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UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
OR

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to           
Commission File No. 001-37733 (MGM Growth Properties LLC)
Commission File No. 333-215571 (MGM Growth Properties Operating Properties LP)

MGM Growth Properties LLC
MGM Growth Properties Operating Partnership LP
(Exact name of registrant as specified in its charter)

DELAWARE (MGM Growth Properties LLC)
DELAWARE (MGM Growth Properties Operating Partnership LP)

47-5513237
81-1162318

(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1980 Festival Plaza Drive, Suite #750, Las Vegas, NV 89135
(Address of principal executive offices)
(702) 669-1480
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    

MGM Growth Properties LLC     Yes    X      No         
MGM Growth Properties Operating Partnership LP     Yes     X       No     
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files):    

MGM Growth Properties LLC     Yes    X      No          
MGM Growth Properties Operating Partnership LP     Yes    X      No          
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

MGM Growth Properties LLC

  Large accelerated filer    X  
 
Accelerated filer        
 
Non-accelerated filer       
 
Smaller reporting company        
 
Emerging growth company        

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ___

MGM Growth Properties Operating Partnership LP
   Large accelerated filer       
 
Accelerated filer        
 
Non-accelerated filer    X  
 
Smaller reporting company        
 
Emerging growth company        

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ___

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act):
 
MGM Growth Properties LLC     Yes            No    X  
MGM Growth Properties Operating Partnership LP      Yes            No    X  

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Shares, no par value
MGP
New York Stock Exchange (NYSE)

As of May 3, 201990,528,073  shares of MGM Growth Properties LLC Class A shares, no par value, and 1 share of MGM Growth Properties LLC Class B share, no par value, were outstanding.




EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended March 31, 2019, of MGM Growth Properties LLC, a Delaware limited liability corporation, and MGM Growth Properties Operating Partnership LP, a Delaware limited partnership. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our,” “MGP” or “the Company” refer to MGM Growth Properties LLC together with its consolidated subsidiaries, including MGM Growth Properties Operating Partnership LP. Unless otherwise indicated or unless the context requires otherwise, all references to the “Operating Partnership” refer to MGM Growth Properties Operating Partnership LP together with its consolidated subsidiaries.
MGP is a real estate investment trust, or REIT, and the owner of the sole general partner of the Operating Partnership. As of March 31, 2019, MGP owned approximately 30.2% of the Operating Partnership units in the Operating Partnership. The remaining approximately 69.8% of the Operating Partnership units in the Operating Partnership are owned by subsidiaries of our parent, MGM Resorts International (“MGM”). As the owner of the sole general partner of the Operating Partnership, MGP has the full, exclusive and complete responsibility for the Operating Partnership’s day-to-day management and control.
We believe combining the quarterly reports on Form 10-Q of MGP and the Operating Partnership into this single report results in the following benefits:
enhances investors’ understanding of MGP and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both MGP and the Operating Partnership, which we believe will assist investors in getting all relevant information on their investment in one place rather than having to access and review largely duplicative reports; and
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.
There are a few differences between MGP and the Operating Partnership, which are reflected in the disclosures in this report. We believe it is important to understand the differences between MGP and the Operating Partnership in the context of how we operate as an interrelated consolidated company. MGP is a REIT, whose only material assets consist of Operating Partnership units representing limited partner interests in the Operating Partnership and our ownership interest in the general partner of the Operating Partnership. As a result, MGP does not conduct business itself, other than acting as the owner of the sole general partner of the Operating Partnership, but it may from time to time issue additional public equity. The Operating Partnership holds all the assets of the Company. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from the offerings of Class A shares by MGP, which were contributed to the Operating Partnership in exchange for Operating Partnership units, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations and by the Operating Partnership’s issuance of indebtedness or through the issuance of Operating Partnership units.
The presentation of noncontrolling interest, shareholders’ equity and partners’ capital are the main areas of difference between the condensed consolidated financial statements of MGP and those of the Operating Partnership. The Operating Partnership units held by subsidiaries of MGM are accounted for as partners’ capital in the Operating Partnership’s condensed consolidated financial statements and as noncontrolling interest within equity in MGP’s condensed consolidated financial statements. The Operating Partnership units held by MGP in the Operating Partnership are accounted for as partners’ capital in the Operating Partnership’s condensed consolidated financial statements and within Class A shareholders’ equity in MGP’s condensed consolidated financial statements. The differences in the presentations between shareholders’ equity and partners’ capital result from the differences in the equity issued at the MGP and Operating Partnership levels.
To help investors understand the significant differences between MGP and the Operating Partnership, this report presents the condensed consolidated financial statements separately for MGP and the Operating Partnership.
As the sole beneficial owner of MGM Growth Properties OP GP LLC, which is the sole general partner with control of the Operating Partnership, MGP consolidates the Operating Partnership for financial reporting purposes, and it does not have any assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of MGP and the Operating Partnership are the same on their respective condensed consolidated financial statements. The separate discussions of MGP and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a condensed consolidated basis and how management operates the Company.




In order to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and 18 U.S.C. §1350, this report also includes separate “Item 4. Controls and Procedures” sections and separate Exhibit 31 and 32 certifications for each of the Company and the Operating Partnership.
All other sections of this report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risk, are presented together for MGP and the Operating Partnership.





MGM GROWTH PROPERTIES LLC
FORM 10-Q
I N D E X

 
 
Page
PART I.
 
 
 
 
Item 1.
 
 
 
 
MGM Growth Properties LLC:
 
 
 
 
 
 
 
MGM Growth Properties Operating Partnership LP:
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 6.




