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Leases | 6 Months Ended
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Jun. 30, 2022
Leases [Abstract] |
Leases | Leases Master Leases The components contained within the Master Leases are accounted for as either (i) operating leases, (ii) finance leases, or (iii) financing obligations. Changes to future lease payments under the Master Leases (i.e., when future escalators become known or future variable rent resets occur), which are discussed below, require the Company to either (i) increase both the Right-of-use (“ROU”) assets and corresponding lease liabilities with respect to operating and finance leases or (ii) record the incremental variable payment associated with the financing obligation to interest expense. In addition, monthly rent associated with Hollywood Casino Columbus (“Columbus”) and monthly rent in excess of the Hollywood Casino Toledo (“Toledo”) rent floor, which are discussed below, are considered contingent rent. PENN Master Lease Pursuant to the triple net master lease with GLPI (the “PENN Master Lease”), which became effective November 1, 2013, the Company leases real estate assets associated with 19 of the gaming facilities used in its operations. The PENN Master Lease has an initial term of 15 years with four subsequent, five-year renewal periods on the same terms and conditions, exercisable at the Company’s option. The Company has determined that the lease term is 35 years. The payment structure under the PENN Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2%, depending on the Adjusted Revenue to Rent Ratio (as defined in the PENN Master Lease) of 1.8:1, and a component that is based on performance, which is prospectively adjusted (i) every five years by an amount equal to 4% of the average change in net revenues of all properties under the PENN Master Lease (other than Columbus and Toledo) compared to a contractual baseline during the preceding five years (“PENN Percentage Rent”) and (ii) monthly by an amount equal to 20% of the net revenues of Columbus and Toledo in excess of a contractual baseline and subject to a rent floor specific to Toledo. The next annual escalator test date is scheduled to occur effective November 1, 2022. The next PENN Percentage Rent reset is scheduled to occur on November 1, 2023. On January 14, 2022, the ninth amendment to the PENN Master Lease between the Company and GLPI became effective. The ninth amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at a leased property, establishes a “floor” with respect to the Hollywood Casino at PENN National Race Course Net Revenue amount used in the calculation of the annual rent escalator and PENN Percentage Rent, and modifies the rent calculations upon a lease termination event as defined in the amendment. The lease term and the four five-year optional renewal periods, which if exercised would extend the PENN Master Lease through October 31, 2048, were not modified in the ninth amendment. We concluded the ninth amendment constituted a modification event under ASC Topic 842, “Leases” (“ASC 842”), which required us to reassess the classifications of the lease components and remeasure the associated lease liabilities. As a result of our reassessment of the lease classifications, (i) the land components of substantially all of the PENN Master Lease properties, which were previously classified as operating leases, are now primarily classified as finance leases, and (ii) the land and building components associated with the operations of Dayton and Mahoning Valley, which were previously classified as finance leases, are now classified as operating leases. As a result of our measurement of the associated lease liabilities, we recognized additional ROU assets and corresponding lease liabilities of $455.4 million. The building components of substantially all of the PENN Master Lease properties continue to be classified as financing obligations. Pinnacle Master Lease In connection with the acquisition of Pinnacle, on October 15, 2018, the Company assumed a triple net master lease with GLPI (the “Pinnacle Master Lease”), originally effective April 28, 2016, pursuant to which the Company leases real estate assets associated with 12 of the gaming facilities used in its operations. Upon assumption of the Pinnacle Master Lease, as amended, there were 7.5 years remaining of the initial ten-year term, with five subsequent, five-year renewal periods, on the same terms and conditions, exercisable at the Company’s option. The Company has determined that the lease term is 32.5 years. The payment structure under the Pinnacle Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2%, depending on the Adjusted Revenue to Rent Ratio (as defined in the Pinnacle Master Lease) of 1.8:1, and a component that is based on the performance, which is prospectively adjusted every two years by an amount equal to 4% of the average change in net revenues compared to a contractual baseline during the preceding two years (“Pinnacle Percentage Rent”). On January 14, 2022, the fifth amendment to the Pinnacle Master Lease between the Company and GLPI became effective. The fifth amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at a leased property and modifies the rent calculations upon a lease termination event as defined in the amendment. The lease term and the five five-year optional renewal periods, which if exercised would extend the Pinnacle Master Lease through April 30, 2051, were not modified in the fifth amendment. We concluded the fifth amendment to the Pinnacle Master Lease constituted a modification event under ASC 842 (collectively with the ninth amendment to the PENN Master Lease, the “Lease Modification”). As a result of the modification, the land components of substantially all of the Pinnacle Master Lease properties, which were previously classified as operating leases, are now primarily classified as finance leases. As a result of our measurement of the associated lease liabilities, we recognized additional ROU assets and corresponding lease liabilities of $937.6 million. The