Lessee, leasing arrangements, percentage of EBITDAR to rent ratio floor

CAESARS ENTERTAINMENT, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)CEI leases certain real property assets from GLPI under the Master Lease (as amended, the “GLPI Master Lease”). The GLPI Master Lease, encompassing a portfolio of properties within the United States, provides for the lease of land, buildings, structures and other improvements on the land (including barges and riverboats), easements and similar appurtenances to the land and improvements relating to the operation of the leased properties. The GLPI Master Lease, inclusive of all amendments, provides for (i) an initial term of 20 years (through September 2038), with four five-year renewals at the Company’s option, (ii) annual land and building base rent of $24 million and $63 million, (iii) escalating provisions of building base rent equal to 101.25% of the rent for the preceding year for lease years five and six, 101.75% for lease years seven and eight and 102% for each lease year thereafter and (iv) relief from the operating, capital expenditure and financial covenants in the event of involuntary closures. The GLPI Master Lease does not provide the Company with an option to purchase the leased property or the ability to terminate its obligations under the GLPI Master Lease prior to its expiration without GLPI’s consent.The Lumière Lease was entered into by the Company and GLPI, whereby the Company sold the real estate underlying Lumière to GLPI and leased back the property under a long-term financing obligation. The Lumière Lease, inclusive of all amendments, provides for (i) an initial term commencing on September 29, 2020 and ending on October 31, 2033, (ii) four five-year renewal options, (iii) annual rent payments of $23 million, (iv) escalation provisions commencing in lease year two equal to 101.25% of the rent for the preceding year for lease years two through five, 101.75% for lease years six and seven and 102% for each lease year thereafter, (v) maintaining a minimum of 1.20:1 adjusted revenue to rent ratio and (vi) certain relief under the financial covenant in the event of involuntary closures. The Company continues to reflect the real estate assets related to the failed sale-lease back transactions on the Balance Sheets in Property and equipment, net as if the Company was the legal owner, and continues to recognize depreciation expense over their estimated useful lives. The future minimum payments related to the GLPI Leases, including the Lumière Lease, and VICI Leases financing obligation, as amended, at December 31, 2021 were as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
| (In millions) | GLPI Leases |  | VICI Leases |
| 2022 | $ | 110  |  |  | $ | 1,066  |  |
| 2023 | 111  |  |  | 1,087  |  |
| 2024 | 112  |  |  | 1,107  |  |
| 2025 | 113  |  |  | 1,120  |  |
| 2026 | 115  |  |  | 1,136  |  |
| Thereafter | 4,604  |  |  | 42,808  |  |
| Total future payments | 5,165  |  |  | 48,324  |  |
| Less: Amounts representing interest | (4,172) |  |  | (38,079) |  |
| Plus: Residual values | 240  |  |  | 893  |  |
| Financing obligation  | $ | 1,233  |  |  | $ | 11,138  |  |

Cash payments made relating to our long-term financing obligations during the years ended December 31, 2021 and 2020 were as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | GLPI Leases (a) |  | VICI Leases (a) |
|  | December 31, |  | December 31, |
| (In millions) | 2021 |  | 2020 |  | 2021 |  | 2020 |
| Cash paid for principal | $ | —  |  |  | $ | —  |  |  | $ | 1  |  |  | $ | 49  |  |
| Cash paid for interest | 109  |  |  | 93  |  |  | 983  |  |  | 472  |  |

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(a)For the initial periods of the GLPI and VICI Leases, cash payments are less than the interest expense recognized, which causes the failed-sale leaseback obligation to increase during the initial years of the lease term.Lease CovenantsThe GLPI Leases and VICI Leases contain certain covenants requiring minimum capital expenditures based on a percentage of net revenues along with maintaining certain financial ratios. The Company was in compliance with all applicable covenants as of December 31, 2021.[Table of Contents](#i37dfc5eabc12461dbfc5ef573d80947e_7)93
