Document


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, 2018
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)

(Former name, former address and former fiscal year, if changed since last report)
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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       
 
Small 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  
 
Small 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  


As of May 1, 2018, 70,907,219 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, 2018, 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, 2018, MGP owned approximately 26.6% of the Operating Partnership units in the Operating Partnership. The remaining approximately 73.4% 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, 2018
 
December 31, 2017
ASSETS
Real estate investments, net
$
9,949,410

 
$
10,021,938

Cash and cash equivalents
280,117

 
259,722

Tenant and other receivables, net
2,337

 
6,385

Prepaid expenses and other assets
33,936

 
18,487

Above market lease, asset
44,194

 
44,588

Total assets
$
10,309,994

 
$
10,351,120

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
 
 
 
Debt, net
$
3,925,203

 
$
3,934,628

Due to MGM Resorts International and affiliates
302

 
962

Accounts payable, accrued expenses and other liabilities
4,596

 
10,240

Above market lease, liability
46,847

 
47,069

Accrued interest
30,515

 
22,565

Dividend and distribution payable
111,733

 
111,733

Deferred revenue
129,708

 
127,640

Deferred income taxes, net
28,544

 
28,544

Total liabilities
4,277,448

 
4,283,381

Commitments and contingencies (Note 11)

 

Shareholders’ equity
 
 
 
Class A shares: no par value, 1,000,000,000 shares authorized, 70,896,795 shares issued and outstanding as of March 31, 2018 and December 31, 2017
—

 
—

Additional paid-in capital
1,716,700

 
1,716,490

Accumulated deficit
(108,895
)
 
(94,948
)
Accumulated other comprehensive income
7,466

 
3,108

Total Class A shareholders’ equity
1,615,271

 
1,624,650

Noncontrolling interest
4,417,275

 
4,443,089

Total shareholders’ equity
6,032,546

 
6,067,739

Total liabilities and shareholders’ equity
$
10,309,994

 
$
10,351,120

The accompanying condensed 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,
 
2018
 
2017
Revenues
 
 
 
Rental revenue
$
186,563

 
$
163,177

Tenant reimbursements and other
29,276

 
20,722

 
215,839

 
183,899

Expenses
 
 
 
Depreciation
68,991

 
61,684

Property transactions, net
4,086

 
6,855

Reimbursable expenses
28,360

 
20,487

Amortization of above market lease, net
171

 
171

Acquisition-related expenses
541

 
—

General and administrative
3,908

 
2,680

 
106,057

 
91,877

Operating income
109,782

 
92,022

Non-operating income (expense)
 
 
 
Interest income
1,032

 
678

Interest expense
(49,230
)
 
(44,636
)
Other non-operating expenses
(2,184
)
 
(134
)
 
(50,382
)
 
(44,092
)
Income before income taxes
59,400

 
47,930

Provision for income taxes
(1,231
)
 
(1,238
)
Net income
58,169

 
46,692

Less: Net (income) attributable to noncontrolling interest
(42,339
)
 
(35,344
)
Net income attributable to Class A shareholders
$
15,830

 
$
11,348

 
 
 
 
Weighted average Class A shares outstanding:
 
 
 
Basic
70,970,141

 
57,506,195

Diluted
71,130,920

 
57,784,240

 
 
 
 
Net income per Class A share (basic)
$
0.22

 
$
0.20

Net income per Class A share (diluted)
$
0.22

 
$
0.20

 
 
 
 
Dividends declared per Class A share
$
0.4200

 
$
0.3875

The accompanying condensed 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,
 
2018
 
2017
Net income
$
58,169

 
$
46,692

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

 
(634
)
Other comprehensive income (loss)
16,355

 
(634
)
Comprehensive income
74,524

 
46,058

Less: Comprehensive (income) attributable to noncontrolling interests
(54,336
)
 
(34,860
)
Comprehensive income attributable to Class A shareholders
$
20,188

 
$
11,198


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,
 
2018
 
2017
Cash flows from operating activities
 
 
 
Net income
$
58,169

 
$
46,692

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
68,991

 
61,684

Property transactions, net
4,086

 
6,855

Amortization of deferred financing costs and debt discount
2,974

 
2,806

Loss on retirement of debt
1,018

 
—

Amortization related to above market lease, net
171

 
171

Provision for income taxes
1,231

 
1,238

Straight-line rental revenues
2,612

 
(677
)
Amortization of deferred revenue
(916
)
 
(235
)
Share-based compensation
384

 
188

Changes in operating assets and liabilities:
 
 
 
Tenant and other receivables, net
4,048

 
4,891

Prepaid expenses and other assets
407

 
(704
)
Due to MGM Resorts International and affiliates
(660
)
 
650

Accounts payable, accrued expenses and other liabilities
(5,241
)
 
(5,249
)
Accrued interest
7,950

 
881

Net cash provided by operating activities
145,224

 
119,191

Cash flows from investing activities
 
 
 
Capital expenditures for property and equipment
(177
)
 
—

Net cash used in investing activities
(177
)
 
—

Cash flows from financing activities
 
 
 
