LAS VEGAS, Feb. 20, 2018 /PRNewswire/ — MGM Growth Properties LLC (“MGP” or the “Company”) (NYSE: MGP) today reported financial results for the quarter and year ended December 31, 2017. Net income attributable to MGP Class A shareholders for the quarter was $8.7 million, or $0.12 per dilutive share and the year ended December 31, 2017 was $41.8 million, or $0.67 per dilutive share.

Financial highlights for the fourth quarter of 2017:

  • Rental revenue was $185.6 million;
  • Net income was $31.7 million, or $0.12 per diluted Operating Partnership unit;
  • Funds From Operations(1) (“FFO”) was $116.5 million, or $0.44 per diluted Operating Partnership unit;
  • Adjusted Funds From Operations(2) (“AFFO”) was $139.1 million, or $0.52 per diluted Operating Partnership unit;
  • Adjusted EBITDA(3) was $184.4 million;
  • General and administrative expenses were $4.0 million; and
  • Acquisition-related costs were $16.2 million, related to the acquisition of the long-term leasehold interest and real property improvements associated with MGM National Harbor casino resort, primarily related to real estate transfer tax and title fees.

Financial highlights for the year ended December 31, 2017:

  • Rental revenue was $675.1 million;
  • Net income was $166.0 million for the year, or $0.66 per diluted Operating Partnership unit;
  • FFO was $460.5 million for the year, or $1.84 per diluted Operating Partnership unit;
  • AFFO was $501.3 million for the year, or $2.01 per diluted Operating Partnership unit;
  • Adjusted EBITDA was $669.8 million for the year; and
  • General and administrative expenses were $12.2 million.

On October 5, 2017, MGP completed the purchase of the long-term leasehold interest and real property improvements associated with MGM National Harbor casino resort for consideration consisting of the assumption of $425 million of debt, $462.5 million of cash and the issuance of 9.8 million Operating Partnership units to a subsidiary of MGM Resorts International (“MGM Resorts”). The assumed debt was repaid in connection with the transaction. Following the transaction, MGM Resorts’ indirect ownership percentage in the Operating Partnership is 73.4%.

“2017 was a very successful second year for MGP. We completed the acquisition of the real property of MGM National Harbor which further diversifies our portfolio and is another step in executing on our strategy,” said James Stewart, CEO of MGM Growth Properties. “In the coming year, we will continue to pursue opportunities to selectively add leisure assets that are financially attractive to our portfolio. Sustainably growing our dividend and creating value for our shareholders over the long term remain our top priority.”

MGM National Harbor was added to the existing Master Lease between MGM Resorts and MGP. As a result, the annual rent under the Master Lease increased by $95 million from $661.7 million to $756.7 million, pro rated for the remainder of the 2017 lease year.

The following table provides a reconciliation of MGP’s net income to FFO, AFFO and Adjusted EBITDA for the three months and year ended December 31, 2017:

Three Months Ended
December 31, 2017

Twelve Months Ended

December 31, 2017

(In thousands, except unit and per unit amounts)

Reconciliation of Non-GAAP Financial Measures

Net income

$

31,723

$

165,990

Depreciation

69,882

260,455

Property transactions, net

14,918

34,022

Funds From Operations

116,523

460,467

Amortization and write-off of financing costs and cash flow hedge amortization

3,049

12,511

Non-cash compensation expense

393

1,336

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

1,753

4,063

Acquisition-related expenses

16,245

17,304

Amortization of above market lease, net

171

686

Provision for income taxes

1,003

4,906

Adjusted Funds From Operations

139,137

501,273

Interest income

(868)

(3,907)

Interest expense

49,177

184,175

Amortization of financing costs and cash flow hedges

(3,049)

(11,713)

Adjusted EBITDA

$

184,397

$

669,828

Weighted average Operating Partnership units outstanding

Basic

265,684,823

249,451,258

Diluted

265,833,366

249,634,668

Net income per Operating Partnership units outstanding

Basic

$

0.12

$

0.67

Diluted

$

0.12

$

0.66

FFO per Operating Partnership unit

Diluted

$

0.44

$

1.84

AFFO per Operating Partnership unit

Diluted

$

0.52

$

2.01

Financial Position

The Company had $259.7 million of cash and cash equivalents as of December 31, 2017. Cash received from rent payments under the master lease for the quarter and year ended December 31, 2017 were $188.2 million and $681.5 million, respectively.

On October 13, 2017, MGM Growth Properties Operating Partnership LP (the “Operating Partnership”) made a cash distribution of $101.2 million relating to the third quarter dividend declared with respect to the Operating Partnership units, $73.2 million of which was paid to subsidiaries of MGM Resorts and $28 million was paid to MGP. Simultaneously, MGP paid a cash dividend of $0.3950 per Class A share.

On December 15, 2017, the Company’s Board of Directors declared an increased quarterly dividend of $0.42 per Class A share (based on a $1.68 dividend on an annualized basis) to holders of record on December 29, 2017.  On January 16, 2018 the Operating Partnership made a cash distribution of $111.7 million related to the fourth quarter dividend declared with respect to the Operating Partnership units, $82 million of which was paid to subsidiaries of MGM Resorts and $29.8 million of which was paid to MGP.  Simultaneously, MGP paid a cash dividend of $0.42 per Class A share.

