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Real Estate Portfolio (Tables) | 3 Months Ended
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Mar. 31, 2021
Real Estate [Abstract] |
Schedule Real Estate Portfolio | The following is a summary of the balances of our real estate portfolio as of March 31, 2021 and December 31, 2020:
(In thousands) | March 31, 2021 |  | December 31, 2020
Minimum lease payments receivable under sales-type leases (1) | $ | 45,234,219 |  |  | $ | 45,500,260 |
Estimated residual values of leased property (not guaranteed) | 3,342,508 |  |  | 3,348,174 |
Gross investment in sales-type leases | 48,576,727 |  |  | 48,848,434 |
Unamortized initial direct costs | 23,666 |  |  | 23,764 |
Less: Unearned income | (35,095,017) |  |  | (35,390,353) |
Less: Allowance for credit losses | (451,241) |  |  | (454,201) |
Investments in leases - sales-type, net | 13,054,135 |  |  | 13,027,644 |
Investments in leases - financing receivables, net | 2,628,422 |  |  | 2,618,562 |
Total investments in leases, net | 15,682,557 |  |  | 15,646,206 |
Investments in loans, net | 515,251 |  |  | 536,721 |
Land | 158,046 |  |  | 158,190 |
Total real estate portfolio | $ | 16,355,854 |  |  | $ | 16,341,117 |
____________________ (1) Minimum lease payments do not include contingent rent, as discussed below, that may be received under the Lease Agreements.
Schedule of Components of Direct Financing and Operating Leases | The following table details the components of our income from direct financing, sales-type and operating leases and lease financing receivables:
| Three Months Ended March 31, |  |
(In thousands) | 2021 |  | 2020 |  |  |  |
Income from sales-type and direct financing leases, excluding contingent rent (1) | $ | 289,574 |  |  | $ | 224,252 |  |  |  |  |
Income from operating leases (2) | — |  |  | 10,913 |  |  |  |  |
Income from lease financing receivables (1) (3) | 59,892 |  |  | 12,020 |  |  |  |  |
Total revenue, excluding contingent rent | 349,466 |  |  | 247,185 |  |  |  |  |
Contingent rent (1) | 572 |  |  | — |  |  |  |  |
Total lease revenue | 350,038 |  |  | 247,185 |  |  |  |  |
Non-cash adjustment (4) | (27,877) |  |  | 3,254 |  |  |  |  |
Total contractual lease revenue | $ | 322,161 |  |  | $ | 250,439 |  |  |  |  |
____________________ (1) At lease inception (or upon modification), we determine the minimum lease payments under ASC 842 (or ASC 840), which exclude amounts determined to be contingent rent. Contingent rent is generally amounts in excess of specified floors or the variable rent portion of our leases. The minimum lease payments are recognized on an effective interest basis at a constant rate of return over the life of the lease and the contingent rent portion of the lease payments are recognized as earned, both in accordance with ASC 842. As of March 31, 2021, we have only recognized contingent rent on our Margaritaville Lease Agreement in relation to the variable rent portion of the lease. Refer to the Lease Provisions section below for information regarding contingent rent on each lease. (2) Represents the portion of land separately classified and accounted for under the operating lease model associated with our investment in Caesars Palace Las Vegas and certain operating land parcels contained in the Regional Master Lease Agreement. Upon the consummation of the Eldorado Transaction on July 20, 2020, the land component of Caesars Palace Las Vegas and certain operating land parcels were reassessed for lease classification and were determined to be a sales-type lease. Accordingly, subsequent to July 20, 2020, such income is recognized as Income from sales-type leases. (3) Represents the MTA Properties and the JACK Cleveland/Thistledown Lease Agreement, both of which were sale leaseback transactions. In accordance with ASC 842, since the lease agreements were determined to meet the definition of a sales-type lease and control of the asset is not considered to have been transferred to us, such lease agreements are accounted for as financings under ASC 310. (4) Amounts represent the non-cash adjustment to the minimum lease payments from direct financing leases, sales-type leases and lease financing receivables in order to recognize income on an effective interest basis at a constant rate of return over the term of the leases.