Deferred financing costs
(4,544
)
 
(526
)
Repayment of debt principal
(8,375
)
 
(16,750
)
Dividends and distributions paid
(111,733
)
 
(94,109
)
Net cash used in financing activities
(124,652
)
 
(111,385
)
Cash and cash equivalents
 
 
 
Net increase for the period
20,395

 
7,806

Balance, beginning of period
259,722

 
360,492

Balance, end of period
$
280,117

 
$
368,298

Supplemental cash flow disclosures
 
 
 
Interest paid
$
38,171

 
$
40,949

Non-cash investing and financing activities
 
 
 
Non-Normal Tenant Improvements by Tenant
$
372

 
$
8,480

Accrual of dividend and distribution payable to Class A shareholders and Operating Partnership unit holders
$
111,733

 
$
94,109

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

4


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

 
March 31, 2018
 
December 31, 2017
ASSETS
Real estate investments, net
$
9,949,410

 
$
10,021,938

Cash and cash equivalents
280,117

 
259,722

Tenant and other receivables, net
2,337

 
6,385

Prepaid expenses and other assets
33,936

 
18,487

Above market lease, asset
44,194

 
44,588

Total assets
$
10,309,994

 
$
10,351,120

 
 
 
 
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
 
 
 
Debt, net
$
3,925,203

 
$
3,934,628

Due to MGM Resorts International and affiliates
302

 
962

Accounts payable, accrued expenses and other liabilities
4,596

 
10,240

Above market lease, liability
46,847

 
47,069

Accrued interest
30,515

 
22,565

Distribution payable
111,733

 
111,733

Deferred revenue
129,708

 
127,640

Deferred income taxes, net
28,544

 
28,544

Total liabilities
4,277,448

 
4,283,381

Commitments and contingencies (Note 11)

 

Partners' capital
 
 
 
General partner
—

 
—

Limited partners: 266,030,918 Operating Partnership units issued and outstanding as of March 31, 2018 and December 31, 2017
6,032,546

 
6,067,739

Total partners' capital
6,032,546

 
6,067,739

Total liabilities and partners’ capital
$
10,309,994

 
$
10,351,120

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


5


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,
 
2018
 
2017
Revenues
 
 
 
Rental revenue
$
186,563

 
$
163,177

Tenant reimbursements and other
29,276

 
20,722

 
215,839

 
183,899

Expenses
 
 
 
Depreciation
68,991

 
61,684

Property transactions, net
4,086

 
6,855

Reimbursable expenses
28,360

 
20,487

Amortization of above market lease, net
171

 
171

Acquisition-related expenses
541

 
—

General and administrative
3,908

 
2,680

 
106,057

 
91,877

Operating income
109,782

 
92,022

Non-operating income (expense)
 
 
 
Interest income
1,032

 
678

Interest expense
(49,230
)
 
(44,636
)
Other non-operating expenses
(2,184
)
 
(134
)
 
(50,382
)
 
(44,092
)
Income before income taxes
59,400

 
47,930

Provision for income taxes
(1,231
)
 
(1,238
)
Net income
58,169

 
46,692

 
 
 
 
Weighted average Operating Partnership units outstanding:
 
 
 
Basic
266,104,264

 
242,868,331

Diluted
266,265,043

 
243,146,376

 
 
 
 
Net income per Operating Partnership unit (basic)
$
0.22

 
$
0.19

Net income per Operating Partnership unit (diluted)
$
0.22

 
$
0.19

 
 
 
 
Distributions declared per Operating Partnership unit
$
0.4200

 
$
0.3875

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


6


MGM GROWTH PROPERTIES OPERATING PARTNERSHIP LP
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
Net income
$
58,169

 
$
46,692

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

 
(634
)
Comprehensive income
$
74,524

 
$
46,058

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


7


MGM GROWTH PROPERTIES OPERATING PARTNERSHIP LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
Cash flows from operating activities
 
 
 
Net income
$
58,169

 
$
46,692

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
68,991

 
61,684

Property transactions, net
4,086

 
6,855

Amortization of deferred financing costs and debt discount
2,974

 
2,806

Loss on retirement of debt
1,018

 
—

Amortization related to above market lease, net
171

 
171

Provision for income taxes
1,231

 
1,238

Straight-line rental revenues
2,612

 
(677
)
Amortization of deferred revenue
(916
)
 
(235
)
Share-based compensation
384

 
188

Changes in operating assets and liabilities:
 
 
 
Tenant and other receivables, net
4,048

 
4,891

Prepaid expenses and other assets
407

 
(704
)
Due to MGM Resorts International and affiliates
(660
)
 
650

Accounts payable, accrued expenses and other liabilities
(5,241
)
 
(5,249
)
Accrued interest
7,950

 
881

Net cash provided by operating activities
145,224

 
119,191

Cash flows from investing activities
 
 
 
Capital expenditures for property and equipment
(177
)
 
—

Net cash used in investing activities
(177
)
 
—

Cash flows from financing activities
 
 
 
Deferred financing costs
(4,544
)
 
