Leases

9 Months Ended

Sep. 30, 2021

LEASES

The Company leases the land underlying certain of its properties, real estate, and various equipment under operating and, to a lesser extent, finance lease arrangements. The master lease agreement with MGP is eliminated in consolidation and, accordingly is not included within the disclosures below; refer to Note 13 for further discussion of the master lease with MGP.

Bellagio real estate assets. The Bellagio lease has an initial term of 30 years that began on November 15, 2019, with two subsequent ten-year renewal periods, exercisable at the Company’s option. The initial term of the lease provides for a fixed 2% escalator to rent for the first ten years and, thereafter, an escalator equal to the greater of 2% and the CPI increase during the prior year, subject to a cap of 3% during the 11th through 20th years and 4% thereafter. As a result of the fixed 2% escalator that went into effect on December 1, 2020 in connection with the commencement of the second lease year, annual cash rent payments increased to $250 million. The Company was in compliance with its applicable lease covenants as of September 30, 2021.

Mandalay Bay and MGM Grand Las Vegas real estate assets. The Mandalay Bay and MGM Grand Las Vegas lease has an initial term of 30 years that began on February 14, 2020, with two subsequent ten-year renewal periods, exercisable at the Company’s option. The initial term of the lease provides for a fixed 2% escalator to rent for the first fifteen years and, thereafter, an escalator equal to the greater of 2% and the CPI increase during the prior year, subject to a cap of 3%. As a result of the fixed 2% escalator that went into effect on March 1, 2021 in connection with the commencement of the second lease year, annual cash rent payments increased to $298 million. The Company was in compliance with its applicable lease covenants as of September 30, 2021.

Aria and Vdara real estate assets. The Aria and Vdara lease has an initial term of 30 years with three subsequent ten-year renewal periods, exercisable at the Company's option. The initial term of the lease provides for an initial annual cash rent of $215 million with a fixed 2% escalator for the first fifteen years, and thereafter, an escalator equal to the greater of 2% and the CPI increase during the prior year, subject to a cap of 3%. The Company does not consider the renewal options reasonably certain of being exercised and, accordingly, has determined the lease term to be 30 years. In consideration of such, the Company determined the expected lease term of 30 years to be less than 75% of the economic useful life of the real estate assets of Aria and Vdara. Further, the lessor provided its implicit rate to the Company, with which the Company determined that the present value of the future minimum lease payments is less than 90% of the fair value of the real estate assets. Accordingly, in consideration of these lease classification tests, as well as the fact that the lease does not transfer ownership of the assets back to the Company at the end of the lease term or grant the Company a purchase option and the real estate assets have alternative uses at the end of the lease term, the Company classified the Aria and Vdara lease as an operating lease.

Additionally, the lease requires the Company to spend a specified percentage of net revenues over a rolling five-year period at the property on capital expenditures and for the Company to comply with certain financial covenants, which, if not met, would require the Company to maintain cash security or a letter of credit in favor of the landlord in an amount equal to rent for the succeeding one-year period. The Company was in compliance with its applicable lease covenants as of September 30, 2021.

Other information. Components of lease costs and other information related to the Company’s leases was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(In thousands)
Operating lease cost, primarily classified within "General and administrative"(1)	$	201,265	$	199,166	$	599,219	$	551,807

Finance lease costs
Interest expense(2)	$	1,186	$	(5,990)	$	134	$	(19,796)
Amortization expense	17,785		17,851		53,271		52,495
Total finance lease costs	$	18,971	$	11,861	$	53,405	$	32,699

(1)The Bellagio lease and the Mandalay Bay and MGM Grand Las Vegas lease are held with related parties, as further discussed in Note 13. Operating lease cost includes $83 million for each of the three months ended September 30, 2021 and 2020 and, $248 million for each of the nine months ended September 30, 2021 and 2020 related to the Bellagio lease. Operating lease cost includes $99 million for each of the three months ended September 30, 2021 and 2020 and $296 million and $248 million for the nine months ended September 30, 2021 and 2020, respectively, related to the Mandalay Bay and MGM Grand Las Vegas lease.

(2)For the three and nine months ended September 30, 2021 and 2020, interest expense includes the effect of COVID-19 related rent concessions received on certain finance leases, for which such effect was recognized as negative variable rent expense.


	September 30, 2021		December 31, 2020
Supplemental balance sheet information	(In thousands)
Operating leases
Operating lease right-of-use assets, net(1)	$	11,551,415	$	8,286,694
Operating lease liabilities - current, classified within "Other accrued liabilities"	$	31,632	$	31,843
Operating lease liabilities - long-term(2)	11,775,109		8,390,117
Total operating lease liabilities	$	11,806,741	$	8,421,960

Finance leases
Finance lease right-of-use assets, net classified within "Property and equipment, net"	$	168,886	$	200,980
Finance lease liabilities - current, classified within "Other accrued liabilities"	$	84,298	$	80,193
Finance lease liabilities - long-term, classified within "Other long-term obligations"	91,879		134,287
Total finance lease liabilities	$	176,177	$	214,480

Weighted-average remaining lease term (years)
Operating leases	29		30
Finance leases	2		3

Weighted-average discount rate (%)
Operating leases	7		8
Finance leases	3		3

(1)As of September 30, 2021 and December 31, 2020, operating lease right-of-use assets, net included $3.6 billion and $3.7 billion related to the Bellagio lease, respectively, and $4.0 billion related to the Mandalay Bay and MGM Grand Las Vegas lease for each of the respective periods.

(2)As of September 30, 2021 and December 31, 2020, operating lease liabilities – long-term included $3.8 billion related to the Bellagio lease for each of the respective periods, and $4.1 billion related to the Mandalay Bay and MGM Grand Las Vegas lease for each of the respective periods.


	Nine Months Ended September 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities	(In thousands)
Operating cash outflows from operating leases	$	483,031	$	421,932
Operating cash outflows from finance leases	3,685		1,741
Financing cash outflows from finance leases(1)	55,815		19,514

ROU assets obtained in exchange for new lease liabilities
Operating leases	$	3,388,103	$	4,120,312
Finance leases	21,081		175,446

(1)Included within “Other” within the “Cash flows from financing activities” on the accompanying consolidated statements of cash flows.

Maturities of lease liabilities were as follows:


	Operating Leases		Finance Leases
Year ending December 31,	(In thousands)
2021 (excluding the nine months ended September 30, 2021)	$	187,052	$	24,688
2022	836,616		81,942
2023	849,198		72,871
2024	863,096		1,029
2025	876,445		514
Thereafter	27,580,105		—
Total future minimum lease payments	31,192,512		181,044
Less: Amount of lease payments representing interest	(19,385,771)		(4,867)
Present value of future minimum lease payments	11,806,741		176,177
Less: Current portion	(31,632)		(84,298)
Long-term portion of lease liabilities	$	11,775,109	$	91,879