Item 16. Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

VICI PROPERTIES INC.
February 14, 2019	By:	/S/ EDWARD B. PITONIAK
		Edward B. Pitoniak
		Chief Executive Officer and Director

POWER OF ATTORNEY

Each of the officers and directors of VICI Properties Inc., whose signature appears below, in so signing, also makes, constitutes and appoints each of Edward B. Pitoniak, David A. Kieske and Gabriel F. Wasserman, and each of them, his or her true and lawful attorneys-in-fact, with full power and substitution, for him or her in any and all capacities, to execute and cause to be filed with the SEC any and all amendments to this Annual Report on Form 10-K, with exhibits thereto and all other documents connected therewith and to perform any acts necessary to be done in order to file such documents, and hereby ratifies and confirms all that said attorneys-in-fact or their substitute or substitutes may do or cause to done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Title		Date
/S/ EDWARD B. PITONIAK		Chief Executive Officer and Director		February 14, 2019
Edward B. Pitoniak		(Principal Executive Officer)
/S/ DAVID A. KIESKE		Chief Financial Officer		February 14, 2019
David A. Kieske		(Principal Financial Officer)
/S/ GABRIEL F. WASSERMAN		Chief Accounting Officer		February 14, 2019
Gabriel F. Wasserman		(Principal Accounting Officer)
/S/ JAMES R. ABRAHAMSON		Chair of the Board of Directors		February 14, 2019
James R. Abrahamson
/S/ DIANA CANTOR		Director		February 14, 2019
Diana Cantor
/S/ EUGENE I. DAVIS		Director		February 14, 2019
Eugene I. Davis
/S/ ERIC L. HAUSLER		Director		February 14, 2019
Eric L. Hausler
/S/ ELIZABETH I. HOLLAND		Director		February 14, 2019
Elizabeth I. Holland
/S/ CRAIG MACNAB		Director		February 14, 2019
Craig Macnab
/S/ MICHAEL D. RUMBOLZ		Director		February 14, 2019
Michael D. Rumbolz

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
VICI Properties Inc.:
	Reports of Independent Registered Public Accounting Firm		F - 2
	Consolidated Balance Sheets as of December 31, 2018 and 2017		F - 4
	Year Ended December 31, 2018 and Period from October 6, 2017 to December 31, 2017
		Consolidated Statements of Operations and Comprehensive Income	F - 5
		Consolidated Statements of Stockholders’ Equity	F - 6
		Consolidated Statements of Cash Flows	F - 7
	Notes to Consolidated Financial Statements		F - 9
Caesars Entertainment Outdoor (Predecessor):
	Report of Independent Registered Public Accounting Firm		F - 37
	Combined Balance Sheets as of October 5, 2017 and December 31, 2016		F - 38
	Period from January 1, 2017 to October 5, 2017 and Years Ended December 31, 2016 and 2015
		Combined Statements of Operations	F - 39
		Combined Statements of Equity	F - 40
		Combined Statements of Cash Flows	F - 41
	Notes to Combined Financial Statements		F - 42
VICI Properties Inc.:
	Schedule I - Condensed Financial Information of Registrant Parent Company Only		S - 1
	Schedule III - Real Estate Assets and Accumulated Depreciation		S - 5

F - 1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of VICI Properties Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of VICI Properties Inc. and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income, stockholders' equity, and cash flows, for the year ended December 31, 2018 and for the period from October 6, 2017 (Formation Date) to December 31, 2017, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for year ended December 31, 2018 and for the period from October 6, 2017 (Formation Date) to December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 14, 2019, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

New York, New York

February 14, 2019

We have served as the Company's auditor since 2016.

F - 2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of VICI Properties Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of VICI Properties Inc. and subsidiaries (the “Company”) as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2018, of the Company and our report dated February 14, 2019, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

New York, New York

February 14, 2019

F - 3

VICI PROPERTIES INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	December 31, 2018				December 31, 2017
Assets
Real estate portfolio:
Investments in direct financing leases, net	$	8,916,047			$	8,268,643
Investments in operating leases	1,086,658				1,110,400
Land	95,789				73,600
Property and equipment used in operations, net	71,513				74,300
Cash and cash equivalents	577,883				183,646
Restricted cash	20,564				13,760
Short-term investments	520,877				—
Other assets	44,037				15,363
Total assets	$	11,333,368			$	9,739,712
Liabilities
Debt, net	$	4,122,264			$	4,785,756
Accrued interest	14,184				21,595
Deferred financing liability	73,600				73,600
Deferred revenue	43,605				68,117
Dividends payable	116,287				—
Other liabilities	62,406				14,280
Total liabilities	4,432,346				4,963,348
Commitments and Contingencies (Note 12)
Stockholders’ equity
Common stock, $0.01 par value, 700,000,000 shares authorized and 404,729,616 and 300,278,938 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively	4,047				3,003
Preferred stock, $0.01 par value, 50,000,000 shares authorized and no shares outstanding at December 31, 2018 and 2017	—				—
Additional paid-in capital	6,648,430				4,645,824
Accumulated other comprehensive loss	(22,124		)		—
Retained earnings	187,096				42,662
Total VICI stockholders’ equity	6,817,449				4,691,489
Non-controlling interests	83,573				84,875
Total stockholders’ equity	6,901,022				4,776,364
Total liabilities and stockholders’ equity	$	11,333,368			$	9,739,712

See accompanying Notes to Consolidated Financial Statements.

F - 4

VICI PROPERTIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except share and per share data)

	Year Ended December 31, 2018				Period from October 6, 2017 to December 31, 2017
Revenues
Income from direct financing leases	$	741,564			$	150,171
Income from operating leases	47,972				11,529
Tenant reimbursement of property taxes	81,240				19,558
Golf operations	27,201				6,351
Revenues	897,977				187,609
Operating expenses
General and administrative	24,429				9,939
Depreciation	3,686				751
Property taxes	81,810				19,558
Golf operations	17,371				4,126
Loss on impairment	12,334				—
Acquisition and transaction expenses	393				9,039
Total operating expenses	140,023				43,413
Operating income	757,954				144,196
Interest expense	(212,663		)		(63,354		)
Interest income	11,307				282
Loss from extinguishment of debt	(23,040		)		(38,488		)
Income before income taxes	533,558				42,636
Income tax (expense) benefit	(1,441		)		1,901
Net income	532,117				44,537
Less: Net income attributable to non-controlling interests	(8,498		)		(1,875		)
Net income attributable to common stockholders	$	523,619			$	42,662
Net income per common share
Basic	$	1.43			$	0.19
Diluted	$	1.43			$	0.19
Weighted average number of common shares outstanding
Basic	367,226,395				227,828,844
Diluted	367,316,901				227,985,455
Other comprehensive income
Net income attributable to common stockholders	$	523,619			$	42,662
Unrealized loss on cash flow hedges	(22,124		)		—
Comprehensive income attributable to common stockholders	$	501,495			$	42,662

See accompanying Notes to Consolidated Financial Statements.

F - 5

VICI PROPERTIES INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

	Common Stock				Preferred Stock				Additional paid-in capital				Accumulated Other Comprehensive Loss				Retained Earnings				Total VICI Stockholders’ Equity				Non-controlling Interests				Total Stockholders’ Equity
Balance as of October 6, 2017	$	1,772			$	120			$	3,431,781			$	—			$	—			$	3,433,673			$	83,000			$	3,516,673
Net income	—				—				—				—				42,662				42,662				1,875				44,537
Preferred stock conversion	514				(120		)		(394		)		—				—				—				—				—
Mandatory debt conversion	176				—				249,811				—				—				249,987				—				249,987
Private equity placement	541				—				963,241				—				—				963,782				—				963,782
Share-based compensation	—				—				1,385				—				—				1,385				—				1,385
Balance as of December 31, 2017	$	3,003			$	—			$	4,645,824			$	—			$	42,662			$	4,691,489			$	84,875			$	4,776,364
Net income	—				—				—				—				523,619				523,619				8,498				532,117
Issuance of common stock from Initial Public Offering	695				—				1,306,424				—				—				1,307,119				—				1,307,119
Issuance of common stock from follow-on offering	345				—				693,844				—				—				694,189				—				694,189
Distributions to non-controlling interests	—				—				—				—				—				—				(9,800		)		(9,800		)
Dividends declared	—				—				—				—				(379,185		)		(379,185		)		—				(379,185		)
Share-based compensation	4				—				2,338				—				—				2,342				—				2,342
Unrealized loss on cash flow hedges	—				—				—				(22,124		)		—				(22,124		)		—				(22,124		)
Balance as of December 31, 2018	$	4,047			$	—			$	6,648,430			$	(22,124	)		$	187,096			$	6,817,449			$	83,573			$	6,901,022

See accompanying Notes to Consolidated Financial Statements.

F - 6

VICI PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31, 2018				Period from October 6, 2017 to December 31, 2017
Cash flows from operating activities
Net income	$	532,117			$	44,537
Adjustments to reconcile net income to cash flows provided by operating activities:
Direct financing lease adjustments	(45,404		)		(8,443		)
Stock-based compensation	2,342				1,385
Depreciation	3,686				751
Amortization of debt issuance costs and original issue discount	5,976				156
Loss on impairment	12,334				—
Loss on extinguishment of debt	23,040				—
Deferred income taxes	(348		)		(1,912		)
Change in operating assets and liabilities:
Other assets	(22,945		)		(7,159		)
Accrued interest	(7,411		)		21,595
Deferred revenue	(24,512		)		68,081
Other liabilities	25,207				10,449
Net cash provided by operating activities	504,082				129,440
Cash flows from investing activities
Investments in direct financing leases	(771,507		)		(1,136,200		)
Capitalized transaction costs	(6,780		)		—
Lease modification fee	159,000				—
Investments in short-term investments	(942,311		)		—
Maturities of short-term investments	421,434				—
Proceeds from sale of land	186				—
Acquisition of property and equipment, net of change in related payables	(899		)		(51		)
Net cash used in investing activities	(1,140,877		)		(1,136,251		)
Cash flows from financing activities
Proceeds from initial public offering of common stock	1,307,119				—
Proceeds from follow-on offering of common stock	694,374				—
Proceeds from private placement of common stock	—				963,782
Payment of Term Loan B Facility	(100,000		)		—
Payment of Revolving Credit Facility	(300,000		)		—
Payment of Second Lien Notes	(290,058		)		—
Proceeds from issuance of Term Loan B Facility, net	—				2,194,686
Proceeds from issuance of Revolving Credit Facility, net	—				298,000
Payment of Prior Term Loan	—				(1,638,387		)
Payment of Prior First Lien Notes	—				(311,721		)
Repurchase of Mezzanine Debt	—				(400,000		)
Debt issuance costs	(1,117		)		(31,501		)
Proceeds from unrecognized sale of real estate	—				73,600
Mandatory debt conversion costs	—				(13		)
Distributions to non-controlling interests	(9,800		)		—
Dividends paid	(262,682		)		—
Net cash provided by financing activities	1,037,836				1,148,446

F - 7

VICI PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Net increase in cash, cash equivalents and restricted cash	401,041				141,635
Cash, cash equivalents and restricted cash, beginning of period	197,406				55,771
Cash, cash equivalents and restricted cash, end of period	$	598,447			$	197,406
Supplemental cash flow information:
Cash paid for interest	$	213,309			$	36,779
Cash paid for income taxes	1,375				—
Supplemental non-cash investing and financing activity:
Dividends declared, not paid	$	116,503			$	—
Transfer of investments in operating leases to land	22,189				—
Transfer of investments in direct financing leases to investments in operating leases	10,967				—
Changes in accruals for additions to deferred transaction costs	742				—

See accompanying Notes to Consolidated Financial Statements.

F - 8

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In this Annual Report on Form 10-K, the words ”VICI,” the “Company,” “we,” “our,” and “us” refer to VICI Properties Inc. and its subsidiaries, on a consolidated basis, unless otherwise stated or the context requires otherwise.

We refer to (i) our Consolidated Financial Statements as our “Financial Statements,” (ii) our Consolidated Balance Sheets as our “Balance Sheet,” (iii) our Consolidated Statements of Operations and Comprehensive Income as our “Statement of Operations,” and (iv) our Consolidated Statement of Cash Flows as our “Statement of Cash Flows.” References to numbered “Notes” refer to the Notes to our Consolidated Financial Statements.

“Caesars” refers to Caesars Entertainment Corporation, a Delaware corporation, and its subsidiaries.

“Caesars Entertainment Outdoor” refers to the historical operations of the golf courses that were transferred from CEOC to VICI Golf on the Formation Date.

“Caesars Lease Agreements” refer collectively to the CPLV Lease Agreement, the Non-CPLV Lease Agreement, the Joliet Lease Agreement and the HLV Lease Agreement, unless the context otherwise requires.

“CEOC” refers to Caesars Entertainment Operating Company, Inc., a Delaware corporation, and its subsidiaries, prior to the Formation Date, and following the Formation Date, CEOC, LLC, a Delaware limited liability company and its subsidiaries. CEOC is a subsidiary of Caesars.

“CPLV CMBS Debt” refers to $1.55 billion of asset-level real estate mortgage financing of Caesars Palace Las Vegas, incurred by a subsidiary of the Operating Partnership on October 6, 2017.

“CPLV Lease Agreement” refers to the lease agreement for Caesars Palace Las Vegas, as amended from time to time.

“CRC” refers to Caesars Resort Collection, LLC, a Delaware limited liability company which is a subsidiary of Caesars.

“Eastside Property” refers to 18.4 acres of property located in Las Vegas, Nevada, east of Harrah’s Las Vegas that we sold to Caesars in December, 2017.

“Formation Date” refers to October 6, 2017.

“Formation Lease Agreements” refers to the CPLV Lease Agreement, the Joliet Lease Agreement and the Non-CPLV Lease Agreement, collectively.

“Greektown” refers to the real estate assets associated with the Greektown Casino-Hotel, located in Detroit, Michigan. On November 13, 2018, we entered into definitive agreements to acquire all of the land and real estate assets associated with Greektown,

“HLV Lease Agreement” refers to the lease agreement for the Harrah’s Las Vegas facilities, as amended from time to time.

“Joliet Lease Agreement” refers to the lease agreement for the facilities in Joliet, Illinois, as amended from time to time.

“Lease Agreements” refer collectively to the Caesars Lease Agreements and the Margaritaville Lease Agreement, unless the context otherwise requires.

“Margaritaville Lease Agreement” refers to the lease agreement for Margaritaville Resort Casino.

“Margaritaville Resort Casino” refers to the real estate of Margaritaville Resort Casino, located in Bossier City, Louisiana, which we purchased on January 2, 2019.

“Non-CPLV Lease Agreement” refers to the lease agreement for regional properties other than the facilities in Joliet, Illinois, as amended from time to time.

The “Operating Partnership” refers to VICI Properties L.P., a Delaware limited partnership and a wholly owned subsidiary of VICI.

“Penn National” refers to Penn National Gaming, Inc. and its subsidiaries.

F - 9

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

“Revolving Credit Facility” refers to the five-year first lien revolving credit facility entered into by VICI PropCo in December 2017.

“Second Lien Notes” refers to $766.9 million aggregate principal amount of 8.0% second priority senior secured notes due 2023 issued by a subsidiary of the Operating Partnership in October 2017, of which approximately $498.5 million aggregate principal amount remains outstanding.

“Term Loan B Facility” refers to the seven-year senior secured first lien term loan B facility entered into by VICI PropCo in December 2017.

“VICI Golf” refers to VICI Golf LLC, a Delaware limited liability company that is the owner and operator of the Caesars Entertainment Outdoor business.

“VICI PropCo” or “PropCo” refers to VICI Properties 1 LLC, a Delaware limited liability company and an indirect wholly-owned subsidiary of VICI.

Note 1 — Business and Organization

We are a Maryland corporation that is primarily engaged in the business of owning and acquiring gaming, hospitality and entertainment destinations, subject to long-term triple net leases. Our national, geographically diverse portfolio consists of 21 market-leading properties, including Caesars Palace Las Vegas and Harrah’s Las Vegas. As of December 31, 2018, we leased all of our properties to subsidiaries of Caesars; however, following our acquisition of Margaritaville Resort Casino on January 2, 2019, we lease such property to Penn National. We also own and operate four championship golf courses located near certain of our properties.

We were created to hold certain real estate assets owned by CEOC, upon CEOC’s emergence from bankruptcy. Pursuant to CEOC’s Plan of Reorganization, on Formation Date, the historical business of CEOC was separated by means of a spin-off transaction whereby the real property assets (“Formation Properties”) of CEOC and certain of its subsidiaries, including four golf course businesses, were transferred to us through a series of transactions. Following the Formation Date, we are a stand-alone entity that was initially owned by certain former creditors of CEOC.

