Hollywood Casino Baton Rouge subsidiary, while the other intangible asset represents a gaming license on the books of its Hollywood Casino Perryville subsidiary. Both subsidiaries are members of the TRS Segment and are considered separate reporting units under ASC 350 - Intangibles - Goodwill and Other ("ASC 350"). Goodwill is tested at the reporting unit level, which is an operating segment or one level below an operating segment for which discrete financial information is available
Under ASC 350, the Company is required to test goodwill for impairment at least annually and whenever events or circumstances indicate that it is more likely than not that goodwill may be impaired. The Company has elected to perform its annual goodwill impairment test as of October 1 of each year. In accordance with ASC 350, the Company tests goodwill for impairment subsequent to testing its other long-lived assets for impairment.
In accordance with ASC 350, the Company considers its Hollywood Casino Perryville gaming license an indefinite-lived intangible asset that does not require amortization based on the Company's future expectations to operate this casino indefinitely, as well as the gaming industry's historical experience in renewing these intangible assets at minimal cost with various state gaming commissions. Rather, the Company's gaming license is tested annually, or more frequently if indicators of impairment exist, for impairment by comparing the fair value of the recorded asset to its carrying amount. If the carrying amount of the indefinite-life intangible asset exceeds its fair value, an impairment loss is recognized.
The Company calculates the fair value of its gaming license using the Greenfield Method under the income approach. The Greenfield Method estimates the fair value of the gaming license assuming the Company built a casino with similar utility to that of the existing facility. The method assumes a theoretical start-up company going into business without any assets other than the intangible asset being valued. As such the value of the license is a function of the following items:
•Projected revenues and operating cash flows;
•Theoretical construction costs and duration;
•Pre-opening expenses;
•Discounting that reflects the level of risk associated with receiving future cash flows attributable to the license; and
•Remaining useful life of the license
The evaluation of goodwill and indefinite-lived intangible assets requires the use of estimates about future operating results to determine the estimated fair value of the reporting unit and the indefinite-lived intangible assets. The Company must make various assumptions and estimates in performing its impairment testing. The implied fair value includes estimates of future cash flows that are based on reasonable and supportable assumptions, which represent the Company's best estimates of the cash flows expected to result from the use of the assets. Changes in estimates, increases in the Company's cost of capital, reductions in transaction multiples, changes in operating and capital expenditure assumptions or application of alternative assumptions and definitions could produce significantly different results. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the Company's estimates. If the Company's ongoing estimates of future cash flows are not met, the Company may have to record impairment charges in future accounting periods. The Company's estimates of cash flows are based on the current regulatory and economic climates, as well as recent operating information and budgets. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or other events.
Forecasted cash flows can be significantly impacted by the local economy in which the Company's subsidiaries operate. For example, increases in unemployment rates can result in decreased customer visitations and/or lower customer spend per visit. In addition, new legislation which approves gaming in nearby jurisdictions or further expands gaming in jurisdictions in which the Company operates can result in increased competition for the property. This generally has a negative effect on profitability once competitors become established, as a certain level of cannibalization occurs absent an overall
increase in customer visitations. Lastly, increases in gaming taxes approved by state regulatory bodies can negatively impact forecasted cash flows.
Assumptions and estimates about future cash flow levels are complex and subjective. They are sensitive to changes in underlying assumptions and can be affected by a variety of factors, including external factors, such as industry, geopolitical and economic trends, and internal factors, such as changes in the Company's business strategy, which may reallocate capital and resources to different or new opportunities which management believes will enhance the Company's overall value but may be to the detriment of its existing operations.
The Company reclassified its goodwill and other intangible assets into Assets held for sale at December 31, 2020. See Note 6 for additional discussion.
Debt Issuance Costs and Bond Premiums and Discounts
Debt issuance costs that are incurred by the Company in connection with the issuance of debt are deferred and amortized to interest expense over the contractual term of the underlying indebtedness. In accordance with ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, the Company records long-term debt net of unamortized debt issuance costs on its consolidated balance sheets. Similarly, the Company records long-term debt net of any unamortized bond premiums and original issuance discounts on its consolidated balance sheets. Any original issuance discounts or bond premiums are also amortized to interest expense over the contractual term of the underlying indebtedness.
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.
Revenue Recognition
The Company recognizes rental revenue from tenants, including rental abatements, lease incentives and contractually fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is reasonably assured in accordance with ASC 842 - Leases. Additionally, percentage rent that is fixed and determinable at the lease inception date is recorded on a straight-line basis over the lease term, resulting in the recognition of deferred rental revenue on the Company’s consolidated balance sheets. Deferred rental revenue is amortized to rental revenue on a straight-line basis over the remainder of the lease term. The lease term includes the initial non-cancelable lease term and any reasonably assured renewable periods. Contingent rental income that is not fixed and determinable at lease inception is recognized only when the lessee achieves the specified target. Recognition of rental income commences when control of the facility has been transferred to the tenant.
Additionally, in accordance with ASC 842, the Company records revenue for the ground lease rent paid by its tenants with an offsetting expense in land rights and ground lease expense within the consolidated statement of income as the Company has concluded that as the lessee it is the primary obligor under the ground leases. The Company subleases these ground leases back to its tenants, who are responsible for payment directly to the landlord.
The Company may periodically loan funds to casino owner-operators for the purchase of gaming related real estate. Interest income related to real estate loans is recorded as revenue from real estate within the Company's consolidated statements of income in the period earned.
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 from slot machines is the aggregate net difference between gaming wins and losses with liabilities recognized for funds deposited by customers before gaming play occurs, for "ticket-in, ticket-out" coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots. Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of coins played, are charged to revenue as the amount of the jackpots increase. Table game gaming revenue is the aggregate of table drop adjusted for the change in aggregate table chip inventory. Table drop is the total dollar amount of the currency, coins, chips, tokens, outstanding counter checks (markers), and front money that are removed from the live gaming tables. Gaming revenue is recognized net of certain sales incentives, including promotional allowances in accordance with ASC 606 - Revenues from Contracts with Customers. The Company also defers a portion of the revenue received from customers (who participate in the points-based loyalty programs) at the time of play until a later period when the points are redeemed or forfeited. Other revenues at the TRS Properties are derived from the properties' dining, retail and certain other ancillary activities and revenue for these activities is recognized as services are performed.
Stock-Based Compensation
The Company's Amended 2013 Long Term Incentive Compensation Plan (the "2013 Plan") provides for the Company to issue restricted stock awards, including performance-based restricted stock awards, and other equity or cash based awards to employees. Any director, employee or consultant shall be eligible to receive such awards.
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.
The unrecognized compensation cost relating to restricted stock awards and performance-based restricted stock awards is recognized as expense over the awards’ remaining vesting periods.
See Note 15 for further information related to stock-based compensation.
Income Taxes
The TRS Segment is able to engage in activities resulting in income that would not be qualifying income for a REIT. As a result, certain activities of the Company which occur within its TRS Segment are subject to federal and state income taxes.
The Company accounts for income taxes in accordance with ASC 740 - Income Taxes ("ASC 740"). Under ASC 740, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and are measured at the prevailing enacted tax rates that will be in effect when these differences are settled or realized. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realizability of the deferred tax assets is evaluated by assessing the valuation allowance and by adjusting the amount of the allowance, if any, as necessary. The factors used to assess the likelihood of realization are the forecast of future taxable income.
ASC 740 also creates a single model to address uncertainty in tax positions, and clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in an enterprise's financial statements. It also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company did not have any uncertain tax positions for the three years ended December 31, 2020.
The Company is required under ASC 740 to disclose its accounting policy for classifying interest and penalties, the amount of interest and penalties charged to expense each period, as well as the cumulative amounts recorded in the consolidated balance sheets. If and when they occur, the Company will classify any income tax-related penalties and interest accrued related to unrecognized tax benefits in taxes on income within the consolidated statements of income. During the years ended December 31, 2020, 2019 and 2018, the Company recognized no penalties and interest, net of deferred income taxes.
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. and Penn Cecil Maryland, Inc. as a "taxable REIT subsidiary" effective on the first day of the first taxable year of GLPI as a REIT. In addition, during 2020, the Company and Tropicana LV, LLC, a wholly owned subsidiary of the Company which holds the real estate of Tropicana Las Vegas, elected to treat Tropicana LV, LLC as a “taxable REIT subsidiary”.
The Company continues to be organized and to operate in a manner that will permit the Company to qualify as a REIT. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to shareholders. As a REIT, the Company generally will not be subject to federal, state or local income tax on income that it distributes as dividends to its shareholders, except in those jurisdictions that do not allow a deduction for such distributions. If the Company fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal, state and local income tax, including any applicable alternative minimum tax, on its taxable income at regular corporate income tax rates, and dividends paid to its shareholders would not be deductible by the Company in computing taxable income. Any resulting corporate liability could be substantial and could materially and adversely affect the Company's net income and net cash available for distribution to shareholders. Unless the Company was entitled to relief under certain Internal Revenue Code provisions, the Company also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which it failed to qualify to be taxed as a REIT.
Earnings Per Share
The Company calculates earnings per share ("EPS") in accordance with ASC 260 - Earnings Per Share. 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. See Note 17 for further details on the Company's earnings per share calculations.
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, L.P. (a wholly-owned subsidiary of GLPI through which GLPI owns substantially all of its real estate assets) and the TRS Segment. The GLP Capital reportable segment consists of the leased real property and represents the majority of the Company’s business. The TRS Segment consists of Hollywood Casino Perryville and Hollywood Casino Baton Rouge, as well as the real estate of Tropicana Las Vegas. See Note 19 for further information with respect to the Company’s segments.
Concentration of Credit Risk
Concentrations of credit risk arise when a number of operators, tenants, or obligors related to the Company's investments are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. Additionally, concentrations of credit risk may arise when revenues of the Company are derived from a small number of tenants. As of December 31, 2020, substantially all of the Company's real estate properties were leased to Penn, Caesars and Boyd. During the year ended December 31, 2020, approximately 78%, 11% and 10% of the Company's collective income from real estate was derived from tenant leases and real estate loans with Penn, Caesars and Boyd, respectively. Revenues from our tenants are reported in the Company's GLP Capital, L.P. reportable segment. Penn, Caesars and Boyd are publicly traded companies that are subject to the informational filing requirements of the Securities Exchange Act of 1934, as amended, and are required to file periodic reports on Form 10-K and Form 10-Q and current reports on Form 8-K with the Securities and Exchange Commission ("SEC"). Readers are directed to Penn, Caesars and Boyd's respective websites for further financial information on these companies. Other than the Company's tenant concentration, management believes the Company's portfolio was reasonably diversified by geographical location and did not contain any other significant concentrations of credit risk. As of December 31, 2020, the Company's portfolio of 48 properties is diversified by location across 16 states.
Financial instruments that subject the Company to credit risk consist of cash and cash equivalents, accounts receivable, real estate loans and other loans receivable. The Company's policy is to limit the amount of credit exposure to any one financial institution and place investments with financial institutions evaluated as being creditworthy, or in short-term money market and tax-free bond funds which are exposed to minimal interest rate and credit risk. At times, the Company has bank deposits and overnight repurchase agreements that exceed federally-insured limits.
