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Real Estate Portfolio

3 Months Ended

Mar. 31, 2021

As of March 31, 2021, our real estate portfolio consisted of the following:

•Investments in leases - sales-type, representing our investment in 23 casino assets leased on a triple net basis to our tenants, Caesars, Penn National, Hard Rock and Century Casinos, under seven separate lease agreements;

•Investments in leases - financing receivables, representing our investment in five casino assets leased on a triple net basis to our tenants, Caesars and JACK Entertainment, under two separate lease agreements;

•Investments in loans, representing our investment in the Amended and Restated ROV Loan, Chelsea Piers Mortgage Loan and Forum Convention Center Mortgage Loan; and

•Land, representing our investment in certain underdeveloped or undeveloped land adjacent to the Las Vegas strip and non-operating, vacant land parcels.

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

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(1) Minimum lease payments do not include contingent rent, as discussed below, that may be received under the Lease Agreements.

Lease Portfolio

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.

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

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(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.

Lease Provisions

Caesars Lease Agreements - Overview

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

Initial Term maturity (2)

7/31/2035

Renewal 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.

Penn National Lease Agreements - Overview

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

Initial term maturity

1/31/2034

5/23/2034

Renewal 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

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

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)

____________________

(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.

Hard Rock Cincinnati Lease Agreement - Overview

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.

Century Portfolio Lease Agreement - Overview

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.

(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.

JACK Cleveland/Thistledown Lease Agreement - Overview

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.

(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.

Capital Expenditure Requirements

We manage our residual asset risk through protective covenants in our Lease Agreements, which require the tenant to, among other things, hold specific insurance coverage, engage in ongoing maintenance of the property and invest in capital improvements. With respect to the capital improvements, the Lease Agreements specify certain minimum amounts that our tenants must spend on capital expenditures that constitute installation, restoration and repair or other improvements of items with respect to the leased properties.

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.

In connection with the ongoing COVID-19 pandemic and its impact on operations and financial performance, we agreed with Caesars, to provide limited relief with respect to a portion of their capital expenditure obligations under the Las Vegas Master Lease Agreement, the Regional Master Lease Agreement and the Joliet Lease Agreement (which relief was subsequently adjusted on October 27, 2020 to provide for a proportionate adjustment to account for the addition of the MTA Properties to the Regional Master Lease Agreement). This relief is conditioned upon (i) expenditures by Caesars of certain minimum capital expenditures, (ii) timely payment of Caesars’ rent obligations under the Caesars Lease Agreements and (iii) no event of default occurring under any of the Caesars Lease Agreements during the applicable compliance period. If Caesars fails to satisfy any of the foregoing conditions, Caesars will be required to satisfy the capital expenditure obligations currently set forth in the Las Vegas Master Lease Agreement, the Regional Master Lease Agreement and the Joliet Lease Agreement.

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).

Loan Portfolio

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.