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 20, 2020	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 20, 2020
Edward B. Pitoniak		(Principal Executive Officer)
/S/ DAVID A. KIESKE		Chief Financial Officer		February 20, 2020
David A. Kieske		(Principal Financial Officer)
/S/ GABRIEL F. WASSERMAN		Chief Accounting Officer		February 20, 2020
Gabriel F. Wasserman		(Principal Accounting Officer)
/S/ JAMES R. ABRAHAMSON		Chair of the Board of Directors		February 20, 2020
James R. Abrahamson
/S/ DIANA CANTOR		Director		February 20, 2020
Diana Cantor
/S/ MONICA H. DOUGLAS		Director		February 20, 2020
Monica H. Douglas
/S/ ELIZABETH I. HOLLAND		Director		February 20, 2020
Elizabeth I. Holland
/S/ CRAIG MACNAB		Director		February 20, 2020
Craig Macnab
/S/ MICHAEL D. RUMBOLZ		Director		February 20, 2020
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, 2019 and 2018		F - 5
	Year Ended December 31, 2019 and 2018 and Period from October 6, 2017 to December 31, 2017
		Consolidated Statements of Operations and Comprehensive Income	F - 6
		Consolidated Statements of Stockholders’ Equity	F - 7
		Consolidated Statements of Cash Flows	F - 8
	Notes to Consolidated Financial Statements		F - 10
Caesars Entertainment Outdoor (Predecessor):
	Report of Independent Registered Public Accounting Firm		F - 50
	Combined Balance Sheets as of October 5, 2017 and December 31, 2016		F - 51
	Period from January 1, 2017 to October 5, 2017 and Years Ended December 31, 2016 and 2015
		Combined Statements of Operations	F - 52
		Combined Statements of Equity	F - 53
		Combined Statements of Cash Flows	F - 54
	Notes to Combined Financial Statements		F - 55
VICI Properties Inc.:
	Schedule I - Condensed Financial Information of Registrant Parent Company Only		S - 1
	Schedule III - Real Estate Assets and Accumulated Depreciation		S - 6

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, 2019 and 2018, the related consolidated statements of operations and comprehensive income, stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2019 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, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019 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, 2019, 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 20, 2020, 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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of Lease Renewal Options in Lease Classification Assessment - Refer to Note 2 to the financial statements

Critical Audit Matter Description

Upon lease inception, the Company assesses lease classification under Accounting Standard Codification Topic 842 - Leases to determine whether its leases should be classified as a direct financing, sales-type, or operating lease. This assessment requires management to evaluate the classification of each lease component based on specified criteria, including, among other matters, determining the noncancelable lease term and comparing the present value of the future minimum lease payments to the fair value of the leased components. In performing its lease classification assessment, management was required to make significant judgments in determining whether its tenants are economically compelled to exercise their renewal options in determining the appropriate noncancelable lease term at the commencement date of each lease. The Company has concluded that it is reasonably certain that its tenants will exercise such renewal options.

F - 2

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures, related to management’s determination of the appropriate noncancelable lease term at the commencement date of its leases, included the following, among others:

•	We tested the design and operating effectiveness of controls over management’s review of lease classification of the lease components which included an evaluation of the lease renewal options in determination of the overall noncancelable lease term.

•	We read the executed lease agreements to understand material lease provisions, including renewal options, and evaluated their implications in the determination of the overall noncancelable lease term.

•	We evaluated the significant judgments management made in concluding that it is reasonable that its tenants’ will exercise all of their lease renewal options.

/s/ Deloitte & Touche LLP

New York, New York

February 20, 2020

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

F - 3

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, 2019, 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, 2019, 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, 2019, of the Company and our report dated February 20, 2020, 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 20, 2020

F - 4

VICI PROPERTIES INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	December 31, 2019				December 31, 2018
Assets
Real estate portfolio:
Investments in direct financing and sales-type leases, net	$	10,734,245			$	8,916,047
Investments in operating leases	1,086,658				1,086,658
Land	94,711				95,789
Cash and cash equivalents	1,101,893				577,883
Restricted cash	—				20,564
Short-term investments	59,474				520,877
Other assets	188,638				115,550
Total assets	$	13,265,619			$	11,333,368
Liabilities
Debt, net	$	4,791,563			$	4,122,264
Accrued interest	20,153				14,184
Deferred financing liability	73,600				73,600
Deferred revenue	70,340				43,605
Dividends payable	137,056				116,287
Other liabilities	123,918				62,406
Total liabilities	5,216,630				4,432,346
Commitments and Contingencies (Note 10)
Stockholders’ equity
Common stock, $0.01 par value, 700,000,000 shares authorized and 461,004,742 and 404,729,616 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively	4,610				4,047
Preferred stock, $0.01 par value, 50,000,000 shares authorized and no shares outstanding at December 31, 2019 and 2018	—				—
Additional paid-in capital	7,817,582				6,648,430
Accumulated other comprehensive loss	(65,078		)		(22,124		)
Retained earnings	208,069				187,096
Total VICI stockholders’ equity	7,965,183				6,817,449
Non-controlling interests	83,806				83,573
Total stockholders’ equity	8,048,989				6,901,022
Total liabilities and stockholders’ equity	$	13,265,619			$	11,333,368

See accompanying Notes to Consolidated Financial Statements.

F - 5

VICI PROPERTIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except share and per share data)

	Year Ended December 31,								Period from October 6, 2017 to December 31, 2017
	2019				2018
Revenues
Income from direct financing and sales-type leases	$	822,205			$	741,564			$	150,171
Income from operating leases	43,653				47,972				11,529
Tenant reimbursement of property taxes	—				81,240				19,558
Golf operations	28,940				27,201				6,351
Revenues	894,798				897,977				187,609
Operating expenses
General and administrative	24,569				24,429				9,939
Depreciation	3,831				3,686				751
Property taxes	—				81,810				19,558
Golf operations	18,901				17,371				4,126
Loss on impairment	—				12,334				—
Transaction and acquisition expenses	4,998				393				9,039
Total operating expenses	52,299				140,023				43,413
Operating income	842,499				757,954				144,196
Interest expense	(248,384		)		(212,663		)		(63,354		)
Interest income	20,014				11,307				282
Loss from extinguishment of debt	(58,143		)		(23,040		)		(38,488		)
Income before income taxes	555,986				533,558				42,636
Income tax (expense) benefit	(1,705		)		(1,441		)		1,901
Net income	554,281				532,117				44,537
Less: Net income attributable to non-controlling interests	(8,317		)		(8,498		)		(1,875		)
Net income attributable to common stockholders	$	545,964			$	523,619			$	42,662
Net income per common share
Basic	$	1.25			$	1.43			$	0.19
Diluted	$	1.24			$	1.43			$	0.19
Weighted average number of common shares outstanding
Basic	435,071,096				367,226,395				227,828,844
Diluted	439,152,946				367,316,901				227,985,455
Other comprehensive income
Net income attributable to common stockholders	$	545,964			$	523,619			$	42,662
Unrealized loss on cash flow hedges	(42,954		)		(22,124		)		—
Comprehensive income attributable to common stockholders	$	503,010			$	501,495			$	42,662

See accompanying Notes to Consolidated Financial Statements.

F - 6

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 Interest				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
Stock-based compensation, net of forfeitures	—				—				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
Distribution to non-controlling interest	—				—				—				—				—				—				(9,800		)		(9,800		)
Dividends declared	—				—				—				—				(379,185		)		(379,185		)		—				(379,185		)
Stock-based compensation, net of forfeitures	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
Net income	—				—				—				—				545,964				545,964				8,317				554,281
Issuance of common stock, net	562				—				1,163,983				—				—				1,164,545				—				1,164,545
Distribution to non-controlling interest	—				—				—				—				—				—				(8,084		)		(8,084		)
Dividends declared	—				—				—				—				(524,991		)		(524,991		)		—				(524,991		)
Stock-based compensation, net of forfeitures	1				—				5,169				—				—				5,170				—				5,170
Unrealized loss on cash flow hedges	—				—				—				(42,954		)		—				(42,954		)		—				(42,954		)
Balance as of December 31, 2019	$	4,610			$	—			$	7,817,582			$	(65,078	)		$	208,069			$	7,965,183			$	83,806			$	8,048,989

See accompanying Notes to Consolidated Financial Statements.

F - 7

VICI PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,								Period from October 6, 2017 to December 31, 2017
	2019				2018
Cash flows from operating activities
Net income	$	554,281			$	532,117			$	44,537
Adjustments to reconcile net income to cash flows provided by operating activities:
Direct financing and sales-type lease adjustments	239				(45,404		)		(8,443		)
Stock-based compensation	5,223				2,342				1,385
Depreciation	3,831				3,686				751
Amortization of debt issuance costs and original issue discount	33,034				5,976				156
Loss on impairment	—				12,334				—
Loss on extinguishment of debt	58,143				23,040				—
Deferred income taxes	—				(348		)		(1,912		)
Change in operating assets and liabilities:
Other assets	(5,635		)		(22,945		)		(7,159		)
Accrued interest	5,969				(7,411		)		21,595
Deferred revenue	26,735				(24,512		)		68,081
Other liabilities	339				25,207				10,449
Net cash provided by operating activities	682,159				504,082				129,440
Cash flows from investing activities
Investments in direct financing and sales-type leases	(1,812,404		)		(771,507		)		(1,136,200		)
Capitalized transaction costs	(8,698		)		(6,780		)		—
Lease modification fee	—				159,000				—
Investments in short-term investments	(440,353		)		(942,311		)		—
Maturities of short-term investments	901,756				421,434				—
Proceeds from sale of land	1,044				186				—
Acquisition of property and equipment	(2,724		)		(899		)		(51		)
Net cash used in investing activities	(1,361,379		)		(1,140,877		)		(1,136,251		)
Cash flows from financing activities
Proceeds from offering of common stock	1,164,307				2,001,493				—
Proceeds from private placement of common stock	—				—				963,782
Proceeds from November 2019 Senior Unsecured Notes	2,250,000				—				—
Payment of CPLV CMBS Debt	(1,663,544		)		—				—
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	(56,055		)		(1,117		)		(31,501		)
Proceeds from unrecognized sale of real estate	—				—				73,600
Mandatory debt conversion costs	—				—				(13		)
Distributions to non-controlling interests	(8,084		)		(9,800		)		—
Dividends paid	(503,958		)		(262,682		)		—
Net cash provided by financing activities	1,182,666				1,037,836				1,148,446

F - 8

VICI PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Net increase in cash, cash equivalents and restricted cash	503,446				401,041				141,635
Cash, cash equivalents and restricted cash, beginning of period	598,447				197,406				55,771
Cash, cash equivalents and restricted cash, end of period	$	1,101,893			$	598,447			$	197,406
Supplemental cash flow information:
Cash paid for interest	$	209,379			$	213,309			$	36,779
Cash paid for income taxes	2,590				1,375				—
Supplemental non-cash investing and financing activity:
Dividends declared, not paid	$	137,149			$	116,503			$	—
CPLV CMBS Debt prepayment penalty reimbursement receivable from Eldorado	55,401				—				—
Lease liabilities arising from obtaining right-of-use assets	26,516				—				—
Debt issuance costs payable	16,066				—				—
Deferred transaction costs payable	1,314				742				—
Transfer of investments in operating leases to land	—				22,189				—
Transfer of investments in direct financing leases to investments in operating leases	—				10,967				—

See accompanying Notes to Consolidated Financial Statements.

F - 9

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.

“2025 Notes” refers to $750 million aggregate principal amount of 3.500% senior unsecured notes due 2025 issued by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in February 2020.

“2026 Notes” refers to $1.25 billion aggregate principal amount of *4.250%*senior unsecured notes due 2026 issued by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in November 2019.

“2027 Notes” refers to $750 million aggregate principal amount of 3.750% senior unsecured notes due 2027 issued by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in February 2020.

“2029 Notes” refers to $1.0 billion aggregate principal amount of 4.625% senior unsecured notes due 2029 issued by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in November 2019.

“2030 Notes” refers to $1.0 billion aggregate principal amount of 4.125% senior unsecured notes due 2030 issued by the Operating Partnership and VICI Note Co. Inc., as Co-Issuer, in February 2020.

“Caesars” refers to Caesars Entertainment Corporation, a Delaware corporation, and, as the context requires, 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.

“Century Casinos” refers to Century Casinos, Inc., a Delaware corporation, and, as the context requires, its subsidiaries.

“Century Portfolio” refers to the real estate assets associated with the (i) Mountaineer Casino, Racetrack & Resort located in New Cumberland, West Virginia, (ii) Century Casino Caruthersville located in Caruthersville, Missouri and (iii) Century Casino Cape Girardeau located in Cape Girardeau, Missouri, which we purchased on December 6, 2019.

“Century Portfolio Lease Agreement” refers to the lease agreement for the Century Portfolio, as amended from time to time.

“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, as the context requires, 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 and repaid in full on November 26, 2019.

“CPLV Lease Agreement” refers to the lease agreement for Caesars Palace Las Vegas, as amended from time to time, which will be combined with the HLV Lease Agreement into a single Las Vegas master lease upon the closing of the pending Eldorado/Caesars Merger.

“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.

“Eldorado Transaction” refers to a series of transactions between us and Eldorado in connection with the Eldorado/Caesars Merger, including the acquisition of the Harrah’s New Orleans, Harrah’s Atlantic City and Harrah’s Laughlin properties, modifications to the Caesars Lease Agreements, and rights of first refusal.

F - 10

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

“Eldorado” refers to Eldorado Resorts, Inc., a Nevada corporation, and, as context requires, its subsidiaries.

“Eldorado/Caesars Merger” refers to the merger contemplated under an Agreement and Plan of Merger pursuant to which a subsidiary of Eldorado will merge with and into Caesars, with Caesars surviving as a wholly owned subsidiary of Eldorado.

“February 2020 Senior Unsecured Notes” refers collectively to the 2025 Notes, 2027 Notes and the 2030 Notes.

“Formation Date” refers to October 6, 2017.

“Greektown” refers to the real estate assets associated with the Greektown Casino-Hotel, located in Detroit, Michigan, which we purchased on May 23, 2019.

