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 ofLouisiana Casino Cruises, Inc. (d/b/aHollywood Casino Baton Rouge ) andPenn Cecil Maryland, Inc. (d/b/aHollywood Casino Perryville ) (which are referred to herein as the "TRS Properties ") and then spun-off GLPI to holders of Penn's common and preferred stock in a tax-free distribution (the "Spin-Off"). In addition, during 2020, the Company andTropicana LV, LLC , a wholly owned subsidiary of the Company which holds the real estate of theTropicana Las Vegas Casino Hotel Resort ("TropicanaLas Vegas "), elected to treatTropicana LV, LLC as a "taxable REIT subsidiary," which together with theTRS Properties andGLP Holdings, Inc. is the Company's TRS segment (the "TRS Segment"). In connection with the Spin-Off, Penn allocated its accumulated earnings and profits (as determined forU.S. federal income tax purposes) for periods prior to the consummation of the Spin-Off between Penn and GLPI. In connection with its election to be taxed as a REIT forU.S. federal income tax purposes for the year endedDecember 31, 2014 , GLPI declared a special dividend to its shareholders to distribute any accumulated earnings and profits relating to the real property assets and attributable to any pre-REIT years, including any earnings and profits allocated to GLPI in connection with the Spin-Off, to comply with certain REIT qualification requirements. 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 ofJune 30, 2021 , GLPI's portfolio consisted of interests in 50 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 Entertainment Corporation ("Caesars"), the real property associated with 4 gaming and related facilities operated by Boyd Gaming Corporation ("Boyd"), the real property associated with 2 gaming and related facilities operated byBally's Corporation ("Bally's ) and the real property associated with theCasino Queen Holding Company Inc. ("Casino Queen ") inEast St. Louis, Illinois . These facilities, including our corporate headquarters building, are geographically diversified across 17 states and contain approximately 25.3 million square feet. As ofJune 30, 2021 , 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.
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 a unitary master lease (the "Penn Master Lease"). The Penn Master Lease is a triple-net operating lease, the current term of which expiresOctober 31, 2033 , with no purchase option, followed by three remaining 5-year renewal options (exercisable by the tenant) on the same terms and conditions. GLPI leases theCasino Queen property inEast St. Louis back to its operators on a triple-net basis on terms similar to those in the Penn Master Lease (the "Casino Queen Lease ").
Amended Pinnacle
InApril 2016 , the Company acquired substantially all of the real estate assets ofPinnacle Entertainment Inc. ("Pinnacle") for approximately$4.8 billion . GLPI originally leased these assets back to Pinnacle, under a unitary triple-net 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 (the "PinnacleMaster Lease "). OnOctober 15, 2018 , the Company completed the previously announced transactions with Penn, Pinnacle and Boyd 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 (the "Penn-Pinnacle Merger"). 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 (the "Amended PinnacleMaster Lease ") and entered into a new unitary triple-net master lease agreement with Boyd (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 Casino ("Plainridge Park") from Penn for$250.0 million , exclusive of transaction fees and 29 -------------------------------------------------------------------------------- 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 a mortgage loan agreement with Boyd in connection with Boyd's acquisition ofBelterra Park Gaming & Entertainment ("Belterra Park") whereby the Company loaned Boyd$57.7 million (the "Belterra Park Loan"). InMay 2020 , the Company acquired the real estate of Belterra Park in satisfaction of the Belterra Park Loan, subject to a long-term lease (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 of Belterra Park during the preceding two years in excess of a contractual baseline.
The Meadows Lease
The real estate assets of the Meadows Racetrack and Casino are leased to Penn pursuant to single property triple-net lease (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 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 fromTropicana Entertainment Inc. ("Tropicana") and certain of its affiliates pursuant to a Purchase and Sale Agreement datedApril 15, 2018 between Tropicana andGLP Capital L.P , ("GLP Capital "), the operating partnership of GLPI, which was subsequently amended onOctober 1, 2018 (as amended, the "Amended Real Estate Purchase Agreement"). 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 (the "GLP Assets") from Tropicana for an aggregate cash purchase price of$964.0 million , exclusive of transaction fees and taxes (the "Tropicana Acquisition"). Concurrent with the Tropicana Acquisition,Eldorado Resorts, Inc. (now doing business as 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 a new unitary triple-net master lease with an initial term of 15 years, with no purchase option, followed by four successive 5-year renewal periods (exercisable by the tenant) on the same terms and conditions (the "CaesarsMaster Lease "). 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 Tropicana Evansville and/or Tropicana Greenville properties under the Amended and Restated CaesarsMaster Lease with one or more of Caesars GamingScioto Downs , The Row inReno ,Isle Casino Racing Pompano Park ,Isle Casino Hotel -Black Hawk ,Lady Luck Casino -Black Hawk ,Isle Casino Waterloo ("Waterloo"),Isle Casino Bettendorf ("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 (the "Exchange Agreement") with subsidiaries of Caesars in which Caesars transferred to the Company the real estate assets of Waterloo and Bettendorf in exchange for the transfer by the Company to Caesars of the real property assets of TropicanaEvansville , plus a cash payment of$5.7 million . This resulted in a non-cash gain of$41.4 million in the fourth quarter of 2020, which represented the difference 30 -------------------------------------------------------------------------------- between the fair value of the properties received compared to the carrying value of Tropicana Evansville and the cash payment made. In connection with the Exchange Agreement, the annual building base rent was increased to$62.5 million and the annual land component was increased to$23.7 million .
