Q3 2019 Earnings Call
Good morning, and welcome to the MGM growth properties third quarter 2019 earnings conference call.
Joining the call from the company today, our James Stewart, Chief Executive Officer.
Andy Chen Chief Financial Officer.
Participants are in listen only mode. After the company's remarks, there will be a question and answer session. If you require operator assistance. Please press Star then zero. Please note. This event is being recorded I would now what to turn the call over to Mr. Andy trend.
Thank you operator, good morning, welcome to the MGM growth properties third quarter 2019 earnings call, it's called being broadcast live on the Internet at MGM growth properties Dot Com and we have Chris our press release on form 8-K to the FCC. This morning.
On this call will make forward looking statements under the safe Harbor provisions of the federal Securities laws.
Actual results may differ materially from those projected in the forward looking statements.
Additional information concerning factors that could cause actual results materially differ from these forward looking statements contained in todays press release and in our periodic filings with the FCC.
During the call. We'll also discuss non-GAAP financial measure and talking about our performance you can find a reconciliation to GAAP financial measures in the press release, which is also available on our website.
The only please note this presentation at the recorded I'll now turn over to James.
Thank you Andy I'd like to welcome everyone to M.D. piece third quarter 2019 conference call.
First we're happy to report that the third quarter reflected yet another opportunity for us to executing our strategy of sustainably growing our dividend to create long term value for our shareholders.
This quarter, we increased our dividend for the night time, representing a 32% increase since your IPO. We're proud to report that current total shareholder return since our IPO in April of 16 is 87%, which continues to exceed the returned one would have earned in the NASDA Q1 00, Yes, NP 500 worthy.
See over the same period.
Second I'd like to comment on what we're seeing in the M&A markets.
I believe there continues to be a significant amount of potential real estate transaction volume residing in the gaming industry and the broader leisure entertainment and hospitality sectors. During the quarter. We've continued to actively explore transaction opportunities.
I've had a number of conversations with potential sellers and third party operators.
Remain committed to our growth strategy in a disciplined allocation of resources and capital.
Our priority remains identifying and executing on accretive transactions that will enhance our ability to return value to our shareholders and increase our CFO and dividend over the long term.
I'd now like to discuss the recently announced sale and leaseback of the real property of Blodgett with Blackstone. This transaction was announced at the lowest cap rate ever paid for an integrated gaming resort a 5.78%.
Since we went public three and a half years ago. Our belief has been that are 13, well diversified integrated resorts and market, leading regional assets would benefit from cap rate compression and draw interest from institutional real estate capital sources for this type of asset I'm convinced that the pricing premium achieved in the blog you a transaction what caused the value of our real estate to increase.
As investors realize the fundamental growth value and stability the cash flows generated by our portfolio.
The gaming resorts sector is still in the early stages of becoming a true institutional class of real estate and this transaction is another step in that progression.
The deal also highlights the robust market for high quality Las Vegas strip assets validates the value of our unique high quality portfolio and further endorses our acquisition strategy of focusing on premier market, leading assets for example, MGM National Harbor, the top burning asset in the entire mid Atlantic and.
It's in the midst of Washington, D.C.. The Borgata is the leading asset in Atlantic City MGM Northfield Park is Ohio's highest.
Property by gaming revenue and MGM Grand Detroit continues to be number one in Detroit in terms of gross gaming revenue. These are just a few examples within our regional portfolio well here in Las Vegas, We believe we have the best looking at best performing assets for each class of customer that they target.
I believe the low cap rate paid for Blasio will ultimately be reached answer passed by the value of our portfolio. We also have the added benefit of cross collateralization apparent guarantee industry, leading that rent coverage and attractive annual escalators across our entire portfolio.
Blackstone is obviously, a very knowledgeable investor and global real estate and through this deal meaningfully increases its existing Las Vegas strip exposure, representing multiple billions of dollars of capital now put to work and gaming through their ownership of the Cosmopolitans and now the belongs your real estate both properties with an easy walk from many of.
M. GPS iconic Las Vegas strip asset.
This transaction also highlights the strength of MGM resorts is a superior tenants with its substantial cash flow generating power.
Mgms recently announced domestic net financial leverage target of approximately one times by the end of 2020 underscores its commitment to building a fortress balance sheet, which only strengthens the value of our rent stream and our master lease guarantee I will now turn it over to Andy to discuss our financial results. Thanks James.