Schedule of Future Minimum Lease Payments for Operating and Capital Leases | At March 31, 2021, minimum lease payments owed to us for each of the five succeeding years under sales-type leases and our leases accounted for as financing receivables, are as follows:
|  | Minimum Lease Payments (1) (2)
|  | Investments in Leases |  |
(In thousands) |  | Sales-Type |  |  |  | Financing Receivables |  | Total
2021 (remaining) |  | $ | 796,332 |  |  |  |  | $ | 167,033 |  |  | $ | 963,365 |
2022 |  | 1,075,944 |  |  |  |  | 227,017 |  |  | 1,302,961 |
2023 |  | 1,094,796 |  |  |  |  | 231,332 |  |  | 1,326,128 |
2024 |  | 1,112,711 |  |  |  |  | 235,421 |  |  | 1,348,132 |
2025 |  | 1,126,826 |  |  |  |  | 237,826 |  |  | 1,364,652 |
2026 |  | 1,141,221 |  |  |  |  | 240,191 |  |  | 1,381,412 |
Thereafter |  | 38,886,389 |  |  |  |  | 7,999,428 |  |  | 46,885,817 |
Total |  | $ | 45,234,219 |  |  |  |  | $ | 9,338,248 |  |  | $ | 54,572,467 |
Weighted Average Lease Term (2) |  | 34.2 |  |  |  | 34.2 |  | 34.2
____________________ (1) Minimum lease payments do not include contingent rent, as discussed below, that may be received under the Lease Agreements. (2) The minimum lease payments and weighted average remaining lease term assumes the exercise of all tenant renewal options, consistent with our conclusions under ASC 842 and ASC 310. Upon the consummation of the Eldorado Transaction, the lease term of each of the Caesars Lease Agreements was extended by approximately three years and, as such, the weighted average lease term has increased accordingly.
Schedule of Lease Agreements | The following is a summary of the material lease provisions of our Caesars Lease Agreements:
($ In thousands) |  |  |  | Regional Master Lease Agreement and Joliet Lease Agreement |  |  |  |  |  | Las Vegas Master Lease Agreement
Lease Provision (1) |  |  |  |  |  |  |  |
Initial Term (2) |  |  |  | 18 years |  |  |  |  |  | 18 years
Initial Term maturity (2) |  |  |  | 7/31/2035 |  |  |  |  |  | 7/31/2035
Renewal Terms |  |  |  | Four, five-year terms |  |  |  |  |  | Four, five-year terms
Current annual rent (3) |  |  |  | $672,472 |  |  |  |  |  | $402,609
Escalator (4) |  |  |  | Lease years 2-5 - 1.5% Lease years 6-end of term - CPI subject to 2.0% floor |  |  |  |  |  | > 2% / change in CPI
Variable Rent adjustment |  |  |  | Year 8: 70% base rent / 30% variable rent Years 11 & 16: 80% base rent / 20% variable rent |  |  |  |  |  | Years 8, 11 & 16: 80% base rent / 20% variable rent
Variable Rent adjustment calculation (5) |  |  |  | 4% of revenue increase/decrease: Year 8: Avg. of years 5-7 less avg. of years 0-2 Year 11: Avg. of years 8-10 less avg. of years 5-7 Year 16: Avg. of years 13-15 less avg. of years 8-10 |  |  |  |  |  | 4% of revenue increase/decrease: Year 8: Avg. of years 5-7 less avg. of years 0-2 Year 11: Avg. of years 8-10 less avg. of years 5-7 Year 16: Avg. of years 13-15 less avg. of years 8-10
____________________ (1) All capitalized terms used without definition herein have the meanings detailed in the applicable Caesars Lease Agreements. (2) Upon the consummation of the Eldorado Transaction, the Caesars Lease Agreements were extended such that each lease has a full 15-year initial term. (3) The amounts represent the current annual base rent payable for the current lease year, which is the period from November 1, 2020 through October 31, 2021. (4) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP. No such rent has been recognized for the three months ended March 31, 2021 and 2020. (5) Variable Rent is not subject to the Escalator. The following is a summary of the material lease provisions of our Penn National Lease Agreements:
($ In thousands) |  |  |  |
Lease Provision |  | Margaritaville Lease Agreement |  | Greektown Lease Agreement
Initial term |  | 15 years |  | 15 years
Initial term maturity |  | 1/31/2034 |  | 5/23/2034
Renewal terms |  | Four, five-year terms |  | Four, five-year terms
Current annual rent (1) |  | $23,462 |  | $55,556
Escalation commencement (2) |  | Lease year two |  | Lease year four
Escalation |  | 2% of Building base rent, subject to the net revenue to rent ratio floor |  | 2% of Building base rent, subject to the net revenue to rent ratio floor
Performance to rent ratio floor (2) |  | 6.1x net revenue commencing lease year two |  | Net revenue ratio to be mutually agreed upon prior to the commencement of lease year four