Lumière Place Lease
OnOctober 1, 2018 , the Company entered into a loan agreement with Caesars in connection with Caesars's acquisition of LumièrePlace Casino ("Lumière Place"), whereby the Company loaned Caesars$246.0 million (the "CZR loan"). The CZR loan bore interest at a rate equal to (i) 9.09% untilOctober 1, 2019 and (ii) 9.27% until its maturity. On the one-year anniversary of the CZR loan, the mortgage evidenced by a deed of trust on the Lumière Place property terminated and the loan became unsecured. OnJune 24, 2020 , the Company received approval from theMissouri Gaming Commission to own the Lumière Place property in satisfaction of the CZR loan. OnSeptember 29, 2020 , the transaction closed and we entered into a new triple net lease with Caesars (the "Lumière Place Lease") the initial term of which expires onOctober 31, 2033 , with 4 separate renewal options of five years each, exercisable at the tenant's option. The Lumière Place Lease's rent is subject to an annual escalator of up to 2% if certain rent coverage ratio thresholds are met.Bally's Master Lease OnJune 3, 2021 , the Company completed its previously announced transaction pursuant to which a subsidiary ofBally's acquired 100% of the equity interests in the Caesars subsidiary that currently operates Tropicana Evansville and the Company reacquired the real property assets of Tropicana Evansville from Caesars for a cash purchase price of approximately$340.0 million . In addition, the Company purchased the real estate assets ofDover Downs Hotel & Casino fromBally's for a cash purchase price of approximately$144.0 million . The real estate assets of these two facilities were added to a new master lease (the "Bally's Master Lease ") which has 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 is$40 million annually and is subject to an annual escalator of up to 2% determined in relation to the annual increase in Consumer Price Index ("CPI").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. OnApril 13, 2021 ,Bally's agreed to acquire the Company's non-land real estate assets and Penn's outstanding equity interests inTropicana Las Vegas for$150.0 million . The Company will retain ownership of the land and concurrently enter into a 50 year ground lease with an initial annual rent of$10.5 million . The ground lease will be supported by aBally's corporate guarantee and cross-defaulted with theBally's Master Lease . This transaction is expected to close in early 2022. 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 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 (the "Morgantown Lease").
OnNovember 25, 2020 , the Company entered into a definitive agreement to sell the operations of ourHollywood Casino Baton Rouge toCasino Queen for$28.2 million (the "HCBR transaction"). The Company will retain ownership of all 31 -------------------------------------------------------------------------------- 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 the second half of 2021, subject to regulatory approvals and customary closing conditions, GLPI will forgive the unsecured$13.0 million , 5.5 year term loan made toCQ Holding Company, Inc. , an affiliate ofCasino Queen , which has been previously written off in return for a one-time cash payment of$4 million .Hollywood Casino Perryville OnDecember 15, 2020 , the Company announced that Penn exercised its option to purchase from the Company the operations of ourHollywood Casino Perryville , located inPerryville, Maryland , for$31.1 million . The transaction closed onJuly 1, 2021 and the real estate assets of theHollywood Casino Perryville are being leased to Penn for an 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 increasing by 1.50% during such period and then increasing by 1.25% for the remaining lease term. The escalation provisions beginning in the fifth lease year are subject to the CPI being at least 0.5% for the preceding lease year. As ofJune 30, 2021 , 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 Accounting Standards Codification ("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 Condensed 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. Recent Developments and Business Outlook COVID-19 The spread of the novel coronavirus (COVID-19) and the recent developments surrounding the global pandemic had material negative impacts on the global andUnited States economies that resulted in an unprecedented drop in economic activity in 2020. Inmid-March 2020 , many businesses inthe United States were forced to close by state governments in an effort to limit the spread of COVID-19, which resulted in record unemployment claims. As theU.S. economy began to reopen in the second quarter of 2020, the unemployment rate, which was approximately 3.5% at the beginning of 2020, declined from itsApril 2020 peak of 14.7% and steadily improved to its current rate of approximately 5.9%. Additional impacts and recent developments include: •During the initial stages of the COVID-19 outbreak, federal, state and local government officials took steps to require various non-essential businesses to close to slow the spread of COVID-19. Inmid-March 2020 , all casinos closed across the country, which in turn had a significant negative impact on our tenants' and our own operating results. Although the majority of casinos have reopened throughout the country, it is possible that individual jurisdictions may elect to close them again (which has occurred in certain instances) to mitigate the spread of COVID-19. 32 -------------------------------------------------------------------------------- •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 as results for the first half of 2021 have exceeded comparable 2019 levels (prior to the COVID-19 outbreak). Current year results have benefited from pent up demand, reduced competition from non-gaming leisure related activities and federal stimulus. •OnOctober 27, 2020 , the Company entered into a series of definitive agreements pursuant to which a subsidiary ofBally's acquired 100% of the equity interests in the Caesars subsidiary that operated Tropicana Evansville and the Company reacquired 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 purchased the real estate assets of theDover Downs Hotel & Casino , located inDover, Delaware , which is currently operated byBally's , for a cash purchase price of approximately$144.0 million . OnNovember 6, 2020 , the Company issued 9.2 million common shares at$36.25 to partially finance the funding required for this transaction. These transactions closed onJune 3, 2021 , and the real estate assets are being leased pursuant to theBally's Master Lease . TheBally's Master Lease has 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. The initial rent under theBally's Master Lease is$40.0 million annually, subject to escalations tied to the CPI. If the CPI increase is at least 0.5% for any lease year, then the rent under theBally's Master Lease shall increase by the greater of 1% of the rent as of the immediately preceding lease year or the actual CPI increase for such lease year, capped at 2%. If the CPI is less than 0.5% for such lease year, then the rent shall not increase for such lease year. •OnApril 13, 2021 , the Company announced that it entered into a binding term sheet withBally's to acquire the real estate ofBally's casino property inBlack Hawk, CO andRock Island, IL which it recently acquired inJune 2021 . Total consideration for the acquisition is$150 million . The parties expect to add the properties to theBally's Master Lease , for incremental rent of$12.0 million . Normalized rent coverage on the assets is expected to be 2.25x in the first calendar year post-acquisition. The acquisitions of the real estate assets ofBally's properties inRock Island andBlack Hawk are expected to close in early 2022. •In addition,Bally's has granted GLPI a right of first refusal to