Part I.    FINANCIAL INFORMATION
Item 1.    Financial Statements
MGM GROWTH PROPERTIES LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(unaudited)
 
March 31, 2019
 
December 31, 2018
ASSETS
Real estate investments, net
$
10,296,433

 
$
9,742,225

Property and equipment, used in operations, net
776,719

 
784,295

Lease incentive asset
542,195

 

Cash and cash equivalents
74,050

 
59,817

Tenant and other receivables, net
9,872

 
14,990

Prepaid expenses and other assets
36,158

 
37,837

Above market lease, asset
42,621

 
43,014

Goodwill
17,915

 
17,915

Other intangible assets, net
250,321

 
251,214

Operating lease right-of-use assets
280,401

 

Total assets
$
12,326,685

 
$
10,951,307

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
 
 
 
Debt, net
$
4,939,702

 
$
4,666,949

Due to MGM Resorts International and affiliates
425

 
307

Accounts payable, accrued expenses and other liabilities
48,701

 
49,602

Above market lease, liability

 
46,181

Accrued interest
38,768

 
26,096

Dividend and distribution payable
139,279

 
119,055

Deferred revenue
72,790

 
163,977

Deferred income taxes, net
34,642

 
33,634

Operating lease liabilities
335,461

 

Total liabilities
5,609,768

 
5,105,801

Commitments and contingencies (Note 12)

 

Shareholders’ equity
 
 
 
Class A shares: no par value, 1,000,000,000 shares authorized, 90,461,166 and 70,911,166 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively

 

Additional paid-in capital
2,210,545

 
1,712,671

Accumulated deficit
(173,017
)
 
(150,908
)
Accumulated other comprehensive income
54

 
4,208

Total Class A shareholders’ equity
2,037,582

 
1,565,971

Noncontrolling interest
4,679,335

 
4,279,535

Total shareholders’ equity
6,716,917

 
5,845,506

Total liabilities and shareholders’ equity
$
12,326,685

 
$
10,951,307

The accompanying notes are an integral part of these condensed consolidated financial statements.


1



MGM GROWTH PROPERTIES LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
Revenues
 
 
 
Rental revenue
$
196,882

 
$
186,563

Tenant reimbursements and other
6,541

 
29,276

Gaming, food, beverage and other
67,841

 

Total revenues
271,264

 
215,839

 
 
 
 
Expenses
 
 
 
Gaming, food, beverage and other
44,929

 

Depreciation and amortization
75,009

 
68,991

Property transactions, net
1,113

 
4,086

Ground lease and other reimbursable expenses
5,920

 
28,360

Amortization of above market lease, net

 
171

Acquisition-related expenses
8,792

 
541

General and administrative
4,237

 
3,908

 
140,000

 
106,057

Operating income
131,264

 
109,782

Non-operating income (expense)
 
 
 
Interest income
1,846

 
1,032

Interest expense
(63,948
)
 
(49,230
)
Other non-operating expenses
(137
)
 
(2,184
)
 
(62,239
)
 
(50,382
)
Income before income taxes
69,025

 
59,400

Provision for income taxes
(2,661
)
 
(1,231
)
Net income
66,364

 
58,169

Less: Net (income) attributable to noncontrolling interest
(46,409
)
 
(42,339
)
Net income attributable to Class A shareholders
$
19,955

 
$
15,830

 
 
 
 
Weighted average Class A shares outstanding:
 
 
 
Basic
84,043,706

 
70,970,141

Diluted
84,303,041

 
71,130,920

 
 
 
 
Net income per Class A share (basic)
$
0.24

 
$
0.22

Net income per Class A share (diluted)
$
0.24

 
$
0.22

The accompanying notes are an integral part of these condensed consolidated financial statements.


2



MGM GROWTH PROPERTIES LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)

 
Three Months Ended March 31,
 
2019
 
2018
Net income
$
66,364

 
$
58,169

Other comprehensive income (loss)
 
 
 
Unrealized gain (loss) on cash flow hedges, net
(15,612
)
 
16,355

Other comprehensive income (loss)
(15,612
)
 
16,355

Comprehensive income
50,752

 
74,524

Less: Comprehensive income attributable to noncontrolling interests
(35,514
)
 
(54,336
)
Comprehensive income attributable to Class A shareholders
$
15,238

 
$
20,188


The accompanying notes are an integral part of these condensed consolidated financial statements.

3



MGM GROWTH PROPERTIES LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
Cash flows from operating activities
 
 
 
Net income
$
66,364

 
$
58,169

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
75,009

 
68,991

Property transactions, net
1,113

 
4,086

Amortization of deferred financing costs and debt discount
3,144

 
2,974

Loss on retirement of debt

 
1,018

Non-cash ground lease, net
260

 
171

Deemed contributions - tax sharing agreement
1,344

 
1,231

Straight-line rental revenues
6,455

 
2,612

Amortization of lease incentive
1,345

 

Amortization of deferred revenue
(880
)
 
(916
)
Share-based compensation
565

 
384

Deferred income taxes
1,317

 

Park MGM Transaction
(605,625
)
 

Changes in operating assets and liabilities:
 
 
 
Tenant and other receivables, net
(2,524
)
 
4,048

Prepaid expenses and other assets
109

 
407

Due to MGM Resorts International and affiliates
118

 
(660
)
Accounts payable, accrued expenses and other liabilities
(319
)
 
(5,241
)
Accrued interest
12,672

 
7,950

Net cash provided by (used in) operating activities
(439,533
)
 
145,224

Cash flows from investing activities
 
 
 
Capital expenditures for property and equipment
(12
)
 
(177
)
Net cash used in investing activities
(12
)
 
(177
)
Cash flows from financing activities
 
 
 
Net repayments under bank credit facility
(469,625
)
 
(8,375
)
Proceeds from issuance of debt
750,000

 

Deferred financing costs
(9,983
)
 
(4,544
)
Repayment of assumed bridge facility
(245,950
)
 

Issuance of Class A shares
571,838

 

Class A share issuance costs
(23,447
)
 

Dividends and distributions paid
(119,055
)
 
(111,733
)
Net cash provided by (used in) financing activities
453,778

 
(124,652
)
Cash and cash equivalents
 
 
 
Net increase for the period
14,233

 
20,395

Balance, beginning of period
59,817

 
259,722

Balance, end of period
$
74,050

 
$
280,117

Supplemental cash flow disclosures
 
 
 
Interest paid
$
47,995

 
$
38,171

Non-cash investing and financing activities
 
 
 
Non-Normal Tenant Improvements by Tenant
$

 
$
372

Accrual of dividend and distribution payable to Class A shareholders and Operating Partnership unit holders
$
139,279

 
$
111,733

Empire City Transaction assets acquired
$
625,000

 
$

The accompanying notes are an integral part of these condensed consolidated financial statements.

