Lease Assets and Lease Liabilities Lease Assets and Lease Liabilities

12 Months Ended

Dec. 31, 2023

Lease Assets and Lease Liabilities

Lease Assets

The Company is subject to various operating leases as lessee for both real estate and equipment, the majority of which are ground leases related to properties the Company leases to its tenants under triple-net operating leases. These ground leases may include fixed rent, as well as variable rent based upon an individual property’s performance or changes in an index such as the CPI and have maturity dates ranging from 2028 to 2108, when considering all renewal options. For certain of these ground leases, the Company’s tenants are responsible for payment directly to the third-party landlord. Under ASC 842, the Company is required to gross-up its consolidated financial statements for these ground leases as the Company is considered the primary

obligor. In conjunction with the adoption of ASU 2016-02 on January 1, 2019, the Company recorded right-of-use assets and related lease liabilities on its Consolidated Balance Sheet to represent its rights to use the underlying leased assets and its future lease obligations, respectively, including for those ground leases paid directly by our tenants. Because the right-of-use asset relates, in part, to the same leases which resulted in the land right assets the Company recorded on its Consolidated Balance Sheet in conjunction with the Company's assumption of below market leases at the time it acquired the related land and building assets, the Company is required to report the right-of-use assets and land rights in the aggregate on the Consolidated Balance Sheet.

Land rights, net represent the Company's rights to land subject to long-term ground leases. The Company obtained ground lease rights through the acquisition of several of its rental properties and immediately subleased the land to its tenants. These land rights represent the below market value of the related ground leases. The Company assessed the acquired ground leases to determine if the lease terms were favorable or unfavorable, given market conditions at the acquisition date. Because the market rents to be received under the Company's triple-net tenant leases were greater than the rents to be paid under the acquired ground leases, the Company concluded that the ground leases were below market and were therefore required to be recorded as a definite lived asset (land rights) on its books.

Components of the Company's right-of use assets and land rights, net are detailed below (in thousands):


	December 31, 2023		December 31, 2022
Right-of-use assets - operating leases (1)	$	196,254	$	181,243
Land rights, net	639,270		652,824
Right-of-use assets and land rights, net	$	835,524	$	834,067

(1) During the year ended December 31, 2023, the Company acquired certain real estate assets at the Belle at Baton Rouge and the previously recorded right-of-use assets and related accumulated amortization associated with the ground leases at this property totaling $0.4 million were written off.

Land Rights

The land rights are amortized over the individual lease term of the related ground lease, including all renewal options, which ranged from 10 years to 92 years at their respective acquisition dates. Land rights net, consist of the following:


	December 31, 2023		December 31, 2022
	(in thousands)
Land rights (2)	$	727,114	$	727,796
Less accumulated amortization (2)	(87,844)		(74,972)
Land rights, net	$	639,270	$	652,824

(2) During the year ended December 31, 2023, the Company acquired certain real estate assets at the Belle at Baton Rouge and the previously recorded land rights and related accumulated amortization associated with the ground leases at this property totaling $0.7 million were written off.

During the year ended December 31, 2022, the Company recorded $2.7 million of accelerated land right amortization as it donated a portion of the land underlying a ground lease.

As of December 31, 2023, estimated future amortization expense related to the Company’s land rights by fiscal year is as follows (in thousands):


Year ending December 31,
2024	$	13,104
2025	13,104
2026	13,104
2027	13,104
2028	13,104
Thereafter	573,750
Total	$	639,270

Operating Lease Liabilities

At December 31, 2023, maturities of the Company's operating lease liabilities were as follows (in thousands):


Year ending December 31,
2024	$	14,566
2025	14,510
2026	14,512
2027	14,038
2028	13,920
Thereafter	642,022
Total lease payments	$	713,568
Less: interest	(516,715)
Present value of lease liabilities	$	196,853

Lease Expense

Operating lease costs represent the entire amount of expense recognized for operating leases that are recorded on the Consolidated Balance Sheets. Variable lease costs are not included in the measurement of the lease liability and include both lease payments tied to a property's performance and changes in an index such as the CPI that are not determinable at lease commencement, while short-term lease costs are costs for those operating leases with a term of 12 months or less.

The components of lease expense were as follows:


	Year Ended December 31, 2023		Year Ended December 31, 2022
	(in thousands)
Operating lease cost	$	14,805	$	13,477
Variable lease cost	19,757		19,755
Short-term lease cost	—		2
Amortization of land right assets	13,554		15,859
Total lease cost	$	48,116	$	49,093

Amortization expense related to the land right intangibles, as well as variable lease costs and the majority of the Company's operating lease costs are recorded within land rights and ground lease expense in the consolidated statements of income. The Company's short-term lease costs as well as a small portion of operating lease costs are recorded in both gaming, food, beverage and other expense and general and administrative expense in the consolidated statements of income.

Supplemental Disclosures Related to Operating Leases

Supplemental balance sheet information related to the Company's operating leases was as follows:


			December 31, 2023
Weighted average remaining lease term - operating leases			50.71 years
Weighted average discount rate - operating leases			6.57%

Supplemental cash flow information related to the Company's operating leases was as follows:


	Year Ended December 31, 2023		Year Ended December 31, 2022
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (1)	$	1,618	$	1,617

(1) The Company's cash paid for operating leases is significantly less than the lease cost for the same period due to the majority of the Company's ground lease rent being paid directly to the landlords by the Company's tenants. Although GLPI expends no cash related to these leases, they are required to be grossed up in the Company's financial statements under ASC 842.

Financing Lease Liabilities

In connection with the acquisition of the real property assets of Live! Casino & Hotel Maryland, the Company acquired the rights to land subject to a long-term ground lease which expires on June 6, 2111. As the Maryland Live! Lease was accounted for as an Investment in lease, financing receivable, the underlying ground lease was accounted for as a financing lease obligation within Lease liabilities on the Consolidated Balance Sheets. In accordance with ASC 842, the Company records revenue for the ground lease rent paid by its tenant with an offsetting expense in interest expense as the Company has concluded that as the lessee it is the primary obligor under the ground leases. The ground lease contains variable lease payments based on a percentage of gaming revenues generated by the facility and has fixed minimum annual payments. The Company discounted the fixed minimum annual payments at 5.0% to arrive at the initial lease obligation. At December 31, 2023, maturities of this finance lease were as follows (in thousands):


Year ending December 31,
2024	$	2,244
2025	2,267
2026	2,289
2027	2,313
2028	2,335
Thereafter	299,723
Total lease payments	$	311,171
Less: Interest	(256,910)
Present value of finance lease liability	$	54,261