Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the audited consolidated Financial Statements and notes thereto of VICI Properties Inc. and other financial information included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our business and growth strategies, statements regarding the industry outlook and our expectations regarding the future performance of our business contained herein are forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.” You should also review the “Risk Factors” section in Item 1A of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by such forward-looking statements.

OVERVIEW

We are a Maryland corporation that is primarily engaged in the business of owning and acquiring gaming, hospitality and entertainment destinations. We lease our properties to subsidiaries of Caesars, Penn National, Hard Rock, Century Casinos and JACK Entertainment, with Caesars being our largest tenant. We conduct our real property business through an operating partnership and our golf course business through a TRS, VICI Golf LLC. The financial information included in this Annual Report on Form 10-K are our consolidated results (including the real property business and the golf course business) for the years ended December 31, 2020, 2019 and 2018.

Key 2020 Highlights

Operating Results

Collected 100% of rent in cash.
Total revenues increased 37.0% year-over-year to $1.2 billion.
Net income attributable to common stockholders was $891.7 million, or $1.75 per diluted share.
AFFO increased 28.7% year-over-year to $835.8 million and AFFO per diluted share increased 10.8% to $1.64.

Acquisition and Investment Activity

Completed $4.6 billion of acquisitions and investments, including:

◦Acquisition of the real estate assets of Harrah’s New Orleans, Harrah’s Laughlin, and Harrah’s Atlantic City and modification of certain provisions of the Caesars Lease Agreements in connection with the Eldorado/Caesars Merger for total consideration of approximately $3.2 billion; and

**◦**Acquisition of the real estate assets of JACK Cleveland/Thistledown for total consideration of approximately $843.3 million.

◦Originated $575.0 million of mortgage loan investments, including our first investment outside of gaming through an $80.0 million mortgage loan secured by Chelsea Piers New York, a sports and entertainment complex located in New York City.

Added $318.4 million of contractual rent on an annualized basis to our real estate portfolio.

Capital Markets and Financing Activity

Increased our quarterly cash dividend to $0.33 per share (or $1.32 per share on an annualized basis), representing a 10.9% increase compared to our previous quarterly dividend.
Completed an equity offering in which 29,900,000 shares were sold through a forward sale agreement at $22.15 per share, raising gross proceeds of $662.3 million, with 3,000,000 shares subsequently settled for net proceeds to us of approximately $63.0 million and 26,900,000 shares remaining for settlement under the forward sale agreement.
Settled all 65,000,000 shares of the Company's outstanding June 2019 forward sale agreements for net proceeds of approximately $1.3 billion.
Issued 7,500,000 shares under the Company’s ATM Program for net proceeds of approximately $200.0 million
Issued $2.5 billion of Senior Unsecured Notes at a blended and weighted average interest rate of 3.83% and used $500.0 million of those proceeds to redeem our 8% Second Lien Notes that were scheduled to mature in 2023.
Repriced our Term Loan B Facility and lowered the interest rate from L + 2.00% to L + 1.75%.

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SUMMARY OF SIGNIFICANT 2020 ACTIVITIES

Acquisition and Investment Activity

Caesars Forum Convention Center Mortgage Loan.** On September 18, 2020, we provided a $400.0 million mortgage loan to Caesars that is secured by the Caesars Forum Convention Center. The loan bears interest at an initial rate of 7.7%, has a term of five years and is prepayable beginning in year three, subject to certain conditions. The Caesars Forum Convention Center is subject to the A&R Convention Center Put-Call Agreement between Caesars and us, with our call option being accelerated to 2025 in connection with the entry into the mortgage loan.
Chelsea Piers Mortgage Loan. On August 31, 2020, we entered into an $80.0 million mortgage loan agreement with Chelsea Piers New York (“Chelsea Piers”) secured by the Chelsea Piers complex in New York City, pursuant to which we provided an initial $65.0 million term loan and a $15.0 million delayed draw term loan (which remains undrawn), subject to certain conditions. The loan bears interest at a rate of 7.0% per annum and has a term of seven years.
Consummation of the Eldorado Transaction. On July 20, 2020, concurrent with the consummation of the Eldorado/Caesars Merger, we consummated the Eldorado Transaction contemplated by the Master Transaction Agreement and associated agreements. The closing of the Eldorado Transaction includes the consummation of the transactions contemplated by the below described agreements. Refer to Note 4 - Property Transactions for further details.

◦Acquisition of the MTA Properties. We acquired all of the land and real estate assets associated with Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City (collectively, the “MTA Properties”) for an aggregate purchase price of $1,823.5 million (the “MTA Properties Acquisitions”). The Regional Master Lease Agreement was amended to, among other things, include each such property, with initial aggregate total annual rent payable to us increased by $154.0 million to $621.7 million, to extend the initial lease term to July 2035 and to adjust certain minimum capital expenditure requirements and other related terms and conditions as a result of the MTA Properties being included in the Regional Master Lease Agreement.

◦Creation of Las Vegas Master Lease. In consideration of a payment by us to (i) the tenant under the CPLV Lease Agreement of $1,189.9 million (the “CPLV Lease Amendment Payment”) and (ii) the tenant under the HLV Lease Agreement of $213.8 million (the “HLV Lease Amendment Payment”), upon the consummation of the Eldorado Transaction, (a) the CPLV Lease Agreement was amended to (A) combine the CPLV Lease Agreement and the HLV Lease Agreement into a single Las Vegas Master Lease Agreement, (B) increase the annual rent payable to us thereunder associated with Caesars Palace Las Vegas by $83.5 million (the “CPLV Additional Rent Acquisition”), (C) increase the annual rent payable to us thereunder with respect to the Harrah’s Las Vegas property by $15.0 million (the “HLV Additional Rent Acquisition”) and (D) provide for the amended terms described below, and (b) the HLV Lease Agreement and the related lease guaranty were terminated. As a result of such amendments, the Harrah’s Las Vegas property is also now subject to the higher rent escalator under the Las Vegas Master Lease Agreement.

Lease Amendments and Terminations. Each of the Caesars Lease Agreements was amended to, among other things, (i) remove the rent coverage floors, which coverage floors served to reduce the rent escalators under such leases in the event that the “EBITDAR to Rent Ratio” (as defined in the applicable Caesars Lease Agreements) coverage was below the stated floor and (ii) extend the term of each such lease to July 2035 to ensure that each lease will have a full 15-year initial lease term following the consummation of the Eldorado Transaction.

*•*Centaur Properties Put-Call Agreement. Prior to the consummation of the Eldorado Transaction, we were party to a right of first refusal agreement with affiliates of Pre-Merger Caesars with respect to the Centaur Properties. Upon the consummation of the Eldorado Transaction, the right of first refusal agreement terminated, and we entered into the Centaur Put-Call Agreement, whereby (i) we 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 Caesars 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) Caesars 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 Caesars 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 Centaur Put-Call Agreement provides that the leaseback of the Centaur Properties will be

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implemented through the addition of the Centaur Properties to the Regional Master Lease Agreement.