I'll provide some highlights for a few items, our third quarter financial results.
We recognize 219.8 million a rental revenue on a GAAP basis or 236.5 million on a cash basis.
Net income was 68.6 million is it felt was 173.19 or 59 cents.
Our diluted operating partner should be in.
Adjusted EBITDA was 232.6 million do you need expenses for the quarter 4.5 million.
Also in the third quarter, our dividend increased to 47 cents per share, which represents $1.88 on an annualized basis and it's nice dividend increase since our IPO.
During the quarter, we continue to take advantage of the favorable interest rate environment.
We entered into and or modified and extended totaled $700 million an interest rate swaps as a result, we've lowered our weighted average fixed interest rate as of September thirtyth, two approximately 1.7% and went to be swaps, 93% of our debt is currently fixed.
Our net leverage for the quarters 5.1 times, resulting a decrease in pricing for a term loan a revolver and unused fee.
He's balance sheet actions provide a significant savings and increased cash flows that can be used to return value to shareholders as well meaningfully meaningful capacity compete complete future transactions are critically.
With that let's turn it back over the James.
Thank you Andy operator, we'd like to now open it up for questions.
We will now begin the question and answer session to ask your question you May Press Star then one on your Touchtone phone.
If you were using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then to.
At this time, we will pause momentarily to assemble our roster.
First question comes from Joe Greff of JP Morgan. Please go ahead.
Hey, Good afternoon My center on for Joe Thanks for taking my question.
Well, you had 9.9 million in property transactions harder than the Threeq you relatively sizable amount can you talk about this presumably that's really the deal so on your children.
How much of what you were looking for into Threeq you relating to this 9.9 million units don't warm enough work you I.
I guess in other words, how much of this relates to blodgett on Circus Circus MGM Grand other transaction how much of this is away from MGM resorts.
As far as property transaction doesn't noncash charge as we.
Go through the property portfolio from an accounting standpoint, it not related to any expenses that we incurred during the quarter. Its really just accounting charge and so I'm not really transaction activity or the like at all.
And that in general I guess for acquisitions can you remind us the minimum if all per share accretion and how perceived asset quality factors into this the smell.
I guess would you buy something that is barely accretive if you like the quality real estate.
We don't provided target as far as dollar or percentage accretion for any given deal.
Well, we do says we like those transactions to be accretive.
And it every transaction a different balance sheet at different a point in time and each transaction easy look and isolation.
Great. Thanks.
The next question comes from Nick Yulico of Scotiabank. Please go ahead.
Hey, Good morning, this is great mcginnis on with Nick.
James on what should we be reading into a comments from the MTM call. That's apparently more than likely MGP is going to participate and MGM Grand deal. That's me like a 100% ownership propco or is it possible that a deal could be split among multiple investors could you also maybe comment on timing of a potential deal I know that might be difficult.
Yeah.
Yeah. Thanks, Greg.
Well as you know we are Oh.
Our policy is not to comment on specific transactions and I think the MGM call outline pretty clearly I'm sort of how things are progressing along in terms of structure. You know one of the great skill sets that resides with it MGP isn't ability to creatively.
Structure and analyzed multiple different transaction types and quickly and so as we think through optimal structures in any transaction you know whether we yeah, how exactly we funded deal how exactly we bring it in.
The specific terms around it we're always looking for creative ideas around how that can be structured such that it's.
The most possible enhancement to our AFFO dividend stream and shareholder value. So I would say not just with deal potential deal around the MGM Grand but there aren't any transaction, we're always open and looking for ways to transact in such a way that maximizes value.
So is it fair to say that how you know maybe got prop cousin to pass is not necessarily oh, you'll be funding deals in the future.
No I would say that has always been the philosophy of the company and you know it's dependent on many things that are.
To a large degree outside our control such as interest rates debt, you know I'm environment stock valuation receptivity of stock investors to issuance and so on and so forth. So you know to date, we have done them in a particular structure that we think makes the most sense for shareholders and that maybe the structure going forward or.
It may not depending on what a specific saar of the deal.
All right. That's fair. Thanks, and then just a follow up here could you talk about or any other particular investments you're looking at either casino or otherwise, where particularly thinking about the cosmopolitan, which seems like a nice opportunity to work with MGM and solidify controls.
