Quarterly report pursuant to Section 13 or 15(d)

LEASES

v3.22.2
LEASES
6 Months Ended
Jun. 30, 2022
LEASES  
LEASES

4. LEASES

The Company has no leases in which it is the lessor. As lessee, the Company has one finance lease for a hotel and various operating leases for land, casino and office space, equipment, buildings, and signage. The Company’s lease terms, including extensions, range from one month to approximately 36 years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants, but the land lease at Silver Slipper does include contingent rent, as further discussed below.

Operating Leases

Silver Slipper Casino Land Lease through April 2058 and Options to Purchase. In 2004, the Company’s subsidiary, Silver Slipper Casino Venture, LLC, entered into a land lease with Cure Land Company, LLC for approximately 31 acres of marshlands and a seven-acre parcel on which the Silver Slipper Casino and Hotel is situated. The land lease includes fixed, base monthly payments of $77,500 plus contingent rents of 3% of monthly gross gaming revenue (as defined in the lease) in excess of $3.65 million, with no scheduled base rent increases through the remaining lease term ending in 2058.

From April 1, 2022 through October 1, 2027, the Company may buy out the lease for $15.5 million plus a seller-retained interest in Silver Slipper Casino and Hotel’s operations of 3% of net income (as defined) for 10 years following the purchase date.

Bronco Billy’s / Chamonix Lease through January 2035 and Option to Purchase. Bronco Billy’s leases certain parking lots and buildings, including a portion of the hotel and casino, under a long-term lease. The lease term includes six renewal options in three-year increments to 2035. The Company exercised its third renewal option to extend the lease term through January 2026, with current annual lease payments of $0.4 million. The lease contains a $7.6 million purchase option exercisable at any time during the lease term, or as extended, and a right of first refusal on any sale of the property.  

Third Street Corner Building through August 2023 and Option to Purchase. The Company leased a closed casino in Colorado in August 2018 and reopened it in November 2018. The reopened casino did not produce enough incremental revenue to offset the incremental costs, and it was closed in September 2020. The Company has the right to purchase the casino at any time during the extended lease term for $2.8 million.

As part of the Chamonix development project, this building is currently used as office space for construction personnel, obviating the need for construction trailers. The lease had an initial three-year term with annual lease payments of $0.2 million, and was subsequently extended to August 13, 2023, with current annual lease payments of $0.3 million.

Grand Lodge Casino Lease through August 2023. The Company’s subsidiary, Gaming Entertainment (Nevada), LLC, has a lease with Incline Hotel, LLC, the owner of the Hyatt Regency Lake Tahoe Resort (“Hyatt Lake Tahoe”), to operate the Grand Lodge Casino. It is collateralized by the Company’s interests under the lease and property (as defined in the lease) and is subordinate to the liens of the Notes (see Note 6). The lessor currently has an option to purchase the Company’s leasehold interest and related operating assets of the Grand Lodge Casino, subject to assumption of applicable liabilities, and such option has not been exercised by the lessor as of this report date. The option price is an amount equal to the Grand Lodge Casino’s positive working capital, plus Grand Lodge Casino’s earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the twelve-month period preceding the acquisition (or pro-rated if less than twelve months remain on the lease), plus the fair market value of the Grand Lodge Casino’s personal property. The current monthly rent of $166,667 is applicable through the remaining lease term ending in August 2023.

Corporate Office Lease through January 2025. The Company leases 4,479 square feet of office space in Las Vegas, Nevada. Annual rent is approximately $0.2 million and the term of the office lease expires in January 2025.

Finance Lease

Rising Star Casino Hotel Lease through October 2027 and Option to Purchase. The Company’s Indiana subsidiary, Gaming Entertainment (Indiana) LLC, leases a 104-room hotel at Rising Star Casino Resort. At any time during the lease term, the Company has the option to purchase the hotel, and approximately 3.01 acres of land on which it resides, at a price based upon the hotel’s original cost of $7.7 million, reduced by the cumulative principal payments made by the Company during the lease term. At June 30, 2022, such potential purchase price was $3.0 million. Upon expiration of the lease term in October 2027, (i) the landlord has the right to sell the hotel to the Company, and (ii) the Company has the option to purchase the hotel. In either case, the purchase price is $1 plus closing costs.