building components of substantially all of the Pinnacle Master Lease properties continue to be classified as financing obligations. As a result of the annual escalator, effective as of May 1, 2022 for the lease year ended April 30, 2022, the fixed component of rent increased by $4.6 million and an additional ROU asset and corresponding lease liability of $33.2 million were recognized associated with the finance lease components of the Pinnacle Master Lease. The next annual escalator test date is scheduled to occur on May 1, 2023. The May 1, 2022 Pinnacle Percentage Rent reset resulted in an annual rent increase of $1.9 million, which will be in effect until the next Pinnacle Percentage Rent reset, scheduled to occur on May 1, 2024. Upon reset of the Pinnacle Percentage Rent, effective May 1, 2022, we recognized an additional finance lease ROU asset and corresponding lease liability of $26.1 million. Morgantown Lease On October 1, 2020, the Company entered into a triple net lease with a subsidiary of GLPI for the land underlying our development project in Morgantown, Pennsylvania (“Morgantown Lease”) in exchange for $30.0 million in rent credits to be utilized to pay rent under the Master Leases, Meadows Lease, and the Morgantown Lease. The initial term of the Morgantown Lease is 20 years with six subsequent, five-year renewal periods, exercisable at the Company’s option. Initial annual rent under the Morgantown Lease is $3.0 million, subject to a 1.50% fixed annual escalation in each of the first three years subsequent to the facility opening, which occurred on December 22, 2021. Thereafter, the lease will be subject to an annual escalator consisting of either (i) 1.25%, if the consumer price index increase is greater than 0.50%, or (ii) zero, if the consumer price index increase is less than 0.50%. All improvements made on the land, including the constructed building, will be owned by the Company while the lease is in effect, however, on the expiration or termination of the Morgantown Lease, ownership of all tenant improvements on the land will transfer to GLPI. Perryville Lease In conjunction with the acquisition of the operations of Hollywood Casino Perryville on July 1, 2021, the Company entered into a triple net lease with GLPI for the real estate assets associated with the property (“Perryville Lease”) for initial annual rent of $7.8 million per year subject to escalation. The initial term of the Perryville Lease is 20 years with three subsequent, five-year renewal periods, exercisable at the Company’s option. The building portion of the annual rent is subject to a fixed annual escalation of 1.50% in each of the following three years, with subsequent annual escalations of either (i) 1.25%, if the consumer price index increase is greater than 0.50%, or (ii) zero, if the consumer price index increase is less than 0.50%. Operating Leases In addition to any operating lease components contained within the Master Leases, the Company’s operating leases consist mainly of (i) individual triple net leases with GLPI for the real estate assets used in the operations of Tropicana (the “Tropicana Lease”) and Hollywood Casino at Meadows Racetrack (the “Meadows Lease”), (ii) individual triple net leases with VICI Properties Inc. (NYSE: VICI) (“VICI”) for the real estate assets used in the operations of Margaritaville Casino Resort (the “Margaritaville Lease”) and Hollywood Casino at Greektown (the “Greektown Lease” and collectively with the Master Leases’ operating lease components, the Meadows Lease, the Margaritaville Lease and the Tropicana Lease, the “Triple Net Operating Leases”), (iii) ground and levee leases to landlords which were not assumed by our REIT Landlords and remain an obligation of the Company, and (iv) building and equipment not subject to the Master Leases. Certain of our lease agreements include rental payments based on a percentage of sales over specified contractual amounts, rental payments adjusted periodically for inflation, and rental payments based on usage. The Company’s leases include options to extend the lease terms. The Company’s operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. On January 14, 2022, the second amendment to the Meadows Lease between the Company and GLPI became effective. The second amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at the facility. This amendment did not result in a modification event under ASC 842. On February 1, 2022, the Margaritaville annual escalator test resulted in an annual rent increase of $0.4 million, and the recognition of an additional operating lease ROU asset and corresponding lease liability of $2.9 million. We did not incur an annual escalator for the lease year ended January 31, 2021. The next annual escalator and Margaritaville Percentage Rent reset are scheduled to occur on February 1, 2023. In May 2020, the Greektown lease was amended to remove the escalator for the lease years ending May 31, 2021 and 2022 and to provide for a Net Revenue to Rent coverage floor to be mutually agreed upon prior to the commencement of the fourth lease year (June 1, 2022). In April 2022, the lease was further amended to provide for a Net Revenue to Rent coverage floor to be mutually agreed upon prior to the commencement of the fifth lease year (June 1, 2023). The following is a maturity analysis of our operating leases, finance leases and financing obligations as of June 30, 2022:
(in millions) | Operating Leases |  | Finance Leases |  | Financing Obligations
Year ended December 31, |  |  |  |  |
2022 (excluding the six months ended June 30, 2022) | $ | 68.0 |  |  | $ | 193.2 |  |  | $ | 186.3 |
2023 | 125.2 |  |  | 375.2 |  |  | 369.8 |
2024 | 119.9 |  |  | 347.9 |  |  | 355.3 |
2025 | 116.6 |  |  | 346.9 |  |  | 355.4 |
2026 | 112.2 |  |  | 346.9 |  |  | 355.4 |
Thereafter | 1,341.4 |  |  | 7,873.5 |  |  | 8,285.7 |
Total lease payments | 1,883.3 |  |  | 9,483.6 |  |  | 9,907.9 |
Less: Imputed interest | (814.0) |  |  | (4,421.5) |  |  | (5,842.8) |
Present value of future lease payments | 1,069.3 |  |  | 5,062.1 |  |  | 4,065.1 |