fund the real property acquisition or development project costs associated with any and all potential future transactions inMichigan ,Maryland ,New York andVirginia through one or more sale-leaseback or similar transactions for a term of seven years. •OnApril 13, 2021 ,Bally's also agreed to acquire both GLPI's non-land real estate assets and Penn's outstanding equity interests inTropicana Las Vegas Hotel and Casino, Inc. for an aggregate cash acquisition price of$150 million . GLPI will retain ownership of the land and will concurrently enter into a 50-year ground lease with initial annual rent of$10.5 million . The ground lease will be supported by aBally's corporate guarantee and cross-defaulted with theBally's Master Lease . This transaction is expected to close in early 2022. •Both GLPI andBally's have committed to a structure in which GLPI has the potential to acquire additional assets in sale-leaseback transactions to the extentBally's elects to utilize GLPI's capital as a funding source for their proposed acquisition of Gamesys. The$500 million commitment providesBally's an alternative financing commitment that in GLPI's sole discretion, may be funded in the form of equity, additional prepaid sale-leaseback transactions or secured loans. However, onJuly 26, 2021 ,Bally's announced that as a result of better than expected operating performance at its land-based retail casinos and interactive businesses, it does not plan to draw on the previously disclosed commitment to fund the Gamesys acquisition. •OnJuly 1, 2021 , the Company completed its sale of the operations ofHollywood Casino Perryville , located inPerryville, Maryland , to Penn for$31.1 million . The Company is leasing the real estate of thePerryville facility to Penn pursuant to a lease providing for initial annual rent on the retained real estate 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 by 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.
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 33 --------------------------------------------------------------------------------
Segment consists of our operations at
Executive Summary Financial Highlights We reported total revenues and income from operations of$317.8 million and$212.1 million , respectively, for the three months endedJune 30, 2021 , compared to$262.0 million and$180.7 million , respectively, for the corresponding period in the prior year.
The major factors affecting our results for the three and six months ended
•Total income from real estate was$274.1 million and$537.9 million for the three and six months endedJune 30, 2021 , and$252.0 million and$508.7 million for the three and six months endedJune 30, 2020 , respectively. Total income from real estate increased by$22.1 million and$29.2 million for the three and six months endedJune 30, 2021 , as compared to the corresponding period in the prior year. This was primarily the result of higher percentage rent on ourPenn Master Lease of$11.1 million and$14.3 million for the three month and six month periods endedJune 30, 2021 due to strong results atHollywood Casino Columbus andHollywood Casino Toledo in the current year coupled with the negative impact from the temporary closures from COVID-19 in the prior year. We also recognized cash rental income of$3.1 million from ourBally's Master Lease that became effective onJune 3, 2021 . The Company also recognized higher rents of$3.4 million and$1.2 million on theCasino Queen Lease for the three month and six month periods endedJune 30, 2021 due to the negative impact from COVID-19 closures in the prior year that resulted in rent deferrals in the second quarter of 2020 that were subsequently collected in the fourth quarter of 2020. Additionally, in accordance with the rent deferral agreement that was signed in 2020 withCasino Queen ,$2.1 million of rent was deferred due to the property's temporary closure in the first quarter of 2021. GLPI anticipates this amount will be collected at the closing of the HCBR transaction. Also benefiting current year results was the impact of our Morgantown Lease that became effective onOctober 1, 2020 , which added$0.75 million and$1.5 million in rent during the three and six month periods endedJune 30, 2021 , as well as year over year favorable straight-line rent adjustments in accordance with ASC 842 of$2.5 million and$12.0 million . Partially offsetting these favorable variances was lower percentage rents of$1.1 million and$3.2 million for the three month and six month periods endedJune 30, 2021 on our Amended PinnacleMaster Lease ,Boyd Master Lease and Meadows Lease as these leases reset in 2020 and were negatively impacted by COVID-19 mandated closures. Additionally, we had lower cash rental income of$0.7 million and$1.3 million for the three month and six month periods endedJune 30, 2021 from the Amended and Restated CaesarsMaster Lease that became effective inJuly 2020 . •Revenues for ourTRS Properties increased by$33.7 million and$44.6 million for the three and six months endedJune 30, 2021 , as compared to the corresponding periods in the prior year, primarily due to strong results in 2021 and the impact of COVID-19 on the prior year which, as previously discussed, closed both of these properties inmid-March 2020 . •Total operating expenses increased by$24.4 million and$28.7 million for the three and six months endedJune 30, 2021 , as compared to the corresponding periods in the prior year. The increase in operating expenses for the three and six months endedJune 30, 2021 was primarily driven by higher expenses in our TRS Segment of$18.0 million and$22.2 million due to their closures inmid-March 2020 from COVID-19. Additionally, the Company had higher depreciation expense by$0.8 million and$2.9 million for the three and six months endedJune 30, 2021 due to its recent acquisitions. Additionally, the Company had higher land rights and ground lease expense of$2.4 million and$1.1 million . The Company's ground leases tied to tenants revenues increased by$2.4 million and$1.9 million for the three and six month periods endedJune 30, 2021 due to COVID-19 closures in the prior year. Partially offsetting this increase was lower ground lease expense due to the exchange agreement with Caesars in the fourth quarter of 2020, which led to the exchange of the Tropicana Evansville property, which contained a ground lease, with Waterloo and Bettendorf, which did not contain ground leases. Finally, the Company incurred higher general and administrative expenses in its REIT segment for the three and six months endedJune 30, 2021 by$1.8 million and$1.1 million , respectively, due to higher bonus accruals in the current year as a result of improved financial performance relative to the prior year. 34 -------------------------------------------------------------------------------- •Other expenses increased by$1.2 million and decreased by$17.7 million for the three and six months endedJune 30, 2021 , as compared to the corresponding periods in the prior year due to increased interest expense in the second quarter of 2021 due to the issuance of Senior Notes inJune 2020 andAugust 2020 to lengthen the duration of our debt obligations. The proceeds were utilized to repay short term borrowings that carried lower interest rates. The decline for the six month periods endedJune 30, 2021 was a result of debt extinguishment charges of$17.3 million incurred in the first quarter of 2020 as the Company retired certain near-term senior unsecured notes Senior Notes to lengthen our average debt maturity and lower our financing costs. •Income tax expense increased by$6.7 million for the six months endedJune 30, 2021 , as compared to the corresponding period in the prior year due to improved performance at the TRS Segment due to strong results in the current period as well as the impact of temporary closures related to COVID-19 in the prior year.