Two miles the Las Vegas strip.
Greg I think you're gonna have to jump from research onto the banking side the [laughter].
The you know there it's a very very active time in the market are in both the gaming resort business as well as.
The non gaming resort and leisure business. So we are we're busy we are looking at a lot of different types of opportunities and anything that fits our general criteria and it's accretive to AFFO and value that's something we want to do.
Alright, thank you.
The next question comes from Carlo Santarelli of Deutsche Bank. Please go ahead, Hey, guys. Good afternoon and good morning.
Andy James whoever wants to kind of take a shot at this but obviously the blasio transaction in the Blackstone structure lease structure in some of that the terms and tenants that went with that was was different than I think what we've seen in some other transactions. Obviously your relationship with MGM. Some of your peers with their tenants was there anything.
In the structure of the lease and how it was set up do you guys feel like is something we could see you incorporate going forward in transactions.
Yes, I would say, there's certain things that we liked about that lease or certain things that we would prefer within our own type of lease and again any.
<unk> <unk> any transaction that we do is so subject to the property the timing the seller the operator and so on its hard to say with specifics exactly what we wouldn't do or not but there are definitely certain components of that lease that I find attractive and I'm not going to go into any details of them but.
Things that we thought we create a good ideas that could be beneficial for us to look out in the future.
Great. That's very helpful. And then just any in terms you. Your your remarks earlier, you talked a little bit about gaming and broader leisure and hospitality.
Being you know two avenues not not entirely different than comments you've made in the past, but have you noticed anything in the in the non gaming arena, that's kind of changed in terms of of how you've looked at it historically or how others. In this industry have looked at kind of outside of the gaming spear historically.
So, let's say in terms of the non gaming assets, it's been pretty consistent I'm. You know obviously, we stay in touch with the bankers to brokers et cetera that all looking at potential transactions like a sale lease back to US you know from a lodging standpoint, there's still a larger management management fee lodging REIT structure.
Out there, but you know leased assets or in the market and we have seen though so I think.
It's been pretty consistent and we continue to evaluate those opportunities just to jump in with one last thought on that Carlos is I would say starting maybe.
Not much to a year ago, there's been a consistently increasing tempo with other potential real estate owners asset owners operators wanting to talk with us about potential transactions across a consistently widening circle of type of opportunity. So I think the.
They are you know the company success in in our read a right the sort of a net lease gaming resort.
Field isn't lost a number of other players and you know, we're starting to be look to more and more and more by operators as a potential source of of deal flow in transactions and funding.
Great Jameson and just to kind of tied up you are saying to reverse inquiry aspect, that's kind of they increased meaning youre being approach more frequently by those non gaming partners.
Yeah definitely thank you guys spoke very much <unk> so.
The next question comes from Daniel Adam of Nomura Instinet. Please go ahead.
Hey, guys. Thanks for taking my questions.
Sure so that <unk> last week MGM seem pretty convinced that you guys would really only be interested in acquiring quote quality assets Oh of course, we could all debate what what they meant by quality, but you know reading between the lines their comments seem to suggest your pipeline was was skewed maybe more.
Toward strip assets I guess did you Karen you would you agree with that characterization.
Or are there also maybe some regional assets, perhaps that don't involve them MGM that are also in the pipeline.
The quality of asset, it's certainly not limited the strip assets in anyway, not even but by no means is that how we view things that said there are a number of quality strip assets, but if you look at the five large transactions. We've done three of which came from outside sellers in two of which came from within.
GM the three asset that we bought from outside sellers have all been.
Really the powerhouses in that market and.
For us quality is a combination of.
Building quality fit and finish such that the asset has an enduring value that will go to the full 30 years of our lease and have a meaningful value after that the ability to offer multiple types of activities within the resort, which gives you a broader more diverse customer base and if you're just offering one activity.
The thing that we have generally shied away from is just you know a smaller properties that are primarily offering a slot machine experience, we'd prefer something that offers many more types of activities inside it brings more people brings more sources of revenue more sources of profit and becomes iconic and critical to the city within it operate within which it operates so.
We have purposefully focused on what we think are those types of assets market leaders very high quality very great fit and finish and we think that overtime, we're going to be consistently rewarded for that because those types of assets are always in demand. So it's not just strip, but it's certainly isn't ruling outstrip. It's a it remains as it is but we like the folk.
