LAS VEGAS, Aug. 7, 2018 /PRNewswire/ -- MGM Growth Properties LLC ("MGP" or the "Company") (NYSE: MGP) today reported financial results for the quarter ended June 30, 2018. Net income attributable to MGP Class A shareholders for the quarter was $13.1 million, or $0.18 per dilutive share.

Financial highlights for the second quarter of 2018:

  • Rental revenue was $186.6 million;
  • Net income was $48.1 million, or $0.18 per diluted Operating Partnership unit;
  • Funds From Operations(1) ("FFO") was $130.0 million, or $0.49 per diluted Operating Partnership unit;
  • Adjusted Funds From Operations(2) ("AFFO") was $145.6 million, or $0.55 per diluted Operating Partnership unit;
  • Adjusted EBITDA(3) was $190.4 million; and
  • General and administrative expenses were $2.8 million.

On May 28, 2018, the Company entered into an agreement to acquire the real property associated with the Empire City Casino's race track and casino ("Empire City") from MGM Resorts International ("MGM Resorts") for total consideration of $625 million, which will include the assumption of approximately $245 million of debt, with the balance through the issuance of operating partnership units to MGM Resorts. Empire City will be added to the existing Master Lease between MGM Resorts and MGP.  As a result, the annual rent payment to MGP will increase by $50 million.  Consistent with the Master Lease terms, 90% of this rent will be fixed and contractually grow at 2% per year until 2022. In addition, pursuant to the Master Lease, MGP will have a right of first offer with respect to certain undeveloped land adjacent to the property to the extent MGM Resorts develops additional gaming facilities and chooses to sell or transfer the property in the future. The transactions are expected to close in the first quarter of 2019, subject to regulatory approvals and other customary closing conditions.

On April 4, 2018, the Company entered into an agreement with Milstein Entertainment LLC to acquire the Hard Rock Rocksino Northfield Park ("Rocksino") for approximately $1.06 billion, which was completed on July 6, 2018. The Company funded the acquisition with cash on hand and borrowings under its senior secured credit facility. Simultaneously with the close, the Company entered into a new agreement with Hard Rock to continue to serve as the manager of the property.

"In the second quarter of this year, MGP celebrated its second year of being a public company. We announced the acquisition of the real estate assets of the Empire City Casino in New York, the signing and subsequent completion of the Hard Rock Rocksino Northfield acquisition and a $0.04 increase to our dividend, which brings MGP's annualized dividend up to $1.72, over 20% higher than our dividend at IPO," said James Stewart, CEO of MGM Growth Properties. "We are excited for the remainder of the year and look forward to continue executing on our business plan, to add high quality properties, such as the Rocksino and Empire City, accretively to our portfolio and sustainably grow our dividend over time."

The following table provides a reconciliation of MGP's net income to FFO, AFFO and Adjusted EBITDA for the three months ended June 30, 2018 (in thousands, except unit and per unit amounts):


Three Months Ended
June 30, 2018

Reconciliation of Non-GAAP Financial Measures


Net income

$

48,059


Depreciation

67,474


Property transactions, net

14,426


Funds From Operations

129,959


Amortization of financing costs and cash flow hedges

3,216


Non-cash compensation expense

556


Net effect of straight-line rent and amortization of deferred revenue

5,103


Acquisition-related expenses

2,131


Amortization of above market lease, net

172


Other non-operating expenses

3,205


Provision for income taxes

1,263


Adjusted Funds From Operations

145,605


Interest income

(1,278)


Interest expense

49,276


Amortization of financing costs and cash flow hedges

(3,216)


Adjusted EBITDA

$

190,387


Weighted average Operating Partnership units outstanding


Basic

266,127,214


Diluted

266,319,119




Net income per Operating Partnership units outstanding


Basic

$

0.18


Diluted

$

0.18




FFO per Operating Partnership unit


Diluted

$

0.49


AFFO per Operating Partnership unit


Diluted

$

0.55


Financial Position

The Company had $289.9 million of cash and cash equivalents as of June 30, 2018. Cash received from rent payments under the master lease for the three months ended June 30, 2018 was $192.6 million, reflecting the increase in annual rent payments due under the master lease to $770.3 million effective as of April 1, 2018.

On June 14, 2018, the Company successfully amended the MGM Growth Properties Operating Partnership LP ("Operating Partnership") credit agreement to provide for a $750 million increase and extension of the revolving facility to $1.35 billion due 2023, extend the maturity date of the existing $270 million term loan A to 2023 and provide for a new $200 million delayed draw term loan A due 2023. Additionally, the revolving and term loan A facilities were repriced to provide pricing step downs based on a leverage grid.

On July 16, 2018, the Operating Partnership made a cash distribution of $114.4 million relating to the second quarter dividend, $83.9 million of which was paid to subsidiaries of MGM Resorts and $30.5 million of which was paid to MGP. Simultaneously, MGP paid a cash dividend of $0.43 per Class A share.