4



MGM GROWTH PROPERTIES LLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)
 
Class A Shares
 
Additional Paid-in Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income (Loss)
 
Total Class A Shareholders' Equity
 
Noncontrolling Interest
 
Total Shareholders' Equity
Balance at January 1, 2019

 
$
1,712,671

 
$
(150,908
)
 
$
4,208

 
$
1,565,971

 
$
4,279,535

 
$
5,845,506

Net income

 

 
19,955

 

 
19,955

 
46,409

 
66,364

Deemed contribution - tax sharing agreement

 

 

 

 

 
1,345

 
1,345

Dividends and distributions declared ($0.4650 per Class A share)

 

 
(42,064
)
 

 
(42,064
)
 
(97,215
)
 
(139,279
)
Issuance of Class A shares

 
471,647

 

 
774

 
472,421

 
75,970

 
548,391

Empire City Transaction

 
23,940

 

 
(195
)
 
23,745

 
355,305

 
379,050

Park MGM Transaction

 
2,512

 

 
(16
)
 
2,496

 
29,379

 
31,875

Share-based compensation

 
164

 

 

 
164

 
401

 
565

Other comprehensive income - cash flow hedges

 

 

 
(4,717
)
 
(4,717
)
 
(10,895
)
 
(15,612
)
Other

 
(389
)
 

 

 
(389
)
 
(899
)
 
(1,288
)
Balance at March 31, 2019

 
$
2,210,545

 
$
(173,017
)
 
$
54

 
$
2,037,582

 
$
4,679,335

 
$
6,716,917


The accompanying notes are an integral part of these condensed consolidated financial statements.










5



MGM GROWTH PROPERTIES LLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(unaudited)
 
Class A Shares
 
Additional Paid-in Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income (Loss)
 
Total Class A Shareholders' Equity
 
Noncontrolling Interest
 
Total Shareholders' Equity
Balance at January 1, 2018

 
$
1,716,490

 
$
(94,948
)
 
$
3,108

 
$
1,624,650

 
$
4,443,089

 
$
6,067,739

Net income

 

 
15,830

 

 
15,830

 
42,339

 
58,169

Deemed contribution - tax sharing agreement

 

 

 

 

 
1,231

 
1,231

Dividends and distributions declared ($0.4200 per Class A share)

 

 
(29,777
)
 

 
(29,777
)
 
(81,956
)
 
(111,733
)
Share-based compensation

 
102

 

 

 
102

 
282

 
384

Other comprehensive income - cash flow hedges

 

 

 
4,358

 
4,358

 
11,997

 
16,355

Other

 
108

 

 

 
108

 
293

 
401

Balance at March 31, 2018

 
$
1,716,700

 
$
(108,895
)
 
$
7,466

 
$
1,615,271

 
$
4,417,275

 
$
6,032,546


The accompanying notes are an integral part of these condensed consolidated financial statements.


6



MGM GROWTH PROPERTIES OPERATING PARTNERSHIP LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except unit amounts)
(unaudited)

 
March 31, 2019
 
December 31, 2018
ASSETS
 
 
 
Real estate investments, net
$
10,296,433

 
$
9,742,225

Property and equipment, used in operations, net
776,719

 
784,295

Lease incentive asset
542,195

 

Cash and cash equivalents
74,050

 
59,817

Tenant and other receivables, net
9,872

 
14,990

Prepaid expenses and other assets
36,158

 
37,837

Above market lease, asset
42,621

 
43,014

Goodwill
17,915

 
17,915

Other intangible assets, net
250,321

 
251,214

Operating lease right-of-use assets
280,401

 

Total assets
$
12,326,685

 
$
10,951,307

LIABILITIES AND PARTNERS' CAPITAL
 
 
 
Liabilities
 
 
 
Debt, net
$
4,939,702

 
$
4,666,949

Due to MGM Resorts International and affiliates
425

 
307

Accounts payable, accrued expenses and other liabilities
48,701

 
49,602

Above market lease, liability

 
46,181

Accrued interest
38,768

 
26,096

Distribution payable
139,279

 
119,055

Deferred revenue
72,790

 
163,977

Deferred income taxes, net
34,642

 
33,634

Operating lease liabilities
335,461

 

Total liabilities
5,609,768

 
5,105,801

Commitments and contingencies (Note 12)

 

Partners' capital
 
 
 
General partner

 

Limited partners: 299,526,035 and 266,045,289 Operating Partnership units issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
6,716,917

 
5,845,506

Total partners' capital
6,716,917

 
5,845,506

Total liabilities and partners’ capital
$
12,326,685

 
$
10,951,307

The accompanying notes are an integral part of these condensed consolidated financial statements.


7



MGM GROWTH PROPERTIES OPERATING PARTNERSHIP LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit and per unit amounts)
(unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
Revenues
 
 
 
Rental revenue
$
196,882

 
$
186,563

Tenant reimbursements and other
6,541

 
29,276

Gaming, food, beverage and other
67,841

 

Total revenues
271,264

 
215,839

 
 
 
 
Expenses
 
 
 
Gaming, food, beverage and other
44,929

 

Depreciation and amortization
75,009

 
68,991

Property transactions, net
1,113

 
4,086

Ground lease and other reimbursable expenses
5,920

 
28,360

Amortization of above market lease, net

 
171

Acquisition-related expenses
8,792

 
541

General and administrative
4,237

 
3,908

 
140,000

 
106,057

Operating income
131,264

 
109,782

Non-operating income (expense)
 
 
 
Interest income
1,846

 
1,032

Interest expense
(63,948
)
 
(49,230
)
Other non-operating expenses
(137
)
 
(2,184
)
 
(62,239
)
 
(50,382
)
Income before income taxes
69,025

 
59,400

Provision for income taxes
(2,661
)
 
(1,231
)
Net income
$
66,364

 
$
58,169

 
 
 
 
Weighted average Operating Partnership units outstanding:
 
 
 
Basic
288,351,486

 
266,104,264

Diluted
288,610,821

 
266,265,043

 
 
 
 
Net income per Operating Partnership unit (basic)
$
0.23

 
$
0.22

Net income per Operating Partnership unit (diluted)
$
0.23

 
$
0.22

The accompanying notes are an integral part of these condensed consolidated financial statements.


