GAMING AND LEISURE PROPERTIES, INC. Our Operations
GLPI is a self-administered and self-managed Pennsylvania REIT. The Company was formed from the 2013 tax-free spin-off of the real estate assets of Penn and was incorporated inPennsylvania onFebruary 13, 2013 , as a wholly-owned subsidiary of Penn. OnNovember 1, 2013 , Penn contributed to GLPI, through a series of internal corporate restructurings, substantially all of the assets and liabilities associated with Penn's real property interests and real estate development business, as well as the assets and liabilities of theTRS Properties and then spun-off GLPI to holders of Penn's common and preferred stock in the Spin-Off. The Company elected on itsU.S. federal income tax return for its taxable year that began onJanuary 1, 2014 to be treated as a REIT and the Company, together with an indirect wholly-owned subsidiary of the Company,GLP Holdings, Inc. , jointly elected to treat each ofGLP Holdings, Inc. ,Louisiana Casino Cruises, Inc. (d/b/aHollywood Casino Baton Rouge ) andPenn Cecil Maryland, Inc. (d/b/aHollywood Casino Perryville ) as a "taxable REIT subsidiary" effective on the first day of the first taxable year of GLPI as a REIT. In addition, during 2020, the Company andTropicana LV, LLC , a wholly owned subsidiary of the Company which holds the real estate ofTropicana Las Vegas , elected to treatTropicana LV, LLC as a "taxable REIT subsidiary". As a result of the Spin-Off, GLPI owns substantially all of Penn's former real property assets (as of the consummation of the Spin-Off) and leases back most of those assets to Penn for use by its subsidiaries, under the Penn Master Lease and owns and operates theTRS Properties through its indirect wholly-owned subsidiary,GLP Holdings, Inc. The assets and liabilities of GLPI were recorded at their respective historical carrying values at the time of the Spin-Off. GLPI's primary business consists of acquiring, financing, and owning real estate property to be leased to gaming operators in triple-net lease arrangements. As ofDecember 31, 2020 , GLPI's portfolio consisted of interests in 48 gaming and related facilities, including the TRS Segment, the real property associated with 33 gaming and related facilities operated by Penn, the real property associated with 7 gaming and related facilities operated by Caesars, the real property associated with 4 gaming and related facilities operated by Boyd and the real property associated with theCasino Queen inEast St. Louis, Illinois . These facilities, including our corporate headquarters building, are geographically diversified across 16 states and contain approximately 24.3 million square feet. As ofDecember 31, 2020 , our properties were 100% occupied. We expect to continue growing our portfolio by pursuing opportunities to acquire additional gaming facilities to lease to gaming operators under prudent terms.
Amended Pinnacle
InApril 2016 , the Company acquired substantially all of the real estate assets of Pinnacle for approximately$4.8 billion . GLPI originally leased these assets back to Pinnacle, under the PinnacleMaster Lease , the term of which expires onApril 30, 2031 , with no purchase option, followed by four remaining 5-year renewal options (exercisable by the tenant) on the same terms and conditions. OnOctober 15, 2018 , the Company completed the previously announced Penn-Pinnacle Merger to accommodate Penn's acquisition of the majority of Pinnacle's operations, pursuant to a definitive agreement and plan of merger between Penn and Pinnacle, datedDecember 17, 2017 . Concurrent with the Penn-Pinnacle Merger, the Company amended the PinnacleMaster Lease to allow for the sale of the operating assets ofAmeristar Casino Hotel Kansas City ,Ameristar Casino Resort Spa St. Charles and Belterra Casino Resort from Pinnacle to Boyd and entered into the Boyd Master Lease for these properties on terms similar to the Company's Amended PinnacleMaster Lease . The Boyd Master Lease has an initial term of 10 years (from the originalApril 2016 commencement date of the PinnacleMaster Lease and expiringApril 30, 2026 ), with no purchase option, followed by five 5-year renewal options (exercisable by the tenant) on the same terms and conditions. The Company also purchased the real estate assets ofPlainridge Park from Penn for$250.0 million , exclusive of transaction fees and taxes and added this property to the Amended PinnacleMaster Lease . The Amended PinnacleMaster Lease was assumed by Penn at the consummation of the Penn-Pinnacle Merger. The Company also entered into the Belterra Park Loan with Boyd in connection with Boyd's acquisition ofBelterra Park . InMay 2020 , the Company acquired the real estate ofBelterra Park in satisfaction of the Belterra Park Loan, subject to the Belterra Park Lease with a Boyd affiliate operating the property. The Belterra Park Lease rent terms are consistent with the Boyd Master Lease. The annual rent is comprised of a fixed component, part of which is subject to an annual escalator of up to 2% if certain rent coverage ratio thresholds are met, and a component that is based on the performance of the facilities which is adjusted, subject to certain floors, every two years to an amount equal to 4% of the average annual net revenues ofBelterra Park during the preceding two years in excess of a contractual baseline.
The Meadows Lease
The real estate assets of the Meadows are leased to Penn pursuant to the Meadows Lease. The Meadows Lease commenced onSeptember 9, 2016 and has an initial term of 10 years, with no purchase option, and the option to renew for 36 -------------------------------------------------------------------------------- Table of Contents three successive 5-year terms and one 4-year term (exercisable by the tenant) on the same terms and conditions. The Meadows Lease contains a fixed component, subject to annual escalators, and a component that is based on the performance of the facility, which is reset every two years to an amount determined by multiplying (i) 4% by (ii) the average annual net revenues of the facility for the trailing two-year period. The Meadows Lease contains an annual escalator provision for up to 5% of the base rent, if certain rent coverage ratio thresholds are met, which remains at 5% until the earlier of ten years or the year in which total rent is$31 million , at which point the escalator will be reduced to 2% annually thereafter.
Amended and Restated Caesars
OnOctober 1, 2018 , the Company closed its previously announced transaction to acquire certain real property assets from Tropicana and certain of its affiliates pursuant to the Real Estate Purchase Agreement datedApril 15, 2018 betweenTropicana andGLP Capital , which was subsequently amended onOctober 1, 2018 . Pursuant to the terms of the Amended Real Estate Purchase Agreement, the Company acquired the real estate assets ofTropicana Atlantic City , TropicanaEvansville , Tropicana Laughlin,Trop Casino Greenville and the Belle of Baton Rouge from Tropicana for an aggregate cash purchase price of$964.0 million , exclusive of transaction fees and taxes. Concurrent with the Tropicana Acquisition, Caesars acquired the operating assets of these properties from Tropicana pursuant to an Agreement and Plan of Merger datedApril 15, 2018 by and among Tropicana,GLP Capital , Caesars and a wholly-owned subsidiary of Caesars and leased the GLP Assets from the Company pursuant to the terms of the CaesarsMaster Lease . Additionally, onOctober 1, 2018 , the Company entered into the CZR loan in connection with Caesars's acquisition of Lumière Place. The CZR loan was satisfied and replaced with the Lumière Place Lease onSeptember 29, 2020 , the initial term of which expires onOctober 31, 2033 , with 4 separate renewal options of five years each, exercisable at the tenants' option. The Lumière Place Lease rent is subject to an annual escalator of up to 2% if certain rent coverage ratio thresholds are met. OnJune 15, 2020 , the Company amended and restated the CaesarsMaster Lease (as amended, the "Amended and Restated CaesarsMaster Lease ") to, (i) extend the initial term of 15 years to 20 years, with renewals of up to an additional 20 years at the option of Caesars, (ii) remove the variable rent component in its entirety commencing with the third lease year, (iii) in the third lease year increase annual land base rent to approximately$23.6 million and annual building base rent to approximately$62.1 million , (iv) provide fixed escalation percentages that delay the escalation of building base rent until the commencement of the fifth lease year with building base rent increasing annually by 1.25% in the fifth and sixth lease year, 1.75% in the seventh and eighth lease years and 2% in the ninth lease year and each lease year thereafter, (v) subject to the satisfaction of certain conditions, permit Caesars to elect to replace the TropicanaEvansville and/or Tropicana Greenville properties under the Amended and Restated CaesarsMaster Lease with one or more of Caesars Gaming Scioto Downs, The Row inReno ,Isle Casino Racing Pompano Park ,Isle Casino Hotel -Black Hawk ,Lady Luck Casino -Black Hawk ,Waterloo ,Bettendorf or Isle ofCapri Casino Boonville , provided that the aggregate value of such new property, individually or collectively, is at least equal to the value of Tropicana Evansville or Tropicana Greenville, as applicable (vi) permit Caesars to elect to sell its interest in Belle of Baton Rouge and sever it from the Amended and Restated CaesarsMaster Lease (with no change to the rent obligation to the Company), subject to the satisfaction of certain conditions, and (vii) provide certain relief under the operating, capital expenditure and financial covenants thereunder in the event of facility closures due to pandemics, governmental restrictions and certain other instances of unavoidable delay. The effectiveness of the Amended and Restated CaesarsMaster Lease was subject to the review of certain gaming regulatory agencies and the expiration of applicable gaming regulatory advance notice periods which were received onJuly 23, 2020 . OnDecember 18, 2020 , the Company and Caesars completed an Exchange Agreement with subsidiaries of Caesars in which Caesars transferred to the Company the real estate assets ofWaterloo andBettendorf in exchange for the transfer by the Company to Caesars of the real property assets of Tropicana Evansville, plus a cash payment of$5.7 million .Tropicana Las Vegas OnApril 16, 2020 , the Company and certain of its subsidiaries closed on its previously announced transaction to acquire the real property associated with theTropicana Las Vegas from Penn in exchange for rent credits of$307.5 million , which were applied against future rent obligations due under the parties' existing leases during 2020. An affiliate of Penn will continue to operate the casino and hotel business of theTropicana Las Vegas pursuant to a triple net lease with GLPI for nominal rent for the earlier of two years (subject to three one-year extensions at the Company's option) or until theTropicana Las Vegas is sold. We will conduct a sale process with respect to theTropicana Las Vegas , with Penn receiving 75% of the net proceeds above$307.5 million (plus certain taxes, expenses and costs) if a sale agreement is signed during the first 12 months following closing and 50% of net proceeds above$307.5 million (plus certain taxes, expenses and costs) if a sale agreement is signed during the subsequent 12 months following closing. Penn will not be entitled to receive any net sale proceeds if the relevant sale agreement is signed at any time after 24 months from closing. 37 -------------------------------------------------------------------------------- Table of Contents Morgantown Lease OnOctober 1, 2020 , the Company and Penn closed on their previously announced transaction whereby GLPI acquired the land under Penn's gaming facility under construction inMorgantown, Pennsylvania in exchange for$30.0 million in rent credits that were utilized by Penn in the fourth quarter of 2020. The Company is leasing the land back to an affiliate of Penn pursuant to the Morgantown Lease for an initial annual rent of$3.0 million , provided, however, that (i) on the opening date and on each anniversary thereafter the rent shall be increased by 1.5% annually (on a prorated basis for the remainder of the lease year in which the gaming facility opens) for each of the following three lease years and (ii) commencing on the fourth anniversary of the opening date and for each anniversary thereafter, (a) if the CPI increase is at least 0.5% for any lease year, the rent for such lease year shall increase by 1.25% of rent as of the immediately preceding lease year, and (b) if the CPI increase is less than 0.5% for such lease year, then the rent shall not increase for such lease year subject to escalation provisions following the opening of the property.
