MGM Growth Properties Reports First Quarter Financial Results - WIRE.RealEstate

MGM Growth Properties Reports First Quarter Financial Results

May 4, 2021 2:48 PM ET


MGM Growth Properties LLC reported financial results for the quarter ended March 31, 2021. Net income attributable to MGP Class A shareholders for the quarter was $59.6 million, or $0.44 per dilutive share.

Financial highlights for the first quarter of 2021:

  • Consolidated rental revenue of $188.3 million;
  • Consolidated net income of $115.4 million, or $0.42 per diluted Operating Partnership unit;
  • Consolidated Funds From Operations(1) (“FFO”) of $184.7 million, or $0.67 per diluted Operating Partnership unit;
  • Consolidated Adjusted Funds From Operations(2) (“AFFO”) of $166.9 million, or $0.60 per diluted Operating Partnership unit;
  • Consolidated Adjusted EBITDA(3) (“Adjusted EBITDA”) of $240.9 million;
  • General and administrative expenses of $3.7 million; and
  • Income from unconsolidated affiliate of $25.5 million.

In March 2021, certain subsidiaries of MGM delivered a notice of redemption covering an aggregate of 37.1 million Operating Partnership units that they held that was satisfied with aggregate cash consideration of approximately $1.2 billion using cash on hand together with the proceeds from the registered public offering of 21.9 million Class A shares. As of March 31, 2021, there were approximately 264.7 million Operating Partnership units outstanding in the Operating Partnership of which MGM owned approximately 111.4 million, or 42.1%, while MGP owns the remaining 57.9%.

“MGP just celebrated its fifth anniversary as a public company and 2021 is off to another successful start. We completed the redemption of 37.1 million Operating Partnership units from MGM Resorts, reducing MGM’s ownership to 42.1%, and raised our annualized dividend for the 12th time to $1.98 per share,” said James Stewart, CEO of MGM Growth Properties. “Further, the first rent escalator under the MGP BREIT Venture lease of 2% went into effect on March 1, 2021 and the fifth base rent escalator under the MGM-MGP Master Lease of 2% went into effect on April 1, 2021, resulting in current annual pro rata rent of $992 million. We believe these steps further strengthen our ability to execute on our long-term strategy.”

The following table provides a reconciliation of MGP’s consolidated net income to FFO, AFFO and Adjusted EBITDA for the three months ended March 31, 2021:

 

Three Months Ended March 31,

 

2021

 

Consolidated

 

(In thousands, except per unit amounts)

Reconciliation of Non-GAAP Financial Measures

 

Net income (loss)

$

115,409

 

Depreciation1

57,937

 

Share of depreciation of unconsolidated affiliate

10,477

 

Property transactions, net

843

 

Funds From Operations

184,666

 

Amortization of financing costs and cash flow hedges

7,481

 

Share of amortization of financing costs of unconsolidated affiliate

63

 

Non-cash compensation expense

852

 

Straight-line rental revenues, excluding lease incentive asset

13,633

 

Share of straight-line rental revenues of unconsolidated affiliate

(12,623)

 

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

4,627

 

Acquisition-related expenses

 

Non-cash ground lease rent, net

259

 

Other expenses

197

 

(Gain) loss on unhedged interest rate swaps, net

(35,059)

 

Provision for income taxes

2,792

 

Share of provision for income taxes of unconsolidated affiliate

 

Adjusted Funds From Operations

166,888

 

Interest income

(317)

 

Interest expense

68,446

 

Share of interest expense of unconsolidated affiliate

13,432

 

Amortization of financing costs and cash flow hedges

(7,481)

 

Share of amortization of financing costs of unconsolidated affiliate

(63)

 

Adjusted EBITDA

$

240,905

 

Weighted average Operating Partnership units outstanding

 

Basic

276,692

 

Diluted

276,919

 
   

Net income (loss) per Operating Partnership units outstanding

 

Basic

$

0.42

 

Diluted

$

0.42

 
   

FFO per Operating Partnership unit

 

Diluted

$

0.67

 

AFFO per Operating Partnership unit

 

Diluted

$

0.60

 

(1)  Includes depreciation on Mandalay Bay real estate assets for the period of January 1, 2020 through February 14, 2020.

Financial Position

The Company had $143.2 million of cash and cash equivalents as of March 31, 2021. Cash received from rent payments under the Master Lease for the quarter ended March 31, 2021 was $206.9 million. Cash received from distributions from the unconsolidated affiliate, MGP BREIT Venture, for the quarter ended March 31, 2021 was $15.2 million. The distributions reflect those received in January and February 2021. In April 2021, a distribution of $16.0 million was received from MGP BREIT Venture representing the distributions for March and April 2021, which was paid upon the Operating Partnership and an entity affiliated with BREIT’s delivery to the lenders of an excess cash flow guarantee in accordance with the terms of the MGP BREIT Venture’s loan agreement.

On April 15, 2021, the Operating Partnership made a cash distribution of $131.0 million relating to the first quarter, $55.1 million of which was paid to MGM and $75.9 million of which was paid to MGP. Simultaneously, MGP paid a cash dividend of $0.4950 per share.

“During the first quarter, we successfully completed the issuance of 21.9 million Class A shares in a registered public offering for net proceeds of approximately $676 million. The issuance, together with cash on hand, permanently financed the redemption of 37.1 million Operating Partnership units from MGM Resorts,” said Andy Chien, CFO of MGM Growth Properties. “While our current pro rata net leverage is slightly above our long-term range of 5.0-5.5x, we expect to return to our targeted leverage levels in the near term.”

The Company’s debt at March 31, 2021 was as follows (in thousands):

 

March 31, 2021

Senior secured credit facility:

 

Senior secured revolving credit facility

$

500

 

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

 

3.875% senior notes, due 2029

750,000

 

Total principal amount of debt

4,200,500

 

Less: Unamortized discount and debt issuance costs

(39,061)

 

Total debt, net of unamortized debt issuance costs

$

4,161,439

 

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 2929980. A replay of the call will be available through Friday, May 7, 2021. The replay may be accessed by dialing 1-877-344-7529 or 1-412-317-0088. The replay access code is 10154829. 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. Consolidated Funds From Operations (“FFO”) is consolidated 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 the Company’s share of depreciation of its unconsolidated affiliate.

  2. Consolidated Adjusted Funds From Operations (“AFFO”) is FFO as adjusted for amortization of financing costs and cash flow hedges; the Company’s share of amortization of financing costs of its unconsolidated affiliate; 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); the Company’s share of straight-line rental revenues of its 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) loss on unhedged interest rate swaps, net; our share of provision for income taxes of unconsolidated affiliate; and provision for income taxes.

  3. Consolidated Adjusted EBITDA (“Adjusted EBITDA”) is consolidated 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; the Company’s share of depreciation of its unconsolidated affiliate; amortization of financing costs and cash flow hedges; the Company’s share of amortization of financing costs of its unconsolidated affiliate; non-cash compensation expense; straight-line rental revenue; the Company’s share of straight-line rental revenues of its 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) loss on unhedged interest rate swaps, net; our share of provision for income taxes of unconsolidated affiliate; interest income; interest expense (including amortization of financing costs and cash flow hedges); the Company’s share of interest expense (including amortization of financing costs) of its 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.

See Campaign: http://www.mgmgrowthproperties.com
Contact Information:
http://www.mgmgrowthproperties.com

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