“Greektown Lease Agreement” refers to the lease agreement for Greektown, as amended from time to time.

“Hard Rock” means Hard Rock International, and, as context the requires, its subsidiary and affiliate entities.

“Hard Rock Cincinnati” refers to the casino-entitled land and real estate and related assets associated with the Hard Rock Cincinnati Casino, located in Cincinnati, Ohio, which we purchased on September 20, 2019 (and previously referred to in our prior filings as JACK Cincinnati).

“Hard Rock Cincinnati Lease Agreement” refers to the lease agreement for Hard Rock Cincinnati, as amended from time to time.

“HLV Lease Agreement” refers to the lease agreement for the Harrah’s Las Vegas facilities, as amended from time to time, which will be combined with the CPLV Lease Agreement into a single Las Vegas master lease upon the closing of the Eldorado/Caesars Merger.

“JACK Entertainment” refers to JACK Ohio LLC, and, as the context requires, its subsidiary and affiliate entities.

“JACK Cleveland/Thistledown” refers to the casino-entitled land and real estate and related assets associated with the JACK Cleveland Casino located in Cleveland, Ohio, and the video lottery gaming and pari-mutuel wagering authorized land and real estate and related assets of JACK Thistledown Racino located in North Randall, Ohio, which we purchased on January 24, 2020.

“JACK Cleveland/Thistledown Lease Agreement” refers to the lease agreement for JACK Cleveland/Thistledown, 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, the Penn National Lease Agreements, the Hard Rock Cincinnati Lease Agreement, the Century Portfolio Lease Agreement and, from and after January 24, 2020, the JACK Cleveland/Thistledown Lease Agreement, unless the context otherwise requires.

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

“Margaritaville Lease Agreement” refers to the lease agreement for Margaritaville, as amended from time to time.

“Master Transaction Agreement” refers to the master transaction agreement with Eldorado relating to the Eldorado Transaction.

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

“November 2019 Senior Unsecured Notes” refer collectively to the 2026 Notes and the 2029 Notes.

“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, as the context requires, its subsidiaries.

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

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“Revolving Credit Facility” refers to the five-year first lien revolving credit facility entered into by VICI PropCo, as amended from time to time.

“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 remained outstanding as of December 31, 2019, and which were redeemed in full on February 20, 2020.

“Seminole Hard Rock” means Seminole Hard Rock Entertainment, Inc.

“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, as of December 31, 2019, of 26 market-leading properties, including Caesars Palace Las Vegas and Harrah’s Las Vegas. As of December 31, 2019, our properties are leased to, and our tenants are, subsidiaries of Caesars, Penn National, Hard Rock and Century Casinos. We also own and operate four championship golf courses located near certain of our properties.

We conduct our operations as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. As such, we generally will not be subject to U.S. federal income taxes on our taxable income to the extent that we annually distribute all of our net taxable income to stockholders and maintain our qualification as a REIT. We conduct our real property business through our Operating Partnership and our golf course business, through a taxable REIT subsidiary (“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”) as 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.

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 property and is the lessor under the related Joliet Lease Agreement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 for the CPLV CMBS Debt. The CPLV CMBS Debt was repaid in full in November 2019 and accordingly, we no longer have any restricted cash balances as of December 31, 2019.

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, 2019				December 31, 2018
Cash and cash equivalents	$	1,101,893			$	577,883
Restricted cash	—				20,564
Total cash, cash equivalents and restricted cash shown in the Statement of Cash Flows	$	1,101,893			$	598,447

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 180 days and are accounted for as available for sale securities. As of December 31, 2019 and 2018, we had $59.5 million and $520.9 million, respectively, of short-term investments.

Investments in Direct Financing and Sales-Type Leases, Net

We account for our investments in leases under ASC 842 “Leases” (“ASC 842”), which we adopted on January 1, 2019. Upon lease inception or lease modification, we assess lease classification to determine whether the lease should be classified as a direct financing, sales-type or operating lease. As required by ASC 842, we separately assess the land and building components of the property to determine the classification of each component, unless the impact of doing so is immaterial. If the lease component is determined to be a direct financing or sales-type lease, we record a net investment in the lease, which is equal to the sum of the lease receivable and the unguaranteed residual asset, discounted at the rate implicit in the lease. Any difference between the fair value of the asset and the net investment in the lease is considered selling profit or loss and is either recognized upon execution of the lease or deferred and recognized over the life of the lease, depending on the classification of the lease. Due to the nature of our assets, the net investment in the lease is generally equal to the purchase price of the asset, and the land and building components of an investment generally have the same lease classification.

For leases determined to be sales-type leases, we further assess to determine whether the transaction is considered a sale leaseback transaction. If we determine that the lease meets the definition for a sale leaseback transaction, the lease is considered a financing receivable and is recognized in accordance with ASC 310 “Receivables” (“ASC 310”). We currently do not have any lease investments that are accounted for as financing receivables under ASC 310.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Upon adoption of ASC 842, we made an accounting policy election to use a package of practical expedients that, among other things, allow us to not reassess prior lease classifications or initial direct costs for leases that existed as of the balance sheet date. As such, we have not reassessed the classification of our Caesars Lease Agreements, as these leases existed prior to our adoption of ASC 842.

We determined that the land and building components of the Margaritaville Lease Agreement, the Greektown Lease Agreement, the Hard Rock Cincinnati Lease Agreement and the Century Portfolio Lease Agreement meet the definition of a sales-type lease. The Caesars Lease Agreements continue to be accounted for as direct financing leases and are included within Investments in direct financing and sales-type leases on the Balance Sheet, with the exception of the land component of Caesars Palace Las Vegas which was determined to be an operating lease and is included in Investments in operating leases on the Balance Sheet. The income recognition for our direct financing leases recognized under ASC 840 is consistent with the income recognition for our sales-type lease under ASC 842.

Lease Term

We assess the noncancelable lease term under ASC 842, which includes any reasonably assured renewal periods. All of our Lease Agreements provide for an initial term, with multiple tenant renewal options. We have individually assessed all of our Lease Agreements and concluded that the lease term includes all of the periods covered by extension options as it is reasonably certain our tenants will renew the Lease Agreements. We believe our tenants are economically compelled to renew the Lease Agreements due to the importance of our real estate to the operation of their business, the significant capital they have invested in our properties and the lack of suitable replacement assets.

Income from Leases

We recognize the related income from our direct financing and sales-type 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 and sales-type leases will not equal income from our Lease Agreements. Rather, a portion of the cash rent we receive is recorded as Income from direct financing and sales-type leases in our Statement of Operations and a portion is recorded as a change to Investments in direct financing and sales-type leases, net.

Under ASC 840, we determined that the land component of Caesars Palace Las Vegas was greater than 25% of the overall fair value of the combined land and building components. At lease inception the land was determined to be an operating lease and we record the related income 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. Revenue from this lease is recorded as Income from operating leases in our Statement of Operations.

Initial direct costs incurred in connection with entering into lease agreements are included in the balance of the net investment in lease. In relation to direct financing and sales-type leases, such amounts will be recognized as a reduction to Income from investments in leases over the life of the lease using the effective interest method. Costs that would have been incurred regardless of whether the lease was signed, such as legal fees and certain other third-party fees, are expensed as incurred to Transaction and acquisition expenses 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 2018 we reclassified the entire $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 did 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$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 is included within Other assets on our Balance Sheet and represents assets primarily related to VICI Golf, our golf operations. 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 investments in operating leases, land and property and equipment used in operations for impairment under ASC 360 “Property, Plant and Equipment” (“ASC 360”) 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. We assess our investments in direct financing and sales-type leases for impairment under ASC 310. Under ASC 310, the net investment in the lease is identified for impairment when it becomes probable that we will be unable to collect all rental payments associated with our investment in 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. 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.

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 9 - 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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 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.

Tenant Reimbursement of Property Taxes

Real estate taxes paid directly by our tenants to taxing authorities were recorded gross on our Balance Sheets and Income Statements during 2018 and 2017, as we concluded we are the primary obligor. Such amounts were 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 2019, such amounts are 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 $10.3 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” and recognized ratably over the performance period.

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.

Income Taxes-REIT Qualification

We conduct our operations as a REIT for U.S. federal income tax purposes. 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.

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VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Transaction and Acquisition Expenses

Transaction and acquisition-related expenses that are not capitalizable under GAAP, including most leasing costs under ASC 842, are expensed in the period they occur. Transaction and acquisition expenses also include dead deal costs.

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

See Note 12—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

Caesars is the guarantor of all the lease payment obligations of the tenants under the respective leases of the properties that it leases from us, with the exception of Harrah’s Las Vegas which is guaranteed by a subsidiary of Caesars. Revenue from the Caesars Lease Agreements represented 93 %, 100% and 100% of our lease revenues for the years ended December 31, 2019 and 2018 and the period from October 6, 2017 through December 31, 2017, respectively. Additionally, our properties on the Las Vegas Strip generated approximately 33%, 36% and 28% of our lease revenues for the years ended December 31, 2019 and 2018 and the period from October 6, 2017 through December 31, 2017, respectively. We do not believe there are any other significant concentrations of credit risk.

Caesars is a publicly traded company that is subject to the informational filing requirements of the Securities Exchange Act of 1934, as amended, and is required to file periodic reports on Form 10-K and Form 10-Q and current reports on Form 8-K with the SEC. Caesars’ SEC filings are available to the public from the SEC’s web site at www.sec.gov. We make no representation as to the accuracy or completeness of the information regarding Caesars that is available through the SEC’s website or otherwise made available by Caesars or any third party, and none of such information is incorporated by reference in this Annual Report on Form 10-K.

Reclassifications

In the quarter ended June 30, 2019 we reclassified property and equipment used in operations, net to Other assets in the Balance Sheet in order to simplify our presentation. As of December 31, 2019 and 2018, such amounts represent $70.4 million and $71.5 million of the balance of Other assets, respectively.

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VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3 — Recently Issued Accounting Pronouncements

Accounting Pronouncements Recently Adopted

ASU No. 2016-02 - Leases (Topic 842) - February 2016 (as amended through March 2019): The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 and is implemented using a modified retrospective approach, with the option to apply the guidance at the effective date or the beginning of the earliest comparative period.

We adopted the guidance on January 1, 2019 and elected to apply the effective date method and, as such, have not re-cast prior periods to show the effects of ASC 842. Additionally, upon adoption, we elected a package of practical expedients that, among other things, allow us to not reassess prior lease classifications or initial direct costs for leases that existed before the adoption date. As such, we have not reassessed the classification of our Caesars Lease Agreements, as these leases existed prior to our adoption of ASC 842.

Lessor Accounting

The new guidance did not have a material impact on the accounting treatment of our triple-net tenant leases, which are the primary source of our revenues. As such, upon adoption of ASC 842, we have not recorded any adjustment to our beginning balance of retained earnings. However, as of January 1, 2019, there are certain changes to the guidance under ASC 842, which will have an impact on future operating results, as follows:

•

Costs that are paid directly by the lessee to a third party, such as real estate taxes and insurance, are no longer recognized in our Statement of Operations. Prior to our adoption of ASC 842, we presented on a gross basis the real estate taxes that were paid by our tenants directly to the taxing authority. Subsequent to our adoption of ASC 842, Tenant reimbursements of property taxes and Property taxes expense are presented on a net basis, as the lessee pays for such costs directly. However, consistent with our effective date adoption approach, we have not re-cast prior year financial results to conform to the current period presentation.

•	Initial direct costs associated with the execution of lease agreements, such as legal fees and certain transaction costs will no longer be capitalizable and instead are expensed in the period incurred.

•

Long-term leases entered into or modified subsequent to our adoption of ASC 842 will most likely be considered sales-type leases, as defined in ASC 842. The accounting for a sales-type lease is materially consistent with that of the current accounting for our direct financing leases. If we determine that the lease meets the definition for a sale leaseback transaction, the lease is considered a financing receivable and is accounted for in accordance with ASC 310.

•	Prior to our adoption of ASC 842, the residual value component of our Lease Agreements was assessed for impairment under ASC 360 while the receivable component was separately assessed for impairment under ASC 310. Upon adoption of ASC 842, both the receivable and residual value components of the direct financing and sales-type leases are assessed for impairment under ASC 310.

Lessee Accounting

In relation to certain operating leases for which we are the lessee, such as the ground lease on the Cascata golf course, upon adoption of ASC 842, we recorded a right of use asset and corresponding lease liability of $11.1 million, which is included in Other assets and Other liabilities on our Balance Sheets. There was no change to our lease expense as a result of the change in accounting as such expense is still being recorded on a straight-line basis.

Accounting Pronouncements Not Yet Adopted

ASU No. 2016-13 - Financial Instruments-Credit Losses (Topic 326) - June 2016 (as amended through May 2019)**: This amended guidance changes how entities will measure credit losses for most financial assets and certain other instruments, including direct financing and sales-type 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. As a result of the guidance, we will be required to estimate and record non-cash credit losses related to our historical, and any future investments in direct financing and sales-type leases and expand credit quality disclosures. We do not believe the new standard will materially impact any of our other financial assets or instruments that we currently have on our balance sheet.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We will measure credit losses by engaging a data analytics firm to assist with estimating both the probability of default (“PD”) and loss given default (“LGD”) of our tenants and their parent guarantors over the life of each individual lease. These individual loss rates will then be applied to our net investment in direct financing and sales-type leases. The estimated losses will be discounted using the effective interest rate implicit in the lease. We currently estimate that our initial allowance for credit losses upon the adoption of the standard will be between 1% and 5% of our total net investment in direct financing and sales-type leases.

We will adopt the guidance on January 1, 2020 using the modified retrospective approach method of adoption. Under this method we will record a cumulative-effect adjustment to the balance sheet and retained earnings by recording a credit allowance for all of our existing investments in direct financing and sales-type leases. Periods prior to the adoption date that are presented for comparative purposes will not be adjusted. Each time we enter into a new direct financing or sales-type lease, we will be required to estimate a credit allowance which will result in a non-cash charge to the Statement of Operations and a corresponding reduction in our net investment in the lease. Finally, each reporting period we will be required to update the estimated allowance for any estimated changes in the credit loss, with the resulting change being recorded through the Statement of Operations.

