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MGM Growth Properties sees Q2 profit edge up ahead of VICI acquisition


MGM Growth Properties (MGP), the real estate investment trust spun off from MGM Resorts International, reported a 7.1% year-on-year rise in net profit for the second quarter of its 2021 financial year, ahead of its anticipated acquisition by VICI Properties.

Total revenue for the three months through to June 30 amounted to $194.3m, which was level with the same period in 2020. Rental revenue remained flat at $188.3m, as did ground lease revenue at $6.0m.

The quarter saw MGP agree to acquire the real estate assets of MGM Springfield from MGM Resorts for $400.0m in cash. This will see MGM Springfield added to its existing master lease with MGM and the annual rent payment increase by $30.0m.

The MGM Springfield deal is expected to close in the fourth quarter of this year, subject to regulatory approvals from the Massachusetts Gaming Commission and other customary closing conditions.

In terms of costs for the quarter, total expenses reached $68.3m, which was again largely in line with the corresponding period last year. Consolidated adjusted earnings before interest, tax, depreciation and amortization (EBITDA) amounted to $244.3m.

MGP reported an additional $25.3m in profit from an unconsolidated affiliate, but this was offset by $68.7m in interest expenses and a $6.5m loss on unhedged interest rate swaps, meaning it posted $50.6m in other costs.

Taking this into account, profit before tax reached $75.5m, down 24.1% from $99.5m at the same point last year, with the business also accounted for $1.8m in income tax costs.

However, with the $29.8m net loss from non-controlling interests being significantly lower than $56.0m last year, this meant it ended the quarter with a net profit of $43.9m, up 7.1% from $41.0m in 2020.

Publication of the results comes after it was announced last week that VICI Properties, the real estate investment trust spun off from Caesars Entertainment in 2017, agreed to acquire MGP for $17.2bn.

MGP Class A shareholders will receive 1.366 shares of newly issued VICI stock for each share of MGP they hold. With VICI’s shares trading at an average of $31.47 in the five days before the deal, this suggested a price of $43.00 per MGM Growth Properties share, a 15.9% premium compared to its share price before the deal.

MGP’s controlling shareholder, MGM Resorts, will receive $43.00 in cash for the redemption of the majority of units that it holds, for a total consideration of $4.4bn. However, it will retain 12 million units.

“Since our initial public offering (IPO) in 2016, MGP completed over $7.00bnof real estate transactions that grew our portfolio of premier entertainment assets, including introducing innovative transaction structures to the gaming REIT universe,” MGP chief executive James Stewart said.

“As a result of our completed and announced transactions, MGP’s pro rata rental revenue has nearly doubled from $550.0m at IPO to approximately $1.00bn, our annualized dividends per share increased 44%, and our total shareholder return has more than doubled.

“Following the announced strategic VICI Transaction, MGP shareholders will benefit from the collective strengths of both companies.”

MGP only reported results for the second quarter and not publish figures for the first six months of its financial year.

Last week also saw MGM Resorts International post financial results, reporting an overall net loss of $227.1mfor the first half of its 2021 financial year despite experiencing a 54.0% year-on-year increase in revenue.

Total revenue for the six months to June 30 amounted to $3.92bn, up from $2.54bn in the corresponding period last year.