Just on more of the higher quality stuff.
Okay. That's that's super helpful. And then I guess my other on also.
Last week so.
Jim.
Alluded to.
A half a dozen or so bidders on the Blasio real estate deal Oh, a half dozen would mean that at least two more players that are currently.
We know of in the gaming read space, including Blackstone.
We're interested in that deal and so I guess my question is are you seeing any changes in the competitive landscape versus say, what you were saying three three months ago.
Yeah.
Oh I have talked for a long time, we've thought for a long time that the.
The market will come to appreciate more and more and more and more as time goes on.
The strength.
Of the cash flow generating power of these assets and their value overtime and I'm not at all surprised that we have brought in more competitors and frankly for one welcome.
The added interest in the space because we're sitting on more luxury integrated resort real estate gaming resort real estate, then any company arguably in the world and we think it's gonna bode very well for US as time goes on.
Okay, great. Thanks, guys.
[noise] next question comes from Jordan vendor of Macquarie. Please go ahead.
Thanks for taking my question I'm. So last week MGM noted that the 17.3 times is something that they probably couldn't have got earlier in the year even last year.
And then you mentioned that your real estate or hopefully pass at 17.3 times eventually.
In the conversations that you've been having have you seen the multiples.
Start to increase.
Maybe towards that 17.3 times I'm over the last couple of months.
I would I would say that a if you go back to our.
IPO to now and if you buy and then you can even go back to earlier times. When you had really only GLP I focusing on resort such as these there has been a consistent increase in the.
Value the multiple paid for the real estate, but also commensurate increase even greater increase in the trading valuations of the stock. So it's not so much it's almost impossible to call the trend over like a three month period, but I think if you look over the longer haul as these valuations of our own companies have increased.
Valuations of the private market have also increased so yeah. There has been consistent increase in yen value.
Awesome. Thank you.
The next question comes from Rich Hightower of Evercore. Please go ahead.
Hey, good morning out there guys.
Sure its new edge.
So I just I couldn't help but observe the the commentary on the pipeline and the breadth and the quality sort of available. That's you know out there potentially on the come to the commentary sounds pretty similar to two kind of what you guys said last quarter. So I'm wondering is there anything in particular that seems to be holding up timing on on some of it.
Those announcements is it sort of a funding a a gap you know among the gaming rates is it something else that relates to the timing there to anything a that we should be aware of.
No I would say that you know these transactions take take a long time, they're big transactions they have.
Financing negotiations.
I'm, just negotiating buyer and seller at least negotiations et cetera. They just take a long time I'm. So there's nothing in particular that I'd point out that's any different than.
Any other quarter for us.
Okay. That's helpful and then and the only go back to maybe some of your a quick comments in the prepared commentary on energy piece cost of debt and I'm. Just wondering you know as we look at the credit or the statistics for MGM going forward and their leverage targets and so forth how how much of that.
Improvement do you think eventually will be imputed, two mg piece cost of debt sort of in this you know virtuous circle way of thinking about things is that is that a realistic expectation for the way, we think about a MGP going forward as well.
I certainly think so I certainly hope so in terms of to the extent, there's credit rating improvements for any tenant there should be improvements then to know the lease quality as we look across the space at.
All companies all net lease companies right credit quality is important aspect, you'll get the asset back for a number of years and that payments in between are dependent on the company that's paying it so theres improvement there and at MGM front and they've communicated a target of one times.
National everybody in the next year.
You know that credit rating improvement should flow through to us and the value of the cash those that's being paid.
As cash rent on a court on a monthly basis improves as well. So we think that that would enter to our benefit.
Okay, but specifically you wouldn't say, there's any sort of tangible evidence of that so far.
Well the transaction has to close.
Then I think the agencies will do their work from just a rating standpoint, but you know just over the past.
I mean, it's really been a week [laughter] shares have done well that's traded well so.
Yes for a small sample said, yes.
Got it all right. Thanks.
Again, if you have a question. Please press Star then one on the Touchtone phone.
The next question comes from Thomas Allen of Morgan Stanley . Please go ahead.
Hi, most of my questions related to just Questcor question did you tap in to the H.M. in the quarter. Thanks.
Yes, we did there was a we utilize the ATM during the quarter or Q will be posted in a couple of hours here. So we are detailed in there.
Okay.
Thank you.
Makes sense.