ASU No. 2018-16 - Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes - October 2018*:* This amended guidance expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting by adding the OIS rate based on SOFR as an eligible benchmark interest rate and is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018. We are currently evaluating the effect of this new benchmark interest rate option, and do not believe this ASU will have a material impact on our financial statements.

Note 4 — Property Transactions

Summary of Recent Activities

Since January 1, 2019 our significant activities, in reverse chronological order, are as follows:

Closing of Purchase of JACK Cleveland/Thistledown

On January 24, 2020 we completed the previously announced transaction to acquire the casino-entitled land and real estate and related assets of the JACK Cleveland Casino, located in Cleveland, Ohio and the video lottery gaming and pari-mutuel wagering authorized land and real estate and related assets of the JACK Thistledown Racino located in North Randall, Ohio from affiliates of JACK Entertainment, for approximately $843.3 million in cash (the “JACK Cleveland/Thistledown Acquisition”). Simultaneous with the closing of the JACK Cleveland/Thistledown Acquisition, we entered into a master triple-net lease agreement for JACK Cleveland and JACK Thistledown with subsidiaries of JACK Entertainment. The lease has an initial total annual rent of $65.9 million and an initial term of 15 years, with four five-year tenant renewal options. The tenant’s obligations under the lease are guaranteed by Rock Ohio Ventures LLC (“Rock Ohio Ventures”). Additionally, we made a $50.0 million loan (the “ROV Loan”) to affiliates of Rock Ohio Ventures secured by, among other things, certain non-gaming real estate assets owned by such affiliates and guaranteed by Rock Ohio Ventures. The ROV Loan bears interest at 9.0% per annum for a period of five years with two one-year extension options.

Sale of Harrah’s Reno

On December 31, 2019 we and Caesars entered into a definitive agreement to sell the Harrah’s Reno asset for $50.0 million to a third party. We are entitled to receive 75% of the proceeds of the sale and Caesars is entitled to receive 25% of the proceeds. The annual rent payments under the Non-CPLV Lease Agreement will remain unchanged following completion of the disposition.

Closing of Purchase of Century Portfolio

On December 6, 2019, we completed the previously announced transaction to acquire the land and real estate assets of (i) Mountaineer Casino, Racetrack & Resort located in New Cumberland, West Virginia, (ii) Century Casino Caruthersville located in Caruthersville, Missouri and (iii) Century Casino Cape Girardeau located in Cape Girardeau, Missouri from affiliates of Eldorado, for approximately $277.8 million, and a subsidiary of Century Casinos acquired the operating assets of the Century Portfolio for approximately $107.2 million (together, the “Century Portfolio Acquisition”). Simultaneous with the closing of the Century Portfolio Acquisition, we entered into a master triple-net lease agreement for the Century Portfolio with a subsidiary of Century Casinos. The master lease has an initial total annual rent of $25.0 million and an initial term of 15 years, with four five-year tenant renewal options. The tenant’s obligations under the lease are guaranteed by Century Casinos. We determined that the land and building components of the Century Portfolio Lease Agreement meet the definition of a sales-type lease and have recorded the

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corresponding asset, including related transaction and acquisition costs, in Investments in direct financing and sales-type leases on our Balance Sheet.

Closing of Purchase of Hard Rock Cincinnati

On September 20, 2019, we completed the previously announced transaction to acquire the casino-entitled land and real estate and related assets of Hard Rock Cincinnati, located in Cincinnati, Ohio from affiliates of JACK Entertainment LLC, for approximately $558.3 million, and a subsidiary of Hard Rock acquired the operating assets of the Hard Rock Cincinnati Casino for $186.5 million (together, the “Hard Rock Cincinnati Acquisition”). Simultaneous with the closing of the Hard Rock Cincinnati Acquisition, we entered into a triple-net lease agreement for Hard Rock Cincinnati with a subsidiary of Hard Rock. The lease has an initial total annual rent of $42.8 million and an initial term of 15 years, with four five-year tenant renewal options. The tenant’s obligations under the lease are guaranteed by Seminole Hard Rock Entertainment, Inc. We determined that the land and building components of the Hard Rock Cincinnati Lease Agreement meet the definition of a sales-type lease and have recorded the corresponding asset, including related transaction and acquisition costs, in Investments in direct financing and sales-type leases on our Balance Sheet.

Eldorado Transaction

On June 24, 2019, we entered into a master transaction agreement (the “Master Transaction Agreement” or “MTA”) with Eldorado relating to the transactions described below (collectively, the “Eldorado Transaction”), all of which are conditioned upon consummation of the closing of the merger contemplated under an Agreement and Plan of Merger (the “Eldorado/Caesars Merger Agreement”) pursuant to which a subsidiary of Eldorado will merge with and into Caesars, with Caesars surviving as a wholly owned subsidiary of Eldorado. Upon closing of the merger, Eldorado will be renamed Caesars. Any references to Eldorado in the subsequent transaction discussion refer to the combined Eldorado/Caesars subsequent to the closing of the Eldorado/Caesars Merger, as applicable.

The Eldorado Transaction and the Eldorado/Caesars Merger are both subject to regulatory approvals and customary closing conditions. Eldorado has publicly disclosed that it expects the Eldorado/Caesars Merger to be completed in the first half of 2020. However, we can provide no assurances that the Eldorado/Caesars Merger or the Eldorado Transaction described herein will close in the anticipated timeframe, on the contemplated terms or at all. We intend to fund the Eldorado Transaction with a combination of cash on hand, proceeds from the settlement of our forward sales agreements entered into as part of our June equity offering, as described in Note 11 - Stockholders’ Equity in the Notes to our Financial Statements, and proceeds from our February 2020 Senior Unsecured Notes Offering.

The Master Transaction Agreement contemplates the following transactions:

•

Acquisition of the MTA Properties. We have agreed to acquire all of the land and real estate assets associated with Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City (or, if necessary, certain replacement properties designated in the Master Transaction Agreement) (collectively, the “MTA Properties” and each, an “MTA Property”) for an aggregate purchase price of $1,823.5 million (which reflects a purchase price adjustment of $14.0 million related to Harrah’s New Orleans) (the “MTA Properties Acquisitions” and each, an “MTA Property Acquisition”). Simultaneous with the closing of each MTA Property Acquisition the Non-CPLV Lease Agreement will be amended to include such MTA Property, with (i) initial aggregate total annual rent payable to us and attributable to the MTA Properties of $154.0 million, (ii) so long as the MTA Property Acquisitions are consummated concurrent with the closing of the Eldorado/Caesars Merger, an initial term of approximately 15 years and (iii) the same renewal terms available to the other tenants under the Non-CPLV Lease Agreement at such time. The Non-CPLV Lease Agreement will also be amended to adjust certain minimum capital expenditure requirements and other related terms and conditions as a result of the MTA Properties being included in the Non-CPLV Lease Agreement.

On September 26, 2019, we entered into the following agreements (each of which were entered into in accordance with the terms of the Master Transaction Agreement): (i) a Purchase and Sale Agreement (the “Harrah’s New Orleans Purchase Agreement”) pursuant to which we agreed to acquire, and Eldorado agreed to cause to be sold, all of the fee and leasehold interests in the land and real property improvements associated with Harrah’s New Orleans in New Orleans, Louisiana for a cash purchase price of $789.5 million (which reflects a purchase price adjustment of $14.0 million); (ii) a Purchase and Sale Agreement (the “Harrah’s Atlantic City Purchase Agreement”) pursuant to which we agreed to acquire, and Eldorado agreed to cause to be sold, all of the land and real property improvements associated with Harrah’s Resort Atlantic City and Harrah’s Atlantic City Waterfront Conference Center in Atlantic City, New Jersey for a cash purchase price of $599.3 million; and (iii) a Purchase and Sale Agreement (the “Harrah’s Laughlin Purchase Agreement” and,

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collectively with the Harrah’s New Orleans Purchase Agreement and the Harrah’s Atlantic City Purchase Agreement, the “MTA Property Purchase Agreements” and each, a “MTA Property Purchase Agreement”) pursuant to which we agreed to acquire, and Eldorado agreed to cause to be sold, all of the equity interests in a newly formed entity that will acquire the land and real property improvements associated with Harrah’s Laughlin Hotel & Casino in Laughlin, Nevada for a cash purchase price of $434.8 million.

Each of our existing call options on the Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City properties will terminate upon the earlier to occur of the closing of the corresponding MTA Property Acquisition or our obtaining specific performance or liquidated damages with respect to the relevant property. The closings of the MTA Property Acquisitions are subject to conditions in addition to the consummation of the Eldorado/Caesars Merger, and are not cross-conditioned on each other (that is, we are not required to close on “all or none” of the MTA Properties). In addition, the closing of the other transactions that comprise the Eldorado Transaction is not conditioned on the completion of any or all of the MTA Property Acquisitions.

•	CPLV Lease Agreement Amendment. In consideration of a payment by us to Eldorado of $1,189.9 million, we and Eldorado will amend the CPLV Lease Agreement to (i) increase the annual rent payable to us under the CPLV Lease Agreement by $83.5 million (the “CPLV Additional Rent Acquisition”) and (ii) provide for the amended terms described below.

•

HLV Lease Agreement Termination and Creation of Las Vegas Master Lease. In consideration of a payment by us to Eldorado of $213.8 million, we and Eldorado will terminate the HLV Lease Agreement and the related lease guaranty. Annual rent previously payable to us with respect to the Harrah’s Las Vegas property will be increased by $15.0 million (the “HLV Additional Rent Acquisition”). The CPLV Lease Agreement will be amended (as amended, the “Las Vegas Master Lease Agreement”) to provide, among other things, that the Harrah’s Las Vegas property, which is currently subject to the HLV Lease Agreement, will be leased pursuant thereto (with the Harrah’s Las Vegas property subject to the higher rent escalator currently in place under the CPLV Lease Agreement). Thereafter the Las Vegas Master Lease Agreement will be a multi-property master lease whereby the Harrah’s Las Vegas property tenant and the Caesars Palace Las Vegas property tenant will collectively be the tenant.

•

Centaur Properties Put/Call Agreement. Affiliates of Caesars currently own two gaming facilities in Indiana - Harrah’s Hoosier Park and Indiana Grand (together the “Centaur Properties”). At the closing of the Eldorado/Caesars Merger, a right of first refusal that we have with respect to the Centaur Properties will terminate and we will enter into a put/call agreement with Eldorado, whereby (i) we will have the right to acquire all of the land and real estate assets associated with the Centaur Properties at a price equal to 13.0x the initial annual rent of each facility (determined as provided below), and to simultaneously lease back each such property to a subsidiary of Eldorado for initial annual rent equal to the property’s trailing four quarters EBITDA at the time of acquisition divided by 1.3 (i.e., the initial annual rent will be set at 1.3x rent coverage) and (ii) Eldorado will have the right to require us to acquire the Centaur Properties at a price equal to 12.5x the initial annual rent of each facility, and to simultaneously lease back each such Centaur Property to a subsidiary of Eldorado for initial annual rent equal to the property’s trailing four quarters EBITDA at the time of acquisition divided by 1.3 (i.e., the initial annual rent will be set at 1.3x rent coverage). Either party will be able to trigger its respective put or call, as applicable, beginning on January 1, 2022 and ending on December 31, 2024. The put/call agreement will provide that the leaseback of the Centaur Properties will be implemented through addition of the Centaur Properties to the Non-CPLV Lease Agreement.

•

Las Vegas Strip Assets ROFR. We will enter into a right of first refusal agreement with Eldorado (the “Las Vegas ROFR”) whereby we will have the first right, with respect to the first two of certain specified Las Vegas Strip assets that Eldorado proposes to sell, whether pursuant to a sale leaseback or a WholeCo sale, to a third party, to acquire any such asset (it being understood that we will have the opportunity to find an operating company should Eldorado elect to pursue a WholeCo sale). Pursuant to the Master Transaction Agreement, the specified Las Vegas Strip assets subject to the Las Vegas ROFR will be the land and real estate assets associated (i) with respect to the first such asset subject to the Las Vegas ROFR, the Flamingo Las Vegas, Paris Las Vegas, Planet Hollywood and Bally’s Las Vegas gaming facilities, and (ii) with respect to the second asset subject to the Las Vegas ROFR, the foregoing assets plus The LINQ gaming facility. If we enter into a sale leaseback transaction with Eldorado on any of these facilities, the leaseback will be implemented through the addition of such properties to the CPLV Lease Agreement.

•	Horseshoe Baltimore ROFR. We and Eldorado agreed to enter into a right of first refusal agreement pursuant to which we will have the first right to enter into a sale leaseback transaction with respect to the land and real estate assets associated with the Horseshoe Baltimore gaming facility (subject to any consent required from Caesars’ joint venture partners with

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respect to this asset) (the “Horseshoe Baltimore ROFR”).

•

Lease Guaranties and MLSA Terminations. Eldorado will execute new guaranties (the “Eldorado Guaranties”) of the CPLV Lease Agreement, the Non-CPLV Lease Agreement and the Joliet Lease Agreement, and the existing guaranties by Caesars of such leases, along with all covenants and other obligations of Caesars incurred in connection with such guaranties, will be terminated with respect to Caesars (which will become a subsidiary of Eldorado following the closing of the Eldorado/Caesars Merger). The Eldorado Guaranties will guaranty the prompt and complete payment and performance in full of: (i) all monetary obligations of the tenants under the respective leases, including all rent and other sums payable by the tenants under the leases and any obligation to pay monetary damages in connection with any breach and to pay any indemnification obligations of the tenants under the leases; and (ii) the performance when due of all other covenants, agreements and requirements to be performed and satisfied by the tenants under the leases. In addition, we and Eldorado will terminate the Management and Lease Support Agreements with respect to the CPLV Lease Agreement, the Non-CPLV Lease Agreement and the Joliet Lease Agreement, and certain provisions currently set forth therein will be added to the respective leases, as amended, and the Eldorado Guaranties.

