LEASES

9 Months Ended

Jun. 30, 2021

Leases [Abstract]

LEASES

LEASES:

Lessee

The Company leases real estate and equipment under various operating and finance lease agreements. The leases have terms ranging from approximately one month to 50 years and do not contain any material residual value guarantees or restrictive covenants. Rental payments under these lease agreements are fixed and/or variable based on periodic adjustments for inflation, performance, usage or appraised land values. Variable components of lease payments are not included in the calculation of right-of-use assets and liabilities.

The Company’s lease arrangements contain both lease and non-lease components. For instances in which the Company is a lessee, the Company accounts for both lease and non-lease components as a single lease component for substantially all classes of underlying assets (primarily real estate and equipment). Leases with an expected or initial term of 12 months or less are not recorded on the Company’s condensed consolidated balance sheet and the related lease expenses are recognized on a straight-line basis over the expected lease term.

Information related to weighted average lease terms and discount rates is as follows:

	June 30, 2021
Weighted average remaining lease terms (years):
Operating leases	23
Finance leases	19
Weighted average discount rates:
Operating leases	7.68	%
Finance leases	7.76	%

The components of lease expense are as follows (in thousands):

	For the		For the		For the		For the
	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Operating lease expense	$	11,456	$	9,046	$	34,160	$	28,022
Short-term lease expense	9,248		2,747		23,464		20,297
Variable lease expense	4,666		2,354		12,531		9,161
Finance lease expense:
Amortization of right-of-use assets	1,602		593		2,854		1,806
Interest on lease liabilities	2,067		373		2,942		1,161
Less: sublease income (1)	(5,410)		(69)		(13,467)		(16,794)
Total	$	23,629	$	15,044	$	62,484	$	43,653

________

(1)Represents income earned by the Company from the rental of hotel, convention or retail space at the MGE Niagara Resorts and the Earth Hotel Tower at Mohegan Sun, both of which are leased properties.

Supplemental cash flow information related to lease liabilities is as follows (in thousands):

	For the		For the
	Nine Months Ended		Nine Months Ended
	June 30, 2021		June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Payments on operating lease obligations	$	12,072	$	18,820
Payments for interest on finance lease obligations	174		853
Payments on finance lease obligations	808		1,034
Total	$	13,054	$	20,707

Maturities of right-of-use lease obligations are as follows (in thousands):

	Operating Leases		Finance Leases
Fiscal years:
2021 (1)	$	12,614	$	3,719
2022	39,458		8,144
2023	40,437		12,269
2024	40,240		11,839
2025	40,499		11,439
Thereafter	839,308		172,231
Total future lease payments	1,012,556		219,641
Less: amounts representing interest	(543,621)		(105,696)
Plus: residual values	—		327
Present value of future lease payments	468,935		114,272
Less: current portion of lease obligations	(12,312)		(5,283)
Lease obligations, net of current portion	$	456,623	$	108,989

________

(1)Represents payment obligations from July 1, 2021 to September 30, 2021.

Lessor

The Company leases space at its facilities to third parties. Lease terms for these non-cancelable operating leases range from approximately one month to 21 years. Rental income under these lease agreements is fixed and/or variable based on percentage of tenant sales or periodic adjustments for inflation. Rental income is recorded within hotel and retail, entertainment and other revenues. For instances in which the Company is the lessor, and the class of underlying asset represents retail space, the Company accounts for both the lease and non-lease components, such as common area maintenance and tenant services, as a single lease component. In all other instances, non-lease components are accounted for separately in accordance with applicable guidance, most commonly ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”.