We have elected to be taxed as a real estate investment trust (“REIT”) for U.S. Federal income tax purposes commencing with our taxable year ended December 31, 2017. We conduct our real property business through our Operating Partnership and our golf course business, through a taxable REIT subsidiary (a “TRS”), VICI Golf.

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the applicable rules and regulations of the Securities and Exchange Commission (“SEC”).

On the Formation Date, upon CEOC’s emergence from bankruptcy, we adopted fresh-start reporting in accordance with provisions of ASC 852, “Reorganizations” (“ASC 852”). In the application of fresh start accounting, we allocated the enterprise value to the fair value of assets and liabilities in conformity with the guidance for the acquisition method of accounting for business combinations under ASC 805, “Business Combinations” (“ASC 805”).

Principles of Consolidation and Non-controlling Interest

The accompanying consolidated Financial Statements include our accounts and the accounts of our Operating Partnership, and the subsidiaries in which we or our Operating Partnership has a controlling interest, which includes a single variable interest entity (“VIE”) where we are the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation. We consolidate all subsidiaries in which we have a controlling financial interest and VIEs for which we or one of our consolidated subsidiaries is the primary beneficiary.

F - 10

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We present non-controlling interest and classify such interest as a component of consolidated stockholders’ equity, separate from VICI stockholders’ equity. Our non-controlling interest represents a 20% third-party ownership of Harrah’s Joliet LandCo LLC, the entity that owns the Harrah’s Joliet facility and is the lessor under the related Joliet Lease Agreement.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

Reportable Segments

Our real property business and our golf course business represent two reportable segments. The real property business segment consists of leased real property and represents the substantial majority of our business. The golf course business segment consists of four golf courses, each of which is an operating segment and is aggregated into one reportable segment.

Corporate and overhead costs are allocated to reportable segments based upon revenue or headcount. Management believes that the assumptions and methodologies used in the allocation of such expenses are reasonable.

Cash, Cash Equivalents, and Restricted Cash

Cash consists of cash-on-hand and cash-in-bank. Any investments with an original maturity of three months or less from the date of purchase are considered cash equivalents and are stated at the lower of cost or market value. Investments with an original maturity of greater than three months and less than one year from the date of purchase are considered short-term investments and are stated at fair value.

As of December 31, 2018, restricted cash was primarily comprised of funds paid by us into a restricted account for a lender required FF&E replacement reserve. Pursuant to the amended CMBS Loan Agreement we are required to fund into escrow certain amounts to be used for FF&E replacement should Caesars vacate the property and remove the furniture, fixtures and equipment upon exit. As of December 31, 2017, restricted cash was comprised of funds paid monthly by Caesars for the CPLV rent that are held in a restricted cash management account for the purpose of funding debt service or impositions related to CPLV debt issued by us. Once all debt service and impositions are paid out of restricted cash, the remaining funds are returned to our unrestricted operating account.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Balance Sheet to the total of the same such amounts presented in the Statement of Cash Flows.

(In thousands)	December 31, 2018				December 31, 2017
Cash and cash equivalents	$	577,883			$	183,646
Restricted cash	20,564				13,760
Total cash, cash equivalents and restricted cash shown in the Statement of Cash Flows	$	598,447			$	197,406

Short-Term Investments

We generally invest our excess cash in short-term investment grade commercial paper as well as discount notes issued by government-sponsored enterprises including the Federal Home Loan Mortgage Corporation and certain of the Federal Home Loan Banks. These investments generally have original maturities between 91 and 120 days and are accounted for as available for sale securities. As of December 31, 2018, we had $520.9 million of short-term investments. We did not have any short-term investments as of December 31, 2017.

Investments in Direct Financing and Operating Leases

Upon lease inception, we assess lease classification under ASC 840 “Leases” (“ASC 840”) to determine if the lease should be classified as capital or operating. If a lease is determined to be a capital lease, we further assess if it is a direct financing or sales-type lease as defined in ASC 840. For leases determined to be direct financing capital leases, upon execution of the lease transaction, the asset is classified to Investments in direct financing leases, net. For direct financing leases where the land represents greater than 25% of the fair value of the underlying asset, the land and building components of the lease are bifurcated and separately assessed for classification.

F - 11

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We have determined that all of our leases meet the definition of direct financing leases under ASC 840, with the exception of the land component of our investment in Caesars Palace Las Vegas and certain parcels of land contained in the Non-CPLV Lease Agreement. We recognize the related income from our direct financing leases on an effective interest basis at a constant rate of return over the terms of the applicable leases. As a result, the cash payments accounted for under direct financing leases will not equal income from direct financing leases. Rather, a portion of the cash rent we receive is recorded as Income from direct financing leases in our Statement of Operations and a portion is recorded as a change to the Investments in direct financing leases, net.

Initial direct costs incurred in connection with direct financing lease transactions are included in the balance of Investments in direct financing leases, net. Such amounts will be recognized as a reduction to Income from direct financing leases over the life of the lease using the effective interest method.

Under the operating lease model, as the lessor, at lease inception the land is recorded as Investments in operating leases in our Balance Sheet and we record income from operating leases on a straight-line basis over the lease term. The amount of annual minimum lease payments attributable to the land element after deducting executory costs, including any profit thereon, is determined by applying the lessee’s incremental borrowing rate to the value of the land. We record this lease income as Income from operating leases in our Statement of Operations.

Investments in Land

Vacant, Non-Operating Land

On the Formation Date, CEOC transferred certain vacant, non-operating land parcels to us, which are subject to the provisions of the Non-CPLV Lease Agreement. The Non-CPLV Lease Agreement allows for the sale of these vacant, non-operating land parcels without Caesars’ consent since they are specifically identified as de minimis to the operations of Caesars. All of the land parcels are located outside of Las Vegas and none of the land parcels are a component of the operations of our regional property portfolio. In the 2018 we reclassified the remaining $22.2 million carrying value of the vacant, non-operating land from Investments in operating leases to Land.

Eastside Property

In 2017, we sold certain land parcels known as the Eastside Property to Caesars for a sales price of $73.6 million. It was determined that the transaction does not meet the requirements of a completed sale for accounting purposes due to a put/call option on the land parcels and a convention center currently in process of being constructed (“Caesars Forum Convention Center”). The amount of $73.6 million is presented as Land with a corresponding amount of $73.6 million recorded as Deferred financing liability in our Consolidated Balance Sheet.

Property and Equipment Used in Operations

Property and equipment used in operations represents assets for VICI Golf, our golf operations, and were recorded at fair value of $75.0 million at the Formation Date. We assign lives to our assets based on our standard policy, which is established by management as representative of the useful life of each category of asset.

Additions to property used in operations are stated at cost. We capitalize the costs of improvements that extend the life of the asset and expense maintenance and repair costs as incurred. Gains or losses on the dispositions of property and equipment are recognized in the period of disposal.

Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset or the related lease as follows:

Depreciable land improvements	2-50 years
Building and improvements	5-25 years
Furniture and equipment	2-5 years

Impairment

We assess our real estate portfolio and property and equipment used in operations for impairment on a quarterly basis or whenever certain events or changes in circumstances indicate a possible impairment of the carrying value of the asset. Events or circumstances that may occur include changes in management’s intended holding period or potential sale to a third party, significant changes in real estate market conditions or tenant financial difficulties resulting in non-payment of the lease. Impairments are measured as

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the amount by which the current book value of the asset exceeds the estimated fair value of the asset. With respect to estimated expected future cash flows for determining whether an asset is impaired, assets are grouped at the lowest level of identifiable cash flows.

If and when an investment in direct financing leases is identified for impairment evaluation, we will apply the guidance in both ASC 310, “Receivables” (“ASC 310”) and ASC 360 “Property, Plant and Equipment” (“ASC 360”). Under ASC 310, the lease receivable portion of the net investment in direct financing lease is identified for impairment when it becomes probable that we will be unable to collect all rental payments associated with our investment in direct financing leases. Under ASC 360, the residual value portion of the net investment in direct financing leases is monitored for impairment under the same method we apply to real estate investments.

Tenant Reimbursement of Property Taxes

Real estate taxes paid directly by our tenants to taxing authorities are recorded gross on our Balance Sheets and Income Statements, as we have concluded we are the primary obligor. Such amounts are presented as revenues from tenant reimbursement of property taxes with a corresponding and offsetting property tax expense. Upon adoption of ASC 842, “Leases” (“ASC 842”) in the first quarter of 2019, we believe such amounts will be presented net, as the tenants pay the real estate taxes directly to the applicable taxing authority. Refer to Note 3 - Recently Issued Accounting Pronouncements for further details.

Revenue from Golf Operations

On the Formation Date, subsidiaries of VICI Golf entered into a golf course use agreement (the “Golf Course Use Agreement”) with New CEOC and Caesars Enterprise Services, LLC (“CES”) (collectively, the “users”), whereby the users were granted certain priority rights and privileges with respect to access and use of certain golf course properties. Payments under the Golf Course Use Agreement are currently comprised of a $10.2 million annual membership fee, $3.1 million of use fees and approximately $1.2 million of minimum rounds fees. The annual membership fee, use fees and minimum round fees are subject to an annual escalator beginning at the times provided under the Golf Course Use Agreement. Revenue from the Golf Course Use Agreement is recognized in accordance with ASC 606, “Revenue From Contracts With Customers”.

Additional revenues from golf course operations, food and beverage and merchandise sales are recognized at the time of sale or when the service is provided and are reported net of sales tax. Golf memberships sold to individuals are not refundable and are deferred and recognized within golf revenue in the Statements of Operations over the expected life of an active membership, which is typically one year or less.

Fair Value Measurements

We measure the fair value of financial instruments based on assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. In accordance with the fair value hierarchy, Level 1 assets/liabilities are valued based on quoted prices for identical instruments in active markets, Level 2 assets/liabilities are valued based on quoted prices in active markets for similar instruments, on quoted prices in less active or inactive markets, or on other “observable” market inputs and Level 3 assets/liabilities are valued based significantly on “unobservable” market inputs.

Refer to Note 11 - Fair Value for further information.

Derivative Financial Instruments

We record our derivative financial instruments as either Other assets or Other liabilities on our Balance Sheet at fair value.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows are considered cash flow hedges. We formally document our hedge relationships and designation at the contract’s inception. This documentation includes the identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and our evaluation of the effectiveness of its hedged transaction.

On a quarterly basis, we also assess whether the derivative we designated in each hedging relationship is expected to be, and has been, highly effective in offsetting changes in the value or cash flows of the hedged items. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued and the changes in fair value of the instrument are included in net income prospectively. If the hedge relationship is terminated, then the value of the derivative is

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recorded in Accumulated other comprehensive income and recognized in earnings when the cash flows that were hedged affect earnings. Changes in the fair value of our derivative instruments that qualify as hedges are reported as a component of Accumulated other comprehensive income on our consolidated financial statements.

We use derivative instruments to mitigate the effects of interest rate volatility inherent in our variable rate debt, which could unfavorably impact our future earnings and forecasted cash flows. We do not use derivative instruments for speculative or trading purposes.

Income Taxes-REIT Qualification

We have elected to be taxed as a REIT for U.S. Federal income tax purposes commencing with our taxable year ended December 31, 2017. 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 stockholders, determined without regard to the dividends paid deduction and excluding any net capital gains. As a REIT, we generally will not be subject to federal income tax on income that we pay as distributions to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax on our taxable income at regular corporate income tax rates, and distributions paid to our stockholders would not be deductible by us in computing taxable income. Additionally, any resulting corporate liability created if we fail to qualify as a REIT could be substantial and could materially and adversely affect our net income and net cash available for distribution to stockholders. 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.

The TRS operations (represented by the four golf course businesses) are 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 its TRS operations are subject to federal and state income taxes. The provision for income taxes includes current and deferred portions. The current income tax provision differs from the amount of income tax currently payable because of temporary differences in the recognition of certain income and expense items between financial reporting and income tax reporting. We use the asset and liability method to provide for income taxes, which requires that our income tax expense reflect the expected future tax consequences of temporary differences between the carrying amounts of assets or liabilities for financial reporting versus income tax purposes. Accordingly, a deferred tax asset or liability for each temporary difference is determined based on enacted tax rates that we expect to be in effect when the underlying items of income and expense are realized and the differences reverse.

We recognize any interest and penalties, as incurred, in general and administrative expenses in our Statement of Operations.

Debt Issuance Costs

Debt issuance costs are deferred and amortized to interest expense over the contractual term of the underlying indebtedness. We present unamortized deferred financing costs as a direct deduction from the carrying amount of the associated debt liability.

Acquisition and Transaction Expenses

Dead deal costs and other transaction and acquisition related expenses which are not capitalizable under GAAP are expensed in the period they occur.

Stock-Based Compensation

We account for stock-based compensation under ASC 718, Compensation - Stock Compensation (“ASC 718”), which requires us to expense the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This expense is recognized ratably over the requisite service period following the date of grant. For non-vested share awards that vest over a predetermined time period, we use the10-day volume weighted average price using the 10 trading days ending on the grant date. For non-vested share awards that vest based on market conditions, we use a Monte Carlo simulation (risk-neutral approach) to determine the value of each tranche.

The unrecognized compensation relating to awards under our stock incentive plan will be amortized to general and administrative expense over the awards’ remaining vesting periods. Vesting periods for award of equity instruments range from zero to four years.

See Note 15—Stock-Based Compensation for further information related to the stock-based compensation.

Earnings Per Share

Earnings per share (”EPS”) is calculated in accordance with ASC 260, “Earnings Per Share”. Basic EPS is computed by dividing net income applicable to common stockholders by the weighted-average number of shares of common stock outstanding during

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the period. Diluted EPS reflects the additional dilution for all potentially-dilutive securities including those from our stock incentive plan.

See Note 14—Earnings Per Share for the detailed EPS calculation.

Underwriting Commissions and Offering Costs

Underwriting commissions and offering costs incurred in connection with common stock offerings are reflected as a reduction of additional paid-in capital. Costs incurred that are not directly associated with the completion of a common stock offering are expensed when incurred.

Concentrations of Credit Risk

As of December 31, 2018, all of our real estate holdings (other than VICI Golf) are currently leased by us to CEOC or other affiliates of Caesars, and most of our revenues are derived from the Lease Agreements that we have with CEOC or other affiliates of Caesars. Additionally, our properties on the Las Vegas Strip generated approximately 36% of our lease revenue for the year ended December 31, 2018. Other than having a single tenant from which we will derive most of our revenue and our concentration in the Las Vegas market, we do not believe there are any other significant concentrations of credit risk.

On November 13, 2018, we entered into definitive agreements to acquire from affiliates of JACK Entertainment LLC all of the land and real estate assets associated with Greektown located in Detroit, Michigan, for $700.0 million in cash, and an affiliate of Penn National has agreed to acquire the operating assets of Greektown for $300.0 million in cash (together, the “Greektown Acquisition”). Additionally, on January 2, 2019 we completed the previously disclosed transaction to acquire the Margaritaville Resort Casino located in Bossier City, Louisiana, with Penn National . These transactions will result in us having a more diversified tenant base.

Note 3 — Recently Issued Accounting Pronouncements

Accounting Standard Update (“ASU”) No. 2018-13 - Fair Value Measurement (Topic 820) - August 2018: The amendments in the update remove, modify and add certain fair value disclosures as a broader initiative to improve the effectiveness of financial disclosures. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. In 2018 we elected to early adopt this ASU, which resulted in no material changes to our fair value disclosures.

ASU No. 2017-12 - Derivatives and Hedging (Topic 815) - August 2017: The amendments refine and expand hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. The transition guidance provides the option of early adoption using a modified retrospective transition method in any interim period after issuance of the update, or alternatively requires adoption for fiscal years beginning after December 15, 2018. We adopted this guidance in the quarter ended June 30, 2018 in connection with the cash flow hedges that we entered into in April 2018. Since we did not hold any derivatives prior to implementation of this guidance, the adoption had no impact on our Financial Statements.

ASU No. 2016-13 - Financial Instruments-Credit Losses (Topic 326) - June 2016 (as amended through November 2018)**: This amended guidance changes how entities will measure credit losses for most financial assets and certain other instruments, including direct financing leases, that are not measured at fair value through net income. The guidance replaces the current “incurred loss” model with an “expected loss” approach, which will generally result in earlier recognition of allowance for losses. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted after December 2018. We are currently evaluating the impact of adopting the new standard and have determined that, upon adoption, we will be required to estimate and record credit losses related to our investments in deferred financing leases.

ASU No. 2016-02 - Leases (Topic 842) - February 2016 (as amended through December 2018): The amended guidance requires most lease obligations to be recognized as a right-of-use asset with a corresponding liability on the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The guidance should be implemented for the earliest period presented using a modified retrospective approach, which includes optional practical expedients primarily focused on leases that commence before the effective date. We plan to elect to use such practical expedients upon adoption on January 1, 2019.

