MGM Growth Properties, the real estate investment trust that serves as landlord to 10 MGM Resorts casino properties in the U.S., marked its first anniversary as a public company Tuesday with a $0.03 dividend increase amid swirling talk of an eventual acquisition of MGM National Harbor.
Adjusted funds from operations – a REIT-specific metric that is net income plus real estate depreciation, minus gains and losses from property sales and adjusted for amortization, financing and other costs – checked in at $121.7 million, or $0.50, for the quarter.
“In the quarter, we celebrated our first anniversary of being a public company and received our first rent escalator under the Master Lease,” said James Stewart, CEO of MGM Growth Properties.
“The $12 million increase in annual rent and related increase to AFFO per share allowed us to increase our dividend to $1.58 representing a $0.03 increase from our prior annual dividend rate and a more than 10 percent increase from our dividend at IPO,” Stewart continued.
Total rental revenues for the quarter checked in at $163.2 million, boosted by the activation of a $12 million annual escalator. Net income was $43.9 million, while adjusted EBITDA was $162.7 million.
These figures were in line with consensus Wall Street estimates.
“By design, there were no surprises in the numbers,” said John DeCree, an analyst with Union Gaming, adding that the next big event in the company’s story will be the likely acquisition of National Harbor.
“We believe the next leg up for MGP will likely come with the potential purchase of MGM National Harbor in the coming quarters,” he said. “The question is more when than if MGP/MGM strike a deal. While we believe an end of year announcement is still reasonable, we are not concerned if it flows into 2018.”
Stewart, on a conference call with investors, said that a potential transaction was shaping up for the second half of 2017.
Jim Murren, chief executive of MGM Resorts, said in his company’s second quarter conference call last month that the intention was to wait a few quarters after National Harbor’s December opening before opening negotiations to strike a deal with MGP.
“Well, we have a few quarters under our belt right now, so I would think that it would be logical to assume that a transaction would be more in the near term than the long term between MGM and MGP,” Murren said.
MGP is currently the only REIT focused specifically on casino gaming aside from Gaming and Leisure Properties, though Stewart, on a call with investors, emphasized that MGP is also weighing potential non-gaming acquisitions and that he has seen a “marked uptick” in overall opportunities.
Murren also said that MGP – which MGM holds an ownership stake in – is aggressively seeking to grow its portfolio both inside and outside the MGM universe.
“MGP is out on the prowl on a variety of other transactions, some of which will not involve MGM, but others very likely could,” he said, adding that an acquisition of the forthcoming
MGM Springfield was also a likely possibility.
As of June 30, MGP had $376.8 million in cash on hand against total debt of $3.6 billion.