Lease income consists of the following (in thousands):

	For the Three Months Ended June 30, 2021				For the Three Months Ended June 30, 2020
	Hotel		Retail, Entertainment and Other		Hotel		Retail, Entertainment and Other
Fixed rent	$	14,635	$	742	$	2,444	$	1,299
Variable rent	—		1,634		—		(96)
Total	$	14,635	$	2,376	$	2,444	$	1,203

	For the Nine Months Ended June 30, 2021				For the Nine Months Ended June 30, 2020
	Hotel		Retail, Entertainment and Other		Hotel		Retail, Entertainment and Other
Fixed rent	$	36,137	$	3,626	$	29,542	$	5,964
Variable rent	—		3,079		—		3,035
Total	$	36,137	$	6,705	$	29,542	$	8,999

Future fixed rental income that the Company expects to earn under non-cancelable operating leases, exclusive of amounts under contingent escalated rent clauses, is as follows (in thousands):

Fiscal years:	Operating Leases Fixed Rental Income
2021 (1)	$	1,608
2022	5,293
2023	4,629
2024	4,113
2025	2,876
Thereafter	7,830
Total	$	26,349

________

(1)Represents future fixed rental income from July 1, 2021 to September 30, 2021.

Due to the evolving nature of COVID-19 and the related economic uncertainties, the Company cannot be certain that the contractual future fixed rental income presented above will be realized in its entirety.

The portions of Mohegan Sun, including the Sky Hotel Tower and the Earth Expo & Convention Center, and Mohegan Sun Pocono that are leased to third parties under operating leases are recorded within property and equipment, net as follows (in thousands):

	June 30, 2021		September 30, 2020
Property and equipment, at cost	$	491,527	$	484,143
Less: accumulated depreciation	(216,354)		(198,080)
Property and equipment, net	$	275,173	$	286,063

LEASES

LEASES:

Lessee

The Company leases real estate and equipment under various operating and finance lease agreements. The leases have terms ranging from approximately one month to 50 years and do not contain any material residual value guarantees or restrictive covenants. Rental payments under these lease agreements are fixed and/or variable based on periodic adjustments for inflation, performance, usage or appraised land values. Variable components of lease payments are not included in the calculation of right-of-use assets and liabilities.

The Company’s lease arrangements contain both lease and non-lease components. For instances in which the Company is a lessee, the Company accounts for both lease and non-lease components as a single lease component for substantially all classes of underlying assets (primarily real estate and equipment). Leases with an expected or initial term of 12 months or less are not recorded on the Company’s condensed consolidated balance sheet and the related lease expenses are recognized on a straight-line basis over the expected lease term.

Information related to weighted average lease terms and discount rates is as follows:

	June 30, 2021
Weighted average remaining lease terms (years):
Operating leases	23
Finance leases	19
Weighted average discount rates:
Operating leases	7.68	%
Finance leases	7.76	%

The components of lease expense are as follows (in thousands):

	For the		For the		For the		For the
	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Operating lease expense	$	11,456	$	9,046	$	34,160	$	28,022
Short-term lease expense	9,248		2,747		23,464		20,297
Variable lease expense	4,666		2,354		12,531		9,161
Finance lease expense:
Amortization of right-of-use assets	1,602		593		2,854		1,806
Interest on lease liabilities	2,067		373		2,942		1,161
Less: sublease income (1)	(5,410)		(69)		(13,467)		(16,794)
Total	$	23,629	$	15,044	$	62,484	$	43,653

________

(1)Represents income earned by the Company from the rental of hotel, convention or retail space at the MGE Niagara Resorts and the Earth Hotel Tower at Mohegan Sun, both of which are leased properties.

Supplemental cash flow information related to lease liabilities is as follows (in thousands):

	For the		For the
	Nine Months Ended		Nine Months Ended
	June 30, 2021		June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Payments on operating lease obligations	$	12,072	$	18,820
Payments for interest on finance lease obligations	174		853
Payments on finance lease obligations	808		1,034
Total	$	13,054	$	20,707

Maturities of right-of-use lease obligations are as follows (in thousands):

	Operating Leases		Finance Leases
Fiscal years:
2021 (1)	$	12,614	$	3,719
2022	39,458		8,144
2023	40,437		12,269
2024	40,240		11,839
2025	40,499		11,439
Thereafter	839,308		172,231
Total future lease payments	1,012,556		219,641
Less: amounts representing interest	(543,621)		(105,696)
Plus: residual values	—		327
Present value of future lease payments	468,935		114,272
Less: current portion of lease obligations	(12,312)		(5,283)
Lease obligations, net of current portion	$	456,623	$	108,989

________

(1)Represents payment obligations from July 1, 2021 to September 30, 2021.