OnNovember 25, 2020 , the Company entered into a definitive agreement to sell the operations of ourHollywood Casino Baton Rouge toCasino Queen Holding Company Inc. ("Casino Queen ") for$28.2 million . The Company will retain ownership of all real estate assets atHollywood Casino Baton Rouge and will simultaneously enter into a master lease withCasino Queen , which will include theCasino Queen property inEast St. Louis that is currently leased by us to them and theHollywood Casino Baton Rouge facility. The initial annual cash rent will be approximately$21.4 million and the lease will have an initial term of 15 years with four 5 year renewal options exercisable by the tenant. This rental amount will be increased annually by 0.5% for the first six years. Beginning with the seventh lease year through the remainder of the lease term, if the CPI increases by at least 0.25% for any lease year then annual rent shall be increased by 1.25%, and if the CPI increase is less than 0.25% then rent will remain unchanged for such lease year.Additionally, the Company will complete the current landside development project that is in process and the rent under the master lease will be adjusted upon delivery to reflect a yield of 8.25% on GLPI's project costs. The Company will also have a right of first refusal withCasino Queen for other sale leaseback transactions up to$50 million over the next 2 years. Finally, upon the closing of the transaction, which is anticipated to occur in mid 2021, subject to regulatory approvals and customary closing conditions, GLPI will forgive theCasino Queen Loan which has been previously written off in return for a one-time cash payment of$4 million .
OnDecember 11, 2020 , Penn agreed to purchase from the Company the operations of ourHollywood Casino Perryville , located inPerryville, Maryland , for$31.1 million , with the closing of such purchase, subject to regulatory approvals, expected to occur during calendar year 2021 on a date selected by Penn with reasonable prior notice to the Company unless otherwise agreed by both parties. Upon closing, the Company will lease the real estate assets of thePerryville facility to Penn pursuant to a lease providing for initial annual rent of$7.77 million ,$5.83 million of which will be subject to escalation provisions beginning in the second lease year through the fourth lease year and shall increase by 1.50% and then to 1.25% for the remaining lease term. The escalation provisions beginning in the fifth lease year are subject to CPI being at least 0.5% for the preceding lease year. As ofDecember 31, 2020 , the majority of our earnings are the result of the rental revenues we receive from our triple-net master leases with Penn, Boyd and Caesars. Additionally, we have rental revenue from theCasino Queen property which is leased back to a third-party operator on a triple-net basis pursuant to theCasino Queen Lease . In addition to rent, the tenants are required to pay the following executory costs: (1) all facility maintenance, (2) all insurance required in connection with the leased properties and the business conducted on the leased properties, including coverage of the landlord's interests, (3) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor) and (4) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties. Additionally, in accordance with ASC 842, we record revenue for the ground lease rent paid by our tenants with an offsetting expense in land rights and ground lease expense within the Consolidated Statement of Income as we have concluded that as the lessee we are the primary obligor under the ground leases. We sublease these ground leases back to our tenants, who are responsible for payment directly to the landlord. Gaming revenue for ourTRS Properties is derived primarily from gaming on slot machines and to a lesser extent, table game and poker revenue, which is highly dependent upon the volume and spending levels of customers at ourTRS Properties . Other revenues at ourTRS Properties are derived from our dining, retail and certain other ancillary activities. 38 -------------------------------------------------------------------------------- Table of Contents Our Competitive Strengths We believe the following competitive strengths will contribute significantly to our success: Geographically Diverse Property Portfolio As ofDecember 31, 2020 , our portfolio consisted of 48 gaming and related facilities, including 45 rental properties, the TRS Segment. Our portfolio, including our corporate headquarters building, comprises approximately 24.3 million square feet and approximately 5,700 acres of land and is broadly diversified by location across 16 states. We expect that our geographic diversification will limit the effect of a decline in any one regional market on our overall performance. Financially Secure Tenants Three of the company's tenants, Penn, Caesars and Boyd, are leading, diversified, multi-jurisdictional owners and managers of gaming and pari-mutuel properties and established gaming providers with strong financial performance. All three of these tenants raised significant amounts of capital in 2020 to bolster their liquidity positions in response to COVID-19. Additionally, all of the aforementioned tenants are publicly traded companies that are subject to the informational filing requirements of the Securities Exchange Act of 1934, as amended, and are required to file periodic reports on Form 10-K and Form 10-Q and current reports on Form 8-K with theSecurities and Exchange Commission ("SEC"). Readers are directed to Penn's, Caesar's and Boyd's respective websites for further financial information on these companies. Long-Term, Triple-Net Lease Structure Our real estate properties are leased under long-term triple-net leases guaranteed by our tenants, pursuant to which the tenant is responsible for all facility maintenance, insurance required in connection with the leased properties and the business conducted on the leased properties, including coverage of the landlord's interests, taxes levied on or with respect to the leased properties (other than taxes on our income) and all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties. Resilient Regional Gaming Characteristics We believe that the recession resulting from COVID-19 pandemic has illustrated the resiliency of the regional gaming market. In spite of all our properties being forced to close duringmid-March 2020 , the Company collected all contractual rents, inclusive of rent credits, due in 2020. Furthermore, our tenants' results since they have reopened has been strong and in some cases better than prior to COVID-19, due to their increased focus on cost efficiencies and decreasing and/or eliminating lower margin amenities. Although we are unable to predict whether these results will continue, we believe that our assets should generate substantial cash flows well into the future for both ourselves and our tenants. Flexible UPREIT Structure We have the flexibility to operate through an umbrella partnership, commonly referred to as an UPREIT structure, in which substantially all of our properties and assets are held byGLP Capital or by subsidiaries ofGLP Capital . Conducting business throughGLP Capital allows us flexibility in the manner in which we structure and acquire properties. In particular, an UPREIT structure enables us to acquire additional properties from sellers in exchange for limited partnership units, which provides property owners the opportunity to defer the tax consequences that would otherwise arise from a sale of their real properties and other assets to us. As a result, this structure potentially may facilitate our acquisition of assets in a more efficient manner and may allow us to acquire assets that the owner would otherwise be unwilling to sell because of tax considerations. We believe that this flexibility will provide us an advantage in seeking future acquisitions. Experienced and Committed Management Team Our management team has extensive gaming and real estate experience.Peter M. Carlino , our chief executive officer, has more than 30 years of experience in the acquisition and development of gaming facilities and other real estate projects. Through years of public company experience, our management team also has extensive experience accessing both debt and equity capital markets to fund growth and maintain a flexible capital structure. Segment Information Consistent with how our Chief Operating Decision Maker (as such term is defined in ASC 280 - Segment Reporting) reviews and assesses our financial performance, we have two reportable segments,GLP Capital and the TRS Segment. TheGLP Capital reportable segment consists of the leased real property and represents the majority of our business. The TRS Segment consists of our operations atHollywood Casino Perryville andHollywood Casino Baton Rouge , as well as the real estate ofTropicana Las Vegas we acquired in 2020. 39
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Table of Contents Executive Summary Financial Highlights We reported total revenues and income from operations of$1,153.2 million and$809.3 million , respectively, for the year endedDecember 31, 2020 , compared to$1,153.5 million and$717.4 million , respectively, for the year endedDecember 31, 2019 . The major factors affecting our results for the year endedDecember 31, 2020 , as compared to the year endedDecember 31, 2019 , were as follows: •Total income from real estate was$1,050.2 million and$1,025.1 million for the years endedDecember 31, 2020 and 2019, respectively. Total income from real estate increased by$25.1 million for the year endedDecember 31, 2020 , as compared to the year endedDecember 31, 2019 , primarily due to favorable non-cash straight line rent adjustments on our Amended PinnacleMaster Lease ,Boyd Master Lease and Amended and Restated CaesarsMaster Lease . Additionally current year results were positively impacted by higher building base rents as the majority of our leases incurred escalators in 2019. This was partially offset by lower percentage rent from the Amended PinnacleMaster Lease andBoyd Master Lease which reset onMay 1, 2020 and the Meadows Lease which reset onOctober 1, 2020 as well as lower ground rents due to the casino closures related to COVID-19. Finally, 2020 results were negatively impacted by lower percentage rent on the Penn Master Lease due to the temporary closures ofHollywood Casino Columbus and to a lesser extent,Hollywood Casino Toledo frommid-March 2020 toJune 19, 2020 . •Net revenues for ourTRS Properties decreased by$25.4 million for the year endedDecember 31, 2020 , as compared to the prior year, due to decreased revenues at bothTRS Properties . The largest driver of the decrease resulted from the temporary closures of the properties during 2020 due to COVID-19.The TRS Properties were closed inmid-March 2020 .Hollywood Casino Baton Rouge reopened to the public onMay 18, 2020 andHollywood Casino Perryville reopened onJune 19, 2020 with various restrictions to limit capacity in accordance with regulatory requirements. •Total operating expenses decreased by$92.2 million for the year endedDecember 31, 2020 , as compared to the prior year, primarily driven by a non-cash gain on the disposition of property related to theEvansville swap transaction of$41.4 million , the$13 million loan impairment charge recorded on theCasino Queen Loan in 2019, lower land rights and ground lease expense due primarily to the acceleration of amortization of expense related to the ground lease for the closure of theResorts Casino Tunica property and lower ground rents due to the casino closures from COVID-19 and decreased expenses at bothTRS Properties during 2020 due to the temporary closures from COVID-19. Finally, depreciation expense declined due primarily to the acceleration of$10.3 million related to the closure of theResorts Casino Tunica property in 2019. •Other expenses, net decreased by$22.1 million for the year endedDecember 31, 2020 , as compared to the prior year, primarily due to lower interest expense resulting from the refinancing of long term debt.
