With executives buoyed by the closing of acquisitions, planned renovations for two Las Vegas Strip properties and surging performance across its portfolio, MGM Growth Properties reported increases in revenue and funds from operation for its fourth quarter.
But both figures missed Wall Street projections.
In a statement Thursday, the real estate investment trust, spun off from casino giant MGM Resorts International in 2015, reported adjusted funds from operation, which exclude nonrecurring items, of $152.4 million, or 57 cents per share, for the three months ended Dec. 31.
The result missed Zacks Financial Research’s consensus estimate of 59 cents per share. MGM Growth has topped analysts’ forecasts for funds from operation just once in the past four quarters, Zacks said.
In the year-earlier fourth quarter, MGM Growth had $132.4 million, or 52 cents per share, in funds from operation, a closely watched fiscal yardstick for real estate investment trusts that takes net income and adds back depreciation and amortization.
The results sent the REIT’s stock down in late-morning trading on the New York Stock Exchange, however, MGM Growth shares closed unchanged at $31.37.
Fourth-quarter net income for MGM Growth, which also owns the real estate and buildings associated with 11 MGM Resorts-operated hotel-casinos, including six on the Strip and Atlantic City’s Borgata, was $18.6 million, or 26 cents per share.
Fourth-quarter revenue rose 32.4 percent to $284 million from $214.5 million. Zacks-polled analysts had expected $284.5 million.
In a conference call with investors, MGM Growth CEO James Stewart said several of the REIT’s properties set fourth-quarter records for revenue and earnings before interest, taxes, depreciation and amortization — MGM Grand Detroit; MGM National Harbor in Oxon Hill, Maryland; Beau Rivage in Biloxi, Mississippi; Gold Strike Tunica in Tunica, Mississippi; and the Hard Rock Rocksino in Northfield Park, Ohio.
“In 2018, we announced over $2.3 billion in acquisitions,” Stewart said. “Since our (initial public offering) in April 2016, we’ve announced acquisitions totaling over $4.7 billion. Both figures are among the highest acquisition volumes of any company in the entire triple-net REIT space over the equivalent time period.”
On Jan. 29, the REIT and MGM Resorts International said it closed its $850 million deal for the Empire City Casino in Yonkers, New York. In the deal, MGM Growth gained the casino’s land for $625 million and leased it back to MGM Resorts, which will operate the property.
MGM Resorts agreed to pay $50 million more if Empire City is awarded a license for live table games on before Dec. 31, 2022, and MGM Resorts accepts such license by Dec. 31, 2024.
Empire City features more than 5,200 slots and electronic table games, restaurants and both live and simulcast horse racing. It employs 1,200 people.
MGM Growth Chief Financial Officer Andy Chien has said he expects the deals for Empire City and the Hard Rock Rocksino, acquired for $1.06 billion in July, to increase annual rental revenue by $110 million, or 14 percent, in 2019’s first half.
Gaming analysts said MGM Growth will continue to expand.
“MGM Growth management noted they continue to see an active deal environment with activity similar to the elevated levels seen in 2018,” said SunTrust gaming analyst Barry Jonas.
MGM Resorts owns 70 percent of MGM Growth, but said it plans to reduce that stake to below 50 percent over the next few years.
“We think MGM Growth remains aggressive, broadly, in its search for assets, presumably those for which they can do deals away from MGM,” Deutsche Bank gaming analyst Carlo Santarelli told investors. “We continue to see the overhang of MGM’s desire to reduce its stake in MGM Growth as an impediment for investment here.”
On Dec. 20, MGM Growth said it will pay MGM Resorts $637.5 million for investments to reposition Park MGM and NoMad Las Vegas, formerly known as Monte Carlo. The REIT is paying for the improvements MGM Resorts made in the 2,700-room hotel-casino. MGM Growth owns the hotel-casino; the NoMad chain operates 293 rooms.
On Thursday, Chien said MGM Growth improved its debt profile by amending its revolver loans and issuing $750 in senior notes.
“Our well-positioned balance sheet is a key driver of long-term value creation for our shareholders by enabling us to continue to execute on accretive acquisitions,” Chein said in a statement.
During the call, Stewart said MGM Growth’s board approved three dividend increases in 2018, raising it from $1.68 per share at the year’s beginning to $1.79 at year’s end.
For the 12 months ended Dec. 31, MGM Growth had reported funds from operations of $593.4 million, or $2.23 per share. Full-year revenue was $1 billion.
Follow Matthew Crowley on Twitter @copyjockey.