•Net income increased by
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 condensed 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.
For further information on our critical accounting estimates, see Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Notes to our audited consolidated financial statements
included in our most recent Annual Report. There has been no material change to
these estimates for the three and six months ended
Results of Operations
The following are the most important factors and trends that contribute or may contribute to our operating performance:
•As discussed previously, the impact of the COVID-19 outbreak resulted in the nationwide closures of all casino operations throughoutthe United States inmid-March 2020 that extended in many jurisdictions where our properties were located through the summer of 2020. The majority of our leases have components of rent that are based on a percentage of the net revenues generated by the properties in the applicable leases as well as escalation clauses based on the applicable leases' adjusted revenues to rent ratios. Our tenants have reopened their facilities and generated strong operating performance. OnMay 1, 2021 , full escalators were achieved on the Amended PinnacleMaster Lease , the Boyd Master Lease and the Belterra Park Lease that increased annualized rent by$6.1 million . We anticipate that the Penn Master Lease adjusted revenue to rent ratio atNovember 1, 2021 will result in a full escalation resulting in a$5.6 million increase to annualized rent. We believe results at our tenants' operations since they have reopened are benefiting from significant levels of pent up demand, federal stimulus and reduced competitive entertainment offerings. •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 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, the Internal Revenue Service and theU.S. Department of the Treasury . Changes to the tax laws or interpretations thereof, 35 -------------------------------------------------------------------------------- including any changes proposed and implemented by the new administration, with or without retroactive application, could materially and adversely affect GLPI and its investors.
The consolidated results of operations for the three and six months ended
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(in thousands)
Total revenues $ 317,761 $ 261,968 $ 619,304 $ 545,450
Total operating expenses 105,637 81,252 207,079 178,384
Income from operations 212,124 180,716 412,225 367,066
Total other expenses (70,359) (69,206) (140,648) (158,343)
Income before income taxes 141,765 111,510 271,577 208,723
Income tax expense (benefit) 3,549 (840) 6,177 (521)
Net income $ 138,216 $ 112,350 $ 265,400 $ 209,244 Certain information regarding our results of operations by segment for the three
and six months ended
Three Months Ended June 30,
2021 2020 2021 2020
Total Revenues Income from Operations
(in thousands)
GLP Capital $ 274,102 $ 251,989 $ 197,945 $ 182,198
TRS Properties 43,659 9,979 14,179 (1,482)
Total $ 317,761 $ 261,968 $ 212,124 $ 180,716
Six Months Ended June 30, 2021
2021 2020 2021 2020
Total Revenues Income from Operations
(in thousands)
GLP Capital $ 537,944 $ 508,712 $ 388,116 $ 365,382
TRS Properties 81,360 36,738 24,109 1,684
Total $ 619,304 $ 545,450 $ 412,225 $ 367,066 FFO, AFFO and Adjusted EBITDA
Funds From Operations ("FFO"), Adjusted Funds From Operations ("AFFO") and
Adjusted EBITDA are non-U.S. generally accepted accounting principles ("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, the amortization of land rights, straight-line rent adjustments,
and losses on debt extinguishment, reduced by maintenance capital expenditures.
Finally, we define Adjusted
36
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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, the amortization of land rights, and losses on debt
extinguishment.
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.