Less: Current portion of lease obligations | (74.2) |  |  | (115.5) |  |  | (63.8) |
Long-term portion of lease obligations | $ | 995.1 |  |  | $ | 4,946.6 |  |  | $ | 4,001.3 |
Total payments made under the Triple Net Leases were as follows:
| For the three months ended June 30, |  | For the six months ended June 30,
(in millions) | 2022 |  | 2021 |  | 2022 |  | 2021
PENN Master Lease | $ | 120.6 |  |  | $ | 120.7 |  |  | $ | 239.8 |  |  | $ | 238.7 |
Pinnacle Master Lease | 83.4 |  |  | 82.1 |  |  | 165.9 |  |  | 163.4 |
Perryville Lease | 2.0 |  |  | — |  |  | 3.9 |  |  | — |
Meadows Lease | 6.2 |  |  | 6.2 |  |  | 12.4 |  |  | 12.4 |
Margaritaville Lease | 6.0 |  |  | 5.9 |  |  | 11.9 |  |  | 11.7 |
Greektown Lease | 12.9 |  |  | 13.5 |  |  | 25.7 |  |  | 27.4 |
Morgantown Lease | 0.7 |  |  | 0.7 |  |  | 1.5 |  |  | 1.5 |
Total (1) | $ | 231.8 |  |  | $ | 229.1 |  |  | $ | 461.1 |  |  | $ | 455.1 |
(1)Rent payable under the Tropicana Lease is nominal. Therefore, it has been excluded from the table above. The components of lease expense were as follows:
| Location on unaudited Consolidated Statements of Operations |  | For the three months ended June 30, |  | For the six months ended June 30,
(in millions) |  | 2022 |  | 2021 |  | 2022 |  | 2021
Operating Lease Costs |  |  |  |  |  |  |  |  |
Rent expense associated with triple net operating leases (1) | General and administrative |  | $ | 28.0 |  |  | $ | 116.5 |  |  | $ | 88.1 |  |  | $ | 226.9 |
Operating lease cost (2) | Primarily General and administrative |  | 4.9 |  |  | 3.9 |  |  | 9.9 |  |  | 7.8 |
Short-term lease cost | Primarily Gaming expense |  | 18.5 |  |  | 15.5 |  |  | 36.6 |  |  | 28.8 |
Variable lease cost (2) | Primarily Gaming expense |  | 1.2 |  |  | 1.0 |  |  | 2.3 |  |  | 2.1 |
Total |  |  | $ | 52.6 |  |  | $ | 136.9 |  |  | $ | 136.9 |  |  | $ | 265.6 |
Finance Lease Costs |  |  |  |  |  |  |  |  |
Interest on lease liabilities (3) | Interest expense, net |  | $ | 75.7 |  |  | $ | 3.7 |  |  | $ | 115.2 |  |  | $ | 7.4 |
Amortization of ROU assets (3) | Depreciation and amortization |  | 48.8 |  |  | 2.1 |  |  | 80.9 |  |  | 4.0 |
Total |  |  | $ | 124.5 |  |  | $ | 5.8 |  |  | $ | 196.1 |  |  | $ | 11.4 |
Financing Obligation Costs |  |  |  |  |  |  |  |  |
Interest on financing obligations (4) | Interest expense, net |  | $ | 85.2 |  |  | $ | 105.3 |  |  | $ | 174.8 |  |  | $ | 207.9 |
(1)Pertains to the operating lease components contained within the Master Leases, inclusive of the variable expense associated with Columbus and Toledo for the operating lease components, the Meadows Lease, the Margaritaville Lease, the Greektown Lease, and the Tropicana Lease. Prior to the Lease Modification, the operating lease components contained within the Master Leases primarily consisted of the land, inclusive of the variable expense associated with Columbus and Toledo. Subsequent to the Lease Modification, the operating lease components contained within the Master Leases consist of the land and building components associated with the operations of Dayton and Mahoning Valley. (2)Excludes the operating lease costs and variable lease costs pertaining to our triple net leases with our REIT landlords classified as operating leases, discussed in footnote (1) above. (3)Pertains to the finance lease components contained within the Master Leases, and the Perryville Lease (effective July 1, 2021) which results in interest expense and amortization expense (as opposed to rent expense). Prior to the Lease Modification, the finance lease components contained within the Master Leases consisted of the land and building components associated with the operations of Dayton and Mahoning Valley. Subsequent to the Lease Modification, the finance lease components contained within the Master Leases consist of the land, inclusive of the variable expense associated with Columbus and Toledo. (4) Pertains to the components contained within the Master Leases (primarily buildings) and the Morgantown Lease determined to be a financing obligation, inclusive of the variable expense associated with Columbus and Toledo for the financing obligation components (the buildings).
Leases | Leases Master Leases The components contained within the Master Leases are accounted for as either (i) operating leases, (ii) finance leases, or (iii) financing obligations. Changes to future lease payments under the Master Leases (i.e., when future escalators become known or future variable rent resets occur), which are discussed below, require the Company to either (i) increase both the Right-of-use (“ROU”) assets and corresponding lease liabilities with respect to operating and finance leases or (ii) record the incremental variable payment associated with the financing obligation to interest expense. In addition, monthly rent associated with Hollywood Casino Columbus (“Columbus”) and monthly rent in excess of the Hollywood Casino Toledo (“Toledo”) rent floor, which are discussed below, are considered contingent rent. PENN Master Lease Pursuant to the triple net master lease with GLPI (the “PENN Master Lease”), which became effective November 1, 2013, the Company leases real estate assets associated with 19 of the gaming facilities used in its operations. The PENN Master Lease has an initial term of 15 years with four subsequent, five-year renewal periods on the same terms and conditions, exercisable at the Company’s option. The Company has determined that the lease term is 35 years. The payment structure under the PENN Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2%, depending on the Adjusted Revenue to Rent Ratio (as defined in the PENN Master Lease) of 1.8:1, and a component that is based on performance, which is prospectively adjusted (i) every five years by an amount equal to 4% of the average change in net revenues of all properties under the PENN Master Lease (other than Columbus and Toledo) compared to a contractual baseline during the preceding five years (“PENN Percentage Rent”) and (ii) monthly by an amount equal to 20% of the net revenues of Columbus and Toledo in excess of a contractual