•

Other Lease Amendments. The CPLV Lease Agreement, the Non-CPLV Lease Agreement and the Joliet Lease Agreement will be amended to, among other things, (i) remove the rent coverage floors, which coverage floors serve to reduce the rent escalators under such leases in the event that the “EBITDAR to Rent Ratio” (as defined in each of the CPLV Lease Agreement, the Non-CPLV Lease Agreement and the Joliet Lease Agreement) coverage is below the stated floor and (ii) extend the term of each such lease by such additional period of time as necessary to ensure that following the consummation of the Eldorado/Caesars Merger, each lease will have a full 15-year initial lease term. The Non-CPLV Lease Agreement also will be amended to, among other things: (a) permit the tenant under the Non-CPLV Lease Agreement to cause facilities subject to the Non-CPLV Lease Agreement that in the aggregate represent up to five percent of the aggregate EBITDAR of (A) all of the facilities under such Non-CPLV Lease Agreement and (B) the Harrah’s Joliet facility, for the 2018 fiscal year (defined as the “2018 EBITDAR Pool” in the Non-CPLV Lease Agreement, without giving effect to any increase in the 2018 EBITDAR Pool as a result of a facility being added to the Non-CPLV Lease Agreement) to be sold (whereby the tenant and landlord under the Non-CPLV Lease Agreement would sell the operations and real estate, respectively, with respect to such facility), provided, among other things, that (1) we and Eldorado mutually agree to the split of proceeds from such sales, (2) such sales do not result in any impairment(s)/asset write down(s) by us, (3) rent under the Non-CPLV Lease Agreement remains unchanged following such sale and (4) the sale does not result in us recognizing certain taxable gain; (b) restrict the ability of the tenant thereunder to transfer and sell the operating business of Harrah’s New Orleans and Harrah’s Atlantic City to replacement tenants without our consent and remove such restrictions with respect to Horseshoe Southern Indiana (in connection with the restrictions applying to Harrah’s New Orleans) and Horseshoe Bossier City (in connection with the restrictions applying to Harrah’s Atlantic City), provided that the tenant under the Non-CPLV Lease Agreement may only sell such properties if certain terms and conditions are met, including that replacement tenants meet certain criteria provided in the Non-CPLV Lease Agreement; and (c) require that the tenant under the Non-CPLV Lease Agreement complete and pay for all capital improvements and other payments, costs and expenses related to the extension of the existing operating license with respect to Harrah’s New Orleans, including, without limitation, any such payments, costs and expenses required to be made to the City of New Orleans, the State of Louisiana or any other governmental body or agency.

•

CPLV CMBS Refinancing. We were obligated to cause the CPLV CMBS Debt to be repaid in full prior to the closing of the Eldorado/Caesars Merger. Eldorado has agreed to reimburse us for 50% of our out-of-pocket costs in connection with the prepayment penalties associated with refinancing the CPLV CMBS Debt (which reimbursement obligations exist pursuant to the MTA regardless of whether the Eldorado/Caesars Merger is consummated). We repaid the CPLV CMBS Debt in full in November of 2019 resulting in a prepayment penalty of $110.8 million, $55.4 million of which will be reimbursed by Eldorado. Due to the prepayment of the CPLV CMBS Debt, we recognized a loss on extinguishment of debt of $58.1 million during the year ended December 31, 2019, the majority of which related to the prepayment penalty.

•

Eldorado Bridge Facility. On June 24, 2019, in connection with the Eldorado Transaction, VICI PropCo entered into a commitment letter (the “Commitment Letter”) with Deutsche Bank Securities Inc. and Deutsche Bank AG Cayman Islands Branch (collectively, the “Bridge Lender”), pursuant to which and subject to the terms and conditions set forth therein, the Bridge Lender has agreed to provide (i) a 364-day first lien secured bridge facility of up to $3.3 billion in the aggregate (the “Eldorado Senior Bridge Facility”) and (ii) a 364-day second lien secured bridge facility of up to $1.5 billion in the aggregate (the “Eldorado Junior Bridge Facility,” and, together with the Eldorado Senior Bridge Facility, the “Bridge Facilities”), for the purpose of providing a portion of the financing necessary to fund the consideration to

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be paid pursuant to the terms of the Eldorado Transaction documents and related fees and expenses. Following the issuance of the 2026 Notes and 2029 Notes in November of 2019, the commitments under the Bridge Facility were reduced by $1.6 billion, to $3.2 billion. Following the issuance of the February 2020 Senior Secured Notes we placed $2.0 billion of the net proceeds into escrow pending the consummation of the Eldorado Transaction and the commitments under the Bridge Facility were further reduced by $2.0 billion to $1.2 billion.

The Master Transaction Agreement contains customary representations, warranties and covenants by the parties to the agreement and is subject to the consummation of the Eldorado/Caesars Merger as well as customary closing conditions, including, among other things, that: (i) the absence of any law or order restraining, enjoining or otherwise preventing the transactions contemplated by the Master Transaction Agreement; (ii) the receipt of certain regulatory approvals, including gaming regulatory approvals; (iii) certain restructuring transaction shall have been consummated; (iv) the accuracy of the respective parties’ representations and warranties, subject to customary qualifications; and (v) material compliance by the parties with their respective covenants and obligations. The Master Transaction Agreement contains certain termination rights, including that the Master Transaction Agreement shall automatically terminate upon the termination of the Eldorado/Caesars Merger Agreement and a right by us to terminate the Master Transaction Agreement in the event the closing of the transactions contemplated by the Master Transaction Agreement has not occurred by the date on which the Eldorado/Caesars Merger is required to close pursuant to the Eldorado/Caesars Merger Agreement, but in no event later than December 24, 2020.

If the Master Transaction Agreement is terminated by Eldorado under certain circumstances where we have a financing failure, we may be obligated to pay Eldorado a reverse termination fee of $75.0 million (the “Reverse Termination Fee”). If the amendment of the CPLV Lease Agreement is not entered into on the date on which the Eldorado/Caesars Merger closes, under certain circumstances, we may be obligated to pay Eldorado a fee of $45.0 million (the “CPLV Break Payment”), provided we will not be obligated to pay both the Reverse Termination Fee and the CPLV Break Payment. If the Eldorado/Caesars Merger does not close for any reason, under certain circumstances, Eldorado may be obligated to pay us a termination fee of $75.0 million. For more information, see Item 1A. “Risk Factors”.

Closing of Purchase of Greektown

On May 23, 2019, we completed the previously announced transaction 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, and an affiliate of Penn National acquired the operating assets of Greektown for $300.0 million in cash (together, the “Greektown Acquisition”). Simultaneous with the closing of the Greektown Acquisition, we entered into a triple-net lease agreement for Greektown with a subsidiary of Penn National. The lease has 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 are guaranteed by Penn National and certain of its subsidiaries. We determined that the land and building components of the Greektown Lease Agreement meet the definition of a sales-type lease and have recorded the corresponding asset, including related transaction and acquisition costs, in Investments in direct financing and sales-type leases on our Balance Sheet.

Closing of Purchase of Margaritaville

On January 2, 2019, we completed the previously announced transaction to acquire the land and real estate assets of Margaritaville, located in Bossier City, Louisiana, for $261.1 million. Penn National acquired the operating assets of Margaritaville for $114.9 million. Simultaneous with the closing of this transaction, we entered into a triple-net lease agreement with 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 tenant renewal options. The tenant’s obligations under the lease are guaranteed by Penn National and certain of its subsidiaries. We determined that the land and building components of the Margaritaville Lease Agreement meet the definition of a sales-type lease and have recorded the corresponding asset, including related transaction and acquisition costs, in Investments in direct financing and sales-type leases on our Balance Sheet.

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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), 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, 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 tenant 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. 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 5 - Real Estate Portfolio for a summary of the terms of the modified leases.

Other Agreements with Caesars

Caesars Forum Convention Center - Put/Call Agreement

In December 2017, we sold to Caesars approximately 18.4 acres of certain parcels located in Las Vegas, Nevada, east of Harrah’s Las Vegas, known as the Eastside Property, for $73.6 million. The Caesars Forum Convention Center is currently being constructed on the Eastside Property and is expected to be completed by the end of the first quarter of 2020. 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. This agreement survives the closing of the Eldorado/Caesars Merger.

Due to the 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, at December 31, 2017, we reclassified $73.6 million from Investments in operating leases to Land and recorded a $73.6 million Deferred financing liability on our Balance Sheet.

Second 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 Properties, which were 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

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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, provides us with the right to acquire from Caesars, under certain circumstances, certain undeveloped land adjacent to the Las Vegas Strip. Upon closing of the Eldorado/Caesars Merger, the Second Amended and Restated Right of First Refusal will be terminated and we will enter into the Las Vegas ROFR and the Horseshoe Baltimore ROFR.

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 5 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. As described above under “Eldorado Transaction-Acquisition of the MTA Properties,” we have entered into agreements to acquire all of the land and real estate assets associated with the MTA Properties, and the existing call right agreements will terminate, upon the earlier to occur of the closing of the corresponding MTA Property Acquisition or our obtaining specific performance or liquidated damages with respect to the relevant property in accordance with the terms of the MTA.

Note 5 — Real Estate Portfolio

As of December 31, 2019, our real estate portfolio consisted of the following:

•	Investments in direct financing and sales-type leases, representing our investment in 26 casino assets leased on a triple net basis to our tenants, Caesars, Penn National, Hard Rock and Century Casinos, under eight separate lease agreements;

•	Investments in operating leases, representing the 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; and

•	Land, representing our investment in the Eastside Property and certain non-operating, vacant land parcels contained in the Non-CPLV Lease Agreement.

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The following is a summary of the balances of our real estate portfolio as of December 31, 2019 and 2018:

(In thousands)	December 31, 2019				December 31, 2018
Minimum lease payments receivable under direct financing and sales-type leases (1)	$	31,460,712			$	27,285,943
Estimated residual values of leased property (unguaranteed)	2,525,469				2,135,312
Gross investment in direct financing and sales-type leases	33,986,181				29,421,255
Unamortized initial direct costs	42,819				22,822
Less: Unearned income	(23,294,755		)		(20,528,030		)
Net investment in direct financing and sales-type leases	10,734,245				8,916,047
Investment in operating leases	1,086,658				1,086,658
Total Investments in leases, net	11,820,903				10,002,705
Land	94,711				95,789
Total Real estate portfolio	$	11,915,614			$	10,098,494

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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 following table details the components of our income from direct financing, sales-type and operating leases:

	Year Ended December 31,								Period from October 6, 2017 to December 31, 2017
(In thousands)	2019				2018
Income from direct financing and sales-type leases	$	822,205			$	741,564			$	150,171
Income from operating leases	43,653				47,972				11,529
Total leasing revenue	865,858				789,536				161,700
Direct financing and sales-type lease adjustments (1)	239				(45,404		)		(8,443		)
Total contractual leasing revenue	$	866,097			$	744,132			$	153,257

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(1) Amounts represent the non-cash adjustment to income from direct financing and sales-type 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, 2019, minimum lease payments owed to us for each of the five succeeding years under direct financing, sales-type and operating leases are as follows:

(In thousands)	Minimum Lease Payments (1)
2020	$	953,949
2021	960,374
2022	971,004
2023	985,938
2024	998,222
Thereafter	28,024,506
Total	$	32,893,993

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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, assuming the exercise of all tenant renewal options, for our direct financing, sales-type and operating leases at December 31, 2019 was 33.0 years.

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VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Caesars Lease Agreements - Overview

The following is a summary of the material provisions of the Caesars Lease Agreements (which does not reflect the modifications to the Caesars Lease Agreements contemplated in connection with the closing of the Eldorado Transaction):

($ In thousands)
Lease Provision (1)		Non-CPLV Lease Agreement and Joliet Lease Agreement		CPLV Lease Agreement		HLV Lease Agreement
Initial Term		15 years		15 years		15 years
Renewal Terms		Four, five-year terms		Four, five-year terms		Four, five-year terms
Current annual rent (2)		$508,534		$207,745		$89,157
Escalator commencement		Lease year two		Lease year two		Lease year two
Escalator (3)		Lease years 2-5 - 1.5% Lease years 6-15 - 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 (4)		1.2x commencing lease year 8		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
Variable Rent split (5)		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
Variable Rent percentage (5)		4%		4%		4%

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

(2) In relation to the Non-CPLV Lease Agreement, Joliet Lease Agreement and CPLV Lease Agreement, the amount represents the current annual base rent payable for the current lease year which is the period from November 1, 2019 through October 31, 2020. In relation to the HLV Lease Agreement the amount represents current annual base rent payable for the current lease year which is the period from January 1, 2020 through December 31, 2020.

(3) 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 years ended December 31, 2019 and 2018*.*

(4) 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. The EBITDAR to Rent Ratio floor is conditioned upon obtaining a favorable private letter ruling from the Internal Revenue Service. The coverage floors, which coverage floors serve to reduce the rent escalators under the Caesars Lease Agreements in the event that the “EBITDAR to Rent Ratio” coverage is below the stated floor, will be removed upon execution of the amendments to the Caesars Lease Agreements in connection with the closing of the Eldorado Transaction.

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

F - 27

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Penn National Lease Agreements - Overview

The following is a summary of the material provisions of the Penn National Lease Agreements:

($ In thousands)
Lease Provision		Margaritaville Lease Agreement		Greektown Lease Agreement
Initial term		15 years		15 years
Renewal terms		Four, five-year terms		Four, five-year terms
Current annual rent (1)		$23,544		$55,600
Escalation commencement		Lease year two		Lease year two
Escalation		2% of Building base rent, subject to the net revenue to rent ratio floor		2% of Building base rent, subject to the EBITDAR to rent ratio floor
Performance to rent ratio floor (2)		6.1x net revenue commencing lease year two		1.85x EBITDAR commencing lease year two
Percentage rent (3)		$3,000 (fixed for lease year one and two)		$6,400 (fixed for lease year one and two)
Percentage rent reset		Lease year three and each and every other lease year thereafter		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)		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 relation to the Margaritaville Lease Agreement, the amount represents current annual base rent payable for the current lease year which is the period from February 1, 2020 through January 31, 2021. In relation to the Greektown Lease Agreement, the amount represents current annual base rent payable for the current lease year which is the period from May 23, 2019 through May 31, 2020.