8



MGM GROWTH PROPERTIES OPERATING PARTNERSHIP LP
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
Net income
$
66,364

 
$
58,169

Unrealized gain (loss) on cash flow hedges, net
(15,612
)
 
16,355

Comprehensive income
$
50,752

 
$
74,524

The accompanying notes are an integral part of these condensed consolidated financial statements.


9



MGM GROWTH PROPERTIES OPERATING PARTNERSHIP LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
Cash flows from operating activities
 
 
 
Net income
$
66,364

 
$
58,169

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
75,009

 
68,991

Property transactions, net
1,113

 
4,086

Amortization of deferred financing costs and debt discount
3,144

 
2,974

Loss on retirement of debt

 
1,018

Non-cash ground lease, net
260

 
171

Deemed contributions - tax sharing agreement
1,344

 
1,231

Straight-line rental revenues
6,455

 
2,612

Amortization of lease incentive
1,345

 

Amortization of deferred revenue
(880
)
 
(916
)
Share-based compensation
565

 
384

Deferred income taxes
1,317

 

Park MGM Transaction
(605,625
)
 

Changes in operating assets and liabilities:
 
 
 
Tenant and other receivables, net
(2,524
)
 
4,048

Prepaid expenses and other assets
109

 
407

Due to MGM Resorts International and affiliates
118

 
(660
)
Accounts payable, accrued expenses and other liabilities
(319
)
 
(5,241
)
Accrued interest
12,672

 
7,950

Net cash provided by (used in) operating activities
(439,533
)
 
145,224

Cash flows from investing activities
 
 
 
Capital expenditures for property and equipment
(12
)
 
(177
)
Net cash used in investing activities
(12
)
 
(177
)
Cash flows from financing activities
 
 
 
Net repayments under bank credit facility
(469,625
)
 
(8,375
)
Proceeds from issuance of debt
750,000

 

Deferred financing costs
(9,983
)
 
(4,544
)
Repayment of assumed bridge facility
(245,950
)
 

Issuance of Operating Partnership units
548,391

 

Distributions paid
(119,055
)
 
(111,733
)
Net cash provided by (used in) financing activities
453,778

 
(124,652
)
Cash and cash equivalents
 
 
 
Net increase for the period
14,233

 
20,395

Balance, beginning of period
59,817

 
259,722

Balance, end of period
$
74,050

 
$
280,117

Supplemental cash flow disclosures
 
 
 
Interest paid
$
47,995

 
$
38,171

Non-cash investing and financing activities
 
 
 
Non-Normal Tenant Improvements by Tenant
$

 
$
372

Accrual of distribution payable to Operating Partnership unit holders
$
139,279

 
$
111,733

Empire City Transaction assets acquired
$
625,000

 
$


The accompanying notes are an integral part of these condensed consolidated financial statements.

10



MGM GROWTH PROPERTIES OPERATING PARTNERSHIP LP
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(in thousands)
(unaudited)
 
General Partner
 
Limited Partners
 
Total
Partners'
Capital
Balance at January 1, 2019
$

 
$
5,845,506

 
$
5,845,506

Net income

 
66,364

 
66,364

Deemed contribution - tax sharing agreement

 
1,345

 
1,345

Distributions declared ($0.4650 per unit)

 
(139,279
)
 
(139,279
)
Issuance of Operating Partnership units

 
548,391

 
548,391

Empire City Transaction

 
379,050

 
379,050

Park MGM Transaction

 
31,875

 
31,875

Share-based compensation

 
565

 
565

Other comprehensive income - cash flow hedges

 
(15,612
)
 
(15,612
)
Other

 
(1,288
)
 
(1,288
)
Balance at March 31, 2019
$

 
$
6,716,917

 
$
6,716,917

The accompanying notes are an integral part of these condensed consolidated financial statements.




































11







MGM GROWTH PROPERTIES OPERATING PARTNERSHIP LP
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(in thousands)
(unaudited)
 
General Partner
 
Limited Partners
 
Total
Partners'
Capital
Balance at January 1, 2018
$

 
$
6,067,739

 
$
6,067,739

Net income

 
58,169

 
58,169

Deemed contribution - tax sharing agreement

 
1,231

 
1,231

Distributions declared ($0.4200 per unit)

 
(111,733
)
 
(111,733
)
Share-based compensation

 
384

 
384

Other comprehensive income - cash flow hedges

 
16,355

 
16,355

Other

 
401

 
401

Balance at March 31, 2018
$

 
$
6,032,546

 
$
6,032,546

The accompanying notes are an integral part of these condensed consolidated financial statements.


12



MGM GROWTH PROPERTIES LLC AND MGM GROWTH PROPERTIES OPERATING PARTNERSHIP LP CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 — BUSINESS

Organization. MGM Growth Properties LLC (“MGP” or the “Company”) is a limited liability company that was organized in Delaware in October 2015. MGP conducts its operations through MGM Growth Properties Operating Partnership LP (the “Operating Partnership”), a Delaware limited partnership that was formed in January 2016 and acquired by MGP in April 2016. The Company elected to be treated as a real estate investment trust (“REIT”) commencing with its taxable year ended December 31, 2016.

