Master Lease Financing Obligation

12 Months Ended

Dec. 31, 2017

10.Master Lease Financing Obligation

The Company’s lease obligation with GLPI that is described in Note 3 to the consolidated financial statements is accounted for as a financing obligation. The obligation was calculated at the inception of the transaction based on the future minimum lease payments discounted at the Company’s estimated incremental borrowing rate at lease inception over the lease term, including renewal options, that were reasonably assured of being exercised and the funded construction of certain leased real estate assets in development at the date of the Spin-Off. As of May 1, 2017, in connection with the acquisition of 1st Jackpot and Resorts, the Company’s Master Lease Financing obligation was increased by $82.6 million which was the purchase price paid by GLPI for the casinos underlying real estate assets. Total payments to GLPI under the Master Lease were $455.4 million, $442.3 million and $437.0 million for the years ended December 31, 2017, 2016 and 2015, respectively, of which $397.6 million, $391.7 million and $390.1 million respectively, were recognized as interest expense. The interest expense recognized for the years ended December 31, 2017, 2016 and 2015 includes $46.8 million, $43.8 million and $43.5 million, respectively from contingent payments associated with the monthly variable components for Hollywood Casino Columbus and Hollywood Casino Toledo.

The future minimum payments related to the Master Lease financing obligation with GLPI, at December 31, 2017 are as follows (in thousands):


2018	$	387,456
2019		332,259
2020		332,259
2021		332,259
2022		332,259
Thereafter		8,583,363
Total minimum payments		10,299,855
Less amounts representing interest		(7,148,946)
Plus residual values		387,912
Present value of future minimum payments		3,538,821
Less current portion of financing obligation		(56,248)
Long-term portion of financing obligation	$	3,482,573