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LEASES | 9 Months Ended
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Sep. 30, 2021
LEASES |
LEASES | 3. LEASES The Company has no leases in which it is the lessor. As lessee, the Company has one finance lease for a hotel and various operating leases for land, casino and office space, equipment, buildings, and signage. The Company’s lease terms, including extensions, range from one month to approximately 37 years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants, but the land lease at Silver Slipper does include contingent rent, as further discussed below. Operating Leases Silver Slipper Casino Land Lease through April 2058 and Options to Purchase. In 2004, the Company’s subsidiary, Silver Slipper Casino Venture, LLC, entered into a land lease with Cure Land Company, LLC for approximately 31 acres of marshlands and a seven-acre parcel on which the Silver Slipper Casino and Hotel is situated. The agreement includes fixed, base monthly payments of $77,500 plus contingent rents of 3% of monthly gross gaming revenue (as defined in the lease) in excess of $3.65 million, with no scheduled base rent increases through the remaining lease term ending in 2058. The Company executed a fourth amendment to the original lease with the landlord, effective March 2020, which granted a waiver of base rent for April and May of 2020. Such abatement totaled $155,000 and the value of such abatement was amortized over the remaining term of the lease. From April 1, 2022 through October 1, 2027, the Company may buy out the lease for $15.5 million plus a seller-retained interest in Silver Slipper Casino and Hotel’s operations of 3% of net income (as defined) for 10 years following the purchase date. Bronco Billy’s / Chamonix Lease through January 2035 and Option to Purchase. Bronco Billy’s leases certain parking lots and buildings, including a portion of the hotel and casino, under a long-term lease. The lease term includes six renewal options in three-year increments to 2035. The Company considers the renewal options reasonably certain of being exercised through January of 2026, with current annual lease payments of $0.4 million. The lease contains a $7.6 million purchase option exercisable at any time during the lease term, or as extended, and a right of first refusal on any sale of the property. Third Street Corner Building through August 2023 and Option to Purchase. The Company leased a nearby closed casino in August 2018 and reopened it in November 2018. The reopened casino did not produce enough incremental revenue to offset the incremental costs, and it was closed in September 2020. The Company has the right to purchase the casino at any time during the lease term, as extended. Currently, the purchase price is $2.8 million as of November 1, 2021. As part of the Chamonix development project, this building is currently used as office space for construction personnel, obviating the need for construction trailers. The lease includes a minimum three-year term with annual lease payments of $0.2 million, and was subsequently extended in June 2021 for an additional two years with annual lease payments of $0.3 million. Grand Lodge Casino Lease through August 2023. The Company’s subsidiary, Gaming Entertainment (Nevada), LLC, has a lease with Incline Hotel, LLC, the owner of the Hyatt Regency Lake Tahoe Resort (“Hyatt Lake Tahoe”), to operate the Grand Lodge Casino. The lease was assigned to Incline Hotel, LLC when it purchased the Hyatt Lake Tahoe in September 2021. It is collateralized by the Company’s interests under the lease and property (as defined in the lease) and is subordinate to the liens of the 2028 Notes (see Note 5). The lessor currently has an option to purchase the Company’s leasehold interest and related operating assets of the Grand Lodge Casino, subject to assumption of applicable liabilities. The option price is an amount equal to the Grand Lodge Casino’s positive working capital, plus Grand Lodge Casino’s earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the twelve-month period preceding the acquisition (or pro-rated if less than twelve months remain on the lease), plus the fair market value of the Grand Lodge Casino’s personal property. The current monthly rent of $166,667 is applicable through the remaining lease term ending in August 2023. In July 2020, the Company executed a fifth amendment to the facilities lease that retroactively reduced rent amounts due during the closure period, specifically a 25% reduction in rent for March 2020 and a 50% reduction in rent for each of April and May of 2020. Such reductions totaled $208,000 and such benefit was amortized over the remaining life of the lease. Corporate Office Lease through January 2025. The Company leases 4,479 square feet of office space in Las Vegas, Nevada. Annual rent is approximately $0.2 million and the term of the office lease expires in January 2025. Finance Lease Rising Star Casino Hotel Lease through October 2027 and Option to Purchase. The Company’s Indiana subsidiary, Gaming