Item 1.01 Entry into a Material Definitive Agreement.
On January 14, 2020, MGM Resorts International (the "Company") entered into a
Master Transaction Agreement (the "MTA") with MGM Growth Properties Operating
Partnership LP ("MGP OP") and BCORE Windmill Parent LLC (the "Sponsor"), a
subsidiary of Blackstone Real Estate Income Trust, Inc., among other parties,
which provides for, among other things, (i) the transfer by a subsidiary of the
Company of the real estate assets related to MGM Grand Las Vegas (the "MGM Grand
Property") first to its wholly-owned subsidiary ("MGM Grand PropCo") and then to
MGP OP and (ii) the transfer by a subsidiary of MGP OP of the real estate assets
related to Mandalay Bay Resort and Casino (including Mandalay Place) (the
"Mandalay Bay Property" and, together with the MGM Grand Property, collectively,
the "Property") to its wholly-owned subsidiary ("Mandalay Bay PropCo" and,
together with MGM Grand PropCo, collectively, the "Landlord"), followed by
transfers by MGP OP of each of Mandalay Bay PropCo and MGM Grand Propco to a
newly formed entity (the "Joint Venture") owned 50.1%, directly or indirectly,
by MGP OP, and owned 49.9%, directly or indirectly, by Sponsor. Landlord will
lease the Property to a newly formed wholly-owned subsidiary of the Company (the
"Tenant"), and the Tenant will in turn sublease the MGM Grand Property and the
Mandalay Bay Property to the subsidiaries of the Company that currently operate
such properties.
Upon the terms and subject to the conditions set forth in the MTA, Sponsor will
acquire its 49.9% interest in the Joint Venture (the "Interest Acquisition") for
cash consideration estimated at $803 million based on a valuation of the
Property of $4.6 billion and subject to adjustment based on the final amount of
indebtedness of the Joint Venture and transaction costs. In connection with the
transaction, the Company will also provide a shortfall guaranty of the principal
amount of indebtedness of the Joint Venture (and any interest accrued and unpaid
thereon), which is expected to be approximately $3 billion. At the closing of
the transaction, MGP OP will issue MGP OP limited partnership units to the
Company equal to 5% of the equity value of the Joint Venture and distribute to
the Company approximately $2.4 billion of the proceeds received by MGP OP in
connection with the Joint Venture's debt financing. The transaction is expected
to close in the first quarter of 2020, subject to certain closing conditions.
Upon the terms and subject to the conditions set forth in the MTA, following the
Interests Acquisition, Sponsor or its affiliate will purchase 4,891,395 Class A
common shares representing limited liability company interests in MGM Growth
Properties LLC ("MGP"), representing an aggregate investment amount of
$150 million, based on a volume-weighted average price of MGP's shares for a
ten-day trading period ending on January 10, 2020.
Pursuant to the terms of the MTA, the Property will be leased by the Landlord to
the Tenant pursuant to a lease (the "Lease") with an initial annual base rent of
$292 million (the "Rent") for a term of thirty years with two ten-year renewal
options. The Rent will escalate annually throughout the term of the Lease at a
rate of 2% per annum for the first fifteen years and thereafter equal to the
greater of 2% and the CPI increase during the prior year subject to a cap of 3%.
In addition, the Lease will require the Tenant to spend 3.5% of net revenues
over a rolling five-year period at the Property on capital expenditures and for
the Tenant and the Company to comply with certain financial covenants, which, if
not met, will require the Tenant to maintain cash security or provide one of
more letters of credit in favor of the Landlord in an amount equal to the rent
for the succeeding one year period. The Company will provide a guarantee of
Tenant's obligations under the Lease. In connection with the Landlord and the
Tenant entering into the Lease, the existing master lease between the Company's
and MGP OP's respective subsidiaries will be revised to remove the Mandalay Bay
Property from such master lease and the rent under the existing master lease
will be reduced by $133 million.
The representations, warranties and covenants contained in the MTA were made
only for purposes of the MTA and as of the specific date (or dates) set forth
therein and were solely for the benefit of the parties to such agreement and are
subject to certain limitations as agreed upon by the contracting parties. In
addition, the representations, warranties and covenants contained in the MTA may
be subject to standards of materiality applicable to the contracting parties
that differ from those applicable to investors. Investors are not third-party
beneficiaries of the MTA and should not rely on the representations, warranties
and covenants contained therein, or any descriptions thereof, as
characterizations of the actual state of facts or conditions of the Company,
MGP, MGP OP or any other parties thereto.
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This description of the MTA is qualified in its entirety by reference to the
full text of the MTA attached hereto as Exhibit 2.1. Exhibits and schedules that
have been excluded from the text of the MTA attached hereto will be
supplementally furnished to the Commission upon request.
Item 8.01 Other Events.
On January 14, 2020, in connection with the transactions contemplated by the
MTA, (i) the Company, (ii) MGP OP and MGM Growth Properties LLC ("MGP") and
(iii) the limited partners named therein (the "Limited Partners") entered into a
Waiver Agreement (the "Waiver Agreement"). Pursuant to the Waiver Agreement,
among other things, beginning on the Closing Date (as defined in the MTA), MGP
agreed to waive the right to make a REIT Shares Election (pursuant to that
certain Second Amended and Restated Agreement of Limited Partnership of MGP OP,
dated as of February 2, 2017 (the "LPA")) in connection with a redemption under
the LPA for a period of twenty-four (24) months following the Closing Date (the
"Waiver"). During such 24-month period, MGP OP will be obligated to redeem any
common units tendered by a Limited Partner for cash at a price per common unit
equal to a three percent (3%) discount to the Cash Amount (as defined in the
LPA). Any cash payments made pursuant to the Waiver will not exceed
$1,400,000,000 in the aggregate.
Item 9.01 Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits:
Exhibit
No. Description
2.1 Master Transaction Agreement by and among MGM Resorts
International, MGM Growth Properties Operating Partnership LP and
BCORE Windmill Parent LLC, and, solely with respect to certain
sections therein, MGM Growth Properties LLC, dated as of January 14,
2020
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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