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MGM Growth Properties Reports Third Quarter Financial Results

November 05, 2019

LAS VEGAS, Nov. 5, 2019 /PRNewswire/ -- MGM Growth Properties LLC ("MGP" or the "Company") (NYSE: MGP) today reported financial results for the quarter ended September 30, 2019. Net income attributable to MGP's Class A shareholders for the quarter was $22.5 million, or $0.24 per diluted share.

Other financial highlights for the third quarter of 2019 included:

  • Rental revenue of $219.8 million;
  • Consolidated net income of $68.6 million, or $0.23 per diluted Operating Partnership unit;
  • Funds From Operations(1) ("FFO") of $150.4 million, or $0.51 per diluted Operating Partnership unit;
  • Adjusted Funds From Operations(2) ("AFFO") of $173.1 million, or $0.59 per diluted Operating Partnership unit;
  • Adjusted EBITDA(3) of $232.6 million; and
  • General and administrative expenses were $4.5 million.

"We are pleased to present our third quarter 2019 results. MGP increased its dividend for the 9th time since the IPO to an annualized dividend of $1.88 per share, representing a 5.0% year to date increase and an increase of 31.5% since the IPO," said James Stewart, CEO of MGM Growth Properties. "We are excited about the growth opportunities available to us in the market right now and continue to evaluate numerous prospects in the gaming and leisure spaces using a disciplined approach focused on sustainable, long-term value creation."

The following table provides a reconciliation of MGP's net income to FFO, AFFO and Adjusted EBITDA for the three months ended September 30, 2019 (in thousands, except unit and per unit amounts):


Three Months Ended
September 30, 2019

Reconciliation of Non-GAAP Financial Measures


Net income

$

68,553


Real estate depreciation

71,957


Property transactions, net

9,921


Funds From Operations

150,431


Amortization of financing costs and cash flow hedges

3,369


Non-cash compensation expense

519


Straight-line rental revenues, excluding lease incentive asset

11,664


Amortization of lease incentive asset and deferred revenue on non-normal tenant improvements

4,501


Acquisition-related expenses

92


Non-cash ground lease rent, net

259


Other expenses

306


Provision for income taxes

1,979


Adjusted Funds From Operations

173,120


Interest income

(241)


Interest expense

63,048


Amortization of financing costs and cash flow hedges

(3,369)


Adjusted EBITDA

$

232,558




Weighted average Operating Partnership units outstanding


Basic

292,867,986


Diluted

293,025,483




Net income per Operating Partnership unit outstanding


Basic

$

0.23


Diluted

$

0.23




FFO per Operating Partnership unit


Diluted

$

0.51




AFFO per Operating Partnership unit


Diluted

$

0.59


The Company had $153.5 million of cash and cash equivalents as of September 30, 2019. Cash received from rent payments under the Master Lease for the three months ended September 30, 2019 was $236.5 million.

On October 15, 2019, the Operating Partnership made a cash distribution of $138.7 million relating to the third quarter dividend, $93.9 million of which was paid to subsidiaries of MGM Resorts and $44.9 million of which was paid to MGP. Simultaneously, MGP paid a cash dividend of $0.47 per Class A share to MGP Class A shareholders.

During the quarter, the Operating Partnership entered into an interest rate swap agreement with a notional amount of $300 million and also modified and extended certain of its existing interest rate swaps with a combined notional amount of $400 million. As of September 30, 2019, the Operating Partnership pays a weighted average fixed rate of 1.707% on $1.5 billion total notional amount of effective interest rate swap agreements.

"Our net leverage provides for ample flexibility and significant liquidity to fund future transactions accretively," said Andy Chien, CFO of MGM Growth Properties. "We have utilized interest rate swaps to fix interest expense and now 93% of our debt is fixed rate. This is another example of executing on our long-term business strategy of delivering long-term growth for our shareholders by creating a stable and predictable stream of cash flows and opportunistically tapping the capital markets to hedge interest rate risk."

The Company's long-term debt at September 30, 2019 was as follows (in thousands):


September 30, 2019

Senior secured credit facility:


Senior secured term loan A facility

$

467,063


Senior secured term loan B facility

1,785,250


Senior secured revolving credit facility


$1,050 million 5.625% senior notes, due 2024

1,050,000


$500 million 4.50% senior notes, due 2026

500,000


$750 million 5.75% senior notes, due 2027

750,000


$350 million 4.50% senior notes, due 2028

350,000


Total principal amount of long-term debt

4,902,313


Less: Unamortized discount and debt issuance costs

(54,905)


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

$

4,847,408


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 0065419. A replay of the call will be available through Tuesday, November 12, 2019. The replay may be accessed by dialing 1-877-344-7529 or 1-412-317-0088. The replay access code is 10135302. 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.

  2. Adjusted Funds From Operations ("AFFO") is FFO as adjusted for amortization of financing costs and cash flow hedges; non-cash compensation expense; straight-line rent (which is defined as the difference between contractual rent and cash rent payments, excluding lease incentive asset amortization); amortization of  lease incentive asset and deferred revenue relating to non-normal tenant improvements; acquisition-related expenses; non-cash ground lease rent, net; other expenses and provision for income taxes.