The reconciliation of the Company's net income per GAAP to FFO, AFFO, and
Adjusted EBITDA for the three and six months ended June 30, 2021 and 2020 is as
follows:
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(in thousands)
Net income $ 138,216 $ 112,350 $ 265,400 $ 209,244
Losses (gains) from disposition of properties 93 (8) 93 (7)
Real estate depreciation 56,783 54,551 113,172 108,830
Funds from operations $ 195,092 $ 166,893 $ 378,665 $ 318,067
Straight-line rent adjustments (828) 1,678 (1,656) 10,322
Other depreciation 1,367 2,839 3,679 5,123
Amortization of land rights 3,006 3,020 5,849 6,040
Amortization of debt issuance costs, bond premiums and original issuance discounts
2,470 2,593 4,940 5,363
Stock based compensation 3,612 4,064 9,400 8,299
Losses on debt extinguishment - 5 - 17,334
Capital maintenance expenditures (914) (495) (1,352) (1,141)
Adjusted funds from operations $ 203,805 $ 180,597 $ 399,525 $ 369,407
Interest, net 70,359 69,201 140,648 141,009
Income tax expense (benefit) 3,549 (840) 6,177 (521)
Capital maintenance expenditures 914 495 1,352 1,141
Amortization of debt issuance costs, bond premiums and original issuance discounts
(2,470) (2,593) (4,940) (5,363)
Adjusted EBITDA $ 276,157 $ 246,860 $ 542,762 $ 505,673
37-------------------------------------------------------------------------------- The reconciliation of each segment's net income per GAAP to FFO, AFFO, and Adjusted EBITDA for the three and six months endedJune 30, 2021 and 2020 is as follows: GLP Capital TRS Properties Three Months Ended Three Months Ended June 30, June 30, 2021 2020 2021 2020 (in thousands) Net income$ 131,841
- - 93 (8)
Real estate depreciation 56,783 54,551 - -
Funds from operations $ 188,624
(828) 1,678 - -
Other depreciation 468 498 899 2,341
Amortization of land rights 3,006 3,020 - -Amortization of debt issuance costs, bond premiums and original issuance discounts
2,470 2,593 - -
Stock based compensation 3,612 4,064 - -
Losses on debt extinguishment - 5 - -
Capital maintenance expenditures (44) (56) (870) (439)
Adjusted funds from operations $ 197,308
65,900 64,743 4,459 4,458
Income tax expense (benefit) 204 182 3,345 (1,022)
Capital maintenance expenditures 44 56 870 439
Amortization of debt issuance costs, bond premiums and original issuance discounts
(2,470) (2,593) - -
Adjusted EBITDA $ 260,986 $ 246,009 $ 15,171 $ 851
38--------------------------------------------------------------------------------
GLP Capital TRS Properties
Six Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(in thousands)
Net income $ 255,889 $ 213,789 $ 9,511 $ (4,545)
Losses (gains) from dispositions of properties - - 93 (7)
Real estate depreciation 113,172 108,830 - -
Funds from operations $ 369,061 $ 322,619 $ 9,604 $ (4,552)
Straight-line rent adjustments (1,656) 10,322 - -
Other depreciation 940 995 2,739 4,128
Amortization of land rights 5,849 6,040 - -
Amortization of debt issuance costs, bond
premiums and original issuance discounts 4,940 5,363 - -
Stock based compensation 9,400 8,299 - -
Losses on debt extinguishment - 17,334 - -
Capital maintenance expenditures (65) (144) (1,287) (997)
Adjusted funds from operations $ 388,469 $ 370,828 11,056 (1,421)
Interest, net (1) 131,731 133,950 8,917 7,059
Income tax expense (benefit) 496 309 5,681 (830)
Capital maintenance expenditures 65 144 1,287 997
Amortization of debt issuance costs, bond
premiums and original issuance discounts (4,940) (5,363) - -
Adjusted EBITDA $ 515,821 $ 499,868 $ 26,941 $ 5,805
(1)Interest expense, net for the GLP Capital segment is net of intercompany
interest eliminations of $4.5 million and $8.9 million for the three and six
months ended June 30, 2021 compared to $4.5 million and $7.1 million for the
corresponding periods in the prior year.
Net income for our GLP Capital segment was $131.8 million for the three months
ended June 30, 2021 and $117.3 million for the three months ended June 30, 2020 .
FFO, AFFO, and Adjusted EBITDA for our GLP Capital segment were $188.6 million ,
$197.3 million and $261.0 million for the three months ended June 30, 2021 ,
respectively. FFO, AFFO, and Adjusted EBITDA for our GLP Capital segment were
$171.8 million , $183.6 million and $246.0 million for the three months ended
June 30, 2020 , respectively. The increase in net income for our GLP Capital
segment for the three months ended June 30, 2021 of $14.6 million , was primarily
driven by higher income from real estate of $22.1 million partially offset by
higher land rights and ground lease expense of $2.4 million , increased general
and administrative expenses of $1.8 million , higher depreciation expense of $2.2
million and higher net interest expense of $1.2 million , all of which were
previously discussed.
Net income for our GLP Capital segment was $255.9 million for the six months
ended June 30, 2021 and $213.8 million for the six months ended June 30, 2020 .
FFO, AFFO, and Adjusted EBITDA for our GLP Capital segment were $369.1 million ,
$388.5 million and $515.8 million for the six months ended June 30, 2021 ,
respectively. FFO, AFFO, and Adjusted EBITDA for our GLP Capital segment were
$322.6 million , $370.8 million and $499.9 million for the six months ended June
30, 2020 , respectively. The increase in net income for our GLP Capital segment
for the six months ended June 30, 2021 of $42.1 million , was primarily driven by
higher income from real estate of $29.2 million and lower net interest expense
of $2.2 million partially offset by higher land rights and ground lease expense
of $1.1 million , increased general and administrative expenses of $1.1 million ,
and higher depreciation expense of $4.3 million due to our recent acquisitions.
Additionally, the results for the six months ended June 30, 2020 included a debt
extinguishment charge of $17.3 million related to the redemption of certain
Senior Notes in the first quarter of 2020.
The increase in FFO in our GLP Capital segment for the three and six months
ended June 30, 2021 , as compared to the corresponding periods in the prior year,
was driven by the explanations above, including an add-back for real estate
depreciation expense. The increase in AFFO for our GLP Capital segment for the
three and six months ended June 30, 2021 , as compared to the corresponding
periods in the prior year was primarily driven by the changes described above,
less the
39
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adjustments mentioned in the table above, primarily straight-line rent
adjustments and losses on debt extinguishment. Adjusted EBITDA for our
Net income, FFO, AFFO and Adjusted EBITDA for ourTRS Properties segment each increased from the corresponding periods in the prior year primarily due to the impact of COVID-19 on the prior year, which resulted in both properties being forced to close inmid-March 2020 .Hollywood Casino Baton Rouge reopened to the public onMay 18, 2020 andHollywood Casino Perryville reopened onJune 19, 2020 with various restrictions to limit capacity in accordance with regulatory requirements. Additionally, the performance of ourTRS Properties has exceeded the corresponding periods in the prior years as spend per visit has increased coupled with reductions in marketing and payroll costs on various amenities that have been curtailed in light of the capacity restrictions. We also believe results have benefited since being reopened from pent up demand, federal stimulus efforts and reduced competition from other entertainment offerings.
