MGM Resorts International (NYSE: MGM) and MGM Growth Properties LLC (NYSE: MGP) announced today that they have entered into a definitive agreement whereby a subsidiary of MGP will purchase the long-term leasehold interest and real property improvements associated with the MGM National Harbor casino resort. MGM Resorts will lease the property from MGP and continue to operate the property following the consummation of the transaction, with no expected change to its employees, vendors, customers, and the community.
MGP will pay total consideration of approximately $1.1875 billion, consisting of a combination of $462.5 million in cash (which may include cash on hand or cash from financings, including borrowings under MGP's revolving credit facility), the assumption of approximately $425 million of secured indebtedness of MGM National Harbor, LLC (which is expected to be immediately repaid by MGP on the closing date) and the issuance by MGM Growth Properties Operating Partnership LP, a subsidiary of MGP, of operating partnership units representing $300 million of value based upon the closing price of MGP's Class A shares on September 5, 2017. MGM National Harbor will be added to the existing Master Lease between MGM Resorts and MGP, and the rent payment to MGP will increase by $95 million. Consistent with the Master Lease terms, 90 percent of this rent will be fixed and contractually grow at 2 percent per year until 2022. The sale is expected to close in the fourth quarter of 2017, subject to regulatory approvals and other customary closing conditions.
"We are excited to welcome MGM National Harbor to our portfolio and expand our geographic presence on the East Coast," said James Stewart, CEO of MGP. "As a result of this transaction, we expect to achieve mid-single digit percentage accretion to AFFO per share, while maintaining our balance sheet flexibility. Since MGP's IPO last year, we have worked diligently to increase value for our shareholders and we remain focused on continuing to drive prudent growth through future transactions."
"We are pleased to announce another accretive transaction with MGM Growth Properties, which we believe serves the best interests of the shareholders of both companies and again demonstrates our team's ability to deliver on our long-term plan," said Jim Murren, Chairman and CEO of MGM Resorts. "MGM National Harbor has exhibited strong financial performance and has already secured its place as the leading resort in its market. We will continue to support MGP as it drives future growth through the expansion of its quality asset portfolio."
As of September 5, 2017, MGM Resorts held a 76 percent economic interest in the operating partnership of MGP.
Logos, product and company names mentioned are the property of their respective owners.