The next question comes from John Decree of Union Gaming. Please go ahead.
Good morning, guys. Thanks for taking the questions.
James I think in response to an earlier question you talked about the quality of real estate casino assets, both on the Las Vegas strip and.
Outside of Las Vegas, and I was curious if you had a view.
On valuation or cap rate compression between Las Vegas strip and and some of the stuff you might own a in the regional markets sleep blogs Shale Center strip.
Connick asset or do you ultimately see kind of valuation for high quality assets, regardless of location converging or you have a view of the strip for regional.
I would be a would be a preference for additional investors institutional investors.
It's really interesting question, John and I would say one of the unique characteristics of the gaming resort business in general is the unique nature of each individual market you have a mark in Las Vegas, which obviously is you know a world famous draws a huge number of.
Customers daily flights everyday a you know frequently from multiple cities in China daily flights from Oslo Daily flights from London, et cetera, et cetera. So you have that characteristics sort of the you know the.
Corner main and main here right. However, as you go through the United States and you look individually each individual market. There are so there are also absolutely fantastic jurisdictions in large multifaceted cities with lots of different types of industries and growing populations.
Which have casino resorts as well now there's some markets that are less.
Vibrant and exciting to us, but as we look across the whole landscape. We think that there are many many regional assets, where we think the cap rate should not only be the equivalent of a luxury Las Vegas, you know resort like a blasio, but could potentially exceed it and I think if you look at I mean, I'll say one that.
We started earlier, but.
Are you look at National Harbor, which sits a on the edge of the Potomac and overlooks you know a number of the monuments right in the midst of Washington, D.C. You know that is something that is a really unique.
Asset that it's going to be one of the gems for the whole Washington DC area for you know dozens and dozens of years I'd say the same thing with MGM Grand Detroit, There's no asset like it it's absolutely fantastic. It's the state of choice. If you have something going on in that city and has shares many of those same characteristic.
Thanks, So as it relates to cap rates screen Vegas, and the regions I think it's it's it is too but want to view them in that isolated format, it's really market by market city by city jurisdiction by jurisdiction. Given you know the number of regulations tax rate change that said.
<unk> tax rate regimes et cetera that overlay the operating environment that anyone region, but I see no and that asset and tenant by tenant.
I see no impediment adult regional assets moving up to that are moving down to the same kind of cap rates that we're talking about for luxury Las Vegas real estate.
That's helpful. James appreciate your thoughts on that subject and then perhaps a quick follow up.
If if there was some type of third party interest in one of your assets you on some of the.
Probably most robust regional gaming assets in the U.S. right now you've you've mentioned National Harbor and Detroit. If there was interest from a party like Blackstone would you be willing and able to sell well one of your properties out the master lease if it was that valuation metrics significantly attractive enough.
To you.
We certainly can and you know we're in the or ultimate goals are to drive AFFO dividend and shareholder value. So if it's something that makes sense we are.
You know more then able and would be very willing to transact like that with the caveat. It has to make sense for our shareholders over the long term and grow value sustainably.
Great. Thanks, again for all the commentary and the questions.
The next what the next question comes from Robin Farley of Yes. Please go ahead.
Great. Thanks, I just wanted to get your take on.
We look at the 17 times.
Rent stream that.
Rent sold four.
Do you think that the MGM Grand I said is.
Similar quality given the size of location.
Okay.
Robin look every transaction is different every tenant every leases different its that's hard to comment on something like that.
And if you just look at where are we trade where other assets trade other transactions have traded they'll have their own characteristics in terms of.
You know that aspect that I talked about so each one won't get priced accordingly.
And obviously, we don't comment on transactions that we potentially be working on or not.
Is it reasonable to conclude that.
And she p. wasn't all involved.
Transaction that but that you weren't willing to pay a multiple that high for Blash I guess, we can that's a reasonable.
<unk>.
We don't comment on to the actions that you know that we didn't do per se. So [laughter] Scott I'll leave it at that.
Okay.
I'm just just trying to.
I think about.
Last attempt to get some color [laughter] when you're talking about features of the transaction right. There are things like about that structure and didn't like or I think you sort of comment similar to that at the beginning of the call.
Is there.
I don't know if you would assign some value in terms of like how many turns of rent too.
A seller is guaranteeing the alone for the buyer or anything like that where you would say like.
When you look at the multiple.
