Q2 2021 MGM Growth Properties LLC Earnings Call

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Good day and welcome to the MGM growth properties second quarter 2021 earnings conference call.

Joining the call from the company today are Mr. James Stewart, Chief Executive Officer, and Mr. Andy Chien, Chief Financial Officer.

Participants are in a listen only mode. Please.

Please note this event is being recorded.

I would now like to turn a conference call over to Mr. Andy Chien, Mr. Chien the floor is yours Sir.

Great. Thank you Mike Good morning, good afternoon, and welcome to the MGM growth properties second quarter 2021 earnings call.

This call is being broadcast live on the Internet at MGM growth properties dotcom.

And we have furnished our press release on form 8-K to the S. A C. This morning.

On this call we will make forward looking statements under the safe Harbor provisions of a federal securities laws.

Actual results may differ materially from those projected in these forward looking statements.

Additional information concerning factors that could cause actual results to materially differ from these forward looking statements.

A contained in today's press release and in a periodic filings with the SEC.

During the call. We will also discuss non-GAAP financial measures in talking about a performance.

Can find a reconciliation of GAAP financial measures in the press release, and our Investor presentation, which are also available on a website.

Following today's remarks, there'll be no question and answer session.

Please note that this presentation is being recorded.

I'll now turn it over to James.

Thank you Andy I would like to welcome everyone to M. G. P second quarter 2021 earnings call.

Although this quarter had a number of achievements a noteworthy items to discuss a I'll also spend some time addressing what is even bigger and more exciting news that happened after quarter's end the announcement of our combination with features.

On May 11th we announced the acquisition of a beautiful MGM Springfield Casino resort. This first class property was a greenfield development by MGM resorts and opened in August 2018.

We entered into an agreement to acquire a the real property for $400 million in exchange for $30 million a annual rent.

Springfield would be added to our existing master lease with MGM resorts, providing investors with the safety and security that comes from a cross Collateralization a 13 other master lease properties.

We acquired MGM Springfield for an attractive initial cap rate a 7.5 per cent, implying a $13.3 times multiple on initial rent.

Upon closing it will be immediately accretive to our a F that vote per share.

As has been the case with every single acquisition, we have ever completed.

Anticipate the transaction will close in the fourth quarter, a 'twenty 'twenty 1.

Subject to regulatory and customary closing conditions.

During the quarter. We also raised our annual dividend to $2.06 per share an increase of 8 tenths on an annualized basis.

It represents an increase of 4% from the previous quarter.

M. G. P has a great track record a consistent dividend increases in fact, we've increased our dividend 13 times of 21 quarters since formation.

From a starting point of a $1.43 to $2.06 per day.

<unk> this will maintain a a consistent payout ratio in the low 80 per cent range.

We have a growing array F F O.

A payout ratio currently stands at approximately 80% based on second quarter, a F F O per share now.

Moving to the most exciting news this year for M. G P.

On August 4th we announced that we would be combining with veatch eat in an all stock deal for a M. G P class a shareholders.

This transaction values the company at a implied 17.5 times EBITDA multiple.

Multiple and a 5.8% cap rate.

This represents a roughly 16% premium to M. G piece closing stock price on August 3.2021, and a significant premium to M. G P's previous all time high.

M. G. P class a shareholders will receive 1.366 shares of newly issued Beachy stock in exchange for each class a share a M. G P.

Fixed exchange ratio represents an agreed upon price a $43 per share of M. G. P class a shares based on beaches trailing 5 day b.

P Wap a $31.47 as of July 32021.

This exciting resulting company will be transformational for our shareholders. It will be the largest triple net REIT on an adjusted EBITDA adjusted EBITDA basis have best in class governance, and a much broader index fund shareholding that M. G. P did on a standalone basis.

Prospects for the combined company or a extremely great gaming.

Gaming asset cap rates have compressed significantly over the past 5 years as investors have learned more about the power of this iconic and enduring real estate asset class I am very confident that this cap rate improvement will continue in the years to come for the benefit of our shareholders as part of the combined company.

For our investors M. G P's returns have been frankly incredible.

We went public at $21 per share a little more than 5 years ago, we've paid over $9 in dividends, so far and we will receive $43 a value based on the previously mentioned exchange ratio.