•Net income increased by
Segment Developments
The following are recent developments that have had or are expected to have an impact on us by segment:
GLP Capital •Due to temporary casino closures that occurred during 2020 as a result of COVID-19, for our leases that contain variable rent which is reset on varying schedules depending on the lease, we would expect downward resets. In the aggregate, the portion of our cash rents that are variable represented approximately 15% of our 2020 full year cash rental income. Of that variable rent, approximately 29% resets every five years which is associated with ourPenn Master Lease andCasino Queen Lease , 41% resets every two years and 30% resets monthly which is associated with the Penn Master Lease (of which approximately 51% is subject to a floor or$22.9 million annually forHollywood Casino Toledo ). The percentage rent in the Penn Master Lease decreased by$4.0 million for the year endedDecember 31, 2020 compared to the year ended 2019 due to the temporary closures ofHollywood Casino Columbus and to a lesser extent,Hollywood Casino Toledo frommid-March 2020 toJune 19, 2020 , which was partially offset by the strong reopening performance of these properties in the third quarter of 2020 as well as the benefitHollywood Casino Toledo experienced due to the 40
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•The variable rent resets in the Amended PinnacleMaster Lease and the Boyd Master Lease reset for the two year period endedApril 30, 2020 , which resulted in a$5.0 million and a$1.4 million reduction in annual variable rent on each of these leases, respectively, which will prevail for the subsequent two year period throughApril 30, 2022 . In addition, the Meadows Lease variable rent reset occurred inOctober 2020 which lowered variable rent annually by$2.1 million . The CaesarsMaster Lease variable rent reset was scheduled to occur inOctober 2020 ; however, the variable rent component was removed in its entirety commencing with the third lease year in connection with the Amended and Restated CaesarsMaster Lease . We have no other variable resets scheduled to occur until 2022. •The fact that several wholly-owned subsidiaries of Penn lease a substantial number of our properties which account for a significant portion of our revenue, pursuant to two master leases and a single property lease.
•On
•OnOctober 1, 2020 , the Company and Penn closed on their previously announced transaction whereby GLPI acquired the land under Penn's gaming facility under construction inMorgantown, Pennsylvania in exchange for$30.0 million in rent credits that were utilized in 2020. The Company is leasing the land back to an affiliate of Penn pursuant to the Morgantown Lease for an initial annual rent of$3.0 million , provided, however, that (i) on the opening date and on each anniversary thereafter the rent shall be increased by 1.5% annually (on a prorated basis for the remainder of the lease year in which the gaming facility opens) for each of the following three lease years and (ii) commencing on the fourth anniversary of the opening date and for each anniversary thereafter, (a) if the CPI increase is at least 0.5% for any lease year, the rent for such lease year shall increase by 1.25% of rent as of the immediately preceding lease year, and (b) if the CPI increase is less than 0.5% for such lease year, then the rent shall not increase for such lease year subject to escalation provisions following the opening of the property. •In connection with the Exchange Agreement with Caesars described earlier, whereby the Company acquiredWaterloo andBettendorf to replace TropicanaEvansville under the Amended and Restated CaesarsMaster Lease , the Company recorded a non-cash gain of$41.4 million in the fourth quarter of 2020, which represented the difference between the fair value of the properties received compared to the carrying value of Tropicana Evansville and the cash payment of$5.7 million made to Caesars. •OnOctober 27, 2020 , the Company entered into a series of definitive agreements pursuant to which a subsidiary ofBally's will acquire 100% of the equity interests in the Caesars subsidiary that currently operates Tropicana Evansville and the Company will reacquire the real property assets of Tropicana Evansville from Caesars for a cash purchase price of approximately$340.0 million . In addition, the Company entered into a real estate purchase agreement withBally's pursuant to which the Company will purchase the real estate assets of theDover Downs Hotel & Casino , located inDover, Delaware which is currently owned and operated byBally's , for a cash purchase price of approximately$144.0 million . At the closing of the transactions, which is expected in mid-2021, subject to regulatory approvals, theTropicana Evansville and Dover Downs Hotel and Casino facilities will be added to theBally's Master Lease . The Company anticipates that theBally's Master Lease will have an initial term of 15 years, with no purchase option, followed by four five-year renewal options (exercisable by the tenant) on the same terms and conditions. Rent under theBally's Master Lease will be$40.0 million annually and is subject to an annual escalator of up to 2% determined in relation to the annual increase in the Consumer Price Index. OnNovember 6, 2020 , the Company issued 9.2 million common shares at$36.25 to partially finance the funding required for this transaction. 41 -------------------------------------------------------------------------------- Table of Contents TRS Segment •The Company's wholly-owned and operatedTRS Properties closed inmid-March 2020 due to the COVID-19 outbreak. Our property in Baton Rouge reopened onMay 18, 2020 and our property inPerryville, Maryland reopened onJune 19, 2020 with enhanced safety protocols and capacity restrictions. To date, both properties have performed well in spite of lower attendance levels; however we are unable to predict whether this will continue as we believe results have benefited from pent up demand, reduced competition from non-gaming leisure related activities and federal stimulus benefits.
