The CEO of MGM Growth Properties — which acts as landlord for a number of MGM hotel-casinos — said the company sits in a “very enviable position.”
On Tuesday, the real estate investment trust reported access to nearly $2 billion worth of liquidity and said its tenant, MGM Resorts International, was paying rent “in full and on time,” despite the economic challenges brought on by the pandemic.
Its portfolio includes 15 Las Vegas and regional assets, including the MGM Grand and New York-New York on the Strip.
CEO James Stewart said the company continued to return value to shareholders in the second quarter by redeeming and retiring 30.3 million operating partnership units with MGM Resorts for $700 million in May. The deal brought the casino operator’s stake in the company down from 61 percent to nearly 57 percent.
MGM Resorts has until February 2022 to cash out on another $700 million worth of units.
The affiliated casino operator is currently the company’s sole tenant, but MGM Growth CEO James Stewart said the REIT is in discussions with “various gaming operators” about potential sale-leaseback transactions.
“(These deals) would help them generate … liquidity and provide them with an opportunity to replace financial debt with predictable, long-term leases,” Stewart said. “Benefits of long-term leases with no maturities are more apparent than ever, we’re confident in our ability to grow over the long term.”
Most discussions are focused on “either a large asset or more than one asset,” Stewart said, but moving forward with deals has proven to be tricky in the midst of a global pandemic, since share volatility makes it difficult to determine an asset’s underlying cash flow and value.
“Changing protocols, the ebbs and flows of the impacts of the pandemic, the impact on property openings, etc. — all of that made deal-making much harder,” Stewart said.
Nevertheless, Chief Financial Officer Andy Chien remained confident that transactions will come and said integrated resort operators are finding sale leasebacks “more and more attractive.”
Stewart added that MGM Growth continues to focus on tenants within the gaming industry.
“There’s not been a single industry I can think of that’s been more responsive to changing customer tastes than the integrated resort business,” he said. “If there’s any industry that can figure out how you reposition space and drive profitability through that space as needed, it’s the gaming business.”
MGM Growth reported $97 million in net income for the second quarter, a 43 percent bump compared with the same period last year, showing once more that real estate investment trusts are some of the strongest-performing gaming-affiliated businesses in the age of COVID-19.
Revenue from rent was $188.3 million for the quarter. Total revenue was down 14 percent to $194.3 million.
MGM Growth’s shares were up 1.3 percent to $27.71 late Tuesday morning on the New York Stock Exchange.
MGM Growth Properties LLC
Second-quarter revenue and earnings for Las Vegas-based MGM Growth Properties, the real estate investment trust affiliated with MGM Resorts International, and owner of the real estate beneath mixed-use Las Vegas resorts and market-leading metropolitan assets. (NYSE: MGP)
Revenue
2020: $194.3 million
2019: $225.8 million
Change: -14%
Net income (loss)
2020: $97 million
2019: $67.8 million
Change: +43.1%
Earnings per share
2020: $0.30
2019: $0.24
Change: +25%
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