baseline and subject to a rent floor specific to Toledo. The next annual escalator test date is scheduled to occur effective November 1, 2022. The next PENN Percentage Rent reset is scheduled to occur on November 1, 2023. On January 14, 2022, the ninth amendment to the PENN Master Lease between the Company and GLPI became effective. The ninth amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at a leased property, establishes a “floor” with respect to the Hollywood Casino at PENN National Race Course Net Revenue amount used in the calculation of the annual rent escalator and PENN Percentage Rent, and modifies the rent calculations upon a lease termination event as defined in the amendment. The lease term and the four five-year optional renewal periods, which if exercised would extend the PENN Master Lease through October 31, 2048, were not modified in the ninth amendment. We concluded the ninth amendment constituted a modification event under ASC Topic 842, “Leases” (“ASC 842”), which required us to reassess the classifications of the lease components and remeasure the associated lease liabilities. As a result of our reassessment of the lease classifications, (i) the land components of substantially all of the PENN Master Lease properties, which were previously classified as operating leases, are now primarily classified as finance leases, and (ii) the land and building components associated with the operations of Dayton and Mahoning Valley, which were previously classified as finance leases, are now classified as operating leases. As a result of our measurement of the associated lease liabilities, we recognized additional ROU assets and corresponding lease liabilities of $455.4 million. The building components of substantially all of the PENN Master Lease properties continue to be classified as financing obligations. Pinnacle Master Lease In connection with the acquisition of Pinnacle, on October 15, 2018, the Company assumed a triple net master lease with GLPI (the “Pinnacle Master Lease”), originally effective April 28, 2016, pursuant to which the Company leases real estate assets associated with 12 of the gaming facilities used in its operations. Upon assumption of the Pinnacle Master Lease, as amended, there were 7.5 years remaining of the initial ten-year term, with five subsequent, five-year renewal periods, on the same terms and conditions, exercisable at the Company’s option. The Company has determined that the lease term is 32.5 years. The payment structure under the Pinnacle Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2%, depending on the Adjusted Revenue to Rent Ratio (as defined in the Pinnacle Master Lease) of 1.8:1, and a component that is based on the performance, which is prospectively adjusted every two years by an amount equal to 4% of the average change in net revenues compared to a contractual baseline during the preceding two years (“Pinnacle Percentage Rent”). On January 14, 2022, the fifth amendment to the Pinnacle Master Lease between the Company and GLPI became effective. The fifth amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at a leased property and modifies the rent calculations upon a lease termination event as defined in the amendment. The lease term and the five five-year optional renewal periods, which if exercised would extend the Pinnacle Master Lease through April 30, 2051, were not modified in the fifth amendment. We concluded the fifth amendment to the Pinnacle Master Lease constituted a modification event under ASC 842 (collectively with the ninth amendment to the PENN Master Lease, the “Lease Modification”). As a result of the modification, the land components of substantially all of the Pinnacle Master Lease properties, which were previously classified as operating leases, are now primarily classified as finance leases. As a result of our measurement of the associated lease liabilities, we recognized additional ROU assets and corresponding lease liabilities of $937.6 million. The building components of substantially all of the Pinnacle Master Lease properties continue to be classified as financing obligations. As a result of the annual escalator, effective as of May 1, 2022 for the lease year ended April 30, 2022, the fixed component of rent increased by $4.6 million and an additional ROU asset and corresponding lease liability of $33.2 million were recognized associated with the finance lease components of the Pinnacle Master Lease. The next annual escalator test date is scheduled to occur on May 1, 2023. The May 1, 2022 Pinnacle Percentage Rent reset resulted in an annual rent increase of $1.9 million, which will be in effect until the next Pinnacle Percentage Rent reset, scheduled to occur on May 1, 2024. Upon reset of the Pinnacle Percentage Rent, effective May 1, 2022, we recognized an additional finance lease ROU asset and corresponding lease liability of $26.1 million. Morgantown Lease On October 1, 2020, the Company entered into a triple net lease with a subsidiary of GLPI for the land underlying our development project in Morgantown, Pennsylvania (“Morgantown Lease”) in exchange for $30.0 million in rent credits to be utilized to pay rent under the Master Leases, Meadows Lease, and the Morgantown Lease. The initial term of the Morgantown Lease is 20 years with six subsequent, five-year renewal periods, exercisable at the Company’s option. Initial annual rent under the Morgantown Lease is $3.0 million, subject to a 1.50% fixed annual escalation in each of the first three years subsequent to the facility opening, which occurred on December 22, 2021. Thereafter, the lease will be subject to an annual escalator consisting of either (i) 1.25%, if the consumer price index increase is greater than 0.50%, or (ii) zero, if the consumer price index increase is less than 0.50%. All improvements made on the land, including the constructed building, will be owned by the Company while the lease is in effect, however, on the expiration or termination of the Morgantown Lease, ownership of all tenant improvements on the land will transfer to GLPI. Perryville