Lessor

The Company leases space at its facilities to third parties. Lease terms for these non-cancelable operating leases range from approximately one month to 21 years. Rental income under these lease agreements is fixed and/or variable based on percentage of tenant sales or periodic adjustments for inflation. Rental income is recorded within hotel and retail, entertainment and other revenues. For instances in which the Company is the lessor, and the class of underlying asset represents retail space, the Company accounts for both the lease and non-lease components, such as common area maintenance and tenant services, as a single lease component. In all other instances, non-lease components are accounted for separately in accordance with applicable guidance, most commonly ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”.

Lease income consists of the following (in thousands):

	For the Three Months Ended June 30, 2021				For the Three Months Ended June 30, 2020
	Hotel		Retail, Entertainment and Other		Hotel		Retail, Entertainment and Other
Fixed rent	$	14,635	$	742	$	2,444	$	1,299
Variable rent	—		1,634		—		(96)
Total	$	14,635	$	2,376	$	2,444	$	1,203

	For the Nine Months Ended June 30, 2021				For the Nine Months Ended June 30, 2020
	Hotel		Retail, Entertainment and Other		Hotel		Retail, Entertainment and Other
Fixed rent	$	36,137	$	3,626	$	29,542	$	5,964
Variable rent	—		3,079		—		3,035
Total	$	36,137	$	6,705	$	29,542	$	8,999

Future fixed rental income that the Company expects to earn under non-cancelable operating leases, exclusive of amounts under contingent escalated rent clauses, is as follows (in thousands):

Fiscal years:	Operating Leases Fixed Rental Income
2021 (1)	$	1,608
2022	5,293
2023	4,629
2024	4,113
2025	2,876
Thereafter	7,830
Total	$	26,349

________

(1)Represents future fixed rental income from July 1, 2021 to September 30, 2021.

Due to the evolving nature of COVID-19 and the related economic uncertainties, the Company cannot be certain that the contractual future fixed rental income presented above will be realized in its entirety.

The portions of Mohegan Sun, including the Sky Hotel Tower and the Earth Expo & Convention Center, and Mohegan Sun Pocono that are leased to third parties under operating leases are recorded within property and equipment, net as follows (in thousands):

	June 30, 2021		September 30, 2020
Property and equipment, at cost	$	491,527	$	484,143
Less: accumulated depreciation	(216,354)		(198,080)
Property and equipment, net	$	275,173	$	286,063

LEASES

LEASES:

Lessee

The Company leases real estate and equipment under various operating and finance lease agreements. The leases have terms ranging from approximately one month to 50 years and do not contain any material residual value guarantees or restrictive covenants. Rental payments under these lease agreements are fixed and/or variable based on periodic adjustments for inflation, performance, usage or appraised land values. Variable components of lease payments are not included in the calculation of right-of-use assets and liabilities.

The Company’s lease arrangements contain both lease and non-lease components. For instances in which the Company is a lessee, the Company accounts for both lease and non-lease components as a single lease component for substantially all classes of underlying assets (primarily real estate and equipment). Leases with an expected or initial term of 12 months or less are not recorded on the Company’s condensed consolidated balance sheet and the related lease expenses are recognized on a straight-line basis over the expected lease term.