MGP is a publicly traded REIT primarily engaged through its investment in the Operating Partnership in the real property business, which consists of owning, acquiring and leasing large-scale destination entertainment and leisure properties, whose tenants generally offer casino gaming, hotel, convention, dining, entertainment and retail. One of the Company’s wholly-owned taxable REIT subsidiaries (“TRS”), MGP OH, Inc. owned the Hard Rock Rocksino Northfield Park (the “Rocksino”) in Northfield, Ohio until April 1, 2019 as discussed below. A wholly owned subsidiary of the Operating Partnership (the “Landlord”) leases all of its real estate properties to a wholly owned subsidiary (the “Tenant”) of MGM Resorts International (“MGM”) under a master lease agreement (the “Master Lease”).

    As of March 31, 2019, there were approximately 299.5 million Operating Partnership units outstanding in the Operating Partnership, of which MGM owned approximately 209.1 million, or 69.8%, and MGP owned the remaining 30.2%. MGM’s Operating Partnership units are exchangeable into Class A shares of MGP on a one-to-one basis, or cash at the fair value of a Class A share. MGP’s independent conflicts committee determines the settlement method for such exchanges. MGM’s indirect ownership of these Operating Partnership units is recognized as a noncontrolling interest in MGP’s financial statements. A wholly owned subsidiary of MGP is the general partner of the Operating Partnership and operates and controls all of its business affairs. As a result, MGP consolidates the Operating Partnership and its subsidiaries. MGM also has ownership of MGP’s outstanding Class B share. The Class B share is a non-economic interest in MGP which does not provide its holder any rights to profits or losses or any rights to receive distributions from the operations of MGP or upon liquidation or winding up of MGP but which represents a majority of the voting power of MGP’s shares. As a result, MGP continues to be controlled by MGM through its majority voting rights and is consolidated by MGM.
    
Empire City Transaction

On January 29, 2019, the Company acquired the developed real property associated with Empire City Casino (“Empire City”) from MGM upon its acquisition of Empire City (“Empire City Transaction”). Empire City was added to the existing Master Lease between the Landlord and Tenant. As a result, the annual rent payment to MGP increased by $50 million, prorated for the remainder of the lease year. Consistent with the Master Lease terms, 90% of this rent is fixed and will contractually grow at 2% per year until 2022. In addition, pursuant to the Master Lease, MGP has a right of first offer with respect to certain undeveloped land adjacent to the property to the extent MGM develops additional gaming facilities and chooses to sell or transfer the property in the future. Refer to Note 3 for further discussion.

Park MGM Transaction

On March 7, 2019, the Company completed the transaction relating to renovations undertaken by MGM Resorts regarding the Park MGM and NoMad Las Vegas property (the “Park MGM Transaction”) for total consideration of $637.5 million. MGP funded the transaction with $605.6 million in cash and the issuance of approximately 1.0 million of Operating Partnership units to a subsidiary of MGM. As a result of the transaction, the Company recorded a lease incentive asset and annual rent payment to MGP increased by $50 million, prorated for the remainder of the lease year. Consistent with the Master Lease terms, 90% of this rent is fixed and will contractually grow at 2% per year until 2022. Refer to Note 6 for further discussion.

Northfield OpCo Disposition

Subsequent to quarter end, on April 1, 2019, a subsidiary of MGM acquired the membership interests of Northfield Park Associates, LLC (“Northfield”), the entity that owned the real estate assets and operations of the Hard Rock Rocksino Northfield Park in Northfield, Ohio, from the Company for consideration consisting of Operating Partnership units that were ultimately redeemed by the Operating Partnership, and the Company retained the real estate assets, thereafter dissolving the TRS. Subsequently, MGM rebranded the operations it acquired (“Northfield OpCo”) to MGM Northfield Park, which was then added to the existing Master Lease between the Landlord and Tenant. As a result, the annual rent payment to MGP increased by $60.0

13



million. Consistent with the Master Lease terms, 90% of this rent is fixed and will contractually grow at 2% per year until 2022. Refer to Note 3 for additional details.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. All adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Certain reclassifications have been made to conform the prior period presentation.

The accompanying condensed consolidated financial statements and related notes should be read in conjunction with the audited financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K.
Variable Interest Entities. The condensed consolidated financial statements of MGP include the accounts of the Operating Partnership, a variable interest entity (“VIE”) of which the Company is the primary beneficiary, as well as its wholly owned and majority-owned subsidiaries, which represents all of MGP’s assets and liabilities. As MGP holds what is deemed a majority voting interest in the Operating Partnership through its ownership of the Operating Partnership’s sole general partner, it qualifies for the exemption from providing certain of the required disclosures associated with investments in VIEs. The condensed consolidated financial statements of the Operating Partnership include the accounts of its wholly owned subsidiary, the Landlord, which owns the real estate, a VIE of which the Operating Partnership is the primary beneficiary. As of March 31, 2019, on a consolidated basis the Landlord had total assets of $11.2 billion primarily related to its real estate assets, and total liabilities of $437.6 million primarily related to its deferred revenue and operating lease liabilities.
Noncontrolling interest. The Company presents noncontrolling interest and classifies such interest as a component of consolidated shareholders’ equity, separate from the Company’s Class A shareholders’ equity. Noncontrolling interest in the Company represents Operating Partnership units currently held by subsidiaries of MGM. Net income or loss of the Operating Partnership is allocated to its noncontrolling interest based on the noncontrolling interest’s ownership percentage in the Operating Partnership except for income tax expenses. Ownership percentage is calculated by dividing the number of Operating Partnership units held by the noncontrolling interest by the total Operating Partnership units held by the noncontrolling interest and the Company. Issuance of additional Class A shares and Operating Partnership units changes the ownership interests of both the noncontrolling interest and the Company. Such transactions and the related proceeds are treated as capital transactions.
MGM may tender its Operating Partnership units for redemption by the Operating Partnership in exchange for cash equal to the market price of MGP’s Class A shares at the time of redemption or for unregistered Class A shares on a one-for-one basis. Such selection to pay cash or issue Class A shares to satisfy an Operating Partnership unitholder’s redemption request is solely within the control of MGP’s independent conflicts committee.