3. New Accounting Pronouncements
Accounting Pronouncements Adopted in 2020
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. The Company's adoption of ASU 2018-15 on January 1, 2020 did not have an impact on its 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, real estate 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 Topic 310 on receivables, ASC 470 on debt, and ASC 842 on leases and ASC subtopic 815-15 on embedded derivatives. Based on the limited amount of obligations and contracts the Company currently has that references LIBOR, the Company does not anticipate any material impact from this pronouncement on its Consolidated Financial Statements.
4. Real Estate Investments
Real estate investments, net, represent investments in 45 rental properties and the corporate headquarters building and is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
|
December 31,
2019
|
|
|
(in thousands)
|
|
Land and improvements
|
$
|
2,667,616
|
|
|
$
|
2,552,285
|
|
|
Building and improvements
|
6,030,482
|
|
|
5,749,211
|
|
|
|
|
|
|
|
Total real estate investments
|
8,698,098
|
|
|
8,301,496
|
|
|
Less accumulated depreciation
|
(1,410,940)
|
|
|
(1,200,941)
|
|
|
Real estate investments, net
|
$
|
7,287,158
|
|
|
$
|
7,100,555
|
|
The increase in real estate investments is primarily due to the Company acquiring the real estate of Belterra Park in satisfaction of the Belterra Park 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. Additionally, the Exchange Transaction described in Note 1 which closed in December 2020, resulted in an increase to real estate investments of $72.6 million (net increase to land and improvements of $46.4 million and building and improvements of $26.2 million). Finally, the Company acquired the land underlying Penn's development project in Morgantown, Pennsylvania for $30.0 million.
5. Property and Equipment Used in Operations
Property and equipment used in operations, net, consists of the following and primarily represents the assets utilized at the TRS Properties as the real estate will be leased to third party operators subsequent to the completion of the sale transactions as discussed in Note 6.
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|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
|
December 31,
2019
|
|
|
(in thousands)
|
|
Land and improvements
|
$
|
30,540
|
|
|
$
|
30,492
|
|
|
Building and improvements
|
117,333
|
|
|
116,904
|
|
|
Furniture, fixtures, and equipment (1)
|
28,767
|
|
|
118,766
|
|
|
Construction in progress
|
474
|
|
|
120
|
|
|
Total property and equipment
|
177,114
|
|
|
266,282
|
|
|
Less accumulated depreciation (1)
|
(96,496)
|
|
|
(172,202)
|
|
|
Property and equipment, net
|
$
|
80,618
|
|
|
$
|
94,080
|
|
(1) The majority of the decline at December 31, 2020 compared to the prior year is related to the reclassification of certain amounts to Assets held for sale. See Note 6 for further details.
6. Assets Held for Sale
On November 25, 2020, the Company entered into a definitive agreement to sell the operations of our Hollywood Casino Baton Rouge to Casino Queen for $28.2 million. The Company will retain ownership of all real estate assets at Hollywood Casino Baton Rouge and will simultaneously enter into a master lease with Casino Queen, which will include the Casino Queen property in East St. Louis that is currently leased by us to Casino Queen and the Hollywood Casino Baton Rouge facility (the "Casino Queen Master Lease"). The initial annual cash rent on the retained real estate will be approximately $21.4 million and the Casino Queen Master Lease will have an initial term of 15 years with four 5 year renewal options exercisable by the tenant. Additionally, the Company will complete the current land side development project that is in process and the rent under the Casino Queen Master Lease will be adjusted upon delivery to reflect a yield of 8.25% on GLPI's project costs. The transaction is subject to customary closing conditions and regulatory approvals and is expected to close in the second half of 2021.
On December 11, 2020, Penn agreed 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, subject to regulatory approvals, expected to occur during the second half of 2021. Upon closing, the Company will lease the real estate of the Perryville facility to Penn pursuant to a lease providing for initial annual rent on the retained real estate of $7.77 million, subject to escalation provisions.
The Company has classified the operating assets of the two properties above as Assets held for sale since we expect these transactions to close within 12 months and classified the respective liabilities within Other liabilities on the Consolidated Balance Sheet which is comprised of the following. (in thousands)
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|
|
|
|
|
|
|
Assets
|
|
|
Property and equipment, used in operations, net
|
$
|
8,780
|
|
|
Right-of-use assets and land rights, net
|
$
|
263
|
|
|
Cash and cash equivalents
|
$
|
22,131
|
|
|
Prepaid expenses
|
$
|
2,473
|
|
|
Goodwill
|
$
|
16,067
|
|
|
Other intangible assets
|
$
|
9,577
|
|
|
Other assets
|
$
|
2,157
|
|
|
Total
|
$
|
61,448
|
|
|
|
|
|
Liabilities
|
|
|
Accounts payable
|
$
|
8
|
|
|
Accrued expenses
|
$
|
3,387
|
|
|
Accrued salaries and wages
|
$
|
2,064
|
|
|
Gaming, property and other taxes
|
$
|
398
|
|
|
Lease liabilities
|
$
|
262
|
|
|
Other liabilities
|
$
|
710
|
|
|
Total which is classified in Other Liabilities
|
$
|
6,829
|
|
The assets held for sale reside in the Company's TRS Segment. See Note 19 for the pre-tax income of this segment for the years ended December 31, 2020, 2019 and 2018 which is comprised solely of the properties above with the exception of $2.7 million of depreciation expense associated with Tropicana Las Vegas for the year ended December 31, 2020.
7. Acquisitions
The Company accounts for its acquisitions of real estate assets as asset acquisitions under ASC 805 - Business Combinations. Under asset acquisition accounting, transaction costs incurred to acquire the purchased assets are also included as part of the asset cost.
Pending acquisitions
On October 27, 2020, the Company entered into a series of definitive agreements pursuant to which a subsidiary of Bally's Corporation (NYSE: BALY) (Bally's) 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 Bally's 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 Bally's, 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 Bally's (the “Bally's Master Lease”). The Company anticipates that the Bally's Master Lease will have an initial term of 15 years, with no purchase option, followed by four five-year renewal options (exercisable by the tenant) on the same terms and conditions. Rent under the Bally's 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 the CPI. The Company expects this transaction to close in mid-2021 following the completion of customary closing conditions and regulatory approvals. On November 6, 2020, the Company issued 9.2 million common shares at $36.25 per share to partially finance the funding required for this transaction.
Current year acquisitions
As previously discussed in Note 1, the impact of COVID-19 resulted in casino-wide closures by 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 were fully utilized in 2020 for rent due under the parties' existing leases.
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 year ended December 31, 2020 depreciation expense of $2.7 million was recorded. Additionally, deferred rent of $307.5 million was recorded at the acquisition date, which has been fully recognized for the year ended December 31, 2020.
The Tropicana Las Vegas assets are summarized below.
|
|
|
|
|
|
|
|
|
|
|
December 31, 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
|
(2,669)
|
|
|
|
|
Real estate of Tropicana Las Vegas , net
|
$
|
304,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 which were fully utilized by Penn in the fourth quarter of 2020. The Company is leasing the land back to an affiliate of Penn pursuant to the Morgantown Lease for an initial annual rent of $3.0 million, subject to escalation provisions following the opening of the property.
On October 27, 2020, the Company entered into an Exchange Agreement with subsidiaries of Caesars that own, respectively, Waterloo and Bettendorf. Pursuant to the terms of the agreement, Caesars transferred 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 $5.7 million. The exchange transaction closed on December 18, 2020, which resulted in the Waterloo and Bettendorf facilities being added to the Amended and Restated Caesars Master Lease and the rent increased by $0.5 million annually. The Company recorded a non-cash gain of $41.4 million in the fourth quarter of 2020 related to the transaction, which represented the difference between the fair value of the properties received compared to the carrying value of Tropicana Evansville and the cash payment of $5.7 million. The following table summarizes the fair value of the assets acquired in the Exchange Agreement and the carrying value of the Tropicana Evansville assets that were transferred to Caesars. (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bettendorf
|
Waterloo
|
Total
|
|
Land
|
$
|
29,636
|
|
$
|
64,262
|
|
$
|
93,898
|
|
|
Building and improvements
|
85,150
|
|
77,958
|
|
163,108
|
|
|
Total real estate investments
|
$
|
114,786
|
|
$
|
142,220
|
|
$
|
257,006
|
|
|
Less: Evansville Land and improvements
|
|
|
(47,439)
|
|
|
Less: Evansville Buildings and improvements, net
|
|
|
(136,858)
|
|
|
Less: Evansville Right of use assets and land rights, net
|
|
|
(55,456)
|
|
|
Add: Evansville, Operating Lease Liabilities
|
|
|
29,795
|
|
Prior Year Acquisitions
2018
On October 15, 2018, in conjunction with the Penn-Pinnacle Merger the Company acquired the real property assets of Plainridge Park from Penn for approximately $250.9 million. This property was added to the Amended Pinnacle Master Lease via the fourth amendment to the Pinnacle Master Lease and is leased to Penn which will continue to operate the property. The initial annual cash rent of $25.0 million for Plainridge Park will not be subject to rent escalators or adjustments.
Also in conjunction with the Penn-Pinnacle Merger, the Pinnacle Master Lease was amended via the fourth amendment to such 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 and to increase fixed rent under the lease by an additional $13.9 million annually. The Company entered into the Boyd Master Lease for these properties on terms similar to the Company’s existing master leases. As a result of the fourth amendment to the Pinnacle Master Lease, the Company reassessed the lease's classification and determined the new lease agreement 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, the building assets of $2.6 billion previously recorded as an investment in direct financing lease on the Company's consolidated balance sheet were recorded as real estate assets on the Company's consolidated balance sheet and all rent received under the Amended Pinnacle Master Lease is recorded as rental income on the Company's consolidated statement of income. The Amended Pinnacle Master Lease was assumed by Penn at the consummation of the Penn-Pinnacle Merger.
On October 1, 2018, the Company acquired the real property assets of five casino properties from Tropicana and certain of its affiliates for approximately $992.5 million, pursuant to the Real Estate Purchase Agreement dated April 15, 2018 between Tropicana and GLP Capital, which was subsequently amended on October 1, 2018. 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 and the rights to six long-term ground leases for land on which the operations of the acquired Tropicana properties reside. Concurrent with the Tropicana Acquisition, Caesars acquired the operating assets of these properties from Tropicana pursuant to the Tropicana Merger Agreement 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. Initial annual rent under the Caesars Master Lease was $87.6 million and is subject to annual rent escalators and biennial percentage rent adjustments.
Purchase price allocations are primarily based on the fair values of assets acquired and liabilities assumed at the time of acquisition. The following table summarizes the purchase price allocation of the assets acquired in the Tropicana Acquisition (in thousands):
|
|
|
|
|
|
|
|
Real estate investments, net
|
$
|
948,217
|
|
|
Land rights, net
|
44,331
|
|
|
Total purchase price
|
$
|
992,548
|
|
8. 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 the Belterra Park Loan. The Belterra Park Loan's initial interest rate was equal to 11.11% and the loan 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 Belterra Park Loan, subject to the Belterra Park Lease.
Other Loans 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 Casino Queen 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 5-year periods.