Las Vegas Strip Assets ROFR. Upon the consummation of the Eldorado Transaction, we entered into the Las Vegas Strip ROFR Agreement pursuant to which we have the first right, with respect to the first two Las Vegas Strip assets described below that Caesars 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 Caesars elect to pursue a WholeCo sale). The Las Vegas Strip assets subject to the Las Vegas Strip ROFR Agreement are the land and real estate assets associated (i) with respect to the first such asset subject to the Las Vegas Strip ROFR Agreement, 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 Strip ROFR Agreement, the foregoing assets plus The LINQ gaming facility. If we enter into a sale leaseback transaction with Caesars on any of these facilities, the leaseback may be implemented through the addition of such properties to the Las Vegas Master Lease Agreement.
Horseshoe Baltimore ROFR. Upon the consummation of the Eldorado Transaction, we entered into a right of first refusal agreement with Caesars (the “Horseshoe Baltimore ROFR Agreement”) pursuant to which we 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 respect to this asset).
Acquisition of JACK Cleveland/Thistledown. On January 24, 2020, we completed the acquisition of the real estate of JACK Cleveland, located in Cleveland, Ohio and JACK Thistledown, located in North Randall, Ohio (the “JACK Cleveland/Thistledown Acquisition”) from JACK Entertainment, for approximately $843.3 million. 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 a subsidiary of JACK Entertainment. The lease has an initial total annual rent of $65.9 million and, as subsequently amended, an initial term of 20 years, with three (rather than four) five-year tenant renewal options. The tenant’s obligations under the lease are guaranteed by Rock Ohio Ventures LLC. Additionally, we made a $50.0 million loan to affiliates of Rock Ohio Ventures LLC secured by, among other things, certain non-gaming real estate assets owned by such affiliates and guaranteed by Rock Ohio Ventures LLC. The terms of the JACK Cleveland/Thistledown Lease Agreement and the ROV Loan were subsequently amended on July 16, 2020 pursuant to the JACK Lease Agreement Amendment and Amended and Restated ROV Loan as described below in Other Portfolio Activity.

Disposition Activity

Sale of Bally’s Atlantic City. On November 18, 2020, we and Caesars closed on the previously announced transaction to sell Bally’s Atlantic City to Bally’s Corporation for proceeds of $19.0 million to us. The annual rent payments under the Regional Master Lease Agreement remain unchanged following completion of the disposition.
Sale of Harrah’s Reno. On September 30, 2020, we and Caesars closed on the previously announced transaction to sell Harrah’s Reno to a third party for proceeds of $31.1 million to us. The annual rent payments under the Regional Master Lease Agreement remain unchanged following completion of the disposition.
Sale of Louisiana Downs. On September 3, 2020, we and Caesars entered into definitive agreements to sell Harrah’s Louisiana Downs to Rubico Acquisition Corp. for proceeds of $5.5 million to us. The annual rent payments under the Regional Master Lease Agreement will remain unchanged following completion of the disposition, which we anticipate will close in the first half of 2021 and remains subject to regulatory approval and customary closing conditions.

Other Portfolio Activity

Caesars Southern Indiana Lease Agreement.** On December 24, 2020, in connection with the Eastern Band of Cherokee Indians’ (“EBCI”) agreement to acquire the operations of Caesars Southern Indiana from Caesars, we agreed to enter into a triple-net lease agreement with EBCI with respect to the real property associated with Caesars Southern Indiana, at the closing of EBCI’s acquisition. In addition, as part of the transaction, the parties have agreed to negotiate a right of first refusal for VICI Properties on the real property associated with the development of a new casino resort in Danville, Virginia. Initial total annual rent under the lease with EBCI will be $32.5 million. The lease will have an initial term of 15 years, with four 5-year tenant renewal options. The tenant’s obligations under the lease will be guaranteed by EBCI. Annual base rent payments under the Regional Master Lease will be reduced by $32.5 million upon completion of EBCI’s acquisition of the operations of Caesars Southern Indiana and the execution of the lease between us and EBCI. The property is expected to retain the Caesars brand name and to continue to be a part of the Caesars Rewards loyalty program in accordance with the terms of a licensing agreement negotiated between EBCI and

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Caesars. The transaction is subject to customary regulatory and other approvals (and, with respect to the right of first refusal, negotiation of definitive documentation and applicable regulatory and other governmental approvals) and are expected to be completed in the third quarter of 2021.

Amendment to JACK Cleveland/Thistledown Lease Agreement. On July 16, 2020, we and JACK Entertainment entered into an amendment to the JACK Cleveland/Thistledown Lease Agreement (the “JACK Lease Agreement Amendment”), pursuant to which, among other things, we agreed to fund $18.0 million for the construction of a new gaming patio amenity at JACK Thistledown Racino, which will be leased by JACK Entertainment pursuant to the JACK Lease Agreement Amendment. In connection with the construction of the gaming patio, commencing on April 1, 2022, annual rent under the JACK Cleveland/Thistledown Lease Agreement (as amended by the JACK Lease Agreement Amendment) will be increased by an incremental $1.8 million. The JACK Lease Agreement Amendment also provides for relief with respect to certain existing covenants through March 31, 2022, adds an additional five years to the initial lease term, with the tenant under the JACK Cleveland/Thistledown Lease Agreement having three (rather than four) five-year renewal options as a result of such extension of the initial lease term, and provides for rent escalation to begin in 2022 rather than 2021. The JACK Lease Agreement Amendment does not provide for a reduction or deferral of the tenant’s rent obligations. The relief is conditioned upon the satisfaction of certain requirements.
Amendment and Restatement of ROV Loan**.** Simultaneously with entry into the JACK Lease Agreement Amendment, we and affiliates of Rock Ohio Ventures LLC entered into an amendment and restatement of the existing $50.0 million term loan agreement pursuant to which, among other things, the Company increased the existing term loan to $70.0 million, bearing interest at a rate of 9.0% per annum, and added a $25.0 million revolving credit facility (which remains undrawn), bearing interest at a rate of LIBOR plus 2.75%. Additionally, a commitment fee of 0.50% per annum calculated on the unused portion of the ROV Credit Facility is payable quarterly. In connection with the amendment and restatement of the loan, we received additional collateral so that the term loan and revolving credit facility are now secured by a first priority lien on substantially all gaming and non-gaming real and personal property of JACK Entertainment.
CapEx Amendment to Caesars Lease Agreements. On June 1, 2020, we and Caesars entered into an Omnibus Amendment to Leases (the “Omnibus Amendment”) in connection with the ongoing COVID-19 pandemic and its impact on operations and financial performance, which was further amended on October 27, 2020 to capture the addition of the MTA Properties to the Regional Master Lease Agreement. The Omnibus Amendment provides Caesars with certain relief with respect to a portion of their capital expenditure obligations under the Caesars Lease Agreements, subject to certain conditions.
Amendment to Century Portfolio Lease Agreement. In May 2020, we entered into an amendment to the Century Portfolio Lease Agreement to amend certain covenants, including minimum capital expenditures. In connection with the COVID-19 pandemic and its impact on operations and financial performance, the Company agreed to waive Century’s capital expenditure requirements for 2020 and defer to not later than December 31, 2021 certain other expenditures contemplated in connection with the underwriting of the acquired casino properties, subject to certain conditions.

