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MGM Growth Properties Reports Third Quarter Financial Results

November 02, 2020

LAS VEGAS, Nov. 2, 2020 /PRNewswire/ -- MGM Growth Properties LLC ("MGP" or the "Company") (NYSE: MGP) today reported financial results for the quarter ended September 30, 2020. Earnings attributable to MGP's Class A shareholders for the quarter was $43.4 million, or $0.34 per diluted share.

Other financial highlights for the third quarter of 2020 included:

  • Rental revenue of $188.3 million;
  • Consolidated net income of $97.4 million, or $0.32 per diluted Operating Partnership unit;
  • Funds From Operations(1) ("FFO") of $166.1 million, or $0.55 per diluted Operating Partnership unit;
  • Adjusted Funds From Operations(2) ("AFFO") of $173.5 million, or $0.57 per diluted Operating Partnership unit;
  • Adjusted EBITDA(3) of $240.6 million;
  • General and administrative expenses of $3.5 million; and
  • Income from unconsolidated affiliate of $25.2 million.

"We are pleased with our industry leading performance during the quarter and are further encouraged now that all the properties in our portfolio have been re-opened to the public," said James Stewart, CEO of MGM Growth Properties. "We continued to collect 100% of our rent through October, demonstrating the strength of our master lease and liquidity position of our tenant despite the ongoing economic challenges caused by COVID-19. We continue to seek opportunities to grow our portfolio and execute on our business strategy to prudently deliver shareholder value."

The following table provides a reconciliation of MGP's net income to FFO, AFFO and Adjusted EBITDA for the three months ended September 30, 2020 (in thousands, except unit and per unit amounts):


Three Months Ended
September 30, 2020

Reconciliation of Non-GAAP Financial Measures


Net income

$

97,408


Depreciation

58,240


Share of depreciation of unconsolidated affiliate

10,464


Property transactions, net


Funds From Operations

166,112


Amortization of financing costs and cash flow hedges

6,003


Share of amortization of financing costs of unconsolidated affiliate

65


Non-cash compensation expense

639


Straight-line rental revenues, excluding lease incentive asset

13,632


Share of straight-line rental revenues of unconsolidated affiliate

(12,866)


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

4,627


Acquisition-related expenses


Non-cash ground lease rent, net

260


Other expenses

36


Gain on unhedged interest rate swaps

(7,701)


Provision for income taxes

2,732


Adjusted Funds From Operations

173,539


Interest income

(533)


Interest expense

59,974


Share of interest expense of unconsolidated affiliate

13,731


Amortization of financing costs and cash flow hedges

(6,003)


Share of amortization of financing costs of unconsolidated affiliate

(65)


Adjusted EBITDA

$

240,643




Weighted average Operating Partnership units outstanding


Basic

303,579,950


Diluted

303,712,557




Net income per Operating Partnership units outstanding


Basic

$

0.32


Diluted

$

0.32




FFO per Operating Partnership unit


Diluted

$

0.55




AFFO per Operating Partnership unit


Diluted

$

0.57


The Company had $655.2 million of cash and cash equivalents as of September 30, 2020. Cash received from rent payments for the three months ended September 30, 2020 was $206.9 million. Cash received from distributions from our unconsolidated affiliate, MGP BREIT Venture, for the three months ended September 30, 2020 was $22.9 million.

On October 15, 2020, the Operating Partnership made a cash distribution of $147.9 million relating to the third quarter dividend, $83.9 million of which was paid to subsidiaries of MGM Resorts and $64.1 million of which was paid to MGP. Simultaneously, MGP paid a cash dividend of $0.4875 per share.

"Our balance sheet remains strong and flexible to capitalize on future accretive opportunities, including the opportunity to redeem an additional $700 million of units from MGM," said Andy Chien, CFO of MGM Growth Properties. "We have no debt maturities until 2023 and our pro rata net leverage of 4.6x remains below our long-term target of 5.0-5.5x."

The Company's debt at September 30, 2020 was as follows (in thousands):


September 30, 2020

Senior secured credit facility:


Senior secured revolving credit facility

$

100,000


5.625% senior notes, due 2024

1,050,000


4.625% senior notes, due 2025

800,000


4.50% senior notes, due 2026

500,000


5.75% senior notes, due 2027

750,000


4.50% senior notes, due 2028

350,000


Total principal amount of long-term debt

3,550,000


Less: Unamortized discount and debt issuance costs

(33,523)


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

$

3,516,477


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 session. The call will be accessible by webcast at 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 3582723. A replay of the call will be available through Monday, November 9, 2020. The replay may be accessed by dialing 1-877-344-7529 or 1-412-317-0088. The replay access code is 10149335. The call will be archived at www.mgmgrowthproperties.com. In addition, MGP will post supplemental slides today on its website at http://www.mgmgrowthproperties.com/events-and-presentations, which includes a reconciliation of MGP's pro rata net leverage.