(2) In February 2020 the performance basis of such ratio was adjusted from a 1.9x EBITDAR ratio to a 6.1x net revenue ratio. In the event that the net revenue or EBITDAR to rent ratio coverage is below the stated floor, the escalation will be reduced to such amount to achieve the stated net revenue or EBITDAR to rent ratio coverage, provided that the amount shall never result in a decrease to the prior year’s rent. In relation to the Greektown Lease Agreement, the EBITDAR to rent ratio floor is conditioned upon obtaining a favorable private letter ruling from the Internal Revenue Service.

(3) Percentage rent is subject to the percentage rent multiplier. After the percentage rent reset in lease year three, any amounts related to percentage rent are considered contingent rent in accordance with GAAP. No such rent has been recognized for the years ended December 31, 2019 and 2018*.*

F - 28

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Hard Rock Cincinnati Lease Agreement - Overview

The following is a summary of the material lease provisions of the Hard Rock Cincinnati Lease Agreement:

($ In thousands)
Lease Provision		Term
Initial term		15 years
Renewal terms		Four, five-year terms
Current annual rent (1)		$42,750
Escalator commencement		Lease year two
Escalator (2)		Lease years 2-4 - 1.5% Lease years 5-15 - The greater of 2% or the change in consumer price index (“CPI”) unless the change in CPI is less than 0.5%, in which case there is no escalation in rent for such lease year
Variable rent commencement/reset		Lease year 8
Variable rent split (3)		80% Base Rent and 20% Variable Rent
Variable rent percentage (3)		4%

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(1)The amount represents the current annual base rent payable for the current lease year which is the period from September 20, 2019 through September 30, 2020.

(2) 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 years ended December 31, 2019 and 2018*.*

(3) Variable rent is not subject to the escalator and is calculated as an increase or decrease of the average of net revenues for lease years 5 through 7 compared to the average net revenue for lease years 1 through 3, multiplied by the Variable rent percentage.

Century Portfolio Lease Agreement - Overview

The following is a summary of the material lease provisions of the Century Portfolio Lease Agreement:

($ In thousands)
Lease Provision		Term
Initial term		15 years
Renewal terms		Four, five-year terms
Current annual rent (1)		$25,000
Escalator commencement		Lease year two
Escalator (2)		Lease years 2-3 - 1.0% Lease years 4-15 - The greater of 1.25% or the change in consumer price index (“CPI”)
Net revenue to rent ratio floor		7.5x commencing lease year six - if the coverage ratio is below the stated amount the escalator will be reduced to 0.75%
Variable rent commencement/reset		Lease year 8 and 11
Variable rent split (3)		80% Base Rent and 20% Variable Rent
Variable rent percentage (3)		4%

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(1)The amount represents the current annual base rent payable for the current lease year which is the period from December 6, 2019 through December 31, 2020.

(2) 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 years ended December 31, 2019 and 2018*.*

(3) Variable rent is not subject to the escalator and is calculated for lease year 8 as an increase or decrease of the average of net revenues for lease years 5 through 7 compared to the average net revenue for lease years 1 through 3 and for lease year 11 as an increase or decrease of the average of net revenues for lease years 8 through 10 compared to the average net revenue for lease years 5 through 7, multiplied by the Variable rent percentage.

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VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

JACK Cleveland/Thistledown Lease Agreement - Overview

Subsequent to year end, on January 24, 2020, we completed the previously announced JACK Cleveland/Thistledown Acquisition. The following is a summary of the material lease provisions of our lease with a subsidiary of JACK Entertainment which commenced on January 24, 2020, the date of acquisition:

($ In thousands)
Lease Provision		Term
Initial term		15 years
Renewal terms		Four, five-year terms
Current annual rent (1)		$65,880
Escalator commencement		Lease year two
Escalator (2)		Lease years 2-3 - 1.0% Lease years 4-6 - 1.5% Lease Years 7-15 - The greater of 1.5% or the change in consumer price index (“CPI”) capped at 2.5%
Net revenue to rent ratio floor		4.9x in any lease year (commencing in lease year 5) - if the coverage ratio is below the stated amount, there is no escalation in rent for such lease year
Variable rent commencement/reset		Lease year 8 and 11
Variable rent split (3)		80% Base Rent and 20% Variable Rent
Variable rent percentage (3)		4%

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(1)The amount represents the current annual base rent payable for the current lease year which is the period from January 24, 2020 through January 31, 2021.

(2) Any amounts representing rents in excess of the CPI floors specified above are considered contingent rent in accordance with GAAP.

(3) Variable rent is not subject to the escalator and is calculated for lease year 8 as an increase or decrease of the average of net revenues for lease years 5 through 7 compared to the average net revenue for lease years 1 through 3 and for lease year 11 as an increase or decrease of the average of net revenues for lease years 8 through 10 compared to the average net revenue for lease years 5 through 7, multiplied by the Variable rent percentage.

Capital Expenditure Requirements

We manage our residual asset risk through protective covenants in our Lease Agreements, which require the tenant to, among other things, hold specific insurance coverage, engage in ongoing maintenance of the property and invest in capital improvements. With respect to the capital improvements, the Lease Agreements specify certain minimum amounts that our tenants must spend on capital expenditures that constitute installation, restoration and repair or other improvements of items with respect to the leased properties.

The following table summarizes the capital expenditure requirements of the respective tenants under the Caesars Lease Agreements (which does not reflect the modifications to the Caesars Lease Agreements contemplated in connection with the closing of the Eldorado Transaction, including the inclusion of the Harrah’s New Orleans, Harrah’s Atlantic City and Harrah’s Laughlin properties in the Non-CPLV Lease Agreement):

Provision		Non-CPLV Lease Agreement and Joliet Lease Agreement		CPLV Lease Agreement		HLV Lease Agreement
Yearly minimum expenditure		1% of net revenues (1)		1% of net revenues (1)		1% of net revenues commencing in 2022
Rolling three-year minimum (2)		$255 million		$84 million		N/A
Initial minimum capital expenditure		N/A		N/A		$171 million (2017 - 2021)

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(1) The lease agreement requires a $100 million floor on annual capital expenditures for CPLV, Joliet and Non-CPLV in the aggregate. Additionally, annual building & improvement capital improvements must be equal to or greater than 1% of prior year net revenues.

(2) CEOC is required to spend $350 million on capital expenditures (excluding gaming equipment) over a rolling three-year period, with $255 million allocated to Non-CPLV, $84 million allocated to CPLV and the remaining balance of $11 million to facilities covered by any Formation Lease Agreement in such proportion as CEOC may elect. Additionally, CEOC is required to expend a minimum of $495 million on capital expenditures (including gaming equipment) across certain of its affiliates and other assets, together with the $350 million requirement.

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VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the capital expenditure requirements of Penn National, Hard Rock, Century Casinos and JACK Entertainment under the Penn National Lease Agreements, Hard Rock Cincinnati Lease Agreement, Century Portfolio Lease Agreement and JACK Cleveland/Thistledown Lease Agreement, respectively:

Provision		Penn National Lease Agreements		Hard Rock Cincinnati Lease Agreement		Century Portfolio Lease Agreement		JACK Cleveland/Thistledown Lease Agreement
Yearly minimum expenditure		1% of net revenues based on rolling four-year basis		1% of net revenues		1% of net gaming revenues (1)		Initial minimum of $30 million (2) Thereafter - 1% of net revenues on a rolling three-year basis

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(1) Minimum of 1% of net gaming revenue on a rolling three-year basis for each individual facility and 1% of net gaming revenues per fiscal year for the facilities collectively.

(2) Initial minimum required to be spent from the period commencing April 1, 2019 through December 31, 2022.

Loss on Impairment

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. The Non-CPLV Lease 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.

During the quarter ended September 30, 2018 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 had price indications on two other parcels of land. Based on the sales prices and price indications, 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 impairment charge recognized in the quarter ended September 30, 2018 and the sale of one of the parcels that occurred during such quarter, the current carrying value of the vacant, non-operating land parcels is $21.1 million as of December 31, 2019.

Note 6 — Other Assets and Other Liabilities

Other Assets

The following table details the components of our other assets as of December 31, 2019 and 2018:

(In thousands)	December 31, 2019				December 31, 2018
Property and equipment used in operations, net	$	70,406			$	71,513
Receivables	60,111				—
Right of use assets	26,426				—
Debt financing costs	14,575				6,190
Deferred acquisition costs	11,134				7,062
Prepaid expenses	3,252				3,060
Interest receivable	1,626				886
Other	1,108				1,253
Tenant receivable for property taxes	—				25,586
Total other assets	$	188,638			$	115,550

F - 31

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Property and equipment used in operations, included within other assets, is primarily attributable to the land, building and improvements of our golf operations and consists of the following as of December 31, 2019 and 2018:

(In thousands)	December 31, 2019				December 31, 2018
Land and land improvements	$	59,346			$	58,573
Buildings and improvements	14,805				14,572
Furniture and equipment	4,523				2,805
Total property and equipment used in operations	78,674				75,950
Less: accumulated depreciation	(8,268		)		(4,437		)
Total property and equipment used in operations, net	$	70,406			$	71,513

	Year Ended December 31,								Period from October 6, 2017 to December 31, 2017
(In thousands)	2019				2018
Depreciation expense	$	3,831			$	3,686			$	751

Other Liabilities

The following table details the components of our other liabilities as of December 31, 2019 and 2018:

(In thousands)	December 31, 2019				December 31, 2018
Derivative liability	65,078				22,124
Lease liabilities	26,426				—
Other accrued expenses	21,023				30,951
Accrued payroll and other compensation	7,369				4,934
Deferred income taxes	3,382				3,340
Accounts payable	640				1,057
Total other liabilities	$	123,918			$	62,406

Note 7 — Debt

The following tables detail our debt obligations as of December 31, 2019 and 2018:

($ in thousands)		December 31, 2019
Description of Debt		Final Maturity		Interest Rate		Face Value				Carrying Value*(1)*
VICI PropCo Senior Secured Credit Facilities
Revolving Credit Facility*(2)*		2024		L + 2.00%		$	—			$	—
Term Loan B Facility*(3)*		2024		L + 2.00%		2,100,000				2,076,962
Second Lien Notes*(4)*		2023		8.00%		498,480				498,480
November 2019 Senior Unsecured Notes
2026 Notes*(5)*		2026		4.25%		1,250,000				1,231,227
2029 Notes*(5)*		2029		4.625%		1,000,000				984,894
Total Debt						$	4,848,480			$	4,791,563

F - 32

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

($ 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)*		2022		L + 2.00%		$	—			$	—
Term Loan B Facility*(3)*		2024		L + 2.00%		2,100,000				2,073,784
Second Lien Notes*(4)*		2023		8.00%		498,480				498,480
CPLV Debt
CPLV CMBS Debt (6)		2022		4.36%		1,550,000				1,550,000
Total Debt						$	4,148,480			$	4,122,264

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

(2)

Interest on any outstanding balance is payable monthly. The Revolving Credit Facility initially bore interest at LIBOR plus 2.25% and was subject to a 0.5% commitment fee. Upon our initial public offering, on February 5, 2018, the interest rate was reduced to LIBOR plus 2.00%**. On May 15, 2019, we amended our Revolving Credit Facility to, among other things, increase borrowing capacity by $600 million to a total of $1.0 billion and extend the maturity date to May 2024. After giving effect to the amendments executed on May 15, 2019, borrowings under the Revolving Credit Facility will bear interest at a rate based on a leverage based pricing grid with a range of 1.75% to 2.00% over LIBOR, or between 0.75% and 1.00% over the base rate depending on our total net debt to adjusted total assets ratio. Additionally, after giving effect to the amendments executed on May 15, 2019, the commitment fee under the Revolving Credit Facility is calculated on a leverage-based pricing grid with a range of 0.375% to 0.5%**, in each case depending on our total net debt to adjusted total assets ratio. As of December 31, 2019*, the commitment fee was* 0.375%**.

(3)

Interest on any outstanding balance is payable monthly. The Term Loan B Facility 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%**. In connection with the repricing of the Term Loan B Facility in January of 2020, the interest rate was decreased to LIBOR plus 1.75%**. As of December 31, 2019, we had six interest rate swap agreements outstanding with third-party financial institutions having an aggregate notional amount of $2.0 billion at a blended LIBOR rate of 2.7173%**. As of December 31, 2018, we had four interest rate swap agreements outstanding with third-party financial institutions having an aggregate notional amount of $1.5 billion at a LIBOR rate of 2.8297%**. 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. 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).

(4)	Interest is payable semi-annually. Subsequent to the year end, on February 20, 2020 the Second Lien Notes were redeemed in full.

(5)	Interest is payable semi-annually.

(6)	The CPLV CMBS Debt was repaid in full on November 26, 2019 with proceeds from the November 2019 Senior Unsecured Notes.

The following table is a schedule of future minimum payments of our debt obligations as of December 31, 2019:

($ in thousands)	Future Minimum Payments
2020	$	—
2021	—
2022	10,000
2023 (1)	520,480
2024	2,068,000
Thereafter	2,250,000
Total minimum repayments	$	4,848,480

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(1) $498.5 million represents the Second Lien Notes which were redeemed in full on February 20, 2020.

November 2019 Senior Unsecured Notes

On November 26, 2019, the Operating Partnership and VICI Note Co. Inc. (the “Co-Issuer” and, together with the Operating Partnership, the “Issuers”), wholly owned subsidiaries of the Company issued (i) $1,250 million in aggregate principal amount of 4.250% Senior Unsecured Notes due 2026 under an indenture dated as of November 26, 2019 (the “2026 Notes Indenture”), among the Issuers, the subsidiary guarantors party thereto and UMB Bank, National Association, as trustee (the “Trustee”), and (ii) $1,000 million in aggregate principal amount of 4.625% Senior Notes due 2029 under an indenture dated as of November 26, 2019 (the “2029 Notes Indenture” and, together with the 2026 Notes Indenture, the “2019 Senior Unsecured Notes Indentures”), among the Issuers, the subsidiary guarantors party thereto and the Trustee. The Operating Partnership and its subsidiaries represent our “Real Property Business” segment, with the “Golf Course Business” segment corresponding to the portion of our business operated

F - 33

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

through entities that are not direct or indirect subsidiaries of the Operating Partnership or obligors of the Senior Unsecured Notes. See “Note 15 - Segment Information” for more information about our segments.

