MGM Growth Properties, the real estate investment trust spun off from casino giant MGM Resorts International, posted revenue that topped Wall Street analysts’ forecasts.
On Thursday, MGM Growth said its funds from operations, a closely watched fiscal yardstick for real estate investment trusts that takes net income and adds back depreciation and amortization, was $140.6 million, or 53 cents per share, in the three months ended March 31.
MGM Growth said its net income for the period was $15.8 million, or 22 cents per share, matching the 22-cents-per share estimate of analysts polled by Yahoo Finance.
Revenue was $215.8 million in the period, which topped the $214.6 million forecast of analysts from the same Yahoo Finance poll.
MGM Growth, on April 5, agreed to buy the Hard Rocksino in Northfield Park, Ohio, for $1.06 billion in cash and debt from Northfield Park Associates, an investor in real estate and businesses.
The property, 18 miles north of Akron and 16 miles southeast of downtown Cleveland, occupies 110 acres and a 200,000-square-foot casino with more than 2,300 video lottery terminals. The property also has a 1,900-seat concert venue, a 250-seat theater and restaurants.
The Rocksino, which opened in December 2013, reported $232.5 million in gambling revenue in 2017, as reported by Crain’s Cleveland Business, and its Hard Rock Live stage ranked 27th worldwide in Pollstar’s club category, with 103,769 tickets sold in 2017.
The deal will likely close in the year’s second half, MGM Growth Properties said, and boost the REIT’s adjusted funds from operation, a measure of cash flow, by a middle-to-high single-digit percentage rate.
MGM Growth is a triple-net lease REIT; its tenants, casino operators here, maintain the properties and pay real estate taxes and building insurance.
MGM Growth, which had a market capitalization of $6.77 billion as of April 6, and $280.1 million in cash as of March 31, said it expects to pay annual rent of $50 million to $60 million on the Rocksino deal. The REIT said it ultimately plans to find a third-party operator for the Rocksino while keeping the real estate.
“This attractive addition to our portfolio … (demonstrates) again our commitment to generating value for our shareholders,” MGM Growth Properties CEO James Stewart said in a statement announcing the deal.
In January, MGM Growth Properties, which has 12 MGM Resorts properties in its portfolio including Mandalay Bay, The Mirage, and the Luxor in Las Vegas, bid about $5.85 billion bid for real estate managed by Caesars Entertainment Co.’s real estate investment trust, Vici Properties. The Las Vegas Review-Journal reported the REITs began negotiating Dec. 20 on the deal, which would have created a REIT with 32 hotel-casinos.
But the offer was rebuffed. As the Review-Journal reported, the offer price of $19.50 a share was less than the $20.20 Vici shares were trading at on Jan. 5, when the offer was received.
The boldness of the effort nevertheless impressed The Motley Fool’s Rich Duprey, which in March named MGM Growth Properties a stock to build a nest egg around.
“With the REIT paying a dividend that currently yields 6.5 percent,” he wrote, “it represents a lucrative bet that gambling will continue to pay off.”