Financing and Capital Markets Activity

Partial Settlement of June 2020 Forward Sale Offering. On September 28, 2020, we partially settled the June 2020 Forward Sale Agreement (as defined below) by delivering 3,000,000 shares of our common stock to the forward purchaser in exchange for total net proceeds of approximately $63.0 million.
June 2020 Forward Sale Offering. On June 17, 2020, we completed a primary follow-on offering of 29,900,000 shares of common stock (inclusive of 3,900,000 shares sold pursuant to the exercise in full of the underwriters’ option to purchase additional shares) at a public offering price of $22.15 per share for an aggregate offering value of $662.3 million, all of which are subject to a forward sale agreement (the “June 2020 Forward Sale Agreement”), which initially required settlement by September 17, 2020. On September 16, 2020, we amended the June 2020 Forward Sale Agreement to extend the maturity date from September 17, 2020 to June 17, 2021. Following the partial settlement on September 28, 2020 referred to above, 26,900,000 shares of common stock remain to be settled under the June 2020 Forward Sale Agreement.
Unsecured February 2020 Senior Notes Offering and Redemption and Repayment of the Second Lien Notes. On February 5, 2020, the Operating Partnership and the Co-Issuer (together with the Operating Partnership, the “Issuers”) issued (i) $750.0 million in aggregate principal amount of 2025 Notes, accruing interest at 3.500% per annum, (ii) $750.0 million in aggregate principal amount of 2027 Notes, accruing interest at 3.750% per annum and (iii) $1.0 billion aggregate principal amount of 2030 Notes, accruing interest at 4.125% per annum. On February 20, 2020, we

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used a portion of the 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 the Second Lien Notes Applicable Premium, for a total redemption cost of approximately $537.5 million. We used the remaining $2.0 billion of the net proceeds of the offering to fund a portion of the purchase price of the Eldorado Transaction on July 20, 2020.

Repricing of Term Loan B Facility. On January 24, 2020, we amended the Term Loan B Facility to reduce the interest rate from L + 2.00% to L + 1.75%.

KEY TRENDS THAT MAY AFFECT OUR BUSINESS

Subsidiaries of Caesars, Penn National, Hard Rock, Century Casinos and JACK Entertainment are the lessees of all of our properties pursuant to the Lease Agreements, and Caesars, Penn National, Seminole Hard Rock, Century Casinos or Rock Ohio Ventures LLC guarantees the obligations of their respective subsidiary tenants under the Lease Agreements. The Lease Agreements account for a substantial majority of our revenues. Additionally, we expect to realize organic growth in rental revenue through annual rent escalators in our Lease Agreements. Accordingly, we are dependent on our tenants, the gaming industry and the health of the economies in the areas where our properties are located for the foreseeable future, and an event that has a material adverse effect on any of our tenant’s business, financial condition, liquidity, results of operations or prospects, such as the ongoing COVID-19 pandemic, would have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects. See Item 1A “Risk Factors—Risks Related to Our Business and Operations.”. For a full discussion on the impact of the COVID-19 Pandemic on our business see Item 1 “Business—Impact of the COVID-19 Pandemic on Our Business.”

We actively seek to grow our portfolio through acquisitions of, and investments in, experiential real estate in geographically diverse dynamic markets spanning hospitality, entertainment, leisure and gaming properties. Additionally, we expect to grow our portfolio through acquisitions by pursuing opportunities to execute sale leaseback transactions with Caesars, including pursuant to: (i) the Centaur Properties Put-Call Agreement; (ii) the Caesars Forum Put-Call Agreement; and (iii) the Las Vegas Strip ROFR Agreement and Horseshoe Baltimore ROFR Agreement. However, Caesars will make an independent financial decision regarding whether to sell properties and therefore trigger the rights of first refusal under the Las Vegas Strip ROFR Agreement and the Horseshoe Baltimore ROFR Agreement, and we will make an independent financial decision whether to purchase the properties in each instance. Finally, we believe the approximately 34 acres of undeveloped or underdeveloped land on and adjacent to the Las Vegas Strip that we own may provide attractive opportunities for potential future expansion and development. In pursuing external growth initiatives, we will generally seek to acquire or invest in properties that can generate stable revenue through long-term leases with tenants with established operating histories, and we will consider various factors when evaluating acquisitions and other investments, including the ability to continue to diversify our tenant base and increasing our geographic diversification.

Our operating and financial performance in the future will be significantly influenced by the success of our acquisition strategy, and the timing and the availability and terms of financing of any acquisitions that we may complete, as well as broader macroeconomic and other conditions that affect our tenants’ operating and financial performance, including the impact of the COVID-19 pandemic. We can provide no assurance that we will exercise any of our contractual rights to purchase one or more properties from Caesars, that Caesars will trigger the rights of first offer under the Las Vegas Strip ROFR Agreement and Horseshoe Baltimore ROFR Agreement, or that we will otherwise be successful in acquiring any properties (whether subject to the Las Vegas Strip ROFR Agreement, the Horseshoe Baltimore ROFR Agreement, or otherwise). Additionally, our ability to successfully implement our acquisition and investment strategy will depend upon the availability and terms of financing, including debt and equity capital. Further, the pricing of any acquisitions or other investments we may consummate and the terms of any leases that we may enter into will significantly impact our future results. Competition to enter into transactions, including sale leaseback transactions, with attractive properties and desirable tenants is intense, and we can provide no assurance that any future acquisitions, investments or leases will be on terms as favorable to us as those relating to recent transactions. We anticipate that we would seek to finance these acquisitions with a combination of debt and equity, although no assurance can be given that we would be able to issue equity in such amounts on favorable terms, or at all, or that we would not determine to incur more debt on a relative basis at the relevant time due to market conditions or otherwise. In addition to rent, our current Lease Agreements require our tenants to pay the following: (1) all facility maintenance; (2) all insurance required in connection with the leased properties and the business conducted on the leased properties; (3) taxes levied on or with respect to the leased properties (other than taxes on our income); and (4) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties. Accordingly, due to the “triple-net” structure of our leases, we do not expect to incur significant property-level expenses.

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DISCUSSION OF OPERATING RESULTS

Results of Operations for the Years Ended December 31, 2020 and December 31, 2019


(In thousands)	2020		2019		Variance
Revenues
Income from sales-type and direct financing leases	$	1,007,508	$	822,205	$	185,303
Income from operating leases	25,464		43,653		(18,189)
Income from lease financing receivables and loans	153,017		—		153,017
Other income	15,793		—		15,793
Golf revenues	23,792		28,940		(5,148)
Total revenues	1,225,574		894,798		330,776

Operating expenses
General and administrative	30,661		24,569		6,092
Depreciation	3,731		3,831		(100)
Other Expenses	15,793		—		15,793
Golf expenses	17,632		18,901		(1,269)
Change in allowance for credit losses	244,517		—		244,517

Transaction and acquisition expenses	8,684		4,998		3,686
Total operating expenses	321,018		52,299		268,719

Interest expense	(308,605)		(248,384)		(60,221)
Interest income	6,795		20,014		(13,219)
Loss from extinguishment of debt	(39,059)		(58,143)		19,084
Gain upon lease modification	333,352		—		333,352
Income before income taxes	897,039		555,986		278,996
Income tax expense	(831)		(1,705)		874
Net income	896,208		554,281		279,870
Less: Net income attributable to non-controlling interest	(4,534)		(8,317)		3,783
Net income attributable to common stockholders	$	891,674	$	545,964	$	283,653

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Revenue

For the years ended December 31, 2020 and 2019, our revenue was comprised of the following items:


(In thousands)	2020		2019		Variance
Leasing revenue	$	1,170,316	$	865,858	$	304,458
Income from loans	15,673		—		15,673
Other income	15,793		—		15,793
Golf revenues	23,792		28,940		(5,148)
Total revenues	$	1,225,574	$	894,798	$	330,776

Leasing Revenue

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


(In thousands)	2020		2019		Variance
Income from sales-type and direct financing leases	$	1,007,508	$	822,205	$	185,303
Income from operating leases (1)	25,464		43,653		(18,189)
Income from lease financing receivables (2)	137,344		—
Total leasing revenue	1,170,316		865,858		304,458
Non-cash adjustment (3)	(39,883)		239		(40,122)
Total contractual leasing revenue	$	1,130,433	$	866,097	$	264,336

____________________

(1) Represents portion of land separately classified and accounted for under the operating lease model associated with our investment in Caesars Palace Las Vegas and certain operating land parcels contained in the Regional Master Lease Agreement. Upon the consummation of the Eldorado Transaction on July 20, 2020, the land component of Caesars Palace Las Vegas and certain operating land parcels were reassessed for lease classification and determined to be a sales-type lease. Accordingly, subsequent to July 20, 2020, such income is recognized as Income from sales-type and direct financing leases.