Revenues
Revenues for the three and six months endedJune 30, 2021 and 2020 were as follows (in thousands): Three Months Ended June 30, Percentage 2021 2020 Variance Variance Rental income$ 274,102 $ 245,749 $ 28,353 11.5 % Interest income from real estate - 6,240 (6,240) N/A Total income from real estate 274,102 251,989 22,113 8.8 % Gaming, food, beverage and other 43,659 9,979 33,680 337.5 % Total revenues$ 317,761 $ 261,968 $ 55,793 21.3 % Six Months Ended June 30, Percentage 2021 2020 Variance Variance Rental income$ 537,944 $ 495,156 $ 42,788 8.6 % Interest income from real estate - 13,556 (13,556) N/A Total income from real estate 537,944 508,712 29,232 5.7 % Gaming, food, beverage and other 81,360 36,738 44,622 121.5 % Total revenues 619,304 545,450 73,854 13.5 % Total income from real estate For the three months and six months endedJune 30, 2021 and 2020, total income from real estate was$274.1 million and$537.9 million compared to$252.0 million and$508.7 million for the corresponding periods in the prior year. 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 condensed 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. These amounts increased by$2.0 million and$0.6 million in the three months and six months endedJune 30, 2021 compared to the corresponding periods in the prior year due to COVID-19 closures in the prior year. Partially offsetting this increase was lower ground lease expense due to the exchange agreement with Caesars in the fourth quarter of 2020, which led to the exchange of the Tropicana Evansville property, which contained a ground lease, with Waterloo and Bettendorf, which did not contain ground leases. Total income from real estate increased$22.1 million , or 8.8%, for the three months endedJune 30, 2021 and$29.2 million or 5.7%, for the six months endedJune 30, 2021 , as compared to the corresponding periods in the prior year. This was primarily from favorable straight line rent adjustments of$2.5 million and$12.0 million for the three months and six months endedJune 30, 2021 in accordance with ASC 842, and higher percentage rent on ourPenn Master Lease of$11.1 million and$14.3 million for the three months and six months endedJune 30, 2021 due to strong results atHollywood Casino Columbus 40 -------------------------------------------------------------------------------- andHollywood Casino Toledo in the current year coupled with the negative impact from the temporary closures from COVID-19 in the prior year. Additionally, our Morgantown Lease, which became effective onOctober 1, 2020 , added$0.75 million and$1.5 million in rent during the three months and six months endedJune 30, 2021 and ourBally's Master Lease became effective onJune 3, 2021 which added$3.1 million of rent for the three months and six months endedJune 30, 2021 . The Company also realized escalations on its Amended PinnacleMaster Lease ,Boyd Master Lease and Belterra Park Lease which increased rental income by$1.0 million for the three months and six months endedJune 30, 2021 . Partially offsetting these favorable variances were lower percentage rents of$1.1 million and$3.2 million for the three months and six months endedJune 30, 2021 on our Amended PinnacleMaster Lease ,Boyd Master Lease and Meadows Lease as these leases reset in 2020 and will not reset again until 2022. Additionally, we had lower cash rental income of$0.7 million and$1.3 million for the three months and six months endedJune 30, 2021 from the Amended and Restated CaesarsMaster Lease that became effective inJuly 2020 . Finally, the Company had increases of$3.4 million and$1.2 million in rent from theCasino Queen Lease for the three months and six months endedJune 30, 2021 due to timing of receipts of rental payments that were deferred because of COVID-19 which forced the closure of their operations. The Company has a rent deferral agreement withCasino Queen in which$2.1 million of rent was deferred due to the property's temporary closure in the first quarter of 2021. GLPI anticipates this amount will be collected at the closing of the HCBR transaction later this year.
Details of the Company's income from real estate for the three and six months
ended
Total cash Straight-line rent Ground rent Other rental Total rental
2021 rent rent Percentage rent rental income adjustments in revenue revenue income
Penn Master Lease $ 69,851 $ 23,492 $ 26,387 $ 119,730 $ 2,232 $ 891 $ 12 $ 122,865
Amended Pinnacle Master Lease 57,558 17,814 6,694 82,066 (4,837) 1,804 - 79,033
Penn - Meadows Lease 3,952 - 2,262 6,214 572 - 63 6,849
Penn Morgantown - 750 - 750 - - - 750
Caesars Master Lease 15,628 5,932 - 21,560 2,590 403 - 24,553
Lumiere Place Lease 5,701 - - 5,701 - - - 5,701
BYD Master Lease 19,162 2,947 2,462 24,571 574 401 - 25,546
BYD Belterra Lease 678 473 455 1,606 (303) - - 1,303
Bally's Master Lease 3,111 - - 3,111 - 760 - 3,871
Casino Queen Lease 2,276 - 1,355 3,631 $ - - - 3,631
Total $ 177,917 $ 51,408 $ 39,615 $ 268,940 $ 828 $ 4,259 $ 75 $ 274,102
Six Months Ended June 30, Building base Total cash Straight-line rent Ground rent Other rental Total rental 2021
rent Land base rent Percentage
rent rental income adjustments in revenue revenue income
$ 139,703 $ 46,984 $ 49,954$ 236,641 $ 4,463$ 1,593 $ 12 $
242,709