(526
)
Repayment of debt principal
(8,375
)
 
(16,750
)
Distributions paid
(111,733
)
 
(94,109
)
Net cash used in financing activities
(124,652
)
 
(111,385
)
Cash and cash equivalents
 
 
 
Net increase for the period
20,395

 
7,806

Balance, beginning of period
259,722

 
360,492

Balance, end of period
$
280,117

 
$
368,298

Supplemental cash flow disclosures
 
 
 
Interest paid
$
38,171

 
$
40,949

Non-cash investing and financing activities
 
 
 
Non-Normal Tenant Improvements by Tenant
$
372

 
$
8,480

Accrual of distribution payable to Operating Partnership unit holders
$
111,733

 
$
94,109

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


8


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 on October 23, 2015. MGP conducts its operations through MGM Growth Properties Operating Partnership LP (the “Operating Partnership”), a Delaware limited partnership that was formed on January 6, 2016 and acquired by MGP on April 25, 2016. The Company has 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 engaged through its investment in the Operating Partnership in the real property business, which primarily consists of owning, acquiring and leasing large-scale destination entertainment and leisure resorts, whose tenants generally offer casino gaming, hotel, convention, dining, entertainment and retail. MGM Resorts International (“MGM” or the “Parent”) is a Delaware corporation that acts largely as a holding company and, through its subsidiaries, owns and operates large-scale destination entertainment and leisure resorts. Pursuant to a master lease agreement (the “Master Lease”), a subsidiary of the Operating Partnership (the “Landlord”) leases the real estate assets of The Mirage, Mandalay Bay, Luxor, New York-New York, Monte Carlo (which was rebranded as Park MGM in May 2018), Excalibur, The Park, Gold Strike Tunica, MGM Grand Detroit, Beau Rivage, Borgata, and MGM National Harbor back to a subsidiary of MGM (the “Tenant”).

    As of March 31, 2018, there were 266,030,918 Operating Partnership units outstanding in the Operating Partnership of which MGM owned 195,134,123 or 73.4% and MGP owns the remaining 26.6%. 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. The determination of settlement method is at the option of MGP’s independent conflicts committee. 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.

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. Property tax expense and property insurance expense were separately classified in prior periods and are now classified within “reimbursable expenses” in the accompanying condensed consolidated statements of operations.

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 VIE of which the Company is the primary beneficiary, as well as its wholly owned and majority-owned subsidiaries. MGP’s maximum exposure to loss is the carrying value of the assets and liabilities of the Operating Partnership, 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. The Operating Partnership’s maximum exposure to loss is the carrying value of the assets and liabilities of the Landlord, which represent $10 billion of the Operating Partnership’s assets and $207 million of the Operating Partnership’s liabilities at March 31, 2018.

9


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.
Real estate investments. Real estate investments consist of land, buildings, improvements and integral equipment. The contribution or acquisition of the real property by the Operating Partnership from MGM represent transactions between entities under common control, 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.
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. Inception-to-date Non-Normal Tenant Improvements were $125.8 million through March 31, 2018.
Deferred revenue. The Company receives nonmonetary consideration related to Non-Normal Tenant Improvements as they automatically become MGP’s property, 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.
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 2.1% and 2.6% for the three months ended March 31, 2018 and March 31, 2017, respectively. The provision for current taxes and the deferred tax liability in the accompanying financial statements are attributable to noncontrolling interest since the payment of such taxes are the responsibility of MGM.

Recently issued accounting standards.  In August 2017, the FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years. ASU 2017-12 amends the hedge accounting recognition and presentation requirements in order to improve the transparency and understandability of information about an entity’s risk management activities, and simplifies the application of hedge accounting. The Company is currently assessing the impact that adoption of this guidance will have on its consolidated financial statements and footnote disclosures.

In 2016 and 2018, the FASB issued ASC 842 “Leases (Topic 842),” which replaces the existing guidance in ASC 840, “Leases.” 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 account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use (“ROU”) asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the ROU asset and for operating

10


leases the lessee would recognize a straight-line total lease expense. The Company is currently assessing the impact the adoption of ASC 842 will have on its consolidated financial statements and footnote disclosures.

In May 2014, the FASB issued ASC 606, Revenue from Contracts with Customers (Topic 606) which outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Under the standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods and services. The Company adopted ASC 606 on January 1, 2018 and it did not have a material impact on the Company’s financial statements and footnote disclosures.

NOTE 3 — REAL ESTATE INVESTMENTS
The carrying value of real estate investments is as follows:

 
March 31, 2018
 
December 31, 2017
 
(in thousands)
Land
$
4,143,513

 
$
4,143,513

Buildings, building improvements, land improvements and integral equipment
8,490,592

 
8,512,334

 
12,634,105

 
12,655,847

Less: Accumulated depreciation
(2,684,695
)
 
(2,633,909
)
 
$
9,949,410

 
$
10,021,938


NOTE 4 — MASTER LEASE
Pursuant to the Master Lease, the Tenant has leased the Company’s real estate properties. The Master Lease is accounted for as an operating lease and has an initial lease term of ten years with the potential to extend the term for four additional five-year terms thereafter at the option of the Tenant.