(2) Represents the MTA Properties and the JACK Cleveland/Thistledown Lease Agreement, both of which were sale leaseback transactions. In accordance with ASC 842, since the lease agreements were determined to meet the definition of a sales-type lease and control of the asset is not considered to have transferred to us, such lease agreements are accounted for as financings under ASC 310.

(3) Amounts represent the non-cash adjustment to income from sales-type leases, direct financing leases and lease financing receivables in order to recognize income on an effective interest basis at a constant rate of return over the term of the leases.

Leasing revenue is generated from rent from our Lease Agreements. Total leasing revenue increased $304.5 million during the year ended December 31, 2020 compared to the year ended December 31, 2019. Total contractual leasing revenue increased $264.3 million during the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was primarily driven by the addition of Greektown, Hard Rock Cincinnati, the Century Portfolio, JACK Cleveland/Thistledown and the MTA Properties to our real estate portfolio in May 2019, September 2019, December 2019, January 2020 and July 2020, respectively, as well as the CPLV Additional Rent Acquisition and the HLV Additional Rent Acquisition in July 2020.

Income From Loans

Income from loans increased $15.7 million during the during the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was driven by the addition of the Amended and Restated ROV Loan, Chelsea Piers Mortgage Loan and Forum Convention Center Mortgage Loan to our real estate portfolio in January 2020, August 2020 and September 2020, respectively.

Other Income

For the year ended December 31, 2019, Other income was included net in General and administrative expenses. During the year ended December 31, 2020, we have re-classified Other income to be presented gross with an offsetting amount within Other expenses. Additionally, during the year ended December 31, 2020, we recognized additional income and an offsetting expense as a result of the assumption of the HNO Ground Lease, as further described in Note 4 - Property Transactions, as part of the MTA Properties Acquisitions.

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Golf Course Revenues

Revenues from golf operations decreased $5.1 million during the year ended December 31, 2020 compared to the year ended December 31, 2019. The decrease was primarily driven by the closure of our golf courses in mid-March until early to mid-May, as well as lower resort play at our Las Vegas courses as a result of the ongoing COVID-19 pandemic, partially offset by an increase in the contractual fees paid to us by Caesars for the use of our golf courses, pursuant to the Golf Course Use Agreement.

Operating Expenses

For the years ended December 31, 2020 and 2019, our operating expenses were comprised of the following items:


(In thousands)	2020		2019		Variance
General and administrative	$	30,661	$	24,569	$	6,092
Depreciation	3,731		3,831		(100)
Other expenses	15,793		—		15,793
Golf expenses	17,632		18,901		(1,269)
Change in allowance for credit losses	244,517		—		244,517
Transaction and acquisition expenses	8,684		4,998		3,686
Total operating expenses	$	321,018	$	52,299	$	268,719

General and Administrative Expenses

General and administrative expenses increased $6.1 million during the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was primarily driven by an increase in compensation, including stock-based compensation.

Other Expenses

For the year ended December 31, 2019, Other expenses were included net in General and administrative expenses. During the year ended December 31, 2020, we have re-classified Other expenses to be presented gross with an offsetting amount within Other income. Additionally, during the year ended December 31, 2020, we recognized additional income and an offsetting expense as a result of the assumption of the HNO Ground Lease, as further described in Note 4 - Property Transactions, as part of the MTA Properties Acquisitions.

Golf Course Expenses

Expenses from golf operations decreased $1.3 million during the year ended December 31, 2020 compared to the year ended December 31, 2019. The decrease was primarily driven by the closure of our golf courses in mid-March until early to mid-May, as well as lower resort play at our Las Vegas courses as a result of the ongoing COVID-19 pandemic, partially offset by an increase in the water usage charges at one of our golf courses. Additionally, even though our courses were closed from mid-March until early to mid-May as a result of the ongoing COVID-19 pandemic, we continued to pay all of our golf course employees their full salaries and benefits for the closure period and, accordingly, the decrease in our golf course operating revenues was not proportionately offset by a decrease in golf course operating expenses.

In addition, $3.7 million and $3.8 million of depreciation expense was incurred primarily by the golf business during the year ended December 31, 2020 and 2019, respectively.

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Change in Allowance for Credit Losses

On January 1, 2020, we adopted ASU No. 2016-13 - Financial Instruments-Credit Losses (Topic 326) which requires us to record an estimated credit loss for our (i) Investments in leases - sales-type and direct financing, (ii) Investments in leases - financing receivables and (iii) Investments in loans. During the year ended December 31, 2020, we recognized a $244.5 million increase in our allowance for credit losses primarily driven by the increase in investment balances subject to CECL. Specifically, the increase was primarily attributable to (i) the increase in investment balances resulting from the Eldorado Transaction, which includes (A) an initial CECL allowance on our $1.8 billion investment in the MTA Properties, (B) an additional CECL allowance on our aggregate $1.4 billion increased investment in the Las Vegas Master Lease Agreement as a result of the CPLV Additional Rent Acquisition and HLV Additional Rent Acquisition and (C) an additional CECL allowance on the $333.4 million increased balance of our existing Caesars Lease Agreements as a result of the mark to fair value in connection with the reassessment of lease classification, (ii) an increase related to our initial investment in JACK Cleveland/Thistledown and the ROV Loan in January 2020, (iii) an increase in the short-term probability of default of Caesars as a result of the Eldorado/Caesars Merger and (iv) an increase in the long-term probability of default of our tenants due to downgrades on certain of the credit ratings of our tenants’ senior secured debt in connection with the COVID-19 pandemic. The credit loss standard does not require retrospective application and, as such, there is no corresponding charge for the year ended December 31, 2019. Refer to Note 6 - Allowance for Credit Losses for further details.

Transaction and Acquisition Expenses

Transaction and acquisition costs increased $3.7 million during the year ended December 31, 2020 compared to the year ended December 31, 2019. Changes in transaction and acquisition expenses are related to fluctuations in (i) costs incurred for investments during the period that are not capitalizable under GAAP and (ii) costs incurred for investments that we are no longer pursuing.

Non-Operating Income and Expenses

Interest Expense

Interest expense increased $60.2 million during the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase is primarily attributable to the increase in debt of $4.75 billion from the February 2020 Senior Unsecured Notes offering and the November 2019 Senior Unsecured Notes offering, partially offset by a $2.05 billion reduction in debt as a result of the full redemption of the Second Lien Notes in February 2020 and full repayment of the CPLV CMBS Debt in November 2019.