•As previously discussed, the Company has entered into definitive agreements to
sell the operations of the
•OnApril 16, 2020 , the Company and certain of its subsidiaries acquired the real property associated with theTropicana Las Vegas from Penn. This asset has been placed in the Company's TRS Segment. An affiliate of Penn will continue to operate the casino and hotel business of theTropicana Las Vegas pursuant to a triple net lease with GLPI for nominal rent for the earlier of two years (subject to three one-year extensions at the Company's option) or until theTropicana Las Vegas is sold. The Company will conduct a sale process with respect to theTropicana Las Vegas , with Penn receiving 75% of the net proceeds above$307.5 million (plus certain taxes, expenses and costs) if a sale agreement is signed during the first 12 months following closing and 50% of net proceeds above$307.5 million (plus certain taxes, expenses and costs) if a sale agreement is signed during the subsequent 12 months following closing. Penn will not be entitled to receive any net sale proceeds if the relevant sale agreement is signed at any time after 24 months from closing. Critical Accounting Estimates We make certain judgments and use certain estimates and assumptions when applying accounting principles in the preparation of our consolidated financial statements. The nature of the estimates and assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to change. We have identified the accounting for leases, income taxes, and real estate investments as critical accounting estimates, as they are the most important to our financial statement presentation and require difficult, subjective and complex judgments. We believe the current assumptions and other considerations used to estimate amounts reflected in our consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations and, in certain situations, could have a material adverse effect on our consolidated financial condition. Leases As a REIT, the majority of our revenues are derived from rent received from our tenants under long-term triple-net leases. Currently, we have master leases with Penn, Caesars and Boyd under which we lease thirty one, six and three properties, respectively, to these tenants. We also have a long-term lease withCasino Queen and separate single property leases with Penn, Caesars and Boyd. The accounting guidance under ASC 842 is complex and requires the use of judgments and assumptions by management to determine the proper accounting treatment of a lease. We perform a lease classification test upon the entry into any new tenant lease or lease modification to determine if we will account for the lease as an operating or sales-type lease. The revenue recognition model and thus the presentation of our financial statements is significantly different under operating leases and sales-type leases. Under the operating lease model, as the lessor, the assets we own and lease to our tenants remain on our balance sheet as real estate investments and we record rental revenues on a straight-line basis over the lease term. This includes the recognition of percentage rents that are fixed and determinable at the lease inception date on a straight-line basis over the entire lease term, resulting in the recognition of deferred rental revenue on our consolidated balance sheets. Deferred rental revenue is amortized to rental revenue on a straight-line basis over the remainder of the lease term. The lease term includes the initial non-cancelable lease term and any reasonably assured renewal periods. Contingent rental income that is not fixed and determinable at lease inception is recognized only when the lessee achieves the specified target. 42 -------------------------------------------------------------------------------- Table of Contents Under the sales-type lease model, however, at lease inception we would record an investment in sales-type lease on our consolidated balance sheet rather than recording the actual assets we own. Furthermore, the cash rent we receive from tenants is not entirely recorded as rental revenue, but rather a portion is recorded as interest income and a portion is recorded as a reduction to the lease receivable. Under ASC 842, for leases with both land and building components, leases may be bifurcated between operating and sales-type leases. To determine if our real estate leases trigger full or partial sales-type lease treatment we conduct the five lease tests outlined in ASC 842 below. If a lease meets any of the five criteria below, it is accounted for as a sales-type lease. 1) Transfer of ownership - The lease transfers ownership of the underlying asset to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of a nominal fee, for example, the minimum required by statutory regulation to transfer title. 2) Bargain purchase option - The lease contains a bargain purchase option, which is a provision allowing the lessee, at its option, to purchase the leased property for a price which is sufficiently lower than the expected fair value of the property at the date the option becomes exercisable and that is reasonably certain to be exercised. 3) Lease term - The lease term is for the major part of the remaining economic life of the underlying asset. However, if the commencement date falls at or near the end of the economic life of the underlying asset, this criterion shall not be used for purposes of classifying the lease. 4) Minimum lease payments - The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset. 5) Specialized nature - The underlying asset is of such specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. Additionally, the adoption of ASC 842 requires us to record right-of-use assets and lease liabilities on balance sheet for the assets we lease from third-party landlords, including equipment and real estate. As a lessee, we utilize our own incremental borrowing rate as the discount rate utilized to determine the initial lease liability and right-of-use asset we record on balance sheet, as well as the lease's classification as an operating or finance lease, using the same tests outlined above. Although both operating and finance leases result in the same right-of-use asset and lease liability being recorded on balance sheet at lease inception, the expense profile of the two lease types differs, in that expense is straight-lined over the term of an operating lease, while the expense profile under a finance lease is front-loaded. Furthermore, expense under the operating lease model is classified simply as lease expense, whereas the finance lease model breaks the expense into the interest expense and asset amortization expense. The tests outlined above, as well as the resulting calculations, require subjective judgments, such as determining, at lease inception, the fair value of the underlying leased assets, the residual value of the assets at the end of the lease term, the likelihood a tenant will exercise all renewal options (in order to determine the lease term), the estimated remaining economic life of the leased assets, and an allocation of rental income received under our Master Leases to the underlying leased assets. A slight change in estimate or judgment can result in a materially different financial statement presentation. Income Taxes We elected on ourU.S. federal income tax return for our taxable year that began onJanuary 1, 2014 to be treated as a REIT and we, together with an indirect wholly-owned subsidiary of the Company,GLP Holdings, Inc. , jointly elected to treat each ofGLP Holdings, Inc. ,Louisiana Casino Cruises, Inc. andPenn Cecil Maryland, Inc. as a "taxable REIT subsidiary" effective on the first day of the first taxable year of GLPI as a REIT. In addition, during 2020, the Company andTropicana LV, LLC , a wholly owned subsidiary of the Company which holds the real estate ofTropicana Las Vegas , elected to treatTropicana LV, LLC as a "taxable REIT subsidiary". We intend to continue to be organized and to operate in a manner that will permit us to qualify as a REIT. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to shareholders determined without regard to the dividends paid deduction and excluding any net capital gain, and meet the various other requirements imposed by the Code relating to matters such as operating results, asset holdings, distribution levels, and diversity of stock ownership. As a REIT, we generally will not be subject to federal income tax on income that we distribute as dividends to our shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject toU.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate income tax rates, and dividends paid to our 43 -------------------------------------------------------------------------------- Table of Contents shareholders would not be deductible by us in computing taxable income. Any resulting corporate liability could be substantial and could materially and adversely affect our net income and net cash available for distribution to shareholders. Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT. It is not possible to state whether in all circumstances we would be entitled to this statutory relief. Our TRS Segment is able to engage in activities resulting in income that would not be qualifying income for a REIT. As a result, certain activities of the Company which occur within our TRS Segment are subject to federal and state income taxes. Real Estate Investments Real estate investments primarily represent land and buildings leased to the Company's tenants. Real estate investments that we received in connection with the Spin-Off were contributed to us at Penn's historical carrying amount. We record the acquisition of real estate at fair value, including acquisition and closing costs. The cost of properties developed by GLPI includes costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy. We consider the period of future benefit of the asset to determine the appropriate useful lives. Depreciation is computed using a straight-line method over the estimated useful lives of the buildings and building improvements. If we used a shorter or longer estimated useful life, it could have a material impact on our results of operations. We continually monitor events and circumstances that could indicate that the carrying amount of our real estate investments may not be recoverable or realized. The factors considered by the Company in performing these assessments include evaluating whether the tenant is current on their lease payments, the tenant's rent coverage ratio, the financial stability of the tenant and its parent company, and any other relevant factors. When indicators of potential impairment suggest that the carrying value of a real estate investment may not be recoverable, we estimate the fair value of the investment by calculating the undiscounted future cash flows from the use and eventual disposition of the investment. This amount is compared to the asset's carrying value. If we determine the carrying amount is not recoverable, we would recognize an impairment charge equivalent to the amount required to reduce the carrying value of the asset to its estimated fair value, calculated in accordance withU.S. Generally Accepted Accounting Principles ("GAAP"). We group our real estate investments together by lease, the lowest level for which identifiable cash flows are available, in evaluating impairment. In assessing the recoverability of the carrying value, we must make assumptions regarding future cash flows and other factors. Factors considered in performing this assessment include current operating results, market and other applicable trends and residual values, as well as the effect of obsolescence, demand, competition and other factors. If these estimates or the related assumptions change in the future, we may be required to record an impairment loss.
Results of Operations
The following are the most important factors and trends that contribute or may contribute to our operating performance:
•The fact that several wholly-owned subsidiaries of Penn lease a substantial number of our properties, pursuant to two master leases and two single property leases and account for a significant portion of our revenue. •The risks related to economic conditions, including uncertainty related to COVID-19 and the effect of such conditions on consumer spending for leisure and gaming activities, which may negatively impact our gaming tenants and operators and the variable rent and annual rent escalators we receive from our tenants as outlined in the long-term triple-net leases with these tenants.
•The ability to refinance our significant levels of debt at attractive terms and obtain favorable funding in connection with future business opportunities.
•The fact that the rules and regulations ofU.S. federal income taxation are constantly under review by legislators, theIRS and theU.S. Department of the Treasury . Changes to the tax laws or interpretations thereof, with or without retroactive application, could materially and adversely affect GLPI's investors or GLPI. 44
-------------------------------------------------------------------------------- Table of Contents The consolidated results of operations for the years endedDecember 31, 2020 and 2019 are summarized below: Year Ended December 31, 2020 2019 (in thousands) Total revenues$ 1,153,165 $ 1,153,473 Total operating expenses 343,891 436,050 Income from operations 809,274 717,423 Total other expenses (299,686) (321,778) Income before income taxes 509,588 395,645 Income tax expense 3,877 4,764 Net income$ 505,711 $ 390,881 In accordance with theSEC's recent amendments to modernize and simplify Regulation S-K, the Company has omitted the discussion comparing its operating results for the year endedDecember 31, 2019 to its operating results for the year endedDecember 31, 2018 from its Annual Report on Form 10-K for the year endedDecember 31, 2020 . Readers are directed to Item 7 of the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 for these disclosures.
Certain information regarding our results of operations by segment for the years
ended
Total Revenues Income (Loss) from Operations
Year Ended December 31, Year Ended December 31,
2020 2019 2020 2019
(in thousands)
GLP Capital $ 1,050,166 $ 1,025,082 $ 792,467 $ 694,215
TRS Segment 102,999 128,391 16,807 23,208
Total $ 1,153,165 $ 1,153,473 $ 809,274 $ 717,423
45
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FFO, AFFO and Adjusted EBITDA
Funds From Operations ("FFO"), Adjusted Funds From Operations ("AFFO") and
Adjusted EBITDA are non-GAAP financial measures used by the Company as
performance measures for benchmarking against the Company's peers and as
internal measures of business operating performance, which is used as a bonus
metric. The Company believes FFO, AFFO and Adjusted EBITDA provide a meaningful
perspective of the underlying operating performance of the Company's current
business. This is especially true since these measures exclude real estate
depreciation and we believe that real estate values fluctuate based on market
conditions rather than depreciating in value ratably on a straight-line basis
over time.