The November 2019 Notes were sold in the United States only to accredited investors pursuant to an exemption from the Securities Act of 1933, as amended (the “Securities Act”), and subsequently resold to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. persons in accordance with Regulation S under the Securities Act.

We used the proceeds of the offering to repay in full the CPLV CMBS Debt, and pay certain fees and expenses including the net prepayment penalty of $55.4 million. Subsequent to year end, on January 24, 2020, the remaining net proceeds were used to pay for a portion of the purchase price of the JACK Cleveland/Thistledown Acquisition. The 2026 Notes will mature on December 1, 2026, and the 2029 Notes will mature on December 1, 2029. Interest on the 2026 Notes will accrue at a rate of 4.250% per annum, and interest on the 2029 Notes will accrue at a rate of 4.625% per annum. Interest on the Notes will be payable semi-annually in cash in arrears on June 1 and December 1 of each year, commencing on June 1, 2020. The 2019 Senior Unsecured Notes will be fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each existing and future direct and indirect wholly owned material domestic subsidiary of the Operating Partnership that incurs or guarantees certain bank indebtedness or any other material capital market indebtedness, other than certain excluded subsidiaries and the Co-Issuer.

The Issuers may redeem the 2026 Notes at any time prior to December 1, 2022, in whole or in part, at a redemption price equal to 100% of the accrued principal amount thereof plus unpaid interest, if any, to the redemption date plus a make-whole premium. The Issuers may redeem the 2026 Notes, in whole or in part, at any time on or after December 1, 2022 at the redemption price of (i) 102.125% of the principal amount should such redemption occur before December 1, 2023, (ii) 101.063% of the principal amount should such redemption occur before December 1, 2024 and (iii) 100% of the principal amount should such redemption occur on or after December 1, 2024, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The Issuers may redeem the 2029 Notes at any time prior to December 1, 2024, in whole or in part, at a redemption price equal to 100% of the accrued principal amount thereof plus unpaid interest, if any, to the redemption date plus a make-whole premium. The Issuers may redeem the 2029 Notes, in whole or in part, at any time on or after December 1, 2024 at the redemption price of (i) 102.313% of the principal amount should such redemption occur before December 1, 2025, (ii) 101.541% of the principal amount should such redemption occur before December 1, 2026, (iii) 100.771% of the principal amount should such redemption occur before December 1, 2027 and (iv) 100% of the principal amount should such redemption occur on or after December 1, 2027, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, before December 1, 2022, the Issuers may redeem up to 40% of each series of Notes with the net cash proceeds from certain equity offerings (i) at a redemption price of 104.250% of the principal amount redeemed in the case of the 2026 Notes and (ii) at a redemption price of 104.625% of the principal amount redeemed in the case of the 2029 Notes. However, the Issuers may only make such redemptions if at least 60% of the aggregate principal amount of the series of 2019 Senior Unsecured Notes issued under the applicable 2019 Senior Unsecured Notes Indenture remains outstanding after the occurrence of such redemption. As of December 31, 2019, the restricted net assets of the Operating Partnership were approximately $7.9 billion.

The November 2019 Senior Unsecured Notes Indentures contain 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 fund a dividend or distribution by VICI that is believes is necessary to maintain its status as a REIT or to avoid payment of any tax for any calendar year that could be avoided by reason of such distribution, and the ability to make certain restricted payments not to exceed 95% of our cumulative Funds From Operations (as defined in the 2019 Senior Unsecured Notes Indentures), plus the aggregate net proceeds from (i) the sale of certain equity interests in, (ii) capital contributions to, and (iii) certain convertible indebtedness of the Operating Partnership.

February 2020 Senior Unsecured Notes Offering and Redemption and Repayment of the Second Lien Notes

Subsequent to December, 31 2019, On February 5, 2020, the Operating Partnership issued (i) $750 million in aggregate principal amount of 3.500% senior unsecured notes due 2025, (ii) $750 million in aggregate principal amount of 3.750% senior unsecured notes due 2027 and (iii) $1.0 billion of 4.125% senior unsecured notes due 2030. We placed $2.0 billion of the net proceeds into escrow pending the consummation of the Eldorado Transaction, and used the remaining net proceeds from the 2025 Notes, together with cash on hand, to redeem in full the outstanding $498.5 million in aggregate principal amount of the Second Lien Notes plus

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VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the Second Lien Notes Applicable Premium, which resulted in a total redemption amount of approximately $537.5 million. The 2025 Notes will mature on February 15, 2025, the 2027 Notes will mature on February 15, 2027 and the 2030 Notes will mature on August 15, 2030. Interest on the 2025 Notes will accrue at a rate of 3.500% per annum, interest on the 2027 Notes will accrue at a rate of 3.750% per annum and interest on the 2030 Notes will accrue at a rate of 4.125% per annum. Interest on the notes issued in February 2020 will be payable semi-annually in cash in arrears on February 15 and August 15 of each year, commencing on August 15, 2020.

Senior Secured Credit Facilities

In December 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, (the Term Loan B Facility and the Revolving Credit Facility, as amended as discussed below, 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.

On May 15, 2019, VICI PropCo, entered into Amendment No. 2 (“Amendment No. 2”) to the Credit Agreement, pursuant to which certain lenders agreed to provide VICI PropCo with incremental revolving credit commitments and availability under the revolving credit facility in the aggregate principal amount of $600.0 million on the same terms as VICI PropCo’s current revolving credit facility under the Revolving Credit Facility. After giving effect to Amendment No. 2, the Credit Agreement, provided total borrowing capacity pursuant to the revolving credit commitments in the aggregate principal amount of $1.0 billion.

On May 15, 2019, immediately after giving effect to Amendment No. 2, VICI PropCo entered into Amendment No. 3 (“Amendment No. 3”, together with Amendment No. 2, the “Amendments”) to the Credit Agreement, which amended and restated the Credit Agreement in its entirety as of May 15, 2019 ( the “Amended and Restated Credit Agreement”) to, among other things, (i) refinance the Revolving Credit Facility in whole with a new class of revolving commitments, (ii) extend the maturity date to May 15, 2024, which represents an extension of the December 22, 2022 maturity date of the Revolving Credit Facility, (iii) provide that borrowings under the Revolving Credit Facility will bear interest at a rate based on a leverage-based pricing grid with a range of between 1.75% to 2.00% over LIBOR, or between 0.75% and 1.00% over the base rate, in each case depending on our total net debt to adjusted total assets ratio, (iv) provide that the commitment fee payable under the Revolving Credit Facility will bear interest at a rate based on a leverage-based pricing grid with a range of between 0.375% to 0.50% depending on our total net debt to adjusted total assets ratio, (v) amend the existing springing financial covenant, which previously required VICI PropCo to maintain a total net debt to adjusted asset ratio of not more than 0.75 to 1.00 if there was 30% utilization of the Revolving Credit Facility, to require that, only with respect to the Revolving Credit Facility commencing with the first full fiscal quarter ending after the effectiveness of Amendment No. 3, VICI PropCo maintain a maximum total net debt to adjusted asset ratio of not more than 0.65 to 1.00 as of the last day of any fiscal quarter (or, during any fiscal quarter in which certain permitted acquisitions were consummated and the three consecutive fiscal quarters thereafter, not more than 0.70 to 1.00), and (vi) include a new financial covenant only with respect to the Revolving Credit Facility, requiring VICI PropCo to maintain, commencing with the first full fiscal quarter after the effectiveness of Amendment No. 3, an interest coverage ratio (defined as EBITDA to interest charges) of not less than 2.00 to 1.00 as of the last day of any fiscal quarter. The Revolving Credit Facility is available to be used for working capital purposes, capital expenditures, permitted acquisitions, permitted investments, permitted restricted payments and for other lawful corporate purposes. The Amended and Restated Credit Agreement provides for capacity to add incremental loans in an aggregate amount of: (x) $1.2 billion to be used solely to finance certain acquisitions; plus (y) an unlimited amount, subject to VICI PropCo not exceeding certain leverage ratios.

On January 24, 2020, VICI PropCo entered into Amendment No. 1 to the Amended and Restated Credit Agreement, which, among other things, reduced the interest rate on the PropCo Term Loan B Facility from LIBOR plus 2.00% to LIBOR plus 1.75%.

The Amended and Restated Credit Agreement provides that, in the event the LIBOR Rate is no longer in effect, a comparable or successor rate approved by the Administrative Agent under such facility shall be utilized, provided that such approved rate shall be applied in a manner consistent with market practice.

The Amended and Restated Credit Agreement contains customary covenants that are consistent with those set forth in the Credit Agreement (except as to the financial covenants described above), which, 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,

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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 Amended and Restated Credit Agreement) subject to no event of default under the Amended and Restated Credit Agreement and pro forma compliance with the financial covenant pursuant to the Amended and Restated 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. We are also subject to the financial covenants set forth in the Amended and Restated Credit Agreement as previously described above.

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 are subject to the covenants of the Amended and Restated Credit Agreement or are guarantors of the Senior Secured Credit Facilities. The Term Loan B Facility may be voluntarily prepaid at VICI PropCo’s option, in whole or in part, at any time, and is 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 Amended and Restated 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 8— Derivatives for a discussion of our interest rate swap agreements related to the Term Loan B Facility.

Second Lien Notes

The Second Lien Notes were issued on October 6, 2017, pursuant to an indenture (the “Second Lien 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 are subject to the covenants of the Indenture or are guarantors of the Second Lien Notes.

The Second Lien 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.

Prior to October 15, 2020, the Second Lien Notes are redeemable at the option of the Issuers, at a redemption price of 100% of the principal amount of the Second Lien Notes redeemed plus accrued and unpaid interest, if any, to the applicable redemption date, plus an applicable premium equal to the excess of (a) the present value of (i) 104% of the principal amount of the Second Lien Notes so redeemed plus (ii) all required interest payments due on such Second Lien Notes through October 15, 2020, computed using a discount rate equal to the then-applicable U.S. Treasury rate plus 50 basis points, over (b) the then-outstanding principal amount of the Second Lien Notes so redeemed (the “Second Lien Notes Applicable Premium”). The Issuers also had the option to redeem up to 35% of the original aggregate principal amount of the Second Lien Notes 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, plus accrued and unpaid interest, if any, to the redemption date. On or after October 15, 2020, the Second Lien Notes are redeemable at the option of the Issuers, at a redemption price of (a) 104% of the principal amount of the Second

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Lien Notes so redeemed for the period October 15, 2020 through October 14, 2021 and (b) 100% of the principal amount of the Second Lien Notes so redeemed after October 15, 2021, in each case, plus accrued and unpaid interest to the redemption date.

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.

Subsequent to December 31, 2019, on February 20, 2020 we used the proceeds from the issuance of the 2025 Notes to redeem in full the Second Lien Notes at a redemption price of 100% of the principal amount of the Second Lien Notes then outstanding plus the Second Lien Notes Applicable Premium, which resulted in a total redemption amount of approximately $537.5 million. Due to the full redemption, we will recognize a loss on extinguishment of debt in first quarter of 2020 of approximately $39.0 million.

Bridge Facilities

On June 24, 2019, in connection with the Eldorado Transaction, VICI PropCo entered into the Commitment Letter with the Bridge Lender, pursuant to which and subject to the terms and conditions set forth therein, the Bridge Lender has agreed to provide (i) a 364-day first lien secured bridge facility of up to $3.3 billion in the aggregate and (ii) a 364-day second lien secured bridge facility of up to $1.5 billion in the aggregate, for the purpose of providing a portion of the financing necessary to fund the consideration to be paid pursuant to the terms of the Eldorado Transaction documents and related fees and expenses. The Bridge Facilities are subject to a tiered commitment fee based on the period the commitment is outstanding and a structuring fee. The commitment fee is equal to, with respect to any commitments that are terminated prior to July 22, 2019, 0.25% of such commitments, with respect to any commitments that are outstanding on July 22, 2019 and are terminated prior to June 24, 2020, 0.50% of such commitments, with respect to any commitments that are outstanding on June 24, 2020 and are terminated prior to September 24, 2020, 0.75% of such commitments, and with respect to any commitments that are outstanding on September 24, 2020, 1.00% of such commitments. The structuring fee is equal to 0.10% of the total aggregate commitments at the date of the Commitment Letter and was paid in full upon the first reduction of the commitments. For the year ended December 31, 2019 we have recognized $26.0 million of fees related to the Bridge Facilities in Interest expense on our Statement of Operations.

Commitments and loans under the Bridge Facilities will be reduced or prepaid, as applicable, in part upon any issuance by us of equity or notes in a public offering or private placement and/or the incurrence of term loans and certain other debt and upon other specified events prior to the consummation of the Eldorado Transaction, in each case subject to the terms and certain exceptions set forth in the Commitment Letter, including that the commitments and loans will not be reduced as a result of the proceeds from primary follow-on offerings. If we use the Bridge Facilities, funding is contingent on the satisfaction of certain customary conditions set forth in the Commitment Letter, including, among others, (i) the execution and delivery of definitive documentation with respect to the Bridge Facilities in accordance with the terms set forth in the Commitment Letter and (ii) the consummation of the transactions in accordance with the Eldorado Transaction documents. Although we do not currently expect VICI PropCo to make any borrowings under the Bridge Facilities, there can be no assurance that such borrowings will not be made or that we will be able to incur alternative long-term debt financing in lieu of borrowings under the Bridge Facilities. Borrowing under the Bridge Facilities, if any, will bear interest at a floating rate that varies depending on the duration of the loans thereunder. Under the Eldorado Senior Bridge Facility, interest will be calculated on a rate between (i) LIBOR plus 200 basis points and LIBOR plus 275 basis or (ii) the base rate plus 100 basis points and the base rate plus 175 basis points, in each case depending on duration. Under the Eldorado Junior Bridge Facility, interest will be calculated on a rate between (x) LIBOR plus 300 basis points and LIBOR plus 375 basis or (y) the base rate plus 200 basis points and the base rate plus 275 basis points, in each case depending on duration. The Bridge Facilities, if funded, will contain restrictive covenants and events of default substantially similar to those contained in, with respect to the Eldorado Senior Bridge Facility, the Senior Secured Credit Facilities and, with respect to the Eldorado Junior Bridge Facility, the Second Lien Notes. If we draw upon the Bridge Facilities, there can be no assurances that we would be able to refinance the Bridge Facilities on terms satisfactory to us, or at all.