"We are extremely pleased with our accomplishments this quarter on both the acquisition and balance sheet fronts. The capital markets continued to demonstrate their support for MGP and its robust strategy as we successfully completed the increase and extension of the Company's Term Loan A and Revolver. The amendment has provided additional capacity, flexibility and efficiency for recently signed and future acquisitions," said Andy Chien, CFO of MGM Growth Properties. "MGP also received its second escalator in April resulting in an approximately $14 million, or 1.8% increase, in annual rental revenue with a subsequent 2.4% increase to our dividend. This demonstrates the embedded growth in our business model that complements our acquisition strategy to generate value for our shareholders."

The Company's long-term debt at June 30, 2018 was as follows (in thousands):


June 30, 2018

Senior Secured Credit Facility:


Term Loan A Facility

$

270,000


Term Loan B Facility

1,808,375


Revolving Credit Facility


5.625% Senior Notes due 2024

1,050,000


4.50% Senior Notes due 2026

500,000


4.50% Senior Notes due 2028

350,000


Total principal amount of long-term debt

3,978,375


Less: unamortized debt issuance costs

(55,151)


Total long-term debt, net of unamortized debt issuance costs

$

3,923,224


Conference Call Details

MGP will host a conference call at 12:30 p.m. Eastern Time today which will include a brief discussion of these results followed by a question and answer period. The call will be accessible via the Internet through http://www.mgmgrowthproperties.com/events-and-presentations or by calling 1-888-317-6003 for domestic callers and 1-412-317-6061 for international callers. The conference call access code is 9879516. A replay of the call will be available through Tuesday, August 14, 2018. The replay may be accessed by dialing 1-877-344-7529 or 1-412-317-0088. The replay access code is 10121932. The call will be archived at www.mgmgrowthproperties.com.

1

Funds From Operations ("FFO") is net income (computed in accordance with U.S. GAAP), excluding gains and losses from sales or disposals of property (presented as property transactions, net), plus real estate depreciation, as defined by the National Association of Real Estate Investment Trusts ("NAREIT").



2

Adjusted Funds From Operations ("AFFO") is FFO as adjusted for amortization of financing costs and cash flow hedges, amortization of the above market lease, net, non-cash compensation expense, acquisition related expenses, other non-operating expenses, provision for income taxes and the net effect of straight-line rents and amortization of deferred revenue.



3

Adjusted EBITDA is net income (computed in accordance with U.S. GAAP) as adjusted for gains and losses from sales or disposals of property (presented as property transactions, net), real estate depreciation, interest income, interest expense (including amortization of financing costs and cash flow hedges), amortization of the above market lease, net, non-cash compensation expense, acquisition related expenses, other non-operating expenses, provision for income taxes and the net effect of straight-line rents and amortization of deferred revenue.

FFO, FFO per unit, AFFO, AFFO per unit and Adjusted EBITDA are supplemental performance measures that have not been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") that management believes are useful to investors in comparing operating and financial results between periods. Management believes that this is especially true since these measures exclude real estate depreciation and amortization expense and management believes that real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. The Company believes such a presentation also provides investors with a meaningful measure of the Company's operating results in comparison to the operating results of other REITs. Adjusted EBITDA is useful to investors to further supplement AFFO and FFO and to provide investors a performance metric which excludes interest expense. In addition to non-cash items, the Company adjusts AFFO and Adjusted EBITDA for acquisition-related expenses. While we do not label these expenses as non-recurring, infrequent or unusual, management believes that it is helpful to adjust for these expenses when they do occur to allow for comparability of results between periods because each acquisition is (and will be) of varying size and complexity and may involve different types of expenses depending on the type of property being acquired and from whom.

FFO, FFO per unit, AFFO, AFFO per unit and Adjusted EBITDA do not represent cash flow from operations as defined by U.S. GAAP, should not be considered as an alternative to net income as defined by U.S. GAAP and are not indicative of cash available to fund all cash flow needs. Investors are also cautioned that FFO, FFO per unit, AFFO, AFFO per unit and Adjusted EBITDA as presented, may not be comparable to similarly titled measures reported by other REITs due to the fact that not all real estate companies use the same definitions.

Reconciliations of net income to FFO, AFFO and Adjusted EBITDA are included in this release.

About MGM Growth Properties

MGM Growth Properties LLC (NYSE:MGP) is one of the leading publicly traded real estate investment trusts engaged in the acquisition, ownership and leasing of large-scale destination entertainment and leisure resorts, whose diverse amenities include casino gaming, hotel, convention, dining, entertainment and retail offerings. As of June 30, 2018, MGP owns a portfolio of properties acquired from MGM Resorts, consisting of 11 premier destination resorts in Las Vegas and elsewhere across the United States, and the Park, a dining and entertainment complex which opened in April 2016. As of December 31, 2017, these properties collectively comprise over 27,500 hotel rooms, 2.7 million convention square footage, 100 retail outlets, 200 food and beverage outlets and 20 entertainment venues. As a growth-oriented public real estate entity, MGP expects its relationship with MGM Resorts and other entertainment providers to attractively position MGP for the acquisition of additional properties across the entertainment, hospitality and leisure industries that may be developed in the future. For more information about MGP, visit the Company's website at http://www.mgmgrowthproperties.com.