Additionally, the weighted average annualized interest rate of our debt decreased to 4.47% during the year ended December 31, 2020 from 4.95% during the year ended December 31, 2019 as a result of (i) the weighted average interest rate on the February 2020 Senior Unsecured Notes and the November 2019 Senior Unsecured Notes being lower than the weighted average interest rate of the Second Lien Notes and CPLV CMBS Debt, (ii) a decrease in LIBOR on the $100.0 million portion of our variable rate debt that is not hedged and (iii) a reduction in the interest rate on the Term Loan B Facility from LIBOR plus 2.00% to LIBOR plus 1.75%.

Interest Income

Interest income decreased $13.2 million during the year ended December 31, 2020 compared to the year ended December 31, 2019. The decrease was primarily driven by an overall decrease in our cash and short-term investment balances and a substantial decrease in the interest rates earned on these investment balances.

Loss on Extinguishment of Debt

During the year ended December 31, 2020, we recognized a loss on extinguishment of debt of $39.1 million resulting from the full redemption of our Second Lien Notes in February 2020. During the year ended December 31, 2019, we recognized a loss on extinguishment of debt of $58.1 million resulting from the $110.8 million prepayment penalties associated with the full repayment of our CPLV CMBS Debt in November 2019, net of $55.4 million of which was reimbursed by Eldorado.

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Gain Upon Lease Modification

In connection with the Eldorado Transaction and as required under ASC 842, we reassessed the lease classification of the Las Vegas Master Lease Agreement, Regional Master Lease Agreement and Joliet Lease Agreement and determined the leases meet the definition of a sales-type lease, including the land component of Caesars Palace Las Vegas. As a result of the reclassifications of the Caesars Lease Agreements from direct financing and operating leases to sales-type leases, we recorded the investments at their estimated fair values as of the modification date and recognized a net gain equal to the difference in fair value of the assets and their carrying values immediately prior to the modification.

Results of Operations for the Years Ended December 31, 2019 and 2018

For a comparison of our results of operations for the fiscal years ended December 31, 2019 and 2018, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 20, 2020 and incorporated by reference herein.

RECONCILIATION OF NON-GAAP MEASURES

We present Funds From Operations (“FFO”), FFO per share, Adjusted Funds From Operations (“AFFO”), AFFO per share, and Adjusted EBITDA, which are not required by, or presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). These are non-GAAP financial measures and should not be construed as alternatives to net income or as an indicator of operating performance (as determined in accordance with GAAP). We believe FFO, FFO per share, AFFO, AFFO per share and Adjusted EBITDA provide a meaningful perspective of the underlying operating performance of our business.

FFO is a non-GAAP financial measure that is considered a supplemental measure for the real estate industry and a supplement to GAAP measures. Consistent with the definition used by The National Association of Real Estate Investment Trusts (NAREIT), we define FFO as net income (or loss) attributable to common stockholders (computed in accordance with GAAP) excluding (i) gains (or losses) from sales of certain real estate assets, (ii) depreciation and amortization related to real estate, (iii) gains and losses from change in control and (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.

AFFO is a non-GAAP financial measure that we use as a supplemental operating measure to evaluate our performance. We calculate AFFO by adding or subtracting from FFO non-cash leasing and financing adjustments, non-cash change in allowance for credit losses, non-cash stock-based compensation expense, transaction costs incurred in connection with the acquisition of real estate investments, amortization of debt issuance costs and original issue discount, other non-cash interest expense, non-real estate depreciation (which is comprised of the depreciation related to our golf course operations), capital expenditures (which are comprised of additions to property, plant and equipment related to our golf course operations), impairment charges related to non-depreciable real estate and gains (or losses) on debt extinguishment, other non-recurring non-cash transactions (such as non-cash gain upon lease modification) and non-cash adjustments attributable to non-controlling interest with respect to certain of the foregoing. The non-cash change in allowance for credit losses consists of estimated credit losses for our Investments in leases - sales-type and direct financing, Investments in leases - financing receivables and Investments in loans as a result of our adoption of ASU No. 2016-13 - Financial Instruments-Credit Losses (Topic 326). No similar adjustments are reflected in prior periods because the accounting standard was adopted effective January 1, 2020 and does not require retrospective application. Please see Note 6 - Allowance for Credit Losses for further information.

We calculate Adjusted EBITDA by adding or subtracting from AFFO contractual interest expense and interest income (collectively, interest expense, net) and income tax expense.

These non-GAAP financial measures: (i) do not represent cash flow from operations as defined by GAAP; (ii) should not be considered as an alternative to net income as a measure of operating performance or to cash flows from operating, investing and financing activities; and (iii) are not alternatives to cash flow as a measure of liquidity. In addition, these measures should not be viewed as measures of liquidity, nor do they measure our ability to fund all of our cash needs, including our ability to make cash distributions to our stockholders, to fund capital improvements, or to make interest payments on our indebtedness. Investors are also cautioned that FFO, FFO per share, AFFO, AFFO per share and Adjusted EBITDA, as presented, may not be comparable to similarly titled measures reported by other real estate companies, including REITs, due to the fact that not all real estate companies use the same definitions. Our presentation of these measures does not replace the presentation of our financial results in accordance with GAAP.

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Reconciliation of Net Income to FFO, FFO per Share, AFFO, AFFO per Share and Adjusted EBITDA


(In thousands, except share data and per share data)	Year Ended December 31, 2020		Year Ended December 31, 2019
Net income attributable to common stockholders	$	891,674	$	545,964
Real estate depreciation	—		—
FFO	891,674		545,964
Non-cash leasing and financing adjustments	(39,803)		239
Non-cash change in allowance for credit losses	244,517		—
Non-cash stock-based compensation	7,388		5,223
Transaction and acquisition expenses	8,684		4,998
Amortization of debt issuance costs and original issue discount	19,872		33,034
Other depreciation	3,615		3,815
Capital expenditures	(2,200)		(2,097)
Loss on extinguishment of debt	39,059		58,143
Non-cash gain upon lease modification	(333,352)		—
Non-cash adjustments attributable to non-controlling interest	(3,650)		253
AFFO	835,804		649,572
Interest expense, net	281,938		195,336
Income tax expense	831		1,705
Adjusted EBITDA	$	1,118,573	$	846,613

Net income per common share
Basic	$	1.76	$	1.25
Diluted	$	1.75	$	1.24
FFO per common share
Basic	$	1.76	$	1.25
Diluted	$	1.75	$	1.24
AFFO per common share
Basic	$	1.65	$	1.49
Diluted	$	1.64	$	1.48
Weighted average number of common shares outstanding
Basic	506,140,642		435,071,096
Diluted	510,908,755		439,152,946

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LIQUIDITY AND CAPITAL RESOURCES

Overview

As of December 31, 2020, our available cash balances, short-term investments, capacity under our Revolving Credit Facility and additional available proceeds were as follows:


(In thousands)	December 31, 2020
Cash and cash equivalents	$	315,993

Short-term investments	19,973
Capacity under Revolving Credit Facility (1)	1,000,000
Proceeds available from settlement of the June 2020 Forward Sale Agreement (2)	547,221
Total	$	1,883,187

*(1)*Subject to compliance with the financial covenants and other applicable provisions of our Revolving Credit Facility.

*(2)*Assumes the physical settlement of the remaining 26,900,000 shares under the June 2020 Forward Sale Agreement at the forward sale price of $20.34, calculated as of December 31, 2020.

