On January 1, 2020, we adopted ASC 326 and, as a result, we are required to estimate and record non-cash credit losses related to our historical and any future investments in direct financing and sales-type leases, lease financing receivables and loans. Upon adoption, we recorded a $309.4 million cumulative adjustment, representing a 2.88% CECL allowance. Such amount was recorded as a cumulative-effect adjustment to our opening balance sheet with a reduction in our Investments in leases - direct financing and sales-type and a corresponding charge to retained (deficit) earnings. Periods prior to the adoption date that are presented for comparative purposes are not adjusted or disclosed.

During the three months ended June 30, 2020, we recognized a $65.5 million decrease in our allowance for credit losses. This decrease was primarily driven by a decrease in the R&S Period PD of our tenants and their parent guarantors as a result of an improvement in their economic outlook due to the reopening of a majority of their gaming operations.

During the six months ended June 30, 2020, we recognized an $84.0 million increase in our allowance for credit losses. The increase in the CECL allowance was primarily driven by (i) an increase in the R&S Period PD and LGD of our tenants and their parent guarantors due to decreases in the equity market capitalization of the stock of the parent public-entities of certain of our tenants as well as the utilization of forecasted scenarios that incorporate the expected negative impact of the COVID-19 pandemic on the economy and (ii) an increase in the Long-term Period PD of our tenants due to downgrades on certain of the credit ratings of our tenants’ senior secured debt. Additionally, $22.2 million of the $84.0 million increase related to our initial

investment in JACK Cleveland/Thistledown and the ROV Loan in January 2020. This increase was partially offset by a decrease in the R&S Period PD of our tenants and their parent guarantors as a result of an improvement in their economic outlook due to the reopening of a majority of their gaming operations during the second quarter of 2020.

The credit loss standard does not require retrospective application and as such there is no corresponding charge for the three and six months ended June 30, 2019.

As of June 30, 2020 and December 31, 2019, and since our Formation Date, all of our Lease Agreements and the ROV Loan are current in payment of their obligations to us and no investments are on non-accrual status. Additionally, to the best of our knowledge, none of our tenants were in contravention of any of the Lease Agreements.

The following tables detail the allowance for credit losses included as a component in our investments in leases - direct financing and sales-type, Investments in leases - financing receivables and investments in loans as of June 30, 2020 and January 1, 2020, the date of adoption:


	June 30, 2020
(In thousands, except for %)	Amortized Cost		Allowance		Net Investment		Allowance as a % of Amortized Cost
Investments in leases - direct financing and sales-type	$	10,727,992	$	(355,336)	$	10,372,656	3.31	%
Investments in leases - financing receivables	850,253		(37,617)		812,636		4.42	%
Investments in loans	50,313		(437)		49,876		0.87	%
Totals	$	11,628,558	$	(393,390)	$	11,235,168	3.38	%


	January 1, 2020
(In thousands, except for %)	Amortized Cost		Allowance		Net Investment		Allowance as a % of Amortized Cost
Investments in leases - direct financing and sales-type	$	10,734,245	$	(309,362)	$	10,424,883	2.88	%
Investments in leases - financing receivables	—		—		—		—	%
Investments in loans	—		—		—		—	%
Totals	$	10,734,245	$	(309,362)	$	10,424,883	2.88	%


(In thousands)	Six Months Ended June 30, 2020
Beginning Balance December 31, 2019	$	—
Initial allowance upon adoption	309,362
Initial allowance from current period acquisitions	22,158
Current period change in credit allowance	61,870
Write-offs	—
Recoveries	—
Ending Balance June 30, 2020	$	393,390

In the third quarter of 2020, we will be required to record a CECL allowance related to our $1.8 billion investment in the MTA Properties, as well as our aggregate $1.4 billion increased investment in the CPLV Lease Agreement and HLV Lease Agreement as a result of the respective CPLV Additional Rent Acquisition and HLV Additional Rent Acquisition which, following the consummation of the Eldorado Transaction, are reflected in the Las Vegas Master Lease Agreement. We expect the initial CECL allowance percentage related to these investments to be materially consistent with our current CECL allowance percentage as of June 30, 2020.

We assess the credit quality of our investments through the credit ratings of the senior secured debt of the guarantors of our leases, as we believe that our Lease Agreements have a similar credit profile to a senior secured debt instrument. The credit quality indicators are reviewed by us on a quarterly basis as of quarter-end. In instances where the guarantor of one of our Lease Agreements does not have senior secured debt with a credit rating, we use either a comparable proxy company or the overall corporate credit rating, as applicable. We also use this credit rating to determine the Long-term Period PD when estimating credit losses for each investment.

The following tables detail the amortized cost basis of our investments by the credit quality indicator we assigned to each lease or loan guarantor as of June 30, 2020 and January 1, 2020, the date of adoption:


	June 30, 2020
(In thousands)	Ba2		Ba3		B1		B2		B3		Total
Investments in leases - direct financing, sales-type and financing receivable and investments in loans	$	—	$	561,116	$	9,886,007	$	900,566	$	280,869	$	11,628,558


	January 1, 2020
(In thousands)	Ba2		Ba3		B1		B2		B3		Total
Investments in leases - direct financing, sales-type and financing receivable and investments in loans	$	1,527,776	$	—	$	8,926,229	$	280,240	$	—	$	10,734,245