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We are currently finalizing our evaluation of the impact of adopting this new standard on our Financial Statements but do not expect the adoption of the new guidance to have a material impact on the accounting treatment of our triple-net tenant leases, which are the primary source of our revenues. However, upon adoption, we anticipate that certain initial direct costs associated with the execution of lease agreements such as legal fees and transaction costs will no longer be capitalizable and will instead be expensed in the period incurred. Additionally, pursuant to ASU 2018-20, tenant reimbursements of property taxes will be presented on a net basis, as the lessor pays for such costs directly. Finally, we anticipate that long-term leases entered into or modified subsequent to our adoption will be considered sales-type leases, as defined in ASC 842. The accounting for a sales-type lease is substantially consistent with that of the current accounting for our deferred financing leases. If we enter into future sale-lease back transactions with Caesars or other operators and the lease is determined to be a sales-type lease under ASC 842, we will be required to account for such transaction as a financing receivable.

In relation to certain leases for which we are the lessee, such as the ground lease on the Cascata golf course, upon adoption we will be required to record a right of use asset and corresponding lease liability on our balance sheet. We do not anticipate a material change to our lease expense as a result of the change in accounting as such expense will still be recorded on a straight-line basis.

ASU No. 2014-09 - Revenue from Contracts with Customers - May 2014 (amended January 2017)**: The new guidance is intended to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP applicable to revenue transactions. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. We adopted this standard effective January 1, 2018. There was no material impact on our Financial Statements as the majority of our revenue recognition policies was not impacted by the new standard, as leases, which represent the substantial majority of our revenues, were excluded from the new guidance. The adoption of this guidance did not change the timing or process in which we recognize golf revenue.

Note 4 — Fresh-Start Reporting

On the Formation Date, we adopted fresh-start reporting in accordance with provisions of ASC 852. In the application of fresh start accounting, we allocated the enterprise value to the fair value of assets and liabilities in conformity with the guidance for the acquisition method of accounting for business combinations under ASC 805. The amount remaining after allocation of the enterprise value to the fair value of identified tangible and intangible assets and liabilities, if any, would be reflected as goodwill and subject to periodic evaluation for impairment. In addition to fresh start accounting, our Financial Statements reflect all effects of the transactions contemplated by the Plan of Reorganization.

Under ASC 852, fresh-start reporting is required upon emergence from Chapter 11 if (i) the value of the assets of the emerging entity immediately before the date of confirmation is less than the total of all post-petition liabilities and allowed claims; and (ii) holders of existing voting shares immediately before confirmation receive less than 50% of the voting shares of the emerging entity. Accordingly, we qualified for and adopted fresh-start reporting as of October 6, 2017. Adopting fresh-start reporting results in a new reporting entity with no beginning retained earnings or deficits. It also includes the issuance of new shares of the reorganized entity caused by change of control under ASC 852.

The net book value of the real estate assets contributed to us by CEOC under the Plan of Reorganization was $4.8 billion. Based upon the analysis we completed with the assistance of outside third-party valuation experts, we concluded the fair value of these assets were $8.3 billion, net of non-controlling interests related to the Joliet facilities of $83.0 million.

Real estate assets were valued using an income approach and, more specifically, the discounted cash flow (“DCF”) technique. Future lease payments for the properties were modeled according to the terms contained in the initial Lease Agreements. Although we believe the length of the leases with CEOC will extend to the full thirty-five years lease term (assuming the exercise of tenant renewal options) per the initial Lease Agreements, the real property valuation analysis contemplates typical market participant oriented nine- and fourteen-year hold periods as a best methodology to estimate the value of the cash flow during the full term of the lease. Appropriate expenses were estimated and deducted from the future contract rent to derive expected future cash flows. Terminal or reversion values are calculated for both hold period scenarios based on estimated market terminal capitalization rates. The DCF technique estimates value by discounting back to present value the anticipated future cash flows for the interim periods in the DCF model plus the present value of the terminal values using an appropriate discount rate. The discount rate was derived based upon a weighted average cost of capital (“WACC”). The WACC was estimated based upon observations of a peer group of guideline companies whose stock was publicly traded on recognized exchanges as such guideline companies were considered comparable to us. Factors considered in deriving a WACC included general market rates of return at the valuation date, business risks associated with the industry in which VICI operates, and other specific risk factors deemed appropriate. An estimated discount rate of 9.0% was selected as a base rate for all properties. Individual property discount rates were then adjusted based on the specific additional aforementioned risk factors and, once adjusted, ranged from 7.5% to 17.5%.

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The following fresh-start balance sheet illustrates the financial effects of the implementation of the Plan and the adoption of fresh-start reporting. It reflects the effect of the completion of the transactions included in the Plan, including the issuance of equity and the contribution of properties.

(In thousands)	Fair Value as of Formation Date (October 6, 2017)
Assets
Real estate portfolio:
Investments in direct financing leases, net	$	7,124,000
Investments in operating leases	1,184,000
Property and equipment used in operations, net	75,000
Cash and cash equivalents	55,771
Other assets	681
Total assets	$	8,439,452
Liabilities
Debt	$	4,917,000
Deferred income taxes	5,631
Accounts payable and accrued expenses	149
Total liabilities	4,922,780
Redeemable preferred stock	759,000
Stockholders’ Equity
Common stock	1,772
Additional paid-in capital	2,672,900
Total VICI stockholders’ equity	2,674,672
Non-controlling interests	83,000
Total stockholders’ equity	2,757,672
Total liabilities and stockholders’ equity	$	8,439,452

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Note 5 — Property Transactions

2018 Transactions

Our significant activities in 2018, in reverse chronological order, are as follows:

Purchase of Harrah’s Philadelphia and Octavius Tower

On December 26, 2018 we completed the previously announced transaction with Caesars to acquire all of the land and real estate assets associated with Harrah’s Philadelphia Casino and Racetrack (“Harrah’s Philadelphia”) from Caesars for $241.5 million, which purchase price was reduced by $159.0 million to reflect the aggregate net present value of the modifications to the Caesars Lease Agreements (as further described below and in Note 6 - Real Estate Investments), resulting in cash consideration of approximately $82.5 million. In addition, on July 11, 2018, we completed the previously announced transaction with Caesars to acquire, and lease back, all of the land and real estate assets associated with the Octavius Tower at Caesars Palace (“Octavius Tower”) for a purchase price of $507.5 million in cash. Octavius Tower is operated pursuant to the CPLV Lease Agreement, as amended, which provides for annual rent with respect to Octavius Tower of $35.0 million payable in equal consecutive monthly installments and has an initial term that expires on October 31, 2032, with four five-year renewal options.

In connection with the closing of the acquisition of Harrah’s Philadelphia, each of the Non-CPLV Lease Agreement and the CPLV Lease Agreement were amended to, among other things, include Harrah’s Philadelphia and Octavius Tower, respectively, and Caesars will continue to operate both properties under the terms of such leases as amended. The amendment to the Non-CPLV Lease Agreement provided for an additional $21.0 million in annual rent for Harrah’s Philadelphia, which is subject to the amended provisions of the lease. The HLV Lease Agreement and the Joliet Lease Agreement were modified at such time to achieve consistency with the other Lease Agreements. Refer to Note 6 - Real Estate Portfolio for a summary of the terms of the modified leases.

Purchase of Greektown

On November 13, 2018, we entered into definitive agreements to acquire from affiliates of JACK Entertainment LLC all of the land and real estate assets associated with Greektown, for $700.0 million in cash. Simultaneous with the closing of the Greektown Acquisition, the Company will enter into a triple-net lease agreement for Greektown with a subsidiary of Penn National. The lease will have an initial total annual rent of $55.6 million and an initial term of 15 years, with four five-year tenant renewal options. The tenant’s obligations under the lease will be guaranteed by Penn National and certain of its subsidiaries. The transaction is expected to close mid-2019 and is subject to regulatory approvals and customary closing conditions. We can provide no assurances that the acquisition of Greektown will be consummated on the terms or timeframe described herein, or at all.

Purchase of Margaritaville Resort Casino

On June 18, 2018, we entered into definitive agreements to acquire (i) the land and real estate assets of the Margaritaville Resort Casino, located in Bossier City, Louisiana, for $261.1 million and (ii) concurrently with the closing of the transaction, triple-net lease the property to a subsidiary of Penn National. The lease has an initial annual rent of $23.2 million and an initial term of 15 years, with four five-year renewal options. The tenant’s obligations under the lease are guaranteed by Penn National and certain of its subsidiaries. We subsequently closed on the acquisition of Margaritaville Resort Casino on January 2, 2019.

2017 Transactions

Our significant activities in 2017, in reverse chronological order, are as follows:

Purchase of Harrah’s Las Vegas Real Estate

In December 2017, we completed a transaction with Caesars, pursuant to which we acquired all of the land and real property improvements associated with the property commonly known as Harrah’s Las Vegas Hotel & Casino (“Harrah’s Las Vegas” or “HLV”) for a purchase price of $1.1 billion.

At closing, we entered into the HLV Lease Agreement, whereby Caesars leased back Harrah’s Las Vegas from us. Under the terms of the HLV Lease Agreement, Caesars is responsible for ongoing costs relating to the property, including property taxes, insurance, and maintenance and repair costs that arise from the use of the property and are required to continue to invest in the property and related equipment. The HLV Lease Agreement has an initial 15-year term with four five-year renewal terms exercisable at the option of the lessee (subject to certain conditions) and provides for a fixed base rent for each of the first seven years of the lease term equal to $87.4 million annually. We accounted for this transaction as a direct financing lease on our Balance Sheet.

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Sale of Eastside Property

In December 2017, we sold the Eastside Property to Caesars for $73.6 million.

Pursuant to this agreement, Caesars is responsible for the remediation of the flood plain mechanism on the Eastside Property. The costs of the remediation work will be borne fifty percent (50%) by us and fifty percent (50%) by Caesars, pari passu, until such time as the total cost incurred in connection with the remediation work is equal to $12.0 million. Any costs in excess of $12.0 million incurred in connection with the remediation work shall be the sole responsibility of Caesars.

Due to the put/call option on the land parcels, as described below, it was determined that the transaction does not meet the requirements of a completed sale for accounting purposes. As a result, at December 31, 2017, we reclassified $73.6 million from Investment in operating leases to Land. Additionally, we recorded a $73.6 million Deferred financing liability on our Balance Sheet.

Put/Call Agreement

The Caesars Forum Convention Center is currently being constructed on the Eastside Property. Accordingly, we entered into a put/call agreement with Caesars, which provides both parties with certain rights and obligations including: (i) a put right in favor of Caesars, which, if exercised, would result in the sale by Caesars to us and simultaneous leaseback by us to Caesars of the Caesars Forum Convention Center (the “Put Right”); (ii) if Caesars exercises the Put Right and, among other things, the sale of the Caesars Forum Convention Center to us does not close for certain reasons more particularly described in the put/call agreement, then a repurchase right in favor of Caesars, which, if exercised, would result in the sale of Harrah’s Las Vegas by us to Caesars; and (iii) a call right in our favor, which, if exercised, would result in the sale by Caesars to us and simultaneous leaseback by us to Caesars of the Caesars Forum Convention Center.

Amended and Restated Right of First Refusal Agreement

Simultaneously with the sale of the Eastside Property, we also entered into an Amended and Restated Right of First Refusal Agreement with Caesars pursuant to which we will have a right, subject to certain exclusions, (i) to acquire (and lease to Caesars) any of the gaming facilities of Centaur Holdings, LLC, which was acquired by Caesars in the third quarter of 2018, (ii) to acquire (and lease to Caesars) any domestic gaming facilities located outside of the Gaming Enterprise District of Clark County, Nevada, proposed to be acquired or developed by Caesars, and (iii) to acquire certain income-producing improvements if built by Caesars in lieu of the Caesars Forum Convention Center on the Eastside Property, subject to certain exclusions.

The Amended and Restated Right of First Refusal Agreement also contains a right of first refusal in favor of Caesars, pursuant to which Caesars will have the right to lease and manage any domestic gaming facility located outside of Greater Las Vegas, proposed to be acquired or developed by us that is not: (i) any asset that is then subject to a pre-existing lease, management agreement or other contractual restriction that was not entered into in contemplation of such acquisition or development and which (x) was entered into on arms’ length terms and (y) would not be terminated upon or prior to closing of such transaction, (ii) any transaction for which the opco/propco structure would be prohibited by applicable laws, rules or regulations or which would require governmental consent, approval, license or authorization (unless already received), (iii) any transaction structured by the seller as a sale-leaseback, (iv) any transaction in which we and/or our affiliates will not own at least 50% of, or control, the entity that will own the gaming facility, and (v) any transaction in which we or our affiliates propose to acquire a then-existing gaming facility from ourselves or our affiliates.

In the event that the foregoing rights are not exercised by us or Caesars and CEOC, as applicable, each party will have the right to consummate the subject transaction without the other’s involvement, provided the same is on terms no more favorable to the counterparty than those presented to us or Caesars and CEOC, as applicable, for consummating such transaction.

In December 2018, we entered into the Second Amended and Restated Right of First Refusal Agreement which replaced the Amended and Restated Right of First Refusal Agreement and, among other things, provided us with the right to acquire from Caesars, under certain circumstances, certain undeveloped land adjacent to the Las Vegas Strip.

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Option Properties

Call Right Agreements

On the Formation Date, we entered into certain call right agreements, which provide us with the opportunity to acquire Harrah’s Atlantic City, Harrah’s New Orleans and Harrah’s Laughlin from Caesars. We can exercise the call rights within five years from the Formation Date by delivering a request to the applicable owner of the property containing evidence of our ability to finance the call right. The purchase price for each property will be 10 multiplied by the initial property lease rent for the respective property, with the initial property lease rent for each property being the amount that causes the ratio of (x) EBITDAR of the property for the most recently ended four-quarter period for which financial statements are available to (y) the initial property lease rent to equal 1.67.

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Note 6 — Real Estate Portfolio

Our real estate portfolio consisted of the following as of December 31, 2018 and 2017:

(In thousands)	December 31, 2018				December 31, 2017
Minimum lease payments receivable under direct financing leases (1)	$	27,285,943			$	29,302,166
Estimated residual values of leased property (unguaranteed)	2,135,312				1,987,651
Gross investment in direct financing leases	29,421,255				31,289,817
Unamortized initial direct costs	22,822				—
Less: Unearned income	(20,528,030		)		(23,021,174		)
Net investment in direct financing leases, net	8,916,047				8,268,643
Investment in operating leases (2)	1,086,658				1,110,400
Land (3)	95,789				73,600
Total Real estate portfolio	$	10,098,494			$	9,452,643

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(1) Minimum lease payments do not include contingent rent, as discussed below, that may be received under the Lease Agreements.

(2) Represents portion of land separately classified and accounted for under the operating lease model associated with our investment in Caesars Palace Las Vegas and certain operating land parcels contained in the Non-CPLV Lease Agreement.

(3) Represents our investment in the Eastside Property and certain non-operating, de minimis land parcels contained in the Non-CPLV Lease Agreement. Refer to Note 5 *—*Property Transactions in relation to the Eastside Property and “Loss on impairment” below for further information on the non-operating de minimis land parcels.

The following table details the components of our income from direct financing and operating leases:

(In thousands)	Year Ended December 31, 2018				Period from October 6, 2017 to December 31, 2017
Income from direct financing leases	$	741,564			$	150,171
Income from operating leases	47,972				11,529
Total leasing revenue	789,536				161,700
Less: Direct financing lease adjustment (1)	(45,404		)		(8,443		)
Total contractual leasing revenue	$	744,132			$	153,257

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(1) Amounts represent the non-cash adjustment to income from direct financing leases in order to recognize income on an effective interest basis at a constant rate of return over the term of the leases as well as the amortization of capitalized transaction and leasing costs.

At December 31, 2018, minimum lease payments owed to us for each of the five succeeding years under direct financing and operating leases are as follows:

(In thousands)	Minimum Lease Payments (1)
2019	$	795,467
2020	807,283
2021	819,288
2022	831,922
2023	846,042
Thereafter	24,662,875
Total	$	28,762,877

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(1) Minimum lease payments do not include contingent rent, as discussed below, that may be received under the Lease Agreements.

The weighted average remaining lease term, including renewal options, for both operating and direct financing leases at December 31, 2018 was 33.7 years.