Lease In conjunction with the acquisition of the operations of Hollywood Casino Perryville on July 1, 2021, the Company entered into a triple net lease with GLPI for the real estate assets associated with the property (“Perryville Lease”) for initial annual rent of $7.8 million per year subject to escalation. The initial term of the Perryville Lease is 20 years with three subsequent, five-year renewal periods, exercisable at the Company’s option. The building portion of the annual rent is subject to a fixed annual escalation of 1.50% in each of the following three years, with subsequent annual escalations of either (i) 1.25%, if the consumer price index increase is greater than 0.50%, or (ii) zero, if the consumer price index increase is less than 0.50%. Operating Leases In addition to any operating lease components contained within the Master Leases, the Company’s operating leases consist mainly of (i) individual triple net leases with GLPI for the real estate assets used in the operations of Tropicana (the “Tropicana Lease”) and Hollywood Casino at Meadows Racetrack (the “Meadows Lease”), (ii) individual triple net leases with VICI Properties Inc. (NYSE: VICI) (“VICI”) for the real estate assets used in the operations of Margaritaville Casino Resort (the “Margaritaville Lease”) and Hollywood Casino at Greektown (the “Greektown Lease” and collectively with the Master Leases’ operating lease components, the Meadows Lease, the Margaritaville Lease and the Tropicana Lease, the “Triple Net Operating Leases”), (iii) ground and levee leases to landlords which were not assumed by our REIT Landlords and remain an obligation of the Company, and (iv) building and equipment not subject to the Master Leases. Certain of our lease agreements include rental payments based on a percentage of sales over specified contractual amounts, rental payments adjusted periodically for inflation, and rental payments based on usage. The Company’s leases include options to extend the lease terms. The Company’s operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. On January 14, 2022, the second amendment to the Meadows Lease between the Company and GLPI became effective. The second amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at the facility. This amendment did not result in a modification event under ASC 842. On February 1, 2022, the Margaritaville annual escalator test resulted in an annual rent increase of $0.4 million, and the recognition of an additional operating lease ROU asset and corresponding lease liability of $2.9 million. We did not incur an annual escalator for the lease year ended January 31, 2021. The next annual escalator and Margaritaville Percentage Rent reset are scheduled to occur on February 1, 2023. In May 2020, the Greektown lease was amended to remove the escalator for the lease years ending May 31, 2021 and 2022 and to provide for a Net Revenue to Rent coverage floor to be mutually agreed upon prior to the commencement of the fourth lease year (June 1, 2022). In April 2022, the lease was further amended to provide for a Net Revenue to Rent coverage floor to be mutually agreed upon prior to the commencement of the fifth lease year (June 1, 2023). The following is a maturity analysis of our operating leases, finance leases and financing obligations as of June 30, 2022:
(in millions) | Operating Leases |  | Finance Leases |  | Financing Obligations
Year ended December 31, |  |  |  |  |
2022 (excluding the six months ended June 30, 2022) | $ | 68.0 |  |  | $ | 193.2 |  |  | $ | 186.3 |
2023 | 125.2 |  |  | 375.2 |  |  | 369.8 |
2024 | 119.9 |  |  | 347.9 |  |  | 355.3 |
2025 | 116.6 |  |  | 346.9 |  |  | 355.4 |
2026 | 112.2 |  |  | 346.9 |  |  | 355.4 |
Thereafter | 1,341.4 |  |  | 7,873.5 |  |  | 8,285.7 |
Total lease payments | 1,883.3 |  |  | 9,483.6 |  |  | 9,907.9 |
Less: Imputed interest | (814.0) |  |  | (4,421.5) |  |  | (5,842.8) |
Present value of future lease payments | 1,069.3 |  |  | 5,062.1 |  |  | 4,065.1 |
Less: Current portion of lease obligations | (74.2) |  |  | (115.5) |  |  | (63.8) |
Long-term portion of lease obligations | $ | 995.1 |  |  | $ | 4,946.6 |  |  | $ | 4,001.3 |
Total payments made under the Triple Net Leases were as follows:
| For the three months ended June 30, |  | For the six months ended June 30,
(in millions) | 2022 |  | 2021 |  | 2022 |  | 2021
PENN Master Lease | $ | 120.6 |  |  | $ | 120.7 |  |  | $ | 239.8 |  |  | $ | 238.7 |
Pinnacle Master Lease | 83.4 |  |  | 82.1 |  |  | 165.9 |  |  | 163.4 |
Perryville Lease | 2.0 |  |  | — |  |  | 3.9 |  |  | — |
Meadows Lease | 6.2 |  |  | 6.2 |  |  | 12.4 |  |  | 12.4 |
Margaritaville Lease | 6.0 |  |  | 5.9 |  |  | 11.9 |  |  | 11.7 |
Greektown Lease | 12.9 |  |  | 13.5 |  |  | 25.7 |  |  | 27.4 |
Morgantown Lease | 0.7 |  |  | 0.7 |  |  | 1.5 |  |  | 1.5 |
Total (1) | $ | 231.8 |  |  | $ | 229.1 |  |  | $ | 461.1 |  |  | $ | 455.1 |
(1)Rent payable under the Tropicana Lease is nominal. Therefore, it has been excluded from the table above. The components of lease expense were as follows:
| Location on unaudited Consolidated Statements of Operations |  | For the three months ended June 30, |  | For the six months ended June 30,
(in millions) |  | 2022 |  | 2021 |  | 2022 |  | 2021
Operating Lease Costs |  |  |  |  |  |  |  |  |
Rent expense associated with triple net operating leases (1) | General and administrative |  | $ | 28.0 |  |  | $ | 116.5 |  |  | $ | 88.1 |  |  | $ | 226.9 |
Operating lease cost (2) | Primarily General and administrative |  | 4.9 |  |  | 3.9 |  |  | 9.9 |  |  | 7.8 |
Short-term lease cost | Primarily Gaming expense |  | 18.5 |  |  | 15.5 |  |  | 36.6 |  |  | 28.8 |
Variable lease cost (2) | Primarily Gaming expense |  | 1.2 |  |  | 1.0 |  |  | 2.3 |  |  | 2.1 |
Total |  |  | $ | 52.6 |  |  | $ | 136.9 |  |  | $ | 136.9 |  |  | $ | 265.6 |
Finance Lease Costs |  |  |  |  |  |  |  |  |
Interest on lease liabilities (3) | Interest expense, net |  | $ | 75.7 |  |  | $ | 3.7 |  |  | $ | 115.2 |  |  | $ | 7.4 |
Amortization of ROU assets (3) | Depreciation and amortization |  | 48.8 |  |  | 2.1 |  |  | 80.9 |  |  | 4.0 |