Following the November 2019 Senior Unsecured Notes offering, the commitments under the Bridge Facility were reduced by $1.6 billion, to $3.2 billion. Following the February 2020 Senior Unsecured Notes Offering we placed $2.0 billion of the net proceeds into escrow pending the consummation of the Eldorado Transaction and the commitments under the Bridge Facility were further reduced by $2.0 billion to $1.2 billion.

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CPLV CMBS Debt

The CPLV CMBS Debt was incurred on October 6, 2017 pursuant to a loan agreement (the “CMBS Loan Agreement”), and was 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 bore interest at 4.36% per annum.

On November 26, 2019, we used the proceeds from the November 2019 Senior Unsecured Notes offering to repay in full the CPLV CMBS Debt. Due to the prepayment of the CPLV CMBS Debt, we recognized a loss on extinguishment of debt of $58.1 million during the year ended December 31, 2019, the majority of which related to the prepayment penalty.

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, 2019, we are in compliance with all required covenants under our debt obligations.

Note 8 — 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. On January 3, 2019, we entered into two additional interest rate swap agreements with third-party financial institutions having an aggregate notional amount of $500.0 million. 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% and 2.3802%, respectively. For the duration of the interest rate swap transactions, we are only subject to interest rate risk on $100.0 million of variable rate debt.

The following tables detail our outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk as of December 31, 2019 and 2018:

($ in thousands)		December 31, 2019
Instrument		Number of Instruments		Fixed Rate		Notional		Index		Maturity
Interest Rate Swaps		4		2.8297%		$1,500,000		USD LIBOR		April 22, 2023
Interest Rate Swaps		2		2.3802%		$500,000		USD LIBOR		January 22, 2021

($ 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, 2019 and 2018, the interest rate swaps are in net unrealized loss positions and are recorded within Other liabilities. The following table presents the effect of our derivative financial instruments on our Statement of Operations:

	Year Ended December 31,								Period from October 6, 2017 to December 31, 2017
(In thousands)	2019				2018
Unrealized loss recorded in other comprehensive income	$	(42,954	)		$	(22,124	)		$	—
Interest recorded in interest expense	$	9,269			$	6,305			$	—

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Note 9 — Fair Value

The following tables summarize our assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018:

	December 31, 2019
(In thousands)					Fair Value
	Carrying Amount				Level 1				Level 2				Level 3
Financial assets:
Short-term investments (1)	$	59,474			$	—			$	59,474			$	—
Financial liabilities:
Derivative instruments - interest rate swaps (2)	$	65,078			$	—			$	65,078			$	—

	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			$	—

---

(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.

The estimated fair values of our financial instruments at December 31, 2019 and 2018 for which fair value is only disclosed are as follows:

	December 31, 2019								December 31, 2018
(In thousands)	Carrying Amount				Fair Value				Carrying Amount				Fair Value
Financial assets:
Cash and cash equivalents	$	1,101,893			$	1,101,893			$	577,883			$	577,883
Restricted cash	—				—				20,564				20,564
Financial liabilities:
Debt (1)
Revolving Credit Facility	$	—			$	—			$	—			$	—
Term Loan B Facility	2,076,962				2,110,500				2,073,784				2,016,000
Second Lien Notes	498,480				538,358				498,480				535,866
CPLV CMBS Debt (2)	—				—				1,550,000				1,539,040
2026 Notes	1,231,227				1,287,500				—				—
2029 Notes	984,894				1,045,000				—				—

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(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.

(2) The CPLV CMBS Debt was repaid in full in November 2019.

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The following table summarizes our assets and liabilities measured at fair value on a non-recurring basis in relation to the impairment recorded during the three months ended September 30, 2018:

	September 30, 2018
(In thousands)					Fair Value
	Carrying Amount				Level 1				Level 2				Level 3
Financial assets:
Land (1)	$	19,019			$	—			$	7,419			$	11,600

---

(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 the non-recurring 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

Note 10 — 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, 2019, 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 2020 and 2030, respectively. The weighted average remaining lease term as of December 31, 2019 under our operating leases was 16.3 years. Our Cascata ground lease has three 10-year extension options. The rent of such options would be the in-place rent at the time of renewal.

Total rental expense, included in golf operations and general and administrative expenses in our Statement of Operations and contractual rent expense under these agreements were as follows:

	Year Ended December 31,								Period from October 6, 2017 to December 31, 2017
(In thousands)	2019				2018
Rent expense	$	1,622			$	1,519			$	256
Cash paid for rent	$	1,257			$	1,297			$	268

On May 10, 2019 we entered into a lease agreement for new office space in New York, NY for our corporate headquarters. The lease has a 10-year term, with one 5-year extension option and requires a fixed annual rent of $0.9 million. We determined the lease was an operating lease and recorded a $6.7 million right of use asset and a corresponding lease liability within Other assets and Other liabilities, respectively, on our Balance Sheet. The discount rate for the lease was determined to be 5.3% and was based on the yield of our current secured borrowings, adjusted to match borrowings of similar terms.

On January 1, 2019, upon adoption of ASC 842, we recorded an $11.1 million right of use asset and a corresponding lease liability within Other assets and Other liabilities, respectively, on our Balance Sheet, related to the ground lease of the land at the Cascata Golf Course. The discount rate for the lease was determined to be 5.5% and was based on the yield of our current secured borrowings, adjusted to match borrowings of similar terms.

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The future minimum lease commitments relating to the base lease rent portion of noncancelable operating leases at December 31, 2019 are as follows:

(In thousands)		Lease Commitments
2020		$	1,485
2021		1,862
2022		1,880
2023		1,899
2024		1,919
Thereafter		20,983
Total minimum lease commitments		$	30,028
Discounting factor		12,290
Lease liability		$	17,738

Note 11 — Stockholders' Equity

Stock

Authorized

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.

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 approximately $1.3 billion after commissions and expenses.

Primary Follow-on Offerings

November 2018

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 used the net proceeds from the offering to pay the aggregate purchase price of $700.0 million for the recently completed acquisition of the land and real estate assets of Greektown and related fees and expenses.

June 2019

On June 28, 2019, we completed a primary follow-on offering of (i) 50,000,000 (including 15,000,000 shares sold pursuant to the exercise in full of the underwriters’ option to purchase additional common stock) shares of common stock at an offering price of $21.50 per share for an aggregate offering value of $1.1 billion, resulting in net proceeds, after the deduction of the underwriting discount and expenses, of $1.0 billion and (ii) 65,000,000 shares of common stock that are subject to forward sale agreements to be settled by September 26, 2020. We did not initially receive any proceeds from the sale of the shares of common stock subject to the forward sale agreements that were sold by the forward purchasers or their respective affiliates (collectively the “Forward Sale Agreements”). We determined that the Forward Sale Agreements meet the criteria for equity classification and are therefore exempt from derivative accounting. We recorded the Forward Sale Agreements at fair value at inception, which we determined to be zero. Subsequent changes to fair value are not required under equity classification.

We expect to settle the Forward Sale Agreements entirely by the physical delivery of shares of common stock in exchange for cash proceeds, although we may elect cash settlement or net share settlement for all or a portion of our obligations under the Forward Sale Agreements. The settlement of the Forward Sales Agreements is calculated based on the forward sale price ($21.50) as adjusted for a floating interest rate factor and other fixed amounts based on the passage of time, as specified in the Forward Sale Agreements. As of December 31, 2019, based on these adjustments, the forward share price was $19.96 and would result in us receiving $1.3 billion in cash proceeds if we were to physically settle the Forward Sale Agreements. Alternatively, if we were to net cash settle the Forward Share Agreements, it would result in a cash outflow of $346.2 million or if we were to net share settle the Forward

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Sale Agreements, it would result in us issuing 13.5 million shares. As of December 31, 2019, we have not settled any portion of the Forward Sale Agreements.

Further, the shares of common stock issuable upon settlement of the Forward Sale Agreements are reflected in our diluted earnings per share calculations using the treasury stock method. Under this method, the number of our shares of common stock used in calculating diluted earnings per share is deemed to be increased by the excess, if any, of the number of shares of common stock that would be issued upon full physical settlement of the Forward Sale Agreements over the number of shares of common stock that could be purchased by us in the market (based on the average market price during the period) using the proceeds receivable upon full physical settlement (based on the adjusted forward sales price at the end of the reporting period). If and when we physically or net share settle the Forward Sale Agreements, the delivery of our shares of common stock will result in an increase in the number of shares of common stock outstanding and dilution to our earnings per share. We used a portion of the net proceeds from the offering for the Hard Rock Cincinnati Acquisition and the Century Portfolio Acquisition, and intend to use the remaining net proceeds from the offering and the proceeds upon settlement of the Forward Sales Agreements to fund a portion of the purchase price for the Eldorado Transaction and for general corporate purposes, which may include the acquisition and improvement of properties, capital expenditures, working capital and the repayment of indebtedness.

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. During the year ended December 31, 2019, we sold a total of 6,107,633 shares under the at-the-market offering program for net proceeds of $128.3 million. Subsequent to the year end, on February 7, 2020, we sold 7,500,000 shares under the at-the-market offering program for net proceeds of $200.0 million. We have no obligation to sell the remaining shares available for sale under the at-the-market offering program.

The following table details the issuance of outstanding shares of common stock, including restricted common stock:

Common Stock Outstanding		2019			2018
Beginning Balance January 1		404,729,616			300,278,938
Issuance of common stock in initial public offering		—			69,575,000
Issuance of common stock in primary follow-on offerings (1)		50,000,000			34,500,000
Issuance of common stock under the at-the-market offering program		6,107,633			—
Issuance of restricted and unrestricted common stock under the stock incentive program, net of forfeitures (2)		167,493			375,678
Ending Balance December 31		461,004,742			404,729,616

---

(1)	Excludes the 65,000,000 shares issued in June 2019 subject to Forward Sale Agreements to be settled by September 26, 2020*.*

(2)	The years ended December 31, 2019 and 2018 excludes 157,512 share units and 133,491 share units, respectively, issued under the performance-based stock incentive program.

Distributions

Dividends declared (on a per share basis) during the years ended December 31, 2019 and 2018 were as follows:

Year Ended December 31, 2019
Declaration Date		Record Date		Payment Date		Period		Dividend
March 14, 2019		March 29, 2019		April 11, 2019		January 1, 2019 - March 31, 2019		$	0.2875
June 13, 2019		June 28, 2019		July 12, 2019		April 1, 2019 - June 30, 2019		$	0.2875
September 12, 2019		September 27, 2019		October 10, 2019		July 1, 2019 - September 30, 2019		$	0.2975
December 12, 2019		December 27, 2019		January 9, 2020		October 1, 2019 - December 31, 2019		$	0.2975

F - 42

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended December 31, 2018
Declaration Date		Record Date		Payment Date		Period		Dividend
March 15, 2018 (1)		March 29, 2018		April 13, 2018		February 5, 2018 - March 31, 2018		$	0.16
June 14, 2018		June 28, 2018		July 13, 2018		April 1, 2018 - June 30, 2018		$	0.2625
September 17, 2018		September 28, 2018		October 11, 2018		July 1, 2018 - September 30, 2018		$	0.2875
December 13, 2018		December 28, 2018		January 10, 2019		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.

Note 12 — Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock 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, unvested performance-based restricted shares and the shares to be issued by us upon settlement of the Forward Sale Agreements. The shares issuable upon settlement of the Forward Sale Agreements, as described in Note 11, are reflected in the diluted earnings per share calculations using the treasury stock method. Under this method, the number of our shares of common stock used in calculating diluted earnings per share is deemed to be increased by the excess, if any, of the number of shares of common stock that would be issued upon full physical settlement of the Forward Sale Agreements over the number of shares of common stock that could be purchased by us in the market (based on the average market price during the period) using the proceeds receivable upon full physical settlement (based on the adjusted forward sales price at the end of the reporting period). If and when we physically or net share settle the Forward Sale Agreements, the delivery of shares of common stock would result in an increase in the number of shares outstanding and dilution to earnings per share.

The following tables reconcile the weighted-average shares of common stock 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:

	Year Ended December 31,						Period from October 6, 2017 to December 31, 2017
(In thousands)	2019			2018
Determination of shares:
Weighted-average shares of common stock outstanding	435,071			367,226			227,829
Assumed conversion of restricted stock	566			91			156
Assumed settlement of Forward Sale Agreements	3,516			—			—
Diluted weighted-average shares of common stock outstanding	439,153			367,317			227,985

F - 43

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basic and Diluted Earnings Per Share
	Year Ended December 31,								Period from October 6, 2017 to December 31, 2017
(In thousands, except per share data)	2019				2018
Basic:
Net income attributable to common stockholders	$	545,964			$	523,619			$	42,662
Weighted-average shares of common stock outstanding	435,071				367,226				227,829
Basic EPS	$	1.25			$	1.43			$	0.19
Diluted:
Net income attributable to common stockholders	$	545,964			$	523,619			$	42,662
Diluted weighted-average shares of common stock outstanding	439,153				367,317				227,985
Diluted EPS	$	1.24			$	1.43			$	0.19

Note 13 — Stock-Based Compensation

The 2017 Stock Incentive Plan (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, 2019, 11,899,660 shares of common stock remained available for issuance by us as equity awards under the Plan.

Time-Based Restricted Stock

During the years ended December 31, 2019 and 2018 and the period from October 6, 2017 through December 31, 2017, the Company granted approximately 177,000, 172,000 and 124,000, shares of restricted stock, respectively, under the Plan, respectively, 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 the years ended December 31, 2019 and 2018 the Company granted approximately 158,000 and 133,000 restricted stock units, respectively, 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 2.5% - 2.7% and an expected price volatility of 13.3% - 20.0%. The expected price volatility was calculated based on both historical and implied volatility.