Simultaneously with the Casino Queen acquisition, GLPI provided Casino Queen with a $43.0 million, five-year term loan at 7% interest, prepayable 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 prepayable 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 the interest due from CQ Holding Company under the Company's unsecured 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 Company's unsecured loan with CQ Holding Company, related to financial covenant violations during the year ended December 31, 2018.
At December 31, 2018, active negotiations for the sale of Casino Queen's operations were taking place. Despite the payment and covenant defaults noted above, at that time, full payment of the principal was still expected, due to the anticipation that the operations were to be sold in the near term for an amount allowing for repayment of the full $13.0 million of loan principal due to GLPI. However, the paid-in-kind interest due to the Company at December 31, 2018 was not expected to be collected, resulting in an impairment charge of $1.5 million during the fourth quarter of 2018. The Company did not recognize the paid-in-kind interest income due to the Company for the quarter ended December 31, 2018 and took a charge for the previously recognized paid-in-kind interest income through the Company’s consolidated statement of earnings as a reversal of the paid-in-kind interest income recognized earlier in the year.
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. Therefore, the Company recorded an impairment charge of $13.0 million through the Consolidated Statement of Income for the year ended December 31, 2019 to reflect the write-off of the Casino Queen Loan.
Casino Queen was closed in mid-March due to COVID-19 and Casino Queen was in payment default on their lease starting in April 2020. The Company entered into a deferred rental agreement with Casino Queen and received all delinquent rental payments in the fourth quarter of 2020.
9. 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 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 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 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 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):
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
December 31, 2019
|
|
Right-of-use assets - operating leases (1)
|
$
|
151,339
|
|
$
|
184,063
|
|
|
Land rights, net
|
617,858
|
|
654,671
|
|
|
Right-of-use assets and land rights, net
|
$
|
769,197
|
|
$
|
838,734
|
|
(1) In addition, there is $0.3 million of operating lease right-of-use assets included in assets held for sale.
As described in Note 8, on December 18, 2020, the Company and Caesars completed an Exchange Agreement in which the Company transferred to Caesars the real property assets of Tropicana Evansville. In connection with the exchange, the Company removed the land right and right of use asset related to the long-term ground lease at this property which totaled $24.8 million and $30.7 million, respectively, at the closing of the transaction along with the lease liability of $29.8 million it had recorded on its Consolidated Balance Sheet for this lease.
On June 30, 2019, the Resorts Casino Tunica property was closed by the Company's tenant, resulting in the acceleration of $6.3 million of land right amortization expense related to the long-term ground lease at this property and bringing the net book value of this land right to zero at December 31, 2019. Subsequent to the property's closure, the Company entered into an agreement to terminate the long-term ground lease for the Resorts Casino Tunica property, which became effective in February 2020. In connection with the exercised termination option, the Company remeasured the lease liability and adjusted the right-of-use asset it had recorded on its consolidated balance sheet for this lease to align with the new termination date.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
|
December 31,
2019
|
|
|
(in thousands)
|
|
Land rights
|
$
|
667,751
|
|
|
$
|
694,077
|
|
|
Less accumulated amortization
|
(49,893)
|
|
|
(39,406)
|
|
|
Land rights, net
|
$
|
617,858
|
|
|
$
|
654,671
|
|
As of December 31, 2020, estimated future amortization expense related to the Company’s land rights by fiscal year is as follows (in thousands):
|
|
|
|
|
|
|
|
Year ending December 31,
|
|
|
2021
|
$
|
11,372
|
|
|
2022
|
11,372
|
|
|
2023
|
11,372
|
|
|
2024
|
11,372
|
|
|
2025
|
11,372
|
|
|
Thereafter
|
560,998
|
|
|
Total
|
$
|
617,858
|
|
Lease Liabilities
At December 31, 2020, maturities of the Company's operating lease liabilities were as follows (in thousands):
|
|
|
|
|
|
|
|
Year ending December 31,
|
|
|
2021
|
$
|
11,079
|
|
|
2022
|
11,082
|
|
|
2023
|
11,081
|
|
|
2024
|
11,034
|
|
|
2025
|
10,984
|
|
|
Thereafter
|
569,957
|
|
|
Total lease payments
|
$
|
625,217
|
|
|
Less: interest
|
(473,014)
|
|
|
Present value of lease liabilities (1)
|
$
|
152,203
|
|
(1) In addition, there is $0.3 million of lease liabilities included in other liabilities related to liabilities held for sale.
Lease Expense
Operating lease costs represent the entire amount of expense recognized for operating leases that are recorded on the 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
Year Ended December 31, 2019
|
|
|
(in thousands)
|
|
Operating lease cost
|
$
|
13,907
|
|
|
$
|
15,482
|
|
|
Variable lease cost (1)
|
3,364
|
|
|
9,048
|
|
|
Short-term lease cost
|
625
|
|
|
1,060
|
|
|
Amortization of land right assets
|
12,022
|
|
|
18,536
|
|
|
Total lease cost
|
$
|
29,918
|
|
|
$
|
44,126
|
|
(1) Variable lease costs for the year ended December 31, 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 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 consolidated statements of income. The Company's short-term lease costs as well as a small portion of operating lease costs are recorded in both gaming, food, beverage and other expense and general and administrative expense in the consolidated statements of income. Amortization expense related to the land right intangibles totaled $11.3 million for the year ended December 31, 2018. Other lease costs totaled $18.9 million for the year ended December 31, 2018.
Supplemental Disclosures Related to Leases
Supplemental balance sheet information related to the Company's operating leases was as follows:
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Weighted average remaining lease term - operating leases
|
56.41 years
|
|
Weighted average discount rate - operating leases
|
6.7%
|
In addition, the weighted average remaining lease term and the weighted average discount rate for those operating leases included in assets held for sale and other liabilities is 1.79 years and 4.0%, respectively.
Supplemental cash flow information related to the Company's operating leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
Year Ended December 31, 2019
|
|
|
(in thousands)
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash flows from operating leases (1) (2)
|
$
|
1,600
|
|
|
$
|
2,226
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for new lease obligations:
|
|
|
|
|
Operating leases (2)
|
$
|
95
|
|
|
$
|
293
|
|
(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.
(2) In addition, there is $0.2 million and $0.3 million related to assets held for sale and other liabilities for operating cash flows from cash paid for amounts included in the measurement of lease liabilities and right-of-use assets obtained for new lease obligations, respectively for the year ended December 31, 2020.
10. Goodwill and Intangible Assets
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The only goodwill of the Company is recorded on the books of Hollywood Casino Baton Rouge, in connection with Penn's purchase of this entity prior to the Spin-Off. The original assets and liabilities of GLPI, including goodwill and intangible assets were recorded at their respective historical carrying values at the time of the Spin-Off in accordance with the provisions of ASC 505. There is no goodwill recorded on the Company's GLP Capital segment, which holds the Company's REIT operations.
During the year ended December 31, 2018, the Company recorded a goodwill impairment charge of $59.5 million in connection with its operations at Hollywood Casino Baton Rouge. This charge was driven by general market deterioration in the Baton Rouge region and the smoking ban at all Baton Rouge, Louisiana casinos that went into effect during the second quarter of 2018, both of which significantly impacted the Company's forecasted cash flows for this reporting unit. Subsequent to conducting its impairment tests on other long-lived assets, the Company performed Step 1 of the goodwill impairment test, which indicated a potential impairment. Step 1 of the goodwill impairment test involved the determination of the fair value of the Baton Rouge reporting unit and its comparison to the reporting unit's carrying amount. Using a discounted cash flow model, which relied on projected EBITDA to determine the reporting unit's future cash flows, the Company calculated a fair value that was less than the reporting unit's carrying value and proceeded to Step 2. In Step 2 of the goodwill impairment test, the Company performed a fair value allocation as if the reporting unit had been acquired in a business combination and assigned the fair value of the reporting unit calculated in Step 1 to all assets and liabilities of the reporting unit, including any unrecognized intangible assets. Any residual fair value was allocated to goodwill to arrive at the implied fair value of goodwill. After completing the Step 2 allocation, the Company determined the goodwill on its Baton Rouge reporting unit had an implied fair value of $16.1 million and recorded the impairment charge of $59.5 million during the fourth quarter of 2018. There have been no changes in the carrying value of goodwill of $16.1 million for the years ended December 31, 2020 and 2019. As described in Note 6, the Company's goodwill balance at December 31, 2020 has been reclassified to Assets held for sale.
In accordance with ASC 350, the Company considers its gaming license at the Hollywood Casino Perryville property an indefinite-lived intangible asset that does not require amortization based on future expectations to operate this casino indefinitely, as well as the gaming industry's historical experience in renewing these intangible assets at minimal cost with various state gaming commissions. Rather, the Company's gaming license is tested annually, or more frequently if indicators of impairment exist, for impairment by comparing the fair value of the recorded asset to its carrying amount. If the carrying amount of the indefinite-life intangible asset exceeds its fair value, an impairment loss is recognized. Hollywood Casino Perryville's gaming license will expire in September 2025, fifteen years from the casino's opening date. The Company expects to expense any costs related to the gaming license renewal as incurred. The Company conducts its annual impairment assessment of the gaming license on October 1st using the Greenfield Method which estimates the fair value of the gaming license assuming the Company built a casino with similar utility to that of the existing facility. This method also assumes a theoretical start-up company going into business without any assets other than the intangible asset being valued. Based upon these assumptions and the Company's current forecasted cash flows for this reporting unit, the gaming license was not impaired. At both December 31, 2020 and 2019, the gaming license had a carrying value of $9.6 million. As described in Note 6, the Company's other intangible assets balance at December 31, 2020 has been reclassified to Assets held for sale.
11. Fair Value of Financial Assets and Liabilities
Assets and Liabilities Measured at Fair Value on a Recurring Basis
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 consolidated balance sheets.
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 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (1)
|
$
|
486,451
|
|
|
$
|
486,451
|
|
|
$
|
26,823
|
|
|
$
|
26,823
|
|
|
Deferred compensation plan assets
|
35,514
|
|
|
35,514
|
|
|
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
|
|
|
6,026,840
|
|
|
5,290,174
|
|
|
5,707,996
|
|
(1) In addition, there is $22.1 million in cash and cash equivalents in assets held for sale.
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 years ended December 31, 2020 and 2019. There were no assets measured at fair value on a nonrecurring basis during the year ended December 31, 2020; however, assets measured at fair value on a nonrecurring basis during the year ended December 31, 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. Therefore, the remaining balance of the Casino Queen Loan was written off and an impairment charge was recorded in the Consolidated Statement of Income for the year ended December 31, 2019.