​

The components of lease expense are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In thousands)

    

​

    

Three Months Ended

    

Six Months Ended

​

​

Classification within

​

June 30, 

​

June 30, 

Lease Costs

​

Statement of Operations

​

2022

 

2021

​

2022

 

2021

Operating leases:

 

  

 

​

  

​

​

  

 

​

  

​

​

  

Fixed/base rent

 

Selling, General and Administrative Expenses

​

$

1,172

​

$

1,086

​

$

2,337

​

$

2,245

Short-term payments

​

Selling, General and Administrative Expenses

​

​

33

​

​

—

​

​

70

​

​

—

Variable payments

 

Selling, General and Administrative Expenses

​

 

352

​

 

418

​

 

738

​

 

820

Finance lease:

 

​

​

 

  

​

 

​

​

 

  

​

 

  

Amortization of leased assets

 

Depreciation and Amortization

​

 

39

​

 

39

​

 

78

​

 

78

Interest on lease liabilities

 

Interest Expense, Net

​

 

35

​

 

41

​

 

72

​

 

84

Total lease costs

​

​

​

$

1,631

​

$

1,584

​

$

3,295

​

$

3,227

​

​

Leases recorded on the balance sheet consist of the following:

​

​

​

​

​

​

​

​

​

​

(In thousands)

​

​

​

​

​

​

​

​

​

​

​

​

June 30, 

​

December 31, 

Leases

    

Balance Sheet Classification

    

2022

​

2021

Assets

 

  

 

​

  

​

​

  

Operating lease assets

   

Operating Lease Right-of-Use Assets, Net

   

$

14,430

​

$

15,814

Finance lease assets

 

Property and Equipment, Net(1)

​

 

4,644

​

 

4,722

Total lease assets

 

  

​

$

19,074

​

$

20,536

​

​

​

​

​

​

​

​

​

Liabilities

 

  

​

 

  

​

 

  

Current

 

  

​

 

  

​

 

  

Operating

 

Current Portion of Operating Lease Obligations

​

$

3,668

​

$

3,542

Finance

 

Current Portion of Finance Lease Obligation

​

 

526

​

 

514

Noncurrent

 

  

​

 

​

​

 

​

Operating

 

Operating Lease Obligations, Net of Current Portion

​

 

11,293

​

 

12,903

Finance

 

Finance Lease Obligation, Net of Current Portion

​

 

2,518

​

 

2,783

Total lease liabilities

 

  

​

$

18,005

​

$

19,742

__________

(1)

Finance lease assets are recorded net of accumulated amortization of $3.1 million and $3.0 million as of June 30, 2022 and December 31, 2021, respectively.

​

Maturities of lease liabilities as of June 30, 2022 are summarized as follows:

​

​

​

​

​

​

​

​

(In thousands)

​

​

​

​

​

​

​

    

Operating

    

Financing

Years Ending December 31, 

​

Leases

​

Lease(1)

2022 (excluding the six months ended June 30, 2022)

​

$

2,450

​

$

272

2023

​

 

3,641

​

 

652

2024

​

 

1,768

​

 

652

2025

​

 

1,538

​

 

652

2026

​

 

965

​

 

652

Thereafter

​

 

29,140

​

 

543

Total future minimum lease payments

​

 

39,502

​

 

3,423

Less: Amount representing interest

​

 

(24,541)

​

 

(379)

Present value of lease liabilities

​

 

14,961

​

 

3,044

Less: Current lease obligations

​

 

(3,668)

​

 

(526)

Long-term lease obligations

​

$

11,293

​

$

2,518

__________

(1)The Company’s only material finance lease is at Rising Star Casino Resort for a 104-room hotel.

​

Other information related to lease term and discount rate is as follows:

​

​

​

​

​

​

​

Lease Term and Discount Rate

​

June 30, 2022

​

December 31, 2021

Weighted-average remaining lease term

 

  

​

​

  

​

Operating leases

 

22.9

years

​

21.5

years

Finance lease

 

5.3

years

​

5.8

years

Weighted-average discount rate

 

  

​

​

  

​

Operating leases

 

9.39

%

​

9.32

%

Finance lease

 

4.50

%

​

4.50

%

​

Supplemental cash flow information related to leases is as follows:

​

​

​

​

​

​

​

​

(In thousands)

    

Six Months Ended

​

​

June 30, 

Cash paid for amounts included in the measurement of lease liabilities:

​

2022

​

2021

Operating cash flows for operating leases

​

$

2,436

​

$

2,439

Operating cash flows for finance lease

​

$

72

​

$

84

Financing cash flows for finance lease

​

$

254

​

$

242