As of March 31, 2018, the annual rent payments under the Master Lease were $756.7 million. The second 2.0% fixed annual rent escalator went into effect on April 1, 2018, resulting in annual rent payments of $770.3 million for the third lease year.

Rental revenues from the Master Lease for the three months ended March 31, 2018 and 2017 were $186.6 million and $163.2 million, respectively. The Company also recognized revenue related to tenant reimbursements and other of $29.3 million and $20.7 million for the three months ended March 31, 2018 and 2017, respectively.


11


NOTE 5 — DEBT
Debt consists of the following:
 
March 31,
 
December 31,
 
2018
 
2017
 
(in thousands)
Senior secured credit facility:
 
 
 
Senior secured term loan A facility
$
270,000

 
$
273,750

Senior secured term loan B facility
1,813,000

 
1,817,625

Senior secured revolving credit facility
—

 
—

$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

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

 
350,000

 
3,983,000

 
3,991,375

Less: Unamortized discount and debt issuance costs
(57,797
)
 
(56,747
)
 
$
3,925,203

 
$
3,934,628

Operating Partnership credit agreement. At March 31, 2018, the Operating Partnership senior credit facility consisted of a $270.0 million term loan A facility, a $1.8 billion term loan B facility, and a $600 million revolving credit facility. The revolving credit facility and term loan A facility bear interest determined by reference to a total net leverage ratio pricing grid which results in an interest rate of LIBOR plus 2.25% to 2.75%. The revolving credit facility and the term loan A facility will mature in April 2021. The term loan B facility bore interest at LIBOR plus 2.25% with a LIBOR floor of 0% and on March 23, 2018, the Operating Partnership repriced its term loan B interest rate to LIBOR plus 2.00%. The repricing also included an extension of the maturity of the term loan B facility by 2 years to March 23, 2025 and was repriced at a price of 99.75%.  In addition, the Operating Partnership will receive a further reduction in pricing to LIBOR plus 1.75% upon a corporate rating upgrade by either S&P or Moody's.  The effectiveness of the extension is subject to certain conditions, which are expected to occur in May 2018.

The Operating Partnership permanently repaid $4 million of the term loan A facility and $5 million of the term loan B facility in the three months ended March 31, 2018, in accordance with the scheduled amortization. At March 31, 2018, the interest rate on the term loan A facility was 4.38% and the interest rate on the term loan B facility was 3.88%. No amounts have been drawn on the revolving credit facility.
See Note 6 for further discussion of the Company's interest rate swap agreements related to the term loan B facility.
The revolving credit facility and term loan A facility also require the Operating Partnership to maintain compliance with a maximum secured net debt to adjusted total asset ratio, a maximum total net debt to adjusted asset ratio and a minimum interest coverage ratio, all of which may restrict the Operating Partnership’s ability to incur additional debt to fund its obligations in the near term. As of March 31, 2018, the Operating Partnership was required to have a senior secured net debt to adjusted total assets ratio of not more than 0.40 to1.00, a total net debt to adjusted total assets ratio of not more than 0.65 to 1.00, and an interest coverage ratio of not less than 2.00 to 1.00. The Operating Partnership was in compliance with its financial covenants at March 31, 2018.
Fair value of long-term debt. The estimated fair value of the Company’s long-term debt was $4.0 billion and $4.1 billion at March 31, 2018 and December 31, 2017, respectively. Fair value was estimated using quoted prices for identical or similar liabilities in markets that are not active (level 2 inputs).

Deferred financing costs.  The Company recognized non-cash interest expense related to the amortization of deferred financing costs of $3.0 million and $2.8 million and during the three months ended March 31, 2018 and March 31, 2017, respectively.


12


NOTE 6 — DERIVATIVES AND HEDGING ACTIVITIES

The Company uses derivative instruments to mitigate the effects of interest rate volatility inherent in its variable rate debt, which could unfavorably impact our future earnings and forecasted cash flows. The Company does not use derivative instruments for speculative or trading purposes.

The Operating Partnership is party to interest rate swaps to mitigate the interest rate risk inherent in its senior secured term loan B facility. In May 2017 in connection with the term loan B re-pricing, the Company amended its outstanding interest rate swap agreements. As of March 31, 2018 and December 31, 2017, the Company pays a weighted average fixed rate of 1.844% on total notional amount of $1.2 billion and the variable rate received will reset monthly to the one-month LIBOR, with no minimum floor. As of March 31, 2018 and December 31, 2017, all of the Company's derivative financial instruments have been designated as cash flow hedges and qualify for hedge accounting.
    