Entertainment (Indiana) LLC, leases a 104-room hotel at Rising Star Casino Resort. At any time during the lease term, the Company has the option to purchase the hotel at a price based upon the hotel’s original cost of $7.7 million, reduced by the cumulative principal payments made by the Company during the lease term. At September 30, 2021, such potential purchase price was $3.4 million. Upon expiration of the lease term in October 2027, (i) the landlord has the right to sell the hotel to the Company, and (ii) the Company has the option to purchase the hotel. In either case, the purchase price is $1 plus closing costs. The components of lease expense are as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(In thousands) |  | ​ |  | Three Months Ended |  | Nine Months Ended
​ | ​ | ​ | ​ | September 30, | ​ | September 30,
Lease Costs | ​ | Classification within Statement of Operations | ​ | 2021 |  | 2020 | ​ | 2021 |  | 2020
Operating leases: |  |  |  | ​ |  | ​ | ​ |  |  | ​ |  | ​ | ​ |
Fixed/base rent |  | Selling, General and Administrative Expenses | ​ | $ | 1,112 | ​ | $ | 1,156 | ​ | $ | 3,357 | ​ | $ | 3,478
Short-term payments | ​ | Selling, General and Administrative Expenses | ​ | ​ | 29 | ​ | ​ | — | ​ | ​ | 29 | ​ | ​ | —
Variable payments |  | Selling, General and Administrative Expenses | ​ |  | 385 | ​ |  | 219 | ​ |  | 1,254 | ​ |  | 442
Finance lease: |  |  | ​ |  |  | ​ |  | ​ | ​ |  |  | ​ |  |
Amortization of leased assets |  | Depreciation and Amortization | ​ |  | 39 | ​ |  | 39 | ​ |  | 118 | ​ |  | 118
Interest on lease liabilities |  | Interest Expense, Net | ​ |  | 38 | ​ |  | 45 | ​ |  | 122 | ​ |  | 139
Total lease costs | ​ | ​ | ​ | $ | 1,603 | ​ | $ | 1,459 | ​ | $ | 4,880 | ​ | $ | 4,177
​ ​ Leases recorded on the balance sheet consist of the following: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(In thousands) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | September 30, | ​ | December 31,
Leases |  | Balance Sheet Classification |  | 2021 | ​ | 2020
Assets |  |  |  | ​ |  | ​ | ​ |
Operating lease assets |  | Operating Lease Right-of-Use Assets, Net |  | $ | 16,619 | ​ | $ | 17,361
Finance lease assets |  | Property and Equipment, Net(1) | ​ |  | 4,762 | ​ |  | 4,879
Total lease assets |  |  | ​ | $ | 21,381 | ​ | $ | 22,240
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities |  |  | ​ |  |  | ​ |  |
Current |  |  | ​ |  |  | ​ |  |
Operating |  | Current Portion of Operating Lease Obligations | ​ | $ | 3,492 | ​ | $ | 3,283
Finance |  | Current Portion of Finance Lease Obligation | ​ |  | 508 | ​ |  | 491
Noncurrent |  |  | ​ |  | ​ | ​ |  | ​
Operating |  | Operating Lease Obligations, Net of Current Portion | ​ |  | 13,813 | ​ |  | 14,914
Finance |  | Finance Lease Obligation, Net of Current Portion | ​ |  | 2,914 | ​ |  | 3,298
Total lease liabilities |  |  | ​ | $ | 20,727 | ​ | $ | 21,986
__________
(1) | Finance lease assets are recorded net of accumulated amortization of $3.0 million and $2.8 million as of September 30, 2021 and December 31, 2020, respectively.
​ Maturities of lease liabilities as of September 30, 2021 are summarized as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
(In thousands) | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Operating |  | Financing
Years Ending December 31, | ​ | Leases | ​ | Lease(1)
2021 (excluding the nine months ended September 30, 2021) | ​ | $ | 1,234 | ​ | $ | 108
2022 | ​ |  | 4,852 | ​ |  | 652
2023 | ​ |  | 3,539 | ​ |  | 652
2024 | ​ |  | 1,663 | ​ |  | 652
2025 | ​ |  | 1,466 | ​ |  | 652
Thereafter | ​ |  | 30,105 | ​ |  | 1,195
Total future minimum lease payments | ​ |  | 42,859 | ​ |  | 3,911
Less: Amount representing interest | ​ |  | (25,554) | ​ |  | (489)
Present value of lease liabilities | ​ |  | 17,305 | ​ |  | 3,422
Less: Current lease obligations | ​ |  | (3,492) | ​ |  | (508)
Long-term lease obligations | ​ | $ | 13,813 | ​ | $ | 2,914
__________ (1)The Company’s only material finance lease is at Rising Star Casino Resort for a 104-room hotel. ​ Other information related to lease term and discount rate is as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​
Lease Term and Discount Rate | ​ | September 30, 2021 | ​ | December 31, 2020
Weighted-average remaining lease term |  |  | ​ | ​ |  | ​
Operating leases |  | 20.8 | years | ​ | 20.4 | years
Finance lease |  | 6.0 | years | ​ | 6.8 | years
Weighted-average discount rate |  |  | ​ | ​ |  | ​
Operating leases |  | 9.28 | % | ​ | 9.41 | %
Finance lease |  | 4.50 | % | ​ | 4.50 | %
​ Supplemental cash flow information related to leases is as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​
(In thousands) |  | Nine Months Ended
​ | ​ | September 30,
Cash paid for amounts included in the measurement of lease liabilities: | ​ | 2021 | ​ | 2020
Operating cash flows for operating leases | ​ | $ | 3,652 | ​ | $ | 3,250
Operating cash flows for finance lease | ​ | $ | 122 | ​ | $ | 139
Financing cash flows for finance lease | ​ | $ | 367 | ​ | $ | 369
​

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