Fair value measurements. Fair value measurements are utilized in the accounting and impairment assessments of its long-lived assets, assets acquired and liabilities assumed in a business combination, and goodwill and other intangible assets. Fair value measurements also affect the Company’s accounting for certain of its financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy that includes: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs, which are observable inputs for similar assets; or Level 3 inputs, which are unobservable inputs. The Company used the following inputs in its fair value measurements:

Level 2 inputs for its long-term debt fair value disclosures. See Note 7;
Level 2 inputs when measuring the fair value of its interest rate swaps. See Note 8; and
Level 2 and Level 3 inputs when assessing the fair value of assets acquired and liabilities assumed during the Company’s acquisitions. See Note 3.
Real estate investments. Real estate investments consist of land, buildings, improvements and integral equipment related to the Landlord. The contribution or acquisition of the real property by the Operating Partnership from MGM represent transactions between entities under common control, and as a result, such real estate was initially recorded by the Company at MGM’s historical cost basis, less accumulated depreciation (i.e., there was no change in the basis of the contributed assets), as of the contribution or acquisition dates. Costs of maintenance and repairs to real estate investments are the responsibility of the Tenant under the Master Lease.

14



Although the Tenant is responsible for all capital expenditures during the term of the Master Lease, if, in the future, a deconsolidation event occurs, the Company will be required to pay the Tenant, should the Tenant so elect, for certain capital improvements that would not constitute “normal tenant improvements” in accordance with U.S. GAAP (“Non-Normal Tenant Improvements”), subject to an initial cap of $100 million in the first year of the Master Lease increasing annually by $75 million each year thereafter. The Company will be entitled to receive additional rent based on the 10-year Treasury yield plus 600 basis points multiplied by the value of the new capital improvements the Company is required to pay for in connection with a deconsolidation event and such capital improvements will be subject to the terms of the Master Lease. Examples of Non-Normal Tenant Improvements include the costs of structural elements at the properties, including capital improvements that expand the footprint or square footage of any of the properties or extend the useful life of the properties, as well as equipment that would be a necessary improvement at any of the properties, including initial installation of elevators, air conditioning systems or electrical wiring. Such Non-Normal Tenant Improvements are capitalized and depreciated over the asset’s remaining life. Non-Normal Tenant Improvements were $48.4 million at March 31, 2019.
Lease incentive asset. The Company’s lease incentive asset consists of the consideration paid to MGM as part of the Park MGM Transaction, net of the deferred revenue balance associated with Non-Normal Tenant Improvements related to Park MGM, which was derecognized. The Company amortizes the lease incentive asset as a reduction of rental income over the remaining term of the Master Lease.

Property and Equipment used in operations. Property and equipment used in operations are stated at cost. The property and equipment used in operations were acquired through the Company’s acquisition of Northfield in 2018 and therefore recognized at fair value at the acquisition date. Property and equipment used in operations are generally depreciated over the following useful lives on a straight-line basis:
Buildings and improvements
20 to 40 years
Land improvements
10 to 20 years
Furniture, fixtures and equipment
3 to 20 years

    
The Company evaluates its property and equipment and other long-lived assets for impairment based on its classification as held for sale or to be held and used. Several criteria must be met before an asset is classified as held for sale, including that management with the appropriate authority commits to a plan to sell the asset to a third-party at a reasonable price in relation to its fair value and is actively seeking a buyer. For assets held for sale, the Company recognizes the asset at the lower of carrying value or fair market value less costs to sell, as estimated based on comparable asset sales, offers received, or a discounted cash flow model. For assets to be held and used, the Company reviews for impairment whenever indicators of impairment exist. The Company then compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment charge is recorded based on the fair value of the asset, typically measured using a discounted cash flow model. All recognized impairment losses, whether for assets held for sale or assets to be held and used, are recorded as operating expenses. There were no impairment charges related to long lived assets recognized during the quarters ended March 31, 2019 and March 31, 2018.

Deferred revenue. The Company receives nonmonetary consideration related to Non-Normal Tenant Improvements as they become MGP’s property pursuant to the Master Lease and recognizes the cost basis of Non-Normal Tenant Improvements as real estate investments and deferred revenue. The Company depreciates the real estate investments over their estimated useful lives and amortizes the deferred revenue as additional rental revenue over the remaining term of the Master Lease once the related real estate assets are placed in service.

Ground lease and other reimbursable expenses. Ground lease and other reimbursable expenses arise from costs which upon adoption of ASC 842, includes ground lease rent paid directly by the Tenant to the third-party lessor on behalf of the Company. Prior to the adoption of ASC 842 on January 1, 2019, as further described below, reimbursable expenses also included property taxes paid for by the Tenant on behalf of the Company pursuant to the triple-net lease terms of the Master Lease.

Revenue recognition. Rental revenue under the Master Lease is recognized on a straight-line basis over the non-cancelable term and reasonably assured renewal periods, which includes the initial lease term of ten years and all four additional five-year terms under the Master Lease, for all contractual revenues that are determined to be fixed and measurable. The difference between such rental revenue earned and the cash rent due under the provisions of the Master Lease is recorded as deferred rent receivable and included as a component of tenant and other receivables, net or as deferred revenue if cash rent due exceeds rental revenue earned.


15



Tenant reimbursement revenue and other reflects the amortization of deferred revenue relating to Non-Normal Tenant Improvements as well as the non-cash ground lease reimbursement revenue from the Tenant. Prior to the adoption of ASC 842 in 2019, the Company also reflected within this amount the revenue that arises from costs for which the Company is the primary obligor that are required to be paid by the Tenant or reimbursed to the Company pursuant to the Master Lease such as property taxes. This revenue is recognized in the same periods as the expense is incurred.