Some of it could be due to those factors versus.
Purely.
Stream.
Well, we look at all aspects of a transaction and in a certain things have value some of them detract from value, but we're going to hold those cost of the best because as you know we're going to be on one side of negotiating table in somebody else's, many other and we'd like to get those ourselves.
Alright, great. Thanks, very much thanks Robin.
The next question comes from John Massocca of Wattenberg Thalmann. Please go ahead.
Good morning.
Good morning.
So there's been some recent transactions that have been completed kind of on a same buyer opco propco basis that I've had more of an angle towards maybe a redevelopment or repositioning of certain gaming properties.
Kind of in the light in light of that at what point would you feel comfortable maybe purchasing properties that are undergoing say, a repositioning or have kind of a significant capex element to them.
On a kind of going on a near term going forward basis.
For transactions for us that haven't yet stabilize you know theres to the extent the sellers looking for some kind of monetization we can evaluate it it probably isn't the top choice for seller a door for us just because nobody knows the eventual run rate.
Cash flows.
To maximize proceeds for them or maximize the transaction size for us.
But.
To the extent, there's a unique situation like that we can certainly evaluate and underwrite something.
But obviously not our top choice, Okay, and then how does Mgms kinda stated intention to pursue an asset light model impact you're thinking about doing additional deals with then I'm kind of thinking in let's say a post MGM Grand post MGM Springfield World.
Doing something similar to.
Like the park Nomad transaction, but given the other transactions that are potentially in places MGM goes to asset light might impact corporate coverage.
Well one of the things that I think people have.
Maybe not focused on quite enough is <unk> is the superior credit that comes from that strategy and this is what I mean, they're going to if you run.
Sort of a as I think of an asset light strategy through to a gen game the amount of capital that's going to come into the organization is gonna be very very significant and.
They've already stated they're going to have a onex financial leverage target lease obligations in my own opinion are much much better for it operated to have then.
Interest amortization and repayment obligations. The least last for 30 years, which is a very long time and coverages are such that I think your operators are pretty safe in being able to pay it and most of the entities that have gotten into trouble in the gaming operating side have five have found themselves in truck.
I will not due to an inability to pay sort of their ongoing quarterly payments to fund the business, but when they have a large.
Debt maturity come due and the market has not it's not in their favor so.
Many of the well you know very well known a troubled times in the business have come from the decline of business due to recession combined with a lack of capital flow, which is almost inevitable occurs in a recession such that they can't get a refinancing by putting themselves into a position of increasing lease.
Obligations and decreasing financial obligations the credit is much much stronger.
I appreciate the color that's it for me. Thank you very much.
Thanks next question comes from Shaun Kelley of Bank of America. Please go ahead.
Hey, guys good morning.
I just wanted to just wanted to ask briefly he touched up front I'm, just sort of Blackstone and then a little bit about you know sort of deal creativity on time on one of things you bring to the table on there's sort of this part of typical transaction out there where you do a deal you know you go out to the capital markets raised debt and equity to finance it.
But when you kind of start to play with the idea private equity.
Question is are there sort of third party equity partners out there do you think you know whether its blackstone themselves or other people that maybe a walking by you know the sizable cash flows in a low yield environment on you know eating there's an appetite out there for central minority Stakes in you know sort of public companies as a possible for.
Financing vehicle and it's not something that you know MVP would look at.
I think there has been theres been a lot of interest and it consistently increasing interest in the industry from capital sources going back to even a decade ago. If you go back to.
The when we were in the mid two thousands MGM resorts itself brought in Dubai World as a potential part or as a partner pardon me both as a shareholder of the company as well as.
50% partner in City Center show, you know that was sort of the start of sovereign capital entering the business and it's only increase from there and I think the Blackstone transaction you know its high profile and we're in a a fast news dissemination world.
Well couldn't meet of continues that vote progression along that said as Andy mentioned these transactions are big and complex and there are many many different decision factors. After he worked out before when gets done. So you know your one has hit the tape and as highlighted but it's not to say that there hasn't been again I would say consistent.
Drumbeat of increasing interest in the industry that we've talked about certainly on these earnings calls for three and half years and before that so the industry is getting attention and its unique positive characteristics are you know where they're going to continue to drive that.
Got it that thanks, James and then the like.