The fair values of the Company's interest rate swaps are $27.5 million and $11.3 million as of March 31, 2018 and December 31, 2017, respectively based upon the present value of expected future cash flows using observable, quoted LIBOR swap rates for the full term of the swap (level 2 inputs). Interest rate swaps valued in net unrealized gain positions are recognized as asset balances within the prepaid expenses and other assets. Interest rate swaps valued in net unrealized loss positions are recognized as liability balances within accounts payable, accrued expenses and other liabilities. For the three months ended March 31, 2018 and 2017, the amount recorded in other comprehensive income related to the derivative instruments was a net unrealized gain of $16.4 million and a net unrealized loss of $0.6 million, respectively. There was no material ineffective portion of the change in fair value derivatives. For the three months ended March 31, 2018 and 2017, the Company recorded interest expense of $0.8 million and $2.7 million, respectively, related to the swap agreements.    

NOTE 7 — SHAREHOLDERS’ EQUITY AND PARTNERS' CAPITAL

MGP dividends and Operating Partnership distributions. The following table presents the distributions declared and paid by the Operating Partnership and the dividends declared and paid by MGP for the three months ended March 31, 2018 and March 31, 2017. MGP pays its dividends with the receipt of its share of the Operating Partnership's distributions.

Declaration Date
 
Record Date
 
Distribution/ Dividend Per Unit/ Share
 
Payment Date
 
Operating Partnership Distribution
 
MGP Class A Dividend
(in thousands, except per unit and per share amount)
2018
 
 
 
 
 
 
 
 
 
 
March 15, 2018
 
March 30, 2018
 
$
0.4200

 
April 15, 2018
 
$
111,733

 
$
29,777

 
 
 
 
 
 
 
 
 
 
 
2017
 
 
 
 
 
 
 
 
 
 
March 15, 2017
 
March 31, 2017
 
$
0.3875

 
April 13, 2017
 
$
94,109

 
$
22,281



Dividends with respect to MGP’s Class A shares are characterized for federal income tax purposes as taxable ordinary dividends, capital gains dividends, non-dividend distributions or a combination thereof.


13


The following table presents MGP's changes in shareholders' equity for the three months ended March 31, 2018:
 
Total Class A Shareholders' Equity
 
Noncontrolling
Interest
 
Total
Shareholders’
Equity
 
(in thousands)
Balance at December 31, 2017
$
1,624,650

 
$
4,443,089

 
$
6,067,739

Net income - January 1, 2018 to March 31, 2018
15,830

 
42,339

 
58,169

Other comprehensive income - cash flow hedges
4,358

 
11,997

 
16,355

Share-based compensation
102

 
282

 
384

Deemed contribution - tax sharing agreement
—

 
1,231

 
1,231

Dividends and distributions declared
(29,777
)
 
(81,956
)
 
(111,733
)
Other
108

 
293

 
401

Balance at March 31, 2018
$
1,615,271

 
$
4,417,275

 
$
6,032,546


The following table presents the Operating Partnership's changes in partners' capital for the three months ended March 31, 2018:
 
General Partner
 
Limited Partners
 
Total Partners' Capital
 
(in thousands)
Balance at December 31, 2017
$
—

 
$
6,067,739

 
$
6,067,739

Net income - January 1, 2018 to March 31, 2018
—

 
58,169

 
58,169

Other comprehensive income - cash flow hedges
—

 
16,355

 
16,355

Share-based compensation
—

 
384

 
384

Deemed contribution - tax sharing agreement
—

 
1,231

 
1,231

Distributions declared
—

 
(111,733
)
 
(111,733
)
Other
—

 
401

 
401

Balance at March 31, 2018
$
—

 
$
6,032,546

 
$
6,032,546


NOTE 8 — ACCUMULATED OTHER COMPREHENSIVE INCOME

Comprehensive income includes net income and all other non-shareholder changes in equity, or other comprehensive income. The following table summarizes the changes in accumulated other comprehensive income by component for the three months ended March 31, 2018:
 
Cash Flow Hedges
 
(in thousands)
Balance at December 31, 2017
$
11,661

Other comprehensive income before reclassifications
15,510

Amounts reclassified from accumulated other comprehensive income to interest expense
845

Net current period other comprehensive income
16,355

Balance at March 31, 2018
28,016

Accumulated other comprehensive income attributable to noncontrolling interest
(20,550
)
Accumulated other comprehensive income attributable to Class A shareholders
$
7,466


NOTE 9 — NET INCOME PER CLASS A SHARE
    
The table below provides basic net income and per Class A share, which utilizes the weighted-average number of Class A shares outstanding without regard to dilutive potential Class A shares, and “diluted” net income per share, which includes all such shares. Net income attributable to Class A shares, weighted average Class A shares outstanding and the effect of dilutive securities

14


outstanding are presented for the three months ended March 31, 2018 and March 31, 2017. Net income per share has not been presented for the Class B shareholder as the Class B share is not entitled to any economic rights.
 