Amended Pinnacle Master Lease 114,358 35,628 13,389 163,375 (9,673) 3,437 - 157,139 Penn - Meadows Lease 7,905 - 4,523 12,428 1,144 - 113 13,685 Penn Morgantown - $ 1,500 $ - 1,500 - - - 1,500 Caesars Master Lease 31,257 11,864 - 43,121 5,179 805 - 49,105 Lumiere Place Lease 11,402 $ - $ - 11,402 - - - 11,402 BYD Master Lease 38,073 5,893 4,923 48,889 1,148 775 - 50,812 BYD Belterra Lease 1,346 947 909 3,202 (605) - - 2,597 Bally's Master Lease 3,111 $ - $ - 3,111 - 760 - 3,871 Casino Queen Lease 3,211 $ - 1,913 5,124 $ - - - 5,124 Total$ 350,366 $ 102,816 $ 75,611$ 528,793 $ 1,656$ 7,370 $ 125 $ 537,944 41
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Gaming, food, beverage and other revenue
Gaming, food, beverage and other revenue for ourTRS Properties segment increased by$33.7 million and$44.6 million , for the three months and six months endedJune 30, 2021 , as compared to the corresponding periods in the prior years. 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 period in the prior years as spend per visit has increased due to various factors such as pent up demand, government stimulus efforts and reduced consumer discretionary entertainment options due to COVID-19. Operating expenses
Operating expenses for the three and six months ended
Three Months Ended June 30, Percentage
2021 2020 Variance Variance
Gaming, food, beverage and other 22,382 4,858 $ 17,524 360.7 %
Land rights and ground lease expense 8,191 5,781 2,410 41.7 %
General and administrative 16,821 13,231 3,590 27.1 %
(Gains) losses from dispositions of property 93 (8) 101 (1,262.5) %
Depreciation 58,150 57,390 760 1.3 %
Total operating expenses $ 105,637 $ 81,252 $ 24,385 30.0 %
Six Months Ended June 30, Percentage
2021 2020 Variance Variance
Gaming, food, beverage and other $ 42,308 $ 21,361 $ 20,947 98.1 %
Land rights and ground lease expense 14,924 13,859 1,065 7.7 %
General and administrative 32,903 29,218 3,685 12.6 %
(Gains) losses from dispositions of property 93 (7) 100 (1,428.6) %
Depreciation 116,851 113,953 2,898 2.5 %
Total operating expenses $ 207,079 178,384 $ 28,695 16.1 %
Gaming, food, beverage and other
Gaming, food, beverage and other expenses increased by$17.5 million and$20.9 million , for the three months and six months endedJune 30, 2021 , as compared to the corresponding periods in the prior year. This was primarily due to the properties being 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.
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 increased by$2.4 million and$1.1 million for the three months and six months endedJune 30, 2021 , as compared to the corresponding periods in the prior year. This was primarily due to COVID-19 casino closures in the prior year, partially offset by the exchange agreement with Caesars which swapped out the Tropicana Evansville property containing a ground lease with Waterloo and Bettendorf, which did not contain ground leases. 42 --------------------------------------------------------------------------------
General and Administrative Expense
General and administrative expenses include items such as compensation costs (including stock based compensation), professional services and costs associated with development activities. General and administrative expenses increased by$3.6 million and$3.7 million , for the three months and six months endedJune 30, 2021 , as compared to the corresponding periods in the prior year, primarily due to higher bonus expense in the current year due to improved financial performance and higher costs at ourTRS Properties due to COVID-19 closures in the prior year. Depreciation Depreciation expense increased by$0.8 million and$2.9 million for the three months and six months endedJune 30, 2021 as compared to the corresponding periods in the prior year, primarily due to the Company's acquisitions over the past year. Other income (expenses)
Other income (expenses) for the three and six months ended
Three Months Ended June 30, Percentage
2021 2020 Variance Variance
Interest expense $ (70,413) $ (69,474) $ (939) 1.4 %
Interest income 54 273 (219) (80.2) %
Losses on debt extinguishment - (5) 5 N/A
Total other expenses $ (70,359) $ (69,206) $ (1,153) 1.7 %
Six Months Ended June 30, Percentage
2021 2020 Variance Variance
Interest expense $ (140,826) $ (141,478) $ 652 (0.5) %
Interest income 178 469 (291) (62.0) %
Losses on debt extinguishment - (17,334) 17,334 N/A
Total other expenses $ (140,648) $ (158,343) $ 17,695 $ 158,343 (11.2) %
Interest expense
Interest expense increased by $0.9 million and declined by $0.7 million , for the
three months and six months ended June 30, 2021 , as compared to the
corresponding periods in the prior year. Results for the three months and six
months ended June 30, 2021 benefited from reductions in outstanding obligations
under our senior unsecured credit facility, as amended (the "Amended Credit
Facility"). Both periods were impacted by the timing of our Senior Note
issuances in the prior year and revolver drawdown in the first quarter of 2020
related to COVID-19. See Note 8 for further details.
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 a loss on the early extinguishment of debt related to this retirement of$17.3 million , primarily for call premium charges and debt issuance write-offs.