FFO, AFFO and Adjusted EBITDA are non-GAAP financial measures that are
considered supplemental measures for the real estate industry and a supplement
to GAAP measures. The National Association of Real Estate Investment Trusts
defines FFO as net income (computed in accordance with GAAP), excluding (gains)
or losses from sales of property and real estate depreciation. We define AFFO as
FFO excluding stock based compensation expense, the amortization of debt
issuance costs, bond premiums and original issuance discounts, other
depreciation, amortization of land rights, straight-line rent adjustments,
losses on debt extinguishment, and loan impairment charges, reduced by
maintenance capital expenditures. Finally, we define Adjusted EBITDA as net
income excluding interest, taxes on income, depreciation, (gains) or losses from
sales of property, stock based compensation expense, straight-line rent
adjustments, amortization of debt issuance costs, bond premiums and original
issuance discounts, amortization of land rights, losses on debt extinguishment,
and loan impairment charges.
FFO, AFFO and Adjusted EBITDA are not recognized terms under GAAP. These
non-GAAP financial measures: (i) do not represent cash flows from operations as
defined by GAAP; (ii) should not be considered as an alternative to net income
as a measure of operating performance or to cash flows from operating, investing
and financing activities; and (iii) are not alternatives to cash flows as a
measure of liquidity. In addition, these measures should not be viewed as an
indication of our ability to fund our cash needs, including to make cash
distributions to our shareholders, to fund capital improvements, or to make
interest payments on our indebtedness. Investors are also cautioned that FFO,
AFFO and Adjusted EBITDA, as presented, may not be comparable to similarly
titled measures reported by other real estate companies, including REITs due to
the fact that not all real estate companies use the same definitions. Our
presentation of these measures does not replace the presentation of our
financial results in accordance with GAAP.
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Table of Contents The reconciliation of the Company's net income per GAAP to FFO, AFFO, and Adjusted EBITDA for the years endedDecember 31, 2020 and 2019 is as follows: Year Ended December 31, 2020 2019 (in thousands) Net income$ 505,711 $ 390,881 (Gains) losses from dispositions of property (41,393) 92 Real estate depreciation 220,069 230,716 Funds from operations$ 684,387 $ 621,689 Straight-line rent adjustments 4,576 34,574 Other depreciation 10,904 9,719 Amortization of land rights 12,022 18,536
Amortization of debt issuance costs, bond premiums and original issuance discounts (1)
10,503 11,455
Stock based compensation 20,004 16,198
Losses on debt extinguishment 18,113 21,014
Loan impairment charges - 13,000
Capital maintenance expenditures (3,130) (3,017)
Adjusted funds from operations $ 757,379 $ 743,168
Interest, net 281,573 300,764
Income tax expense 3,877 4,764
Capital maintenance expenditures 3,130 3,017
Amortization of debt issuance costs, bond premiums and original issuance discounts (1)
(10,503) (11,455) Adjusted EBITDA$ 1,035,456 $ 1,040,258
(1) Such amortization is a non-cash component included in interest, net.
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Table of Contents The reconciliation of each segment's net income per GAAP to FFO, AFFO, and Adjusted EBITDA for the years endedDecember 31, 2020 and 2019 is as follows: GLP Capital TRS Segment Year Ended December Year Ended December 31, 31, 2020 2019 2020 2019 (in thousands) Net income (loss)$ 508,060 $ 382,184 $ (2,349) $ 8,697 (Gains) losses from dispositions of property (41,402) 8 9 84 Real estate depreciation 220,069 230,716 - - Funds from operations$ 686,727 $ 612,908 $ (2,340) $ 8,781 Straight-line rent adjustments 4,576 34,574 - - Other depreciation 1,972 1,992 8,932 7,727 Amortization of land rights 12,022 18,536 - - Amortization of debt issuance costs, bond premiums and original issuance discounts (1) 10,503 11,455 - - Stock based compensation 20,004 16,198 - - Losses on debt extinguishment 18,113 21,014 - - Loan impairment charges - 13,000 - - Capital maintenance expenditures (186) (22) (2,944) (2,995) Adjusted funds from operations$ 753,731 $ 729,655 $ 3,648 $ 13,513 Interest, net (2) 265,597 290,360 15,976 10,404 Income tax expense 697 657 3,180 4,107 Capital maintenance expenditures 186 22 2,944 2,995 Amortization of debt issuance costs, bond premiums and original issuance discounts (1) (10,503) (11,455) - - Adjusted EBITDA$ 1,009,708 $ 1,009,239 $ 25,748 $ 31,019
(1) Such amortization is a non-cash component included in interest, net.
(2) Interest expense, net for the
Net income, FFO, AFFO, and Adjusted EBITDA for ourGLP Capital segment were$508.1 million ,$686.7 million ,$753.7 million and$1,009.7 million , respectively, for the year endedDecember 31, 2020 . This compared to net income, FFO, AFFO, and Adjusted EBITDA, for ourGLP Capital segment of$382.2 million ,$612.9 million ,$729.7 million and$1,009.2 million , respectively, for the year endedDecember 31, 2019 . The increase in net income in ourGLP Capital segment was primarily driven by a$73.2 million decrease in operating expenses from a gain on the disposition of property related to theEvansville swap transaction of$41.4 million in 2020, lower land right and ground lease expense due to the acceleration of these items for the Penn closure of itsResorts Casino Tunica property in 2019 and a$13.0 million loan impairment charge related to theCasino Queen Loan in 2019. The Company also had a$27.7 million decrease in other expenses, resulting from lower interest expense due to refinancing activities and lower debt extinguishment charges, along with a$25.1 million increase in income from real estate. The increase in income from real estate in ourGLP Capital segment was primarily due to favorable non-cash straight-line rent adjustments of$30.0 million on our Amended PinnacleMaster Lease ,Boyd Master Lease and Amended and Restated CaesarsMaster Lease in accordance with ASC 842. We also experienced higher building base rents as the majority of our leases incurred escalators in 2019. This was partially offset by lower percentage rent resets that occurred onMay 1, 2020 for the Amended PinnacleMaster Lease of$3.3 million and the Boyd Master Lease of$0.9 million due primarily to the impact of the casino closures from COVID-19, lower percentage rent of$4.0 million on the Penn Master Lease due to the temporary closure ofHollywood Casino Columbus and to a lesser extent,Hollywood Casino Toledo frommid-March 2020 toJune 19, 2020 due to COVID-19, and lower percentage rent on the Meadows Lease as the variable rent reset occurred inOctober 2020 which decreased percentage rent by$0.5 million . 48 -------------------------------------------------------------------------------- Table of Contents The decrease in operating expenses in ourGLP Capital segment for the year endedDecember 31, 2020 as compared to the prior year period was primarily from a gain on the disposition of property related to theEvansville swap transaction of$41.4 million along with lower depreciation expense and land right amortization expense in our REIT segment of$24.1 million primarily from lower rent expense on the Company's long term ground leases due to the impact of COVID-19 and the acceleration of depreciation and amortization in 2019 resulting from the closing of Penn'sResorts Casino Tunica property. Additionally, there was a loan impairment charge of$13.0 million for the year endedDecember 31, 2019 related to theCasino Queen Loan . These items were partially offset by charges of$6.3 million associated with severance and stock based compensation acceleration charges for the departure of our former chief financial officer.