Our short-term obligations consist primarily of regular interest payments on our debt obligations, dividends to our common stockholders, normal recurring operating expenses, recurring expenditures for corporate and administrative needs, certain lease and other contractual commitments related to our golf operations and certain non-recurring expenditures. For a list of our material contractual commitments refer to Note 11 - Commitments and Contingent Liabilities.

Our long-term obligations consist primarily of principal payments on our outstanding debt obligations and future funding commitments under our lease and loan agreements. As of December 31, 2020, we have $6.9 billion of debt obligations outstanding, none of which are maturing in the next twelve months. As of December 31, 2020, we have $46.0 million in future funding commitments consisting of $25.0 million related to the ROV Credit Facility, $15.0 million related to the delayed draw portion of the Chelsea Piers Mortgage Loan and $6.0 million related to the funding of the construction of a new gaming patio amenity at JACK Thistledown Racino, which will be leased by JACK Entertainment pursuant to the JACK Lease Agreement Amendment. For a summary of principal debt balances and their maturity dates and principal terms refer to Note 8 - Debt. For a summary of our future funding commitments under our loan portfolio refer to Note 5 - Real Estate Portfolio.

As described in our leases, capital expenditures for properties under the Lease Agreements are the responsibility of the tenants. Minimum capital expenditure spending requirements of the tenants are described in Note 5 - Real Estate Portfolio.

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Contractual Obligations and Commitments

Information concerning our obligations and commitments to make future payments under contracts such as our indebtedness and future minimum lease commitments under operating leases is included in the following table as of December 31, 2020:


		Payments Due By Period
(In thousands)		Total		2021		2022		2023		2024		2025 and Thereafter
Long-term debt, principal
	2025 Notes (1)	$	750,000	$	—	$	—	$	—	$	—	$	750,000
	2026 Notes (1)	1,250,000		—		—		—		—		1,250,000
	2027 Notes (1)	750,000		—		—		—		—		750,000
	2029 Notes (1)	1,000,000		—		—		—		—		1,000,000
	2030 Notes (1)	1,000,000		—		—		—		—		1,000,000
	Term Loan B Facility (2)	2,100,000		—		10,000		22,000		2,068,000		—
	Revolving Credit Facility (3)	—		—		—		—		—		—
Scheduled interest payments (4)		1,729,680		282,348		281,471		255,972		241,452		668,438
Total debt contractual obligations		8,579,680		282,348		291,471		277,972		2,309,452		5,418,438

Leases and contracts
	Future funding commitments – loan investments and lease agreements(5)	46,000		6,000		—		—		—		40,000
	Operating lease for Cascata Golf Course Land	19,749		933		951		970		990		15,905
	Golf maintenance contract for Rio Secco and Cascata Golf Course	10,050		3,350		3,350		3,350		—		—
	Office leases	8,567		918		857		857		857		5,078
Total leases and contract obligations		84,366		11,201		5,158		5,177		1,847		60,983

Total contractual commitments		$	8,664,046	$	293,549	$	296,629	$	283,149	$	2,311,299	$	5,479,421

(1) The 2025 Notes, 2026 Notes, 2027 Notes, 2029 Notes and 2030 Notes will mature on February 15, 2025, December 1, 2026, February 15, 2027, December 1, 2029 and August 15, 2030, respectively.

(2) 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 in February 2018 the next principal payment due on the Term Loan B Facility is September 2022. The Term Loan B Facility will mature on December 22, 2024 (or if the maturity is extended pursuant to the terms of the agreement, such extended maturity date as determined pursuant thereto).

(3) The Revolving Credit Facility will mature on May 15, 2024.

(4) Estimated interest payments on variable interest loans are based on a LIBOR rate as of December 31, 2020.

(5) The allocation of our future funding commitments is based on the commitment funding date or expiration date, as applicable, however we may be obligated to fund these commitments earlier than such date.

We believe that we have sufficient liquidity to meet our liquidity and capital resource requirements primarily through currently available cash and cash equivalents, short-term investments, cash received under our Lease Agreements, borrowings from banks, including undrawn capacity under our Revolving Credit Facility, and proceeds from the issuance of debt and equity securities (including issuances under the June 2020 Forward Sale Agreement and our at-the-market offering program).

All of the Lease Agreements call for an initial term of fifteen years with four, five-year tenant renewal options and are designed to provide us with a reliable and predictable long-term revenue stream (except for the JACK Cleveland/Thistledown Lease Agreement, as amended, which now provides for an initial term of twenty years with three, five-year renewal options). However, the COVID-19 pandemic has adversely impacted our tenants and their financial condition, and is expected to continue to do so, as all of their properties were closed for a period of time, and upon reopening are subject to operating restrictions and continuing uncertainty as to whether they will be forced to close again in the future. In the event our tenants are unable to make all of their contractual rent payments as provided by the Lease Agreements, we believe we have sufficient

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liquidity from the other sources discussed above to meet all of our contractual obligations for a significant period of time. Additionally, we do not have any debt maturities until 2024. For more information, refer to the risk factors in Part I. Item 1A. Risk Factors.

Our cash flows from operations and our ability to access capital resources could be adversely affected due to uncertain economic factors and volatility in the financial and credit markets, including the current conditions created by the COVID-19 pandemic, which has severely and adversely impacted global, national and regional economic activity and has contributed to significant volatility and negative pressure in financial markets. In particular, in connection with the ongoing COVID-19 pandemic and its impact on our tenants’ operations and financial performance, we have provided certain relief under the applicable Lease Agreements to some of our tenants as more fully described above in “—Summary of Significant 2020 Activities — Amendment to JACK Cleveland/Thistledown Lease Agreement”, “—Summary of Significant 2020 Activities — Amendment to Century Portfolio Lease Agreement” and “—Summary of Significant 2020 Activities — Amendment to Caesars Lease Agreements” and, as a result, we can provide no assurances that our tenants will not default on their leases or fail to make full rental payments if their businesses become challenged due to, among other things, current or future adverse economic conditions. In addition, any such tenant default or failure to make full rental payments could impact our operating performance and result in us not satisfying the financial covenants applicable to our outstanding indebtedness, which could result in us not being able to incur additional debt, including the available capacity under our Revolving Credit Facility, or result in a default. Further, current or future economic conditions could impact our tenants’ ability to meet capital improvement requirements or other obligations required in our Lease Agreements that could result in a decrease in the value of our properties.

Our ability to raise funds through the issuance of debt and equity securities and access to other third-party sources of capital in the future will be dependent on, among other things, uncertainties related to COVID-19 and the impact of our response and our tenants’ responses to COVID-19, general economic conditions, general market conditions for REITs, market perceptions and the trading price of our stock. We will continue to analyze which sources of capital are most advantageous to us at any particular point in time, but the capital markets may not be consistently available on terms we deem attractive, or at all.

Cash Flow Analysis

The table below summarizes our cash flows for the years ended December 31, 2020 and 2019:


(In thousands)		2020		2019		Variance ($)
Cash, cash equivalents and restricted cash
	Provided by operating activities	$	883,640	$	682,159	$	201,481
	Used in investing activities	(4,548,759)		(1,361,379)		(3,187,380)
	Provided by financing activities	2,879,219		1,182,666		1,696,553
	Net (decrease) increase in cash, cash equivalents and restricted cash	$	(785,900)	$	503,446	$	(1,289,346)

Cash Flows from Operating Activities

Net cash provided by operating activities increased $201.5 million for the year ended December 31, 2020 compared with the year ended December 31, 2019. The increase was primarily due to (i) cash rental payments from the addition of Greektown, Hard Rock Cincinnati, the Century Portfolio, JACK Cleveland/Thistledown and the MTA Properties to our real estate portfolio in May 2019, September 2019, December 2019, January 2020 and July 2020, respectively, as well as the CPLV Additional Rent Acquisition and the HLV Additional Rent Acquisition in July 2020 and (ii) interest income from the ROV Loan, Chelsea Piers Mortgage Loan and the Forum Convention Center Mortgage Loan, all of which were originated in 2020. The increase was partially offset by a decrease due to the prepayment of certain rent in December 2019 related to January 2020.