Three Months Ended March 31,
 
2018
 
2017
 
(in thousands, except share and per share amounts)
Basic net income per share
 
 
 
Numerator:
 
 
 
Net income attributable to Class A shares
$
15,830

 
$
11,348

Denominator:
 
 
 
Basic weighted average Class A shares outstanding (1)
70,970,141

 
57,506,195

Basic net income per Class A share
$
0.22

 
$
0.20

 
Three Months Ended March 31,
 
2018
 
2017
 
(in thousands, except share and per share amounts)
Diluted net income per share
 
 
 
Numerator:
 
 
 
Net income attributable to Class A shares
$
15,830

 
$
11,348

Denominator:
 
 
 
Basic weighted average Class A shares outstanding (1)
70,970,141

 
57,506,195

Effect of dilutive shares for diluted net income per Class A share (2)
160,779

 
278,045

Weighted average shares for diluted net income per Class A share
71,130,920

 
57,784,240

Diluted net income per Class A share (3)
$
0.22

 
$
0.20


(1) Includes weighted average deferred share units granted to certain members of the board of directors.
(2) No shares related to outstanding share-based compensation awards were excluded due to being antidilutive.
(3) Diluted net income per Class A share does not assume conversion of the Operating Partnership units held by MGM as such conversion would be antidilutive.

NOTE 10 — NET INCOME PER OPERATING PARTNERSHIP UNIT

The table below provides basic net income per Operating Partnership unit, which utilizes the weighted-average number of Operating Partnership units outstanding without regard to dilutive potential Operating Partnership units, and “diluted” net income per Operating Partnership units, which includes all such Operating Partnership units. Net income attributable to Operating Partnership units, weighted average Operating Partnership units outstanding and the effect of dilutive securities outstanding are presented for the three months ended March 31, 2018 and March 31, 2017.
 
Three Months Ended March 31,
 
2018
 
2017
 
(in thousands, except share and per share amounts)
Basic net income per Operating Partnership unit
 
 
 
Numerator:
 
 
 
Net income
$
58,169

 
$
46,692

Denominator:
 
 
 
Basic weighted average Operating Partnership units outstanding (1)
266,104,264

 
242,868,331

Basis net income per Operating Partnership unit
$
0.22

 
$
0.19


15


 
Three Months Ended March 31,
 
2018
 
2017
 
(in thousands, except share and per share amounts)
Diluted net income per Operating Partnership unit
 
 
 
Numerator:
 
 
 
Net income
$
58,169

 
46,692

Denominator:
 
 
 
Basic weighted average Operating Partnership units outstanding (1)
266,104,264

 
242,868,331

Effect of dilutive shares for diluted net income per Operating Partnership unit (2)
160,779

 
278,045

Weighted average shares for diluted net income per Operating Partnership unit
266,265,043

 
243,146,376

Diluted net income per Operating Partnership unit
$
0.22

 
$
0.19


(1) Includes weighted average deferred share units granted to certain members of the Board of Directors.
(2) No shares related to outstanding share-based compensation awards were excluded due to being antidilutive.

NOTE 11 — COMMITMENTS AND CONTINGENCIES
Litigation. In the ordinary course of business, from time to time, the Company expects to be subject to legal claims and administrative proceedings, none of which are currently outstanding, which the Company believes could have, individually or in the aggregate, a material adverse effect on its business, financial condition or results of operations, liquidity or cash flows.

NOTE 12 — CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Operating Partnership’s senior notes were co-issued by MGP Finance Co-Issuer, Inc., a 100% owned finance subsidiary of the Operating Partnership. Obligations to pay principal and interest on the senior notes are currently guaranteed by all of the Operating Partnership’s subsidiaries, other than MGP Finance Co-Issuer, Inc., each of which is directly or indirectly 100% owned by the Operating Partnership. Such guarantees are full and unconditional, and joint and several and are subject to release in accordance with the events described below. Separate condensed financial information for the subsidiary guarantors as of March 31, 2018 and December 31, 2017 and for the three ended March 31, 2018 and March 31, 2017 are presented below.

The guarantee of a subsidiary guarantor will be automatically released upon (i) a sale or other disposition (including by way of consolidation or merger) of the subsidiary guarantor, or the capital stock of the subsidiary guarantor; (ii) the sale or disposition of all or substantially all of the assets of the subsidiary guarantor; (iii) the designation in accordance with the indenture of a subsidiary guarantor as an unrestricted subsidiary; (iv) at such time as such subsidiary guarantor is no longer a subsidiary guarantor or other obligor with respect to any credit facilities or capital markets indebtedness of the Operating Partnership; or (v) defeasance or discharge of the notes.

16


CONSOLIDATING BALANCE SHEET INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2018
 
 
Operating
 
 
 
Guarantor
 
 
 
 
 
 
Partnership
 
Co-Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
Real estate investments, net
 
$
639

 
$
—

 
$
9,948,771

 
$
—

 
$
9,949,410

Cash and cash equivalents
 
280,117

 
—

 
—

 
—

 
280,117

Tenant and other receivables, net
 
426

 
—

 
1,911

 
—

 
2,337

Intercompany
 
1,194,220

 
—

 
—

 
(1,194,220
)
 
—

Prepaid expenses and other assets
 
33,936

 
—

 
—

 
—

 
33,936

Investments in subsidiaries
 
8,593,646

 
—

 
—

 
(8,593,646
)
 
