Revenue Recognition

As of December 31, 2016, 18 of the Company’s real estate investment properties were leased to a subsidiary of Penn under the Penn Master Lease and 14 of the Company's real estate investment properties were leased to a subsidiary of Pinnacle under the Pinnacle Master Lease. The obligations under the Penn and Pinnacle Master Leases are guaranteed by Penn and Pinnacle, respectively and by most Penn and Pinnacle subsidiaries that occupy and operate the facilities leased under the Master Leases. A default by Penn or its subsidiaries with regard to any facility will cause a default with regard to the Penn Master Lease and a default by Pinnacle or its subsidiaries with regard to any facility will cause a default with regard to the Pinnacle Master Lease. Additionally, the newly acquired Meadows real estate assets are leased to Pinnacle under a single property triple-net lease separate from the Pinnacle Master Lease. GLPI also leases the Casino Queen property back to its operator on a triple-net basis on terms similar to those in the Master Leases.

The rent structure under the Penn Master Lease includes a fixed component, a portion of which is subject to an annual 2% escalator if certain rent coverage ratio thresholds are met, and a component that is based on the performance of the facilities, which is adjusted, subject to certain floors (i) every five years to an amount equal to 4% of the average net revenues of all facilities under the Penn Master Lease (other than Hollywood Casino Columbus and Hollywood Casino Toledo) during the preceding five years, and (ii) monthly by an amount equal to 20% of the net revenues of Hollywood Casino Columbus and Hollywood Casino Toledo during the preceding month.

Similar to the Penn Master Lease, the Pinnacle Master Lease also includes a fixed component, a portion of which is subject to an annual 2% escalator if certain rent coverage ratio thresholds are met and a component that is based on the performance of the facilities, which is adjusted, subject to certain floors every two years to an amount equal to 4% of the average annual net revenues of all facilities under the Pinnacle Master Lease during the preceding two years.

The Meadows Lease contains a fixed component, subject to annual escalators, and a component that is based on the performance of the facility, which is reset every two years to a fixed amount determined by multiplying (i) 4% by (ii) the average annual net revenues of the facility for the trailing two year period. The Meadows Lease contains an annual escalator provision for up to 5% of the base rent, if certain rent coverage ratio thresholds are met, which remains at 5% until the earlier of ten years or the year in which total rent is $31.0 million, at which point the escalator will be reduced to 2% annually thereafter.

The rent structure under the Casino Queen Lease also includes a fixed component, a portion of which is subject to an annual 2% escalator if certain rent coverage ratio thresholds are met, and a component that is based on the performance of the facility, which is reset every five years to a fixed amount equal to the greater of (i) the annual amount of non-fixed rent applicable for the lease year immediately preceding such rent reset year and (ii) an amount equal to 4% of the average annual net revenues of the facility for the trailing five year period.

In addition to rent, as triple-net lessees, all of the Company's tenants are required to pay the following executory costs: (1) all facility maintenance, (2) all insurance required in connection with the leased properties and the business conducted on the leased properties, (3) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor) and (4) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.

The Company determined, based on facts and circumstances prevailing at the time of each lease's inception, that neither Penn, Casino Queen or Pinnacle could continue as a going concern without the properties that are leased to it under the respective master lease agreements (in the instance of Penn and Pinnacle) and single property lease (in the instance of Casino Queen) with GLPI. At lease inception, all of Casino Queen's revenues and substantially all of Penn and Pinnacle's revenues were generated from operations in connection with the leased properties. There are also various legal restrictions in the jurisdictions in which Penn, Casino Queen and Pinnacle operate that limit the availability and location of gaming facilities, which makes relocation or replacement of the leased gaming facilities restrictive and potentially impracticable or unavailable. Moreover, under the terms of the master leases, Penn and Pinnacle must make renewal elections with respect to all of the leased property together; the tenant is not entitled to selectively renew certain of the leased property while not renewing other property. Accordingly, the Company concluded that failure by Penn, Casino Queen or Pinnacle to renew the lease would impose a significant penalty on such tenant such that renewal of all lease renewal options appears at lease inception to be reasonably assured. Therefore, the Company concluded that the term of the leases with both Penn and Casino Queen is 35 years, equal to the initial 15 year term plus all four of the 5 year renewal options. The lease term of the Pinnacle Master Lease is also 35 years, equal to the initial 10 year term plus all five of the 5-year renewal options.