The decrease in other expenses, net for the year ended
The increase in FFO for ourGLP Capital segment for the year endedDecember 31, 2020 is due to the items described above, excluding gains from the disposition of property and real estate depreciation. The increase in AFFO is due to the items described above, excluding the impact of straight-line rent adjustments, loan impairment charges and the other items listed on the previous table. The net loss of$2.3 million for our TRS Segment for the year endedDecember 31, 2020 as compared to the net income of$8.7 million for the prior year is primarily related to the impact of the mandated closures of our facilities duringmid-March 2020 to May andJune 2020 due to COVID-19 along with an increase in depreciation expense related to the acquisition ofTropicana Las Vegas . Revenues Revenues for the years endedDecember 31, 2020 and 2019 were as follows (in thousands): Year Ended December 31, Percentage 2020 2019 Variance Variance Rental income$ 1,031,036 $ 996,166 $ 34,870 3.5 % Interest income from real estate loans 19,130 28,916
(9,786) (33.8) %
Total income from real estate 1,050,166 1,025,082 25,084 2.4 % Gaming, food, beverage and other 102,999 128,391 (25,392) (19.8) % Total revenues$ 1,153,165 $ 1,153,473 $ (308) - % Total income from real estate For the years endedDecember 31, 2020 and 2019, total income from real estate was$1,050.2 million and$1,025.1 million , respectively, for ourGLP Capital segment. In accordance with ASC 842, the Company records revenue for the ground lease rent paid by its tenants with an offsetting expense in land rights and ground lease expense within the consolidated statement of income as the Company has concluded that as the lessee it is the primary obligor under the ground leases. The Company subleases these ground leases back to its tenants, who are responsible for payment directly to the landlord. Total income from real estate increased$25.1 million , or 2.4%, for the year endedDecember 31, 2020 , as compared to the year endedDecember 31, 2019 . As previously discussed, this was primarily due to favorable non-cash straight line rent adjustments on our Amended PinnacleMaster Lease ,Boyd Master Lease and the Amended and Restated CaesarsMaster Lease in accordance with ASC 842. Additionally the current year was positively impacted by higher building base rents as the majority of our leases incurred escalators in 2019. This was partially offset by lower ground lease rents due to the impact of COVID-19, lower percentage rent from the Amended PinnacleMaster Lease andBoyd Master Lease which reset onMay 1, 2020 and the Meadows Lease which reset onOctober 1, 2020 . Finally, the year endedDecember 31, 2020 was negatively impacted by lower percentage rent on the Penn Master Lease due to the closures ofHollywood Casino Columbus and to a lesser extent,Hollywood Casino Toledo . The reason for the decline in interest income from real estate loans was due to the CZR loan and Belterra Park Loan both being satisfied in 2020 as the Company acquired the real estate subject to the Lumière Place Lease and theBelterra Park Lease . See Note 8 in the Notes to the Consolidated Financial Statements for further details. 49 -------------------------------------------------------------------------------- Table of Contents Details of the Company's income from real estate for the year endedDecember 31, 2020 was as follows (in thousands): Year Ended Amended PENN - December 31, Penn Master Pinnacle Caesars Boyd Master Belterra Meadows Casino Queen PENN Morgantown 2020 Lease Master Lease Master Lease Lumiere Lease Lease Lease Lease Lease Lease Total Building base rent$ 279,406 $ 227,201 $ 62,156 $
5,828
- $ 676,929
Land base rent 93,969 71,256 15,916 - 11,785 1,263 - - 750 194,939
Percentage rent 82,595 28,452 10,020 - 10,308 1,211 10,637 5,424 - 148,647
Total cash
rental income
(1) $ 455,970 $ 326,909 $ 88,092 $ 5,828 $ 97,736 $ 4,257 $ 26,448 $ 14,525 $ 750 $ 1,020,515
Straight-line
rent
adjustments 8,926 (10,555) (2,980) - (1,448) (808) 2,289 - - (4,576)
Ground rent in
revenue 2,317 5,770 5,299 - 1,519 - - - 14,905
Other rental
revenue - - - - - - 192 - - 192
Total rental
income $ 467,213 $ 322,124 $ 90,411 $ 5,828 $ 97,807 $ 3,449 $ 28,929 $ 14,525 $ 750 $ 1,031,036
Interest income
from mortgaged
real estate - - - 16,976 - 2,154 - - - 19,130
Total income
from realestate$ 467,213 $ 322,124 $ 90,411 $ 22,804 $ 97,807 $ 5,603 $ 28,929 $ 14,525 $ 750$ 1,050,166 (1) Included in cash rental income were rent credits of$337.5 million that were recognized in connection with theTropicana Las Vegas andMorgantown transactions with Penn. See Note 7 in the Notes to the Consolidated Financial Statements for additional information.
Gaming, food, beverage and other revenue
Gaming, food, beverage and other revenue for ourTRS Properties decreased by$25.4 million , or 19.8%, for the year endedDecember 31, 2020 , as compared to the year endedDecember 31, 2019 . These properties were closed inmid-March 2020 due to COVID-19.Hollywood Casino Baton Rouge reopened to the public onMay 18, 2020 andHollywood Casino Perryville reopened onJune 19, 2020 with various restrictions to limit capacity in accordance with regulatory requirements. Results since reopening have exceeded the corresponding periods in the prior years as spend per visit has increased which has more than offset lower visitation levels.
Operating Expenses
Operating expenses for the years endedDecember 31, 2020 and 2019 were as follows (in thousands): Year Ended December 31, Percentage 2020 2019 Variance Variance Gaming, food, beverage and other$ 56,698 $ 74,700 $ (18,002) (24.1) % Land rights and ground lease expense 29,041 42,438 (13,397) (31.6) % General and administrative 68,572 65,385 3,187 4.9 % Gains (losses) from disposition of properties (41,393) 92 (41,485) (45,092.4) % Depreciation 230,973 240,435 (9,462) (3.9) % Loan impairment charges - 13,000 (13,000) N/A Total operating expenses$ 343,891 $ 436,050 $ (92,159) (21.1) %
Gaming, food, beverage and other expense
Gaming, food, beverage and other expense for ourTRS Properties decreased by approximately$18.0 million , or 24.1%, for the year endedDecember 31, 2020 , as compared to the year endedDecember 31, 2019 , primarily due to the impact of COVID-19, which temporarily forced ourTRS Properties to close as previously discussed.
Land rights and ground lease expense
Land rights and ground lease expense includes the amortization of land rights and rent expense related to the Company's long-term ground leases. Land rights and ground lease expense decreased by$13.4 million , or 31.6%, for the year 50 -------------------------------------------------------------------------------- Table of Contents endedDecember 31, 2020 , as compared to the year endedDecember 31, 2019 , primarily due to the acceleration of amortization expense of$6.3 million related to the closure of Penn'sResorts Casino Tunica property in 2019 and lower ground lease rents paid by our tenants in 2020 that are based on the facilities' revenues which declined due to the impact of COVID-19. We sublease these ground leases back to our tenants, who are responsible for payment directly to the applicable landlord. These amounts are required to be recorded in both revenue and expense within the consolidated statements of income as we have concluded that as the lessee the Company is the primary obligor under the ground leases. General and administrative expense General and administrative expenses include items such as compensation costs (including stock-based compensation awards), professional services and costs associated with development activities. General and administrative expenses increased by$3.2 million , or 4.9%, for the year endedDecember 31, 2020 , as compared to the year endedDecember 31, 2019 . This is primarily attributable to the negative impact from severance and stock acceleration charges of$6.3 million , related to the departure of our former chief financial officer which were partially offset by lower payroll costs primarily attributable to the temporary closures of ourTRS Properties due to COVID-19 and lower bonus expense.
Gains and losses from dispositions of property
In connection with the Exchange Agreement with Caesars, whereby the Company acquiredWaterloo andBettendorf to replace Tropicana Evansville under the Amended and Restated CaesarsMaster Lease , the Company recorded a non-cash gain of$41.4 million in the fourth quarter of 2020 which represented the difference between the fair value of the properties received compared to the carrying value of Tropicana Evansville and the cash payment of$5.7 million .
Depreciation expense
Depreciation expense decreased by$9.5 million , or 3.9%, to$231.0 million for the year endedDecember 31, 2020 as compared to the year endedDecember 31, 2019 , primarily due to the closure of theResorts Casino Tunica property in 2019 which resulted in the acceleration of$10.3 million of depreciation expense to bring the net book value related to the building value of this property to zero.
Loan impairment charges
OnMarch 17, 2017 the Company provided theCasino Queen Loan toCQ Holding Company , to partially finance its acquisition ofLady Luck Casino inMarquette, Iowa . During 2018, the operating results ofCasino Queen declined substantially andCasino Queen defaulted under its senior credit agreement and also theCasino Queen Loan . As a result, the operations ofCasino Queen were put up for sale during the fourth quarter of 2018. AtDecember 31, 2018 , active negotiations for the sale ofCasino Queen's operations were taking place and full payment of the principal was still expected, due to the anticipation that the operations were to be sold in the near term for an amount allowing for repayment of the full$13.0 million of loan principal due to GLPI. During 2019, the operating results ofCasino Queen continued to decline, the secured debt ofCasino Queen was sold to a third-party casino operator at a discount and the Company no longer expected theCasino Queen Loan to be repaid. Therefore, the Company recorded an impairment charge of$13.0 million through the Consolidated Statement of Income for the year endedDecember 31, 2019 to reflect the write-off of theCasino Queen Loan .
Other income (expenses)
Other income (expenses) for the years endedDecember 31, 2020 and 2019 were as follows (in thousands): Year Ended December 31, Percentage 2020 2019 Variance Variance Interest expense$ (282,142) $ (301,520) $ 19,378 (6.4) % Interest income 569 756 (187) (24.7) % Losses on debt extinguishment (18,113) (21,014) 2,901 (13.8) % Total other expenses$ (299,686) $ (321,778) $ 22,092 (6.9) % 51
-------------------------------------------------------------------------------- Table of Contents Interest expense For the year endedDecember 31, 2020 , interest expense related to our fixed and variable rate borrowings was$282.1 million , as compared to$301.5 million in the year endedDecember 31, 2019 . Interest expense decreased primarily due to refinancing activities, such as the issuance of$400 million of 3.35% senior unsecured notes due 2024 and$700 million of 4.000% senior unsecured notes due 2030 during the third quarter of 2019. These proceeds were utilized to repay higher cost unsecured borrowings with near term maturities. Interest expense also benefited from the first quarter 2020 redemption of$215.2 million of 4.875% senior unsecured notes that were due inNovember 2020 and$400.0 million of 4.375% of senior unsecured notes that were due inApril 2021 , which were funded by borrowings under our revolving credit facility. Towards the end of the first quarter of 2020, we fully drew down our revolving credit facility by borrowing just over$530 million to increase liquidity levels given the near term uncertainty associated with COVID-19. We subsequently repaid all of our outstanding advances on our revolving credit facility onJune 25, 2020 , with cash on hand and the net proceeds from our 4.00%,$500 million unsecured note issuance due inJanuary 2031 and Term Loan A-2 borrowings. OnAugust 18, 2020 , we raised an additional$200 million of 4.00%, unsecured notes at a premium to par and used the proceeds to repay Term Loan A-1 borrowings. Although these latter two transactions had a negative impact on interest expense they further increased the duration and fixed rate nature of our debt profile.