Northfield generates gaming, food, beverage and other revenue, which primarily consists of video lottery terminal (“VLT”) wager transactions and food and beverage transactions. The transaction price for a VLT wager is the difference between gaming wins and losses (net win). The Company accounts for VLT revenue on a portfolio basis given the similar characteristics of wagers by recognizing net win per gaming day versus on an individual wager basis. The transaction price of food and beverage contracts is the amount collected from the customer or stand-alone selling price for such goods and services and is recorded when the delivery is made. Sales and usage-based taxes are excluded from revenues.

Lessee leases. The Company determines if an arrangement is or contains a lease at inception or modification of the arrangement. An arrangement is or contains a lease if there are identified assets and the right to control the use of an identified asset is conveyed for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.

For leases with terms greater than twelve months, the operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The initial measurement of the operating lease ROU assets also include any prepaid lease payments and are reduced by any previously accrued deferred rent. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company uses its incremental borrowing rate to discount the lease payments based on the information available at commencement date. Certain of the Company’s leases include fixed rental escalation clauses that are factored into the determination of lease payments. Lease terms include options to extend or terminate the lease when it is reasonably certain that such option will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term.
Income tax provision. For interim income tax reporting the Company estimates its annual effective tax rate and applies it to its year-to-date ordinary income. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur. The Company’s effective income tax rate was 3.9% for the three months ended March 31, 2019.
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company is subject to federal, state and local income tax on its TRS operations and recorded a tax provision of $1.3 million on the TRS operations for the three months ended March 31, 2019.
The Landlord is required to join in the filing of a New Jersey consolidated corporation business tax return under the New Jersey Casino Control Act and include in such return its income and expenses associated with its New Jersey assets and is thus subject to an entity level tax in New Jersey. Although the consolidated New Jersey return also includes MGM and certain of its subsidiaries, the Company is required to record New Jersey state income taxes in the accompanying financial statements as if the Landlord was taxed for state purposes on a stand-alone basis. The Company and MGM have entered into a tax sharing agreement providing for an allocation of taxes due in the consolidated New Jersey return. Pursuant to this agreement, the Landlord will only be responsible for New Jersey taxes on any gain that may be realized upon a future sale of the New Jersey assets resulting solely from an appreciation in value of such assets over their value on the date they were contributed to the Landlord by a subsidiary of MGM. MGM is responsible for all other taxes reported in the New Jersey consolidated return and, accordingly, the related income tax balances related to such taxes is reflected within noncontrolling interest within the accompanying financial statements. No amounts were due to MGM under the tax sharing agreement as of March 31, 2019 and December 31, 2018.
Recently issued accounting standards. In February 2016, the FASB issued ASC 842 “Leases (Topic 842)”, which replaces the existing guidance in Topic 840, “Leases”, (“ASC 842”). ASC 842 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. ASC 842 requires a dual approach for lessee accounting under which a lessee would classify and account for its lease agreements as either finance or operating. Both finance and operating leases will

16



result in the lessee recognizing a ROU asset and a corresponding lease liability. For finance leases, the lessee will recognize interest expense associated with the lease liability and depreciation expense associated with the ROU asset; and for operating leases, the lessee will recognize straight-line rent expense. The Company adopted ASC 842 on January 1, 2019 utilizing the simplified transition method and accordingly did not recast comparative period financial information. The Company elected the package of practical expedients available under ASC 842, which includes that the Company need not reassess the lease classification for existing contracts. Accordingly, the Master Lease continues to be classified as an operating lease as of January 1, 2019. ASC 842 requires lessors to exclude from variable payments, and therefore from revenue, lessor costs paid by lessees directly to third parties. Under the Master Lease, the lessee pays property tax directly to third parties; accordingly, the Company no longer reflect such costs as “Tenant reimbursements and other” within revenues or “Ground lease and other reimbursable expenses” within expenses as of January 1, 2019.

The Company is also a lessee in lease arrangements, primarily for land underlying certain of its properties. As a result of adoption, the Company recognized approximately $279.9 million of operating ROU assets and approximately $333.5 million of operating lease liabilities as of January 1, 2019.
NOTE 3 — ACQUISITIONS

Empire City Acquisition

As discussed in Note 1, on January 29, 2019, the Company acquired the developed real property associated with Empire City from MGM for fair value consideration of approximately $634.4 million and leased it back to a subsidiary of MGM that will operate the property. The Company funded the acquisition of the developed real property from MGM through the assumption of approximately $246.0 million of indebtedness, which was repaid with borrowings under its senior secured credit facility, and the issuance of approximately 12.9 million Operating Partnership units to MGM.

The Empire City Transaction was accounted for as a transaction between entities under common control, and therefore, the Company recorded the Empire City real estate assets at the carryover value of $625.0 million from MGM with the difference between the purchase price and carrying value of assets recorded, which was approximately $9.4 million, recorded as a reduction to additional paid-in-capital.

Northfield Acquisition and OpCo Transaction

On July 6, 2018 the TRS completed its acquisition of 100% of the membership interests of Northfield for a purchase price of approximately $1.1 billion. The Company recognized 100% of the assets and liabilities of Northfield at fair value at the date of the acquisition. As of March 31, 2019, the Company is finalizing valuation work related to the asset classes that comprise the property and equipment acquired.

As discussed in Note 1, on April 1, 2019, a subsidiary of MGM acquired the membership interests of Northfield, which reflects the operations of Northfield (“Northfield OpCo”), from the Company for fair value consideration transferred of approximately $301 million consisting of approximately 9.4 million Operating Partnership units that were ultimately redeemed by the Operating Partnership, subject to working capital adjustments, and the Company retained the real estate assets. Concurrent with the closing of the transaction, the TRS liquidated, the real estate assets of Northfield were transferred to the Landlord, and the real estate assets of Northfield were added to the existing Master Lease. As a result, the annual rent payment increased by $60 million. Consistent with the Master Lease terms, 90% of this rent is fixed and will contractually grow at 2% per year until 2022. The Northfield OpCo transaction is accounted for as a transaction between entities under common control and therefore the Company has carried the Northfield OpCo operating assets and liabilities as held and used until the close of the transaction on April 1, 2019. As a transaction between entities under common control, the Company will record the difference between the purchase price and the carrying value of net assets sold to additional paid-in-capital.