F - 21

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Caesars Lease Agreements - Overview

On December 26, 2018, in connection with the closing of the acquisition of Harrah’s Philadelphia, each of the Caesars Lease Agreements were amended to better align our interests with that of our tenant Caesars. Pursuant to the amended lease agreements, the provisions regarding the Escalators for the Non-CPLV Lease Agreement and Joliet Lease Agreement were amended so that the rent escalation commenced effective as of November 1, 2018. The following is a summary of the material lease provisions of our Caesars Lease Agreements prior to amendment and as amended:

($ In thousands)		Non-CPLV Lease Agreement and Joliet Lease Agreement (1)				CPLV Lease Agreement				HLV Lease Agreement (7)
Lease Provision (2)		Prior to Amendment		As Amended		Prior to Amendment		As Amended		Prior to Amendment and as Amended
Initial Term		15 years		15 years		15 years		15 years		15 years
Renewal Terms		Four, five-year terms		Four, five-year terms		Four, five-year terms		Four, five-year terms		Four, five-year terms
Initial Base Rent (3)		$472,925		$493,925		$165,000		$200,000		$87,400
Escalator commencement		Lease year six		Lease year two		Lease year two		Lease year two		Lease year two
Escalator (4)		Consumer price index subject to 2% floor		Lease years 2-5 - 1.5% Lease Years 6-15 - Consumer price index subject to 2% floor		Consumer price index subject to 2% floor		Consumer price index subject to 2% floor		Lease years 2-5 - 1% Lease Years 6-15 - Consumer price index subject to 2% floor
EBITDAR to Rent Ratio floor (5)		None		1.2x commencing lease year 8		None		1.7x commencing lease year 8		1.6x commencing lease year 6
Variable Rent commencement/reset		Lease years 8 and 11		Lease years 8 and 11		Lease years 8 and 11		Lease years 8 and 11		Lease years 8 and 11
Variable Rent split (6)		Lease years 8-10 - 70% Base Rent and 30% Variable Rent Lease years 11-15- 80% Base Rent and 20% Variable Rent		Lease years 8-10 - 70% Base Rent and 30% Variable Rent Lease years 11-15- 80% Base Rent and 20% Variable Rent		80% Base Rent and 20% Variable Rent		80% Base Rent and 20% Variable Rent		80% Base Rent and 20% Variable Rent
Variable Rent percentage (6)		Lease years 8-10 - 19.5% Lease years 11-15 - 13%		4%		13%		4%		4%

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(1) With respect to the Joliet Lease Agreement, we are entitled to receive 80% of the rent thereunder pursuant to the operating agreement of our joint venture, Harrah’s Joliet Landco LLC.

(2) All capitalized terms used without definition herein have the meanings detailed in the applicable Caesars Lease Agreement.

(3) The base rents of the Non-CPLV Lease Agreement and CPLV Lease Agreement were adjusted by $21.0 million and $35.0 million*, respectively, to incorporate the base rent for Harrah’s Philadelphia and Octavius Tower, respectively. The additional* $35.0 million of rent for Octavius Tower is not subject to the Escalator.

(4) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP. No such rent has been recognized for the year ended December 31, 2018 and the period from October 6, 2017 to December 31, 2017.

(5) In the event that the EBITDAR to Rent Ratio coverage is below the stated floor, the Escalator of the respective Caesars Lease Agreements will be reduced to such amount to achieve the stated EBITDAR to Rent Ratio coverage, provided that the amount shall never result in a decrease to the prior year’s rent.

(6) Variable Rent is not subject to the Escalator and is calculated based on the increase or decrease of Net Revenues, as defined in the Caesars Lease Agreements, multiplied by the Variable Rent percentage.

(7) No material modifications to the HLV Lease Agreement occurred as a result of the amendments to the Caesars Lease Agreements.

F - 22

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As a result of the amendments, the purchase price of Harrah’s Philadelphia was reduced by $159.0 million to reflect the aggregate net present value of the modifications to the Caesars Lease Agreements. Additionally, the rent of the Non-CPLV Lease Agreement and CPLV Lease Agreement was adjusted by $21.0 million and $35.0 million, per annum respectively, to incorporate the rent for Harrah’s Philadelphia and Octavius Tower, respectively.

Margaritaville Lease Agreement - Overview

Subsequent to year end, on January 2, 2019, we completed the previously announced transaction to acquire the Margaritaville Resort Casino. The following is a summary of the material lease provisions of our lease with a subsidiary of Penn National which commenced on January 2, 2019, the date of acquisition:

($ In thousands)
Lease Provision		Term
Initial term		15 years
Renewal terms		Four, five-year terms
Building base rent		$17,200
Escalation commencement		Lease year two
Escalation		2% of Building Base rent, subject to the EBITDAR to rent ratio floor
EBITDAR to rent ratio floor (1)		1.9x commencing lease year two
Land base rent (2)		$3,000
Percentage rent (3)		$3,000 (fixed for lease year one and two)
Percentage rent reset		Lease year three and each and every other lease year thereafter
Percentage rent multiplier		The product of (i) 4% and (ii) the excess (if any) of (a) the average annual net revenue of a trailing two-year period preceding such reset year over (b) a threshold amount (defined as 50% of LTM net revenues prior to acquisition)

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(1) In the event that the EBITDAR to rent ratio coverage is below the stated floor, the escalation will be reduced to such amount to achieve the stated EBITDAR to rent ratio coverage, provided that the amount shall never result in a decrease to the prior year’s rent.

(2) Land base rent is not subject to escalation.

(3) Percentage rent is subject to the percentage rent multiplier.

Loss on Impairment

We assess our real estate portfolio for impairment on a quarterly basis or whenever certain events or changes in circumstances indicate a possible impairment of the carrying value of the asset. Events or circumstances that may occur include changes in management’s intended holding period or potential sale to a third party, significant changes in real estate market conditions or tenant financial difficulties resulting in non-payment of the lease. Impairments are measured as the amount by which the current book value of the asset exceeds the estimated fair value of the asset.

On the Formation Date, CEOC transferred certain vacant, non-operating land parcels to us which are subject to the provisions of the Non-CPLV Lease Agreement. The Non-CPLV Lease Agreement allows for the sale of these vacant, non-operating land parcels without Caesars consent since they are specifically identified as de minimis to the operations of Caesars. All of the land parcels are located outside of Las Vegas and none of the land parcels are a component of the operations of our regional property portfolio. These vacant parcels of land had a fair value of $34.7 million on the Formation Date and were included in Investments in operating leases on our Balance Sheet.

We undertook a short-term strategic initiative to monetize certain of these vacant, non-operating land parcels. In relation to this initiative, we sold one land parcel in the quarter ended September 30, 2018 and are actively engaged in negotiations with buyers on two other parcels of land. Based on the sales prices that were or are being negotiated, we determined that the fair value of these three land parcels was lower than their current carrying values and recognized an impairment charge of $6.3 million, based on the anticipated sales prices. As a result of the identified impairment on these three parcels of land, we undertook an evaluation to assess whether indicators of impairment were present on the remaining vacant, non-operating land parcels. We used a sales comparison approach to determine the fair value of the remaining vacant, non-operating land parcels and identified $6.0 million in additional impairment charges. The impairment loss recorded was the result of various factors including changes in market conditions, strategic assessment and environmental and zoning issues that were identified during the sales process. Taking into account the

F - 23

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

impairment charge recognized during the year ended December 31, 2018 and the sale of one of the parcels that occurred during the year, the current carrying value of the vacant, non-operating land parcels is $22.2 million as of December 31, 2018.

In the current year we reclassified the remaining $22.2 million carrying value of the vacant, non-operating land from Investments in operating leases to Land. As of December 31, 2018, the balance of Land consists of $22.2 million representing the vacant, non-operating land and $73.6 million representing the Eastside Property.

Note 7 — Property and Equipment Used in Operations, Net

Property and equipment used in operations is primarily attributable to golf operations land, building and improvements and consists of the following:

(In thousands)	December 31, 2018				December 31, 2017
Land and land improvements	$	58,573			$	57,901
Buildings and improvements	14,572				14,572
Furniture and equipment	2,805				2,578
Total property and equipment used in operations	75,950				75,051
Less: accumulated depreciation	(4,437		)		(751		)
Total property and equipment used in operations, net	$	71,513			$	74,300

(In thousands)	Year Ended December 31, 2018				Period from October 6, 2017 to December 31, 2017
Depreciation expense	$	3,686			$	751

Note 8 — Other Liabilities

The following table details the components of our other liabilities:

(In thousands)	December 31, 2018				December 31, 2017
Other accrued expenses	30,951				2,796
Derivative liability	22,124				—
Accrued payroll and other compensation	4,934				2,559
Deferred income taxes	3,340				3,718
Accounts payable	1,057				5,207
Total other liabilities	$	62,406			$	14,280

F - 24

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9 — Debt

The following tables detail our debt obligations as of December 31, 2018 and 2017:

($ in thousands)		December 31, 2018
Description of Debt		Final Maturity		Interest Rate		Face Value				Carrying Value*(1)*
VICI PropCo Senior Secured Credit Facilities
Revolving Credit Facility*(2)(3)*		2022		L + 2.00%		$	—			$	—
Term Loan B Facility*(3)(4)(5)*		2024		L + 2.00%		2,100,000				2,073,784
Second Lien Notes*(6)*		2023		8.00%		498,480				498,480
CPLV Debt
CMBS Debt (the “CPLV CMBS Debt”) (7)		2022		4.36%		1,550,000				1,550,000
Total Debt						$	4,148,480			$	4,122,264

($ in thousands)		December 31, 2017
Description of Debt		Final Maturity		Interest Rate		Face Value				Carrying Value*(1)*
VICI PropCo Senior Secured Credit Facilities
Revolving Credit Facility*(2)(3)*		2022		L + 2.25%		$	300,000			$	300,000
Term Loan B Facility*(3)(4)(5)*		2024		L + 2.25%		2,200,000				2,168,864
Second Lien Notes*(6)*		2023		8.00%		766,892				766,892
CPLV Debt
CMBS Debt (the “CPLV CMBS Debt”) (7)		2022		4.36%		1,550,000				1,550,000
Total Debt						$	4,816,892			$	4,785,756

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(1)	Carrying value is net of unamortized original issue discount and unamortized debt issuance costs incurred in conjunction with debt.

(2)	Interest on any outstanding balance is payable monthly. Any unused balance is subject to a 0.5% commitment fee paid quarterly.

(3)	Initially bore interest at LIBOR plus 2.25%**. Upon our initial public offering, on February 5, 2018, the interest rate was reduced to LIBOR plus 2.00%**.

(4)	Interest is payable monthly. On April 24, 2018, we entered into four interest rate swap agreements with third party financial institutions having an aggregate notional amount of $1.5 billion*. The interest rate swaps are designated as cash flow hedges that effectively fix the LIBOR component of the interest rate on a portion of the outstanding debt at* 2.8297%**.

(5)	Final maturity is December 2024 or, to the extent the Second Lien Notes remain outstanding, July 2023 (three months prior to the maturity of the Second Lien Notes).

(6)	Interest is payable semi-annually.

(7)	Interest is payable monthly.

The following is a schedule of future minimum repayments of our long-term debt as of December 31, 2018:

(Dollars in thousands)	Future Minimum Payments
2019	$	—
2020	—
2021	—
2022	1,560,000
2023	520,480
Thereafter	2,068,000
Total minimum repayments	$	4,148,480

F - 25

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes our debt related transactions from the Formation Date to December 31, 2018:

		Face Value (In thousands)
Description of Debt		Debt At Formation				Mandatory Conversion				Refinancing Transactions				Debt at December 31, 2017				IPO Transaction				Debt at December 31, 2018
VICI PropCo Senior Secured Credit Facilities
Revolving Credit Facility		$	—			$	—			$	300,000			$	300,000			$	(300,000	)		$	—
Term Loan B Facility										2,200,000				2,200,000				(100,000		)		2,100,000
First Lien Term Loan (“Prior Term Loan”)		1,638,387				—				(1,638,387		)		—				—				—
First Priority Senior Secured Notes (“Prior First Lien Notes”)		311,721				—				(311,721		)		—				—				—
Second Lien Notes		766,892				—				—				766,892				(268,412		)		498,480
CPLV Debt
CPLV CMBS Debt		1,550,000				—				—				1,550,000				—				1,550,000
CPLV Mezzanine Debt
Senior tranche		200,000				—				(200,000		)		—				—				—
Intermediate tranche		200,000				—				(200,000		)		—				—				—
Junior tranche		250,000				(250,000		)		—				—				—				—
Total Debt		$	4,917,000			$	(250,000	)		$	149,892			$	4,816,892			$	(668,412	)		$	4,148,480

Senior Secured Credit Facilities

On December 22. 2017, VICI PropCo entered into a credit agreement (the “Credit Agreement”) comprised of a $2.2 billion Term Loan B Facility and a $400.0 million Revolving Credit Facility, $300.0 million of which was borrowed on December 22, 2017 (the Term Loan B Facility and the Revolving Credit Facility are referred to together as the “Senior Secured Credit Facilities”). The Senior Secured Credit Facilities initially bore interest at LIBOR plus 2.25%. Upon our initial public offering, on February 5, 2018, the interest rate was reduced to LIBOR plus 2.00%, as contemplated by the Credit Agreement.

The Credit Agreement contains customary covenants that, among other things, limit the ability of VICI PropCo and its restricted subsidiaries to: (i) incur additional indebtedness; (ii) merge with a third party or engage in other fundamental changes; (iii) make restricted payments; (iv) enter into, create, incur or assume any liens; (v) make certain sales and other dispositions of assets; (vi) enter into certain transactions with affiliates; (vii) make certain payments on certain other indebtedness; (viii) make certain investments; and (ix) incur restrictions on the ability of restricted subsidiaries to make certain distributions, loans or transfers of assets to VICI PropCo or any restricted subsidiary. These covenants are subject to a number of exceptions and qualifications, including, with respect to the restricted payments covenant, the ability to make unlimited restricted payments to maintain our REIT status and to avoid the payment of federal or state income or excise tax, the ability to make restricted payments in an amount not to exceed 95% of our Funds from Operations (as defined in the Credit Agreement) subject to no event of default under the Credit Agreement and pro forma compliance with the financial covenant pursuant to the Credit Agreement, and the ability to make additional restricted payments in an aggregate amount not to exceed the greater of 0.6% of Adjusted Total Assets or $30,000,000. Commencing with the first full fiscal quarter ended after December 22, 2017, if the outstanding amount of the Revolving Credit Facility plus any drawings under letters of credit issued pursuant to the Credit Agreement that have not been reimbursed as of the end of any fiscal quarter exceeds 30% , of he aggregate amount of the Revolving Credit Facility, VICI PropCo and its restricted subsidiaries on a consolidated basis would be required to maintain a maximum Total Net Debt to Adjusted Total Assets Ratio, as defined in the Credit Agreement as of the last day of any applicable fiscal quarter. The restricted net assets of VICI PropCo as of December 31, 2018 were approximately $5.8 billion.

The Senior Secured Credit Facilities are secured by a first priority lien on substantially all of VICI PropCo’s and its existing and subsequently acquired wholly-owned material domestic restricted subsidiaries’ material assets, including mortgages on their respective real estate, subject to customary exclusions. None of VICI nor certain subsidiaries of VICI PropCo, including CPLV Borrower, are subject to the covenants of the Credit Agreement or are guarantors of the Senior Secured Credit Facilities. The Term

F - 26

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

B Loan Facility may be voluntarily prepaid at VICI PropCo’s option, in whole or in part, at any time, and are subject to mandatory prepayment in the event of receipt by VICI PropCo or any of its restricted subsidiaries of the proceeds from the occurrence of certain events, including asset sales, casualty events and issuance of certain indebtedness.

On February 5, 2018, we completed an initial public offering resulting in net proceeds of approximately $1.3 billion. We used a portion of those proceeds to pay down the $300.0 million outstanding on the Revolving Credit Facility and to repay $100.0 million of the principal amount outstanding on the Term Loan B Facility. Under the Credit Agreement, the Term Loan B Facility is subject to amortization of 1.0% of principal per annum payable in equal quarterly installments on the last business day of each calendar quarter. However, as a result of prepaying $100.0 million of the Term Loan B Facility in February 2018 the next principal payment due on the Term Loan B Facility is September 2022.

Refer to Note 10— Derivatives for a discussion of our interest rate swap agreements related to the Term Loan B Facility.

CPLV CMBS Debt

The CPLV CMBS Debt was incurred on October 6, 2017 pursuant to a loan agreement (the “CMBS Loan Agreement”), and is secured by a first priority lien on all of the assets of CPLV Property Owner LLC, as borrower (“CPLV Borrower”), including CPLV Borrower’s (1) fee interest (except as provided in (2)) in and to Caesars Palace Las Vegas (on the Formation Date other than Octavius Tower), (2) leasehold interest with respect to Octavius Tower on the Formation Date, and (3) interest in the CPLV Lease Agreement and all related agreements, including the Lease Agreements, subject only to certain permitted encumbrances as set forth in the CMBS Loan Agreement. The CPLV CMBS Debt bears interest at 4.36% per annum. The CPLV CMBS Debt is evidenced by one or more promissory notes and secured by, among other things, a mortgage, deed of trust or other similar security instrument that creates a mortgage lien on the fee and/or leasehold interest of the CPLV Borrower.