We've touched on this or in a few different ways throughout the document out here, but just to be sort of you know more direct yeah. When we think about transaction criteria. Yeah. I think Andy specifically said you like you know transactions to be accretive, but that doesn't mean, they specifically have to be so maybe to put you guys on the spot a little bit.
It relates to a bit of a red line.
Can you do or are you willing to do a deal based on let's say the merits of whatever the transaction, maybe the least features et cetera, the quality of the real estate relative to your portfolio that is actually dilutive upfront with the idea that look its enhancing to the overall portfolio and or better real estate and or a better you know fee stream. The way. It structured is that you know or does it.
I have to be accretive to dividend and AFFO to to kind of do that deal.
Well, there's no I mean, the Devil is always in the detail. So I mean, you know if you had something it was accretive within six months, but not initially would that counted as accretive I mean, you know there's little structuring techniques that one can do too.
Made cash flows higher later higher now or whatever but generally speaking we don't see a lot of advantage doing and transaction that is an accretive to our shareholders. We don't job. You know we have very long term leases and accretion day AFFO and ultimately to dividend is one of the core things that we focus on so I think it'd be pretty unlikely.
Lead to see us do some sort of stretch deal that hampers the income statement.
Got it. Thank you for that and then last question would be you know.
He kind of talked about playing out the MGM kind of you to its two at the end game.
We think about the same alot, given our coverage both sides here and one thing we're trying to think about as the you know that potential eventual deconsolidation of MGP, obviously, I think theres a threshold of you know 30% as it stands today, where MGM would deconsolidate is there anything in structuring terms you know is this a negotiable.
Element that could change that where that threshold you know what actually go up meaning you know they could be consolidate earlier than dropping to 30%.
The.
B share that they is a.
You know something that can always be opened up in disgust between the two parties, but I would caveat that was saying the two parties have to.
I agree to transact so.
You know, it's just a contractual deal that we have and you know just like any transaction like that anything can be opened up.
One of the things that I also would just mentioned on the deconsolidation angle is deconsolidation is an accounting.
Provision it doesn't make a difference to the economics of the business and so I think although one can you know when.
Thinks about such things, it's really just a portrayal of the cash flows are flowing out of each entity et cetera, and what the liabilities are as opposed to any real change the economics.
Thank you very much.
Do you show.
The next question comes from Barry Jonas of Suntrust. Please go ahead.
Hey, guys. So look clearly MGM Grand is in play, but curious how discussions around Springfield are progressing yeah, given where that property is in its rap. Thanks.
<unk> Springfield is the of the remaining ROFO, along with Empire city, or the real close or things that we'll be discussing.
Joining me with MGM to the extent it makes sense.
And you know timing wise.
Obviously with their their own real estate Committee overlay there's.
Many things to evaluate there so.
Well I'll throw it into the mix and see what transactions come out a it all kind of depends on all parties come to table.
Helpful. Okay, and then just the second question I want to make sure I've got this correct <unk> is the right way to think about Mgms Real estate Committee analysis did that essentially put you in a holding pattern or create an overhang get deals done with third parties and if so is that now I mean I would assume that's now removed.
No I wouldn't say so discussions with third parties continue or transactions. We evaluate continue these things take a long time. So there's no point in putting into something in holding pattern to wait on some other transaction.
So we continue to work on those.
Great. Thank you so much I'm sorry.
This concludes our question and answer session I would like to turn the conference back over to James Stewart for any closing remarks.
Thank you I would like to leave you with some final thoughts.
We continue to progress on executing or long term business strategy and remain focused on creating a stable and growing income stream that we could enhance your disciplined acquisitions of quality assets.
Iran continues to be protected by our MGM parent guarantee and their superior and improving credit profile.
Our priority is to sustainably grow our dividend and create long term value for shareholders. We actively monitor the M&A market to identify assets that meet our criteria, we're committed to being thoughtful with their allocation of resources and capital as we continue to explore opportunities both within and outside of the gaming sector.
We believe that our iconic Las Vegas strip real estate, our market, leading regional portfolio and the value of our diversified cross collateralized pool of assets backed by a parent guarantee our industry, leading net rent coverage attractive annual escalators and a 6% yield MGP is a very attractive investment opportunity and.
In the most attractive real estates dock that is available in the public markets. Today period. Thank you for continued supported the company. We look forward to our next call with you all for fourth quarter and year end results.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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