12. Long-term Debt
Long-term debt, net of current maturities and unamortized debt issuance costs is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
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 3.350% senior unsecured notes due September 2024
|
400,000
|
|
|
400,000
|
|
|
$850 million 5.250% 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 5.750% senior unsecured notes due June 2028
|
500,000
|
|
|
500,000
|
|
|
$750 million 5.300% senior unsecured notes due January 2029
|
750,000
|
|
|
750,000
|
|
|
$700 million 4.000% 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
|
860
|
|
|
989
|
|
|
Total long-term debt
|
5,799,879
|
|
|
5,786,163
|
|
|
Less: unamortized debt issuance costs, bond premiums and original issuance discounts
|
(45,190)
|
|
|
(48,201)
|
|
|
Total long-term debt, net of unamortized debt issuance costs, bond premiums and original issuance discounts
|
$
|
5,754,689
|
|
|
$
|
5,737,962
|
|
The following is a schedule of future minimum repayments of long-term debt as of December 31, 2020 (in thousands):
|
|
|
|
|
|
|
|
2021
|
$
|
135
|
|
|
2022
|
142
|
|
|
2023
|
924,168
|
|
|
2024
|
400,156
|
|
|
2025
|
850,164
|
|
|
Over 5 years
|
3,625,114
|
|
|
Total minimum payments
|
$
|
5,799,879
|
|
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.
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 December 31, 2020, the Credit Facility had a gross outstanding balance of $424.0 million, consisting of the $424.0 million Term Loan A-2 facility. No amounts were outstanding under the Revolver. Additionally, at December 31, 2020, the Company was contingently obligated under letters of credit issued pursuant to the Credit Facility with face amounts aggregating approximately $0.4 million, resulting in $1,174.6 million of available borrowing capacity under the Revolver.
The interest rates payable on the loans are, at the Company's option, equal to either a LIBOR rate or a base rate plus an applicable margin, which ranges from 1.0% to 2.0% per annum for LIBOR loans and 0.0% to 1.0% per annum for base rate loans, in each case, depending on the credit ratings assigned to the Credit Facility. At December 31, 2020, the applicable margin was 1.50% for LIBOR loans and 0.50% for base rate loans. In addition, the Company is required to pay a commitment fee on the unused portion of the commitments under the Revolver at a rate that ranges from 0.15% to 0.35% per annum, depending on the credit ratings assigned to the Credit Facility. At December 31, 2020, the commitment fee rate was 0.25%. The Company is not required to repay any loans under the Credit Facility prior to maturity and may prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty, subject to reimbursement of any LIBOR breakage costs of the lenders. The Company's wholly owned subsidiary, GLP Capital, is the primary obligor under the Credit Facility, which is guaranteed by GLPI.
The 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 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 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 Credit Facility will enable the lenders under the Credit Facility to accelerate the loans and terminate the commitments thereunder. At December 31, 2020, the Company was in compliance with all required financial covenants under the Credit Facility.
Senior Unsecured Notes
At December 31, 2020, the Company had an outstanding balance of $5,375.0 million of senior unsecured notes (the "Senior 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 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 at an issue price equal to 98.827% of the principal amount 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 an issue price equal to 103.824% of the principal amount 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.
On August 29, 2019, the Company issued $400 million of 3.35% Senior Unsecured Notes maturing on September 1, 2024 at an issue price equal to 99.899% of the principal amount (the "2024 Notes") and $700 million of 4.00% Senior Unsecured Notes maturing on January 15, 2030 at an issue price equal to 99.751% of the principal amount (the "2030 Notes"). Interest on the 2024 Notes is payable semi-annually on March 1 and September 1 of each year, commencing on March 1, 2020. Interest on the 2030 Notes is payable semi-annually on January 15 and July 15 of each year, commencing on January 15, 2020. The net proceeds from the sale of the 2024 Notes and 2030 Notes were used to (i) finance the Company's cash tender offer to purchase its 4.875% Senior Unsecured Notes due 2020 (described below), (ii) repay outstanding borrowings under the Company's revolving credit facility and (iii) repay a portion of the outstanding borrowings under the Company's Term Loan A-1 facility.
On September 12, 2019, the Company completed a cash tender offer (the "2019 Tender Offer") to purchase its $1,000 million aggregate principal amount 4.875% Senior Unsecured Notes due 2020 (the "2020 Notes"). The Company received early
tenders from the holders of approximately $782.6 million in aggregate principal of the 2020 Notes, or approximately 78% of its outstanding 2020 Notes, in connection with the 2019 Tender Offer at a price of 102.337% of the unpaid principal amount plus accrued and unpaid interest through the settlement date. Subsequent to the early tender deadline, an additional $2.2 million in aggregate principal of the 2020 Notes was tendered at a price of 99.337% of the unpaid principal amount plus accrued and unpaid interest through the settlement date, for a total redemption of $784.8 million of the 2020 Notes. The Company recorded a loss on the early extinguishment of debt related to the 2019 Tender Offer, of approximately $21.0 million, for the difference between the reacquisition price of the tendered 2020 Notes and their net carrying value.
The Company may redeem the Senior Notes of any series at any time, and from time to time, at a redemption price of 100% of the principal amount of the Senior Notes redeemed, plus a "make-whole" redemption premium described in the indenture governing the Senior Notes, together with accrued and unpaid interest to, but not including, the redemption date, except that if Senior Notes of a series are redeemed 90 or fewer days prior to their maturity, the redemption price will be 100% of the principal amount of the Senior Notes redeemed, together with accrued and unpaid interest to, but not including, the redemption date. If GLPI experiences a change of control accompanied by a decline in the credit rating of the Senior Notes of a particular series, the Company will be required to give holders of the Senior Notes of such series the opportunity to sell their Senior Notes of such series at a price equal to 101% of the principal amount of the Senior Notes of such series, together with accrued and unpaid interest to, but not including, the repurchase date. The Senior Notes also are subject to mandatory redemption requirements imposed by gaming laws and regulations.
The Senior Notes were issued by GLP Capital, L.P. and GLP Financing II, Inc. (the "Issuers"), two wholly-owned subsidiaries of GLPI, and are guaranteed on a senior unsecured basis by GLPI. The guarantees of GLPI are full and unconditional. The Senior Notes are the Issuers' senior unsecured obligations and rank pari passu in right of payment with all of the Issuers' senior indebtedness, including the Credit Facility, and senior in right of payment to all of the Issuers' subordinated indebtedness, without giving effect to collateral arrangements.
The 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 December 31, 2020, the Company was in compliance with all required financial covenants under its Senior Notes.
Finance Lease Liability
The Company assumed the finance lease obligations related to certain assets at its Aurora, Illinois property. GLPI recorded the asset and liability associated with the finance lease on its consolidated balance sheet. The original term of the finance lease is 30 years and it will terminate in 2026.
13. Commitments and Contingencies
Separation and Distribution Agreements
Pursuant to a Separation and Distribution Agreement between Penn and GLPI, any liability arising from or relating to legal proceedings involving the businesses and operations of Penn’s real property holdings prior to the Spin-Off (other than any liability arising from or relating to legal proceedings where the dispute arises from the operation or ownership of the TRS Properties) will be retained by Penn, and Penn will indemnify GLPI (and its subsidiaries, directors, officers, employees and agents and certain other related parties) against any losses it may incur arising from or relating to such legal proceedings. Similarly, pursuant to a Separation and Distribution Agreement between Pinnacle's operating company and GLPI (as successor to Pinnacle Entertainment), any liability arising from or relating to legal proceedings involving the business and operations of Pinnacle's real property holdings prior to the Pinnacle Merger will be retained by Pinnacle, and Pinnacle will indemnify GLPI (and its subsidiaries, directors, officers, employees and agents and certain other related parties) against any losses it may incur arising from or relating to such legal proceedings. Effective October 15, 2018, Penn assumed all obligations of Pinnacle pursuant to a merger of Pinnacle with and into a subsidiary of Penn. There can be no assurance that Penn will be able to fully satisfy these indemnification obligations. Moreover, even if the Company ultimately succeeds in recovering from Penn any amounts for which the Company is liable, it may be temporarily required to bear those losses.
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.
Employee Benefit Plans
The Company maintains a defined contribution plan under the provisions of Section 401(k) of the Internal Revenue Code of 1986, as amended, which covers all eligible employees. The plan enables participating employees to defer a portion of their salary and/or their annual bonus in a retirement fund to be administered by the Company. The Company makes a discretionary match contribution of 50% of employees' elective salary deferrals, up to a maximum of 6% of eligible employee compensation. The matching contributions for the defined contribution plan were $0.3 million for each of the years ended December 31, 2020, 2019 and 2018.
The Company maintains a non-qualified deferred compensation plan that covers most management and other highly-compensated employees. The plan allows the participants to defer, on a pre-tax basis, a portion of their base annual salary and/or their annual bonus, and earn tax-deferred earnings on these deferrals. The plan also provides for matching Company contributions that vest over a five-year period. The Company has established a Trust, and transfers to the Trust, on a periodic basis, an amount necessary to provide for its respective future liabilities with respect to participant deferral and Company contribution amounts. The Company's matching contributions for the non-qualified deferred compensation plan for the years ended December 31, 2020, 2019 and 2018 were $0.7 million, $0.6 million and $0.7 million, respectively. The Company's deferred compensation liability, which was included in other liabilities within the consolidated balance sheet, was $32.4 million and $25.2 million at December 31, 2020 and 2019, respectively. Assets held in the Trust were $35.5 million and $28.9 million at December 31, 2020 and 2019, respectively, and are included in other assets within the consolidated balance sheet.
Labor Agreements
Some of Hollywood Casino Perryville's employees are currently represented by labor unions. The Seafarers Entertainment and Allied Trade Union represents 129 of Hollywood Casino Perryville's employees under an agreement that expires in January 2032. Additionally, United Industrial Service Transportation Professional and Government Workers of North America and Local No. 27 United Food and Commercial Workers represent certain employees under collective bargaining agreements that expire in 2021 and 2033, respectively, neither of which represents more than 50 of Hollywood Casino Perryville's employees. If the Company fails to renew or modify existing agreements on satisfactory terms, this failure could have a material adverse effect on Hollywood Casino Perryville's business, financial condition and results of operations. There can be no assurance that Hollywood Casino Perryville will be able to maintain these agreements.
14. Revenue Recognition
Revenues from Real Estate
As of December 31, 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 Amended and Restated Caesars Master Lease and 3 of the Company's real estate investment properties were leased to a subsidiary of Boyd under the Boyd Master Lease. Additionally, the Meadows real estate assets are leased to Penn pursuant to the Meadows Lease, the land under a Penn development facility subject to the Morgantown Lease and the Casino Queen real estate assets are leased back to the operator under the Casino Queen Lease. Finally, the Company has single property triple net leases with Caesars under the Lumière Place Lease and Boyd under the Belterra Park Lease.
The obligations under the Penn Master Lease and Amended Pinnacle Master Lease, as well as the Meadows Lease and Morgantown 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 Amended and Restated Caesars Master Lease are jointly and severally guaranteed by Caesars and by most of Caesars subsidiaries that occupy and operate the
leased facilities. 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 prospectively adjusted, (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 in excess of a contractual baseline, 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 in excess of a contractual baseline, 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 prospectively adjusted, every two years to an amount equal to 4% of the average net revenues of all facilities under the Amended Pinnacle Master Lease during the preceding two years in excess of a contractual baseline. The Amended Pinnacle Master Lease reset on May 1, 2020 which resulted in an annual decline of $5.0 million.
On July 23, 2020, the Amended and Restated Caesars Master Lease became effective as described more fully in Note 1. 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 is being 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.