  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; amortization of financing costs and cash flow hedges; non-cash compensation expense; straight-line rent; amortization of lease incentive asset and deferred revenue relating to non-normal tenant improvements; acquisition-related expenses; non-cash ground lease rent, net; other expenses; interest income; interest expense (including amortization of financing costs and cash flow hedges), and provision for income taxes.

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. MGP currently owns a portfolio of properties, consisting of 11 premier destination resorts in Las Vegas and elsewhere across the United States, MGM Northfield Park in Northfield, OH, Empire Resort Casino in Yonkers, NY, as well as a retail and entertainment district, The Park in Las Vegas. As of December 31, 2018, our destination resorts, the Park, and MGM Northfield Park collectively comprised approximately 27,400 hotel rooms, 2.7 million convention square footage, 150 retail outlets, 300 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. 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 continue to grow its dividend, successfully execute on its business strategy and acquire additional properties in accretive transactions. 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.

MGP CONTACTS:



Investment Community


News Media

ANDY CHIEN


(702) 669-1480 or media@mgpreit.com

Chief Financial Officer



MGM Growth Properties



(702) 669-1470



 

MGM GROWTH PROPERTIES LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)



Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018

Revenues








Rental revenue

$

219,847



$

186,564



$

636,575



$

559,690


Tenant reimbursements and other

6,164



30,095



18,618



93,198


Total revenues

226,011



216,659



655,193



652,888










Expenses








Depreciation

71,957



63,468



223,062



199,933


Property transactions, net

9,921



339



11,344



18,851


Ground lease and other reimbursable expenses

5,920



29,168



17,760



90,435


Amortization of above market lease, net



171





514


Acquisition-related expenses

92



1,931



8,891



4,603


General and administrative

4,476



3,358



12,305



10,021


Total expenses

92,366



98,435



273,362



324,357










Other income (expense)








Interest income

241



163



2,189



2,473


Interest expense

(63,048)



(58,743)



(190,973)



(157,249)


Other

(306)



(1,020)



(806)



(6,409)



(63,113)



(59,600)



(189,590)



(161,185)


Income from continuing operations before income taxes

70,532



58,624



192,241



167,346


Provision for income taxes

(1,979)



(2,650)



(5,771)



(5,144)


Income from continuing operations, net of tax

68,553



55,974



186,470



162,202


Income from discontinued operations, net of tax



13,949



16,216



13,949


Net income

68,553



69,923



202,686



176,151


Less: Net income attributable to noncontrolling interest

(46,038)



(50,439)



(138,358)



(127,691)


Net income attributable to Class A shareholders

$

22,515



$

19,484



$

64,328



$

48,460










Weighted average Class A shares outstanding:








Basic

93,165,443



71,005,052



89,440,552



70,991,129


Diluted

93,322,940



71,201,791



89,645,109



71,174,270










Net income per share attributable to Class A shareholders (basic):








Income from continuing operations

$

0.24



$

0.22



$

0.67



$

0.63


Income from discontinued operations



0.05



0.05



0.05


Net income per Class A share

$

0.24



$

0.27



$

0.72



$

0.68










Net income per share attributable to Class A shareholders (diluted):








Income from continuing operations

$

0.24



$

0.22



$

0.67



$

0.63


Income from discontinued operations



0.05



0.05



0.05


Net income per Class A share

$

0.24



$

0.27



$

0.72



$

0.68


 

MGM GROWTH PROPERTIES LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)



September 30, 2019


December 31, 2018

ASSETS

Real estate investments, net

$

10,894,121



$

10,506,129


Lease incentive asset

532,186




Cash and cash equivalents

153,526



3,995


Tenant and other receivables, net

463



7,668


Prepaid expenses and other assets

27,413



34,813


Above market lease, asset

41,834



43,014


Operating lease right-of-use assets

280,020




Assets held for sale



355,688


Total assets

$

11,929,563



$

10,951,307


LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities




Debt, net

$

4,847,408



$

4,666,949


Due to MGM Resorts International and affiliates

298



227


Accounts payable, accrued expenses and other liabilities

59,937



20,796


Above market lease, liability



46,181


Accrued interest

37,407



26,096


Dividend and distribution payable

138,730



119,055


Deferred revenue

95,306



163,926


Deferred income taxes, net

29,721



33,634


Operating lease liabilities

336,452




Liabilities related to assets held for sale



28,937


Total liabilities

5,545,259



5,105,801


Commitments and contingencies




Shareholders' equity




Class A shares: no par value, 1,000,000,000 shares authorized, 95,468,067 and 70,911,166 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively




Additional paid-in capital

2,307,463



1,712,671


Accumulated deficit

(216,824)



(150,908)


Accumulated other comprehensive income

(16,129)



4,208


Total Class A shareholders' equity

2,074,510



1,565,971


Noncontrolling interest

4,309,794



4,279,535


Total shareholders' equity

6,384,304



5,845,506


Total liabilities and shareholders' equity

$

11,929,563



$

10,951,307


 

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SOURCE MGM Growth Properties LLC

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