Cash Flows Used In Investing Activities

Net cash used in investing activities increased $3,187.4 million for the year ended December 31, 2020 compared with the year ended December 31, 2019.

During the year ended December 31, 2020, the primary sources and uses of cash from investing activities included:

The JACK Cleveland/Thistledown Acquisition and the Eldorado Transaction for a total cost of $4,101.8 million, including acquisition costs;
The ROV Loan, the Chelsea Piers Mortgage Loan and the Forum Convention Center Mortgage Loan for a total cost of $535.5 million, including loan origination costs;

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Proceeds from the sale of Harrah’s Reno and Bally’s Atlantic City in the aggregate amount of $50.1 million;
Proceeds from net maturities of short-term investments of $39.5 million;
Acquisition of property and equipment costs of $2.8 million; and
Deferred transaction costs of $0.3 million.

During the year ended December 31, 2019, the primary sources and uses of cash from investing activities include:

Acquisitions of Margaritaville, Greektown, Hard Rock Cincinnati and the Century Portfolio for a total cost of $1,821.1 million, including acquisition costs;
Proceeds from net maturities of short-term investments of $461.4 million;
Proceeds from the sale of vacant, non-operating land of $1.0 million;
Acquisition of property and equipment cost of $2.7 million; and
Deferred transaction costs of $8.7 million.

Cash Flows from Financing Activities

Net cash provided by financing activities increased $1,696.6 million for the year ended December 31, 2020 compared with the year ended December 31, 2019.

During the year ended December 31, 2020, the primary sources and uses of cash from financing activities included:

Net proceeds from the sale of an aggregate of $1,539.7 million of our common stock pursuant to the full physical settlement of our June 2019 Forward Sale Agreements, the partial physical settlement of our common stock pursuant to our June 2020 Forward Sale Agreement and pursuant to our at-the-market program;
Gross proceeds from our February 2020 Senior Unsecured Notes offering of $2,500.0 million;
Full redemption of the $498.5 million outstanding aggregate principal amount of our Second Lien Notes, as well as the $39.0 million Second Lien Notes Applicable Premium, plus fees;
Dividend payments of $612.2 million;
Debt issuance costs of $57.8 million;
Reimbursement of the CPLV CMBS Debt prepayment penalty from Caesars in the amount of $55.4 million; and
Distributions of $8.2 million to non-controlling interest

During the year ended December 31, 2019, the primary sources and uses of cash from financing activities include:

Net proceeds from the sale of an aggregate of $1,164.3 million of our common stock from a primary follow-on offering and pursuant to our at-the-market program;
Gross proceeds from our November 2019 Senior Unsecured Notes offering of $2,250.0 million;
Full repayment of $1,550.0 million of our CPLV CMBS Debt, including the $110.8 million prepayment penalty plus fees;
Dividend payments of $504.0 million;
Debt issuance costs of $56.1 million; and
Distributions of $8.1 million to non-controlling interest

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Debt

The following tables detail our debt obligations as of December 31, 2020:


($ In thousands)	December 31, 2020
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 + 1.75%	2,100,000		2,080,974
Senior Unsecured Notes (4)
2025 Notes	2025	3.500%	750,000		740,333
2026 Notes	2026	4.250%	1,250,000		1,233,119
2027 Notes	2027	3.750%	750,000		739,733
2029 Notes	2029	4.625%	1,000,000		985,730
2030 Notes	2030	4.125%	1,000,000		985,643
Total Debt			$	6,850,000	$	6,765,532

*(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. On May 15, 2019, we amended our Revolving Credit Facility to, among other things, increase borrowing capacity by $600.0 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 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. For the year ended December 31, 2020, the commitment fee was 0.375%.

*(3)*Interest on any outstanding balance is payable monthly. In connection with the repricing of the Term Loan B Facility in January 2020, the interest rate was decreased to LIBOR plus 1.75%. As of December 31, 2020 and 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%.

*(4)*Interest is payable semi-annually.

Financing Activity During 2020

On February 5, 2020, the Issuers issued (i) $750.0 million in aggregate principal amount of 2025 Notes, (ii) $750.0 million in aggregate principal amount of 2027 Notes and (iii) $1.0 billion in aggregate principal amount of 2030 Notes. We placed $2.0 billion of the net proceeds of the offering into escrow pending the consummation of the Eldorado Transaction (which was subsequently released from escrow and used to fund a portion of the consideration payable in connection with the closing of the Eldorado Transaction on July 20, 2020). On February 20, 2020, we 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 the Second Lien Notes Applicable Premium for a total redemption cost of approximately $537.5 million.

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 Term Loan B Facility from LIBOR plus 2.00% to LIBOR plus 1.75%.

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Covenants

On December 22, 2017, VICI PropCo entered into a credit agreement (as amended, 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 November 2019 Senior Unsecured Notes and the February 2020 Senior Unsecured Notes (together, the “Senior Unsecured Notes”) were issued in November 2019 and February 2020, respectively, pursuant to indentures (the “Senior Unsecured Notes Indentures”) by and among the Operating Partnership and the Co-Issuer (together with the Operating Partnership, the “Senior Unsecured Notes Issuers”), the subsidiary guarantors party thereto and UMB Bank, National Association, as trustee. The 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 it 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 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.

At December 31, 2020, the Company was in compliance with all required debt-related financial covenants.

Non-Guarantor Subsidiaries of Senior Unsecured Notes

The subsidiaries of the Operating Partnership that do not guarantee the Senior Unsecured Notes accounted for: (i) 5.2% of the Operating Partnership’s revenue (or 5.1% of our consolidated revenue) for the fiscal year ended December 31, 2020 and (ii) 3.8% of the Operating Partnership’s total assets (or 3.8% of our consolidated total assets) as of December 31, 2020.

Capital Expenditures

Off-Balance Sheet Arrangements

As of December 31, 2020, and as of the date this report was filed, we do not have any off-balance sheet arrangements.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our Financial Statements are prepared in accordance with GAAP. We have identified certain accounting policies that we believe are the most critical to the presentation of our financial information over a period of time. These accounting policies may require our management to take decisions on subjective and/or complex matters relating to reported amounts of assets, liabilities, revenue, costs, expenses and related disclosures, including, but not limited to, determining the classification of our leases, the subsequent accounting for our leases and the calculation of our allowance for credit losses. The judgment on such estimates and underlying assumptions is based on our historical experience that we believe is reasonable under the circumstances. Actual results may differ from the estimates.

Investments in Leases - Sales-type and Direct Financing, Net

We account for our investments in leases under ASC 842 “Leases” (“ASC 842”). Upon lease inception or lease modification, we assess lease classification to determine whether the lease should be classified as a sales-type, direct financing 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. 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. Since we purchase properties and simultaneously enter into new leases directly with the tenants, the net investment in the lease is generally equal to the purchase price of the asset, and, due to the long term nature of our leases, the land and building components of an investment generally have the same lease classification.