On December 18, 2020, following the receipt of required regulatory approvals, the Company and Caesars completed an Exchange Agreement with subsidiaries of Caesars in which Caesars transferred to the Company the real estate assets of Waterloo and Bettendorf in exchange for the transfer by the Company to Caesars of the real property assets of Tropicana Evansville, plus a cash payment of $5.7 million. The Waterloo and Bettendorf facilities were added to the Amended and Restated Caesars Master Lease and the rent was increased by $520,000 annually. This Exchange Transaction resulted in a reconsideration of the Amended and Restated Caesars Master Lease which resulted in the continuation of operating lease treatment for accounting classification purposes. Additionally, a non cash gain of $41.4 million was recorded in other income which reflected the fair value of the Waterloo and Bettendorf facilities which exceeded the net book value of the Tropicana Evansville property and the $5.7 million payment at the date of the exchange.
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, 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 in excess of a contractual baseline.
In May 2020, the Company acquired the real estate of Belterra Park in satisfaction of the Belterra Park Loan, subject to 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 annual rent is comprised of a fixed component, part 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, every two years to an amount equal to 4% of the average annual net revenues of Belterra Park during the preceding two years in excess of a contractual baseline.
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, the initial term of which expires on October 31, 2033, with 4 separate renewal options of five years each, exercisable at the tenants' option. The Lumière Place Lease's rent 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 Morgantown Lease became effective on October 1, 2020 whereby the Company is leasing the land under Penn's
gaming facility under construction for an initial cash rent of $3.0 million, provided, however, that (i) on the opening date and on each anniversary thereafter the rent shall be increased by 1.5% annually (on a prorated basis for the remainder of the lease year in which the gaming facility opens) for each of the following three lease years and (ii) commencing on the fourth anniversary of the opening date and for each anniversary thereafter, (a) if the CPI increase is at least 0.5% for any lease year, the rent for such lease year shall increase by 1.25% of rent as of the immediately preceding lease year, and (b) if the CPI increase is less than 0.5% for such lease year, then the rent shall not increase for such lease year.
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. In June 2019, a percentage rent floor was triggered on Penn's Hollywood Casino Toledo property, as a result of Penn's 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 the Casino Queen Master Lease. 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 or unavailable. 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.
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.
In connection with Penn exercising its first renewal option on October 1, 2020, the Company reassessed the Amended Pinnacle Master Lease as the lease term now concludes on May 1, 2031. The Company continued to conclude that each individual lease component within the Amended Pinnacle Master Lease meets the definition of an operating lease. The deferred rent and fixed minimum lease payments at October 1, 2020 are being recognized on a straight-line basis over the new initial lease term ending on May 1, 2031.
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 any 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 tenant's business at lease inception; therefore the Company concluded that the lease term of the Amended and Restated Caesars Master Lease was its remaining initial lease term which was extended by 5 years when the Amended and Restated Caesars Master Lease became effective on July 23, 2020. The lease term of the Boyd Master Lease is 10 years, equal to the initial term of such master lease.
The Belterra Park Lease, Morgantown Lease and Lumière Park Lease are single property leases operated by large-multi-property operators and as such the Company concluded it was not reasonably assured at lease inception that the operator would elect to exercise any renewal options, as such the lease term of these leases is equal to their initial terms.
Details of the Company's rental income for the year ended December 31, 2020 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
Building base rent (1)
|
$
|
676,929
|
|
|
Land base rent
|
194,939
|
|
|
Percentage rent
|
148,647
|
|
|
Total cash rental income (2)
|
$
|
1,020,515
|
|
|
Straight-line rent adjustments
|
(4,576)
|
|
|
Ground rent in revenue
|
14,905
|
|
|
Other rental revenue
|
192
|
|
|
Total rental income
|
$
|
1,031,036
|
|
(1) Building base rent is subject to the annual rent escalators described above.
(2) Cash rental income includes rent credits of $337.5 million related to the Tropicana Las Vegas and Morgantown transactions with Penn. See Note 7 for further details.
As of December 31, 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ending December 31,
|
Future Rental Payments Receivable
|
|
Straight-Line Rent Adjustments
|
|
Future Base Ground Rents Receivable
|
|
Future Income to be Recognized Related to Operating Leases
|
|
2021
|
$
|
1,015,479
|
|
|
$
|
3,312
|
|
|
$
|
9,462
|
|
|
$
|
1,028,253
|
|
|
2022
|
987,785
|
|
|
22,180
|
|
|
9,468
|
|
|
1,019,433
|
|
|
2023
|
962,333
|
|
|
30,927
|
|
|
9,473
|
|
|
1,002,733
|
|
|
2024
|
930,017
|
|
|
30,053
|
|
|
9,480
|
|
|
969,550
|
|
|
2025
|
931,378
|
|
|
28,927
|
|
|
9,486
|
|
|
969,791
|
|
|
Thereafter
|
12,488,695
|
|
|
217,662
|
|
|
78,558
|
|
|
12,784,915
|
|
|
Total
|
$
|
17,315,687
|
|
|
$
|
333,061
|
|
|
$
|
125,927
|
|
|
$
|
17,774,675
|
|
The table above presents the cash rent the Company expects to receive from its tenants, 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. For further details on these tenant paid ground leases, refer to Note 9.
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 revenue from real estate within the Company's consolidated statements of income in the period earned. During the years ended December 31, 2020 and 2019, the Company recognized interest income from these real estate loans of $19.1 million and $28.9 million, respectively.
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. The Company also defers a portion of the revenue received from customers (who participate in the 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. During the years ended December 31, 2020 and 2019, the Company recognized gaming, food, beverage and other revenue of $103.0 million and $128.4 million, respectively.
15. Stock-Based Compensation
As of December 31, 2020, the Company had 4,111,073 shares available for future issuance under the Amended 2013 Long Term Incentive Compensation Plan (the "2013 Plan"). The 2013 Plan provides for the Company to issue restricted stock awards, including performance-based restricted stock awards and other equity or cash based awards to employees. Any director, employee or consultant shall be eligible to receive such awards. The Company issues new authorized common shares to satisfy stock option exercises and restricted stock award releases.
As of December 31, 2020, there was $3.2 million of total unrecognized compensation cost for restricted stock awards that will be recognized over the grants' remaining weighted average vesting period of 1.59 years. For the years ended December 31, 2020, 2019 and 2018, the Company recognized $9.3 million, $7.5 million and $4.7 million, respectively, of compensation expense associated with these awards. The total fair value of awards released during the years ended December 31, 2020, 2019 and 2018, was $13.7 million, $10.1 million and $10.0 million, respectively.
The following table contains information on restricted stock award activity for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Award
Shares
|
|
Weighted Average Grant-Date Fair Value
|
|
Outstanding at December 31, 2018
|
299,642
|
|
|
$
|
33.53
|
|
|
Granted
|
317,290
|
|
|
$
|
22.69
|
|
|
Released
|
(299,961)
|
|
|
$
|
21.47
|
|
|
Canceled
|
—
|
|
|
$
|
—
|
|
|
Outstanding at December 31, 2019
|
316,971
|
|
|
$
|
34.10
|
|
|
Granted
|
275,456
|
|
|
$
|
28.29
|
|
|
Released
|
(331,868)
|
|
|
$
|
25.65
|
|
|
Canceled
|
(7,999)
|
|
|
$
|
38.46
|
|
|
Outstanding at December 31, 2020
|
252,560
|
|
|
$
|
38.72
|
|
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 and meet a minimum market capitalization. As of December 31, 2020, there was $9.0 million of total unrecognized compensation cost for performance-based restricted stock awards, which will be recognized over the awards' remaining weighted average vesting period of 1.73 years. For the years ended December 31, 2020, 2019 and 2018, the Company recognized $10.7 million, $8.7 million and $6.4 million, respectively, of compensation expense associated with these awards. The total fair value of performance-based stock awards released during the years ended December 31, 2020, 2019, and 2018 was $23.4 million, $14.7 million, and $20.1 million respectively.
The following table contains information on performance-based restricted stock award activity for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Performance-Based Award Shares
|
|
Weighted Average Grant-Date Fair Value
|
|
Outstanding at December 31, 2018
|
1,342,000
|
|
|
$
|
18.60
|
|
|
Granted
|
512,000
|
|
|
$
|
17.85
|
|
|
Released
|
(447,334)
|
|
|
$
|
17.22
|
|
|
Canceled
|
(23,332)
|
|
|
$
|
18.63
|
|
|
Outstanding at December 31, 2019
|
1,383,334
|
|
|
$
|
18.77
|
|
|
Granted
|
504,000
|
|
|
$
|
23.62
|
|
|
Released
|
(561,667)
|
|
|
$
|
18.51
|
|
|
Canceled
|
(131,673)
|
|
|
$
|
20.74
|
|
|
Outstanding at December 31, 2020
|
1,193,994
|
|
|
$
|
20.72
|
|
16. Income Taxes
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. The benefits of the intended REIT conversion on the Company's tax provision and effective income tax rate are reflected in the tables below. Deferred tax assets and liabilities are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years. As a result of the Tax Cuts and Jobs Act, the corporate tax rate was permanently lowered from the previous maximum rate of 35% to 21%, effective for tax years including or commencing January 1, 2018.
The components of the Company's deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2020
|
|
2019
|
|
|
(in thousands)
|
|
Deferred tax assets:
|
|
|
|
|
Accrued expenses
|
$
|
1,508
|
|
|
$
|
1,597
|
|
|
Property and equipment
|
6,443
|
|
|
5,844
|
|
|
Interest expense
|
1,170
|
|
|
596
|
|
|
Net operating losses
|
310
|
|
|
—
|
|
|
Gross deferred tax assets
|
9,431
|
|
|
8,037
|
|
|
Less: valuation allowance
|
(1,731)
|
|
|
—
|
|
|
Net deferred tax assets
|
7,700
|
|
|
8,037
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Property and equipment
|
(556)
|
|
|
(624)
|
|
|
Intangibles
|
(1,813)
|
|
|
(1,636)
|
|
|
Net deferred tax liabilities
|
(2,369)
|
|
|
(2,260)
|
|
|
Net:
|
$
|
5,331
|
|
|
$
|
5,777
|
|
The carrying amounts of deferred tax assets have been reduced by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. In assessing the requirement for, and amount of, a valuation allowance in accordance with the more likely than not standard for all periods, the Company gives appropriate consideration to all positive and negative evidence related to the realization of the deferred tax assets.
As of December 31, 2020, the valuation allowance against deferred tax assets was $1.7 million. The valuation allowance balance is associated mainly with net operating losses, disallowed interest expense carryforward, and other additional deferred tax assets.