The CMBS Loan Agreement contains certain covenants limiting CPLV Borrower’s ability to, among other things: (i) incur additional debt; (ii) enter into certain transactions with its affiliates; (iii) consolidate, merge, sell or otherwise dispose of its assets; and (iv) allow transfers of its direct or indirect equity interests.

Second Lien Notes

The Second Lien Notes were issued on October 6, 2017, pursuant to an indenture (the “Indenture”) by and among VICI PropCo and its wholly owned subsidiary, VICI FC Inc. (together, the “Issuers”), the subsidiary guarantors party thereto, and UMB Bank National Association, as trustee. The Second Lien Notes are guaranteed by each of the Issuers’ existing and subsequently acquired wholly-owned material domestic restricted subsidiaries and secured by a second priority lien on substantially all of the Issuers’ and such restricted subsidiaries’ material assets, including mortgages on their respective real estate, subject to customary exclusions. None of VICI nor certain subsidiaries of VICI PropCo, including CPLV Borrower, are subject to the covenants of the Indenture or are guarantors of the Second Lien Notes.

The Indenture contains covenants that limit the Issuers’ and their restricted subsidiaries’ ability to, among other things: (i) incur additional debt; (ii) pay dividends on or make other distributions in respect of their capital stock or make other restricted payments; (iii) make certain investments; (iv) sell certain assets; (v) create or permit to exist dividend and/or payment restrictions affecting their restricted subsidiaries; (vi) create liens on certain assets to secure debt; (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets; (viii) enter into certain transactions with their affiliates; and (ix) designate their subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of exceptions and qualifications, including the ability to declare or pay any cash dividend or make any cash distribution to VICI to the extent necessary for VICI to distribute cash dividends of 100% of our “real estate investment trust taxable income” within the meaning of Section 857(b)(2) of the Internal Revenue Code of 1986, as amended, the ability to make certain restricted payments not to exceed the amount of our cumulative earnings (calculated pursuant to the Indenture as $30,000,000 plus 95% of our cumulative Adjusted Funds From Operations (as defined in the Indenture) less cumulative distributions, with certain other adjustments), and the ability to make restricted payments in an amount equal to the greater of 0.6% of Adjusted Total Assets (as defined in the Indenture) or$30,000,000.

The Second Lien Notes are redeemable at the option of the Issuers, with the option to redeem up to 35% of the original aggregate principal amount thereof with the net cash proceeds of certain issuances of common or preferred equity by VICI PropCo or VICI, at a price equal to 108% of such principal amount of the Second Lien Notes redeemed. In February 2018, we used a portion of the proceeds from our initial public offering to redeem $268.4 million of the Second Lien Notes, which represented 35% of the original aggregate principal amount, at a redemption price of 108% plus accrued and unpaid interest to the date of redemption. Due to the partial redemption of the Second Lien Notes, we recognized a loss on extinguishment of debt of $23.0 million during the three months ended March 31, 2018, the majority of which relates to the premium paid on the redemption price.

F - 27

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Mandatory Conversion

The CPLV mezzanine debt junior tranche of $250.0 million was automatically exchanged for 17,630,700 shares of the Company’s common stock on November 6, 2017. Refer to Note 13 - Stockholders' Equity for further information on the mandatory conversion.

Financial Covenants

As described above, our debt obligations are subject to certain customary financial and protective covenants that restrict VICI PropCo and its subsidiaries’ ability to incur additional debt, sell certain asset and restrict certain payments, among other things. These covenants are subject to a number of exceptions and qualifications, including the ability to make restricted payments to maintain our REIT status. At December 31, 2018, we are in compliance with all required covenants under our debt obligations.

Note 10 — Derivatives

On April 24, 2018, we entered into four interest rate swap agreements with third party financial institutions having an aggregate notional amount of $1.5 billion. The interest rate swap transactions are designated as cash flow hedges that effectively fix the LIBOR component of the interest rate on a portion of the outstanding debt under the Term Loan B Facility at 2.8297%.

The following table details our outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

($ in thousands)		December 31, 2018
Instrument		Number of Instruments		Fixed Rate		Notional		Index		Maturity
Interest Rate Swaps		4		2.8297%		$1,500,000		USD LIBOR		April 22, 2023

As of December 31, 2018, the interest rate swaps are in net unrealized loss positions and are recognized within Other liabilities. For the year ended December 31, 2018 the amount recorded in other comprehensive income related to the derivative instruments was an unrealized loss of $22.1 million. For the year ended December 31, 2018, we recorded interest expense of $6.3 million related to the interest rate swap agreements.

Subsequent to year end, on January 3, 2019, we entered into two additional interest rate swap transactions having an aggregate notional amount of $500.0 million. These interest rate swap transactions each have an effective date of January 22, 2019 and a termination date of January 22, 2021 and are intended to be cash flow hedges that effectively fix for two years, at a blended rate of 2.38%, the LIBOR component of the interest rate on $500.0 million of the outstanding debt under the Term Loan B Facility. Subsequent to the effectiveness and for the duration of the interest rate swap transactions, the Company is only subject to interest rate risk on $100.0 million of variable rate debt.

Note 11 — Fair Value

Recurring Fair Value Measurements

The following table summarizes our assets and liabilities measured at fair value on a recurring basis:

	December 31, 2018
(In thousands)					Fair Value
	Carrying Amount				Level 1				Level 2				Level 3
Financial assets:
Short-term investments (1)	$	520,877			$	—			$	520,877			$	—
Financial liabilities:
Derivative instruments - interest rate swaps (2)	$	22,124			$	—			$	22,124			$	—

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(1)	The carrying value of these investment is equal to their fair value due to the short-term nature of the investments as well as their credit quality.

(2)	The fair values of our interest rate swap derivative instruments were estimated using advice from a third-party derivative specialist, based on contractual cash flows and observable inputs comprising interest rate curves and credit spreads, which are Level 2 measurements as defined under ASC 820.

F - 28

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Non-recurring Fair Value Measurements

The following table summarizes our assets and liabilities measured at fair value on a non-recurring basis:

	December 31, 2018
(In thousands)					Fair Value
	Carrying Amount				Level 1				Level 2				Level 3
Financial assets:
Land (1)	$	19,019			$	—			$	7,419			$	11,600

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(1)	The fair value of the de minimis land valued based on the contract price represents a level 2 measurement as defined in ASC 820, while the inputs for the de minimis land valued using the sales comparison approach represents level 3 measurements as defined in ASC 820. The measurement and related estimates were made as of September 30, 2018.

The following table summarizes the significant unobservable inputs used in Level 3 fair value measurements:

								Significant Assumptions ($ in per sq. ft.)
Asset Type		Fair Value				Valuation Technique		Range		Weighted Average				Square Footage
Land		$	11,600			Sales comparison		$0.50 - 5.00		$	2.90			4,002,908

The estimated fair values of our financial instruments at December 31, 2018 and 2017 for which fair value is only disclosed are as follows:

	December 31, 2018								December 31, 2017
(In thousands)	Carrying Amount				Fair Value				Carrying Amount				Fair Value
Financial assets:
Cash and cash equivalents	$	577,883			$	577,883			$	183,646			$	183,646
Restricted cash	20,564				20,564				13,760				13,760
Financial liabilities:
Debt (1)
Revolving Credit Facility	$	—			$	—			$	300,000			$	300,000
Term Loan B Facility	2,073,784				2,016,000				2,168,864				2,200,000
Second Lien Notes	498,480				535,866				766,892				853,167
CPLV CMBS Debt	1,550,000				1,539,040				1,550,000				1,559,486

---

(1)	The fair value of our debt instruments was estimated using quoted prices for identical or similar liabilities in markets that are not active and, as such, these fair value measurements are considered Level 2 of the fair value hierarchy.

Note 12 — Commitments and Contingent Liabilities

Litigation

In the ordinary course of business, from time to time, we may be subject to legal claims and administrative proceedings. As of December 31, 2018, we are not subject to any litigation that we believe could have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations, liquidity or cash flows.

Operating Lease Commitments

We are liable under various operating leases for: (i) land at the Cascata golf course, which expires in 2038 and (ii) offices in New Orleans, Louisiana and New York, New York, which expire in 2019 and 2020, respectively. Total rental expense under these agreements, included in golf operations and general and administrative expenses in our Statement of Operations, was approximately

F - 29

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$1.5 million for the year ended December 31, 2018 and $0.3 million for the period from October 6, 2017 to December 31, 2017.

The future minimum lease commitments relating to the base lease rent portion of noncancelable operating leases at December 31, 2018 are as follows:

(In thousands)		Lease Commitments
2019		$	1,242
2020		983
2021		933
2022		951
2023		970
Thereafter		16,895
Total minimum lease commitments		$	21,974

Golf commitment

The TRS utilizes a third-party golf maintenance company for its Rio Secco and Cascata golf courses and recorded expense to golf operations in the amount of $3.0 million, related to such agreements. On November 1, 2018, we entered into new golf course maintenance agreements with BrightView Golf Maintenance, LLC related to the Rio Secco and Cascata golf courses, which became effective January 1, 2019. The agreements are for five years and expire on December 31, 2023, and include all labor and equipment necessary to maintain both golf course grounds. Pursuant to the agreements, we pay an annual golf maintenance fee of $3.3 million and such fee is subject to an annual escalator calculated as a weighted combination of the annual change in the Employment Cost Index (75%) and Consumer Price Index (25%).

Other Contractual Commitments

As discussed in Note 5 — Property Transactions, pursuant to the Eastside Property sale agreement, Caesars is responsible for the remediation of the flood plain mechanism on the Eastside Property. The costs of the remediation work will be borne fifty percent (50%) by us and fifty percent (50%) by Caesars, pari passu, until such time as the total cost incurred in connection with the remediation work is equal to $12.0 million. Any costs in excess of $12.0 million incurred in connection with the remediation work shall be the sole responsibility of Caesars.

Note 13 — Stockholders' Equity

Stock

We have the authority to issue 750,000,000 shares of stock, consisting of 700,000,000 shares of Common Stock, $0.01 par value per share and 50,000,000 shares of Preferred Stock, $0.01 par value per share.

2017 Transactions

Formation

On the Formation Date, the Company issued 177,160,494 shares of common stock and 12,000,000 shares of Series A preferred stock with an aggregate liquidation preference of $300.0 million ($25 per share) to CEOC and certain of its subsidiaries in exchange for the Properties and Caesars Entertainment Outdoor. CEOC distributed such shares to certain of its creditors and to certain backstop parties.

Pursuant to the Plan and a Backstop Commitment Agreement dated September 12, 2017, the backstop purchasers agreed, or otherwise had the right, to purchase a specified number of the shares of the Series A preferred stock for cash, with the cash proceeds of such purchases being paid to certain creditors of CEOC. An aggregate of 6,002,907 shares of Series A preferred stock were purchased by the backstop purchasers on the Formation Date (the “Backstop Shares”) at a price of $20.83 per share and an aggregate of 5,997,093 shares of Series A preferred stock were issued to certain creditors of CEOC as a portion of the recovery on account of their claims.

F - 30

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Mandatory Conversions

On November 6, 2017, all of the Series A preferred stock automatically converted into 51,433,692 shares of the Company’s common stock (the “Mandatory Preferred Conversion”). No additional consideration was payable in connection with the Mandatory Preferred Conversion.

In addition, on the Formation Date, CPLV Mezz 3 LLC, a special-purpose parent entity of CPLV Mezz 2 LLC (which itself is the special-purpose parent entity of CPLV Mezz 1 LLC, the special-purpose parent entity of CPLV Property Owner LLC (the mortgage borrower under the CPLV CMBS Debt and the owner of CPLV)), issued a junior tranche of CPLV mezzanine debt in an amount of $250.0 million to institutional accredited investors, which debt automatically converted into an aggregate of 17,630,700 shares of the Company’s common stock on November 6, 2017 (the “Mandatory Mezzanine Conversion”). No additional consideration was payable in connection with the Mandatory Mezzanine Conversion.

Private Equity Placement

In November 2017, we entered into a common stock purchase agreement with certain of our existing investors, which certain additional investors joined in December 2017, pursuant to which we agreed to sell, contemporaneously with the consummation of the acquisition of the Harrah’s Las Vegas property, an aggregate of 54,054,052 shares of our common stock at a price of $18.50 per share in a private placement transaction, for gross proceeds of approximately $1.0 billion. The net proceeds from the transaction of approximately $963.8 million was used to partially fund the purchase price for the Harrah’s Las Vegas property and for working capital and general corporate purposes. At the closing of the private placement, on December 22, 2017, we made a cash payment equal to 2% of the committed amount, or $17.0 million in the aggregate, to the investors who entered into the purchase agreement with us in November 2017. In addition, at the private placement closing, we entered into a registration rights agreement with the investors, which provides, among other things, for us to file a shelf registration statement for the benefit of the investors within 75 days following the closing. Subsequent to year end, on January 3, 2019, we filed a post-effective amendment to Form S-11 to de-register all of the shares that remained unsold under the registration statement because we are no longer obligated to maintain the effectiveness of the registration statement pursuant to the terms of the registration rights agreement. The post-effective amendment became effective on January 30, 2019.

2018 Transactions

Initial Public Offering

On February 5, 2018, we completed an initial public offering of 69,575,000 shares of common stock at an offering price of $20.00 per share for an aggregate offering value of $1.4 billion, resulting in net proceeds of $1.3 billion after commissions and expenses.

Primary Follow-on Offering

On November 19, 2018, we completed a primary follow-on offering of 34,500,000 shares of common stock at an offering price of $21.00 per share for an aggregate offering value of $724.5 million, resulting in net proceeds of $694.2 million. We intend to contribute the net proceeds from the offering to pay a portion of the aggregate purchase price of $700.0 million for the recently announced acquisition of the land and real estate assets of Greektown in Detroit, Michigan, and related fees and expenses.

At-the-Market Offering Program

On December 19, 2018, we entered into an equity distribution agreement, or ATM Agreement, pursuant to which we may sell, from time to time, up to an aggregate sales price of $750.0 million of our common stock. Sales of common stock, if any, made pursuant to the ATM Agreement may be sold in negotiated transactions or transactions that are deemed to be “at the market” offerings, as defined in Rule 415 of the Securities Act of 1933, as amended. Actual sales will depend on a variety of factors including market conditions, the trading price of our common stock, our capital needs, and our determination of the appropriate sources of funding to meet such needs. We did not sell any shares of our common stock under the ATM Agreement during the year ended December 31, 2018.

After giving effect to the initial public offering, the primary follow-on offering and the issuance of certain unvested restricted shares under the 2017 Stock Incentive Plan (the “Plan”), we have 404,729,616 shares of Common Stock issued and outstanding as of December 31, 2018.

F - 31

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Distributions

Dividends declared (on a per share basis) during the year ended December 31, 2018 were as follows:

Declaration Date		Period		Dividend
March 15, 2018 (1)		February 5, 2018 - March 31, 2018		$	0.16
June 14, 2018 (2)		April 1, 2018 - June 30, 2018		$	0.2625
September 17, 2018 (3)		July 1, 2018 - September 30, 2018		$	0.2875
December 13, 2018 (4)		October 1, 2018 - December 31, 2018		$	0.2875

---

(1)	The dividend was pro-rated for the period commencing upon the closing of our initial public offering and ending on March 31, 2018, based on a quarterly distribution rate of $0.2625 per share. The dividend was paid on April 13, 2018 to stockholders of record as of the close of business on March 29, 2018.

(2)	The dividend was paid on July 13, 2018 to stockholders of record as of the close of business on June 28, 2018.

(3)	The dividend was paid on October 11, 2018 to stockholders of record as of the close of business on September 28, 2018. This dividend represents an increase in our targeted annualized dividend to $1.15 per share of common stock, which represents a 9.5% increase from our previous annualized dividend rate of $1.05 per share.

(4)	The dividend was paid on January 10, 2019 to stockholders of record as of the close of business on December 28, 2018.