Upon adoption of ASC 842 on January 1, 2019, 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, at that time we did not reassess the classification of our Caesars Lease Agreements, as these leases existed prior to our adoption of ASC 842.

Prior to the consummation of the Eldorado Transaction, the Caesars Lease Agreements continued to be accounted for as direct financing leases and were included within Investments in leases - sales-type and direct financing, net 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 was included in Investments in leases - operating on the Balance Sheet. The income recognition for our direct financing leases recognized under ASC 840 “Leases” (“ASC 840”) was consistent with the income recognition for our sales-type lease under ASC 842.

Upon the consummation of the Eldorado Transaction on July 20, 2020, we modified the CPLV Lease Agreement, HLV Lease Agreement, Non-CPLV Lease Agreement and Joliet Lease Agreement, which included amending certain of the lease terms, combining the CPLV Lease Agreement and HLV Lease Agreement into the Las Vegas Master Lease Agreement and replacing the Non-CPLV Lease Agreement with the Regional Master Lease Agreement. Upon modification, we reassessed the lease classification of the Las Vegas Master Lease Agreement, Regional Master Lease Agreement and Joliet Lease Agreement and determined that the leases meet the definition of a sales-type lease, including the land component of Caesars Palace Las Vegas. Accordingly, we reclassified the land component of Caesars Palace Las Vegas from Investments in leases - operating to Investments in leases - sales-type and direct financing. Further, as a result of the reclassifications of the Caesars Lease Agreements from direct financing and operating leases to sales-type leases, we recorded the investments at their estimated fair values as of the modification date and recognized a net gain equal to the difference in fair value of the assets and their carrying values immediately prior to the modification. Such gain is recognized in our Statement of Operations as Gain upon lease modification. Subsequent to the consummation of the Eldorado Transaction, we no longer have any leases classified as operating or direct financing and, as such, there is no longer any income recorded through Investments in leases - operating. Refer to Note 4 - Property Transactions for further discussion surrounding the lease modifications. Refer to Note 10 - Fair Value for further discussion surrounding the mark to fair value.

We have 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 under ASC 842.

Investments in Leases - Financing Receivables, Net

In accordance with ASC 842, for transactions in which we enter into a contract to acquire an asset and lease it back to the seller under a sales-type lease (i.e., a sale leaseback transaction), control of the asset is not considered to have transferred to us. As a result, we do not recognize the underlying asset but instead recognize a financial asset in accordance with ASC 310 “Receivables” (“ASC 310”). The accounting for the financing receivable under ASC 310 is materially consistent with the

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accounting for our investments in leases - sales-type under ASC 842. We determined that the land and building components of the JACK Cleveland/Thistledown Lease Agreement meet the definition of a sales-type lease and, since we purchased and leased the assets back to the seller under a sale leaseback transaction, control is not considered to have transferred to us under GAAP. Accordingly, the JACK Cleveland/Thistledown Lease Agreement is accounted for as Investments in leases - financing receivables on our Balance Sheet, net of allowance for credit losses, in accordance with ASC 310.

Upon the consummation of the Eldorado Transaction on July 20, 2020, and reassessment of the classification of the Caesars Lease Agreements, as described above, we determined that the MTA Properties Acquisitions (as defined in Note 4 - Property Transactions) meet the definition of a separate contract under ASC 842. In accordance with this guidance, we are required to separately assess the lease classification apart from the other assets in the Regional Master Lease Agreement. We determined that the land and building components of the MTA Properties (as defined in Note 4 - Property Transactions) meet the definition of a sales-type lease and, since we purchased and leased the assets back to Caesars, control is not considered to have transferred to us under GAAP. Accordingly, the MTA Properties are accounted for as Investments in leases - financing receivables on our Balance Sheet, net of allowance for credit losses, in accordance with ASC 310.

Lease Term

We assess the non-cancelable 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 and Lease Financing Receivables

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

Prior to July 20, 2020, 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 recorded 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, was determined by applying the lessee’s incremental borrowing rate to the value of the land. Revenue from this lease was recorded as Income from operating leases in our Statement of Operations. Upon the consummation of the Eldorado Transaction on July 20, 2020, the land component of Caesars Palace Las Vegas was reassessed for lease classification and determined to be a sales-type lease. Accordingly, subsequent to July 20, 2020, the income is recognized as Income from sales-type leases.

Initial direct costs incurred in connection with entering into investments classified as sales-type or direct financing leases are included in the balance of the net investment in lease. 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. In connection with the reassessment of the lease classification and mark to fair value of the Caesars Lease Agreements, any initial direct costs capitalized prior to the Eldorado Transaction were written off as part of the gain upon lease modification.

Loan origination fees and costs incurred in connection with entering into investments classified as lease financing receivables are included in the balance of the net investment and such amounts will be recognized as a reduction to Income from investments in loans and lease financing receivables over the life of the lease using the effective interest method.

Allowance for Credit Losses

On January 1, 2020, we adopted ASC 326 “Credit Losses” (“ASC 326”), which requires that we measure and record current expected credit losses (“CECL”) for the majority of our investments, the scope of which includes our Investments in leases - sales-type and direct financing, Investments in leases - financing receivables and Investments in loans.

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We have elected to use a discounted cash flow model to estimate the Allowance for credit losses, or CECL allowance. This model requires us to develop cash flows which project estimated credit losses over the life of the lease or loan and discount these cash flows at the asset’s effective interest rate. We then record a CECL allowance equal to the difference between the amortized cost basis of the asset and the present value of the expected credit loss cash flows.

Expected losses within our cash flows are determined by estimating the probability of default (“PD”) and loss given default (“LGD”) of our tenants and their parent guarantors over the life of each individual lease or financial asset. We have engaged a nationally recognized data analytics firm to assist us with estimating both the PD and LGD of our tenants and their parent guarantors. The PD and LGD are estimated during a reasonable and supportable period for which we believe we are able to estimate future economic conditions (the “R&S Period”) and a long-term period for which we revert to long-term historical averages (the “Long-term Period”). The PD and LGD estimates for the R&S Period are developed using the current financial condition of the tenant and applied to a projection of economic conditions over a two-year term. The PD and LGD for the Long-term Period are estimated using the average historical default rates and historical loss rates, respectively, of public companies over the past 35 years that have similar credit profiles or characteristics to our tenants and their parent guarantors. We were unable to use our historical data to estimate losses as we have no loss history to date.

The CECL allowance is recorded as a reduction to our net Investments in leases - direct financing and sales type, Investments in leases - financing receivables and Investments in loans on our Balance Sheet. We are required to update our CECL allowance on a quarterly basis with the resulting change being recorded in the Statement of Operations for the relevant period. Finally, each time we make a new investment in an asset subject to ASC 326, we are required to record an initial CECL allowance for such asset, which will result in a non-cash charge to the Statement of Operations for the relevant period.

We are required to estimate a CECL allowance related to contractual commitments to extend credit, such as future funding commitments under a revolving credit facility. The CECL allowance related to these future commitments is recorded as a component of Other liabilities on our Balance Sheet.

Charge-offs are deducted from the allowance in the period in which they are deemed uncollectible. Recoveries previously written off are recorded when received. There were no charge-offs or recoveries for the year ended December 31, 2020.

Refer to Note 6 - Allowance for Credit Losses for further information.

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