The provision for income taxes charged to operations for years ended December 31, 2020, 2019 and 2018 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2020
|
|
2019
|
|
2018
|
|
|
(in thousands)
|
|
Current tax expense
|
|
|
|
|
|
|
Federal
|
$
|
1,111
|
|
|
$
|
3,005
|
|
|
$
|
2,856
|
|
|
State
|
2,315
|
|
|
2,514
|
|
|
2,630
|
|
|
Total current
|
3,426
|
|
|
5,519
|
|
|
5,486
|
|
|
Deferred tax (benefit) expense
|
|
|
|
|
|
|
Federal
|
467
|
|
|
(667)
|
|
|
(512)
|
|
|
State
|
(16)
|
|
|
(88)
|
|
|
(10)
|
|
|
Total deferred
|
451
|
|
|
(755)
|
|
|
(522)
|
|
|
Total provision
|
$
|
3,877
|
|
|
$
|
4,764
|
|
|
$
|
4,964
|
|
The following tables reconcile the statutory federal income tax rate to the actual effective income tax rate for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2020
|
|
2019
|
|
2018
|
|
Percent of pretax income
|
|
|
|
|
|
|
U.S. federal statutory income tax rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
|
State and local income taxes
|
0.4
|
%
|
|
0.5
|
%
|
|
0.6
|
%
|
|
Valuation allowance
|
0.3
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
REIT conversion benefit
|
(21.0)
|
%
|
|
(20.3)
|
%
|
|
(23.8)
|
%
|
|
Goodwill impairment charges
|
—
|
%
|
|
—
|
%
|
|
3.6
|
%
|
|
Other miscellaneous items
|
0.1
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
0.8
|
%
|
|
1.2
|
%
|
|
1.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2020
|
|
2019
|
|
2018
|
|
|
|
(in thousands)
|
|
|
Amount based upon pretax income
|
|
|
|
|
|
|
|
U.S. federal statutory income tax
|
$
|
107,013
|
|
|
$
|
83,086
|
|
|
$
|
72,341
|
|
|
|
State and local income taxes
|
1,955
|
|
|
2,051
|
|
|
2,246
|
|
|
|
Valuation allowance
|
1,731
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
REIT conversion benefit
|
(106,839)
|
|
|
(80,397)
|
|
|
(82,151)
|
|
|
|
Goodwill impairment charges
|
—
|
|
|
—
|
|
|
12,485
|
|
|
|
Permanent differences
|
16
|
|
|
23
|
|
|
19
|
|
|
|
Other miscellaneous items
|
1
|
|
|
1
|
|
|
24
|
|
|
|
|
$
|
3,877
|
|
|
$
|
4,764
|
|
|
$
|
4,964
|
|
|
The Company is still subject to federal income tax examinations for its years ended December 31, 2016 and forward.
17. Earnings Per Share
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 years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(in thousands)
|
|
Determination of shares:
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
218,817
|
|
|
214,667
|
|
|
213,720
|
|
|
Assumed conversion of employee stock-based awards
|
—
|
|
|
—
|
|
|
206
|
|
|
Assumed conversion of restricted stock awards
|
76
|
|
|
117
|
|
|
80
|
|
|
Assumed conversion of performance-based restricted stock awards
|
880
|
|
|
1,002
|
|
|
773
|
|
|
Diluted weighted-average common shares outstanding
|
219,773
|
|
|
215,786
|
|
|
214,779
|
|
The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(in thousands, except per share and share amounts)
|
|
Calculation of basic EPS:
|
|
|
|
|
|
|
Net income
|
$
|
505,711
|
|
|
$
|
390,881
|
|
|
$
|
339,516
|
|
|
Less: Net income allocated to participating securities
|
(583)
|
|
|
(576)
|
|
|
(475)
|
|
|
Net income attributable to common shareholders
|
$
|
505,128
|
|
|
$
|
390,305
|
|
|
$
|
339,041
|
|
|
Weighted-average common shares outstanding
|
218,817
|
|
|
214,667
|
|
|
213,720
|
|
|
Basic EPS
|
$
|
2.31
|
|
|
$
|
1.82
|
|
|
$
|
1.59
|
|
|
|
|
|
|
|
|
|
Calculation of diluted EPS:
|
|
|
|
|
|
|
Net income
|
$
|
505,711
|
|
|
$
|
390,881
|
|
|
$
|
339,516
|
|
|
Diluted weighted-average common shares outstanding
|
219,773
|
|
|
215,786
|
|
|
214,779
|
|
|
Diluted EPS
|
$
|
2.30
|
|
|
$
|
1.81
|
|
|
$
|
1.58
|
|
|
|
|
|
|
|
|
|
Antidilutive securities excluded from the computation of diluted earnings per share (in shares)
|
426
|
|
|
—
|
|
|
13,335
|
|
18. 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 "2019 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 amounts and at times to be determined by the Company, but has no obligation to sell any of the shares in the 2019 ATM Program. The 2019 ATM Program also allows the Company to enter into forward sale agreements. In no event will the aggregate number of shares sold under the 2019 ATM Program (whether under any forward sale agreement or through a sales agent), have an aggregate sales price in excess of $600 million. The Company expects, that if it enters into a forward sale contract, to physically settle each 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 2019 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 year ended December 31, 2020, GLPI sold 7,971 shares of its common stock at an average price of $45.90 per share under the 2019 ATM Program, which generated gross proceeds of approximately $0.4 million (net proceeds of approximately $0.2 million). Program commencement to date, the Company has sold 9,471 shares of its common stock at an average price of $45.46 per share and generated gross proceeds of approximately $0.4 million (net costs of approximately $0.1 million). As of December 31, 2020, the Company had $599.6 million remaining for issuance under the 2019 ATM Program and had not entered into any forward sale agreements.
During the fourth quarter of 2020, the Company issued 9.2 million shares of common stock at $36.25 per share to partially finance the funding required for the upcoming Bally's transaction. See Note 7 for further details.
The following table lists the regular dividends declared and paid by the Company during the years ended December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
November 5, 2020
|
|
November 16, 2020
|
|
Common Stock
|
|
$
|
0.60
|
|
|
Fourth Quarter 2020
|
|
December 24, 2020
|
|
$
|
137,943
|
|
|
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
|
|
|
November 26, 2019
|
|
December 13, 2019
|
|
Common Stock
|
|
$
|
0.70
|
|
|
Fourth Quarter 2019
|
|
December 27, 2019
|
|
$
|
150,285
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 1, 2018
|
|
March 9, 2018
|
|
Common Stock
|
|
$
|
0.63
|
|
|
First Quarter 2018
|
|
March 23, 2018
|
|
$
|
134,490
|
|
|
April 24, 2018
|
|
June 15, 2018
|
|
Common Stock
|
|
$
|
0.63
|
|
|
Second Quarter 2018
|
|
June 29, 2018
|
|
$
|
134,631
|
|
|
July 31, 2018
|
|
September 7, 2018
|
|
Common Stock
|
|
$
|
0.63
|
|
|
Third Quarter 2018
|
|
September 21, 2018
|
|
$
|
134,844
|
|
|
October 12, 2018
|
|
December 14, 2018
|
|
Common Stock
|
|
$
|
0.68
|
|
|
Fourth Quarter 2018
|
|
December 28, 2018
|
|
$
|
145,627
|
|
(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). Dividend distributed on December 24, 2020 was paid $27.6 million in cash and $110.3 million in stock (2,543,675 shares at $43.3758). 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 the years ended December 31, 2020, 2019 and 2018, dividend payments were made to GLPI restricted stock award holders in the amount of $0.8 million, $0.9 million and $0.8 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). Dividends distributed to the Company's employees on December 24, 2020 were paid $34 thousand in cash and $118 thousand in stock (2,722 shares at $43.3758).
A summary of the Company's common stock distributions for the years ended December 31, 2020, 2019 and 2018 is as follows (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
(in dollars per share)
|
|
Qualified dividends
|
$
|
—
|
|
|
$
|
0.0387
|
|
|
$
|
0.0391
|
|
|
Non-qualified dividends
|
2.4517
|
|
|
2.2649
|
|
|
2.2955
|
|
|
Capital gains
|
0.0025
|
|
|
0.0353
|
|
|
0.0270
|
|
|
Non-taxable return of capital
|
0.0458
|
|
|
0.4011
|
|
|
0.2084
|
|
|
Total distributions per common share
|
$
|
2.50
|
|
|
$
|
2.74
|
|
|
$
|
2.57
|
|
|
|
|
|
|
|
|
|
Percentage classified as qualified dividends
|
—
|
%
|
|
1.41
|
%
|
|
1.52
|
%
|
|
Percentage classified as non-qualified dividends
|
98.07
|
%
|
|
82.66
|
%
|
|
89.32
|
%
|
|
Percentage classified as capital gains
|
0.10
|
%
|
|
1.29
|
%
|
|
1.05
|
%
|
|
Percentage classified as non-taxable return of capital
|
1.83
|
%
|
|
14.64
|
%
|
|
8.11
|
%
|
|
|
100.00
|
%
|
|
100.00
|
%
|
|
100.00
|
%
|
19. Segment Information
The following tables present certain information with respect to the Company’s segments. Intersegment revenues between the Company’s segments were not material in any of the periods presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GLP Capital
|
|
TRS Segment (1)
|
|
Total
|
|
|
|
(in thousands)
|
|
For the year ended December 31, 2020
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
1,050,166
|
|
|
$
|
102,999
|
|
|
$
|
1,153,165
|
|
|
Income from operations
|
|
792,467
|
|
|
16,807
|
|
|
809,274
|
|
|
Interest expense
|
|
266,163
|
|
|
15,979
|
|
|
282,142
|
|
|
Income before income taxes
|
|
508,757
|
|
|
831
|
|
|
509,588
|
|
|
Income tax expense
|
|
697
|
|
|
3,180
|
|
|
3,877
|
|
|
Net income (loss)
|
|
508,060
|
|
|
(2,349)
|
|
|
505,711
|
|
|
Depreciation
|
|
222,041
|
|
|
8,932
|
|
|
230,973
|
|
|
Capital project expenditures
|
|
—
|
|
|
474
|
|
|
474
|
|
|
Capital maintenance expenditures
|
|
186
|
|
|
2,944
|
|
|
3,130
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2019
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
1,025,082
|
|
|
$
|
128,391
|
|
|
$
|
1,153,473
|
|
|
Income from operations
|
|
694,215
|
|
|
23,208
|
|
|
717,423
|
|
|
Interest expense (2)
|
|
291,114
|
|
|
10,406
|
|
|
301,520
|
|
|
Income before income taxes
|
|
382,841
|
|
|
12,804
|
|
|
395,645
|
|
|
Income tax expense
|
|
657
|
|
|
4,107
|
|
|
4,764
|
|
|
Net income
|
|
382,184
|
|
|
8,697
|
|
|
390,881
|
|
|
Depreciation
|
|
232,708
|
|
|
7,727
|
|
|
240,435
|
|
|
Capital project expenditures
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Capital maintenance expenditures
|
|
22
|
|
|
2,995
|
|
|
3,017
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2018
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
923,182
|
|
|
$
|
132,545
|
|
|
$
|
1,055,727
|
|
|
Income (loss) from operations
|
|
630,122
|
|
|
(36,312)
|
|
|
593,810
|
|
|
Interest expense
|
|
237,278
|
|
|
10,406
|
|
|
247,684
|
|
|
Income (loss) before income taxes
|
|
391,196
|
|
|
(46,716)
|
|
|
344,480
|
|
|
Income tax expense
|
|
855
|
|
|
4,109
|
|
|
4,964
|
|
|
Net income (loss)
|
|
390,341
|
|
|
(50,825)
|
|
|
339,516
|
|
|
Depreciation
|
|
127,696
|
|
|
9,397
|
|
|
137,093
|
|
|
Capital project expenditures
|
|
20
|
|
|
—
|
|
|
20
|
|
|
Capital maintenance expenditures
|
|
55
|
|
|
4,229
|
|
|
4,284
|
|
|
|
|
|
|
|
|
|
|
Balance sheet at December 31, 2020
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
8,590,190
|
|
|
$
|
444,178
|
|
|
$
|
9,034,368
|
|
|
|
|
|
|
|
|
|
|
Balance sheet at December 31, 2019
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
8,299,143
|
|
|
$
|
135,155
|
|
|
$
|
8,434,298
|
|
(1) Results for the year ended December 31, 2020 include depreciation expense of $2.7 million associated with Tropicana Las Vegas.