Note 14 — Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period, excluding net income attributable to participating securities (unvested restricted stock awards). Diluted earnings per share reflects the additional dilution for all potentially-dilutive securities such as stock options, unvested restricted shares and unvested performance-based restricted shares. The following table reconciles the weighted-average common shares outstanding used in the calculation of basic earnings per share to the weighted-average common shares outstanding used in the calculation of diluted earnings per share for the year ended December 31, 2018 and for the period from October 6, 2017 to December 31, 2017:

(In thousands)	Year Ended December 31, 2018			Period from October 6, 2017 to December 31, 2017
Determination of shares:
Weighted-average common shares outstanding	367,226			227,829
Assumed conversion of restricted stock	91			156
Diluted weighted-average common shares outstanding	367,317			227,985

Basic and Diluted Earnings Per Share
(In thousands, except per share data)	Year Ended December 31, 2018				Period from October 6, 2017 to December 31, 2017
Basic:
Net income attributable to common stockholders	$	523,619			$	42,662
Weighted-average common shares outstanding	367,226				227,829
Basic EPS	$	1.43			$	0.19
Diluted:
Net income attributable to common stockholders	$	523,619			$	42,662
Diluted weighted-average common shares outstanding	367,317				227,985
Diluted EPS	$	1.43			$	0.19

F - 32

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15 — Stock-Based Compensation

The Plan is designed to provide long-term equity-based compensation to our directors and employees. It is administered by the Compensation Committee of the Board of Directors. Awards under the Plan may be granted with respect to an aggregate of 12,750,000 shares of common stock and may be issued in the form of: (a) incentive stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) dividend equivalent rights, (e) restricted stock, (f) restricted stock units or (g) unrestricted stock. In addition, the Plan limits the total number of shares of common stock with respect to which awards may be granted to any employee or director during any one calendar year. At December 31, 2018, 12,240,831 shares of common stock remained available for issuance by us as equity awards under the Plan.

Time-Based Restricted Stock

During 2017 and 2018, the Company granted approximately 164,000 and 157,000 shares of restricted stock under the Plan subject to vesting restrictions based on service. Such restricted time-based stock awards vest ratably on an annual basis over a service period of three to four years. The number of shares granted was determined based on the 10-day volume weighted average price using the 10 trading days immediately preceding the grant date.

Performance-Based Restricted Stock Units

During 2018 the Company granted approximately 133,000 restricted stock units under the Plan subject to vesting restrictions based on specified absolute and relative total stockholder return goals measured over a three-year performance period. We used a Monte Carlo Simulation (risk-neutral approach) to determine the number of shares that may be earned and vested pursuant to the award as these awards were deemed to have a market condition. The risk-free interest rate assumptions used in the Monte Carlo Simulation were determined based on the zero-coupon risk-free rate of 2.7% and an expected price volatility of 13.3%. The expected price volatility was calculated based on both historical and implied volatility.

Total stock-based compensation expense recorded as General and administrative expense in the Statement of Operations totaled $2.3 million for the year ended December 31, 2018 and $1.4 million for the period from October 6, 2017 to December 31, 2017. Compensation expense is recognized on a straight-line basis over the term of the award.

The following table details the activity of our incentive stock, time-based restricted stock and performance-based restricted stock units:

	Shares			Weighted Average Grant Date Fair Value
Outstanding as of Formation Date	—			$	—
Granted	174,572			15.41
Vested	(50,962	)		14.90
Forfeited	—			—
Canceled	—			—
Outstanding as of December 31, 2017	123,610			15.61
Granted	336,980			19.37
Vested	(59,954	)		10.18
Forfeited	(2,383	)		16.88
Canceled	—			—
Outstanding as of December 31, 2018	398,253			$	19.60

As of December 31, 2018, there was $5.5 million of unrecognized compensation cost related to non-vested share-based compensation arrangements under the Plan. This cost is expected to be recognized over a weighted average period of 2.33 years.

F - 33

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 16 — Income Taxes

We have elected to be taxed as a REIT for U.S. Federal income tax purposes commencing with our taxable year ended December 31, 2017. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pays taxes at regular corporate income tax rates to the extent that it annually distributes less than 100% of its taxable income. The Company intends to meet those requirements and as a result, we generally will not be subject to federal income tax except for the TRS operations.

The TRS operations (represented by the four golf course businesses) are 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 its TRS operations are subject to federal and state income taxes. Accordingly, the Company's tax provision and deferred tax analysis are primarily from the results of TRS activities.

New tax legislation, commonly referred to as the Tax Cuts and Jobs Act (“Tax Reform Act”), was enacted on December 22, 2017, which significantly changed U.S. tax law by, among other things, a permanent reduction of the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018. ASC 740, “Accounting for Income Taxes”, requires companies to recognize the effect of tax law changes in the period of enactment. Accordingly, in 2017 we recorded a reduction to our net deferred tax liability of $2.4 million, and a corresponding increase to income tax benefit during the period.

The composition of our income tax expense (benefit) was as follows:

	Year Ended December 31, 2018												Period from October 6, 2017 to December 31, 2017
(In thousands)	Current				Deferred				Total				Current				Deferred				Total
Federal	$	1,693			$	(459	)		$	1,234			$	—			$	(1,909	)		$	(1,909	)
State	126				81				207				11				(3		)		8
Income tax expense (benefit)	$	1,819			$	(378	)		$	1,441			$	11			$	(1,912	)		$	(1,901	)

At December 31, 2018 and 2017, the net effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were:

(In thousands)	December 31, 2018				December 31, 2017
Deferred tax assets:
Federal net operating loss	$	—			$	55
Accruals, reserves and other	117				24
Total deferred tax assets	117				79
Deferred tax liabilities:
Land, buildings and equipment, net	(3,457		)		(3,797		)
Total deferred tax liabilities	(3,457		)		(3,797		)
Net deferred tax liability	$	(3,340	)		$	(3,718	)

F - 34

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table reconciles our effective income tax rate to the historical federal statutory rate of 21% in 2018 and 35% in 2017:

	Year Ended December 31, 2018							Period from October 6, 2017 to December 31, 2017
(Amounts in thousands)	Amount				Percent			Amount				Percent
Federal income tax expense at statutory rate	$	112,326			21.0	%		$	15,414			35.0	%
REIT income not subject to federal income tax	(111,035		)		(20.8	)		(14,897		)		(33.8	)
Pre-tax gain attributable to taxable subsidiaries	1,291				0.2			517				1.2
State income taxes, net of federal benefits	187				—			5				—
Non-deductible expenses and other	(37		)		—			—				—
Impact of Tax Reform on deferred tax liability	—				—			(2,423		)		(5.5	)
Income tax expense (benefit)	$	1,441			0.2	%		$	(1,901	)		(4.3	)%

As of December 31, 2018, we had estimated NOLs of $151.6 million, generated by our REIT, that will expire in 2029, unless they are utilized by us prior to expiration.

As of December 31, 2018, the 2017 and 2018 tax years remain subject to examination by taxing authorities. Since our formation occurred in 2017, there are no prior tax years subject to examination.

Note 17 — Segment Information

Our real property business and our golf course business represent two reportable segments. The real property business segment consists of leased real property and represents the substantial majority of our business. The golf course business segment consists of four golf courses, with each being operating segments that are aggregated into one reportable segment.

The results of each reportable segment presented below are consistent with the way our management assesses these results and allocates resources, which is a consolidated view that adjusts for the impact of certain transactions between our reportable segments, as described below.

The following tables present certain information with respect to the Company’s segments:

		Year Ended December 31, 2018												Period from October 6, 2017 to December 31, 2017
(In thousands)		Real Property Business				Golf Course Business				VICI Consolidated				Real Property Business				Golf Course Business				VICI Consolidated
Revenues		$	870,776			$	27,201			$	897,977			$	181,258			$	6,351			$	187,609
Operating income		751,803				6,151				757,954				142,722				1,474				144,196
Interest expense		(212,663		)		—				(212,663		)		(63,354		)		—				(63,354		)
Loss on extinguishment of debt		(23,040		)		—				(23,040		)		(38,488		)		—				(38,488		)
Income before income taxes		527,407				6,151				533,558				41,162				1,474				42,636
Income tax expense		—				(1,441		)		(1,441		)		—				1,901				1,901
Net income		527,407				4,710				532,117				41,162				3,375				44,537
Depreciation		7				3,679				3,686				—				751				751
Total assets		$	11,247,637			$	85,731			$	11,333,368			$	9,660,244			$	79,468			$	9,739,712

F - 35

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 18 — Subsequent Events

We have evaluated subsequent events and, except for the closing of Margaritaville Resort Casino on January 2, 2019, as described in Note 6, the interest rate swap transactions entered into on January 3, 2019, as described in Note 10, the post-effective amendment to the registration statement on Form S-11 filed on January 3, 2019 (and declared effective on January 30, 2019), as described in Note 13 and the payment of dividends on January 10, 2019, as described in Note 13, there were no other events relative to the Financial Statements that require additional disclosure.

Note 19 — Quarterly Results of Operations (Unaudited)

The following is a summary of the unaudited quarterly results of operations for the year ended December 31, 2018 and the period from October 6, 2017 to December 31, 2017:

		Quarter Ended																Period from October 6 to December 31, 2017
($ in thousands except per share data)		December 31, 2018				September 30, 2018				June 30, 2018				March 31, 2018
Revenues		$	226,039			$	232,687			$	220,975			$	218,276			$	187,609
Operating income		195,682				184,100				189,448				188,724				144,196
Net income		144,631				132,024				141,359				114,103				44,537
Net income attributable to common stockholders		142,541				129,912				139,044				112,122				42,662
Net income per common share
Basic and diluted		$	0.37			$	0.35			$	0.38			$	0.33			$	0.19
Dividends per share		$	0.2875			$	0.2875			$	0.2625			$	0.1600			$	—

F - 36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of VICI Properties Inc.

Opinion on the Financial Statements

We have audited the accompanying combined balance sheets of Caesars Entertainment Outdoor (the "Business") as of October 5, 2017 and December 31, 2016, the related combined statements of operations, equity, and cash flows for the period from January 1, 2017 to October 5, 2017 and for each of the two years in the period ended December 31, 2016, and the related notes to the combined financial statements (collectively referred to as the "Financial Statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Business as of October 5, 2017 and December 31, 2016, and the results of its operations and its cash flows for the period from January 1, 2017 to October 5, 2017 and for each of the two years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Business’ management. Our responsibility is to express an opinion on the Business’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Business in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Business is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Business’ internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Las Vegas, Nevada

March 28, 2018

We have served as the Business’ auditor since 2016.

F - 37

The following sets forth the historical combined financial statements of Caesars Entertainment Outdoor as our predecessor, the operations of which were contributed to VICI Golf on October 6, 2017 as part of our Formation Transactions.

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

COMBINED BALANCE SHEETS

(Amounts In Thousands)

	October 5, 2017				December 31, 2016
Assets
Current assets
Cash	$	111			$	920
Receivables, net	269				77
Inventories	480				371
Prepayments	84				276
Total current assets	944				1,644
Property and equipment, net	88,309				88,831
Total assets	$	89,253			$	90,475
Liabilities and Equity
Current liabilities
Accounts payable	$	272			$	305
Accrued expenses	647				705
Current portion of long-term debt	—				14
Total current liabilities	919				1,024
Deferred income taxes	4,944				5,043
Liabilities subject to compromise	249				265
Total liabilities	6,112				6,332
Commitments and contingencies (Note 9)
Equity
Net investment	83,091				84,091
Retained earnings	50				52
Total equity	83,141				84,143
Total liabilities and equity	$	89,253			$	90,475

See accompanying Notes to Combined Financial Statements

F - 38

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

COMBINED STATEMENTS OF OPERATIONS

(Amounts In Thousands)

	Period from January 1, 2017 to October 5, 2017				Year Ended December 31, 2016				Year Ended December 31, 2015
Revenues
Golf ($5,685, $6,353 and $5,146 attributable to related parties)	$	11,412			$	14,558			$	14,071
Food and beverage	1,361				2,150				2,150
Retail and other	1,363				2,077				1,856
Net revenues	14,136				18,785				18,077
Operating expenses
Direct
Golf	5,204				7,082				6,767
Food and beverage	1,144				1,828				1,936
Retail and other	1,066				1,691				1,581
Property costs	2,895				3,138				3,133
Depreciation	2,445				3,030				2,882
Administrative and other	1,382				2,009				1,760
Total operating expenses	14,136				18,778				18,059
Income from operations	—				7				18
Interest expense	—				(7		)		(18		)
Income before taxes	—				—				—
Income tax (expense) benefit	(2		)		—				3
Net income (loss)	$	(2	)		$	—			$	3

See accompanying Notes to Combined Financial Statements

F - 39

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

COMBINED STATEMENTS OF EQUITY

(Amounts In Thousands)

	Net Investment				Retained Earnings				Total Equity
Balance at January 1, 2015	$	87,304			$	49			$	87,353
Net income	—				3				3
Transactions with parent, net	(1,981		)		—				(1,981		)
Balance at December 31, 2015	$	85,323			$	52			$	85,375
Net income	—				—				—
Transactions with parent, net	(1,232		)		—				(1,232		)
Balance at December 31, 2016	$	84,091			$	52			$	84,143
Net income (loss)	—				(2		)		(2		)
Transactions with parent, net	(1,000		)		—				(1,000		)
Balance at October 5, 2017	$	83,091			$	50			$	83,141

See accompanying Notes to Combined Financial Statements

F - 40

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

COMBINED STATEMENTS OF CASH FLOWS

(Amounts In Thousands)

	Period from January 1, 2017 to October 5, 2017				Year Ended December 31, 2016				Year Ended December 31, 2015
Cash flows from operating activities
Net income (loss)	$	(2	)		$	—			$	3
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation	2,445				3,030				2,882
Net gain on asset sales	—				—				(38		)
Deferred income taxes	(99		)		(111		)		(101		)
Provisions for (recoveries of) bad debt	12				(10		)		31
Change in current assets and liabilities:
Receivables	(203		)		116				(137		)
Other current assets	—				12				69
Inventories	(109		)		71				(5		)
Prepayments	192				(223		)		6
Accounts payable	(49		)		(39		)		52
Accrued expenses	(58		)		(125		)		126
Cash flows provided by operating activities	2,129				2,721				2,888
Cash flows from investing activities
Acquisitions of property and equipment, net of change in related payables	(1,924		)		(869		)		(798		)
Proceeds from sale of assets	—				—				66
Cash flows used in investing activities	(1,924		)		(869		)		(732		)
Cash flows from financing activities
Repayments for capital leases	(14		)		(51		)		(45		)
Transactions with parent, net	(1,000		)		(1,232		)		(1,981		)
Cash flows used in financing activities	(1,014		)		(1,283		)		(2,026		)
Net increase (decrease) in cash and cash equivalents	(809		)		569				130
Cash and cash equivalents, beginning of period	920				351				221
Cash and cash equivalents, end of period	$	111			$	920			$	351

Supplemental Cash Flow Information:	Period from January 1, 2017 to October 5, 2017				Year Ended December 31, 2016				Year Ended December 31, 2015
Cash paid for interest	$	—			$	7			$	18

See accompanying Notes to Combined Financial Statements

F - 41

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS

In these notes, the words “Caesars Entertainment Outdoor,” “Business,” “Outdoor Business,” “we,” “our,” and “us” refer to the business and operation of the golf courses listed in Note 1 that were wholly owned by Caesars Entertainment Operating Company, Inc. through October 5, 2017*.*

“CEOC” refers to the Caesars Entertainment Operating Company, Inc. “CEC”, “Caesars” and “Caesars Entertainment” refer to Caesars Entertainment Corporation. On October 6, 2017 (the “Formation Date”), CEOC merged with and into CEOC LLC, a Delaware limited liability company (“New CEOC”) with New CEOC surviving the merger.

We also refer to (i) our Combined Financial Statements as our “Financial Statements,” (ii) our Combined Statements of Operations as our “Statements of Operations,” and (iii) our Combined Balance Sheets as our “Balance Sheets.”

Note 1 — Business and Basis of Presentation

Organization

Prior to the Formation Date, the Outdoor Business was a wholly owned business of CEOC and included the operations of the Cascata golf course in Boulder City, Nevada, the Rio Secco golf course in Henderson, Nevada, the Grand Bear golf course in Biloxi, Mississippi, and the Chariot Run golf course in Elizabeth, Indiana. Caesars Entertainment Golf, Inc., Rio Development Company, Inc., Grand Casinos of Biloxi, LLC, and Riverboat Casino, LLC, directly owned these golf courses, respectively, and were debtor-in-possession subsidiaries of CEOC.

The golf courses generate revenue through fees charged for general golf course usage (including green fees, golf club rentals, and cart charges), annual or corporate memberships (at Rio Secco, Grand Bear and Chariot Run), a school of golf (at Rio Secco), and food, beverage, and merchandise sales.

Bankruptcy

On January 15, 2015, CEOC and certain of its subsidiaries (the “Caesars Debtors”) voluntarily filed for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court”). As a result of this filing, CEOC operated as a debtor-in-possession under the Bankruptcy Code. Because each of the four golf courses were owned by Caesars Debtor entities, the Outdoor Business was also considered a debtor-in-possession prior to the Formation Date. CEOC’s plan of reorganization (the “Plan”) was confirmed by the Bankruptcy Court on January 17, 2017.