Percentage rent (3) |  | $3,000 (fixed for lease year one and two) |  | $6,384 (fixed for lease year one and two)
Percentage rent reset |  | Lease year three and each and every other lease year thereafter |  | Lease year three and each and every other lease year thereafter
Percentage rent multiplier |  | The product of (i) 4% and (ii) the excess (if any) of (a) the average annual net revenue of a trailing two-year period preceding such reset year over (b) a threshold amount (defined as 50% of LTM net revenues prior to acquisition) |  | The product of (i) 4% and (ii) the excess (if any) of (a) the average annual net revenue of a trailing two-year period preceding such reset year over (b) a threshold amount (defined as 50% of LTM net revenues prior to acquisition)
____________________ (1) In relation to the Margaritaville Lease Agreement, the amount represents current annual base rent payable for the current lease year, which is the period from February 1, 2021 through January 31, 2022. In relation to the Greektown Lease Agreement, the amount represents current annual base rent payable for the current lease year, which is the period from June 1, 2020 through May 31, 2021. (2) In the event that the net revenue to rent ratio coverage, as applicable, is below the stated floor, the escalation will be reduced to such amount to achieve the stated net revenue to rent ratio coverage, as applicable, provided that the amount shall never result in a decrease to the prior year’s rent. In relation to the Greektown Lease Agreement, in May 2020, the lease was adjusted to remove the escalation for lease years 2 and 3 and to provide for a net revenue to rent ratio coverage floor to be mutually agreed upon by both parties prior to the commencement of lease year four. (3) Percentage rent is subject to the percentage rent multiplier. After the percentage rent reset in lease year three, any amounts related to percentage rent are considered contingent rent in accordance with GAAP. During the three months ended March 31, 2021 and 2020, we recognized approximately $0.6 million and $0.1 million, respectively, in contingent rent in relation to the Margaritaville Lease Agreement escalation. In relation to the Greektown Lease Agreement, no such rent has been recognized for the three months ended March 31, 2021 and 2020. The following is a summary of the material lease provisions of our Hard Rock Cincinnati Lease Agreement:
($ In thousands) |  |
Lease Provision |  | Term
Initial term |  | 15 years
Initial term maturity |  | 9/30/2034
Renewal terms |  | Four, five-year terms
Current base rent (1) |  | $43,391
Escalator commencement |  | Lease year two
Escalator (2) |  | Lease years 2-4 - 1.5% Lease years 5-15 - The greater of 2% or the change in CPI unless the change in CPI is less than 0.5%, in which case there is no escalation in rent for such lease year
Variable rent commencement/reset |  | Lease year 8
Variable rent split (3) |  | 80% base rent and 20% variable rent
Variable rent percentage (3) |  | 4%
____________________ (1) The amount represents the current annual base rent payable for the current lease year, which is the period from October 1, 2020 through September 30, 2021. (2) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP. No such rent has been recognized for the three months ended March 31, 2021 and 2020. (3) Variable rent is not subject to the escalator and is calculated as an increase or decrease of the average of net revenues for lease years 5 through 7 compared to the average net revenue for lease years 1 through 3, multiplied by the Variable rent percentage. The following is a summary of the material lease provisions of our Century Portfolio Lease Agreement:
($ In thousands) |  |
Lease Provision |  | Term
Initial term |  | 15 years
Initial term maturity |  | 12/31/2034
Renewal terms |  | Four, five-year terms
Current annual rent (1) |  | $25,250
Escalator commencement |  | Lease year two
Escalator (2) |  | Lease years 2-3 - 1.0% Lease years 4-15 - The greater of 1.25% or the change in CPI
Net revenue to rent ratio floor |  | 7.5x commencing lease year six - if the coverage ratio is below the stated amount the escalator will be reduced to 0.75%
Variable rent commencement/reset |  | Lease year 8 and 11
Variable rent split (3) |  | 80% Base Rent and 20% Variable Rent
Variable rent percentage (3) |  | 4%