—

Above market lease, asset
 
—

 
—

 
44,194

 
—

 
44,194

Total assets
 
$
10,102,984

 
$
—

 
$
9,994,876

 
$
(9,787,866
)
 
$
10,309,994

Debt, net
 
3,925,203

 
—

 
—

 
—

 
3,925,203

Due to MGM Resorts International and affiliates
 
302

 
—

 
—

 
—

 
302

Intercompany
 
—

 
—

 
1,194,220

 
(1,194,220
)
 
—

Accounts payable, accrued expenses and other liabilities
 
2,685

 
—

 
1,911

 
—

 
4,596

Above market lease, liability
 
—

 
—

 
46,847

 
—

 
46,847

Accrued interest
 
30,515

 
—

 
—

 
—

 
30,515

Dividend and distribution payable
 
111,733

 
—

 
—

 
—

 
111,733

Deferred revenue
 
—

 
—

 
129,708

 
—

 
129,708

Deferred income taxes, net
 
—

 
—

 
28,544

 
—

 
28,544

Total liabilities
 
4,070,438

 
—

 
1,401,230

 
(1,194,220
)
 
4,277,448

General partner
 
—

 
—

 
—

 
—

 
—

Limited partners
 
6,032,546

 
—

 
8,593,646

 
(8,593,646
)
 
6,032,546

Total partners' capital
 
6,032,546

 
—

 
8,593,646

 
(8,593,646
)
 
6,032,546

Total liabilities and partners’ capital
 
$
10,102,984

 
$
—

 
$
9,994,876

 
$
(9,787,866
)
 
$
10,309,994



17


CONSOLIDATING BALANCE SHEET INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
Operating
 
 
 
Guarantor
 
 
 
 
 
 
Partnership
 
Co-Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
Real estate investments, net
 
$
488

 
$
—

 
$
10,021,450

 
$
—

 
$
10,021,938

Cash and cash equivalents
 
259,722

 
—

 
—

 
—

 
259,722

Tenant and other receivables, net
 
299

 
—

 
6,086

 
—

 
6,385

Intercompany
 
1,383,397

 
—

 
—

 
(1,383,397
)
 
—

Prepaid expenses and other assets
 
18,487

 
—

 
—

 
—

 
18,487

Investments in subsidiaries
 
8,479,388

 
—

 
—

 
(8,479,388
)
 
—

Above market lease, asset
 
—

 
—

 
44,588

 
—

 
44,588

Total assets
 
$
10,141,781

 
$
—

 
$
10,072,124

 
$
(9,862,785
)
 
$
10,351,120

Debt, net
 
3,934,628

 
—

 
—

 
—

 
3,934,628

Due to MGM Resorts International and affiliates
 
962

 
—

 
—

 
—

 
962

Intercompany
 
—

 
—

 
1,383,397

 
(1,383,397
)
 
—

Accounts payable, accrued expenses and other liabilities
 
4,154

 
—

 
6,086

 
—

 
10,240

Above market lease, liability
 
—

 
—

 
47,069

 
—

 
47,069

Accrued interest
 
22,565

 
—

 
—

 
—

 
22,565

Dividend and distribution payable
 
111,733

 
—

 
—

 
—

 
111,733

Deferred revenue
 
—

 
—

 
127,640

 
—

 
127,640

Deferred income taxes, net
 
—

 
—

 
28,544

 
—

 
28,544

Total liabilities
 
4,074,042

 
—

 
1,592,736

 
(1,383,397
)
 
4,283,381

General partner
 
—

 
—

 
—

 
—

 
—

Limited partners
 
6,067,739

 
—

 
8,479,388

 
(8,479,388
)
 
6,067,739

Total partners' capital
 
6,067,739

 
—

 
8,479,388

 
(8,479,388
)
 
6,067,739

Total liabilities and partners’ capital
 
$
10,141,781

 
$
—

 
$
10,072,124

 
$
(9,862,785
)
 
$
10,351,120




18


CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
 
Operating
 
 
 
Guarantor
 
 
 
 
 
 
Partnership
 
Co-Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
Revenues
 
 
 
 
 
 
 
 
 
 
Rental revenue
 
$
—

 
$
—

 
$
186,563

 
$
—

 
$
186,563

Tenant reimbursements and other
 
—

 
—

 
29,276

 
—

 
29,276

 
 
—

 
—

 
215,839

 
—

 
215,839

Expenses
 
 
 
 
 
 
 
 
 
 
Depreciation
 
—

 
—

 
68,991

 
—

 
68,991

Property transactions, net
 
—

 
—

 
4,086

 
—

 
4,086

Reimbursable expenses
 
—

 
—

 
28,360

 
—

 
28,360

Amortization of above market lease, net
 
—

 
—

 
171

 
—

 
171

Acquisition-related expenses
 
541

 
—

 
—

 
—

 
541

General and administrative
 
3,908

 
—

 
—

 
—

 
3,908

 
 
4,449

 
—

 
101,608

 
—

 
106,057

Operating income (loss)
 
(4,449
)
 
—

 
114,231

 
—

 
109,782

Equity in earnings of subsidiaries
 
113,000

 
—

 
—

 
(113,000
)
 