(2) Interest expense is net of intercompany interest eliminations of $16.0 million for the year ended December 31, 2020 compared to $10.4 million for each of the years ended December 31, 2019 and 2018.
20. Supplemental Disclosures of Cash Flow Information and Noncash Activities
Supplemental disclosures of cash flow information are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2020
|
|
2019
|
|
2018
|
|
|
(in thousands)
|
|
Cash paid for income taxes, net of refunds received
|
$
|
3,383
|
|
|
$
|
5,554
|
|
|
$
|
5,389
|
|
|
Cash paid for interest
|
261,127
|
|
|
274,530
|
|
|
229,779
|
|
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 consolidated balance sheet to represent its rights to underlying assets and future lease obligations. In 2020, the Company acquired from Penn the real property associated with the Tropicana Las Vegas in exchange for rent credits of $307.5 million and the land at Penn's development facility in Morgantown, Pennsylvania for rent credits of $30.0 million. For the year ended December 31, 2020, the Company also acquired the real property of Belterra Park in satisfaction of the Belterra Park 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 CZR loan subject to the Lumière Place Lease. In addition, as described in Note 7, the Company entered into an Exchange Agreement pursuant to which Caesars transferred to the Company the real estate assets of Waterloo and Bettendorf for the real estate assets of Tropicana Evansville and a cash payment of $5.7 million.
Finally, see Note 18 for a description of the stock dividend that has been distributed in 2020. The Company did not engage in any other noncash investing and financing activities during the years ended December 31, 2020, 2019 and 2018.
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
December 31, 2020
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Cost to Company
|
|
|
|
Net Capitalized Costs (Retirements) Subsequent to Acquisition
|
|
Gross Amount at which Carried at Close of Period
|
|
|
|
|
|
|
|
Life on
which
Depreciation
in Latest
Income
Statement is
Computed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original
Date of
Construction /
Renovation
|
|
|
|
|
Description
|
|
Location
|
|
Encumbrances
|
|
Land and Improvements
|
|
Buildings and
Improvements
|
|
|
|
|
Land and Improvements
|
|
Buildings and
Improvements
|
|
Total (6)
|
|
Accumulated
Depreciation
|
|
|
Date Acquired
|
|
|
Rental Properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hollywood Casino Lawrenceburg
|
|
Lawrenceburg, IN
|
|
$
|
—
|
|
|
$
|
15,251
|
|
|
$
|
342,393
|
|
|
|
|
$
|
(30)
|
|
|
$
|
15,222
|
|
|
$
|
342,392
|
|
|
$
|
357,614
|
|
|
$
|
163,370
|
|
|
1997/2009
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino Aurora
|
|
Aurora, IL
|
|
—
|
|
|
4,937
|
|
|
98,378
|
|
|
|
|
(383)
|
|
|
4,936
|
|
|
97,996
|
|
|
102,932
|
|
|
72,868
|
|
|
1993/2002/ 2012
|
|
11/1/2013
|
|
30
|
|
Hollywood Casino Joliet
|
|
Joliet, IL
|
|
—
|
|
|
19,214
|
|
|
101,104
|
|
|
|
|
(20)
|
|
|
19,194
|
|
|
101,104
|
|
|
120,298
|
|
|
64,300
|
|
|
1992/2003/ 2010
|
|
11/1/2013
|
|
31
|
|
Argosy Casino Alton
|
|
Alton, IL
|
|
—
|
|
|
—
|
|
|
6,462
|
|
|
|
|
—
|
|
|
—
|
|
|
6,462
|
|
|
6,462
|
|
|
4,741
|
|
|
1991/1999
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino Toledo
|
|
Toledo, OH
|
|
—
|
|
|
12,003
|
|
|
144,093
|
|
|
|
|
(201)
|
|
|
11,802
|
|
|
144,093
|
|
|
155,895
|
|
|
45,379
|
|
|
2012
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino Columbus
|
|
Columbus, OH
|
|
—
|
|
|
38,240
|
|
|
188,543
|
|
|
|
|
105
|
|
|
38,266
|
|
|
188,622
|
|
|
226,888
|
|
|
60,259
|
|
|
2012
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino at Charles Town Races
|
|
Charles Town, WV
|
|
—
|
|
|
35,102
|
|
|
233,069
|
|
|
|
|
—
|
|
|
35,102
|
|
|
233,069
|
|
|
268,171
|
|
|
146,579
|
|
|
1997/2010
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino at Penn National Race Course
|
|
Grantville, PA
|
|
—
|
|
|
25,500
|
|
|
161,810
|
|
|
|
|
—
|
|
|
25,500
|
|
|
161,810
|
|
|
187,310
|
|
|
88,411
|
|
|
2008/2010
|
|
11/1/2013
|
|
31
|
|
M Resort
|
|
Henderson, NV
|
|
—
|
|
|
66,104
|
|
|
126,689
|
|
|
|
|
(436)
|
|
|
65,668
|
|
|
126,689
|
|
|
192,357
|
|
|
45,421
|
|
|
2009/2012
|
|
11/1/2013
|
|
30
|
|
Hollywood Casino Bangor
|
|
Bangor, ME
|
|
—
|
|
|
12,883
|
|
|
84,257
|
|
|
|
|
—
|
|
|
12,883
|
|
|
84,257
|
|
|
97,140
|
|
|
38,102
|
|
|
2008/2012
|
|
11/1/2013
|
|
31
|
|
Zia Park Casino
|
|
Hobbs, NM
|
|
—
|
|
|
9,313
|
|
|
38,947
|
|
|
|
|
—
|
|
|
9,313
|
|
|
38,947
|
|
|
48,260
|
|
|
23,174
|
|
|
2005
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino Gulf Coast
|
|
Bay St. Louis, MS
|
|
—
|
|
|
59,388
|
|
|
87,352
|
|
|
|
|
(229)
|
|
|
59,176
|
|
|
87,335
|
|
|
146,511
|
|
|
56,358
|
|
|
1992/2006/ 2011
|
|
11/1/2013
|
|
40
|
|
Argosy Casino Riverside
|
|
Riverside, MO
|
|
—
|
|
|
23,468
|
|
|
143,301
|
|
|
|
|
(77)
|
|
|
23,391
|
|
|
143,301
|
|
|
166,692
|
|
|
72,307
|
|
|
1994/2007
|
|
11/1/2013
|
|
37
|
|
Hollywood Casino Tunica
|
|
Tunica, MS
|
|
—
|
|
|
4,634
|
|
|
42,031
|
|
|
|
|
—
|
|
|
4,634
|
|
|
42,031
|
|
|
46,665
|
|
|
29,759
|
|
|
1994/2012
|
|
11/1/2013
|
|
31
|
|
Boomtown Biloxi
|
|
Biloxi, MS
|
|
—
|
|
|
3,423
|
|
|
63,083
|
|
|
|
|
(137)
|
|
|
3,286
|
|
|
63,083
|
|
|
66,369
|
|
|
52,448
|
|
|
1994/2006
|
|
11/1/2013
|
|
15
|
|
Hollywood Casino St. Louis
|
|
Maryland Heights, MO
|
|
—
|
|
|
44,198
|
|
|
177,063
|
|
|
|
|
(3,239)
|
|
|
40,959
|
|
|
177,063
|
|
|
218,022
|
|
|
98,929
|
|
|
1997/2013
|
|
11/1/2013
|
|
13
|
|
Hollywood Casino at Dayton Raceway
|
|
Dayton, OH
|
|
—
|
|
|
3,211
|
|
|
—
|
|
|
|
|
86,288
|
|
|
3,211
|
|
|
86,288
|
|
|
89,499
|
|
|
17,732
|
|
|
2014
|
|
11/1/2013
|
|
31
|
|
Hollywood Casino at Mahoning Valley Race Track (1)
|
|
Youngstown, OH
|
|
—
|
|
|
5,683
|
|
|
—
|
|
|
|
|
94,314
|
|
|
5,833
|
|
|
94,164
|
|
|
99,997
|
|
|
19,113
|
|
|
2014
|
|
11/1/2013
|
|
31
|
|
Resorts Casino Tunica
|
|
Tunica, MS
|
|
—
|
|
|
—
|
|
|
12,860
|
|
|
|
|
(12,860)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1994/1996/ 2005/2014
|
|
5/1/2017
|
|
N/A
|
|
1st Jackpot Casino
|
|
Tunica, MS
|
|
—
|
|
|
161
|
|
|
10,100
|
|
|
|
|
—
|
|
|
161
|
|
|
10,100
|
|
|
10,261
|
|
|
1,356
|
|
|
1995
|
|
5/1/2017
|
|
31
|
|
Ameristar Black Hawk
|
|
Black Hawk, CO
|
|
—
|
|
|
243,092
|
|
|
334,024
|
|
|
|
|
—
|
|
|
243,092
|
|
|
334,024
|
|
|
577,116
|
|
|
24,886
|
|
|
2000
|
|
4/28/2016
|
|
31
|
|
Ameristar East Chicago
|
|
East Chicago, IN
|
|
—
|
|
|
4,198
|
|
|
123,430
|
|
|
|
|
—
|
|
|
4,198
|
|
|
123,430
|
|
|
127,628
|
|
|
10,578
|
|
|
1997
|
|
4/28/2016
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Belterra Casino Resort
|
|
Florence, IN
|
|
—
|
|
|
63,420
|
|
|
172,875
|
|
|
|
|
—
|
|
|
63,420
|
|
|
172,875
|
|
|
236,295
|
|
|
16,123
|
|
|
2000
|
|
4/28/2016
|
|
31
|
|
Ameristar Council Bluffs
|
|
Council Bluffs, IA
|
|
—
|
|
|
84,009
|
|
|
109,027
|
|
|
|
|
—
|
|
|
84,009
|
|
|
109,027
|
|
|
193,036
|
|
|
9,648
|
|
|
1996
|
|
4/28/2016
|
|
31
|
|
L'Auberge Baton Rouge
|
|
Baton Rouge, LA
|
|
—
|
|
|
205,274
|
|
|
178,426
|
|
|
|
|
—
|
|
|
205,274
|
|
|
178,426
|
|
|
383,700
|
|
|
14,158
|
|
|
2012
|
|
4/28/2016
|
|
31
|
|
Boomtown Bossier City
|
|
Bossier City, LA
|
|
—
|
|
|
79,022
|
|
|
107,067
|
|
|
|
|
—
|
|
|
79,022
|
|
|
107,067
|
|
|
186,089
|
|
|
8,826
|
|
|
2002
|
|
4/28/2016
|
|
31
|
|
L'Auberge Lake Charles
|
|
Lake Charles, LA
|
|
—
|
|
|
14,831
|
|
|
310,877
|
|
|
|
|
—
|