Information related to weighted average lease terms and discount rates is as follows:

	June 30, 2021
Weighted average remaining lease terms (years):
Operating leases	23
Finance leases	19
Weighted average discount rates:
Operating leases	7.68	%
Finance leases	7.76	%

The components of lease expense are as follows (in thousands):

	For the		For the		For the		For the
	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Operating lease expense	$	11,456	$	9,046	$	34,160	$	28,022
Short-term lease expense	9,248		2,747		23,464		20,297
Variable lease expense	4,666		2,354		12,531		9,161
Finance lease expense:
Amortization of right-of-use assets	1,602		593		2,854		1,806
Interest on lease liabilities	2,067		373		2,942		1,161
Less: sublease income (1)	(5,410)		(69)		(13,467)		(16,794)
Total	$	23,629	$	15,044	$	62,484	$	43,653

________

(1)Represents income earned by the Company from the rental of hotel, convention or retail space at the MGE Niagara Resorts and the Earth Hotel Tower at Mohegan Sun, both of which are leased properties.

Supplemental cash flow information related to lease liabilities is as follows (in thousands):

	For the		For the
	Nine Months Ended		Nine Months Ended
	June 30, 2021		June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Payments on operating lease obligations	$	12,072	$	18,820
Payments for interest on finance lease obligations	174		853
Payments on finance lease obligations	808		1,034
Total	$	13,054	$	20,707

Maturities of right-of-use lease obligations are as follows (in thousands):

	Operating Leases		Finance Leases
Fiscal years:
2021 (1)	$	12,614	$	3,719
2022	39,458		8,144
2023	40,437		12,269
2024	40,240		11,839
2025	40,499		11,439
Thereafter	839,308		172,231
Total future lease payments	1,012,556		219,641
Less: amounts representing interest	(543,621)		(105,696)
Plus: residual values	—		327
Present value of future lease payments	468,935		114,272
Less: current portion of lease obligations	(12,312)		(5,283)
Lease obligations, net of current portion	$	456,623	$	108,989

________

(1)Represents payment obligations from July 1, 2021 to September 30, 2021.

Lessor

The Company leases space at its facilities to third parties. Lease terms for these non-cancelable operating leases range from approximately one month to 21 years. Rental income under these lease agreements is fixed and/or variable based on percentage of tenant sales or periodic adjustments for inflation. Rental income is recorded within hotel and retail, entertainment and other revenues. For instances in which the Company is the lessor, and the class of underlying asset represents retail space, the Company accounts for both the lease and non-lease components, such as common area maintenance and tenant services, as a single lease component. In all other instances, non-lease components are accounted for separately in accordance with applicable guidance, most commonly ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”.

Lease income consists of the following (in thousands):

	For the Three Months Ended June 30, 2021				For the Three Months Ended June 30, 2020
	Hotel		Retail, Entertainment and Other		Hotel		Retail, Entertainment and Other
Fixed rent	$	14,635	$	742	$	2,444	$	1,299
Variable rent	—		1,634		—		(96)
Total	$	14,635	$	2,376	$	2,444	$	1,203

	For the Nine Months Ended June 30, 2021				For the Nine Months Ended June 30, 2020
	Hotel		Retail, Entertainment and Other		Hotel		Retail, Entertainment and Other
Fixed rent	$	36,137	$	3,626	$	29,542	$	5,964
Variable rent	—		3,079		—		3,035
Total	$	36,137	$	6,705	$	29,542	$	8,999

Future fixed rental income that the Company expects to earn under non-cancelable operating leases, exclusive of amounts under contingent escalated rent clauses, is as follows (in thousands):

Fiscal years:	Operating Leases Fixed Rental Income
2021 (1)	$	1,608
2022	5,293
2023	4,629
2024	4,113
2025	2,876
Thereafter	7,830
Total	$	26,349

________

(1)Represents future fixed rental income from July 1, 2021 to September 30, 2021.

Due to the evolving nature of COVID-19 and the related economic uncertainties, the Company cannot be certain that the contractual future fixed rental income presented above will be realized in its entirety.

The portions of Mohegan Sun, including the Sky Hotel Tower and the Earth Expo & Convention Center, and Mohegan Sun Pocono that are leased to third parties under operating leases are recorded within property and equipment, net as follows (in thousands):

	June 30, 2021		September 30, 2020
Property and equipment, at cost	$	491,527	$	484,143
Less: accumulated depreciation	(216,354)		(198,080)
Property and equipment, net	$	275,173	$	286,063