17



NOTE 4 — REAL ESTATE INVESTMENTS
The carrying value of real estate investments is as follows:
 
March 31, 2019
 
December 31, 2018
 
(in thousands)
Land
$
4,238,513

 
$
4,143,513

Buildings, building improvements, land improvements and integral equipment
8,919,660

 
8,405,479

 
13,158,173

 
12,548,992

Less: Accumulated depreciation
(2,861,740
)
 
(2,806,767
)
 
$
10,296,433

 
$
9,742,225



NOTE 5 — PROPERTY AND EQUIPMENT USED IN OPERATIONS

The carrying value of property and equipment used in operations of the TRS is as follows:
 
March 31, 2019
 
December 31, 2018
 
(in thousands)
Land
$
392,500

 
$
392,500

Buildings, building improvements and land improvements
382,845

 
382,843

Furniture, fixtures and equipment
18,715

 
18,770

 
794,060

 
794,113

Less: Accumulated depreciation
(17,341
)
 
(9,818
)
 
$
776,719

 
$
784,295


NOTE 6 — LEASES
Master Lease. Pursuant to the Master Lease, the Tenant has leased the Company’s real estate properties, other than the real estate associated with Northfield until April 1, 2019 as discussed in Note 3. The Master Lease is accounted for as an operating lease and has an initial lease term of ten years that began on April 25, 2016 (other than with respect to MGM National Harbor, as described below) with the potential to extend the term for four additional five-year terms thereafter at the option of the Tenant. With respect to MGM National Harbor, the initial lease term ends on August 31, 2024. Thereafter, the initial term of the Master Lease with respect to MGM National Harbor may be renewed at the option of the Tenant for an initial renewal period lasting until the earlier of the end of the then-current term of the Master Lease or the next renewal term (depending on whether MGM elects to renew the other properties under the Master Lease in connection with the expiration of the initial ten-year term). If, however, the Tenant chooses not to renew the lease with respect to MGM National Harbor after the initial MGM National Harbor term under the Master Lease, the Tenant would also lose the right to renew the Master Lease with respect to the rest of the properties when the initial ten-year lease term ends related to the rest of the properties in 2026.
As discussed in Note 1, on March 7, 2019, the Company completed the Park MGM Transaction and amended the existing Master Lease between the Landlord and Tenant concurrent with which the Company paid $637.5 million, of which $605.6 million was cash and the remainder was the issuance of approximately 1.0 million of Operating Partnership unit, to a subsidiary of MGM and as a result, the annual rent payment to the Company increased by $50 million, prorated for the remainder of the lease year. The Company recorded a lease incentive asset which represents the consideration paid, less the existing deferred revenue balance of $94.0 million relating to the non-normal tenant improvements recorded for Park MGM, which was derecognized. The Company was required to reassess the lease classification of the Master Lease and concluded that the Master Lease continued to be an operating lease.
The annual rent payments under the Master Lease for the third lease year increased from $770.3 million to $870.3 million as a result of the $50 million in additional rent for each of the Park MGM Transaction and Empire City. In connection with the commencement of the fourth lease year on April 1, 2019 on which date the third 2.0% fixed annual rent escalator went into effect, as well as the addition of MGM Northfield Park to the Master Lease on April 1, 2019, which increased rent by $60 million to $946.1 million from $870.3 million.

Straight-line rental revenues from the Master Lease, which includes the lease incentive asset amortization, for the three months ended March 31, 2019 and March 31, 2018 were $196.9 million and $186.6 million, respectively. The Company also recognized revenue related to tenant reimbursements and other of $6.5 million and $29.3 million for the three months ended March 31, 2019 and March 31, 2018, respectively.

18



Under the Master Lease, future non-cancelable minimum rental payments, which are the payments under the initial 10-year term and do not include the four five-year renewal options and, with respect to National Harbor, through August 31, 2024, are as follows as of March 31, 2019:

Year ending December 31,
(in thousands)
2019
$
664,546

2020
898,084

2021
914,356

2022
855,069

2023
833,944

Thereafter
1,791,622

 
$
5,957,621



The above table excludes the impact of the addition of MGM Northfield Park to the Master Lease on April 1, 2019.

Lessee Leases. The Company is a lessee of land underlying certain of its properties and, to a lesser extent, certain real estate and equipment under operating lease arrangements. Components of lease expense for the three months ended March 31, 2019 include operating lease cost of $6.0 million. Other information related to the Company’s operating leases was as follows (in thousands, except for lease term and discount rate information):

Supplemental balance sheet information
Balance at March 31, 2019
Operating lease right-of-use assets
$
280,401

Operating lease liabilities
335,461

Weighted-average remaining lease term (years)
59.14

Weighted-average discount rate (%)
7.21
%

Supplemental cash flows information
Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows from operating leases
$
4,482



Maturities of operating lease liabilities were as follows:
Year ending December 31,
(in thousands)
2019 (excluding the three months ended March 31, 2019)
$
15,164

2020
21,223

2021
25,108

2022
25,130

2023
24,993

Thereafter
1,357,660

Total future minimum lease payments
1,469,278

Less: Amount of lease payments representing interest
(1,133,817
)
Total
$
335,461



19



NOTE 7 — DEBT
Debt consists of the following:
 
March 31,
 
December 31,
 
2019
 
2018
 
(in thousands)
Senior secured credit facility:
 
 
 
Senior secured term loan A facility
$
470,000

 
$
470,000

Senior secured term loan B facility
1,794,500

 
1,799,125

Senior secured revolving credit facility
85,000

 
550,000

$1,050 million 5.625% senior notes, due 2024
1,050,000

 
1,050,000

$500 million 4.50% senior notes, due 2026
500,000

 
500,000

$750 million 5.75% senior notes, due 2027
750,000

 

$350 million 4.50% senior notes, due 2028
350,000

 
350,000

 
4,999,500