Total |  |  | $ | 124.5 |  |  | $ | 5.8 |  |  | $ | 196.1 |  |  | $ | 11.4 |
Financing Obligation Costs |  |  |  |  |  |  |  |  |
Interest on financing obligations (4) | Interest expense, net |  | $ | 85.2 |  |  | $ | 105.3 |  |  | $ | 174.8 |  |  | $ | 207.9 |
(1)Pertains to the operating lease components contained within the Master Leases, inclusive of the variable expense associated with Columbus and Toledo for the operating lease components, the Meadows Lease, the Margaritaville Lease, the Greektown Lease, and the Tropicana Lease. Prior to the Lease Modification, the operating lease components contained within the Master Leases primarily consisted of the land, inclusive of the variable expense associated with Columbus and Toledo. Subsequent to the Lease Modification, the operating lease components contained within the Master Leases consist of the land and building components associated with the operations of Dayton and Mahoning Valley. (2)Excludes the operating lease costs and variable lease costs pertaining to our triple net leases with our REIT landlords classified as operating leases, discussed in footnote (1) above. (3)Pertains to the finance lease components contained within the Master Leases, and the Perryville Lease (effective July 1, 2021) which results in interest expense and amortization expense (as opposed to rent expense). Prior to the Lease Modification, the finance lease components contained within the Master Leases consisted of the land and building components associated with the operations of Dayton and Mahoning Valley. Subsequent to the Lease Modification, the finance lease components contained within the Master Leases consist of the land, inclusive of the variable expense associated with Columbus and Toledo. (4) Pertains to the components contained within the Master Leases (primarily buildings) and the Morgantown Lease determined to be a financing obligation, inclusive of the variable expense associated with Columbus and Toledo for the financing obligation components (the buildings).
Leases | Leases Master Leases The components contained within the Master Leases are accounted for as either (i) operating leases, (ii) finance leases, or (iii) financing obligations. Changes to future lease payments under the Master Leases (i.e., when future escalators become known or future variable rent resets occur), which are discussed below, require the Company to either (i) increase both the Right-of-use (“ROU”) assets and corresponding lease liabilities with respect to operating and finance leases or (ii) record the incremental variable payment associated with the financing obligation to interest expense. In addition, monthly rent associated with Hollywood Casino Columbus (“Columbus”) and monthly rent in excess of the Hollywood Casino Toledo (“Toledo”) rent floor, which are discussed below, are considered contingent rent. PENN Master Lease Pursuant to the triple net master lease with GLPI (the “PENN Master Lease”), which became effective November 1, 2013, the Company leases real estate assets associated with 19 of the gaming facilities used in its operations. The PENN Master Lease has an initial term of 15 years with four subsequent, five-year renewal periods on the same terms and conditions, exercisable at the Company’s option. The Company has determined that the lease term is 35 years. The payment structure under the PENN Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2%, depending on the Adjusted Revenue to Rent Ratio (as defined in the PENN Master Lease) of 1.8:1, and a component that is based on performance, which is prospectively adjusted (i) every five years by an amount equal to 4% of the average change in net revenues of all properties under the PENN Master Lease (other than Columbus and Toledo) compared to a contractual baseline during the preceding five years (“PENN Percentage Rent”) and (ii) monthly by an amount equal to 20% of the net revenues of Columbus and Toledo in excess of a contractual baseline and subject to a rent floor specific to Toledo. The next annual escalator test date is scheduled to occur effective November 1, 2022. The next PENN Percentage Rent reset is scheduled to occur on November 1, 2023. On January 14, 2022, the ninth amendment to the PENN Master Lease between the Company and GLPI became effective. The ninth amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at a leased property, establishes a “floor” with respect to the Hollywood Casino at PENN National Race Course Net Revenue amount used in the calculation of the annual rent escalator and PENN Percentage Rent, and modifies the rent calculations upon a lease termination event as defined in the amendment. The lease term and the four five-year optional renewal periods, which if exercised would extend the PENN Master Lease through October 31, 2048, were not modified in the ninth amendment. We concluded the ninth amendment constituted a modification event under ASC Topic 842, “Leases” (“ASC 842”), which required us to reassess the classifications of the lease components and remeasure the associated lease liabilities. As a result of our reassessment of the lease classifications, (i) the land components of substantially all of the PENN Master Lease properties, which were previously classified as operating leases, are now primarily classified as finance leases, and (ii) the land and building components associated with the operations of Dayton and Mahoning Valley, which were previously classified as finance leases, are now classified as operating leases. As a result of our measurement of the associated lease liabilities, we recognized additional ROU assets and corresponding lease liabilities of $455.4 million. The building components of substantially all of the PENN Master Lease properties continue to be classified as financing obligations. Pinnacle Master Lease In connection with the acquisition of Pinnacle, on October 15, 2018, the Company assumed a triple net master lease with GLPI (the “Pinnacle Master Lease”), originally effective April 28, 2016, pursuant to which the Company leases real estate