Transfer of Operations and Assets to VICI

On the Formation Date, pursuant to the Bankruptcy Plan, subsidiaries of CEOC contributed the ownership of the Business to VICI Properties Inc. (“VICI”). Following the Formation, the assets, liabilities and operations of the Business are now included in VICI Golf LLC (“VICI Golf”), a Delaware limited-liability company. VICI Golf is a wholly-owned subsidiary of VICI. VICI is a separate entity initially owned by certain former creditors of CEOC.

In addition, on the Formation Date, subsidiaries of VICI Golf, entered into a golf course use agreement (the “Golf Course Use Agreement”) with New CEOC and Caesars Enterprise Services, LLC (“CES”) (collectively, the “users”), whereby the users were granted certain priority rights and privileges with respect to access and use of certain golf course properties. Payments under the Golf Course Use Agreement are comprised of a $10.0 million annual membership fee, $3.0 million in annual use fees and minimum rounds fees of at least $1.1 million. The annual membership fee, use fees and minimum round fees are subject to an annual escalator beginning at the times provided under the Golf Course Use Agreement.

Basis of Presentation

The Business’ Financial Statements were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and with the applicable rules and regulations of the Securities and Exchange Commission (“SEC”).

The Financial Statements were derived from the financial statements of CEOC, prepared on a “carve-out” basis, to present the financial position and results of operations of the Outdoor Business on a stand-alone basis. The legal entities that own the Grand Bear and the Chariot Run golf courses also include non-golf course operations that are excluded from these carve-out financial statements.

F - 42

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

The Financial Statements include allocations of certain revenue amounts and general corporate expenses among affiliated entities. Such allocated revenue and expenses may not reflect the results we would have incurred if we had operated as a stand-alone company nor are they necessarily indicative of our future results. Management believes the assumptions and methodologies used in the allocation of these revenues and expenses are reasonable. Actual amounts could differ from those estimates.

Golf revenue from CEOC and Caesars' affiliates includes reimbursement for below market-rate golf tee times and free play for certain casino guests. Variable golf fees provided by CEOC and Caesars affiliates are based on revenue shortfalls necessary to cover the cost of maintaining the courses in appropriate playing conditions for casino guests. The variable fee is dependent upon the number of rounds played, the types of rounds played (market-rate or discounted rate), and costs incurred to allow the golf course to continue to offer golf as an amenity to its gaming customers. These reimbursements and adjustments are included in golf revenue in the Statements of Operations.

Each of the golf courses represents a separate operating segment and we aggregate all such operations into one reportable segment.

The Business’ Financial Statements reflect the application of ASC 852. This guidance requires that transactions and events directly associated with the reorganization be distinguished from the ongoing operations of the business. In addition, the guidance provides for changes in the accounting and presentation of liabilities.

Note 2 — Summary of Significant Accounting Policies

Cash

Cash consists of cash-on-hand and cash-in-bank.

Receivables

Accounts receivable are non-interest bearing and are initially recorded at cost. They include amounts for sponsorship and other golf tournament fees, amounts due for hosted private events, and amounts due from credit card clearing activities. The allowance for doubtful accounts is established and maintained based on our best estimate of accounts receivable collectability. Management estimates collectability by specifically analyzing accounts receivable aging, known troubled accounts and other historical factors that affect collections. Accounts are written off when management deems the account to be uncollectible. Recoveries of accounts previously written off are recorded into income when received. Trade receivables are due within one year or less and approximates fair value.

Allowance for Doubtful Accounts

	(In thousands)
	2017				2016				2015
Balance as of January 1,	$	7			$	19			$	1
Charges (credits) to income	12				(10		)		31
Write-offs less recoveries	(11		)		(2		)		(13		)
Balance as of October 5, 2017; December 31, 2016; and December 31, 2015, respectively	$	8			$	7			$	19

Inventory

Inventory, which consists primarily of food and beverages and merchandise held for resale, is stated at the lower of cost or market. Losses on obsolete or excess inventory are not material.

Long-Lived Assets

The Business has significant capital invested in long-lived assets and judgments are made in determining their estimated useful lives and salvage values and if or when an asset (or asset group) has been impaired. The accuracy of these estimates affects the amount of depreciation and amortization expense recognized in the financial results and whether a gain or loss should be recognized on the disposal of an asset. Lives assigned to the assets are based on standard policy, established by management as representative of the useful life of each category of asset.

The carrying value of our long-lived assets is reviewed whenever events and circumstances indicate the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. The factors

F - 43

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

considered by management in performing this assessment may include current operating results, trends, prospects, as well as the effect of demand, competition, and other economic, legal, and regulatory factors. In estimating expected future cash flows for determining whether an asset is impaired, assets are grouped at the lowest level of identifiable cash flows, which in this case, is the four golf courses combined together as an asset group. These analyses are sensitive to management assumptions and the estimates of the obsolescence factors. Changes in these assumptions and estimates could have a material impact on the analyses and the Financial Statements. For the period from January 1, 2017 to October 5, 2017 and the years ended December 31, 2016 and 2015, no impairment of long-lived assets was recorded.

Additions to property and equipment are stated at cost. Costs of improvements that extend the life of the asset are capitalized. Maintenance and repair costs are expensed as incurred. Gains or losses on the dispositions of property and equipment are recognized in the period of disposal. With respect to golf course improvements (included in land improvements), only costs associated with original construction, complete replacements of items such as tee boxes and putting greens, or the addition of new trees, sand traps, fairways or putting greens are capitalized. All other related costs are expensed as incurred. For building improvements, only costs that extend the useful life of the building are capitalized.

Certain land improvements include site preparations that prepare land for its intended use as a golf course. Like the land itself, these improvements are inexhaustible and therefore not depreciated. Examples include excavation, filling, grading and preparation of fairways and roughs. Depreciable land improvements are defined as improvements made to land that have determinable estimated useful lives and deteriorate with use or passage of time. These improvements were built or installed to enhance or facilitate the use of the land for a particular purpose. Depreciable land improvements associated with the golf courses include greens, bunkers, tee boxes, cart paths, fences and gates, landscaping and sprinkler systems.

Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset or the related lease, as follows:

Useful Lives
Land improvements	12-60 years
Buildings and leasehold improvements	40 years
Building improvements	5-15 years
Furniture, fixtures, and equipment	2-10 years

Leasehold improvements are amortized over the shorter of the term of the respective lease or their useful life using the straight-line method.

Liabilities Subject to Compromise

Under bankruptcy law, actions by creditors to collect amounts owed prior to the Petition Date are stayed and certain other prepetition contractual obligations may not be enforced against the companies that own the Business. Substantially all liabilities of the Debtors as of the Petition Date, except those paid under certain first day motions filed with the Bankruptcy Court, have been classified as liabilities subject to compromise in the Balance Sheets. Liabilities subject to compromise, including claims that became known after the bankruptcy petition was filed, are reported using our best estimates of the expected amount of the total allowed claim.

Revenue Recognition

Revenues from golf course operations, food and beverage and merchandise sales are recognized at the time of sale or when the service is provided and are reported net of sales tax. Golf memberships sold are typically to individuals and are not refundable and are deferred and recognized within golf revenue in the Statements of Operations over the expected life of an active membership, which is typically one year or less.

Included in golf revenue are market-rate fees received from public customers as well as discounted fees received from CEOC and Caesars-affiliated customers or associates. In addition, certain VIP casino guests play the golf courses for free. In these cases, the golf course receives amounts paid by CEOC and Caesars’ affiliates at an agreed upon rate for the free play provided to their VIP guests. The reimbursement for free play was approximately $611,000 for the period January 1, 2017 to October 5, 2017, and $620,000 and $708,000 for the years ended December 31, 2016 and 2015, respectively.

There are additional variable golf fees provided by CEOC and Caesars’ affiliates based on revenue shortfalls necessary to cover the cost of operating the courses at a high level appropriate for casino guests. The variable fee is dependent upon the number of

F - 44

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

rounds played, the types of rounds played (market-rate or discounted rate), and costs incurred to allow the golf course to continue to offer golf as an amenity to its gaming customers. Variable golf fees included in golf revenue were approximately $4,692,000 for the period January 1, 2017 to October 5, 2017 and $4,862,000 and $3,669,000 for the years ended December 31, 2016 and 2015, respectively.

Advertising Expense

The golf courses are marketed through advertising and other promotional activities. Advertising expense is charged to income during the period incurred. Advertising expense totaled approximately $63,000 for the period January 1, 2017 to October 5, 2017, and $118,000 and $74,000 for the years ended December 31, 2016 and 2015, respectively, and is included in Administrative and other in the Statements of Operations.

Property Costs

Property costs are charged to income during the period incurred and include land rent, utilities and general repairs and maintenance.

Income Taxes

Historically, the Outdoor Business has been included in the consolidated federal income tax return of Caesars, as well as certain state tax returns where Caesars or one of its subsidiaries files a state tax return. The provisions of ASC 740, “Income Taxes,” was applied and the provision for income taxes was computed on a separate return basis. The separate return method applies the accounting guidance for income taxes to the stand-alone combined Financial Statements as if the Business was a separate taxpayer and a stand-alone enterprise for the periods presented. As discussed in Note 7, these Financial Statements include certain allocations of income and expense amongst affiliated entities. The tax provision was calculated assuming such allocations were appropriate for income tax reporting purposes and do not include any transfer pricing adjustments with respect to such allocations. The calculation of income taxes on a separate return basis requires a considerable amount of judgment and use of both estimates and allocations. Management believes that the assumptions and estimates used to compute these tax amounts are reasonable. However, the Financial Statements may not necessarily reflect our income tax expense or tax payments in the future, or what tax amounts would have been if the Business had been a stand-alone enterprise during the periods presented.

Federal and state income taxes currently payable are settled though our net investment equity account. Certain taxes provided for are deferred because of temporary differences between reporting income and expenses for financial statement purposes versus tax purposes. Federal income tax credits are recorded as a reduction of income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. Accruals for tax uncertainties are classified within other liabilities in our combined balance sheets. Amounts accrued relate to any potential income tax liabilities resulting from uncertain tax positions, as well as potential interest or penalties associated with those liabilities.

Note 3 — Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board (the “FASB”) issued the following authoritative guidance amending the FASB Accounting Standards Codification.

Business Combinations - January 2017*:* Updated amendments intend to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. Amendments in this update provide a more robust framework to use in determining when a set of assets and activities is a business and to provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The amendments are effective to annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is allowed as follows: (1) Transactions for which acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in Financial Statements that have been issued or made available for issuance and (2) transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in Financial Statements that have been issued or made available for issuance. The adoption of this standard could have a material impact on our Financial Statements should we have a future acquisition of a business.

F - 45

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

Leases - February 2016 (amended January 2017)**: The amended guidance requires most lease obligations to be recognized as a right-of-use asset with a corresponding liability on the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The guidance should be implemented for the earliest period presented using a modified retrospective approach, which includes optional practical expedients primarily focused on leases that commence before the effective date. The qualitative and quantitative effects of adoption are still being analyzed. We are in the process of evaluating the full impact the new guidance will have on our Financial Statements.

Revenue from Contracts with Customers - May 2014 (amended January 2017)**: The new guidance is intended to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP applicable to revenue transactions. Existing industry guidance will be eliminated. The FASB has recently issued several amendments to the standard, including clarification on accounting for and identifying performance obligations. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. The guidance should be applied using the full retrospective method or retrospectively with the cumulative effect initially applying the guidance recognized at the date of initial application. We are adopting this standard effective January 1, 2018, retrospectively, and determined that there will not be a material impact to our Financial Statements. The adoption of this guidance does not change the timing or process in which we recognize golf revenue.

Income Taxes - October 2016*:* Amended guidance that addresses intra-entity transfers of assets other than inventory, which requires the recognition of any related income tax consequences when such transfers occur. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Amendments are effective for fiscal years beginning after December 15, 2017, and interim reporting periods within those years. Early adoption is permitted. We do not expect this standard will have a material impact on our Financial Statements.

Statement of Cash Flows - August 2016*:* Amended guidance addresses eight specific cash flow issues with the objective of reducing diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments should be applied retrospectively to each period presented. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We have adopted this standard for our October 5, 2017 Statement of Cash Flows.

Note 4 — Property and Equipment, Net

	(In thousands)
	October 5, 2017				December 31, 2016
Land and non-depreciable land improvements	$	35,525			$	35,525
Depreciable land improvements	40,183				40,174
Buildings and improvements	35,153				35,133
Furniture and equipment (including capital leases)	4,833				5,445
Construction in progress	1,831				—
Total property and equipment	117,525				116,277
Less: accumulated depreciation	(29,216		)		(27,446		)
Total property and equipment, net	$	88,309			$	88,831

	(In thousands)
	Period from January 1, 2017 to October 5, 2017				Year Ended December 31, 2016				Year Ended December 31, 2015
Depreciation expense (including capital lease amortization)	$	2,445			$	3,030			$	2,882

F - 46

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

Note 5 — Accrued Expenses

	(In thousands)
	October 5, 2017				December 31, 2016
Accrued utilities	$	269			$	87
Accrued real estate taxes and other taxes	166				130
Advance deposits	102				112
Deferred revenue	49				125
Accrued legal and professional fees	41				23
Payroll and other compensation	12				228
Other accruals	8				—
Total accrued expenses	$	647			$	705

Note 6 — Liabilities Subject to Compromise

In March 2015, the Bankruptcy Court entered an order establishing May 26, 2015 as the bar date for potential general creditors to file proofs of claims and established the required procedures with respect to filing such claims. A bar date is the deadline by which creditors must file a proof of claim against the Debtors for the claim to be allowed. In addition, a bar date of July 14, 2015 was established as a deadline for claims from governmental units.

As of October 5, 2017, the Business had received 55 proofs of claim, a portion of which assert, in part or in whole, unliquidated claims. These proofs of claims include 9 claims that were carved out of the legal entities that own the Business and that have additional claims, which do not correspond to the Business. In addition, the Business has been assigned by the court an additional 13 claims. In the aggregate, total asserted liquidated proofs of claim for approximately $122.2 million had been filed against or assigned to the Business. Based on reasonable current estimates, the Business expects to ask the Bankruptcy Court to disallow 19 claims representing approximately $116.3 million of such claims. These claims are classified by the Business as amended and replaced, duplicate, redundant or non-Caesars Debtor claims.

As of October 5, 2017 and December 31, 2016, liabilities subject to compromise was approximately $249,000 and $265,000, respectively, and consisted of accounts payable-related liabilities.

On October 6, 2017, the Business settled claims included in liabilities subject to compromise for $125,000 recognizing a reorganization gain of $124,000. In addition, approximately $5.1 million of claims are still disputed and unresolved and have been transferred to New CEOC for final resolution.

Note 7 — Income Taxes

Income Tax (Provision)/Benefit
	(In thousands)
	Period from January 1, 2017 to October 5, 2017				Year Ended December 31, 2016				Year Ended December 31, 2015
Current:
Federal	$	(100	)		$	(111	)		$	(98	)
State	—				—				—
Deferred	98				111				101
Income Tax Benefit	$	(2	)		$	—			$	3

Since the Outdoor Business does not have a formal tax sharing agreement in place with Caesars Entertainment for federal income tax purposes, Caesars Entertainment pays all of the Outdoor Business’ federal income taxes. The Outdoor Business’ portion was approximately $100,000 for the period January 1, 2017 to October 5, 2017 and $111,000 and $98,000 for the years ended December 31, 2016 and 2015, respectively.

F - 47

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

Income Tax Expense Reconciliation
	(In thousands)
	Period from January 1, 2017 to October 5, 2017				Year Ended December 31, 2016				Year Ended December 31, 2015
Expected federal tax at the statutory tax rate	$	—			$	—			$	—
Increases/(decreases) in tax resulting from:
State taxes, net of federal tax benefit	—				—				—
Federal tax credits	—				—				3
Other	(2		)		—				—
Income tax (expense)/benefit	$	(2	)		$	—			$	3

Temporary Differences Resulting in Deferred Tax Assets and Liabilities
	(In thousands)
	As of October 5, 2017				As of December 31, 2016
Deferred tax assets:
Federal net operating loss	$	5,561			$	5,847
State net operating loss	378				392
Federal tax credits	82				82
Other	8				9
Subtotal	6,029				6,330
Less: valuation allowance	1,930				1,930
Total deferred tax assets	4,099				4,400
Deferred tax liabilities:
Depreciation and other property related items	(9,006		)		(9,423		)
Accrued expenses	(37		)		(20		)
Total deferred tax liabilities	(9,043		)		(9,443		)
Net deferred tax liability	$	(4,944	)		$	(5,043	)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

As of October 5, 2017 and December 31, 2016, we had federal NOL carryforwards of $19.2 million and $20.1 million, respectively. These NOL carryforwards will begin to expire in 2032. In addition, we have federal general business tax credit carryforwards of approximately $82 thousand which will begin to expire in 2032. As of October 5, 2017 and December 31, 2016, we had state NOL carryforwards of $15.1 million and $15.5 million, respectively. These NOL carryforwards will begin to expire in 2032.