Losses on debt extinguishment
In the first quarter of 2020, the Company redeemed all$215.2 million aggregate principal amount of the Company's outstanding 4.875% senior unsecured notes due inNovember 2020 and all$400 million aggregate principal amount of the Company's outstanding 4.375% senior unsecured notes due inApril 2021 , resulting in the retirement of such senior notes. The Company recorded losses on the early extinguishment of debt related to the current year retirements of$18.1 million for the year endedDecember 31, 2020 primarily for call premium charges and debt issuance write-offs. OnSeptember 12, 2019 , the Company completed a cash tender offer (the "2019 Tender Offer") to purchase its$1,000 million aggregate principal amount 4.875% Senior Unsecured Notes due 2020 (the "2020 Notes"). The Company received early tenders from the holders of approximately$782.6 million in aggregate principal of the 2020 Notes, or approximately 78% of its outstanding 2020 Notes, in connection with the 2019 Tender Offer at a price of 102.337% of the unpaid principal amount plus accrued and unpaid interest through the settlement date. Subsequent to the early tender deadline, an additional$2.2 million in aggregate principal of the 2020 Notes was tendered at a price of 99.337% of the unpaid principal amount plus accrued and unpaid interest through the settlement date, for a total redemption of$784.8 million of the 2020 Notes. The Company recorded a loss on the early extinguishment of debt related to the 2019 Tender Offer, of approximately$21.0 million , for the difference between the reacquisition price of the tendered 2020 Notes and their net carrying value.
Taxes
Our income tax expense decreased$0.9 million for the year endedDecember 31, 2020 as compared to the year endedDecember 31, 2019 . During the year endedDecember 31, 2020 , we had income tax expense of approximately$3.9 million , compared to income tax expense of$4.8 million during the year endedDecember 31, 2019 . Our income tax expense is primarily driven from the operations of the TRS Segment, which are taxed at the corporate rate. Our effective tax rate (income taxes as a percentage of income before income taxes) was 0.8% and 1.2% for the years endedDecember 31, 2020 and 2019, respectively.
Liquidity and Capital Resources
Our primary sources of liquidity and capital resources are cash flow from operations, borrowings from banks, and proceeds from the issuance of debt and equity securities.
Net cash provided by operating activities was$428.1 million and$750.3 million during the years endedDecember 31, 2020 and 2019, respectively. The decrease in net cash provided by operating activities of$322.2 million for the year endedDecember 31, 2020 as compared to the year endedDecember 31, 2019 was primarily due to a decrease in cash receipts from tenants and customers of$361.6 million , partially offset by$21.9 million and$13.4 million decreases in cash paid for operating expenses and interest, respectively. The decrease in cash receipts collected from our tenants and customers for the year endedDecember 31, 2020 as compared to the corresponding period in the prior year was primarily due to the recognition of$337.5 million in non-cash rent recognized in connection with theTropicana Las Vegas andMorgantown transactions and the impact of COVID-19, which forced ourTRS Properties to temporarily close inmid-March 2020 until May and June of 2020. The reason for the decline in cash paid for operating expenses is primarily attributable to the temporary closures of our TRS properties. 52
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Investing activities used net cash of$9.5 million and$2.8 million during the years endedDecember 31, 2020 and 2019, respectively. Net cash used in investing activities during the year endedDecember 31, 2020 primarily consisted of capital expenditures of$3.1 million and$5.9 million for the acquisition of real estate assets primarily relating to theEvansville swap transaction. Net cash used in investing activities during the year endedDecember 31, 2019 primarily consisted of capital expenditures of$3.0 million , partially offset by proceeds from sales of property and equipment of$0.2 million . Financing activities provided net cash of$63.2 million during the year endedDecember 31, 2020 and used net cash of$746.4 million during the year endedDecember 31, 2019 . Net cash provided by financing activities for the year endedDecember 31, 2020 was driven by$2,076.4 million of proceeds from the issuance of long-term debt and$320.9 million of net proceeds from the issuance of common stock. During the year endedDecember 31, 2020 , we issued approximately 9.2 million shares of our common stock in a primary equity offering and approximately 0.1 million shares of common stock through our ATM. This was partially offset by repayments of long-term debt of$2,060.9 million , dividend payments of$230.5 million ,$15.7 million of premium and related costs paid on the tender of senior unsecured notes, taxes paid related to shares withheld for tax purposes on restricted stock award vestings of$15.3 million and financing costs of$11.6 million . Net cash used in financing activities for the year endedDecember 31, 2019 was driven by repayments of long-term debt of$1,477.9 million , dividend payments of$589.1 million ,$18.9 million of premium and related costs paid on the tender of senior unsecured notes, taxes paid related to shares withheld for tax purposes on restricted stock award vestings, net of stock option exercises of$9.1 million and financing costs of$10.0 million , partially offset by$1,358.9 million of proceeds from the issuance of long-term debt. During the year endedDecember 31, 2019 , the Company issued$1,100.0 million par value in new senior unsecured notes, completed a cash tender for a portion of our 2020 Notes, partially repaid borrowings under our Term Loan A-1 and revolving credit facilities and launched a$600 million ATM Program.
Capital Expenditures
Capital expenditures are accounted for as either capital project or capital maintenance (replacement) expenditures. Capital project expenditures are for fixed asset additions that expand an existing facility or create a new facility. The cost of properties developed by the Company include costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until the project is substantially complete and available for occupancy. Capital maintenance expenditures are expenditures to replace existing fixed assets with a useful life greater than one year that are obsolete, worn out or no longer cost effective to repair. During the years endedDecember 31, 2020 and 2019 we spent approximately$3.1 million and$3.0 million respectively, for capital maintenance expenditures. The majority of the capital maintenance expenditures were for slot machines and slot machine equipment at ourTRS Properties . Our tenants are responsible for capital maintenance expenditures at our leased properties.
Debt
Senior Unsecured Credit Facility
Prior toJune 25, 2020 , the Company's senior unsecured credit facility (the "Credit Facility"), consisted of a$1,175 million revolving credit facility (the "Revolver") with a maturity date ofMay 21, 2023 , and a$449 million Term Loan A-1 facility with a maturity date ofApril 28, 2021 . The Company fully drew down on its Revolver in the first quarter of 2020 to increase its liquidity position and repay certain senior unsecured notes as described below. OnJune 25, 2020 , the Company entered into an amendment to the Credit Facility (as amended, the "Amended Credit Facility" which extended the maturity date of approximately$224 million of outstanding Term Loan A-1 facility borrowings toMay 21, 2023 , which term loans are now classified as a new tranche of term loans (Term Loans A-2). Additionally, the Company borrowed incremental Term Loans A-2 totaling$200 million . Furthermore, onJune 25, 2020 , the Company also closed on an offering of$500 million of 4.00% unsecured senior notes due inJanuary 2031 priced at a slight discount to par. The Company utilized the proceeds from these two financings along with cash on hand to repay all outstanding obligations under its Revolver. OnAugust 18, 2020 , the Company borrowed an additional$200 million of 4.00% unsecured senior notes due inJanuary 2031 priced at a premium to par. The Company utilized the net proceeds from this additional borrowing to repay indebtedness under the Term Loan A-1 facility.
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2020, the Company was contingently obligated under letters of credit issued
pursuant to the Amended Credit Facility with face amounts aggregating
approximately $0.4 million , resulting in $1,174.6 million of available borrowing
capacity under the Revolver.
The interest rates payable on the loans are, at the Company's option, equal to
either a LIBOR rate or a base rate plus an applicable margin, which ranges from
1.0% to 2.0% per annum for LIBOR loans and 0.0% to 1.0% per annum for base rate
loans, in each case, depending on the credit ratings assigned to the Amended
Credit Facility. At December 31, 2020 , the applicable margin was 1.50% for LIBOR
loans and 0.50% for base rate loans. In addition, the Company is required to pay
a commitment fee on the unused portion of the commitments under the Revolver at
a rate that ranges from 0.15% to 0.35% per annum, depending on the credit
ratings assigned to the Amended Credit Facility. At December 31, 2020 , the
commitment fee rate was 0.25%. The Company is not required to repay any loans
under the Amended Credit Facility prior to maturity and may prepay all or any
portion of the loans under the Amended Credit Facility prior to maturity without
premium or penalty, subject to reimbursement of any LIBOR breakage costs of the
lenders. The Company's wholly owned subsidiary, GLP Capital is the primary
obligor under the Amended Credit Facility, which is guaranteed by GLPI.
The Amended Credit Facility contains customary covenants that, among other
things, restrict, subject to certain exceptions, the ability of GLPI and its
subsidiaries to grant liens on their assets, incur indebtedness, sell assets,
make investments, engage in acquisitions, mergers or consolidations or pay
certain dividends and other restricted payments. The Amended Credit Facility
contains the following financial covenants, which are measured quarterly on a
trailing four-quarter basis: a maximum total debt to total asset value ratio, a
maximum senior secured debt to total asset value ratio, a maximum ratio of
certain recourse debt to unencumbered asset value and a minimum fixed charge
coverage ratio. In addition, GLPI is required to maintain a minimum tangible net
worth and its status as a REIT. GLPI is permitted to pay dividends to its
shareholders as may be required in order to maintain REIT status, subject to the
absence of payment or bankruptcy defaults. GLPI is also permitted to make other
dividends and distributions subject to pro forma compliance with the financial
covenants and the absence of defaults. The Amended Credit Facility also contains
certain customary affirmative covenants and events of default, including the
occurrence of a change of control and termination of the Penn Master Lease
(subject to certain replacement rights). The occurrence and continuance of an
event of default under the Amended Credit Facility will enable the lenders under
the Amended Credit Facility to accelerate the loans and terminate the
commitments thereunder. At December 31, 2020 , the Company was in compliance with
all required financial covenants under the Amended Credit Facility.