  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 depreciation, as defined by the National Association of Real Estate Investment Trusts, plus our share of depreciation of our unconsolidated affiliate.
  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 rental revenue (which is defined as the difference between contractual rent and cash rent payments, excluding lease incentive asset amortization); our share of straight-line rental revenues of our unconsolidated affiliate; 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; gain on unhedged interest rate swaps; 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); depreciation; our share of depreciation of our unconsolidated affiliate; amortization of financing costs and cash flow hedges; non-cash compensation expense; straight-line rent; our share of straight-line rental revenues of our unconsolidated affiliate; 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; gain on unhedged interest rate swaps; our share of provision for income taxes of our unconsolidated affiliate; interest income; interest expense (including amortization of financing costs and cash flow hedges); our share of interest expense of our unconsolidated affiliate, 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, together with its joint venture, currently owns a portfolio of properties, consisting of 12 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, 2019, our destination resorts, the Park, Empire Resort Casino, and MGM Northfield Park collectively comprised approximately 27,400 hotel rooms, 1.4 million casino square footage, and 2.7 million convention square footage. 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 the continued impact of the COVID-19 pandemic on its business and the business of its tenant, its ability to continue to grow its dividend, successfully execute on its business strategy and acquire additional properties or redeem Operating Partnership Units 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.

 

MGM GROWTH PROPERTIES LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)



Three Months Ended September 30,


2020


2019

Revenues




Rental revenue

$

188,303



$

219,847


Ground lease and other

6,039



6,164


Total Revenues

194,342



226,011






Expenses




Depreciation

58,240



71,957


Property transactions, net



9,921


Ground lease expense

5,920



5,920


Acquisition-related expenses



92


General and administrative

3,476



4,476


Total Expenses

67,636



92,366






Other income (expense)




Income from unconsolidated affiliate

25,210




Interest income

533



241


Interest expense

(59,974)



(63,048)


Gain on unhedged interest rate swaps, net

7,701




Other

(36)



(306)



(26,566)



(63,113)


Income before income taxes

100,140



70,532


Provision for income taxes

(2,732)



(1,979)


Net income

97,408



68,553


Less: Net income attributable to noncontrolling interest

(54,030)



(46,038)


Net income attributable to Class A shareholders

$

43,378



$

22,515






Weighted average Class A shares outstanding:




Basic

131,567,362



93,165,443


Diluted

131,699,969



93,322,940






Earnings per share attributable to Class A shareholders:




Basic

$

0.34



$

0.24


Diluted

$

0.34



$

0.24


 


MGM GROWTH PROPERTIES LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)


September 30, 2020


December 31, 2019

ASSETS

Real estate investments, net

$

8,369,090



$

10,827,972


Lease incentive asset

512,166



527,181


Investment in unconsolidated affiliate

807,936




Cash and cash equivalents

655,169



202,101


Prepaid expenses and other assets

26,537



31,485


Above market lease, asset

40,260



41,440


Operating lease right-of-use assets

280,430



280,093


Total assets

$

10,691,588



$

11,910,272






LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND SHAREHOLDERS' EQUITY

Liabilities




Debt, net

$

3,516,477



$

4,307,354


Due to MGM Resorts International and affiliates

275



774


Accounts payable, accrued expenses and other liabilities

139,606



37,421


Accrued interest

50,753



42,904


Dividend and distribution payable

147,941



147,349


Deferred revenue

143,505



108,593


Deferred income taxes, net

29,909



29,909


Operating lease liabilities

340,106



337,956


Total liabilities

4,368,572



5,012,260






Redeemable noncontrolling interest

700,000




Shareholders' equity




Class A shares*: no par value, 1,000,000,000 shares authorized, 131,455,410 and
113,806,820 shares issued and outstanding as of September 30, 2020 and December 31,
2019, respectively




Additional paid-in capital

2,970,905



2,766,325


Accumulated deficit

(400,294)



(244,381)


Accumulated other comprehensive loss

(52,583)



(7,045)


Total Class A shareholders' equity

2,518,028



2,514,899


Noncontrolling interest

3,104,988



4,383,113


Total shareholders' equity

5,623,016



6,898,012


Total liabilities, redeemable noncontrolling interest, and shareholders' equity

$

10,691,588



$

11,910,272



(*) Reflects all Class A shares outstanding.

 

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SOURCE MGM Growth Properties LLC

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