|
|
14,831
|
|
|
310,877
|
|
|
325,708
|
|
|
28,166
|
|
|
2005
|
|
4/28/2016
|
|
31
|
|
Boomtown New Orleans
|
|
Boomtown, LA
|
|
—
|
|
|
46,019
|
|
|
58,258
|
|
|
|
|
—
|
|
|
46,019
|
|
|
58,258
|
|
|
104,277
|
|
|
5,238
|
|
|
1994
|
|
4/28/2016
|
|
31
|
|
Ameristar Vicksburg
|
|
Vicksburg, MS
|
|
—
|
|
|
128,068
|
|
|
96,106
|
|
|
|
|
—
|
|
|
128,068
|
|
|
96,106
|
|
|
224,174
|
|
|
10,290
|
|
|
1994
|
|
4/28/2016
|
|
31
|
|
River City Casino & Hotel
|
|
St Louis, MO
|
|
—
|
|
|
8,117
|
|
|
221,038
|
|
|
|
|
—
|
|
|
8,117
|
|
|
221,038
|
|
|
229,155
|
|
|
18,138
|
|
|
2010
|
|
4/28/2016
|
|
31
|
|
Ameristar Kansas City
|
|
Kansas City, MO
|
|
—
|
|
|
239,111
|
|
|
271,598
|
|
|
|
|
—
|
|
|
239,111
|
|
|
271,598
|
|
|
510,709
|
|
|
24,970
|
|
|
1997
|
|
4/28/2016
|
|
31
|
|
Ameristar St. Charles
|
|
St. Charles, MO
|
|
—
|
|
|
375,597
|
|
|
437,908
|
|
|
|
|
—
|
|
|
375,596
|
|
|
437,908
|
|
|
813,504
|
|
|
33,300
|
|
|
1994
|
|
4/28/2016
|
|
31
|
|
Jackpot Properties
|
|
Jackpot, NV
|
|
—
|
|
|
48,785
|
|
|
61,550
|
|
|
|
|
—
|
|
|
48,785
|
|
|
61,550
|
|
|
110,335
|
|
|
7,290
|
|
|
1954
|
|
4/28/2016
|
|
31
|
|
Plainridge Park Casino
|
|
Plainridge, MA
|
|
—
|
|
|
127,068
|
|
|
123,850
|
|
|
|
|
—
|
|
|
127,068
|
|
|
123,850
|
|
|
250,918
|
|
|
8,823
|
|
|
2015
|
|
10/15/2018
|
|
31
|
|
Belterra Park Gaming and Entertainment Center (1)
|
|
Cincinnati, OH
|
|
—
|
|
|
11,689
|
|
|
45,995
|
|
|
|
|
—
|
|
|
11,689
|
|
|
45,995
|
|
|
57,684
|
|
|
1,401
|
|
|
2013
|
|
5/6/2020
|
|
31
|
|
The Meadows Racetrack and Casino
|
|
Washington, PA
|
|
—
|
|
|
181,532
|
|
|
141,370
|
|
|
|
|
386
|
|
|
181,918
|
|
|
141,370
|
|
|
323,288
|
|
|
24,291
|
|
|
2006
|
|
9/9/2016
|
|
31
|
|
Casino Queen
|
|
East St. Louis, IL
|
|
—
|
|
|
70,716
|
|
|
70,014
|
|
|
|
|
—
|
|
|
70,716
|
|
|
70,014
|
|
|
140,730
|
|
|
18,882
|
|
|
1999
|
|
1/23/2014
|
|
31
|
|
Tropicana Atlantic City
|
|
Atlantic City, NJ
|
|
—
|
|
|
166,974
|
|
|
392,923
|
|
|
|
|
—
|
|
|
166,974
|
|
|
392,923
|
|
|
559,897
|
|
|
28,061
|
|
|
1981
|
|
10/1/2018
|
|
31
|
|
Tropicana Evansville (2)
|
|
Evansville, IN
|
|
—
|
|
|
47,439
|
|
|
146,930
|
|
|
|
|
(194,369)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1995
|
|
10/1/2018
|
|
N/A
|
|
Tropicana Laughlin
|
|
Laughlin, NV
|
|
—
|
|
|
20,671
|
|
|
80,530
|
|
|
|
|
—
|
|
|
20,671
|
|
|
80,530
|
|
|
101,201
|
|
|
6,428
|
|
|
1988
|
|
10/1/2018
|
|
27
|
|
Trop Casino Greenville
|
|
Greenville, MS
|
|
—
|
|
|
—
|
|
|
21,680
|
|
|
|
|
—
|
|
|
—
|
|
|
21,680
|
|
|
21,680
|
|
|
1,544
|
|
|
2012
|
|
10/1/2018
|
|
31
|
|
Belle of Baton Rouge
|
|
Baton Rouge, LA
|
|
—
|
|
|
11,873
|
|
|
52,400
|
|
|
|
|
—
|
|
|
11,873
|
|
|
52,400
|
|
|
64,273
|
|
|
5,488
|
|
|
1994
|
|
10/1/2018
|
|
31
|
|
Isle Casino Waterloo (2)
|
|
Waterloo, IA
|
|
—
|
|
|
64,263
|
|
|
77,958
|
|
|
|
|
—
|
|
|
64,263
|
|
|
77,958
|
|
|
142,221
|
|
|
105
|
|
|
2005
|
|
12/18/2020
|
|
31
|
|
Isle Casino Bettendorf (4)
|
|
Bettendorf, IA
|
|
—
|
|
|
29,636
|
|
|
85,150
|
|
|
|
|
—
|
|
|
29,636
|
|
|
85,150
|
|
|
114,786
|
|
|
114
|
|
|
2015
|
|
12/18/2020
|
|
31
|
|
Lumiere Place (1)
|
|
St Louis, MO
|
|
—
|
|
|
26,930
|
|
|
219,070
|
|
|
|
|
—
|
|
|
26,930
|
|
|
219,070
|
|
|
246,000
|
|
|
2,151
|
|
|
2005
|
|
10/1/2020
|
|
31
|
|
Hollywood Casino Morgantown (3)
|
|
Morgantown, PA
|
|
—
|
|
|
30,253
|
|
|
—
|
|
|
|
|
—
|
|
|
30,253
|
|
|
—
|
|
|
30,253
|
|
|
—
|
|
|
2020
|
|
10/1/2020
|
|
N/A
|
|
|
|
|
|
—
|
|
|
2,711,300
|
|
|
6,001,589
|
|
|
|
|
(30,888)
|
|
|
2,660,070
|
|
|
6,021,930
|
|
|
8,682,000
|
|
|
1,409,505
|
|
|
|
|
|
|
|
|
Headquarters Property:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GLPI Corporate Office (4)
|
|
Wyomissing, PA
|
|
—
|
|
|
750
|
|
|
8,465
|
|
|
|
|
85
|
|
|
750
|
|
|
8,550
|
|
|
9,300
|
|
|
1,435
|
|
|
2014/2015
|
|
9/19/2014
|
|
31
|
|
Other Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other owned land (5)
|
|
various
|
|
—
|
|
|
6,798
|
|
|
—
|
|
|
|
|
—
|
|
|
6,798
|
|
|
—
|
|
|
6,798
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
2,718,848
|
|
|
$
|
6,010,054
|
|
|
|
|
$
|
(30,803)
|
|
|
$
|
2,667,618
|
|
|
$
|
6,030,480
|
|
|
$
|
8,698,098
|
|
|
$
|
1,410,940
|
|
|
|
|
|
|
|
(1)During 2020, the Company acquired the real estate of both of these properties in satisfaction of previously outstanding loans, subject to the Belterra Park Lease and the Lumiere Place Lease, respectively.
(2) On December 18, 2020 Caesar's elected to replace Tropicana Evansville with Isle Casino Bettendorf and Isle Casino Waterloo as allowed under the Amended and Restated Caesars Master Lease.
(3) 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 which were fully utilized by Penn in the fourth quarter of 2020. The Company is leasing the land back to an affiliate of Penn pursuant to the Morgantown Lease for an initial annual rent of $3.0 million, subject to escalation provisions following the opening of the property.
(4) The Company's corporate headquarters building was completed in October 2015. The land was purchased on September 19, 2014 and construction on the building occurred through October 2015.
(5) This includes undeveloped land the Company owns at locations other than its tenant occupied properties.
(6) The aggregate cost for federal income tax purposes of the properties listed above was $8.34 billion at December 31, 2020. This amount includes the tax basis of all real property assets acquired from Pinnacle, including building assets. The table above excludes the real estate assets of Tropicana Las Vegas which as described in Note 7 is in our TRS Segment and was acquired for $307.5 million ($226.2 million of Land and improvements and $81.3 million in Building and Improvements) in April 2020 with accumulated depreciation at December 31, 2020 totaling $2.7 million.
A summary of activity for real estate and accumulated depreciation for the years ended December 31, 2020, 2019 and 2018 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
Real Estate:
|
(in thousands)
|
|
Balance at the beginning of the period
|
$
|
8,301,496
|
|
|
$
|
8,314,546
|
|
|
$
|
4,519,501
|
|
|
Acquisitions
|
590,971
|
|
|
—
|
|
|
1,199,135
|
|
|
|
|
|
|
|
|
|
Capital expenditures and assets placed in service
|
—
|
|
|
|
|
—
|
|
|
Dispositions
|
(194,369)
|
|
|
(13,050)
|
|
|
(3,270)
|
|
|
Balance at the end of the period
|
$
|
8,698,098
|
|
|
$
|
8,301,496
|
|
|
$
|
8,314,546
|
|
|
Accumulated Depreciation:
|
|
|
|
|
|
|
Balance at the beginning of the period
|
$
|
(1,200,941)
|
|
|
$
|
(983,086)
|
|
|
$
|
(857,456)
|
|
|
Depreciation expense
|
(220,069)
|
|
|
(230,716)
|
|
|
(125,630)
|
|
|
Dispositions
|
10,070
|
|
|
12,861
|
|
|
—
|
|
|
Balance at the end of the period
|
$
|
(1,410,940)
|
|
|
$
|
(1,200,941)
|
|
|
$
|
(983,086)
|
|
4
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
Year Ended December 31, 2019
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
Mortgage Loans:
|
|
|
|
|
|
|
|
|
Balance at the beginning of the period
|
$
|
57,684
|
|
|
$
|
303,684
|
|
|
|
|
|
|
Additions during the period:
|
|
|
|
|
|
|
|
|
New mortgage loans
|
—
|
|
|
—
|
|
|
|
|
|
|
Deductions during the period:
|
|
|
|
|
|
|
|
|
Collections of principal
|
—
|
|
|
—
|
|
|
|
|
|
|
Other deductions (1)
|
(57,684)
|
|
|
(246,000)
|
|
|
|
|
|
|
Balance at the end of the period
|
$
|
—
|
|
|
$
|
57,684
|
|
|
|
|
|
(1) On October 1, 2019, 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.
(2) 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.