____________________ (1) The amount represents the current annual base rent payable for the current lease year, which is the period from January 1, 2021 through December 31, 2021. (2) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP. No such rent has been recognized for the three months ended March 31, 2021 and 2020. (3) Variable rent is not subject to the escalator and is calculated for lease year 8 as an increase or decrease of the average of net revenues for lease years 5 through 7 compared to the average net revenue for lease years 1 through 3 and for lease year 11 as an increase or decrease of the average of net revenues for lease years 8 through 10 compared to the average net revenue for lease years 5 through 7, in each case multiplied by the Variable rent percentage. The following is a summary of the material lease provisions of our JACK Cleveland/Thistledown Lease Agreement:
($ In thousands) |  |
Lease Provision |  | Term
Initial term |  | 20 years
Initial term maturity |  | 1/31/2040
Renewal terms |  | Three, five-year terms
Current annual rent (1) |  | $65,880
Escalator commencement |  | Lease year three
Escalator (2) |  | Lease years 3-4 - 1.0% Lease years 5-7 - 1.5% Lease years 8-15 - The greater of 1.5% or the change in CPI capped at 2.5%
Net revenue to rent ratio floor |  | 4.9x in any lease year (commencing in lease year 6) - if the coverage ratio is below the stated amount, there is no escalation in rent for such lease year
Variable rent commencement/reset |  | Lease year 8, 11 and 16
Variable rent split (3) |  | 80% Base Rent and 20% Variable Rent
Variable rent percentage (3) |  | 4%
____________________ (1) The amount represents the current annual base rent payable for the current lease year, which is the period from February 1, 2021 through January 31, 2022. (2) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP. No such rent has been recognized for the three months ended March 31, 2021 and 2020. (3) Variable rent is not subject to the escalator and is calculated (i) for lease year 8 as an increase or decrease of the average of net revenues for lease years 5 through 7 compared to the average net revenue for lease years 1 through 3, (ii) for lease year 11 as an increase or decrease of the average of net revenues for lease years 8 through 10 compared to the average net revenue for lease years 5 through 7, and (iii) for lease year 16 as an increase or decrease of the average of net revenues for lease years 13 through 15 compared to the average net revenue for lease years 8 through 10, in each case multiplied by the Variable rent percentage.
Schedule Of Capital Expenditure Requirements Under Lease Agreements | The following table summarizes the capital expenditure requirements of the respective tenants under the Caesars Lease Agreements:
Provision |  | Regional Master Lease Agreement and Joliet Lease Agreement |  | Las Vegas Master Lease Agreement
Yearly minimum expenditure |  | 1% of net revenues (1) |  | 1% of net revenues for CPLV (commencing in 2022 with respect to HLV) (1)
Rolling three-year minimum (2) |  | $311 million |  | $84 million
Initial minimum capital expenditure |  | N/A |  | $171 million (2017 - 2021) (with respect solely to HLV)
____________________ (1) The lease agreements require a $114.5 million floor on annual capital expenditures for Caesars Palace Las Vegas, Joliet and the Regional Master Lease Agreement properties in the aggregate. Additionally, annual building & improvement capital improvements must be equal to or greater than 1% of prior year net revenues. (2) Certain tenants under the Caesars Lease Agreements, as applicable, are required to spend $405.2 million on capital expenditures (excluding gaming equipment) over a rolling three-year period, with $311.0 million allocated to the regional assets, $84.0 million allocated to Caesars Palace Las Vegas and the remaining balance of $10.2 million to facilities (other than the Harrah’s Las Vegas Facility) covered by any Caesars Lease Agreement in such proportion as such tenants may elect. Additionally, the tenants under the Regional Master Lease Agreement and Joliet Lease Agreement are required to expend a minimum of $566.7 million on capital expenditures (including gaming equipment) across certain of its affiliates and other assets, together with the $405.2 million requirement. The following table summarizes the capital expenditure requirements of the respective tenants under the Penn National Lease Agreements, Hard Rock Cincinnati Lease Agreement, Century Portfolio Lease Agreement and JACK Cleveland/Thistledown Lease Agreement:
Provision |  | Penn National Lease Agreements |  | Hard Rock Cincinnati Lease Agreement |  | Century Portfolio Lease Agreement |  | JACK Cleveland/Thistledown Lease Agreement