“We are very proud of our accomplishments in the past year highlighted by the closing of the MGM National Harbor transaction on October 5th funded with our new senior notes and first follow-on equity offering. Through the continued focus on our business model and capital markets execution, we generated value for our shareholders with an 8.4% increase in our dividends for the year,” said Andy Chien, CFO of MGM Growth Properties. “With MGP’s increased financial capacity due to its strong balance sheet and more diversified portfolio, we are well positioned to continue to maximize shareholder value.”

The Company’s long-term debt at December 31, 2017 was as follows (in thousands):

December 31, 2017

Senior Secured Credit Facility:

Term Loan A Facility

$

273,750

Term Loan B Facility

1,817,625

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

3,991,375

Less: unamortized debt issuance costs

(56,747)

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

$

3,934,628

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 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 6195826. A replay of the call will be available through Tuesday, February 27, 2018. The replay may be accessed by dialing 1-877-344-7529 or 1-412-317-0088. The replay access code is 10116207. 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 and write-off of financing costs and cash flow hedge amortization, the net amortization of the above market lease, non-cash compensation expense, acquisition related 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 hedge amortization), write-off of financing costs, the net amortization of the above market lease, non-cash compensation expense, acquisition related 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. MGP currently owns a portfolio of properties acquired from MGM Resorts, consisting of ten premier destination resorts in Las Vegas and elsewhere across the United States and one dining and entertainment complex which opened in April 2016. As of December 31, 2017, these properties collectively comprise 27,541 hotel rooms, approximately 2.7 million convention square footage, over 100 retail outlets, over 200 food and beverage outlets and over 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 MGM Resorts or other entertainment providers may develop 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 MGP’s ability to further grow its portfolio and drive shareholder value. These forward-looking statements involve a number of risks and uncertainties. Among 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

COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended
December 31,

Twelve Months Ended
December 31,

2017

2016

2017

2016

Revenues

Rental revenue

$

185,557

$

163,177

$

675,089

$

419,239

Tenant reimbursements and other

28,985

20,969

90,606

48,309

214,542

184,146

765,695

467,548

Expenses

Depreciation

69,882

61,808

260,455

220,667

Property transactions, net

14,918

2,033

34,022

4,684

Reimbursable expenses

28,142

20,889

88,254

68,063

Amortization of above market lease, net

171

172

686

286

Acquisition-related expenses

16,245

79

17,304

10,178

General and administrative

3,966

3,406

12,189

9,896

133,324

88,387

412,910

313,774

Operating income

81,218

95,759

352,785

153,774

Non-operating income (expense)

Interest income

868

774

3,907

774

Interest expense

(49,177)

(43,898)

(184,175)

(116,212)

Other non-operating

(183)

(287)

(1,621)

(726)

(48,492)

(43,411)

(181,889)

(116,164)

Income before income taxes

32,726

52,348

170,896

37,610

Provision for income taxes

(1,003)

(1,349)

(4,906)

(2,264)

Net income

31,723

50,999

165,990

35,346

Less: Net (income) attributable to noncontrolling interest

(23,001)

(38,605)

(124,215)

(5,408)

Net income attributable to Class A shareholders

$

8,722

$

12,394

$

41,775

$

29,938

Weighted average Class A shares outstanding:

Basic

70,975,569

57,504,001

61,733,136

57,502,158

Diluted

71,124,112

57,760,665

61,916,546

57,751,489

Net income per share attributable to Class A shareholders:

Basic

$

0.12

$

0.22

$

0.68

$

0.52

Diluted

$

0.12

$

0.21

$

0.67

$

0.52

 

MGM GROWTH PROPERTIES LLC

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

December 31,
2017

December 31,
2016

ASSETS

Real estate investments, net

$

10,021,938

$

9,079,678

Cash and cash equivalents

259,722

360,492

Tenant and other receivables, net

6,385

9,503

Prepaid expenses and other assets

18,487

10,906

Above market lease, asset

44,588

46,161

Total assets

$

10,351,120

$

9,506,740

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities

Debt, net

$

3,934,628

$

3,621,942

Due to MGM Resorts International and affiliates

962

166

Accounts payable, accrued expenses and other liabilities

10,240

10,478

Above market lease, liability

47,069

47,957

Accrued interest

22,565

26,137

Dividend payable

111,733

94,109

Deferred revenue

127,640

72,322

Deferred income taxes, net

28,544

25,368

Total liabilities

4,283,381

3,898,479

Commitments and contingencies

Shareholders’ equity

Class A shares: no par value, 1,000,000,000 shares authorized, 70,896,795 and 57,500,000 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively

Additional paid-in capital

1,716,490

1,363,130

Accumulated deficit

(94,948)

(29,758)

Accumulated other comprehensive income

3,108

445

Total Class A shareholders’ equity

1,624,650

1,333,817

Noncontrolling interest

4,443,089

4,274,444

Total shareholders’ equity

6,067,739

5,608,261

Total liabilities and shareholders’ equity

$

10,351,120

$

9,506,740

 

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SOURCE MGM Growth Properties LLC