Taxes
During the three months and six months endedJune 30, 2021 , income tax expense was approximately$3.5 million and$6.2 million compared with and income tax benefit of$0.8 million and$0.5 million , for the three months and six months endedJune 30, 2020 , respectively. The reason for the increase was due to improved performance at our TRS Segment. 43 --------------------------------------------------------------------------------
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$402.6 million and$229.7 million during the six months endedJune 30, 2021 and 2020, respectively. The increase in net cash provided by operating activities of$172.9 million for the six months endedJune 30, 2021 , as compared to the corresponding period in the prior year, was primarily comprised of an increase in cash receipts from customers of$192.4 million , a decrease in interest payments of$1.1 million and a decrease in cash paid to employees of$5.4 million partially offset by an increase in cash paid for taxes of$7.5 million and an increase in cash paid for operating expenses of$18.2 million . The increase in cash receipts collected from our customers for the six months endedJune 30, 2021 , as compared to the corresponding period in the prior year, was primarily due to the higher percentage rent received on the Penn Master lease due to strong results at theHollywood Casino Columbus andHollywood Casino Toledo properties, theBally's andMorgantown acquisitions, along with strong re-openings of ourTRS Properties , which were forced to close in mid-March 2020 due to the impact of COVID-19. These properties reopened inMay 2020 andJune 2020 as previously discussed. The reduction in cash paid to employees was primarily due to lower bonus payouts and salaries and wages at ourGLP Capital segment for the six months endedJune 30, 2021 . The increase in taxes paid was due to the strong results at theTRS Properties . Investing activities used cash of$489.8 million and$1.1 million during the six months endedJune 30, 2021 and 2020, respectively. Net cash used in investing activities during the six months endedJune 30, 2021 consisted of$487.4 million for the acquisition of real estate assets in theBally's transaction and capital expenditures of$2.5 million . Net cash used in investing activities for the six months endedJune 30, 2020 consisted of capital expenditures of$1.1 million . Financing activities used cash of$248.2 million and$181.4 million during the six months endedJune 30, 2021 and 2020, respectively. Net cash used in financing activities during the six months endedJune 30, 2021 was driven by dividend payments of$308.6 million and taxes paid related to shares withheld for tax purposes on restricted stock award vestings of$9.8 million partially offset by$70.2 million in net proceeds received from the Company's continuous equity offering under which the Company may sell up to an aggregate of$600 million of its common stock from time to time through a sales agent in "at the market" offerings. Cash used in financing activities during the six months endedJune 30, 2020 was driven by$1,868.7 million of proceeds from the issuance of long-term debt, partially offset by repayments of long-term debt of$1,835.8 million , dividend payments of$176.7 million ,$15.7 million of premium and related costs paid on the retirement of certain Senior Notes, and taxes paid related to shares withheld for tax purposes on restricted stock award vestings of$12.6 million . During the three months endedMarch 31, 2020 , the Company fully drew down on its revolving credit facility to increase its liquidity due to the COVID-19 outbreak which resulted in the shut-down of all of our tenants' properties. Additionally, as described in Note 13 in the Condensed Consolidated Financial Statements, the second quarter 2020 dividends were paid partially in cash and in the Company's shares.
Capital Expenditures
Capital expenditures are accounted for as either capital project expenditures 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 six months endedJune 30, 2021 and 2020, theTRS Properties spent approximately$2.5 million and$1.1 million , respectively, for capital expenditures. The majority of the capital maintenance expenditures were for slot machines and slot machine equipment. Under the triple-net lease structure, our tenants are responsible for capital maintenance expenditures at our leased properties. However, during 2021,$1.1 million was incurred on capital project expenditures related to a landside development project atHollywood Casino Baton Rouge . 44
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Debt
Senior Unsecured Credit Facility
Prior toJune 25, 2020 , the Company's senior unsecured 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 Notes. OnJune 25, 2020 , the Company entered into 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 closed on an offering of$500 million of 4.00% unsecured senior notes due inJanuary 2031 at an issue price equal to 98.827% of the principal amount. 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 at an issue price equal to 103.824% of the principal amount. The Company utilized the net proceeds from this additional borrowing to repay indebtedness under the Term Loan A-1 facility. AtJune 30, 2021 , the Amended Credit Facility had a gross outstanding balance of$424.0 million , consisting of the Term Loan A-2 facility. Additionally, atJune 30, 2021 , 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 available borrowing capacity under the Revolver as ofJune 30, 2021 . 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, that 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. AtJune 30, 2021 , 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. AtJune 30, 2021 , 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. AtJune 30, 2021 , the Company was in compliance with all required financial covenants under the Amended Credit Facility.
Senior Unsecured Notes
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 . The Company recorded 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. 45 -------------------------------------------------------------------------------- AtJune 30, 2021 , the Company had$5,375.0 million of outstanding Senior Notes. Each of the Company's 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. AtJune 30, 2021 , the Company was in compliance with all required financial covenants under its Senior Notes. GLPI guarantees the Senior Notes that were co-issued by its subsidiaries,GLP Capital andGLP Financing II, Inc. Each of the subsidiary issuers is 100% owned by GLPI. The guarantees of GLPI are full and unconditional. GLPI is not subject to any material or significant restrictions on its ability to obtain funds from its subsidiaries through dividends or loans or to transfer assets from such subsidiaries, except as provided by applicable law. None of GLPI's other subsidiaries guarantee the Senior Notes. Summarized financial information for Subsidiary Issuers and Parent Guarantor As of June 30, 2021 As of December 31, 2020 Real estate investments, net $ 3,202,109 $ 2,720,767 Right-of-use assets and land rights, net 222,805 121,866 Cash and cash equivalents 140,629 480,066 Long term debt, net of unamortized debt issuance costs, bond premiums and original issuance discounts 5,759,561 5,754,689 Accrued interest 70,598 72,285 Lease liabilities 93,501 58,654 Deferred rental revenue 256,249 265,891 For the six months ended
For the year ended December
June 30, 2021 31, 2020
Revenues $ 310,719 $ 580,428
Income from operations 222,919 446,708
Interest expense (140,826) (282,142)
Net income 81,774 146,323
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.
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. Such distributions generally can be made with cash and/or a combination of cash and Company common stock if certain requirements are met. 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. To the extent any of the Company's taxable income was not previously distributed, the Company will make a dividend declaration pursuant to Section 858(a)(1) of the Code, allowing the Company to treat certain dividends that are to be distributed after the close of a taxable year as having been paid during the taxable year. LIBOR Transition 46
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The majority of our debt is at fixed rates and our exposure to variable interest
rates is currently limited to our Revolver 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 to
transition to a new standard rate, the Secured Overnight Financing Rate
("SOFR"). We are currently monitoring the transition and cannot be certain
whether SOFR will become the standard rate for our variable rate debt.
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