Yearly minimum expenditure |  | 1% of net revenues based on rolling four-year basis |  | 1% of net revenues |  | 1% of net gaming revenues (1) |  | Initial minimum of $30 million (2) Thereafter - 1% of net revenues on a rolling three-year basis
____________________ (1) Minimum of 1% of net gaming revenue on a rolling three-year basis for each individual facility and 1% of net gaming revenues per fiscal year for the facilities collectively. In May 2020, in connection with the ongoing COVID-19 pandemic and its impact on operations and financial performance, we agreed to waive Century’s capital expenditure requirements for 2020 and defer to not later than December 31, 2021 certain other expenditures contemplated in connection with the underwriting of the acquired casino properties, conditioned upon (i) Century’s timely payment of rent obligations under the Century Portfolio Lease Agreement during the compliance period set forth in the amendment and (ii) no tenant event of default occurring under the Century Portfolio Lease Agreement during the compliance period set forth in the amendment. If Century fails to satisfy any of the foregoing conditions, Century will be required to satisfy the capital expenditure obligations set forth in the Century Portfolio Lease Agreement or, in certain cases, to deposit amounts in respect thereof into a capital expenditure reserve for expenditure in accordance with the amendment. (2) Initial minimum required to be spent from the period commencing April 1, 2019 through December 31, 2022, which includes $18.0 million advanced by us and expended by JACK Entertainment for the construction of the new gaming patio amenity at JACK Thistledown Racino (which construction has been completed as of March 31, 2021).
Summary of Investments In Loans | The following is a summary of our investments in loans as of March 31, 2021 and December 31, 2020:
($ In thousands) |  | March 31, 2021
Investment Name |  | Loan Type |  | Principal Balance |  | Carrying Value(1) |  | Future Funding Commitments(2) |  | Interest Rate(3) |  | Final Maturity(4)
Forum Convention Center Mortgage Loan |  | Senior Secured |  | $ | 400,000 |  |  | $ | 400,043 |  |  | $ | — |  |  | 7.7 | % |  | 9/18/2025
Chelsea Piers Mortgage Loan |  | Senior Secured |  | 65,000 |  |  | 64,931 |  |  | 15,000 |  |  | 7.0 | % |  | 8/31/2027
Amended and Restated ROV Loan |  |  |  |  |  |  |  |  |  |  |  |
ROV Term Loan |  | Senior Secured |  | 50,000 |  |  | 50,277 |  |  | — |  |  | 9.0 | % |  | 1/24/2027
ROV Credit Facility |  | Senior Secured |  | — |  |  | — |  |  | 25,000 |  |  | L + 2.75% |  | 1/24/2027
Total |  |  |  | $ | 515,000 |  |  | $ | 515,251 |  |  | $ | 40,000 |  |  | 7.7 | % |  |
($ In thousands) |  | December 31, 2020
Investment Name |  | Loan Type |  | Principal Balance |  | Carrying Value(1) |  | Future Funding Commitments(2) |  | Interest Rate(3) |  | Final Maturity(4)
Forum Convention Center Mortgage Loan |  | Senior Secured |  | $ | 400,000 |  |  | $ | 400,045 |  |  | $ | — |  |  | 7.7 | % |  | 9/18/2025
Chelsea Piers Mortgage Loan |  | Senior Secured |  | 65,000 |  |  | 64,880 |  |  | 15,000 |  |  | 7.0 | % |  | 8/31/2027
Amended and Restated ROV Loan |  |  |  |  |  |  |  |  |  |  |  |
ROV Term Loan |  | Senior Secured |  | 70,000 |  |  | 71,796 |  |  | — |  |  | 9.0 | % |  | 1/24/2027
ROV Credit Facility |  | Senior Secured |  | — |  |  | — |  |  | 25,000 |  |  | L + 2.75% |  | 1/24/2027
Total |  |  |  | $ | 535,000 |  |  | $ | 536,721 |  |  | $ | 40,000 |  |  | 7.8 | % |  |
____________________ (1) Carrying value is net of unamortized loan origination costs and allowance for credit losses. (2) Our future funding commitments are subject to our borrowers' compliance with the financial covenants and other applicable provisions of each respective loan agreement. (3) Represents current interest rate per annum. The interest rate of the Forum Convention Center Mortgage Loan is subject to 2.0% annual escalation (resulting in a year two interest rate of 7.854%). (4) Final maturity assumes all extension options are exercised; however, our loans may be repaid, subject to certain conditions, prior to such date.

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