assets associated with 12 of the gaming facilities used in its operations. Upon assumption of the Pinnacle Master Lease, as amended, there were 7.5 years remaining of the initial ten-year term, with five subsequent, five-year renewal periods, on the same terms and conditions, exercisable at the Company’s option. The Company has determined that the lease term is 32.5 years. The payment structure under the Pinnacle Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2%, depending on the Adjusted Revenue to Rent Ratio (as defined in the Pinnacle Master Lease) of 1.8:1, and a component that is based on the performance, which is prospectively adjusted every two years by an amount equal to 4% of the average change in net revenues compared to a contractual baseline during the preceding two years (“Pinnacle Percentage Rent”). On January 14, 2022, the fifth amendment to the Pinnacle Master Lease between the Company and GLPI became effective. The fifth amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at a leased property and modifies the rent calculations upon a lease termination event as defined in the amendment. The lease term and the five five-year optional renewal periods, which if exercised would extend the Pinnacle Master Lease through April 30, 2051, were not modified in the fifth amendment. We concluded the fifth amendment to the Pinnacle Master Lease constituted a modification event under ASC 842 (collectively with the ninth amendment to the PENN Master Lease, the “Lease Modification”). As a result of the modification, the land components of substantially all of the Pinnacle Master Lease properties, which were previously classified as operating leases, are now primarily classified as finance leases. As a result of our measurement of the associated lease liabilities, we recognized additional ROU assets and corresponding lease liabilities of $937.6 million. The building components of substantially all of the Pinnacle Master Lease properties continue to be classified as financing obligations. As a result of the annual escalator, effective as of May 1, 2022 for the lease year ended April 30, 2022, the fixed component of rent increased by $4.6 million and an additional ROU asset and corresponding lease liability of $33.2 million were recognized associated with the finance lease components of the Pinnacle Master Lease. The next annual escalator test date is scheduled to occur on May 1, 2023. The May 1, 2022 Pinnacle Percentage Rent reset resulted in an annual rent increase of $1.9 million, which will be in effect until the next Pinnacle Percentage Rent reset, scheduled to occur on May 1, 2024. Upon reset of the Pinnacle Percentage Rent, effective May 1, 2022, we recognized an additional finance lease ROU asset and corresponding lease liability of $26.1 million. Morgantown Lease On October 1, 2020, the Company entered into a triple net lease with a subsidiary of GLPI for the land underlying our development project in Morgantown, Pennsylvania (“Morgantown Lease”) in exchange for $30.0 million in rent credits to be utilized to pay rent under the Master Leases, Meadows Lease, and the Morgantown Lease. The initial term of the Morgantown Lease is 20 years with six subsequent, five-year renewal periods, exercisable at the Company’s option. Initial annual rent under the Morgantown Lease is $3.0 million, subject to a 1.50% fixed annual escalation in each of the first three years subsequent to the facility opening, which occurred on December 22, 2021. Thereafter, the lease will be subject to an annual escalator consisting of either (i) 1.25%, if the consumer price index increase is greater than 0.50%, or (ii) zero, if the consumer price index increase is less than 0.50%. All improvements made on the land, including the constructed building, will be owned by the Company while the lease is in effect, however, on the expiration or termination of the Morgantown Lease, ownership of all tenant improvements on the land will transfer to GLPI. Perryville Lease In conjunction with the acquisition of the operations of Hollywood Casino Perryville on July 1, 2021, the Company entered into a triple net lease with GLPI for the real estate assets associated with the property (“Perryville Lease”) for initial annual rent of $7.8 million per year subject to escalation. The initial term of the Perryville Lease is 20 years with three subsequent, five-year renewal periods, exercisable at the Company’s option. The building portion of the annual rent is subject to a fixed annual escalation of 1.50% in each of the following three years, with subsequent annual escalations of either (i) 1.25%, if the consumer price index increase is greater than 0.50%, or (ii) zero, if the consumer price index increase is less than 0.50%. Operating Leases In addition to any operating lease components contained within the Master Leases, the Company’s operating leases consist mainly of (i) individual triple net leases with GLPI for the real estate assets used in the operations of Tropicana (the “Tropicana Lease”) and Hollywood Casino at Meadows Racetrack (the “Meadows Lease”), (ii) individual triple net leases with VICI Properties Inc. (NYSE: VICI) (“VICI”) for the real estate assets used in the operations of Margaritaville Casino Resort (the “Margaritaville Lease”) and Hollywood Casino at Greektown (the “Greektown Lease” and collectively with the Master Leases’ operating lease components, the Meadows Lease, the Margaritaville Lease and the Tropicana Lease, the “Triple Net Operating Leases”), (iii) ground and levee leases to landlords which were not assumed by our REIT Landlords and remain an obligation of the Company, and (iv) building and equipment not subject to the Master Leases. Certain of our lease agreements include rental payments based on a percentage of sales over specified contractual amounts, rental payments adjusted periodically for inflation, and rental payments based on usage. The Company’s leases include options to extend the lease terms. The Company’s operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. On January 14, 2022, the second amendment