As described above, subsequent to purchasing the majority of Pinnacle's real estate assets and leasing them back to Pinnacle, GLPI entered into a separate triple-net lease with Pinnacle to lease the newly acquired Meadows real estate assets to Pinnacle. Because this lease involves only a single property within Pinnacle's portfolio, GLPI concluded it was not reasonably assured at lease inception that Pinnacle would elect to exercise all lease renewal options. The Company concluded that failure by Pinnacle to renew the Meadows Lease would not impose a significant penalty on such tenant as this property's operations represent only an incremental portion of Pinnacle's total business at lease inception. Therefore, the Company concluded that the lease term of the Meadows Lease is 10 years, equal to the initial 10 year term only.

As of December 31, 2016, the future minimum rental income from the Company's properties under non-cancelable operating leases, including any reasonably assured rental periods, was as follows (in thousands):



Year ending December 31,	Future Rental Payments Receivable		Straight-Line Rent Adjustments			Future Income to be Recognized Related to Operating Leases
2017	$	683,200	$	(64,981	)	$	618,219
2018	671,380		(50,641		)	620,739
2019	622,203		11,141			633,344
2020	622,203		11,141			633,344
2021	622,203		11,141			633,344
Thereafter	17,003,035		248,251			17,251,286
Total	$	20,224,224	$	166,052		$	20,390,276

For the years ended December 31, 2016, 2015 and 2014, GLPI recognized $43.8 million, $43.5 million and $40.5 million, respectively, in contingent rental income from Hollywood Casino Columbus and Hollywood Casino Toledo related to clause (ii) in the paragraph above. The expected future minimum rental income from these properties, as well as the portion of the expected future rent based on the performance of the Company's leased facilities that will reset after a certain passage of time as detailed above are excluded from the table above as they are considered contingent rental income under ASC 840 "Leases." Furthermore, during the years ended December 31, 2016, 2015 and 2014 the Company recognized $9.1 million, $4.0 million and $0.5 million, respectively of rental income related to the annual rent escalators described above. Any anticipated future rent escalations are also excluded from the table above.

As of December 31, 2016, the expected future cash receipts to be recognized as income, as well as the cash receipts to be applied against the investment in direct financing lease from the Company's properties under the non-cancelable direct financing lease, inclusive of the fixed portion of ground lease rent and including any reasonably assured rental periods, is as follows (in thousands):



Year ending December 31,	Cash Receipts to be Recorded as Income		Cash Receipts to be Applied Against the Investment in Direct Financing Lease
2017	$	68,672	$	73,073
2018	66,509		45,244
2019	64,722		32,881
2020	63,057		34,546
2021	61,391		36,212
Thereafter	1,059,880		1,798,944
Total	$	1,384,231	$	2,020,900

The portion of the ground lease rent that is fixed and determinable is included in the schedule above as future income, while the portion of the ground lease rent that is variable, as well as, the property taxes the Company's records as revenue are excluded from future minimum revenue as the amounts are not fixed and determinable at December 31, 2016. Furthermore, any contingent rent the Company expects to receive from tenants is excluded from the above schedules as it is not fixed and determinable at December 31, 2016.

The following table discloses the components of gaming revenue within the consolidated statements of income for the years ended December 31, 2016, 2015 and 2014:



	Year Ended December 31,
	2016		2015		2014
	(in thousands)
Video lottery	$	119,390	$	122,292	$	127,572
Table game	18,069		18,799		19,120
Poker	1,135		1,219		1,591
Total gaming revenue, net of cash incentives	$	138,594	$	142,310	$	148,283

The retail value of food and beverage and other services furnished to guests without charge is included in gross revenues and then deducted as promotional allowances. The amounts included in promotional allowances for the years ended December 31, 2016, 2015 and 2014 are as follows:



	Year Ended December 31,
	2016		2015		2014
	(in thousands)
Food and beverage	$	5,482	$	5,512	$	5,732
Other	128		83		41
Total promotional allowances	$	5,610	$	5,595	$	5,773

The estimated cost of providing such complimentary services, which is primarily included in food, beverage, and other expense, for the years ended December 31, 2016, 2015 and 2014 are as follows:



	Year Ended December 31,
	2016		2015		2014
	(in thousands)
Food and beverage	$	2,305	$	2,343	$	2,766
Other	61		38		15
Total cost of complimentary services	$	2,366	$	2,381	$	2,781