The following table details the stock-based compensation expense recorded as General and administrative expense in the Statement of Operations:

	Year Ended December 31,								Period from October 6, 2017 to December 31, 2017
(In thousands)	2019				2018
Stock-based compensation expense	$	5,223			$	2,342			$	1,385

F - 44

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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
Granted	338,788			22.03
Vested	(121,786	)		18.57
Forfeited	(13,783	)		20.44
Canceled	—			—
Outstanding as of December 31, 2019	601,472			$	21.16

As of December 31, 2019, there was $7.8 million of unrecognized compensation cost related to non-vested stock-based compensation arrangements under the Plan. This cost is expected to be recognized over a weighted average period of 1.7 years.

Note 14 — Income Taxes

We conduct our operations as a REIT for U.S. federal income tax purposes. 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. We intend 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 of our activities which occur within our TRS operations are subject to federal and state income taxes. Accordingly, our 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.

F - 45

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	Year Ended December 31,																								Period from October 6, 2017 to December 31, 2017
	2019												2018
(In thousands)	Current				Deferred				Total				Current				Deferred				Total				Current				Deferred				Total
Federal	$	1,100			$	46			$	1,146			$	1,693			$	(459	)		$	1,234			$	—			$	(1,909	)		$	(1,909	)
State	563				(4		)		559				126				81				207				11				(3		)		8
Income tax expense (benefit)	$	1,663			$	42			$	1,705			$	1,819			$	(378	)		$	1,441			$	11			$	(1,912	)		$	(1,901	)

At December 31, 2019 and 2018, 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, 2019				December 31, 2018
Deferred tax assets:
Federal net operating loss	$	—			$	—
Accruals, reserves and other	96				117
Total deferred tax assets	96				117
Deferred tax liabilities:
Land, buildings and equipment, net	(3,478		)		(3,457		)
Total deferred tax liabilities	(3,478		)		(3,457		)
Net deferred tax liability	$	(3,382	)		$	(3,340	)

The following table reconciles our effective income tax rate to the historical federal statutory rate of 21% in 2019 and 2018 and 35% in 2017:

	Year Ended December 31, 2019							Year Ended December 31, 2018							Period from October 6, 2017 to December 31, 2017
(Amounts in thousands)	Amount				Percent			Amount				Percent			Amount				Percent
Federal income tax expense at statutory rate	$	116,757			21.0	%		$	112,326			21.0	%		$	15,414			35.0	%
REIT income not subject to federal income tax	(115,395		)		(20.8	)		(111,035		)		(20.8	)		(14,897		)		(33.8	)
Pre-tax gain attributable to taxable subsidiaries	1,362				0.3			1,291				0.2			517				1.2
State income taxes, net of federal benefits	542				0.1			187				—			5				—
Non-deductible expenses and other	(199		)		—			(37		)		—			—				—
Impact of Tax Reform on deferred tax liability	—				—			—				—			(2,423		)		(5.5	)
Income tax expense (benefit)	$	1,705			0.3	%		$	1,441			0.2	%		$	(1,901	)		(4.3	)%

F - 46

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We declared dividends of $1.17 per common share and $0.9975 per common share during the years ended December 31, 2019 and 2018, respectively. We did not declare any dividends during the period from October 6, 2017 through December 31, 2017. For U.S. Federal income tax purposes, the portion of the dividends allocated to stockholders for the years ended December 31, 2019 and 2018 are characterized as follows:

	Year Ended December 31,
($ per share)	2019				2018
Ordinary dividends	$	0.8465			$	0.9251
Section 199A dividends (1)	$	0.8159			$	0.9251
Qualified dividend (1)	$	0.0306			$	—
Non-dividend distribution	$	0.0985			$	—

---

(1)	These amounts are a subset of, and are included in, the ordinary dividend amounts.

As of December 31, 2019, 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, 2019, the 2017, 2018 and 2019 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 15 — 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 our segments:

	Year Ended December 31, 2019
(In thousands)	Real Property Business				Golf Course Business				VICI Consolidated
Revenues	$	865,858			$	28,940			$	894,798
Operating income	836,275				6,224				842,499
Interest expense	(248,384		)		—				(248,384		)
Loss on extinguishment of debt	(58,143		)		—				(58,143		)
Income before income taxes	549,503				6,483				555,986
Income tax expense	470				1,235				1,705
Net income	549,033				5,248				554,281
									—
Depreciation	16				3,815				3,831
Total assets	$	13,177,318			$	88,301			$	13,265,619
Total liabilities	$	5,199,029			$	17,601			$	5,216,630

F - 47

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	Year Ended December 31, 2018
(In thousands)	Real Property Business				Golf Course Business				VICI Consolidated
Revenues (1)	$	870,776			$	27,201			$	897,977
Operating income	751,803				6,151				757,954
Interest expense	(212,663		)		—				(212,663		)
Loss on extinguishment of debt	(23,040		)		—				(23,040		)
Income before income taxes	527,407				6,151				533,558
Income tax expense	—				(1,441		)		(1,441		)
Net income	527,407				4,710				532,117
Depreciation	7				3,679				3,686
Total assets	$	11,247,637			$	85,731			$	11,333,368
Total liabilities	$	4,424,861			$	7,485			$	4,432,346

	Period from October 6, 2017 to December 31, 2017
(In thousands)	Real Property Business				Golf Course Business				VICI Consolidated
Revenues (1)	$	181,258			$	6,351			$	187,609
Operating income	142,722				1,474				144,196
Interest expense	(63,354		)		—				(63,354		)
Loss on extinguishment of debt	(38,488		)		—				(38,488		)
Income before income taxes	41,162				1,474				42,636
Income tax expense	—				1,901				1,901
Net income	41,162				3,375				44,537
Depreciation	—				751				751

---

(1)	Upon the adoption of ASC 842 on January 1, 2019, we ceased recording tenant reimbursement of property taxes as these taxes are paid directly by our tenants to the applicable government entity.

Note 16 — Subsequent Events

We have evaluated subsequent events and, except for the payment of dividends on January 9, 2020, as described in Note 11, and the closing of the JACK Cleveland/Thistledown Acquisition on January 24, 2020, as described in Note 4, the repricing of the Term Loan B Facility on January 24, 2020, as described in Note 7, the sale of common stock under the at-the-market offering program on February 7, 2020, as described in Note 11 and the February 2020 Senior Unsecured Notes offering that closed on February 5, 2020 and the repayment of the Second Lien Notes on February 20, 2020, as described in Note 7, there were no other events relative to the Financial Statements that require additional disclosure.

F - 48

VICI PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 17 — Quarterly Results of Operations (Unaudited)

The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2019 and 2018:

		Quarter Ended
($ in thousands except per share data)		December 31, 2019				September 30, 2019				June 30, 2019				March 31, 2019
Revenues		$	237,537			$	222,513			$	220,746			$	214,002
Operating income		226,758				208,380				205,495				201,866
Net income		100,713				146,515				154,127				152,926
Net income attributable to common stockholders		98,631				144,435				152,049				150,849
Net income per common share
Basic and Diluted		$	0.21			$	0.31			$	0.37			$	0.37
Dividends per share		$	0.2975			$	0.2975			$	0.2875			$	0.2875

		Quarter Ended
($ 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
Operating income		195,682				184,100				189,448				188,724
Net income		144,631				132,024				141,359				114,103
Net income attributable to common stockholders		142,541				129,912				139,044				112,122
Net income per common share
Basic and diluted		$	0.37			$	0.35			$	0.38			$	0.33
Dividends per share		$	0.2875			$	0.2875			$	0.2625			$	0.1600

F - 49

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 - 50

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 - 51

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 - 52

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 - 53

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 - 54

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 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.

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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

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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

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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.

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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

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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.

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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.

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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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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, 2019				December 31, 2018
Assets
Cash and cash equivalents	$	13,912			$	377,704
Restricted cash	—				48
Short-term investments	—				520,877
Other assets	159				2,150
Due from affiliates	838				133
Investment in subsidiaries	8,087,905				6,033,310
Total assets	$	8,102,814			$	6,934,222
Liabilities
Other liabilities	$	576			$	486
Dividends payable	137,056				116,287
Total liabilities	137,632				116,773
Stockholders’ equity
Common stock, $0.01 par value, 700,000,000 shares authorized and 461,004,742 and 404,729,616 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively	4,610				4,047
Preferred stock, $0.01 par value, 50,000,000 shares authorized and no shares outstanding at December 31, 2019 and 2018	—				—
Additional paid in capital	7,817,582				6,648,430
Accumulated other comprehensive loss	(65,078		)		(22,124		)
Retained earnings	208,068				187,096
Total stockholders’ equity	7,965,182				6,817,449
Total liabilities and stockholders’ equity	$	8,102,814			$	6,934,222

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,								Period from October 6, 2017 to December 31, 2017
	2019				2018
Expenses
General and administrative	—				78				—
Total expenses	—				78				—
Equity in earnings of investment in subsidiary	$	532,699			$	516,116			$	—
Interest income	13,265				7,581				282
Income before income taxes	545,964				523,619				282
Income taxes	—				—				—
Net income	$	545,964			$	523,619			$	282
Other comprehensive income
Net income	$	545,964			$	523,619			$	282
Unrealized loss on cash flow hedges - investment in subsidiaries	(42,954		)		(22,124		)		—
Comprehensive income	$	503,010			$	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,								Period from October 6, 2017 to December 31, 2017
	2019				2018
Cash flows from operating activities
Net income	$	545,964			$	523,619			$	282
Adjustments to reconcile net income to cash flows provided by operating activities:
Equity in income from subsidiaries	(532,699		)		—				—
Distributions of earnings from subsidiaries	13,334				—				—
Change in operating assets and liabilities:
Change in other assets	48				(2,150		)		—
Change in other liabilities	1,370				270				—
Change in intercompany balances, net	(1,985		)		(614		)		98,813
Cash flows from operating activities	26,032				521,125				99,095
Cash flows from investing activities
Investment in subsidiary	(1,700,748		)		(1,838,205		)		(1,000,000		)
Distributions from subsidiaries	232,875				357,781				—
Investments in short-term investments	(342,767		)		(691,239		)		—
Maturities of short-term investments	760,419				170,362				—
Cash flows used in investing activities	(1,050,221		)		(2,001,301		)		(1,000,000		)
Cash flows from financing activities
Proceeds from follow-on offering of common stock	1,164,307				694,374				—
Proceeds from private placement of common stock	—				—				964,376
Proceeds from initial public offering of common stock	—				1,307,119				—
Dividends paid	(503,958		)		(262,682		)		—
Mandatory debt conversion costs	—				—				(13		)
Cash flows provided by financing activities	660,349				1,738,811				964,363
Net increase in cash and cash equivalents	(363,840		)		258,635				63,458
Cash, cash equivalents and restricted cash, beginning of period	377,752				119,117				55,659
Cash, cash equivalents and restricted cash, end of period	$	13,912			$	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 “Second Lien Notes Indenture”) by and among VICI PropCo and its wholly owned subsidiary, VICI FC Inc. (together, the “Second Lien Notes Issuers”), the subsidiary guarantors party thereto, and UMB Bank National Association, as trustee. The Second Lien Notes Indenture contains covenants that limit the Second Lien Notes 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. Subsequent to December 31, 2019, on February 20, 2020 we used the proceeds from the 2025 Notes to redeem in full the Second Lien Notes at a redemption price of 100% of the principal amount of the Second Lien Notes then outstanding plus the Second Lien Notes Applicable Premium, which resulted in a total redemption amount of approximately $537.5 million.

The November 2019 Senior Unsecured Notes were issued in November 2019, pursuant to indentures (the “2019 Senior Unsecured Notes Indentures”) by and among the Operating Partnership and VICI Note Co. Inc. (the “Co-Issuer” and, together with the Operating Partnership, the “2019 Senior Unsecured Notes Issuers”), the subsidiary guarantors party thereto and UMB Bank, National Association, as trustee. The 2019 Senior Unsecured Notes Indentures contains covenants that limit the 2019 Senior Unsecured Notes Issuers’ and their restricted subsidiaries’ ability to, among other things: pursuant to a indenture agreements

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containing certain covenants limiting our ability (i) incur additional debt; (ii) create liens on assets; (iii) make distributions and pay dividends on or redeem or repurchase stock; (iv) make certain types of investments; (v) sell stock in certain subsidiaries; (vi) enter into agreements that restrict dividends or other payments from subsidiaries; (vii) enter into transactions with affiliates; (viii) issue guarantees of debt; and (ix) sell assets or merge with other companies. 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 fund a dividend or distribution by VICI that is believes is necessary to maintain its status as a REIT or to avoid payment of any tax for any calendar year that could be avoided by reason of such distribution, and the ability to make certain restricted payments not to exceed 95% of our cumulative Funds From Operations (as defined in the 2019 Senior Unsecured Notes Indentures), plus the aggregate net proceeds from (i) the sale of certain equity interests in, (ii) capital contributions to, and (iii) certain convertible indebtedness of, the Operating Partnership.

The amount of restricted net assets the Company’s consolidated subsidiaries held as of December 31, 2019 was approximately $7.9 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 7 of the Company’s consolidated financial statements.

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SCHEDULE III

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

December 31, 2019

(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				$	1,010,967			$	—			$	—			$	—			$	1,010,967			$	—			$	1,010,967			$	—			10/6/2017 (b)		N/A
Land Parcels subject to Non-CPLV Lease Agreement		Various		(c)		75,691				—				—				—				75,691				—				75,691				—				10/6/2017		N/A
Vacant, non-operating Land		Various				21,111				—				—				—				21,111				—				21,111				—				10/6/2017		N/A
Eastside Property (d)		Las Vegas, Nevada				73,600				—				—				—				73,600				—				73,600				—				10/6/2017		N/A
						$	1,181,369			$	—			$	—			$	—			$	1,181,369			$	—			$	1,181,369			$	—
(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) Octavius tower addition to the Land was acquired on July 11, 2018.
(c) Pledged to secure obligations under the Senior Secured Credit.
(d) 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, 2019 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			$	—
	Additions		—				—
	Impairments		—				—
	Disposals		(1,078		)		—
	Depreciation expense		—				—
Balance as of December 31, 2019			$	1,181,369			$	—

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