—

Non-operating income (expense)
 
 
 
 
 
 
 
 
 
 
Interest income
 
1,032

 
—

 
—

 
—

 
1,032

Interest expense
 
(49,230
)
 
—

 
—

 
—

 
(49,230
)
Other non-operating expenses
 
(2,184
)
 
—

 
—

 
—

 
(2,184
)
 
 
(50,382
)
 
—

 
—

 
—

 
(50,382
)
Income before income taxes
 
58,169

 
—

 
114,231

 
(113,000
)
 
59,400

Provision for income taxes
 
—

 
—

 
(1,231
)
 
—

 
(1,231
)
Net income
 
$
58,169

 
$
—

 
$
113,000

 
$
(113,000
)
 
$
58,169

 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income
 
 
 
 
 
 
 
 
 
 
Net income
 
58,169

 
—

 
113,000

 
(113,000
)
 
58,169

Unrealized gain on cash flow hedges, net
 
16,355

 
—

 
—

 
—

 
16,355

Comprehensive income
 
$
74,524

 
$
—

 
$
113,000

 
$
(113,000
)
 
$
74,524




19


CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2017
 
 
Operating
 
 
 
Guarantor
 
 
 
 
 
 
Partnership
 
Co-Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
Revenues
 
 
 
 
 
 
 
 
 
 
Rental revenue
 
$
—

 
$
—

 
$
163,177

 
$
—

 
$
163,177

Tenant reimbursements and other
 
—

 
—

 
20,722

 
—

 
20,722

 
 
—

 
—

 
183,899

 
—

 
183,899

Expenses
 
 
 
 
 
 
 
 
 
 
Depreciation
 
—

 
—

 
61,684

 
—

 
61,684

Property transactions, net
 
—

 
—

 
6,855

 
—

 
6,855

Reimbursable expenses
 
—

 
—

 
20,487

 
—

 
20,487

Amortization of above market lease, net
 
—

 
—

 
171

 
—

 
171

General and administrative
 
2,680

 
—

 
—

 
—

 
2,680

 
 
2,680

 
—

 
89,197

 
—

 
91,877

Operating income (loss)
 
(2,680
)
 
—

 
94,702

 
—

 
92,022

Equity in earnings of subsidiaries
 
93,464

 
—

 
—

 
(93,464
)
 
—

Non-operating income (expense)
 
 
 
 
 
 
 
 
 
 
Interest income
 
678

 
—

 
—

 
—

 
678

Interest expense
 
(44,636
)
 
—

 
—

 
—

 
(44,636
)
Other non-operating expenses
 
(134
)
 
—

 
—

 
—

 
(134
)
 
 
(44,092
)
 
—

 
—

 
—

 
(44,092
)
Income before income taxes
 
46,692

 
—

 
94,702

 
(93,464
)
 
47,930

Provision for income taxes
 
—

 
—

 
(1,238
)
 
—

 
(1,238
)
Net income
 
$
46,692

 
$
—

 
$
93,464

 
$
(93,464
)
 
$
46,692

 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income
 
 
 
 
 
 
 
 
 
 
Net income
 
46,692

 
—

 
93,464

 
(93,464
)
 
46,692

Unrealized loss on cash flow hedges, net
 
(634
)
 
—

 
—

 
—

 
(634
)
Comprehensive income
 
$
46,058

 
$
—

 
$
93,464

 
$
(93,464
)
 
$
46,058



20


CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
 
Operating
 
 
 
Guarantor
 
 
 
 
 
 
Partnership
 
Co-Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
 
$
(43,951
)
 
$
—

 
$
189,175

 
$
—

 
$
145,224

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
Capital expenditures for property and equipment
 
(177
)
 
—

 
—

 
—

 
(177
)
Net cash used in investing activities
 
(177
)
 
—

 
—

 
—

 
(177
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
Deferred financing costs
 
(4,544
)
 
—

 
—

 
—

 
(4,544
)
Repayment of debt principal
 
(8,375
)
 
—

 
—

 
—

 
(8,375
)
Distributions paid
 
(111,733
)
 
—

 
—

 
—

 
(111,733
)
Cash received by Parent on behalf of Guarantor Subsidiaries
 
189,175

 
—

 
(189,175
)
 
—

 
—

Net cash provided by (used in) financing activities
 
64,523

 
—

 
(189,175
)
 
—

 
(124,652
)
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
Net increase for the period
 
20,395

 
—

 
—

 
—

 
20,395

Balance, beginning of period
 
259,722

 
—

 
—

 
—

 
259,722

Balance, end of period
 
$
280,117

 
$
—

 
$
—

 
$
—

 
$
280,117


CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2017
 
 
Operating
 
 
 
Guarantor
 
 
 
 
 
 
Partnership
 
Co-Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
 
$
(43,309
)
 
$
—

 
$
162,500

 
$
—

 
$
119,191

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
Capital expenditures for property and equipment funded by Parent
 
—

 
—

 
—

 
—

 
—

Net cash used in investing activities
 
—

 
—

 
—

 
—