to the Meadows Lease between the Company and GLPI became effective. The second amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at the facility. This amendment did not result in a modification event under ASC 842. On February 1, 2022, the Margaritaville annual escalator test resulted in an annual rent increase of $0.4 million, and the recognition of an additional operating lease ROU asset and corresponding lease liability of $2.9 million. We did not incur an annual escalator for the lease year ended January 31, 2021. The next annual escalator and Margaritaville Percentage Rent reset are scheduled to occur on February 1, 2023. In May 2020, the Greektown lease was amended to remove the escalator for the lease years ending May 31, 2021 and 2022 and to provide for a Net Revenue to Rent coverage floor to be mutually agreed upon prior to the commencement of the fourth lease year (June 1, 2022). In April 2022, the lease was further amended to provide for a Net Revenue to Rent coverage floor to be mutually agreed upon prior to the commencement of the fifth lease year (June 1, 2023). The following is a maturity analysis of our operating leases, finance leases and financing obligations as of June 30, 2022:
(in millions) | Operating Leases |  | Finance Leases |  | Financing Obligations
Year ended December 31, |  |  |  |  |
2022 (excluding the six months ended June 30, 2022) | $ | 68.0 |  |  | $ | 193.2 |  |  | $ | 186.3 |
2023 | 125.2 |  |  | 375.2 |  |  | 369.8 |
2024 | 119.9 |  |  | 347.9 |  |  | 355.3 |
2025 | 116.6 |  |  | 346.9 |  |  | 355.4 |
2026 | 112.2 |  |  | 346.9 |  |  | 355.4 |
Thereafter | 1,341.4 |  |  | 7,873.5 |  |  | 8,285.7 |
Total lease payments | 1,883.3 |  |  | 9,483.6 |  |  | 9,907.9 |
Less: Imputed interest | (814.0) |  |  | (4,421.5) |  |  | (5,842.8) |
Present value of future lease payments | 1,069.3 |  |  | 5,062.1 |  |  | 4,065.1 |
Less: Current portion of lease obligations | (74.2) |  |  | (115.5) |  |  | (63.8) |
Long-term portion of lease obligations | $ | 995.1 |  |  | $ | 4,946.6 |  |  | $ | 4,001.3 |
Total payments made under the Triple Net Leases were as follows:
| For the three months ended June 30, |  | For the six months ended June 30,
(in millions) | 2022 |  | 2021 |  | 2022 |  | 2021
PENN Master Lease | $ | 120.6 |  |  | $ | 120.7 |  |  | $ | 239.8 |  |  | $ | 238.7 |
Pinnacle Master Lease | 83.4 |  |  | 82.1 |  |  | 165.9 |  |  | 163.4 |
Perryville Lease | 2.0 |  |  | — |  |  | 3.9 |  |  | — |
Meadows Lease | 6.2 |  |  | 6.2 |  |  | 12.4 |  |  | 12.4 |
Margaritaville Lease | 6.0 |  |  | 5.9 |  |  | 11.9 |  |  | 11.7 |
Greektown Lease | 12.9 |  |  | 13.5 |  |  | 25.7 |  |  | 27.4 |
Morgantown Lease | 0.7 |  |  | 0.7 |  |  | 1.5 |  |  | 1.5 |
Total (1) | $ | 231.8 |  |  | $ | 229.1 |  |  | $ | 461.1 |  |  | $ | 455.1 |
(1)Rent payable under the Tropicana Lease is nominal. Therefore, it has been excluded from the table above. The components of lease expense were as follows:
| Location on unaudited Consolidated Statements of Operations |  | For the three months ended June 30, |  | For the six months ended June 30,
(in millions) |  | 2022 |  | 2021 |  | 2022 |  | 2021
Operating Lease Costs |  |  |  |  |  |  |  |  |
Rent expense associated with triple net operating leases (1) | General and administrative |  | $ | 28.0 |  |  | $ | 116.5 |  |  | $ | 88.1 |  |  | $ | 226.9 |
Operating lease cost (2) | Primarily General and administrative |  | 4.9 |  |  | 3.9 |  |  | 9.9 |  |  | 7.8 |
Short-term lease cost | Primarily Gaming expense |  | 18.5 |  |  | 15.5 |  |  | 36.6 |  |  | 28.8 |
Variable lease cost (2) | Primarily Gaming expense |  | 1.2 |  |  | 1.0 |  |  | 2.3 |  |  | 2.1 |
Total |  |  | $ | 52.6 |  |  | $ | 136.9 |  |  | $ | 136.9 |  |  | $ | 265.6 |
Finance Lease Costs |  |  |  |  |  |  |  |  |
Interest on lease liabilities (3) | Interest expense, net |  | $ | 75.7 |  |  | $ | 3.7 |  |  | $ | 115.2 |  |  | $ | 7.4 |
Amortization of ROU assets (3) | Depreciation and amortization |  | 48.8 |  |  | 2.1 |  |  | 80.9 |  |  | 4.0 |
Total |  |  | $ | 124.5 |  |  | $ | 5.8 |  |  | $ | 196.1 |  |  | $ | 11.4 |
Financing Obligation Costs |  |  |  |  |  |  |  |  |
Interest on financing obligations (4) | Interest expense, net |  | $ | 85.2 |  |  | $ | 105.3 |  |  | $ | 174.8 |  |  | $ | 207.9 |
(1)Pertains to the operating lease components contained within the Master Leases, inclusive of the variable expense associated with Columbus and Toledo for the operating lease components, the Meadows Lease, the Margaritaville Lease, the Greektown Lease, and the Tropicana Lease. Prior to the Lease Modification, the operating lease components contained within the Master Leases primarily consisted of the land, inclusive of the variable expense associated with Columbus and Toledo. Subsequent to the Lease Modification, the operating lease components contained within the Master Leases consist of the land and building components associated with the operations of Dayton and Mahoning Valley. (2)Excludes the operating lease costs and variable lease costs pertaining to our triple net leases with our REIT landlords classified as operating leases, discussed in footnote (1) above. (3)Pertains to the finance lease components contained within the Master Leases, and the Perryville Lease (effective July 1, 2021) which results in interest expense and amortization expense (as opposed to rent expense). Prior to the Lease Modification, the finance lease components contained within the Master Leases consisted of the land and building components associated with the operations of Dayton and Mahoning Valley. Subsequent to the Lease Modification, the finance lease components contained within the Master Leases consist of the land, inclusive of the variable expense associated with Columbus and Toledo. (4) Pertains to the components contained within the Master Leases (primarily buildings) and the Morgantown Lease determined to be a financing obligation, inclusive of the variable expense associated with Columbus and Toledo for the financing obligation components (the buildings).

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