This release includes "forward-looking" statements and "safe harbor statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and/or uncertainties, including those described in MGP's public filings with the Securities and Exchange Commission. MGP has based forward-looking statements on management's current expectations and assumptions and not on historical facts. Examples of these statements include, but are not limited to, MGP's expectations regarding its ability to meet its financial and strategic goals and its ability to further grow its portfolio and dividend and drive shareholder value. These forward-looking statements involve a number of risks and uncertainties and the important factors that could cause actual results to differ materially from those indicated in such forward-looking statements include risks related to MGP's ability to receive, or delays in obtaining, any regulatory approvals required to own its properties, or other delays or impediments to completing MGP's planned acquisitions or projects, including any acquisitions of properties from MGM; the ultimate timing and outcome of any planned acquisitions or projects; MGP's ability to maintain its status as a REIT; the availability of and the ability to identify suitable and attractive acquisition and development opportunities and the ability to acquire and lease those properties on favorable terms; MGP's ability to access capital through debt and equity markets in amounts and at rates and costs acceptable to MGP; changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs or to the gaming or lodging industries; and other factors described in MGP's period reports filed with the Securities and Exchange Commission. In providing forward-looking statements, MGP is not undertaking any duty or obligation to update these statements publicly as a result of new information, future events or otherwise, except as required by law. If MGP updates one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those other forward-looking statements.

MGM GROWTH PROPERTIES LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)



Three Months Ended
June 30,


Six Months Ended
June 30,


2018


2017


2018


2017

Revenues








Rental revenue

$

186,563



$

163,177



$

373,126



$

326,354


Tenant reimbursements and other

33,827



21,279



63,103



42,001



220,390



184,456



436,229



368,355


Expenses








Depreciation

67,474



60,227



136,465



121,911


Property transactions, net

14,426



10,587



18,512



17,442


Reimbursable expenses

32,907



20,642



61,267



41,129


Amortization of above market lease, net

172



172



343



343


Acquisition-related expenses

2,131





2,672




General and administrative

2,755



2,661



6,663



5,341



119,865



94,289



225,922



186,166


Operating income

100,525



90,167



210,307



182,189


Non-operating income (expense)








Interest income

1,278



881



2,310



1,559


Interest expense

(49,276)



(44,818)



(98,506)



(89,454)


Other non-operating expenses

(3,205)



(1,178)



(5,389)



(1,312)



(51,203)



(45,115)



(101,585)



(89,207)


Income before income taxes

49,322



45,052



108,722



92,982


Provision for income taxes

(1,263)



(1,177)



(2,494)



(2,415)


Net income

48,059



43,875



106,228



90,567


Less: Net (income) attributable to noncontrolling interest

(34,913)



(33,195)



(77,252)



(68,539)


Net income attributable to Class A shareholders

$

13,146



$

10,680



$

28,976



$

22,028










Weighted average Class A shares outstanding:








Basic

70,993,091



57,687,558



70,982,243



57,596,223


Diluted

71,184,996



57,854,088



71,158,585



57,818,511










Net income per share attributable to Class A shareholders:








Basic

$

0.19



$

0.19



$

0.41



$

0.38


Diluted

$

0.18



$

0.18



$

0.41



$

0.38


 

MGM GROWTH PROPERTIES LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)



June 30, 2018


December 31, 2017

ASSETS

Real estate investments, net

$

9,880,658



$

10,021,938


Cash and cash equivalents

289,909



259,722


Tenant and other receivables, net

4,197



6,385


Prepaid expenses and other assets

51,500



18,487


Above market lease, asset

43,801



44,588


Total assets

$

10,270,065



$

10,351,120



LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities




Debt, net

$

3,923,224



$

3,934,628


Due to MGM Resorts International and affiliates

147



962


Accounts payable, accrued expenses and other liabilities

9,758



10,240


Above market lease, liability

46,625



47,069


Accrued interest

25,119



22,565


Dividend payable

114,399



111,733


Deferred revenue

147,946



127,640


Deferred income taxes, net

28,544



28,544


Total liabilities

4,295,762



4,283,381


Commitments and contingencies




Shareholders' equity




Class A shares: no par value, 1,000,000,000 shares authorized, 70,911,166 and 70,896,795 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively




Additional paid-in capital

1,717,086



1,716,490


Accumulated deficit

(126,241)



(94,948)


Accumulated other comprehensive income

9,141



3,108


Total Class A shareholders' equity

1,599,986



1,624,650


Noncontrolling interest

4,374,317



4,443,089


Total shareholders' equity

5,974,303



6,067,739


Total liabilities and shareholders' equity

$

10,270,065



$

10,351,120


 

 

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SOURCE MGM Growth Properties LLC


Source: MGM Growth Properties LLC