Reconciliation of Unrecognized Tax Benefit
	(In thousands)
	Period from January 1, 2017 to October 5, 2017				Year Ended December 31, 2016				Year Ended December 31, 2015
Balance at beginning of period	$	1,309			$	1,309			$	1,309
Additions based on tax positions related to the current period	—				—				—
Balance at end of period	$	1,309			$	1,309			$	1,309

We classify reserves for tax uncertainties within accrued expenses and deferred credits and other in our balance sheets, separate from any related income tax payable or deferred income taxes. Reserve amounts related to potential income tax liabilities resulting from uncertain tax positions as well as potential interest or penalties associated with those liabilities.

F - 48

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

We accrue interest and penalties related to unrecognized tax benefits in income tax expense. There were no adjustments to our accrual for the period ending October 5, 2017 and the years ending December 31, 2016 and 2015, respectively, for accrued interest or penalties. There are no unrecognized tax benefits included in the balances of unrecognized tax benefits as of October 5, 2017, December 31, 2016 and 2015 that, if recognized, would impact the effective tax rate.

Note 8 — Related Party Transactions

We had transactions with CEOC resulting in net distributions of approximately $1.0 million for the period January 1, 2017 to October 5, 2017 and $1.2 million and $2.0 million for the years ending December 31, 2016 and 2015, respectively. The net distributions are the result of cash generated by the operations of the Business and proceeds from the sale of assets, partially offset by amounts contributed by CEOC to fund capital improvements and capital lease obligations. These transactions are included as transactions with parent, net in our Combined Statements of Equity.

Related Party Fees and Expenses

The following amounts are recorded with respect to the related-party transactions described in this section:

				(In thousands)
Transaction type		Recorded as:		Period from January 1, 2017 to October 5, 2017				Year Ended December 31, 2016				Year Ended December 31, 2015
Insurance expense		Administrative and other		$	37			$	45			$	55
Allocation of indirect expenses from CEOC and Caesars’ affiliates (1)		Administrative and other		214				330				318
Golf revenue from CEOC and Caesars’ affiliates (2)		Golf revenue		5,304				5,482				4,377
Pass-through revenue with CEOC and Caesars’ affiliates (3)		Golf revenue		382				871				769
	Food and beverage revenue		107				83				66
	Retail and other revenue		116				143				102

_____________

(1)

The Statements of Operations include allocated overhead costs for certain functions historically performed by CEOC and Caesars’ affiliates, including allocations of direct and indirect operating and maintenance costs and expenses for procurement, logistics and general and administrative costs and expenses related to executive oversight, marketing, information technology, accounting, treasury, tax, and legal. These costs were allocated on the basis of either revenue or payroll costs.

(2)	See Summary of Significant Accounting Policies - Revenue Recognition.

(3)	Primarily includes transactions where CEOC and Caesars affiliates’ customers charge their golf, food and beverage and retail purchases directly to their hotel bill. Amounts collected from the customer by the hotel are remitted to the golf course.

Savings and Retirement Plans

CEOC maintains a defined contribution savings and retirement plan that allows certain employees of the Business to make pre-tax and after-tax contributions. Under the plan, participating employees may elect to contribute up to 50% of their eligible earnings, subject to IRS rules and regulations, and are eligible to receive a company match of up to $600. Participating employees become vested in matching contributions on a pro-rata basis over five years of credited service. Our contribution expense, included in direct operating expenses and administrative and other expense, was approximately $27,000 for the period January 1, 2017 to October 5, 2017 and $34,000 and $39,000 for the years ended December 31, 2016 and 2015, respectively.

Note 9 — Litigation, Contractual Commitments and Contingent Liabilities

Litigation

The Business and its operations may be subject to litigation involving employment matters, personal injuries, and other matters that arise in the normal course of business. We do not expect the outcome of such ordinary and routine litigation to have a material effect on our combined financial position, results of operations, or cash flows.

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

Contingent Liabilities

In January 2015, a majority of the Trustees of the National Retirement Fund (“NRF”), a multi-employer defined benefit pension plan, voted to expel Caesars and certain of its affiliates from the plan. The NRF has advised Caesars and Caesars Entertainment Resort Properties, LLC (“CERP”) that this expulsion triggered a withdrawal liability with a present value of approximately $360 million, payable in 80 quarterly payments of about $6 million. The NRF filed a similar claim against each Caesars Debtor in CEOC’s bankruptcy. Although the Business’ employees did not participate in this plan, because the entities that own the Business are a member of the Caesars Group (as defined below), such entities are jointly and severally liable with Caesars and CEOC for any liability under the NRF’s claims.

On March 13, 2017, CEOC, CEC, CERP, the Caesars employers that contribute to the NRF, and the NRF and certain of its related parties entered into a settlement agreement resolving all issues related to the disputes with the NRF. Under the terms of the settlement, CEC, or a person on CEC’s behalf, was required to pay a total of $45 million to the NRF on the Formation Date.

Under the Caesars Debtors’ Plan, the NRF is barred from asserting any claims against the Company and its subsidiaries to the extent such claims arose prior to the Formation Date.

Operating Lease Commitments

The Business is liable under operating leases for land at the Cascata golf course, equipment and other miscellaneous assets, which expire at various dates through 2039. Total rental expense under these agreements included in direct golf operating expenses and property costs in our Statements of Operations were approximately $0.7 million for the period January 1, 2017 to October 5, 2017 and approximately $1.0 million for each of the years ended December 31, 2016 and 2015, respectively.

The future minimum lease commitments relating to the base lease rent portion of noncancelable operating leases at October 5, 2017 are as follows:

	(In thousands)
	Operating Leases
2017	$	214
2018	873
2019	891
2020	908
2021	926
2022 and thereafter	18,911
Total minimum rental commitments	$	22,723

Other Commitments

The Business utilizes a third-party golf maintenance company for its Rio Secco and Cascata golf courses. The agreements are for five years and expire in February 2019 and include all labor and equipment necessary to maintain both golf course grounds. Total expense under these agreements included in direct golf operating expenses in the Statements of Operations were approximately $2.1 million for the period January 1, 2017 to October 5, 2017 and $2.9 million and $2.8 million for the years ended December 31, 2016 and 2015, respectively.

The future commitments relating to these agreements at October 5, 2017 are as follows:

	(In thousands)
	Maintenance Agreements
2017	$	775
2018	2,969
2019	225
Total maintenance agreement commitments	$	3,969

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Schedule I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY ONLY

VICI PROPERTIES INC.

CONDENSED BALANCE SHEETS

(In thousands, except share and per share data)

	December 31, 2018				December 31, 2017
Assets
Cash and cash equivalents	$	377,704			$	119,117
Restricted cash	48				—
Short-term investments	520,877				—
Other assets	2,150				—
Due from affiliates	133				57,573
Investment in subsidiaries	6,033,310				9,545,013
Total assets	$	6,934,222			$	9,721,703
Liabilities
Other liabilities	$	486			$	—
Dividends payable	116,287				—
Due to affiliates	—				155,001
Total liabilities	116,773				155,001
Shareholders’ equity
Common stock, $0.01 par value, 700,000,000 shares authorized and 404,729,616 and 300,278,938 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively	4,047				3,003
Preferred stock, $0.01 par value, 50,000,000 shares authorized and no shares outstanding at December 31, 2018 and 2017	—				—
Additional paid in capital	6,648,430				9,563,417
Accumulated other comprehensive loss	(22,124		)		—
Retained earnings	187,096				282
Total shareholders' equity	6,817,449				9,566,702
Total liabilities and shareholders’ equity	$	6,934,222			$	9,721,703

See accompanying Notes to Condensed Financial Information

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Schedule I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY ONLY

VICI PROPERTIES INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands)

	Year Ended December 31, 2018				Period from October 6, 2017 to December 31, 2017
Revenues
Equity in earnings of investment in subsidiary	$	516,116			$	—
Revenues	516,116				—
Operating Expenses
General and administrative	78				—
Total operating expenses	78				—
Operating income	516,038				—
Interest income	7,581				282
Income before income taxes	523,619				282
Income taxes	—				—
Net income	$	523,619			$	282
Other comprehensive income
Net income	$	523,619			$	282
Unrealized loss on cash flow hedges - investment in subsidiaries	(22,124		)		—
Comprehensive income	$	501,495			$	282

See accompanying Notes to Condensed Financial Information

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Schedule I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY ONLY

VICI PROPERTIES INC.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31, 2018				Period from October 6, 2017 to December 31, 2017
Cash flows from operating activities
Net income	$	523,619			$	282
Change in operating assets and liabilities:
Change in other assets	(2,150		)		—
Change in other liabilities	270				—
Change in intercompany balances, net	(614		)		98,813
Cash flows from operating activities	521,125				99,095
Cash flows from investing activities
Investment in subsidiary	(1,838,205		)		(1,000,000		)
Distributions from subsidiaries	357,781				—
Investments in short-term investments	(691,239		)		—
Maturities of short-term investments	170,362				—
Cash flows used in investing activities	(2,001,301		)		(1,000,000		)
Cash flows from financing activities
Proceeds from private placement of common stock	—				964,376
Proceeds from initial public offering of common stock	1,307,119				—
Proceeds from follow-on offering of common stock	694,374				—
Dividends paid	(262,682		)		—
Mandatory debt conversion costs	—				(13		)
Cash flows provided by financing activities	1,738,811				964,363
Net increase in cash and cash equivalents	258,635				63,458
Cash, cash equivalents and restricted cash, beginning of period	119,117				55,659
Cash, cash equivalents and restricted cash, end of period	$	377,752			$	119,117

See accompanying Notes to Condensed Financial Information

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Schedule I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT PARENT COMPANY ONLY

VICI PROPERTIES INC.

NOTES TO CONDENSED FINANCIAL INFORMATION

1.	Background and Basis of Presentation

The condensed parent company financial information has been prepared in accordance with Rule 12-04, Schedule 1 of Regulation S-X, as the restricted net assets of VICI Properties Inc. and its subsidiaries exceed 25% of the consolidated net assets of VICI Properties Inc. and its subsidiaries (the “Company”). This information should be read in conjunction with the Company’s consolidated financial statements included elsewhere in this filing.

2.	Restricted net assets of subsidiaries

VICI Properties 1 LLC (“VICI PropCo”), a Delaware limited liability company and an indirect wholly-owned subsidiary of VICI Properties, Inc*.,* has certain restrictions on its ability to pay dividends or make intercompany loans and advances pursuant to financing arrangements. On December 22, 2017, VICI PropCo entered into a credit agreement (the “Credit Agreement”) governing the Term Loan B Facility and the Revolving Credit Facility. The Credit Agreement contains customary covenants that, among other things, limit the ability of VICI PropCo and its restricted subsidiaries to: (i) incur additional indebtedness; (ii) merge with a third party or engage in other fundamental changes; (iii) make restricted payments; (iv) enter into, create, incur or assume any liens; (v) make certain sales and other dispositions of assets; (vi) enter into certain transactions with affiliates; (vii) make certain payments on certain other indebtedness; (viii) make certain investments; and (ix) incur restrictions on the ability of restricted subsidiaries to make certain distributions, loans or transfers of assets to VICI PropCo or any restricted subsidiary. These covenants are subject to a number of exceptions and qualifications, including the ability to make unlimited restricted payments to maintain our REIT status and to avoid the payment of federal or state income or excise tax, the ability to make restricted payments in an amount not to exceed 95% of our Funds from Operations (as defined in the Credit Agreement) subject to no event of default under the Credit Agreement and pro forma compliance with the financial covenant pursuant to the Credit Agreement, and the ability to make additional restricted payments in an aggregate amount not to exceed the greater of 0.6% of Adjusted Total Assets (as defined in the Credit Agreement) or $30,000,000. Commencing with the first full fiscal quarter ended after December 22, 2017, if the outstanding amount of the Revolving Credit Facility plus any drawings under letters of credit issued pursuant to the Credit Agreement that have not been reimbursed as of the end of any fiscal quarter exceeds 30% of the aggregate amount of the Revolving Credit Facility, VICI PropCo and its restricted subsidiaries on a consolidated basis would be required to maintain a maximum Total Net Debt to Adjusted Total Assets Ratio, as defined in the Credit Agreement, as of the last day of any applicable fiscal quarter.

The Second Lien Notes were issued on October 6, 2017, pursuant to an indenture (the “Indenture”) by and among VICI PropCo and its wholly owned subsidiary, VICI FC Inc. (together, the “Issuers”), the subsidiary guarantors party thereto, and UMB Bank National Association, as trustee. The Indenture contains covenants that limit the Issuers’ and their restricted subsidiaries’ ability to, among other things: (i) incur additional debt; (ii) pay dividends on or make other distributions in respect of their capital stock or make other restricted payments; (iii) make certain investments; (iv) sell certain assets; (v) create or permit to exist dividend and/or payment restrictions affecting their restricted subsidiaries; (vi) create liens on certain assets to secure debt; (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets; (viii) enter into certain transactions with their affiliates; and (ix) designate their subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of exceptions and qualifications, including the ability to declare or pay any cash dividend or make any cash distribution to VICI to the extent necessary for VICI to distribute cash dividends of 100% of our “real estate investment trust taxable income” within the meaning of Section 857(b)(2) of the Internal Revenue Code of 1986, as amended, certain restricted payments not to exceed the amount of our cumulative earnings (calculated pursuant to the Indenture as $30,000,000 plus 95% of our cumulative Adjusted Funds From Operations (as defined in the Indenture) less cumulative distributions, with certain other adjustments), and the ability to make restricted payments in an amount equal to the greater of 0.6% of Adjusted Total Assets (as defined in the Indenture) or $30,000,000.

The amount of restricted net assets the Company’s consolidated subsidiaries held as of December 31, 2018 was approximately $5.8 billion.

3.	Commitments, contingencies, and long-term obligations

For a discussion of the Company’s commitments, contingencies, and long-term obligations under its senior secured credit facilities, see Note 9 of the Company’s consolidated financial statements.

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SCHEDULE III

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

December 31, 2018

(in thousands)

						Acquisition Costs								Costs Capitalized Subsequent to Acquisition								Gross Amount at Which Carried at Close of Period
Description		Location		Encumbrances		Land and Improvements				Building and Improvements				Land and Improvements				Building and Improvements				Land and Improvements				Building and Improvements				Total (a)				Accumulated Depreciation				Date Acquired		Useful Life
Caesars Palace Land		Las Vegas, Nevada		(b)		$	1,010,967			$	—			$	—			$	—			$	1,010,967			$	—			$	1,010,967			$	—			10/6/2017 (c)		N/A
Land Parcels subject to Non-CPLV Lease Agreement		Various		(d)		75,691				—				—				—				75,691				—				75,691				—				10/6/2017		N/A
Vacant, non-operating Land		Various				22,189				—				—				—				22,189				—				22,189				—				10/6/2017		N/A
Eastside Property (e)		Las Vegas, Nevada				73,600				—				—				—				73,600				—				73,600				—				10/6/2017		N/A
						$	1,182,447			$	—			$	—			$	—			$	1,182,447			$	—			$	1,182,447			$	—
(a) As discussed further in Note 2 — Summary of Significant Accounting Policies, the Lease Agreements are bifurcated between operating leases and direct financing leases, resulting in land that is subject to operating lease treatment being recorded as a Real Estate Investments accounted for using the operating method on the Company's Balance Sheet and included in this Schedule III. Building assets that triggered direct financing lease treatment are recorded Investment in direct financing leases, net on the Company's Balance Sheet and are not included in this Schedule III.
(b) Pledged to secure obligations under the CPLV CMBS Debt.
(c) Octavius tower addition to the Land was acquired on July 11, 2018.
(d) Pledged to secure obligations under the Senior Secured Credit .
(e) The transaction to sell the Eastside Property to a subsidiary of Caesars closed on December 22, 2017. Due to a put/call option on the land parcels, it was determined that the transaction does not meet the requirements of a completed sale for accounting purposes. As a result, we reclassified $73.6 million from Real estate investments accounted for using the operating method to Land.

A summary of activity for real estate assets and accumulated depreciation for the period October 6, 2017 to December 31, 2018 is as follows:

			Real Estate				Accumulated Depreciation
Balance as of October 6, 2017			$	1,184,000			$	—
	Additions		—				—
	Disposals		—				—
	Depreciation expense		—				—
Balance as of December 31, 2017			$	1,184,000			$	—
	Additions		10,967				—
	Impairments		(12,334		)		—
	Disposals		(186		)		—
	Depreciation expense		—				—
Balance as of December 31, 2018			$	1,182,447			$	—

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