IPO investors will have more than doubled their money at a $43 deal price and earned another approximately 50% of their investment and income through our dividends.

M. G. P returns from IPO to the deal price put us near the top of any major triple net REIT over the same time period and in addition in terms of total return we have outperformed the R&M Z E. S&P 500, and the S&P 500, since our IPO to date.

I'll now turn it over to Andy.

Thanks James.

I'll start with providing some highlights for a few it ends up a few items on our second quarter financial results.

With a quarter, we recognize $188.3 million a rental revenue on a GAAP basis.

Cash rental payments received by M. G P and a pro rata share a joint venture cash rent growth.

$243.7 a M.

Shifting a $210.7 million from the MGM Master lease.

And a 37 point to me from a share of a N G. P. B REIT joint venture a master lease.

Share of distributions received from a joint venture was $31.8 million.

Consolidated net income was $73.7 million.

Consolidated <unk> was $171.8 million or 65 cents per diluted operating partnership unit.

Consolidated adjusted EBITDA was $244.3 million.

G&A expenses for the quarter on a $4.3 million and our dividend was $51.5 per share, which represents a $2.6 on an annualized basis.

Our current pro rata net leverage a 5.5 times is in line with a targeted range of 5 to 5 and a half times.

Our balance sheet positioning over the last 5 years. So it's always up a nice be as flexible as possible.

To be able to prudently allocate capital to achieve a accretive growth.

Maintaining ample access a meaningful amounts of liquidity proved to be key as we navigated a varied economic circumstances over the last year and a half.

Ultimately, our thoughtful decision, making was reflected in a significant dividend growth and price depreciation over the years.

From our IPO through today.

We have raised over $13 billion on equity unsecured notes term loans and to India to fund the company and our growth.

I would like to take this time to thank the investment community, our lenders our banking relationships and a research community for all of a support they've given us in helping to build and grow M. G. P.

It's been a pleasure working with you all to develop this real estate sector into what it is today.

With that let's turn it back over to James.

Thank you Andy.

Now I would like to say a few words about the beat G Senior management team.

It's a Tony Act, John Payne, David key ski and Samantha Gallagher.

Our experienced thoughtful and great strategic thinkers.

I also believe they're a great people.

We have at times been fierce competitors through that process might already high level, a respect and trust and all of them only group.

The first ever employee a M. G. P. I've put a great deal of my energy and my soul into making this company a success.

Along with my friend and a CFO, Andy Chien spearheaded the debt spearheaded M. G P tied to a successful IPO you're.

The offering was both the largest triple net REIT IPO of all time in the third largest REIT IPO of all time a completion.

We're honored to have the IPO a recognized for its innovative structure and a strong investor reception, winning the Ifr 2016 U S. IPO a year award by Thomson Reuters.

I have never sold a share.

I care, a very very deeply for this company or a team and our shareholders.

With that as background I want to emphasize how confident I am in Ed John David and Samantha I know they will continue to be exceptional stewards of capital.

For the combined entity.

Shareholders will benefit from enhanced tenant diversification increased scale and improved cost of capital and as a result of this transaction.

It'll be thrilling to see what new Heights, a combined company, we'll reach it will be America's largest owner a experiential real estate with an enterprise value of approximately $45 billion.

Catalyst for the future include the potential to obtain amplified index inclusion and trading liquidity liquidity as well as to achieve investment grade status. These.

These bode well for the company's cost of capital, which will ultimately a fuel further accretive growth it will be a compelling opportunity for investors looking for exposure to the best portfolio of experiential real estate assets assembled in the world.

I'd like to end this earnings call by thanking everyone involved in helping M. G. P becomes a company that is today.

Company was the first time in history that investors could meaningfully allocate their capital to integrated casino resort real estate.

And it has been a pleasure to be able to work with a a shareholders to execute on a business strategy.

We have built a tremendous company over the last 5 and a half years.

Weighted team laser focused on creating the highest quality real estate portfolio and the gaming and entertainment space.

I'm proud to have been part of the collective effort to get M. G. P. At this point and the team that we have built here.

Truly appreciate all of the support from our investors Board of Directors partners at MGM resorts and my Incomparable team. Thank you all.

So we thank you Sir and to the rest of the management team for your time accounts.

Call is now concluded at this time he moves connect your lines. Thank you everyone take care and have a great day.

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