Senior Unsecured Notes
At
In the first quarter of 2020, the Company redeemed all$215.2 million aggregate principal amount of the Company's outstanding 4.875% senior unsecured notes due inNovember 2020 and all$400 million aggregate principal amount of the Company's outstanding 4.375% senior unsecured notes due inApril 2021 , incurring a loss on the early extinguishment of debt related to the redemption of$17.3 million , primarily for call premium charges and debt issuance write-offs. OnJune 25, 2020 , the Company issued$500 million of 4.00% senior unsecured notes dueJanuary 2031 at an issue price equal to 98.827% of the principal amount to repay indebtedness under its Revolver. OnAugust 18, 2020 the Company issued an additional$200 million of 4.00% senior unsecured notes dueJanuary 2031 at an issue price equal to 103.824% of the principal amount to repay Term Loan A-1 indebtedness, incurring a loss on the early extinguishment of debt of$0.8 million , related to debt issuance write-offs. These bond offerings have extended the maturities of our long-term debt. OnAugust 29, 2019 , the Company issued$400 million of 3.35% Senior Unsecured Notes maturing onSeptember 1, 2024 at an issue price equal to 99.899% of the principal amount (the "2024 Notes") and$700 million of 4.00% Senior Unsecured Notes maturing onJanuary 15, 2030 at an issue price equal to 99.751% of the principal amount (the "2030 Notes"). Interest on the 2024 Notes is payable semi-annually onMarch 1 andSeptember 1 of each year, commencing onMarch 1, 2020 . Interest on the 2030 Notes is payable semi-annually onJanuary 15 andJuly 15 of each year, commencing onJanuary 15, 2020 . The net proceeds from the sale of the 2024 Notes and 2030 Notes were used to (i) finance the Company's cash tender offer to purchase its 4.875% Senior Unsecured Notes due 2020 (described below) (ii) repay outstanding borrowings under the Company's revolving credit facility and (iii) repay a portion of the outstanding borrowings under the Company's Term Loan A-1 facility. OnSeptember 12, 2019 , the Company completed a cash tender offer (the "2019 Tender Offer") to purchase its$1,000 million aggregate principal amount 4.875% Senior Unsecured Notes due 2020 (the "2020 Notes"). The Company received early tenders from the holders of approximately$782.6 million in aggregate principal of the 2020 Notes, or approximately 78% of its 54 -------------------------------------------------------------------------------- Table of Contents outstanding 2020 Notes, in connection with the 2019 Tender Offer at a price of 102.337% of the unpaid principal amount plus accrued and unpaid interest through the settlement date. Subsequent to the early tender deadline, an additional$2.2 million in aggregate principal of the 2020 Notes was tendered at a price of 99.337% of the unpaid principal amount plus accrued and unpaid interest through the settlement date, for a total redemption of$784.8 million of the 2020 Notes. The Company recorded a loss on the early extinguishment of debt related to the 2019 Tender Offer, of approximately$21.0 million , for the difference between the reacquisition price of the tendered 2020 Notes and their net carrying value. The Company may redeem the Senior Notes of any series at any time, and from time to time, at a redemption price of 100% of the principal amount of the Senior Notes redeemed, plus a "make-whole" redemption premium described in the indenture governing the Senior Notes, together with accrued and unpaid interest to, but not including, the redemption date, except that if Senior Notes of a series are redeemed 90 or fewer days prior to their maturity, the redemption price will be 100% of the principal amount of the Senior Notes redeemed, together with accrued and unpaid interest to, but not including, the redemption date. If GLPI experiences a change of control accompanied by a decline in the credit rating of the Senior Notes of a particular series, the Company will be required to give holders of the Senior Notes of such series the opportunity to sell their Senior Notes of such series at a price equal to 101% of the principal amount of the Senior Notes of such series, together with accrued and unpaid interest to, but not including, the repurchase date. The Senior Notes also are subject to mandatory redemption requirements imposed by gaming laws and regulations. The Senior Notes were issued byGLP Capital, L.P. andGLP Financing II, Inc. (the "Issuers"), two wholly-owned subsidiaries of GLPI, and are guaranteed on a senior unsecured basis by GLPI. The guarantees of GLPI are full and unconditional. The Senior Notes are the Issuers' senior unsecured obligations and rank pari passu in right of payment with all of the Issuers' senior indebtedness, including the Credit Facility, and senior in right of payment to all of the Issuers' subordinated indebtedness, without giving effect to collateral arrangements. The Senior Notes contain covenants limiting the Company's ability to: incur additional debt and use its assets to secure debt; merge or consolidate with another company; and make certain amendments to the Penn Master Lease. The Senior Notes also require the Company to maintain a specified ratio of unencumbered assets to unsecured debt. These covenants are subject to a number of important and significant limitations, qualifications and exceptions.
At
Finance Lease Liability
The Company assumed the finance lease obligations related to certain assets at itsAurora, Illinois property. GLPI recorded the asset and liability associated with the finance lease on its consolidated balance sheet. The original term of the finance lease is 30 years and it will terminate in 2026. 55
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Summarized financial information for Subsidiary Issuers and Parent Guarantor
As of December 31, 2020 As of December 31, 2019
Real estate investments, net $ 2,720,767 $ 2,514,806
Real estate loans - 246,000
Right-of-use assets and land rights, net 121,866 181,593
Cash and cash equivalents 480,066 4,281
Long term debt, net of unamortized debt
issuance costs, bond premiums and
original issuance discounts 5,754,689 5,737,962
Accrued interest 72,285 60,695
Lease liabilities 58,654 89,856
Deferred rental revenue 265,891 271,837
For the year ended December For the year ended December
31, 2020 31, 2019
Revenues $ 580,428 $ 575,451
Income from operations 446,708 384,170
Interest expense (282,142) (301,520)
Net income 146,323 61,734
The financial information presented above is that of the subsidiary issuers and
parent guarantor and the financial information of non-issuer subsidiaries has
been excluded. The financial information of subsidiary issuers and the parent
guarantor has been presented on a combined basis; however, the only asset on the
parent guarantor balance sheet is its investment in subsidiaries which is not
included in the presentation above in accordance with the disclosure
requirements.
We had no off-balance sheet arrangements at
Distribution Requirements
We generally must distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, in order to qualify to be taxed as a REIT (assuming that certain other requirements are also satisfied) so thatU.S. federal corporate income tax does not apply to earnings that we distribute. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT but distribute less than 100% of our REIT taxable income, determined without regard to the dividends paid deduction and including any net capital gains, we will be subject toU.S. federal corporate income tax on our undistributed net taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our shareholders in a calendar year is less than a minimum amount specified underU.S. federal income tax laws. We intend to make distributions to our shareholders to comply with the REIT requirements of the Code. While the Company's Board of Directors declared a cash dividend of$0.70 for the first quarter of 2020, quarterly dividends of$0.60 per share on the Company's common stock were declared for both the second, third and fourth quarters. These dividends consisted of a combination of cash and shares of the Company's common stock. The cash component of the dividend (other than cash paid in lieu of fractional shares) did not exceed 20% in the aggregate, or$0.12 per share, with the balance, or$0.48 per share, payable in shares of the Company's common stock. This quarterly dividend level reflected the impact of the COVID-19 closures on the Company's business.
LIBOR Transition
The majority of our debt is at fixed rates and our exposure to variable interest
rates is currently limited to our revolving credit facility and our Term Loan
A-2. Both of these debt instruments are indexed to LIBOR which is expected to be
phased out during late 2021 through mid-2023. The discontinuance of LIBOR would
affect our interest expense and earnings. The borrowings under our Amended
Credit Facility will be subject to the expected LIBOR transition. LIBOR is
currently expected
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Outlook
Based on our current level of operations and anticipated earnings, we believe that cash generated from operations and cash on hand, together with amounts available under our Amended Credit Facility, will be adequate to meet our anticipated debt service requirements, capital expenditures, working capital needs and dividend requirements. During 2020, we refinanced our near term debt obligations and as such have no significant obligations coming due until 2023 and we issued common shares in advance of the planned 2021 closing of theBally's transaction. We also announced a project to move ourHollywood Casino Baton Rouge property landside in early 2022. OnDecember 15, 2020 , we announced that Penn had exercised its option to acquire the gaming operations atHollywood Casino Perryville for$31.1 million and that we entered into an agreement to sell the gaming operations ofHollywood Casino Baton Rouge for$28.2 million toCasino Queen . The Company will retain ownership of the real estate assets atHollywood Casino Baton Rouge and will simultaneously enter into theCasino Queen Master Lease . Rent under theCasino Queen Master Lease will be adjusted upon completion of the project to reflect a yield of 8.25% on the Company's project costs. Both transactions are expected to close in the second half of 2021, subject to regulatory approvals and other customary closing conditions. In addition, we expect the majority of our future growth to come from acquisitions of gaming and other properties to lease to third parties. If we consummate significant acquisitions in the future, our cash requirements may increase significantly and we would likely need to raise additional proceeds through a combination of either common equity (including under our ATM Program) and/or debt offerings. Our future operating performance and our ability to service or refinance our debt will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. See "Risk Factors-Risks Related to Our Capital Structure" of this Annual Report on Form 10-K for a discussion of the risk related to our capital structure.
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